Aspects of Contract & Negligence for Business (pdf)

Aspects of Contract and
Negligence for Business

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Importance of the essential elements required for the formation of a valid contract.......1
1.2 Impact of different types of contract................................................................................2
1.3 Analysation of terms in contracts with reference to their meaning and effect.................3
TASK 2............................................................................................................................................4
2.1 Elements of contract in given business scenarios.............................................................4
2.2 Apply the law on terms in different contracts..................................................................5
2.3 The effect of different terms in given contracts...............................................................6
TASK 3............................................................................................................................................6
3.1 Contrast liability in tort with contractual liability............................................................6
Contractual liability................................................................................................................6
3.2 Nature of liability in Negligence......................................................................................7
3.3 How a business can be vicariously liable.........................................................................8
TASK 4............................................................................................................................................9
4.1 Apply the elements of tort of negligence and defences in different business situations. 9
4.2 Apply the elements of vicarious liability in given business situations...........................10
CONCLUSION .............................................................................................................................11
REFERENCES .............................................................................................................................12

INTRODUCTION
A contract can be simply defined a concord which lies between two or more people. This
is a kind of agreement which usually permits different parties to perform a service, offer various
goods & services or commit to an act (Thompson, 2012). If a contract comprises of all of the
required components, it is considered as valid and is enforceable in a tribunal of law. The
essential elements of a valid agreement are offered, acceptance, consideration, lawful subject
matter, certainty of meaning etc. The present report is highlighting the several aspects of
contracts and the consequences which may occur after negligence of any aspect of an accord.
Importance of different components of a valid contract is described in this assignment to light on
various contracts laws. Additionally, some light has been thrown on impacts of various types of
agreement. Nature of liability in Negligence is also described in this project.
TASK 1
1.1 Importance of the essential elements required for the formation of a valid contract
Valid contracts are lawfully binding promises made between minimum of two parties to
fulfil obligations in exchange or dealing for something of value. It can be presented in various
forms such as written, verbal or an integration of both. A valid agreement assures people that
their interests are protected by norms and laws since both the parties who are involved in accord
will fulfil each obligations as promised. Every agreement is not treated as valid contract. In-fact,
only those agreements which are enforceable at law is considered as a contract. This is to be
noted that each and every valid contract comprises of certain elements which is discussed
below :
 Offer and acceptance : For creating a valid contract, existence of a legitimate offer is
mandatory which is provided by one party. Additionally, legal acceptance of similar is
also necessary from the side of another involved party.
 Intention to create legal relations : This is important to have an intention of forming a
legitimate relationship amongst the members who are willing to form an accord. In the
absence of such kind of relation, that accord is not treated as valid which is why this is
significant for a valid contract (Weber, 2017).
1

 Legal consideration : As per the views of Black Stone, “Consideration is a recompense
which is provided by those participant who is contracting to another. Thereby, presence
of a lawful consideration is essential.
 Capacity of parties : According to this component, individuals should comprises of
capacities for becoming a part of a valid contract. People falling under few criteria like
miners, unsound brain etc. does not considered in any accord.
 Free consent : This states that both of the parties must have to agree on similar things in
identical sense. According to Section 14, a consent will considered as free when it is not
caused by any kind of compulsion, fraud, misrepresentation and mistake.
 Certainty of meaning : Under Section 29, it has been mentioned that if the meaning of
any agreement is not certain, then that comes in the category of void or illegal contract.
(Source : Elements necessary to create a contract, 2016)
Thus, it can be said that all the above mentioned elements is having great value since without it
an agreement can not be converted into a valid one.
1.2 Impact of different types of contract
Contracts are falling in different categories and the implication of such kind of concords
also keep varying from one to another. There are distinct types of contracts which are requisite
on the grounds of different cases. This can be better understand by observing following sections :
2
Illustration 1: Elements necessary to create a contract

