Aspects of Contract and Negligence for Business

This report discusses the elements of contract, types of contract, and terms of contract in a business scenario. It also explores the principles of contractual liability and tortious liability. The report includes case scenarios and their implications.

ASPECTS OF CONTRACT
AND NEGLIGENCE FOR
BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Elements of Contract.............................................................................................................1
1.2 Types of Contract..................................................................................................................2
1.3 Terms of Contract.................................................................................................................3
TASK 2............................................................................................................................................5
2.1 Case Scenario........................................................................................................................5
2.2 Case Scenario........................................................................................................................6
2.3 Different terms in contract....................................................................................................7
TASK 3............................................................................................................................................7
3.1 Contractual Liability and Tortious Liability.........................................................................7
3.2 Principle of Negligence ........................................................................................................8
3.3 Doctrine of Vicarious Liability.............................................................................................8
TASK 4............................................................................................................................................9
4.1 Case Scenario........................................................................................................................9
4.2 Case Scenario........................................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
A contractual relation is based on agreements which are enforceable in nature. Every
business organization prefers to develop relations which could be governed by Law of contract.
This enables them to develop unambiguous relations with different stakeholders, and ascertain
specific rights and duties to govern long term relations. It is important to note that all agreements
between parties cannot be enforced in the court of law, unlike the contracts. Hence, in order to
make an agreement into a valid contract, it shall be comprised of all the essential elements of the
contract. In pursuance to the same, present report purports to elaborate on significance of all the
elements, implications of each of the terms and the manner of formation of a valid contractual
relation. Further, Law of Tort also finds application in a business scenario. These are various
interactions which may not be bound by law of contract, but have the consequence of injuring a
third party. In such cases different torts shall cover the act to make the wrong person liable for
his/her actions. The principle of Negligence and the doctrine of Vicarious Liability are the two
most important and widely applicable concepts, especially in a business scenario.
TASK 1
1.1 Elements of Contract
Contract is a very important agreement with the promises which has many element for
validating it. Contract must be voluntarily signed by the parties without any influence from the
other parties (O'malley, 2012). Both the parties must have legal requirements to fulfil all the
conditions written in the document. There are various elements which need to formulate a valid
contract between the parties:-
 Offer: An offer is an intention of the first party showing to the another party to do or not
to do something which has legal obligation. Offer communicated to the another party for
taking the consent of other party. Another party can give his acceptance or reject the
proposal given by the offerer. In the case of Harvey v Facey [1893] AC 552 privy council
held that there was no contract concluded between the parties (Marks, Marks and
Jackson, 2013.). Thus there was no evidence of intention that the telegram sent by face
was to be an offer.
 Acceptance: it is defined as an unconditional assent, communicated by the offeree to the
offeror to all the terms of the offer with the intention of accepting. When the offeror
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receives the communication, the contract becomes effective (Can silence amount to
acceptance of a contract?, 2012).
 Consideration: It means something in return and any other benefits to the person which
must be valuable and lawful. First party may offer a monetary compensation to the
person who may accept the proposal. In Re McArdle (1951) held that the promise to
make payment came after the consideration had been performed therefore the promise to
make payment was not binding (Cross and Miller, 2011). Past consideration is not valid.
 Free consent: Both parties should give their consent which cannot be influenced by any
person and consent must be free from any influence also. Acceptance must be given to
the same thing and with the same sense to constitute a valid contract.
 Capacity: The law prescribe certain qualification to becomes a competent person to enter
into a contract. The person must attain the age of maturity and at the time of making
contract has sound mind for the lawful contract. The person who is disqualified by the
law and unsound mind cannot enter into contract.
 Lawful object: Court can reject any agreement if it has unlawful clause and object which
are contrary to the law (Cibinic, Nash and Nagle, 2006). It one party has doing fraud in
the subject of the contract and involves any injury to other person then it will not
considered as the valid contract.
For making a valid contract these are the element which need to follow by the parties and
validate their contract. If parties to the agreement fail to satisfy the legal requirements of a
contract then it becomes void.
1.2 Types of Contract
A Contract is a legally binding agreement which is enforceable by law. Parties in the
valid contracts gain rights and responsibilities and if there is any dispute between them the court
will make sure the parties follow rights and liabilities. There are many contract that individuals
making for completing their promises. In this case Ramsgate Victoria Hotel v Montefoire (1866)
LR 1 Ex 109 the offer was no longer open as due to the nature of the subject matter of the
contract the offer lapsed after a reasonable period of time (Miller and Cross, 2012). Therefore
there was no contract and the claimant's action for specific performance was unsuccessful.
