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Unit 7 Business Contract Law Assignment
Diploma in Business
Unit Number and Title
Unit 7 Business Contract Law Assignment
A contract is an agreement made between two parties called offeror and offeree. Basically in this Unit 7 Business Contract Law Assignmentthe elements of contract are discussed which are very important to be understood to form a contract legally. Understanding the different implications of helps the person realise his rights and duties in the society, personal life and in the organisation.
1.1 What are the essential elements required for the formation of a contract in the UK and explain their importance. Include an explanation of what is meant by ‘An invitation to treat’ with reference to the scenario 1 above.
A contract is a voluntary arrangement between two or more parties that is enforceable at law as a binding legal agreement. Contract is a branch of law of obligation in jurisdiction of the civil law tradition. To form a contract there should be four basic elements
- intent to be legally bound
Offer: According to sweet and Maxwell’s contract law revision an offer can be defined as the statement of willingness to contract on specified terms made with intention that , if accepted there will arise a binding contract.
Acceptance: Acceptance occurs when an offeree agrees to be mutually bound to the terms of the contract by giving consideration or something of value like money.
Consideration: It is a vital element of law of contract which might proof to be beneficial that must be bargained for between the parties and is essential for the parties to enter into the law.
Intent to be legally bound: It is term that is used in a aspects of contract law especially in the English laws that denotes that whether a court should presume that parties to an agreement wishing to be enforceable by law (Burrows, 2011).
In the above scenario James wants to sell his shop for £ 160,000.He gets a reply from martin who wants to buy it for £ 120,000ut James stated that he can accept minimum of £ 140,000. Two weeks have passed but there was no reply from Martin so, James agreed to accept £ 120,000 but there was no response from Martin.
As per Fisher V Bell (1961) 1 QB394 when a product is displayed in the shop with price line then it is an example of Invitation of Treat. Hence when James posted the ad to sale his shop £ 160,000 it is considered to an ‘Invitation to Treat’
1.2. In the report, identify and discuss the main types of contracts that may be entered into in the UK by individuals and businesses and discuss their impact.
There are different types of contract that are applicable to business. They are as:
- Express contracts: When there is an expression and conversation between the two parties it is termed as express contract. Hence in this case where Martin and James had word regarding the deal of the shop and a barraging happened between them is considered as express contracts.
- Implied contract: A contract where there is no occurrence of conversation between the parties is called the implied contract. Hence, in this scenario when James accepted to sell his shop at the price.
- Quasi contracts: In case of quasi contract there doesn’t occur any offer acceptance to construct a contract. Therefore there is no relation created between both the parties to form a contract. Hence a contract which is created virtually is termed as per law as quasi contract (Burrows, 2011).
2.1 Discuss the above scenarios in detail and apply various elements of a contract. In other words, are the contracts between ‘James and Martin’, and ‘James and Ben’ valid?
In case of James and Martin an advertisement and promotion was given to sell a shop at £ 160,000 but Martin gave a counter offer £120,000. On the Other hand James offered minimum of £140, 000 but martin never replied back James last price quote.
In the first scenario the first proposal was made by James on which martin accepted proposal with a new price quote but James again made a counter offer to which there was reply from Martins end. Hence, it can be sated that when counter offer is made it kills the first contract and creates a new offer. So as there was no reply to James answer the offer fails to form a contract which will not be considered as a valid contract.
In case of James and Ben James offered to sale his motor bike at £5000 which Ben accepted and wrote back to James and posted the letter. After posting the letter but before delivery he changed his mind and sent a fax to James to ignore the letter when it arrives to his place. James has proposed an offer to Ben which was readily accepted by posting a letter to James. Later, Ben later changed his mind and revoked the contract by sending a fax stating to ignore the letter sent by him. Therefore, in this case the validity of the contract depends on delivering of the letters i.e. if the letter reaches first it will be considered to be a valid contract but if the fax reaches first then it will not be considered as a valid contract.
M1 You are required to produce a formal report for your manager explaining the above requirements. The report should include; Title of the report, Summary, Introduction, Body, Conclusion, Recommendations and References.
Introduction: There have been two scenarios taken for making the report. In the first scenario James and Martin were the parties between whom the proposals occurred for selling a shop and in the second scenario the conversation and proposal were made for selling a motor bike.
As per case study in the first case there was an offer made and later a counter offer made for which the offer got cancelled automatically for which a valid contract was not formed (Chen-Wishart, 2005).
In the second scenario an offer was which was at first accepted but later it was revoked but in this case to form a contract it has to be determined which letter reached first to the proposer i.e. whether the letter sent by post or the fax. If letter reached first it will be considered as a valid contract and vice versa.
