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Unit 5 contract law for Business Assignment copy
Diploma in Business
Unit Number and Title
Unit 5 contract law for Business
The contract law for business report would provide an understanding of the contract law and law of tort. It will be ensured that the factors and elements so involved in the method of the determining the liability are provided to gather an idea of the functioning of the law. The different types of contract and terms are focused on in order to study the varying nature of contracts. The liability so arising is different in two aspect of law and the same would be determined in details. The different types of liability provided under law of tort are to be studied to gather a better understanding of the non-performance of the duty of care.
1.1: Explain the essential elements of a contract.
- Offer: The primary step towards the formation of the contract is offer. An offer moves from the offeror that contains the terms of the contract that when accepted by the offeree leads to being a contract. An offer helps in initiating the contract between the parties. It is important to derive the offer is different from invitation to offer. An offer is a clear statement regarding the terms of the contract wherein the invitation to offer is merely an informative statement about the possibility of creation of a contract. The offer moves from the offeror wherein the invitation to offer can be made by anyone who would like to be an offeree to the offer so made in the same regards. In the case of Fisher v Bell, it was observed that a knife variety was displayed in the window of the shop. However, according to the laws the sale of such a knife is prohibited under the law. The judge under the case held that the display of the knife in the shop window was for the invitation to offer and not an offer itself. It also would not be considered to be an invitation but merely a piece of decoration to be sold at the option of the person possessing it. Thereby, the same was invalid and the possessor had no intent to sell the same, no laws are violated creating no liability on the part of the person having the knife in the display window. This was because for an offer to be certain it is important to know that the party was intending to sale for a certain price to negotiates and form a contract. As the offer for the purchase of the knife would be invalid and illegal no law is said to be breached without being accepting a valid offer. In the case of Carlill v Carbolic Smoke Ball the company had advertised for the cure for influenza. The same if did not work could be claimed for from a bank where them money was already deposited. Mrs. Carlill on using the same was not satisfied with the treatment and went to claim the same where she was told that she did not notify of her acceptance. It is a rule under the offer to the world that the element of acceptance is waived off. Also, the advertisement was clear enough to derive the meaning of an offer and the company’s intent to pay the sum of money as promised under the advertisement.
- Acceptance: The acceptance of the contract is the final step towards entering into the contract. The acceptance just like the offer should be clear and express. The acceptance should be made through an acceptable means of communication. This element helps in creation if the contract. The accepting party waives off the element of acceptance under the offer to the world because the acceptance comprises of the performance of the act. Every contract that is created shall have the presence of acceptance to form a contract. The acceptance shall be so that the conduct or the words of the party convey the same. The acceptance is an essential part of the contract because without the same the contract could not be created by the parties. In the case of Day Morris Associates v Voyce another, that the conduct of the defendant was sufficient to let the offeror believe of the presence of mental intent to create the contract. Thereby, the actions so undertaken by the claimant were bound by the contract for the acceptance provided for the marketing planning of the estates and the commission was due to the agent respectively.
There are two types of contracts that allow the parties to enter the contract. Such contracts are unilateral and bilateral. The elements of the contract are all present under a standard contract. A bilateral contract is a simple contract so entered by the parties to create a legal relationship for a said purpose. The unilateral contracts however, do not contain the element of the acceptance. This is because the offeror in such a case makes an offer to the world. The offer is so clear in the meaning that it contains a contingency whereby an act is performed as asked under the offer the party would automatically come into contract with the offeror without being notified of the acceptance. This is because such contract is entered as soon as the parties perform the said act. Therefore, the element of acceptance is said to be waived off in case of the unilateral contract.
- Consideration: Every contract should have the element of consideration in order to make it legal under the law. The consideration ensures that each party has derived something of value through the contract. The consideration should be of valid nature, sufficient, not of past and not be derived from the existing duty under contract or social. The consideration helps in determining the validity of a contract in terms of its existence. The consideration shall be sufficient if not adequate. This was proven under the case of Chappel v Nestle. It was held that the at least 3 wrappers of the chocolate bar shall be sent in order claim a record. Chappel had copyright for one such record and thereby claimed that the consideration of the contract is inadequate and not enough to giveaway the record for an invalid contract. The final decision stated that a consideration for the contract shall not be adequate but sufficient. The wrappers of the chocolate contribute towards the sale and therefore add value to the chocolate. The wrappers had certain value for being part of the chocolate so sold and thereby, formed part of the consideration sufficiently. The contract so formed is said to be valid.
