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Unit 5 Legal Contract Negligence Business Assignment
Diploma in Business
Unit Number and Title
Unit 5 Legal Contract and Negligence Business
The key element essential for contract formation comprise of an offer, acceptance to the offer, intention and capacity to enter into the contract and finally the considerations of the contract. Meeting of minds is very crucial for an acceptance of an offer. However it is important for Peter Abraham to understand that an individual with a mentally challenged situation or in drug addicted situation do not own the capacity to enter into a contract. Minor below the age of 18 years are also not entitled to enter into a contract. An invitation to treat is not an offer and silence is not considered as an acceptance to the offer. Important to convey that acceptance to an offer can be made by conduct and the offeror cannot revoke the offer. Acceptance should be made within a reasonable time period. Another important aspect of contract formation is criteria for termination of an offer. An offer can be revoked at any time prior the acceptance to the offer provided that the revocation is properly communicated. Postal rule are not applicable in case of termination of offer. Furthermore an offer is terminated following lapse of time, rejection or death of one of the contracting parties (Adams, 2008).
As a suggestion to Peter Abraham it can be stated that he should focus on the contractual terms and conditions before entering into a business strategy. It is crucial for him to document all the details of the contracting parties with clearly mentioning the contractual terms and conditions. The other important aspects in this respect are incorporation of provision of payment options, product or service specification also with mentioning the validity period of the said contract. Restoration of confidentiality in the said contract is also important for both the parties. Peter Abraham should also emphasis on understanding the implied terms and exclusion clause applicable for the contract he intent to sign for business purpose (Adams, 2008).
- Face to face: Interpersonal or face-to face communication is an approach wherein a contract is formed through verbal interaction between parties and written documentation of the contractual terms is missing. However, meeting of minds is an absolute necessity in this respect. It is a tedious job to address breach in contract in such cases.
- Written contract: A contract formed by proper documentation clearly mentioned the contractual terms and conditions is a written contract and such contracts are legally safer to address the breach related cases. A written contract is legally validated provided that the contracting parties bear the capacity to enter into the contract and give their mutual consent towards the contractual considerations. Peter Abraham is recommended to enter into a written contract with his business partners.
- Distance selling: Distance selling by communication over the telephone or through internet is another mode of contract formation but do not follow the postal rule of contract formation. This particular mode is also considered as instant mode of communication that can be further understood by reviewing the case of Entores versus Miles Far East Corporation (1955) (Maclntyre, 2011).
- Condition:A condition is identified as an important term that form the root of the contract and breach of a condition can lead to damages or discharge or both. Furthermore if a breach in contractual condition is proved the injured party own the right to terminate the contract or can also refuse execute their contractual obligations (Maclntyre, 2011).
- Warranty:A warranty in a contract can be defined as a subsidiary obligation with respect to a contract. A breach in warranty does not give legal permission to the injured party to terminate the said contract. However the injured party own the legal right to sue the opponent for the damages suffered (Maclntyre, 2011).
- Innominate terms:In a contract formed an implied term that is neither presented as a condition nor a warranty and remain somewhere in between can be defined as intermediary or innominate term and it is crucial for the contracting parties to properly identify such terms. The case of Hong Kong Fir Shipping versus Kawasaki Kisen Kaisha (1962) was the origin point of innominate term (Maclntyre, 2011).
- Exemption clauses: An exemption clause can be defined as a contractual agreement that intent to stipulate that a party is excluded to bear the contractual liabilities to a certain extent, however the validity of this clause is tested in accordance to the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulation 1999. Photo productions versus Securicor (1980) can be reviewed to understand how exemption clause is applied to limit the contracting parties from bearing the liabilities (Maclntyre, 2011)..
Case 1- Agreement
An offer can be legally defined as a definite and unequivocal promise or willingness to be bounded on a particular contractual term without indulging into further negotiation, however an offer can be oral, in writing or by conduct. A mere statement of selling price, a statement showing intention to sell and invitation to treat is not an offer. Advertisement, exhibition of goods for sale, shop window displays, goods on shop shelves, auctions and tenders are variants of invitation to offer (Beale, 2010). Referring to case 1 of task 2 it is observed an advertisement for furniture is given and the subject named Carol has communicated with the seller revealing her intention to purchase the advertised product. Hence this case has reflected an invitation to offer and not an offer. The case of Partridge versus Crittenden (1968) can be cited for a better understanding (Casebrief.me, 2016). Therefore it can be inferred that as invitation to treat is not an offer, acceptance to the offer is not validated and hence Carol has not entered into any contract with the seller. Important to highlight that a price label is an invitation to treat to the customer to make an offer which the shop can either accept or reject. The Case of Fisher versus Bell (1961) is a good example to review (E-lawresources.co.uk, 2016).
