Unit 5 Contract Aspect and Negligence for Business Assignment

Unit 5 Contract Aspect and Negligence for Business Assignment

Unit 5 Contract Aspect and Negligence for Business Assignment


Diploma in Business

Unit Number and Title

Unit 5 Contract Aspect and Negligence for Business

QFC Level

Level 5

Assignment title: The case of Peter Abraham and others

Task 1


As a response to the task question it is mandatory for Mr. Peter Abraham to understand that all contracts are agreements but the reverse is not applicable wherein only the agreements that are enforceable by law are identified as contracts. A contract is legally valid when it comprise of an offer followed with an acceptance to the offer, consideration in the contract, capacity of the interested parties to enter into the contract, intention to bind to the contractual obligations and certainty of the contract. This Unit 5 Contract aspect and negligence for business assignment is developed to have the information about the negligence of contract in business. An offer in a contract reflects the intention of an individual to initiate the process of negotiation however it is distinct from an invitation to treat. Acceptance to the offer indicate meeting of minds subsequently forming a contract (Furmston, Tolhurst and Mik, 2010). The acid-test is applicable in cases wherein offer and acceptance to the offer is not   identified   and the case of Meates versus Attorney-General is an example to this. Contractual consideration being other pivotal elements in contract is delivered in return for a promise that must move from the promisee’s side. However Mr. Abraham should also note that individuals like minors,   mentally challenged person and individuals with narcotic abuse not bearing the capacity to develop a contract. Furthermore, presence of clear intention to establish legal relation is a must for contract formation (Garrett and Pursch, 2007). The case of Ermogenous versus Greek Orthodox Community of SA   can be cited in this context. Presence of certainty is also essential in contract that further reflects parties’ right and obligations.  Uncertain or illusory terms present in an agreement indicate lack of certainty in a contract (Treitel, 2003).

Unit 5 Contract Aspect and Negligence for Business Assignment

Hence the above mentioned aspects are essential for Mr. Abraham to know prior signing a contract with his business partner. He should also remain aware regarding the differences in breach in warranty and breach in contractual condition as for the former case the injured party has no right to terminate the said contract

Essential of a valid contract


A contract signed between the parties can be of diverse categories like unilateral, bilateral, simple and standard contract with varying requirements. Below is discussed the various methods of contract formation and some of the legal aspects related with a contract formed.

  • Face to face:The case example of Philips versus Brooks (1919) presented a situation wherein face to face exemptions clause was found not to be applicable. A contract developed by face to face communication although significantly ensure the meeting of minds as clear communication is present within the involved parties but it is solely dependent on the mutual faith between them. A contract formed by face to face communication has it expressed and implied terms undocumented which indicate absence of any future evidences to solve breach related incidents (Burrows and Peel, 2010).
  • Written contract:The benefits of a written contract are many fold compared to a contract formed by face to face communication. As the parties involved in a written contract are bound to include all the expressed contractual terms and conditions, breach in contract is solved with a greater efficacy. Furthermore, the contract party need not to follow the contractual obligations solely depending on the mutual faith between the parties (Burrows and Peel, 2010). The case of Gordon versus Macgregor (1909) can be cited for this purpose.
  • Distance selling (telephone, internet:Distance selling mode of contract formation is evident to rely on the heavy usage of electronic media and telephone wherein the parties establish contract with distantly located clients. This mode finds its immense application in contract of business expansion purposes and also in selling of goods to a distant place. However meeting of minds is also essential for a contract developed through this manner (Kinsella and Simpson, 2004). The case of Easycar (UK) Ltd versus Office of Fair Trading can be reviewed in this respect. However postal rule cannot be implied for addressing the legal implications for a contract developed through distant selling approach.