 Valid contract: This agreement is enforceable by law which fulfil all the requirements of
a contract. All the conditions of a contract must be legal and valid enforceable by law.
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The effect of these contracts is that it can be enforced by the parties in court of law in the
event of breach of any of the terms.
 Voidable contract: it is an agreement which is enforceable by law, but it may be never
being having binding on a party who has suffering from some legal disability at the time
of its execution. It may be rectified by the parties either expressly or impliedly by the
party who has right. In the event of breach of any of the terms, the innocent party shall
have the capacity to terminate the entire contract.
 Void contract: This has no legal right or obligations upon the parties to make it
enforceable by law or court (Wong and Deubert, 2010.). There may have various grounds
for ceasing the enforceability of law such as illegality and impossibility. These contracts
are considered invalid from the point of initiation. Hence, these are invalid contracts
which does not have nay effect on the parties.
 Unilateral contract: This involves a promise that is made by only one party of a legally
enforceable contract. Contract becomes executed when performance constitute an
acceptance of the offer. In this only one party assumes the obligation under the valid
contract. Acceptance of the offer may be revoked until the performance has been
completed. These contract have a binding effect on the party who has made the offer,
once it has been accepted by anyone from the public. Once accepted by other party, it
shall be binding on both the parties.
 Bilateral contract: This contract has mutual promises between the parties by their
performance of an act with respect to each party. It is called a two sided contract where
parties mutually agree with the promises that constitute it. There are two parties takes an
obligation by performing with something. It has a binding effect on both the parties from
the point the contract comes into existence.
 Face to face contract: These are the contracts which are undertaken by the parties either
orally or in written form. These are undertaken when parties are present before each other
(Hillman, 2012). Moreover, reduces the occurrence of mistake of identity as the parties
can be verified through physical presence. These are the contracts which are completely
valid in nature and has a binding effect from the moment it comes into existence.
 Distance selling contract: This types of contract form through the communication devices
via internet, telephone, TV, mobile, Email between the persons. Common law recognizes
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the validity of these contracts in order to boost up business transactions across the world.
Therefore, even if the parties are at distant place they can enter into a valid contractual
relationship through emails, telephone or such other means. In Partridge v Crittenden
(1968) a contract entered into by the parties over a telephone conversation was upheld by
the court. These contracts are also binding in nature, however, creates the possibility of
mistake of identity as parties are not present before each other. Hence, are uncertain in
nature.
1.3 Terms of Contract
Individuals are entering into an agreement where they utilize different terms and these
could be implied or express on the contractual terms. The parties to the agreement do abide by
these terms in contentment of the lawful contract. All these terms play an imperative part in an
agreement.
 Implied terms: These are into the contract by the court on the basis of the nature of the
agreement and parties' intention on the basis of the law. The term where the contract is
silent on a matter on which it is normally implied by law.
a) Terms implied by custom: The terms of a contract may have been negotiated against the
background of the customs of a particular locality or trade. Parties automatically assume that
their contract will be subject to such customs and do not have special need to mention for the
particular matter. Hutton v Warren (1836) 1 M&W 466 (Terms implied by common law, 2017).
b) Terms implied in fact: Certain terms are made applicable in pursuance to the needs and
demands of the surrounding facts.
c)Terms implied by statue/law: There are various act which provides their terms with their legal
rules. Under Sale of Goods Act 1979- in case of sale he has a right to sell the goods and in the
case of an agreement to sell he will have right when property is to pass.
 Conditions and warranties:
a) Conditions: The main purpose of the contract is to fulfil all the conditions which they have
decided in their agreement. If there is any breach of condition then other person may get injured
and repudiate the contract by claiming for damages. By breaking of the condition harmed party
may decide to happen with the agreement or not. The injured party cannot rectify his mistake
where breach of the contract occurs. Poussard v Spiers (1876) 1 QBD 410
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b) Warranties: This term is less important in a contract that cannot repudiate the contract. Breach
of warranty will provides the right to claim for damages only. This will give the right for
compensation, he cannot revoke the agreement (Conditions, Warranties and In-nominate terms,
2017).
c) Intermediate terms: Some undertaking may use the position that can be assessed where breach
of the terms involve severe loss or damages. If breach involves minor loss, then injured party's
remedies limited to damages and repudiate the contract.
