Unit 5 Contract Law and Negligence in Business Assignment

Unit 5 Contract Law and Negligence in Business Assignment

Unit 5 Contract Law and Negligence in Business Assignment


Diploma in Business

Unit Number and Title

Unit 5 Contract Law and Negligence in Business

QFC Level

Level 5


A contract is said to be a defined relationship between the parties that agree to carry out the same for a common purpose. Such a contract may contain varying terms and elements that are common to different types of contract. The same aspects are required to be studied in detail under the present assignment. The liability so arising from the non-performance of the contract and the wrongful act performed under tort is to be analysed. The effect of different types of liabilities on the parties involved is to be presented as well.

Task 1

1.1 Explain to Peter Abraham how a contract is formed and the importance of the various elements which has to be present to form a contract.

It should be noted that Peter Abraham shall understand the meaning and effect of the contract elements in order to form a valid contract under the business and private dealings so undertaken in the course of the business strategy. Every contract has to be initiated with the element of offer.Duhaime’s Law Dictionary defines offer as an explicit proposal for a contract when accepted by the other party would create a binding relationship between the persons creating it. An offer is to be differentiated from the invitation to offer. An offer is a statement that presents the terms of offer that are to be included under the contract. The offer shall be clear in its intent and purpose and determine the meaning clearly and evidently. The offer should use a simple language easy to interpret.An offer is an important part of contract as it helps in initiating the contract. Without an offer the contract could not be discussed or negotiated. The offer is different from invitation to offer because the invitation to offer does not make an offer but merely represent the intent to enter into the contract if the interested party makes an offer. Thereby, an advertisement is regarded to be an invitation to offer Carlil v Carbolic Smoke Ball. Thereby, the offer is to be presented in such a way that it is clear it is an offer. (Andrews, 2011)

Every contract is entered into by the parties if the offeree has accepted the offer. The offer has to be accepted in order for the formation of the contract.Duhaime’s Law Dictionary defines the acceptance to be the unequivocal expression of the assent to the offer that was made by the offeror to create a binding relationship. Acceptance is important in order to enter into the contract. If acceptance is absent no contract can be formed.  The acceptance so made shall be clear and easy to understand in order to put across the common intent of the contract to be formed. It should be precise and timely informed by the offeree. The acceptance may not be whole and sometimes partial when considered to be countered Hyde v Wrench. The acceptance is required to be presented in whole in order for it to form a contract. A counter offer does not amount to an offer but only another offer offered back to the original offerorNormile v Miller. The counter offer may be presented until the final offer has been accepted by the final offeree and the contract has been entered into. In the case of offer so made to the world the element of acceptance is waived off by the party. This is because under the offer the terms explicitly determine the act that when performed would create a contract thereby, the same shall be known. When an acceptance is made it should be noted that it should be made in a manner that the same is clear in understanding, within time and the through the known means of communication. (Adams, 2008)

The contract is said to be valid if it contains the consideration of an amount as discussed under the contract. Duhaime’s Law Dictionary defines consideration to be  a right, interest, profit or benefit to a party under the contract. It may also include forbearance, detriment or loss undertaken by the other party. The considerationhelps define the validity of a contract under the law in regards with the exchange of values between the parties. The consideration helps in restoring the parties in regards with the loss suffered to be a part of the contract. Such an exchange takes place wherein the values so lost while performance are restored by the other party’s performance. The consideration should be such that it is something of value and creates a usage for the other party Currie v Misa. It should not arise from an existing contractual relationship or social duty, be sufficient and present in nature.

Every contract has to be entered into by the parties through the intent to enter into the contract. The parties to the contract should ensure that the purpose of the contract is discussed and common. It should be ensured in order to create enforceability of the contract under the law. The intent to enter into the contract may either be social or commercial. The commercial contracts are naturally enforceable under the law since it is assumed that these are entered into with the intent to create a legal obligation unlike the social contracts. Therefore, it is important to define the purpose of the contract. The intent to enter into the contract is an important part of the contract as it helps in determining the enforceability of the same under the law. If it is not determined under commercial contract it would still be enforceable unlike the social contract that require specific mention of the same.(Finch, 2007)

The parties to the contract may also be of capacity ability that they understand the contract that they are entering into. The contractual capacity is defined as anyone having a legal age, financial soundness and mental stability to grasp the meaning of the contract is considered to be a person of capacity. The contract may be entered into in capacity only when being signed. Such contracts entered into by parties not of capacity will be considered void and not enforceable under the law. Thereby, any party making the acceptance shall do so without undue influence. 