  • Condition:To understand the consequences of a contractual condition it can be state through application of a contractual condition the buyer is entitled to vacant possession of aproperty however if the sellerfails to deliver vacant possessiona breach in contractual condition is evidentsubsequently enabling the injured party to terminate the entire contract (McKendrick, 2005). The case of Maredelanto Compania Naviera SA versus Bergbau-Handel GmbH (The Mihalis Angelos) [1970] can be cited in this respect.
  • Warranty: A warranty with respect to a contract can be presented as an undertaking or stipulation that a particular fact in relation of the individual of the contract is or shall be promised. On simpler terms it is an assurance, promise or a guaranty given by one party to another. Hence the implementation of warranty particularly in commercial reasons can be used as warranty for real estate business, sales and lease of goods or services. Important to convey, breach of a contractual warranty is not sufficient to terminate the entire contract (McKendrick, 2005).
  • Innominate terms: Innominate term being a part of the umbrella of contractual terms is neither a condition nor a contractual warranty. This particular term with respect to legal applications provide remedy for a breach wherein the effects of breach is the primary concern. Innominate term can be utilized as a warranty provided the damages are trivial while it can be implemented as conditions if the damages caused are severe (McKendrick, 2005).The Hansa Nord case (1976) is a popular case example to understand the implications of innominate terms.
  • Exemption clauses (including legality): The benefits of implementation of exemption clause is to enable one of the involved contracting party to limit their extent of bearing risk liabilities andsuch clause is primarily incorporated by signature, through notice and through previousprocess of dealings. However without proper and justified communication of the statement that is desired to be included as an exemption clause to the other party, this clause is not valid. Hence the major impacts of implication of exemption clause are to exclude the liabilities, this clause do not give freedom of contract, do not reflect inequality of bargain and also is one of the means to protect the defendant (McKendrick, 2005). Seapower Resources Cold Storage & Warehousing Ltd. v. Assure Company Ltd. is a case example of this type.

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Task 2


Case 1- Agreement

Statement of prices along with display of the good for sale is considered as an offer initiated by the seller to tempt the purchaser to purchase the advertised good. The case of Harvey versus Facey (1893) can be reviewed that highlighted statement of price as an invitation to treat. However the cited case further affirmed the incorporation of all the terms along with presence of certainty in all the incorporated terms. The case of Payne versus Cave (1789) indicates auction sales as a part of invitation to treat. Hence the given case situation can be aligned with the previously discussed case of Harvey versus Facey, as similar to the cited case Carol has responded to the statement of sale. Therefore she has only responded to the invitation to treat made and hence has not entered into any contract with the seller (Fehr, Hart and Zehnder, 2011). In this context for the purpose of better understanding the legal implications related to invitation to treat the famous case of Partridge versus Crittenden (1968) can be read through that highlighted an advertisement being an a kind of invitation to treat however the advertiser should concentrate on the words use for publishing the said advertisement (E-lawresources.co.uk, 2016).

Case 2 – Consideration

A contract is legally valid when it incorporates a proper consideration identifying the certain exchanged goods or services and also price. Hence following conventional approach consideration in a contract is presented as either a detriment to a promisee or benefit to the promisor. However the case of Jones versus Padavatton (1969) has re defined the legal aspect of consideration wherein it has been considered as an act done before giving a promise or forbearance (Beale and Tallon, 2002). Another popular case of Tweddle versus Atkinson (1861) can be review to understand that a promisee is entitled to provide consideration to a third party, provided at the time of contract formation this particular term has been mentioned. The case of Thomas versus Thomas (1842) indicates that consideration should be sufficient. Furthermore in light of the case of Roscorla versus Thomas (1842) contractual consideration should not be past (Casebrief.me, 2016). Analysing the given case, it is evident that before Preston made a promise to pay George, Smith & Fogarty Company a sum, provided they appoint his son in their company, Devi (Preston’s son) was already engaged into the said organization. Hence this indicates the consideration to be past also not sufficient. In this case, the consideration was not evident to be moving from the promisee. Another point to be highlighted in this context is that in a contract formed a consideration must be legal wherein one party or another should be informed regarding the legality of a consideration (Burrows and Peel, 2010). In this context the case of Rose and Frank Co. Versus Crompton Bros Ltd (1925) can be reviewed that presented a scenario wherein honourable pledges coming from different business organizations cannot is included to create a legally validated contract. Hence it can be concluded; as the consideration in this case is not proper or sufficient, utilizing this said company cannot enforce Preston to pay the promised sum.