TASK 2
2.1 Case Scenario
The advertisement displayed by Charles amounts to be an invitation to offer, completely
distinct from the element of an offer. Charles intend to sell the car at a price of £10,000. When
Jacqui communicates her intention to purchase the said car at £ 9,000 the same shall not lead to
formation of a contract. The offer made by Jacqui is distinct from the term of the advertisement,
thus in such a case an express consent of Charles to this effect shall be required. Further, the
condition that acceptance shall be communicated if no communication made till evening, shall
attract the exceptions to the rule of Silence cannot amount to be a valid acceptance. In the case
of Felthouse v. Bindley (1862) it was held that it is a general rule that silence cannot be construed
to mean an acceptance (Brömmelmeyer, 2011). However, it is subject to the exception that in the
event offeror effectively communicates the same to the offeree, silence can amount to a valid
acceptance. However, in the present case the terms of an offer are distinct from those of
invitation to offer, hence no valid contract comes into existence.
Further, the interaction of Charles with David also cannot be considered as a valid
contract. This can be stated in pursuance to the fact that acceptance of the offer made by Charles
to sell the car at £ 9,850 was accepted through the second fax. It is important to note that Charles
could never receive the said communication. In the case of communication through fax, it has
been upheld by the court that the general rule of offer and acceptance shall be applicable, instead
of the postal rule. Hence, a valid contract could be said to have formed only if Charles had
received the communication from David.
At mid day the communication of Alistar with Charles shall not lead to formation of a
contract till the time a proper offer and acceptance are made. The interaction reflects that the
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parties proceeded by making counter offers, and no acceptance has been forwarded. Further, in
the case of Ed the acceptance communicated through a letter shall not be considered valid, as it
addressed wrongly. In the case of Great Britain v. Boots Cash Chemists Ltd. (1953) it was held
by the court that only those communications through posts shall be held valid which have been
addressed properly. Hence, no valid contract comes into existence.
Lastly, the a valid contract is entered into between Charles and Ed, as before
communication of the acceptance from the end of Alistair the contract was concluded. Moreover,
it is also imperative to understand the fact that Alistar was informed about conclusion of the said
contract before his side of performance, shall be considered relevant.
2.2 Case Scenario
The first contract which Beth enters into is with 'Snow & Ice'. At the time of discussion it
was very clearly communicated by her that she intends to purchase the sleeping bag for an
expedition to Himalayas. Further she also clarifies that it is going to be extremely cold and hence
to provide a suitable sleeping bag. It can be stated this is an express term which was agreed
between the parties. The fact that the owner of Snow & Ice failed to provide an appropriate
product, shall be considered as a breach of the express term of the contract. Moreover, these
could be classified as conditions, as it is directly connected with the object of forming the
contract. Therefore, the contract shall be repudiated and Beth can claim damages for all the
losses sustained by her.
Later, Beth enters into a contractual relation with Alpine Activities Ltd., for climbing the
ice wall. The ticket handed over to them at the reception contained an exclusion clause at the
back, which cannot be considered as valid or legal in nature. In light of the law laid down in the
case of L'Estrange v. Graucob (1934), exclusion clauses mentioned in tickets or
acknowledgement receipts shall not be considered legal. Moreover, it is an implied term that the
concerned instructor is under an obligation to provide reasonably sufficient instructions so as to
accomplish the task. This is an implied term by law under consumer rights act, which requires
provision of services which enables the other party to undertake the task in a proper manner. In
light of these facts, the Alpine Activities shall be liable for injuries sustained by both Beth and
Sarah.
Lastly, the special gas stove bought by Beth from Mountaineering Hires Ltd. imposed
another contractual liability. In the present case the terms mentioned on ticket shall not be
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considered valid in light of the law upheld in the case of Chapelton v. Barry Urban District
Council (1940). It was held held in the case that incorporation of only those documents shall be
considered valid which are included in contractual documents. However, inclusion of clauses
through a ticket cannot be considered valid, since no reasonable person would expect mentioning
of terms on a ticket. The clauses could be considered valid only in the event the entity had
effectively communicated a notice to that effect as held in Hollier v. Rambler Motors Ltd.
(1972). Thus, Beth shall not be entitled to pay the additional amounts.
