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Unit 5 Elements of Valid Contract in Business Assignment
Diploma in Business
Unit Number and Title
Unit 5 Elements of Valid Contract in Business Assignment
This is a solution of Elements of Valid Contract in Business Assignment in which we discuss controct law, types of contract, contractual liability.
1.1Explain the essential elements required for the formation of a valid contract.
To make a contract requires presence of some basic fundamental which are called essential elements of a contract. The same are:
Offer is the first contract essential. An offer is a form of offeror intention which is conveyed to an offeree wherein an offeror wishes that his terms of offer are met by an offeree (Harvey v Facey . Both verbal and written forms of offer are valid. (Elawresource.UK, 2016)
Acceptance takes place when an offer is made to an offeree. When the offeree approves the terms of the offer then an acceptance takes place. It must correspond with the offer terms to be valid (Entorres v Miles Far East ). (Elawresource.UK, 2016)
The offer and acceptance results in agreement. This agreement must be held along with some kind of gain or benefit which is called consideration in law. Consideration makes a contract legal and enforceable (Currie v Misa (1875). (The Law Teacher, 2016)
Also, the parties must be capable, that is, major and sound mind and should have legal intention to bind by the contract terms.
Thus, these are the contract essentials which are required in contract formation.
These contract fundamentals are very necessary because it is only when all the fundamentals are met together that a contract is made. Even if one fundamental is not met then there can be no contract that can be established.
1.2Explain and discuss the impact of the different types of contract
Many contracts can be established with the help of contract fundamentals. The same are:
- Unilateral and Bilateral –When the parties exchange promises with each other, that is, offer and acceptance, then the contract is bilateral. But, when offer is made but the acceptance is undertaken by the acts of the other party then the contract is unilateral. (RocketLawyer, 2016)
- Contracts under Seal (Deed) and simple –The contracts which are in written form. Signed by witnesses and is sealed then the contract is said to be contracts under seal or deeds. Normally, contracts for property are deed contracts. But, the contracts which can be made orally or in written form along with consideration and does not require any specific procedure is simple contracts. (Clariclegalservuces, 2016)
- Written and verbal – the contract made on the piece of paper in black and white are written contracts. However, when the parties orally exchange their respective terms then the contract is oral in nature. ( Jim Blythe, 2013)
- Face to face and Distance Selling – when the contract that is made when the parties are physically sitting and looking at each other then the contracts are face to face in nature. But, when the contract is made when the parties are not physically with each other then the contract are distant selling contracts. These can be made electronically through internet or over telephone. (Jones & Benson, 2016)
- Impact –it is submitted, all kinds of contract are valid and enforceable, regardless of their forms, provided all the contract fundamentals are met. However, if the contract is on written form or is in the form of a deed then such contracts have more value in law as such contracts can be proved easily in courts as the written terms can be laid down in evidence. Oral contracts or simple contracts which lack proof are difficult to establish in courts and does not have significant impact in law.
1.3Explain and analyze the different forms of contractual terms
When a contract is made by the parties then the terms of such contract, whether written or oral, can be distinguished in two categories, that is,
- Express – The terms which are jointly reciprocated by the parties intentionally amid themselves are express in nature (Bannerman v. White (1861).
- Implied – the terms which are not express but are made part of the contract law, custom, usage etc are implied in nature and must be honored by the parties AttorneyGeneral of Belize v. Belize Telecom Ltd. (2009).
The terms can also be distinguished on the basis of importance that they hold in contract. The same are: (Beatson & Cartright, 2016)
- Conditions – those terms which are basis/fundamental/root of a contract with which no contract can be performed are conditions (Poussard v Spiers (1876). If a condition is not met then the party who is aggrieved has right in law to cancel the contract. the defaulting party has an obligation to compensate the other party for non-performance of the condition.
- Warranties – The terms which are part of the contract but are not required for its performance are warranties (Bettini v Gye (1876). These are ancillary term and if not met then only compensation can be received by the aggrieved party.