Case 3

Exclusion clause:Case 3 can be discussed in light of the legal implications following an exclusion clause. Important to convey that exclusion clause remain valid provide it has been properly incorporated and should not be contrary to the law. Furthermore exclusion clause should be legal and it is frequently observed that the judiciary system of a country given the narrowest possible reading to this clause. As previously mentioned that proper incorporation of the exclusion clause is a must, incorporation can be done by signature, by notice and through previous course of dealing. Referring to the details of case 3 it is observed that although incorporation of the exclusion clause was done by signature but the statement considered as exclusion clause was not communicated to the claimant party. This fact directly support the exclusion clause cannot be implemented by the defendant party to limit bearing their liability (Andrews, 2011).

The case of L’ Estrange versus Graucob (1934) is a case example that presented the legal implications following incorporation of exclusion clause through signature (Australiancontractlaw.com, 2016). Another case that can be cited in this respect is the case of Interfoto Picture Library Ltd versus Stiletto Visual Programmes Ltd (1989) that presented a situation whereby one of the parties desired to incorporate onerous terms into document that is just accepted by another party (E-lawresources.co.uk, 2016). However delivery of a reasonable notice is mandatory in this respect. Therefore the said restaurant cannot implement exclusion clause to limit bearing the liability and should compensate the loss suffered.

Case 4 – Implied term

Contractual terms are broadly segmented as expressed terms and implied terms and the former is not documented within a contract but can be enforceable by the judiciary body. Learning from the details provided in case 4 it is justified to discuss this case in light of implied terms. One of the key points in this case is the fact that the said contract has already been terminated with the sudden death of the offeror, Zephra. However it has also to be considered as the other individual involved with this contract, Aaron has made immense financial investment on the property of Zephra. Therefore it should be unfair to abandon Aaron without providing him with any amount of compensation (Chen- Wishart, 2005). Additionally with respect to remoteness issue, death of Zephra is not foreseeable by Aaron and hence remoteness is established. This case is hence a reflection of implied terms by fact as Aaron was found to invest on Zephra’s property with an intention to live in the rented property. For the purpose of detailed investigation, this particular case can be tested through implementation of the business strategy efficacy test and officious bystander test. Through the second test it is possible to evaluate the obviousness in the contractual terms signed between the two parties (Chen- Wishart, 2005). The case of Shirlaw versus Southern Foundries (1939) is a good example to better understand the applicability of officious bystander test (E-lawresources.co.uk, 2016).


Case -5

An insurance contract is a document comprising of an agreement signed between an insurance company and the insured wherein insuring agreement is the central part of such a contract. Important to note an insurance policy should emphasis on specifying the conditions limitations and exclusions making it a valid insurance contract. However certain factors make an insurance policy void, whereby the insurance agent has the legal eligibility to reject an insurance claim.  An insurance policy particular an automobile insurance policy becomes voidable if it is proved that the policy holder has provided fake information on the application form (Austlii.edu.au, 2016). Referring to case 5, as similar situation is evident; it is justified to convey that the insurance agent has the legal right to void the policy rejecting the insurance claim. 

Case – 6

The practices like intention non-disclosure of material information, fraudulent activity and evidences of misinterpretation are sufficient to make an insurance policy void. As observed in the given case, the policy holder has practised an illegal activity of non-disclosure of material information, the policy   should be voided.  However it is a matter of further investigation that whether the concerned policy holder has intentionally practised non-disclosure of material information (Sahoo and Das, 2009).  Hence if found guilty of intentional non-disclosure of material information; the insurance agent has the legal right to void the policy refusing the subsequent policy claims made by the policy holder. Therefore in both the cases (Case 5 And case 6). The practice of providing fake information or the practice of non-disclosure of material information by the policy holder if proved are subjected to legal compensation. Hence it is suggested that the policy holder must remain informed regarding the pros and cons of an insurance policy claim.

Task 3

Contractual liability and liability arising from a tort reflect a number of similarities wherein the presence of an illegal act indicating infringement of the obligations is evident. In both the cases the existence of a damage or injury is evident highlighting a relation of casualty between the illegal act committed and the injury incident. Furthermore, both contractual liability and tortious liability reflect civil wrong and the defendant is entitled to be sued by the court wherein the injured party can claim for compensation. The presence of legal action, prejudice and guilty is present in both contractual liability and tortious liability issues. Also an intention to repair the prejudice is evident in both the cases of contractual liability and tortious liability (Taylor and Taylor, 2009).