1.2 Discuss the impact of forming contracts

Some contracts are found to be entered into by the parties in the presence of each other. Such contracts are known to be face to face contract. These contracts are generally initiated through the conversation taking place between the parties whereby, an offer is presented by the offeror under the conversation. The acceptance of the same may be determined through the same conversation or at a time period set for a later time. The contract so formed is not in writing. These contracts are easier to enter into for the lack of paper work and speedy acceptance derived under the same conversation. It is not difficult to create and the common intent is presumed.The only evidence present for such contract is hearsay and this is not sufficient to make the same enforceable under the law. Therefore, the face to face contract are weak under law. (Meyer, 2010)

Contracts that are entered into by the parties through a written exchange of negotiations is known as written contract. Under such type of contract the offer is presented to the party under writing and the acceptance is made by signing the document containing the terms and conditions for the contract. The contracts are for being present in writing are easily enforceable for having the evidentiary value under the law. The contract when established is harder to escape by the parties than under face to face contract.

When two parties enter into the contract without being present in the same room or vicinity but exchange of words either in writing or oral, such contracts are called distance selling contract. An example of such a contract is that of the online contract formed for the sale of various items so listed online. The contracts may be entered through the website whereby the item is added to the cart, paid for at the checkout and sold after transfer of the money. These contracts require the seller to ensure that the taxes included in the cost are determined, the delivery details are determined and such other aspects as associated with the sale of the time. (Richards, 2006)

Other such distance selling contracts are that of the telephonic conversations wherein the parties discuss the contract over the phone. Another such contract is that whereby a sample is sent over to several clients like an offer to the world and the ones that use the product are accepting the contract. Herein the contract is only formed if the client accepts the use of product.  Contracts may also be entered into through mail or fax wherein the seller presents the terms of the contract through mail or fax and the accepting party communicates the same through the respective medium. These contracts are easier to enter into and save time.

Peter Abraham would require knowing these different aspects of contract in order to consider the type of contract to be created between him and the varied parties he enters into contract with. The contract may be created for different arrangements as per the requirements of the parties and the availability to create a written contract.

1.3 Give analyses of the following terms in contracts with reference to their meaning and effect /condition, warranty, innominate terms/

Accordingly, it is required that a standard contract should contain all the types of terms in order for it to be valid in nature. The different types of contract are considered to be as follows:

Condition: According to Lectric Law Library a condition is statement under a contract in order to fulfil the contract. The object of the same would enable suspension, rescission or modify the principal obligation.Every term that mandates the performance order to achieve the purpose of the contract is considered to be a condition. Such a condition is regarded as essential to the performance of the contract as the non-performance of the same results in voiding the contract by the affected party. The condition may be performed depending on its time so set in order to perform the same. A condition is important part of the contract because it directly relates to the performance of the contract. In the case of Poussard v Spiers the contract stated that Madam Poussards shall perform an opera for the company for three months. However, she became ill before the concert and missed the first four nights. The company voided the contract for the breach of a condition herein Madam Poussards failed to perform as determined under the contract.(Collins, 2008)

Warranty: According to the Duhaime’s Law Dictionary a warranty may be defined as the guarantee provided in lieu of performance for the product or a certain thing. Some terms are important to performance of the contract as they support the performance of condition under a contract. However, these terms when not performed do not amount to breach of a contract. The non-performance only allows the affected party to claim for the damages, specific performance or injunction. The warranties may of different types such as the specific warranty, full warranty, performance warranty and such other depending on the nature of the contract. In the case of Bettini v Gye it was determined that the opera singer had entered into the contract for the performance of the concert but could not attend the rehearsals for being sick. It was held that since the opera singer missed the rehearsal that was an implied warranty the contract is not said to be completely void. Thereby, the contract cannot be ended by the company for not attending the rehearsals but it can claim for damages for the loss so suffered.