Bilateral & Unilateral Contracts : A contract is said to be bilateral when both of the
member be agree on performing the activities or purpose in combined way. In this case, they are
ready to keep their promises. On the another hand, when a contract offered by one participant to
another regarding performing specific task, but the other person may or may not perform the
same, then it is called as an Unilateral contract (SALAMEH, 2013). Hence, it can state that such
kind of agreement is created through an offer that would only be accepted by performance. Since
both person engaged in a bilateral contract is agreed for keeping particular promises, thus, that
agreement will be carried on in an effective way. This shows that it is impacting positively upon
parties as each individual are working happily. On the other hand, in case of unilateral contract,
there is higher possibilities of emerging conflictual situation as conditions presented by one
person may not be accepted by another. Hence, this is influencing negatively upon both
individuals.
Express & Implied Contracts : When each party of an agreement expresses every
relevant terms & conditions to one another then, it is known as expressed contracts. Whereas,
those agreements that are formed by the activities or action of parties participated, but is not
spoken or documented any where are called implied contract. People who are involved in
express contracts are well informed by all necessary information regrading the accord. As a
fruitful result, no confusion would be created in future. This would also reduce the overall
number of conflicts occurring amongst contractors.
Thereby, these type of concords effect optimistically on parties. On the contrary, in case
of implied contracts, facts and figures associated with agreement are not depicted in any format
like written or oral (Rohrmann, Cunha and Falci, 2015). Because of this, the chances of conflicts
as well as misinterpretation is high. Hence, members present in such type of accord are not
satisfied from each other. Apart from this, probability of fraud get also increased since offeree is
not having much more idea about what should be really offered by offerer to him according to
the conditions and promises.
1.3 Analysation of terms in contracts with reference to their meaning and effect
There are various important terms that is used while making an accord. Some of the
important one are mentioned below along with their meaning & effect :
3

 Offeree : A person to whom a contract is offered is known as offeree. It has also having
power of terminating an offer presented in - front of him/her (Reddy and Rampersad,
2012).
 Offerer : Those person who used to give any offer in terms of making a contract to some
one are treated or named as offerer. He or she is capable of deciding about criteria present
while generating specific agreement.
 Conditions : A condition is considered as a significant matter of subject since it is
considered as fundamental to the main causes for the creation of a contract. It is to be
noted that violation of those conditions may result in termination of concord.
 Warranty : This provides a powerful right to the harmed parties i.e. claiming for
difficulties or harms faced by them. Additionally, the claimed member is not permitted to
revoke or cancel the accord.
TASK 2
2.1 Elements of contract in given business scenarios
According to provided scenario, Ivan went to a bookshop which is owned by Todor. He
had seen a HND law book on the display board of sale. Hence, he decided to purchase that book
and consulted to Todor in this regard. But the possessor of store replied that he could sell same
book since that was the last copy and he had sold that to another customer named as Carl
yesterday. In his justification, Todor accepted the mistake of removing books from Shelf but on
the other hand, Ivan want express his desire to get anyhow. By examining this condition,
elements of contract that can be applied here are described below :
 Offer and Acceptance : Todor was listed the name of a book in display self which
shows that he is giving an offer of buying identical book to expected consumers. This is
his mistake of representing the already sold out book in display board. As Ivan was ready
to buy that product by observing information provided to him. So, herein offer is
considered as accepted by the other party (Potter, 2012). But offerer is not able to give
similar product due to discussed reason. Thus, from his side offer is not given. Hence,
there is confusion regarding purchasing of book and only one person is involved in
contract. Therefore, this fall under the category of Unilateral agreement.
4