However certain differences also exist with respect to the legal implications of contractual liability and tortious liability. Considering the example of a claim emergent due to tortious liability it is not mandatory for the defendant to be a contracting party or should remain involved with a contract liabilities. However in case of claim arising from a contractual liability, the defendant should be one of the involved contracting parties. Moreover the legal principles of vicarious liability are applicable wherein claims arise as a result of tortious liability which is not mandatory in case of contractual liability. Certain wrongful action incident is criminal offense but a contract can never be presented as a criminal offence (Elliott and Quinn, 2001). The case of Tweddle versus Atkinson (1861) is an interesting case that discussed the legal implications arising from a contractual liability. Tarasoff v. Regents of the University of California is a case example presenting the legal implications with respect to a tortious liability (Casebriefs.com, 2016).

Supporting factors to establish a negligent claim

Duty, breach of duty, lack of care, cause in fact, proximate cause and damages evident are the key elements to successfully establish a negligent claim. Whether the defendant in a case owned a duty of acre to its plaintiff is essential to be investigated in negligent claim cases while occurrence of breach in duty of care if proved make the defendant accountable for the negligent act. Additionally following the conventional approach a negligent claim can be placed provided the plaintiff has proved that the defendant’s action resulted in damage or injury to the plaintiff. However proximate cause in this reflects the scope of a defendant’s responsibility particularly in a negligent case (Horsey and Rackley, 2011).

The case of Baltimore and Ohio R.R versus Goodman (1927) is an interesting case that indicated the plaintiff himself was responsible for the tort incident. The case of Palsgraf v. Long Island Rail Road Co is a popular case that highlighted proximate cause and its association with duty of care in a negligent act (Casebriefs.com, 2016).

Organizational vicarious liability and its legal implications:

The fundamentals of vicarious liability literally mean that an individual is accountable for the tort committed by another individual within organizational settings. Important to highlight that vicarious liability is not considered as a tort and in a number of situations the employer is held vicariously liable for the tort committed by his employee. The tort committed should clearly indicate a damage or loss. Furthermore it is essential to understand that vicariously liability can be imposed even though the claimant or the injured party is unable to which employee has caused a duty of care (Giliker, 2010). An employer can be held vicariously liable provided it is successfully established that an employer-employee association is prevalent, an act of negligence in evident within the tenure of employment. According to the doctrine of respondeat superior an employer or an organizational head can be held accountable for the lack of duty of care from its employees. However the legal guidelines of Employment Right Act 1996 indicate the presence of limited assistance to establish a clear boundary between the employees and the employers (Brodie, 2010).

The case of Yewens versus Noakes (1880) is evident to be the introducer of the control test (swarb.co.uk, 2016). A reflection of the applicability of this test is evident in the case of Denham v Midland Employers Mutual Assurance Ltd. Lord Denning in Cassidy v Ministry of Health was the proponent of the integration test applicable for investigate vicarious liability issues. The case of Market Investigations versus Minister of Social Security is an example wherein multi-factorial test has been implemented (swarb.co.uk, 2016). The torts like assault, theft, harassments etc if incident within an organizational framework is justified to hold the said organizational vicariously liable. However by utilizing the scopes of contributory negligence, an organization held vicariously liable may defend itself.