Innominate terms: Certain types of terms are not recognised when breached. This is because such terms have different affect in different situations. The different types of terms are either condition or warranty depending on the type of breach so caused relates to the effect. If the term so breached is related to the purpose of the contract and affects its performance then it’ll be considered to be a condition and if not then it’ll be a warranty. These terms are known to be innominate terms and vary in meaning from situation to situation. (Giliker, 2010)

In the case of Schuler v Wickman Tools, Schuler granted the exclusive rights to sell the equipment to Wickman. Contract condition held that the Wickman has to send sales person to every named company at least once a week that could not be met being huge in numbers. Schuler on knowledge of this terminated the contract. Though it was clearly mentioned that the term is a condition the court held that it was a warranty because the way the sales are to be made are only indirectly related to the contract. Thereby the contract is not breached for condition but warranty. The remedies applicable for the breach would be that of the warranty such as specific performance or claiming damages.

A clause that restricts the liability for non-performance of the contract is regarded as the exclusion clause. The exclusion clause should be directly related to the performance of the contract for it to be valid. The clause is only valid if it contains the term of performance of contract and not the damages so suffered from the injuries or death from the non-performance. Such clauses shall be commonly intended to be included for it to be enforceable.The validity of these terms is provided under the UCTA, 1977 and UTCCR, 1999. The incorporation of the clause is through signatures, notice of previous dealings. If the documents are not signed but only provided under the receipts or notices then it is a part only if the same is provided before the contract is entered into. The exclusion clause only applies to a party to the contract under the privity.  In the case of Curtis v Chemical Cleaning Co., it was determined that whereby the receipt for the service is provided after the same has been agreed to, the same would not be the part of the agreement. As the implied rules and laws cannot be escaped through the exclusion clauses the same are to be invalid if present under the contra ct for misrepresentation of the scope.

Task 2:


Case 1

In the provided scenario it is required to be determined that the effect of invitation to offer differs from the effect of the acceptance to an offer. The advertisement so posted in the newspaper for the sale of the brown couch was in context of the making an invitation to offer and not the offer itself. Carol was in need of the couch for her apartment and the same was on sale by the seller wherein the price was quoted among the details of the couch. The price so quoted was for the general negotiation and not the final price. Whereby, Carol had posted an e-mail for the purchase of the same she was merely making an offer to the seller. The seller could either accept it or reject it. If the seller wants to accept the offer the same may be made through post or e-mail or telephoning Carol. Unless an acceptance is made no contract is entered into Fisher v Bell.

Case 2

In the present case scenario it may be stated that Devi had the interview with a prestigious firm concerning a cyber security position. He was a son of a powerful businessman and had specifically asked him to not meddle in the hiring process. The son had gone for the interview at the firm. Few days later after contemplation the firm hired him for the concerning position on 12th April. However, his father being worried about the job had offered the company to pay certain sum of money if the firm hires his son. The son was already hired a day before, thereby, the consideration herein would be considered to be of past nature. As the task so (Adams, 2008)discussed under the contract had already taken place the contract would be of void nature and the firm would not be able to claim for the damages from the father or fire his son Devi as the offer is accepted by him and would now be binding. Accordingly as determined in the case of the Chappel v Nestle, when the consideration is made it shall be sufficient and of future and not past nature or adequate.


Case 3

Herein under it may be determined that a restaurant had a certain policy regarding the responsibility of the customer belongings so entrusted with them. The customers namely a couple had gone to the restaurant one night to have dinner. At the reception they were made to check their coats. After the same was done as they proceeded they were handed over a slip stating the terms of the belongings stating that restaurant will not be responsible for any lost of belongings at the check in counter. It was however not brought to the notice of the couple when handing them the ticket. Accordingly, the person inserting the exclusion clause has the obligation to make the same come to the notice of the other party. The restaurant did not conduct the same. It was also determined that the wallets and other valuables shall not be left in the coat. After the dinner was finished the wallet was missing.

As recalled by them it was last seen in the coat but when they went to check the same the same was not present in the coat and is now assumed to be stolen. It is argued by the restaurant that it would not be responsible for the damages as the slip mentioned they had no responsibility for any such losses. The loss is found to be the fault of the restaurant as the slip so handed over was done after the coats were already checked in and not before. Thereby, the terms so being considered do not form part of any contract. Therefore, the exclusion clause so presented is not enforceable creating it a liability on the part of the restaurantOlley v Marlborough.