 Capacity of parties : Ivan is having the capacity to buy the book since he does not
comes under the class of minors. He is also fit and healthy as he has sound mind for
coming under the contract. His wellness can be judged by his grasping and examining
capabilities since he observe that book was not sold. Besides this, he also understand the
justification or excuse given by Todor.
 Consideration : Price was not taken from Ivan so, this contract is not valid.
 Free consent : In this case, free consent is not present because one of the member was
agree for selling the book. Thus, both of them are not having similar sense of
understanding.
2.2 Apply the law on terms in different contracts
The consequences of different contract is determined on the basis of terms existed in
same. This can be interpreted in better way by examining following mentioned terms :
 A Condition : When certain terms and condition is defined by offerer for involving
within an accord, then it is clear that if offeree wish to enter into that concord, then he /
she must has to work accordingly. If any violation occurs regarding those depicted
criteria, then that offeree may face the situation of paying compensation amount or
charge penalties as per the law of UK government. In above case of Ivan and Todor, none
of the condition was announced from the side of Todor. In-fact, any person is able to
purchase the books offered by him.
 A Warranty : Warranty is a kind of guarantee made by a manufacturer or any party for
setting the condition of its deliverables. Normally, it is designed for offering benefits to
customers. Thus, consumers are liable to claim if they have not received any benefit from
the side of offerer. According to the case, Todor has not provided any warranty related to
books sold by him.
 An innominate term : According to English contract law, an innominate term is treated
as an intermediate terminology which can't be outlined as a warranty as well as condition.
Thus, if such type of criteria is applied in any contract, then the chances of crimes like
fraud may increases drastically (Patten and Saunders, 2018). Since, nothing is defined in
an innominate concord, so offeree is not capable of claiming against contractor if any
action would not going on according to its desire. As per mentioned case of Todor and
Ivan, innominate term can be applied here since Todor has not given any kind of
5

statement regarding warranty. Additionally, no conditions is being offered by him while
selling his products.
2.3 The effect of different terms in given contracts
As per the given scenario, John had visited a park which is administered by his local
council. By reading notice that chairs can be taken at rent at 50p per hour, he paid same amount
and purchased a ticket. Parking attendant provided a chair to him but after some time interval,
the chair get collapsed and as a bad result he had suffered from serious injuries. His garments
also got damaged badly. Thereafter, John had complained about similar accident to the regional
council and has claimed for compensation. Whereas the council denied to give him the
compensation amount by showing him the exemption clause written at the ticket. According to
that “ local council who is managing that park is free from the liability if any harm or accidental
injury happen due to the failure of any hired equipments.”
Thus, herein 'Exemption Clause' is applied. This is nothing but a term existed in an
agreement which is used for excluding one of the member or party from particular liability. In
other words, it limits the responsibility of a person in specific mentioned circumstances and
conditions. Therefore, such type of policies are utilised by people in unfair manner which in-turn
proved as a cons or disadvantage for a party (Pathak, 2013). In this case, specific 'terms and
condition' was framed by associates of council i.e. “If any sudden accident would occur due to
assets given by them, then they are not liable for such happenings”. Since, this clause was not
noticed by John, it is his fault, thus, he is not able to take any legal action in the form of
recompenses against another party.
TASK 3
3.1 Contrast liability in tort with contractual liability
There is few differences between the liability in tort and contractual liability. The major
one listed below :
Contractual liability Tortuous liability
The obligations made under contracts are
decided according to the wish of willingness of
contractor (Miller, 2013).
Whereas, in case of tort, such obligations are
made as well as executed by law.
6