- Innominate –when the term is not specifically distinguished as condition or warranty but takes the nature f one of them depending upon how the term is breached and what is its significance in the contract (Hong Kong Fir Shipping v Kawasaki Kisen Kaisha .
- Exclusion clauses – further, those terms which are made part of the contract jointly by the parties and which excludes/limits the obligation of one party when any specifies incident is incurred, then, such are exclusion terms. If the terms I incorporated unilaterally then the party must make all efforts to bring the same within the notion of the other party to make the term enforceable L'Estrange v Graucob . (The Law Teacher, 2016)
2.1 Apply the law on essential elements to the scenario
Whether Abel was entitled to the car which was advertised by City Car Dealers?
A contract is the combination of offer, acceptance, consideration, capacity and legal intention of the parties.
An offer is a form of offeror intention which is conveyed to an offeree wherein an offeror wishes that his terms of offer are met by an offeree ((Harvey v Facey ). Both verbal and written forms of offer are valid. Acceptance takes place when an offer is made to an offeree. When the offeree approves the terms of the offer then an acceptance takes place. It must correspond with the offer terms to be valid. The Acceptance must be communicated by an offeree and must reach the offeror on order to be effective and binding ((Entorres v Miles Far East ). (Elawresource.UK, 2016)
But, when unilateral offers are made then there is no need for any communication of an acceptance. In Unilateral offers, an offer is made by one party and a prescribed mode of acceptance is mentioned. The offeree has to comply with the prescribed mode in order to depict his acceptance. The actions of the offeree are deem acceptance in unilateral offers. In Carlill v Carbolic Smoke Ball Company , an advertisement is placed and the prescribed actions are mentioned by the company. The plaintiff has comply with all the due requirements which are considered as acceptance and a contract was established. The advertisement was considered as unilateral offer (though normally are invitation to treats as held in Carlill case) because the company has deposited money in the bank to show its genuinely. (Elawresource.UK, 2016)
The offeror must face the consequences if wishes to place unilateral offer.
An advertisement is placed by City Car Dealers. Normally an advertisement is an invitation to treat as per Partridge v Crittenden (1968) and Adel must place offer to the dealer.
But, in the given case, the advertisement is considered a unilateral offer by applying the law in Carlill case, this is because the dealer has laid down conditions which if fulfilled by any person is deem to be an acceptance. Adel has comply with all the terms such as, he was the first to run up the city mountain on 1st November, obtained a ticket and return to the showroom.
Further, all the three cars are placed at the forecourt of our showroom to show the genuinely to the public. Thus, the advertisement is a unilateral offer and not an invitation.
Adel has complied with all the formalities that are required to prove his acceptance.
So, Adel has accepted the unilateral offer of the dealer and thus there is a valid contract between the two. So Adel can sue the dealer for the enforcement of the contract.
2.2 Apply the law on terms to the scenario
Whether the exclusion clause made part of the contract is valid and applicable?
The exclusion clause excludes/limits the liability of one of the party provided the clause was made part of the contract with the approval and consent of both the parties. The clause can be incorporated by signature or notice. If the party put his signature on the contract then the clause is binding irrespective of the fact whether the same is read by him or not (Wilton v Farnworth (1948).
But, as per section 2 of the Unfair contract Terms Act, 1977, a party cannot rely on the exclusion clause which excludes liability for death or personal damages out of negligence. (ElawresourceUK, 2016)
Application & conclusion
Thus, Eric brought a car from the showroom of Rani by signaling a standard form of contract which contains an exclusion clause ‘‘No liability is accepted for death, personal injury, damage to property or consequential loss arising from driving a car which is purchased from the show room’ . Since the contract is signed thus the clause must be applicable upon Eric.
But, since the clause is trying to exclude the liabilities which is in contrary to Unfair contract Term Act 1977, thus, the clause has no validity.
Thus, the clause has no legal significance.
2.3 Evaluate what remedies are available to Eric
What remedies that can be availed by Eric?