- Capacity: Under a contract every party should be of legal age and sound mind having positive financial status in order to make it enforceable under the law. The capacity helps in determining the legality of the contract in order to enforce it. If the parties to the contract are not of capacity the contract so formed would be termed as void and would cease to exist.
- Intent: The intention to enter into the contract is an important part for the contract because the intent helps in making the contract enforceable under the law. The intent of the contract helps in determining the enforceability of the contract under the law. This is because contracts of commercial nature are assumed to be entered into for the legal enforcement. If it is for a social purpose then the clause should be included for the legal enforceability. (Collins, 2008)
If the contract is to be enforceable under the law it is important to make sure that all the elements of the contract are present under the contract. If any of these contracts are not present then it will be considered that the contract is not present between the parties. If any part of the contract is missing then the contract is said to have not been formed.
1.2: Is it possible to have a contract without face to face contact?
Yes, it is possible. Whereby the contracts are entered into by the parties through a distance without any face to face or verbal contract then it will be considered to be a distance selling contract. Under a distance selling contract a supplier and the purchaser of the contract enter into the contract through a written communication whereby an intent to enter into the contract is present. The same is regulated by the distance sales or service regulation scheme. The communication takes place through a distance. (Cooke, 2007) Under distance selling contracts, the consumer must have the right to ask for the inspection of goods and services before accepting the same. A written communication should be part of the contract. If the consumer or the supplier wants to cancel the transaction the same shall be provided for in the contract. Contracts that entered through an online platform would be considered as the online contracts.
Certain contracts are entered into through the communication exchanged under the mail. Such contract are known to be distance contracts as well. Sometimes the supplier send sample products in the mail and send a slip of contract to create the same and the once sent back the contract is officially created. The supplies in such contracts are called through mail order. Many times the contract may be entered into different modes of communication such as the fax, e-mail or telephone. Communication may take place through a form of communication only to be accessed from distances are known to be distance-selling contracts. Usually the contracts may also take place in the presence of the parties but the actual party may be at a distance yet the agent is present in person. Thereby, since the original party is still located at a distance the contract is said to be a distance selling contracts.
Contract that are not entered into in the physical presence are also called written contracts. Such contracts have the terms discussed under the written format and agreed to in signatures. Since these maybe presented under the court they are easier to establish. Certain contracts are unilateral in nature wherein the offer is made to the world and the acceptance is not to be presented but performed in order to create an enforceability of a contract. Such contracts are not taken place in person but performed from a distant place.
1.3: Describe the effects of the words in the advertisement.
An advertisement when posted in the newspaper or a journal it is regarded as an invitation to offer. Unless the invitation to offer is an offer to the world the acceptance is to be made by the accepting party. In case of Carlill v Carbolic Smoke Ball Co., the company advertised for claiming the damages from the Alliance Bank wherein the agreed amount was already deposited.
The company had advertised an offer to the world stating that the smoke ball would cure the disease and if the same did not the accepting party would be entitled to a claim of damage so suffered. Mrs. Carlill was one such user who had not been satisfied and asked for a claim. The company defended stating that there was no acceptance received from her for a valid contract to be created. The advertisement so provided is considered to be the offer to the world and not a trader’s puff because the act of depositing the money is a certain statement and cannot be speculated. It also determines that if a party wished to act on the offer it would automatically be a party to the contract. The actions of performance will be considered to be the acceptance.
The judgement of the case interprets that the manner of offer statement is elemental in deciding whether it will be a valid offer. The acceptance of the contract may depend on the offeror’s offer. A unilateral contract may be offered through an advertisement and the acceptance may be made through action of the offeree. The contract herein under would be a unilateral contract whereby a contract was entered into as soon as Mrs. Carlill had used the product. As the present contract contains the basic elements of offer, acceptance, consideration, intent and capacity, the contractual claim is said to be fair.
It may also be stated that since the advertiser had deposited amount in the bank it showed intent to enter into a contract as soon as the accepting party had performed the certain act stated in the advertisement. Thereby, the advertisement so placed on the readers of the advertisement would be that of a unilateral contract so offered by the company in order to cure the illness. (Giliker, 2010)
2.1: Give a clear opinion on whether the essential elements of a contract were present.