Case 2 – Consideration
A contract is initiated by an offer made by a promisor followed by the acceptance to the offer by the promise. Consideration playing a pivotal role in contract can be presented in monetary form or as a promise to do or not to do something. However presence of mutual consent between the parties is essential for keeping the contractual considerations and capacity to enter into the contract is mandatory. Hence consideration in a contract can be viewed as an exchange of bargained-for promises (McKendrick, 2008) (Beale, 2010). Case 2 of task 2 is an example of contractual consideration wherein the Preston can be identified as the promisor and George, Smith & Fogarty, Inc can be presented as the promise. Important to mention that in case of a bilateral contract both the involved parties should remain obliged to keep the considerations while in case of unilateral contract only the promisor should remain obliged to the contractual consideration. However it is equally essential to convey that consideration must not be past and must be sufficient. Consideration must move from the promise but need not to flow to the promisor. In case 2 the legal implication of considerations are not valid as the consideration is already past and it is not moving from the promise. In this context the case of Re Mc Ardle (1951) can be cited. However important to note, that past consideration can remain valid provided if it has been preceded by a request. The case of Lampleigh versus Braithwaite (1615) is a good example in this respect. Furthermore for understanding that consideration must move from the promise the case of Tweddle versus Atkinson (1861) can be cited (E-lawresources.co.uk, 2016). Hence George cannot enforce the promise as the consideration is not sufficient with a natural duty already owned. The case of White versus Bluett is a good example to review in this respect (Maclntyre, 2011).
Case 3 – Exclusion clause
Case 3 of task 2 can be considered as case example related to exclusion clause. An exclusion clause can be defined as a contractual term that is incorporated in a contract with an intention to limit bearing the liabilities by the contracting parties, although the implementation of exclusion clause is thoroughly validated by the judiciary body of the country. The key criteria of implementation of exclusion clause in that the said clause should be clearly communicated to the other contract party while entering into the contract. In this respect the case of Thorton versus Shoe Lane Parking is a good example to review. Furthermore, the exclusion clause should be brought into attention of the other party. The case of Chapelton versus Barry UDC can be cited. Another key aspect of exclusion clause is that the terms should be properly incorporated. Incorporation by signature, by notice and by previous course of dealing is the major approaches in this respect (Lawhandbook.sa.gov.au, 2016). In case 3 it is clearly evident that the terms included under exclusion clause have been properly neither incorporated nor communicated to the other party. Hence the restaurant owner who is the defendant party in this case cannot limits itself from bearing the liabilities of the contract by application of exclusion clause. The claimant has right of obtain compensation from the defendant party in this case.
Case 4 – Implied term
The legal guidelines presented by the English contract law has categorised contractual terms into two separate groups: expressed terms and implied terms. In a contract signed between the two contracting parties, the terms that are implied in nature although not mentioned in the said contract are considered as implied terms. Important to highlight that such contractual terms are enforceable in nature. There are three types of implied terms: terms implied through custom, terms implied in fact and terms implied at law (Harder, 2011). Case 4 of task 2 can be explained in light of the legal implications of implied terms. In this case Aaron and Zehphra were the contracting parties between whom the initial contract was formed. Yeti can be identified as the third party. In this case, with the death of Zehphra, the initial contract signed was terminated according to English law, a contract is terminated by rejection or refusal by the offeree, through counter offer, lapse of time, revocation or withdrawal by the offeror, failure to condition and death of one of the parties. Hence as the contract was already terminated with Zehphra’s death, no contractual conditions are valid. Hence implied contractual terms cannot be applied in this case and Aaron is not entitled for any compensation. In this context the case of Shell UK versus Lostock Garage Limited (1976) can be cited as an example. In the particular case, the Court of Appeal refused to imply a term in fact as implementation of this terms was not required. The court also refused to imply a term in law (E-lawresources.co.uk, 2016). Therefore for in depth validation of case-4 with respect to the applicability of the implied terms ‘officious bystander test’ and the ‘business efficacy test’ can be considered.
Case- 5 of task 3 has indicated a situation related to the voidable contemporary issues of a car insurance policy. An evident from the case the concerned policy holder has failed to incorporate the proper information with respect to a policy claim. In this context it can be further added that practices like non-disclosure of material fact, misinterpretation, frauds and mutual mistake render an insurance policy to become null and void. Voiding a policy is found to be related with safeguarding the interests of the insurance agent. Furthermore an insurance policy having no legal authentication can be considered as a voided policy and the policy holder cannot claim against that voided policy (Robertson, 2004). In case 5, the car insurance agent is legally permitted to void the policy as the policy holder has clearly practiced an illegal act of non- disclosure of material fact.