2.3 Different terms in contract
The above provided case scenario is inclusive of varied terms, which have been
enumerated herein under: Express Conditions: These are the terms which are mutually agreed upon by the parties
to be included in the contract. In the event any of the parties acts in violation of these
terms the aggrieved party shall be entitled to claim damages. However, if such express
terms are in the form of a condition, it shall formulate to an integral part of the
performance by parties (Kontautas, 2010). Hence, in the event any of the parties act in
breach of these terms, the entire contract shall be repudiated, as the primary object of
entering contract is only vitiated. In the case of Poussard v. Spiers (1876) it was opined
by the court that conditions are fundamental clauses of an agreement, and breach of the
same shall make the entire contract void ab initio.
 Exclusion Clauses: These are the terms which function to limit or restrict the liability of
any of the parties to contract, who have acted in breach of any of the terms. These terms
are known for bringing uncertainty in contractual relations, and hence, are required to be
go through the test of incorporation and construction. It is essential to determine that the
clause has been incorporated in a justifiable manner or not. In the case of unsigned
documents inclusion of exemption clause without giving notice to the other party cannot
be considered as valid. In the case of Olley v. Marlborough Court Hotel (1949) a similar
opinion was upheld, stating that it is imperative to inform application of these clauses to
the other party.
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TASK 3
3.1 Contractual Liability and Tortious Liability
Every person has the duty to follow the rules of law which need to be fulfilled and shall
not prejudice the right in his actions. Civil tort liability involves a compulsory action that arises
from an act causing prejudices or harm to the other party, as held in Blake v Galloway [2004].
Under a contract, the parties are under the obligation to perform the terms of the contract in a
correct and stipulated manner, non-compliance of which shall entitle the parties to suffer a civil
liability. In Roscorla v Thomas (1842) it was upheld that contractual liability is a civil liability
which entitles the aggrieved party to claim damages.
They both are the form of civil liability having a structure and require the fulfilment of
the same structural elements. These are dominated by the idea of repairing the prejudice caused
by the actions of the wrong doer (Cohen, 2011). It should cover both the damages caused and
the earnings, benefits not achieved. The repair of the damage is in kind or by money equivalent
which shows the value of prejudice.
Tort liability imposes the obligation to restore the position of the aggrieved party through
payment of damages, in the same manner as done under contract law. However, the damages
awarded under tort are un-liquidated damages, whereas under contractual liability liquidated
damages are given to the defendant party.
3.2 Principle of Negligence
Under the law, to be liable for something means to be responsible in some way for an
outcome that results in a violation of law or any injury to other. In order to establish the case of
Negligence the following four factors must be present:
 First, defendant must owe some sort of duty to either the plaintiff or other person.
 Second, defendant failed to fulfil his duty in some way.
 Third, plaintiff incurred some injury i.e. physical, emotional and financial. Fourth, a reasonable person predicted that defendant's failure to meet his duty could have
resulted in the plaintiff's injury.
Caparo Industries pIc v Dickman [1990] 2 AC 605 the court held that no duty of care
was owed since the auditors were not aware of the existence of Caparo nor the purpose for which
the accounts were being used by them (Disch, 2016). A person cannot sue another person if his
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own actions were also negligent. A person can only sue for the rough percentage of fault
incurred by the defendant. The principle of negligence makes every person liable who has failed
to act in a reasonable and careful manner, and in pursuance to the same has acted to cause
damage to another person. For instance in the event a driver decides to consume alcohol while
driving the car and in consequence to which collides with another car, causing damage to all the
people sitting in the car. In such a case the driver has acted in a negligent manner by drinking
alcohol while driving the car. This breach has directly caused damage to people of another car.
Hence, all the elements of negligence are present to establish the liability against the driver.
Persons acting in a negligent manner are imposed with joint or several liability, in the
case of more than one party is liable for undertaking the negligent action. Further, it imposes
vicarious liability on the employers for negligent actions undertaken by the employees. Lastly,
liability can be imposed in nature of contributory negligence where more than one person has
caused occurrence of the negligent action.
3.3 Doctrine of Vicarious Liability
The doctrine of vicarious liability operates to make one person liable for the actions of
another person. This is applicable on the relations which are in the nature of principal-agent. In
other words, those relations wherein one person acts on behalf of the other in order to fulfil their
responsibilities and obligations. In a business scenario, an employer is made vicariously liable
for negligent actions of its employees, if undertaken within the course of employment. In the
case of Lister v. Hesley (2006) it was opined by the court that the employers shall be even liable
for those actions which are unethical in nature, but fall within the course of employment
(Brömmelmeyer, 2011). In furtherance to the same, all the tasks and acts which are connected to
the primary job of an employee shall also be considered within the purview of vicarious liability.