The first contract entered into by the parties is through the advertisement so posted by William. It may be determined that the advertisement may be stated as the invitation to treat that was posted by William. The consideration price of the contract was to be determined between the parties. David had asked ten day to finalise the consideration amount. David presents an amount of 18000 Pounds and the same is agreed to by William. Accordingly, William pays 1000 Pounds in advance as timely consideration. David however does not mention the start date under the contract Chappel v Nestle.
On discussions and subsequent negotiations, David and William agreed to enter into the contract. The quotation so provided by David was accepted by William thereby agreeing to the terms and conditions. The consideration is for the amount of 18000 Pounds wherein the intent to make the contract enforceable is present between the parties.
The contract so formed is fair and valid as the offer so made by William was accepted. The acceptance was for the price of consideration amounting to 18000 Pounds. The parties both fairly intended to enter into the contract for a common purpose. The parties were of capacity as well. Both of them are capable to create a legal contract Cutter v Powell. The amount paid in advance is part consideration sufficient enough to present William’s intent to enter into the contract. Both the parties in the present cases are considered to be of majority of age with sound mind and stable financial resources . Thereby a valid contract is said to be formed on the date of 10th May 2014. (Meyer, 2010)
2.2: Was a contract formed between them?
After the contract is performed, the work had begun at 10th June. Although it was informed by William that the equipment is to be needed by 31st July. David had no response on the same. Thereby, as there was no response on the statement the offer is considered to be rejected/revoked. If the contract term is to be changed/added/limited then the same shall be done with the consent of the parties to the contract.According to the case of Felthouse v Bindley, an offer is presented the silence of the offeree will not amount to being an acceptance of the contract. The change is to be allowed by both the sides to include it in the existing contract. The same change will form part of the contract as a term. Thereby, silence is not to be presumed as an acceptance. As David had not agreed to the same the contract change is considered to be not have been made. (Nel, 2004)
2.3: a) Discuss the position of David.
The performance of the contract is directly related to performance of the condition. The affected party has the right to terminate the contract. A warranty is regarded as the less significant part of the contract that when breached would only lead to claim of damages or specific performance. Wherein when David had informed about the additional costs to be added in order to meet the requirement of the added expenses the same was accepted by William giving rise to a new contract between the parties. This contract would be separate from the initial contract so formed between the parties initially.
The terms so included under the contract is said to be a combination of several types of contract. These include express terms and implied terms. Express terms are clearly determined under the contract wherein the implied terms are not included under the contracts. The terms of express nature may either be a condition or a warranty. A condition is said to be that of the essential nature that are to be performed and are directly related to the contract. A warranty is said to be that term that smoothens the performance of the condition. However, this is not directly related to the contract and the damaged party would not have to void the contract as under the breach of condition.
Sometimes it is difficult to identify a condition from warranty. When terms have different affect under different circumstances then it will be regarded as an innominate term. An exclusion clause is regarded as the term that limits the extent of liability in case of breach of contract. By not completing work on a given time frame, David is not in violation of any term thereby, no contract is breached. This is because the statement made by William was a request and not a term.
b) Explain the situation to David on his claim.
As per the facts of the case it is determined that David in the middle of the performance of the contract falls short of the labour force. As it was mentioned by William earlier that he required the equipment by 31st July, David had offered to do the same if William provided for the extra costs of 2000 Pounds. It is already determined that silence does not amount to a contract or acceptance but an answer in agreement makes it a part of the contract. As there was a positive agreement by William for the same he cannot back out at the time of making the payment. William had agreed to the same as he did not want to delay the opening date. Therefore, as the additional amount was agreed to by William it would be a term to the contract and the same shall be claimed by David. William would owe an amount of 2000 Pounds to David for the work provided by him under the contract.
The amount of consideration can be changed but not escaped by the parties. William having agreed to the change would now be bound by it. The element of consideration is a condition under any contract. It would be noted that not paying for the same would be a breach of contract for which David would be able to make a claim for damages or stop the supply of the equipment.(Pratt, 2000)
3.1: Describe how a liability in tort may arise?
Liability in tort
Liability in contract
The liability under tort arises from the civil breach conducted under the society. The civil breach is mostly related to the breach of duty of care present in society to be undertaken by every citizen.
The liability under contract arises from the breach of duty existing under the contract
The damages so caused in such a case cannot be liquidated thereby are calculated on the basis of the wrong so committed. Such torts are negligence, trespassing, nuisance and such other.