Hence, as per the above scenario it has been seen that there has occurred no valid contracts till now as one of the offer was revoked and in the other case the offer was never accepted as the counter offer cancelled the previous contract. As per law a contract can only be formed when all the elements are present in the agreement.
D1. Define and explain the term ‘Promissory Estoppel’ using relevant case law in your explanation.
Promissory estoppel is a type of legal principle which states that a promise is enforceable by law even it is formed without a formal consideration. In this case a promisor promises the promise that then depends on the promise to his consequent determinant. It is a tool to stop the promisor from declining the promise made to the promise. In case of Miller V. Lawloy. The court stated that it is not necessary to determine the relative applicability of the doctrines of the part performances compare to promissory estoppel as it was not required to differentiate them.
1.3 Analyse terms in contracts with reference to their meaning and effect and what would be the impact of such terms?
The various important terms relevant in the case have been mentioned below:
- Breach of contract: This refers to a situation where the party or the parties to the contract have defaulted in delivering their end of the contract deliverables. In this scenario the if a party to the contract fails to deliver the other part can rescind the contract on grounds of breach of contract.
- Frustration: This refers to the situation where the performance of the contract has been rendered impossible due to an unforeseen circumstance. A contract can be terminated on account of frustration by the parties to the contract.
- Exclusion clause: This is the situation where due to the happening of a particular event the particular party to the contract is not to be held liable.
2.2 Using the scenario 3, apply the law on these terms in these two contracts.
In the first case there has been a breach of contract as opined by the singer as she was dismissed or her services were terminated by the employers without giving her a notice. Hence if she is able to prove to the court that a breach has taken place she can claim damages on account of the same.
An employee is entitled to a certain amount of leaves during a year however due to illness or disablement the employee might not be able to attend office or report for work for a long period of time. This results in frustration where the performance of the contract becomes impossible. Though it is not just to terminate the services of an employee on grounds of illness however where the same leads to frustration the employer can terminate the employment. The tenure for which the same is considered to be just depends on the circumstances of the case (Geest, 2011).
In White v. Woolworth Canada Inc. (1996) 22 C.C.E.L. (2d) 110 (Nfld. S.C.A.D.) the court opined that the fact that the employee occupied a key position in the organization was also an important determinant in such cases. Hence where the employee was employed for a limited period of time and occupied a key position and could not report to work due to illness the employer was just in terminating the service of the employee as the same fell within the ambit of frustration.
Applying the rationale in the above case the employers are just in terminating her service.
2.3 Using the scenario 4, evaluate the effect of Expressed and Implied terms
In the current scenario the services or the contract with the farmer was terminated and the farmer was denied expenses borne by him for making the land ready for agriculture. Hutton v Warren  EWHC Exch J61, can be referred to in such scenarios where there exist implied terms to the contract. The court in this case order the defendant to pay the compensation amount to the plaintiff as there existed implied terms in such regions and this profession. Hence the farmer would be required to be made good for all the expenses as the same falls within the ambit of the culture of agriculture in village. Applying the rationale to the case above, it can be affirmed that the implied terms hold good in this scenario.
M2 Using the scenario 5, assuming there was no negligence, explain whether the exemption clause was valid or not and why?
In the second case the customer was wrongly informed about the exclusion clause i.e. facts were misrepresented. If the customer is able to prove to the court the same he would be able to claim damages for the same. Even if it is considered that there existed no negligence on the part of the shop owner the exclusion clause is not valid as the facts surrounding the same were wrongly presented by the assistance (Geest, 2011).
D2. “Exclusion clauses are always valid regardless of when introduced into a contract.” Discuss this statement using case law to explain your answer
An exclusion may be inserted into a contract to limit or exclude a party from a liability arising due to the happening of an event. However the same is only operational on thh happening of such an event and the same should have been interpreted. Once the same is operational its applicability and validity is tested under the the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999. Hence the above mentioned statement is not correct.
4.1 Using the scenario 6, Advise David as to whether he can recover his losses from Adrian applying the elements of tort of negligence and state possible defences from different cases.
In Richard Vs Waldman & Sons (1967) it was held that the accountant shall be held liable where certain facts about the company or the individual were purposefully or accidentally misrepresented as a consequence of which one party to the contract has incurred losses or expenses. However where the third party had certain avenues of get hold of the information, he or she would not be able to claim damages for the same (Goldberg, n.d.).