Another important element which shall be considered to impose this liability is in respect
to the type of contract being shared between the employer and employee. Hence, if a contract of
service is shared between the parties then the employer shall always be liable. This could be
idenitified through the supervision and instructions under which the employee is working. On the
other hand, in the case of contract for service, the employer does not exercise control over the
work of employees, and hence cannot be made vicariously liable for actions of such employees.
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TASK 4
4.1 Case Scenario
In the present case, Sebastian acted in breach of his duty of care by consuming alcohol
right before flying a plane. This can be established through the elements enumerated in
Donoghue v Stevenson (1934), as Sebastian was under an obligation to not drink before flying a
plane. Due to his breach of the duty, damages were sustained by Collin as well as to the flights.
In addition a direct nexus can be established between breach and the damages sustained.
However, Sebastian can take a defence of Voluntary assumption of risk, as Collin was aware of
the fact that Sebastian was drunk at the time of flying the plane and hence this was likely to
occur. For instance in the event a person boards a bus after being informed about the fact that it
is facing certain technical issues and might break down at any moment, is known to the presence
of risk. On sustaining any injury because of this reason, such a person would not be entitled to
claim damages for voluntarily boarding the bus even after knowing the presence of risk. In the
case of Wilsher v. Essex, it was opined by the court that the defendant shall be liable to pay
damages only for the injuries which have been caused by his own actions. Since, multiple factors
were present in the situation causing harm to the plaintiff, it is important to classify the ones
which have actually caused harm. Moreover, this could also be considered as contributory
negligence as both the parties were equally negligent and assisted in happening of the accident.
But this is no more a defence which can be claimed in cases of negligence. Moreover, the fact
that Collin refused to accept blood, further is the basis for raising the defence of voluntary
assumption of risk. Hence, Sebastian shall be liable to pay damages to Sebastian only to the
extent he acted in a negligent manner, and shall be exempted for all the negligence or risks which
were undertaken by Collin himself.
4.2 Case Scenario
In the present case it can be inferred from the given facts that James and Vanessa were
working under a contract of service with Eagle Electrics. This can be supported by the fact that
they were assigned specific projects to be done within a specific time line. Moreover, the
employer also covered travel expenses, though they had the liberty to choose the most suitable
transit. In pursuance to the doctrine of vicarious liability, employers are made liable for all the
actions of their employees within the course of employment. This shall not be affected by the
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fact that the act was authorized or not or was unethical in nature. A similar opinion was held by
the court in Lister v. Hesley (2006), wherein unethical actions with in the course of employment
made the employer liable. In pursuance to this law, the fact that both of them undertook the work
with their own convenient timings shall not make any difference. Moreover, the employer shall
also be liable for the injury caused to eyes of Venessa, in spite of giving repetitive warnings and
protective goggles. Further there seems to be a case of contributory negligence when the
collision of car happens, as James had fallen asleep and Tom was drinking wine at the time of
driving. Thus, the employers of James and Tom shall be vicariously liable for contributory
negligence.
CONCLUSION
It can be inferred from the discussion that formation of a contract can be considered valid
only if it is comprised of all the essential elements of offer, acceptance, consideration, meeting of
minds and so on. Further, a contract can be concluded in the form of a face to face contract,
bilateral contract or any such forms which essentially contain the terms of conditions, warranties,
express or implied term. It is important to know that each and every term has a distinct effect on
the parties, and shall either repudiate the entire contract or entitle the victim to receive damages
or both. For instance in the case the parties fail to comply by the condition mentioned in the
contract, it shall have the effect of repudiating the entire contract, however on breach of a
warranty the parties shall be entitled to claim damages only.
Moreover, the principle of negligence can also take the form contributory negligence, and
make the respective employers vicariously liable for the action of their employees. In order to
establish negligence against any of the persons it is imperative to establish the elements of
Breach of duty of care, causation of damage and remoteness of consequences. Further, to impose
vicarious liability on an employer it is imperative to establish that the relation is based on
contract of service, in pursuance to which control and supervision is being exercised by the
employer on the manner in which the employee is working.
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REFERENCES
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