The liability under the contract is calculated based on the consideration. The law of contract allows the damaged party to void the contract or claim for damages based on the amount of consideration involved.
The liability so caused under the tort is that for the breach of right in rem as it is a right held against the society.
The liability under contract is for the breach of right in personam.
No relationship exists between the parties at the time the wrong takes place.
The contractual relationship exists between the parties when the damage takes place.
The elements to be considered while assessing the extent of damage are that of the remoteness of damage, causation and foreseeability.
The contract validity is tested while deciding on the liability through offer, acceptance and intent.
The damages so arising are compensated based on the amount of consideration involved.
The liability for the damage is decided by the courts.(Richards, 2006)
3.2: Describe what have to be proved by the claimant.
An act of negligence contains the three specific elements to be categorised as so under law of tort.
Elements to be proved
Duty of care
A duty of care should be present to be fulfilled against the party.The duty of care so existent should be neglected by the party.
Breach of duty
The tort of negligence extends towards the neighbour that may be directly affected by the wrongful act so committed by the party owing the duty of care. The duty of care should be owed to any person reasonably exposed to the actions so undertaken.
The neglect should be resultant in a damage that may bequantified in monetary terms, physical harm or psychological harm.
Under the case of Donoghue v Stevenson it was provided the defendant should be in violation of the duty of care and the same violation should be related to the arm so caused to the plaintiff. Such harm shall be avoided by a reasonable person for being foreseeable to owe the duty of care. It focused on creation of the manufacturer’s liability towards the general consumer and not just one consumer buying the product. This would allow for the consumer to be safeguarded as a group. In the case of Caparo Industries it was determined that when determining the tort of negligence, the three principles are considered namely the remoteness of damage, causation and proximity. The remoteness of damage implies the possibility of the wrongful act to cause the damage. The causation refers to the direct relationship that may occur between the wrongful act and the damage so occurring. The proximity relates to the least actual possibility of influence of the act to cause the damage. (Vettori, 2007)
3.3: Describe the concept of vicarious liability.
According to the rules of the Respondeat Superior the employer is liable for the breach of duty of care by the employees as they are controlled by the employers. The wrong so committed shall be in the regular course of the business management . It should be ensured that the employer had delegated the duty that is being breached in order for the employer to be responsible. The employer is required to provide an environment that is healthy and safe for the working purposes. The same is provided for under the Health and Safety at Work etc. Act. The employers should maintain the first aid kit, prepare evacuation drills and provide equipment that are latest and harmless. Accordingly, the Occupier’s Liability Act, the occupier is liable to maintain the premises in a way that keeps the visitors and trespassers safe from any harm that may pertain at the premises. Therefore, it is the liability of the employer or the occupier to ensure that the safety of the visitors is dated. The liability of vicarious nature would only apply when the wrongful act is committed from the performance of official duties.
In the case of Sweeny v Boylan Nominees it was determined that the vicarious liability cannot be established in case of contractor but only employees. The facts of the case determined that the maintenance of the refrigerator was delegated to an independent contractor and had provided a substandard causing the damage to the person using the fridge. The damages were to be paid by the independent contractor for not being a hiree or an employee to anyone as no vicarious liability arises. In the case of Deatons v Flew it was determined that the vicarious liability is only present whereby the employee is performing the task so assigned by the employer. The facts of the case determined that barmaid had thrown a glass at the customer’s face for which the barmaid and the employer both were being sued. It was determined in the court’s decision that he barmaid was only obligated to serve drinks and not keep order. Therefore, as the same was not an official duty but a personal retribution it will not be the vicarious liability of the employer.
Whereby the act so performed is personal and not professional the liability for the same shall be personal. If the act so committed by the employee is intentional or out of whim, then it will be not being the employers’ liability according to the case of Rose v Plenty. In the given case the defendant had hired an underage boy to cater milk as asked not to do so by the employers. The defendant was made liable for the loss so suffered from the accident as he was performing the official duty when it happened. It was also the vicarious liability of the employer for the same. In the case of Roe v Minister of Health it was decided that the employer is liable even if the employee omitting the wrong is not certain of. The case facts established that the defendant authority’s employee had committed a wrong but the identity of the employee was unclear. It was held as long as the act had occurred while performing official duty and under the authority the employer will be held vicariously liable. (Collins, 2008)
4.1: Compare and contrast the verdict in Donoghue v Stevenson with Hill v Chief Constable of West Yorkshire.