Case 4

In the present scenario it is presented that the tenant had undertaken a space on rent from a landlord and signed a contract. The space needed maintenance and the tenant spent the amount that while recovering from the landlord, he had been promise that in return the rent would not be increased for the next five years. However, he died the next year. The new landlord now wants to increase the rent. The tenant may either accept the same or discontinue the contract. But the contract has an implied term of claiming for the amount spent on the rented outlet. Thereby, the tenant would now be able to claim for the amount so present in the balance for the remaining four years on the contract. Therefore the implied term under the present contract is through custom that shall be honoured by the new tenant Hutton v Warren.


Case 5

According to the case facts a policy is applied for by a person. The policy document had certain questions related to the use of the car and claims so made in the past five years for the same. While answering the questions the policy applicant had not provided the correct information for the previous claims so made for theft as was specifically asked under the contract. As the applicant had misrepresented the answer for the question it may be stated that the condition had been breached. The misrepresentation is said to be statement that is not made in the full knowledge or kept hidden on a particular intent. As the term so breached from the misrepresentation is the condition by not providing the right answers the contract is said to be breached. This is because the policy questions acquired by the company are for the purpose of determining the policy of the car and if the same are not informed appropriately the contract may be breached for the breach of conditions. Thereby, the company would have the right to void the contract Bisset v Wilkinson.

Case 6

In the present case study the facts of the case present that an applicant for the policy of the car filled out a policy form. The form had various questions in order to gather the status of the car in order to provide a policy against it. The questions so asked were in respect to the previous claim so made and the condition of the car and the originality of its parts. The questions were however answered to the best knowledge the owner was not well informed of the status of the car. This would amount to giving the wrong answers and would make the company doubt the credibility of the owners of the car. The answers are said to be misrepresented in order to determine the actual state of the car. Misrepresentation is said to be statement that is believed before or while entering into the contract. If it’s the latter the same would be a term of the contract. As in this case the misrepresentation was a term the contract may be voided by the company for the breach of a condition trough misrepresentation. 

n the case of Nottingham Brick & Tile Co. v Butler the case was to mislead the party by telling only part of the truth as provided under the present case study. It may be determine that such a statement is regarded as a misrepresentation. The same shall be that of the warranty for not telling about the previous claims if any made for the car. Secondly, the originality of the parts of the car is not a half-truth as she could have easily checked for the same. Thereby the second term would be condition as there is no escape for the same. Therefore, the contract so breached is from misrepresentation of condition as well as the warranty.

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Task 3:


Liabilities in Tort

Liabilities in Contract

The liability under the tort is measured based on the situation

The same is decided based on the consideration under the contract

The liability under tort is analysed based on the presence of factors such as the remoteness of damage or proximity

The liability under contract is considered to be based on validity of the contract

The liability under tort arises from the breach of duty existing under the society

The liability under the contract arises from the breach of duty under the contract so agreed to between the parties. (Bell, 2013)

The right breached under the tort is that of right in rem.

The right so breached under the contract is that of the right in personam

The parties not related prior to the wrong under tort

A contractual employee relationship is present for the wrong committed under the contract.

The liability arising under the tort is different from that arising under contract. Though the liabilities arising under both areas of law is strict in nature as these arise from the breach of duties existing of civil nature. Both the liabilities are similar in nature when in comes to performance, as it is strict under the law. Once the liability is created the same is to be fulfilled by the party responsible for causing the damage. Therefore, although the creation of liability is different the performance of the liability is similar in nature.


The liability arising under the tort for negligence is dependent on the performance of the duty of care so owed towards the neighbour. The duty of care is present in order to ensure that the act so performed by the party does not affect the safety of the neighbouring party. The duty of care so existing when breached due to irresponsible behaviour or neglect or forgetfulness then it is considered to be an act of negligence. The duty of care so breached shall directly impact the damages party in a manner that is quantified through monetary, physical or psychological harm. The parties to the contract should not have prior relationship of any aspect under the society. (Giliker, 2010)

The case of Mrs. Stevenson describes the neighbour’s principle wherein the parties so associated from the wrongful act shall be directly related by the wrong. The manufacturer’s liability for the person consuming the product causing serious damage is to be analysed in a way that it helps establishing the same. It is important that the manufacturer realises the duty so owed by him towards the society at large for anyone who is capable of consuming its products. Likewise, under the case of Caparo industries the concepts of wrongful act were discussed through a three-fold approach. It includes factors such as the remoteness of damage, proximity, or causation. It is also determined that whereby a possibility of damage may be foreseen by the party performing any act, it is important to undertake duty of care. (TAN, 2008)

Therefore, it may be stated that for a negligence to be valid under the law, the duty of care shall exist against the society at large. The same shall be breached from negligence in order to create a liability for injuries so caused to the affected parties. The affected party shall be so seriously affected considering remoteness of damage and causation that it causes injuries in terms of monetary loss, physical or psychological loss.