Task  4


Case - 7

A. In medical care settings particularly in hospitals and nursing homes, the employer is held vicariously responsible for the negligent act of its doctors and nurses. Hence Goodmayes hospital can be held accountable for the death of Mr. Brown if it is proved that the hospital has not ensured the required qualification and credentials needed to perform the said job. It has also to be proved that the said hospital owned Mr. Brown a duty of care and that particular duty of care was breached causing subsequent damage to the subject concerned. Death of Mr. Brown immediately proved the severity of damage caused. Moreover this case can be discussed in light of principles of causation with respect to tort wherein causation must be proved in order to hold the Goodmayes hospital responsible (Bermingham, 2011). Case 7 can be aligned with the case of R versus White (1964) that reflected the legal implications of factual causation similar to the cited case, in order to hold Goodmayes hospital accountable for the incident ‘but for test’ should be conducted exploring whether the actions of the defendant is justified for the adverse situation that has occurred (E-lawresources.co.uk, 2016). Therefore in order to hold Goodmayes hospital accountable it is mandatory to prove the damage suffered was not remote and foreseeable. The wagon mound test is applicable to investigate the remoteness quotient of this case. Also with respect to subject’s clinical condition greater extent of care was required (Abele, 2003).
The case of Prashanth S. Dhananka vs. Nizam Institute of Medical Science and Ors (1999) can be cited that is a case of medical negligence holing the hospital authority vicariously responsible for the tort committed by the hospital’s staffs.

B.In order to properly establish a negligent claim, it is essential for the widower of Mr. Brown to prove that a negligent act was committed by the concerned hospital authority. However, the Goodmayes hospital cannot be held accountable provided the remoteness of the damage suffered is established. In support of this the fact that death on the concerned individual occurred as a result of poisoning due to the toxic effects of the mould specie present in the subject’s home was foreseeable by the hospital staff and the remoteness to damage is established (Abele, 2003). The case of Bolitho versus City and Hackney Health Authority (1998) is a good example in this respect (Bailii.org, 2016). Furthermore, in order to establish that Goodmayes hospital is not accountable for the demise of the subject Caparo test can be conducted to understand the duty of care required equitable to the severity of the injury suffered. The case of Lamb versus London Borough of Camden can be reviewed for better understanding of case 7 (E- lawresources.co.uk, 2016).

Case 8

Vicarious liability of the employer is applicable in case 8 as the accident or damage caused to the claimant concerned is completely due to the negligent act of the driver. Important to note that the accused driver was the employer to the concerned chauffeur company and it was during his duty hours and in conure of his employment tenure the accident was incident. The concerned chauffeur company should be held vicariously liable for the accident caused as the task of driving was a part of the duty of the concerned driver (Brodie, 2010). This case can be suitably aligned with the case of Century Insurance Co. versus Northern Ireland Road Transport Board (1942) wherein the defendant being an employer to the concerned organization during his employment period due to his negligent act resulted in an explosion causing huge damage making the employer equally liable (Thehealthandsafetymanager.com, 2016). Another interesting case in this context is the popular case of Limpus versus London General Omnibus Co. (1862) wherein the bus company owner was held vicariously liable irrespective of the fact that whether his act is forbidden (Matthews et al., 2009). Another interesting case in this aspect is the case of Conway versus George Wimpy (1951) that reflected a scenario wherein the driver was evident to give unauthorised lifts to the passengers (swarb.co.uk, 2016).

However the chauffeur company may defend itself by provided if it can establish that the said company took reasonable precautions to limit its employee’s offending behaviour by proving proper training of driving. It is also justified for the chauffeur company to sue the accused driver and claim compensation from the concerned driver to cover up some portions of its financial resourses & loss. However the legal implications of contributory negligence cannot be applied by the chauffeur company as the severe injury caused to the claimant clearly depict the degree of damage suffered.

Case 9

The scenario presented in case 9 can be aligned with the case details of Lister versus Ramford ice storage co. Ltd (1957) wherein the negligent act of the defendant caused grave injury to another employee of the same organization . As the tort occurred during the employment tenure of the defendant, the injured party obtained compensation from the said organization holding it vicariously responsible (Jstor.org, 2016). Another interesting point that surfaced in case 9 is the fact that the supermarket owner has given its employee health and safety responsibility to a third party. Although an employer cannot be held vicariously responsible in case of tort committed by independent contractors, activities of its frolic employees who are evident to perform for the employer but are not officially absorbed by the employer, but in this case it is the responsibility of the supermarket owner to monitor that the duty given to another party is being execute properly (Bermingham, 2011). The case of Imperial Chemicals Industries versus Shatwell can be reviewed in this context wherein the employer was held vicariously responsible for the tort committed by its employee (swarb.co.uk, 2016).

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