Case – 6
Case 6 of task 2 similar to the situation of case 5 has depicted a situation wherein policy holder has failed to mention about the technical alteration made in the concerned vehicle. The policy holder has also not mentioned that a policy claim has been already made within the past 5 years. From the above mentioned facts it is strongly evident that a non-disclosure of material fact along with misinterpretation has occurred. Referring to the factors that are justified to void a policy it can be further added that in this case, the policy holder may void the said policy. But the policy holder cannot void the policy from the start date because non-disclosure of material fact was not evident while the policy holder applied for an insurance policy. Hence renewal of the insurance policy can be voided (Robertson, 2004).
According to the legal doctrines, contractual liability can be explained as the obligation of the debtor to repaint prejudices incident to the creditor by the failure to fulfil or fulfilment of the contractual duties. On the other hand, tortuous liability can be defined as a mandatory legal relation that has emerged from an illegal act causing prejudices (McBride and Bagshaw, 2005). With an intention to understand the similarity between the above mentioned forms of liabilities it can be stated that both the liabilities are variants of civil liability with an identical structure. In both the cases, it is required to fulfil the same structural element along with cumulative existence of four conditions namely legal action, prejudice, causality relation of the illegal action and prejudice and guilt. Another similarity in this respect is in both the cases the idea of repairing the prejudice is prevalent and in both the cases that damages caused and the earnings and benefits is not achieved (Edwards et al., 2012).
The key differences between tort liability and contractual liability exist within the fact that the former is the obligations of an individual who caused a prejudice to another individual, through an illegal extra-contractual action (Ludusan, 2013). On the contrary, in case of contractual liability the individual concerned in a part of the contract and in such case prejudice is resulted by the failure or delay to accomplish the contractual obligation. Furthermore, in case of a tortuous claim, it is not mandatory for the defendant to bear any association with the claimant while in case of contractual claim; the defendant must bear an association with the claimant (Horsey and Rackley, 2009).
The decision made in the case of Brown versus Kendall (1850) put forwarded that fact that negligence emerge as a distinct tort and the essence of tort was imposed on the individual who was held accountable for the careless or negligent action (Casebriefs.com, 2016). Although previously defendant’s failure to exercise duty of care and the plaintiff’s proximately resulting harm are the key elements with respect to establish a negligent claim, but in the later negligence is developed based on duty of care, breach, cause and damages suffered. Duty in this respect is considered as the obligation of one individual towards another and flows from millennia of social customs, philosophy and religions; while breach is identified as the misconduct or the defendant’s improper act or omission (Owen, 2007).
A number of case examples can be cited in order to elaborate the legal implication supporting negligent claim. The case of Donoghue versus Stevenson (1932) also known as the ‘snail in the bottle case’ is a classical example in this regard. This case has clearly established the presence of negligence, lack of duty of care and has also ascertained that reasonable care is required to perform a duty. The other case example that can be reviewed to understand the significance of duty of care in legal ground is the case of Home Office versus Dorset yacht Co. Ltd (1970) (Peel and Trietel, 2007). The case of Heasemans versus Clarity Cleaning (1987) can be looked into that presented a breach in duty supporting a negligent claim. Lack of duty of care supporting a negligent claim was also presented in the case of Booth versus Hwite (2003) and Green versus Gaymer (1999). However a negligent claim is nullified if no loss is proved. The case of Baker versus Willoughby (1970) can be reviewed in this respect (E-lawresources.co.uk, 2016).
In organizations, the employer is often found to be held vicariously responsible for the torts committed by an employee relation and the rationale behind imposing this particular type of liability is the fact that if someone have the control over another (i.e subordinates), the controlling body should also be liable for the actions of its subordinates. However in order to establish vicarious liability it is essential to address whether the tort committed by the accused is an employee to the defendant and whether the tort was incident during the service tenure of the accused employee. Control test, integration test, economic reality test and Salmond test can be pursued in order to hold an organization vicariously liable for a tort (Smith, 2011). The incidents of workplace accident, sexual assault, molestation, theft and deceit are the common examples for which an organization or an employer can be held vicariously liable. The case of Limpus versus London General Omnibus Company can be reviewed wherein the employer was vicariously held liable for the road accident caused (European Encyclopedia of Law (BETA), 2013). On the contrary in the case of Beard versus London general Omnibus Company presented the decision of the court that did not held the employer vicariously liable for the road accident.