The liability so arising on the part of a party for the performance of the wrongful act by another party is known to be vicarious liability. The liability is such because the party delegating the same would enjoy the benefits of the act so performed. It would be considered as a vicarious liability whereby an employer employees a person to perform a certain task for its benefit. Therefore, it is necessary that when the breach is being committed the party is an employee and the same is being done in the due course of work that has been officially assigned to the employee by the employer. The benefit is the purpose of the vicarious liability. Such a liability also exists within partnership, agency and master-servant relationship.

According to the Health and Safety at Work etc. Act the employer is responsible to maintain the safety of the premises in order avoid any wrongful act to take place by the employees. The employer should provide for decent sanitary and water availability. The premises should have equipment that are latest and modern in order to ensure the standardised approach Rose v Plenty. The employer under the Occupier’s Liability Act should ensure that the people present on the premises are safeguarded from any danger so present at the time. This would mean that warning signs or notices shall be timely issues in order to ensure the safety of the visitors and the non-visitors Lister v Hesley. (Meyer, 2010)

Task 4:


Case 7:

According to the case facts it is determined that a patient was suffering from chest pains and had gone to the hospital to get treated. The doctor was busy as informed by the nurse and he was not seen but prescribed over the counter medicines in order to treat him. He went home with the medicines. Next day it was found that the patient had died from pneumonia from a toxic mould in his house. It may be derived that the patient had not died from the medicines so prescribed without performing a check up but the toxic mould Hedley Byrne & Co. Ltd v Heller & Partners Ltd. . Herein, the liability so arising on the part of the doctor would be for the non-performance of the duty so derived from the profession. The profession of doctor makes it important to not prescribe medicine without performing a physical check-up. Still the doctor did that same. As the doctor had breached the duty it would be considered as the breach of duty of care and professional negligence. The hospital would have been responsible in the case of death from prescribed medicines, as it is the final authority and employer of the doctor Clack v Wrigleys Solicitors LLP. (Vettori, 2007)


Case 8:

Accordingly, it is derived from the case study that the driver was an employee of the company. He had been assigned a duty to pick up a client and drop her back. After the driver had arrived at the airport he realised there was time for the plane to land. He decided to have some drinks. After the plane landed he drove the client back. On his way back for being drunk he could not drive straight and caused an accident damaging the car as well as the client. It may be derived according to the case of Rose v Plenty, that the wrongful act so committed on the job was not so far from the duty so assigned to the driver as he was performing the duty as asked by the employer. It may be analysed that as the damage so occurred from the accident was while performing the official duties, the employer will be liable for the negligent act so undertaken by the driver and the loss so suffered by the other car and the client. (TAN, 2008)

Case 9:

Under the present case it may be stated that a delivery driver had been assigned the task to load and unload the pallets from the truck. The marketing management had assigned the responsibility of maintaining health and safety requirements on the premises to another organisation. It so happened one day that while performing his official duties the driver slipped and the pallet was thrown in the air leading it to fall on another employee causing him damage. The Supermarket now contends that it would not be responsible for the damage as the health and safety standards were not to be maintained by them but another organisation. The case of Mersey Docks explains that whereby, the employee has more than one employer, the employer having the direct control over the employee would have the responsibility of the damages. The employer may only control what to do but not contain how to do the same. Also, the original employer has an extended duty of care in all situations for its employee be it under indirect control. Thereby, in the present scenario as the accident had occurred on the premises of the Supermarket and being the original employer, it would be responsible for the damage so caused to the other employee on the premises. (Giliker, 2010)

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In the present assignment the elements of the contract are identified and analysed. The different types of contract and the different types of terms so included are studied and researched in order present an accurate analysis. The breach of the contract from the non-performance has been analysed against the breach of duty of care under the law of tort has been determined with respect to performance, elements, duties, rights and damages suffered. The tort of negligence has been presented with respect to the case laws. Likewise, an analysis of the vicarious liability is drawn.


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