The remedy for the breach of any contractual term depends upon the kind of term that is violated.
The terms which are basis/fundamental/root of a contract without which no contract can be performed are conditions and if they are violated then the aggrieved can cancel the contract and seek compensation (Poussard v Spiers (1876). But, the terms which are part of the contract but are not required for its performance are warranties and if they are not met then only compensation can be received by the aggrieved party (Bettini v Gye (1876).
Application & conclusion
Now, the car which is purchased by Eric is faulty in nature as the brakes of the car were not working. The main aim of buying the car was that it must perform the actions for which it has been purchased, that is, driving. But, this core term is violated by Rani.
Thus, a condition is breached, so Eric can sue Rani and can terminate the contract. He can also seek damages and compensation for the same.
3.1 Contrast liability in tort with contractual liability
There are several contrasting features that exist amid the liability in tort when compared with contractual liability.
The contractual liability is strict in nature as the liability is as per the terms of the contract which determines the liability of the parties, but, the liability in tort is fault based as it is only when the defendant has committed some kind of wrong that a liability is imposed upon him. Further, the liability in contract is predetermined/pre-decided as per contract terms but it is the court which determines the liability in tort. The liability is tort is imposed only upon the parties to the contract, but, the liability in tort is imposed only upon those parties who are in proximate relationship with each other. (Bar et al, 2004)
Thus, these are some of the basic distinction amid the liabilities of the two laws.
3.2 Explain the nature of liability in negligence
The law of negligence is a law that was developed in Donoghue v Stevenson (1932) wherein the defendant was only held to be negligent when he was not able to fulfill his legal obligation resulting in causing damages to the plaintiff.
- that the defendant must take all due care while performing his actions so that no injury is caused to any plaintiff who is considered to be his neighbor, that is, who is in such a close and proximate relationship with the defendant that the acts of the defendant will defiantly fall upon such plaintiff. There must be reasonable forseeability of the loss against which the duty of care is imposed (Anns v Merton London Borough (1978).
- The duty of care when not comply with as per the required degree of expectation in the given situation then the duty is breached (Nettleship v Weston (1971)
- The breach should have caused damages to the plaintiff who is direct and not remote.
Thus, the liability in tort is fault based as it is only when the defendant has committed some kind of wrong that a liability is imposed upon him.
3.3 Explain how a business can be vicariously liable
When the employer is held liable for the wrongful actions of the employees which are carried out by him in the employment course, then, this shift of liability occurs as per the law of vicarious liability. Vicarious liability occurs when: (InBrief, 2016)
- The parties are in the relation of employer and employee;
- The employee is acting as per employment rules;
- Some action is undertaken by an employee while carrying out employment;
- The act has caused injury to third party;
- The acts are directed and controlled by an employer.
In such situation, an employer is vicariously liable for the acts of his employee.
4.1 Apply the elements of the tort of negligence and possible defences which could be used by the defendants
Whether Dennis and Emma can sue George and the Restaurant for negligence?
In order to make any defendant liable for negligent actions, it is necessary that:
- The defendant is imposed with duty of care. The duty is only imposed when the actions of the defendant may cause harm to the plaintiff who is in proximate relationship with the defendant and the loss which may be caused is reasonably foreseeable (Donoghue v Stevenson (1932).
- The duty of care is violated when the level of care that is expected in a situation is not met with (Nettleship v Weston (1971)
- The violation of duty has resulted in causing harm to the plaintiff. The loss which is caused should be because of the acts of the defendant and the same must be predictable.
Once, all essentials are proved, the defendant is negligent. But, the defendant can take defenses to protect his interest, that is,
- The defendant can prove that the loss which is caused to the plaintiff is by his own negligent act and thus he is protected under volenti on fit injuria.
- That the plaintiff has also contributed to his own loss along with the negligent actions of the defendant and thus the defense of contributory negligence can be raised.
Application and conclusion
It is submitted that Fresh foods (restaurant) is in occupation to provide food to his clients. Thus, it is its duty under law to provide safe products to his customers.