Task – 4
Case - 7
The case of Donoghue versus Stevenson (1932) is the case from where emerged the modern law of negligence. Important to highlight that in order to establish a proper and correct negligent claim it is mandatory to prove that the defendant owned the claimant a duty of care, breach was committed by the defendant towards the duty, a damage was suffered by the claimant as a result of the breach and most importantly the damage was not too remote. Addressing the question of case 7 of task 4 it can be stated that the Goodmayes Hospital can be held responsible for the death o Mr. Brown provided the above mentioned factors of negligent claim are proved. Hence the concerned hospital can be held accountable if it is established that the on duty nurses and doctors owned Mr. Brown a duty of care that was breached causing damage to the victim. In this case, the first three factors are evident. But to hold the hospital liable for the death, it is also essential to prove that the damage suffered was not too remote. A Wagon Mound test can be conducted in order to establish that the damage caused was not too remote. However the court needs to find out whether a greater degree of care was required with respect to the risk of injury that was high (McBride and Bagshaw, 2005). In this respect the case of Glasgow versus Taylor can be referred (E-lawresources.co.uk, 2016). Also in order to hold the Goodmayes Hospital responsible for the death of Mr. Brown it is mandatory to conduct the ‘But for’ test. Through this test the claimant (widow of Mr. Brown) must establish that the loss suffered was caused by the defendant (Goodmayes hospitals nurses and doctors). The case of Chester versus Afshar (2004) is an example in this respect (E-lawresources.co.uk, 2016).
In light of the factors mentioned in the previous segment that are essential to establish a negligent claim it is justified to state that Goodmayes hospital cannot be held responsible for the death of Mr. Brown if it is established that the damages suffered was too remote. According to the legal principles of English laws, remoteness is considered as a set of rules in both torts and contract related cases that limit the amount of compensatory damages for a wrong action. The case of Lamb versus London Borough of Camden can be taken as an example that depicted a situation wherein remoteness of damage was proved and the defendant was not held responsible for the damages suffered. Furthermore a Caparo test is applicable for imposing a duty of care with respect to the personal injury suffered (Taylor, 2013). Therefore on the concluding ground it can be conveyed that Mrs. Brown cannot hold the Goodmayes Hospital responsible for the death of her husband if it is proved that the damage suffered was too remote and was not foreseeable in nature.
According to the legal guidelines of the Civil Liability (Contribution) Act 1978, vicarious liability is applicable provided an employer who is vicariously liable has the legal right to sue its employee in order to recover some or all of the damages caused. This law also permit the vicariously held employer to recover damages from the employee that is applicable in certain situations (Giliker, 2010). The case of Lister versus Romford Ice and Cold storage Co. (1957) can be cited that depicted it is an ostensible duty of the employee to compensate the employer for the damages or torts caused during his employment tenure. Case 8 of task 4 can be analysed in light of legal aspects of vicarious liabilities. In this case it is observed that an accident was incident due to the negligent action of the driver associated in a chauffeur company. A significant lack of duty of care was also evident from the driver’s side as he was driving in a drunken state that in itself is legally objectionable and a crime. As the accident occurred during the employment tenure, legal aspects of vicarious liability can be imposed on the company and the company can be directed to compensate the remedy suffered. However, referring to the previously mentioned implications of Civil Liability (Contribution) Act 1978, the chauffeur company owns the right to sue the accused driver and also may recover the damages from him. Salmond test can be conducted in order to confirm that the tortuous act was committed by the concerned driver during his duty hours (Geistfeld, 2008).
Case – 9
Employee safety is one of the key concerns of the organizations and according to the English contract law, organizations can be held vicariously accountable for the injuries and damages caused to the employees and by the employee to a third party. Important to note that the legal implications of vicarious liability can be imposed on the organization or the employer provided that the incident has occurred during the employment tenure and is related to the workplace of the concerned employee. As observed in case 9 of task 4 while loading pallets into the truck, the driver of the supermarket slipped on the tail gate and subsequently caused grave injury to his colleague. The marketing principle who was also the employer of the concerned person refused to compensate the damage caused and also held the truck driver, Mr. Jones accountable for the accident. The supermarket owner stated that the responsibilities of employee health and safety were already delegated to another organization. According to law, the parent organization cannot be held vicariously liable for damages suffered if the concerned task has been delegated, however the main organization should monitor whether the task delegated has been execute with efficiency. Important to note, that failure in proper supervision can held the organization vicariously liable for any adverse incident within the organizational premises (Giliker, 2010).
In this case vicariously liability is justified to be imposed on the supermarket owner because the accident suffered by the claimant was not committed by any independent contractor. Therefore in order to ascertain whether the supermarket is vicariously liable it is essential to pursue tests for employment status to determine whether the employee in question are classifies as an employee or not. The other investigative procedures applicable for case 9 are integration test to check whether the job of the accused person is an integral; part of the concerned organization and control test to establish who has the control over the way by which the task was evident to be executed. The case of Lister versus Hesley Hall Ltd (2001) can be reviewed in this respect that established a ‘relative closeness’ bridging the tort and the nature of employment in order to establish the liability (swarb.co.uk, 2016).
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