In the case of Donoghue v Stevenson the universal liability of all the manufacturers towards their products was established. The manufacturers were now responsible towards the damages so caused to the consumers through the use of defective products. Thereby, when Mrs. Stevenson was affected by the consumption of the beer the manufacturer would be liable for the negligence towards the consumers. In the case of Hill v C.C. of West Yorkshire, it was discussed that the Police owed no duty of care towards the victims as proximity was absent from the case. The victims were greater in number and the policies do not dictate the police force to be responsible for the civil wrong o committed to a citizen. The police is not obliged by the duties of individual victims. (Giliker, 2010)
The rule of duty of care only extends to the neighbours and not the entire society. The neighbour’s principle suggests that the harm so caused should be reasonable and foreseeable in order to create a duty of care. The defence so used under the case of Donoghue v Stevenson was that the harm so caused was not from the duty of care so owed to the affected party. However, it was stated that such a harm is foreseeable and the manufacturer owes the same towards any direct or indirect user of the product. Whereas in the case of Hillit was determined that the Police had owed a duty of care towards the society for being in such a part of the legal system. The duty of care in this case was not restricted to the neighbours itself. (Cooke, 2007)
4.2: Discuss his position form the vicarious liability point of view.
The rules of vicarious liability determine that wherein the employer is liable the employee has committed a wrongful act while performing the official duties and the same are assigned by the employer. Thereby the employer- employee relationship is the only relationship binding them. The employer is not liable if the employee intentionally does not follow the instruction, or does not conduct his duties or has a special relationship with the victim whereby the victim is aware of the breach. Whereby the employees are permanently hired it is considered a contract of employment and every wrongful act while performing the duties is obligation of the employer. The contract for employment is a temporary employment and the employer under such contract is not liable unless the situations arise so.
In the case of Rose v Plenty, the milkman was an employee of the dairy and had wilfully neglected the instructions to not employee the underage boy. The damages so caused from the accident were however not so far from the actual duties and therefore the employer is said to have the liability towards the injuries caused to the boy. In the case of Vasey v Surrey Inns it was determined that the employees had attacked the people breaking the door to the premises. As the attack was to protect the property of the employer the same is said to have been while performing official duty making the employer liable. In the case of Alcock v Wraith, it was determined that where the independent contractor is hired the employer would not be liable in the ordinary sense. In the case of Mersey Docks v Coggins, it was determined that the party employed as the independent contractor would be responsible towards the wrongful acts and not the employer unless the employer control the function of the employment.
According to the case study provided it may be determined that the taxi service would not be liable if in case any accident is caused by the taxi drivers on the job. Herein, the accident so caused while driving would be in the course of business of the taxi service. Thereby, under the rule of vicarious liability the taxi service would be liable towards the actions so performed by the taxi drivers. In the case of Limpus v London General Omnibus Co., the bus driver had negligently driven in the course of employment. This resulted in creation of liability of the employer towards the driver. The driver commits a tortuous act when performing the authorised act, the liability falls on the employer and not the drivers personally. If the same arises outside of the performance of authorised activity then it will be regarded as the tortuous act then vicarious liability would not arise. (Meyer, 2010)
In the present assignment it has been aimed to draw an interpretation of the contract law and law of tort in order address the issues so arising. The concepts of negligence, vicarious liability, and contractual liability have been studied in order to understand the meaning and effect of the different laws under different circumstances. A comparison between the liabilities had also been presented.
Collins, H. (2008). Standard contract terms in Europe. Alphen Aan Den Rijn: Kluwer Law International.
Cooke, P. (2007). Law of tort. Harlow: Longman.
Giliker, P. (2010). Vicarious liability in tort. Cambridge, UK: Cambridge University Press.
Meyer, L. (2010). Non-performance and remedies under international contract law principles and Indian contract law. Frankfurt am Main: P. Lang.
Nel, J. (2004). The theoretical basis for contractual liability. Bathurst, N.S.W.: Faculty of Commerce, Charles Sturt University.
Pratt, S. (2000). Duty of care. East Roseville, N.S.W.: Simon & Schuster.
Vettori, S. (2007). The employment contract and the changed world of work. Burlington, VT: Ashgate Pub.