But, this duty of care is not cater by the restaurant as the restaurant is providing long expired food stuff to its customers. Because of this breach of duty of care injury is sustained by Emma.
Also, Emma and the restaurant are in proximate relationship with each other and Emma and Dennis are the neighbors of the restaurant. Also, the restaurant can reasonably foresee the loss which may be caused by providing the stale food.
Thus, there is a clear breach of duty of care by the restaurant resulting in loss to Emma.
So, Emma and Dennis can sue fresh Foods under the law of negligence.
However, fresh food can protract its interest by relying on the defense of contributory negligence by stating that they both are aware of the food quality that is served in the restaurant and thus has voluntary agreed to consume the food and hence the defense of volenti non fit injuria is applicable.
4.2 Apply the law on vicarious liability
Can Fresh Foods can be held vicariously liable for the acts of its chef, George?
The law of vicarious liability is only applicable in situation wherein the parties are in the relation of employer and employee and the employee is acting as per employment rules and undertake some act while carrying out employment and resulted in causing some kind of injury to a third party. Normally, when the employer is held liable for the actions of the employees which are carried out by him in the employment course, then, this shift of liability occurs as per the law of vicarious liability. (InBrief, 2016)
It is necessary that any act of an employee outside the scope of an employment and which are undertaken by an employee out of rage and personal anger are not within the scope of vicarious liability.
Application and conclusion
It is submitted that George is the Chef of Fresh foods. Thus, George is the employee of Fresh Foods. While carrying out his official duties George is preparing food with the help of expired food stuff. This food stuff has resulted in causing harm to Emma. Thus, it is because of the acts of George carried out within the course of employment that has resulted in loss to Emma (outsider). Thus, the law of vicarious liability is fully applicable.
However, it is important to submit that the Restaurant management has warned George several times not to conduct such practices. Thus, use of stale products is not authorized by fresh Foods. George is violating the instructions of the Restaurant and preparing the food despite express directions of the restaurant. Thus, it is submitted that the acts of George are not within the employment course.
So, Fresh Foods cannot be held vicariously liable for the actions of George as the same are outside the scope and direction of Fresh Foods.
Bar et al (2004) The Interaction of Contract Law and Tort and Property Law in Europe: A Comparative Study. sellier. european law publ., 2004
Beatson & Cartright (2016) Anson's Law of Contract. Oxford University Press, 19-May-2016.
Jim Blythe (2013) Principles and Marketing Principles. SAGE, 01-Nov-2013 - Business & Economics
Jones & Benson (2016) Publishing Law. Routledge, 22-Mar-2016
AttorneyGeneral of Belize v. Belize Telecom Ltd. (2009).
Anns v Merton London Borough (1978).
Bannerman v. White (1861).
Bettini v Gye (1876)
Carlill v Carbolic Smoke Ball Company .
Currie v Misa (1875) .
Donoghue v Stevenson (1932);
Entorres v Miles Far East 
Harvey v Facey .
Hong Kong Fir Shipping v Kawasaki Kisen Kaisha .
L'Estrange v Graucob .
Clariclegalservices (2016) Difference between a simple contract and a deed (online). Available at: http://www.clariclegal.co.uk/blog/difference-between-a-simple-contract-and-a-deed. (Accessed on 22nd October 2016).
ElawresourceUK (2016) Contractual agreement - offer and acceptance (online). Available at: http://www.e-lawresources.co.uk/Offer-and-acceptance.php/. (Accessed on 22nd October 2016).
ElawresourceUK (2016) Unfair Terms - Regulation by statute - Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contract Regulations 1999 (online). Available at: http://e-lawresources.co.uk/Unfair-Terms---Regulation-by-statute.php. (Accessed on 22nd October 2016).
InBrief (2016) Vicarious Liability: The Liability of an Employer (online). Available at: http://www.inbrief.co.uk/employers/employer-vicarious-liability/. (Accessed on 22nd October 2016).