3.1 Contrast how the nature of liability in ‘Contract’ differs from the nature of liability in ‘Tort’?
As per common law, a Contract is an agreement between two or more parties on the basis of a consideration and which is enforced by the law. The three basic elements needed to satisfy a contract or make it valid are offer, acceptance and consideration. In case a party fails to abide by the terms of contract, then the person will be held responsible for breach of contract or incurs contractual liability. For example, Dolna enters into a contract with Jevy for purchasing a car for £4000. In case, Jevy fails to make delivery on time then she will be considered of having contractual liability of the contact price, £4000 for breaching the contract. Again, if Dolna failed to make the payment then she would be responsible for the loss and have incurred contractual liability. In case of breach of contract, the damages are always compensatory.
The law of tort forms a part of the English common law. Tort is a civil wrong that occurs when an activity of a person causes harm, whether physical or mental or financial, to another person and depending upon the depth of the harm or damage caused, the person suffering injury can sue the wrongdoer. Any mistake done by negligence is not a part of contract but tort of negligence. Tort can be either due to negligence or intentional. For example, Dolna buys the car from Jevy and the contract becomes successful (DiMatteo, n.d.). While driving the car back to home Dolna calls up her husband who is in office and explains him the features of the car, disregarding the stop sign happens to hit the car driven by Jevy’s sister, Kelly, and injures her. While driving it was Dolna’s responsibility to obey the traffic rules and keep control over the brakes, instead of carelessly talking over phone. This implies that Dolan has failed to satisfy her ‘duty’ and commits tort. Thus, she has tortious liability for the damage that has been caused to Kelly and her car. In case of tort, the damages may be compensatory in most of the cases; however, if any injury is caused to any person, the person suffering damage will be awarded exemplary damages if the cause is malice or fraud.
The above two examples has been set forth to create a clarity in understanding the difference between the two types of liabilities.
3.2 Explain the nature of liability in negligence with reference to ‘Donoghue v Stevenson 1932’ detailing the conditions required to prove negligence.
Two women went to a cafe, where one brought the other a bottle containing ginger beer. While drinking the beer, Mrs Donoghue, realized that there is a decomposed snail inside the bottle. She suffered gastro-enteritis as a result of this. Mrs Donoghue did not commit breach of contract, what happened was an act of negligence. She sued Stevenson and lodged a writ in Court of Sessions, Scotland and claimed for damages, £500. Now, the question is whether Stevenson, the factory owner of ginger beer (defendant) owed Mrs Donoghue (the plaintiff) any duty of care? The court undertook a test, known as “neighbour test” as Donoghue was not the buyer of the bottle, rather it was gifted to her. Hence, she was not the party to contract but, neighbour. The test that applies to this case is of ‘reasonable forseeability’.
The major question in this case was, whether ‘duty of care’ existed or not? This implies that whether the defendant (Stevenson) was able to foresee that one of their activities could cause harm to a person, as the plaintiff in this situation. It is necessary that the plaintiff establishes this for satisfying the first element involved in tort of negligence. The ‘reasonable foreseeability’ is just an objective test, indicating, what could have a reasonable person foreseen? and not, what has been foreseen by Stevenson, actually?
It was held by the House of Lords that Stevenson, the manufacturer of the ginger beer, owed duty of care towards Donoghue, but this was in real situation breached. It was brought under notice that the defendant could ‘reasonably foresee’ that any failure to ensure safety of products manufactured by them may cause harm or injury to the consumers. The outcomes of this case included; negligence, duty of care and neighbour principle (Kovac?, 2011).
The case of Donoghue v. Stevenson, brought a evolution in the common law with respect to tort. Initially, tort was considered only a result of physical damage or injury caused. Getting ill due to consumption of noxious substance, did not come under the scope.
M3 Explain what is meant by ‘strict liability’ in tort. Explain this with particular reference to ‘Rylands v Fletcher1868’
Under strict liability tort a defendant is held completely liable for damage or injury occurred to a party irrespective of the fact that whether the injury or damage caused was intentional or not. The categories which fall under the strict liability tort are:
- Any dangerous act done abnormally
- Liability of product
Fletcher employed contractors in building a reservoir on the land belonging to him. The intention was water supply to Ainsworth Mill. He himself did not get involved in the task. The contractors found many old shafts of coal and passages under the land which was filled up with debris and soil. This adjoined the mine of John Rylands. The contractors left it opened. This resulted in burst of reservoir when filled the very first time flooding the mine of Rylands. He suffered a damage of £937. Fletcher’s effort of pumping the water out went in vain. Sunken coal shaft was discovered by the mine inspector. Rylands and the owner of the mine, Jehu Horrocks claimed against Fletcher.
This case introduced new perspective to the doctrine of strict liability (in limited situations) in the English Law which primarily focused on the intention behind an activity instead of nature of any action (Kovac?, 2011).
It was proven in the court that did not commit negligence, but still they had to pay for the damages. Judges came forth with the following requirements, fulfilling which can be relied on the doctrine of ‘strict liability’ (Sella, 2015).
- Something has to be brought to the land; ‘as water in this case’
- Non-natural use of land; ‘water was brought’
- Any mischieving act
- Escape; ‘a dangerous substance getting escaped’.
3.3 Explain how a business can be held responsible for the ‘wrongs’ committed by its employees, and give an example of when the employer would not be held vicariously liable for the ‘wrongs’ of its employee
It is the employers and not the employees who face problems or held responsible for conduct of an employee; even if the employer had no idea of what injury or harm has been caused by any conduct of his/her employee. Most of the times, the employers are not even aware of the situation and get sued by the plaintiff, who suffers damage. ‘Wrongs’ committed by employees can be the following ways:
- An accident caused by an employee while on duty
- Harm caused by an employee to a customer, while on duty
- Harassment by an employee
Let’s consider the following example,
A bricklayer while working in the site mistakenly drops a brick on a person passing. Under this circumstance the pedestrian holds the right to sue the company employing the bricklayer vicariously and the worker on grounds of behaving negligently (Sella, 2015). The court will even accept this and the bricklayer and the company he is employed with will be awarded damages.
4.2 Explain how a business can be held responsible for the ‘wrongs’ committed by its employees, and give an example of when the employer would not be held vicariously liable for the ‘wrongs’ of its employee
The law of tort governs ‘vicarious liability’. Under ‘vicarious liability’, the employers are under strict liability against any kind or wrongdoings of any of their employees.
Case of John
In this case, John an employee of ABC Dairies, employed a 14-year old boy to work for him disrespecting the policies of the company. However, the employers also did not take any action against this after discovering. The boy meets accident because of John’s careless driving.
There are 3 important essentials that confer negligence:
- Duty of care is missing
- Breach of standard of care
- A conduct that is harmful
As John appoints the boy under him, it is his responsibility to ensure he is careful about the boy. Careless driving is a conduct where accident is foreseeable. While driving it is the duty of John to be careful, that can otherwise cause injury either to any pedestrian or other cars along with drivers. Hence, the first essential of negligence is satisfying. John, being a ‘reasonable person’ must ensure ‘reasonable care’ towards the boy he is employing under him. By causing accident to him, John has breached standard care. [Paris v. Stepney Borough Council  AC 367].
Here, John is liable of negligence.
ABC Dairies being the employer of John shall be vicariously liable for the act performed by John as they were aware of the boy working under him. Thus, court will award damages to both John and his employer.
Case of Vintage Vehicles
In case of the Vintage Vehicles owner, the owner has reluctantly allowed his friend to drive the bus without supervising whether he can drive carefully or not. It was his duty to exercise reasonable due diligence for ensuring that his friend is a safe driver. As the vehicle belongs to the Vintage Vehicles Museum which caused damage to the car of Mrs Smith as a result of negligent driving, she can sue the owner for damages caused by the bus of the company. Mrs. Smith is not aware whether the driver is employed with the company or not but since the driver drove the company’s vehicle as per instructions of the owner, the company owner is responsible of vicarious liability (Halson, 2013).
D3. Explain what is meant by the occupier’s duty of care to visitors, and demonstrate what steps can be taken to help discharge this duty
The term occupier indicates a person who has physical possession of a premise. Premise can be water, vessels or ships, any structure such residential building or for business strategy purpose, trains, cars or any other vehicles. In general term, occupiers of premises are the landowners. Occupiers can be one or more. An occupier has a certain level of responsibility towards the visitors. The occupier is supposed to exercise ‘duty of care’ towards his visitors.
An occupier undertakes the following steps to ensure that reasonable care is taken of his visitors (Halson, 2013).
Duty towards children [Section 2(3)(a)]
In the case, Glasgow Corp V Taylor in 1922, a 7 year old child died of eating berries in the park which were poisonous. Children being less careful than elder people have to be taken good care of. As happened in the case mentioned, it is the duty of the occupier to fence any area where such plants have been planted. Another way of preventing such issues is by restricting visit of children alone. They must be accompanied either by parents or guardian.
Duty towards specialist visitors [Section 2(3)(b)]
They are the professional visitors, who have come for performing any duty. In these circumstances it is expected the visitors are aware of the problems that may arise and needs to undertake prevention against those.
It is the duty of occupier to display a warning in case there is any fault with any of his premises. In the case, White v Blackmore in 1972, the occupier set a notice, “Warning to public. Motor racing is dangerous”. The warning became effective while competitor killed while viewing a race from track (Halson, 2013).
As has been evident the various terms associated with a contract are very important as the same decide the validity and the performance of the contract. In addition to the same a proper understanding of the terms helps to enter into contracts and performing the sam.