This offers free choices for entering into an
accord and creating contractual relations.
No choice is provided.
It can be formed from three parts of actions
that is debt, concordat and sumps.
Whereas, it is derived from the fundamental
rights of trespass.
Obligations or liabilities linked with a contract
is very strict in nature and therefore, it can not
be avoided or neglected.
While liability associated with tort is based on
the faults (Odinet, 2016).
Case : White and Carter (Councils) Ltd v
McGregor [1961] is an English contract law
case which is associated with right to terminate
an accord and the liability or duty to mitigate.
White & Carter Ltd had taken a contract for
displaying advertisement for 3 years on litter
bins from McGregor's garage corporation
(McInnes, Kerr and VanDuzer, 2013). But on
same day, client had cancelled the agreement.
But contractor denied to cancel and displayed
the ads and demanded cost for doing so, which
is illegal. Thus, The House of Lords provided
final judgement by stating that the applicant
could take back or recover the contractual
prices. Claimants are also not liable to do
mitigation for their losses.
Case : Chandler v Cape plc is a case related to
the liability of a parent organisation for injury
to the worker of a subsidiary association. In
this lawsuit, David Chandler was working
under subsidiary firm of Cape Plc. He was
suffering from 'asbestosis' (i.e. a disease of
lung) and claimed against Cape because he
discovered that disease during employment. In
his claim, he said that the company had
breached the “duty of care”. But the subsidiary
organisation was no longer existed. Hence,
Cape plc was denying to pay compensation. On
the other hand, when this matter goes in High
Court, Cape was declared as guilty since it was
his responsibility to appoint better health
professionals for preventing the infection that
may spread through asbestos.
3.2 Nature of liability in Negligence
When an individual is not focussing on particular task provided to them then it is called
'negligence'. This arena of tort law includes harms and damages occurred due to failing of an
action because of carelessness (Kehoe, 2013). Nature of liability in negligence depends on the
specific type of crime and the level or intensity of harms. For instance, if a person dies due to
carelessness of doctor, then obligations for that health-care professional will be different. On the
7

other hand, if a party has been suffering from loss of wealth due to negligence of another party
involved in contract, then liabilities in this case may be different. This is decided by certain laws
designed by UK governing body that is Civil law and Criminal law. This can be understand by
noticing below mentioned points :
Criminal law : This keep concerns with those acts which are contrary to public policies
(i.e. crime) like murder, robbery, rape etc.
Civil law : This commonly deals with such acts that are not against entire social unit, but
rather become the cause of injuries or losses to an enterprise or individual. Besides this, Civil law
comprises of two other branches: First deals with the law of contracts and second is associated
with law of tort.
Some of the liabilities that have to be considered in case of negligence are described
below :
 The neglecter is responsible for paying adequate amount of money to the sufferer if any
financial loss has occurred due to its neglecting activity (Idowu and et. al., 2013).
 If any accident or damages happened because of negligence of an individual, then culprit
is liable to give him suitable compensation in the form of revenue. In addition to that,
offender should also take care of injured person by taking him to the hospital
(Negligence, 2016).
3.3 How a business can be vicariously liable
Vicarious liability simply refers to a situation where an individual is held or treated as
responsible for the mistake or illegal action of some other person. The achievements of a
business contract mainly relies on the relation of two parties in contrasting dictations. Vicarious
liability of a commerce shows obligation or duty that assist in generating healthy relationship
between members engaged in a contract as organisation behaviour. Through various processes, a
business enterprise may considered as vicariously liable. Those processes are described below :
 Worker's liabilities : For vicarious liability of an organisation, the responsibilities
affiliated with workforces is given primary preference (Gomtsian, 2016). At the same
time, managers are vicariously responsible for their neglecting acts under the commercial
law.
 Party's liabilities : In an accord, vicarious liability usually comes, when a party or an
individual is liable for its own negligence chores of another party, that member must be
8

obligated though he/ she was not directly accountable for that particular damage
(Hargreaves and Price, 2015).
Thus, it can be stated that maintenance of principles and policies of liability is an
indispensable component for making a business vicariously liable. In-fact, each person
performing within a company must have to answerable for their own works without giving any
excuse or justification. Besides this team head is also accountable for the working activities of
their group member under the norms and regulations of vicarious liability. Actually, leaders are
liable for all torts of their servants. Whereas, tertiary party is having responsibility for its own
task. Hence, this can be stated that businesses can only become vicarious liable when all the
liabilities of personal actions is full-filled by enterprise.
TASK 4
4.1 Apply the elements of tort of negligence and defences in different business situations
According to case study, David was driving at very high speed i.e. 35 MPH in a lane
street. But the speed should be within 25 MPH as mentioned for safe driving. Kevin, 9 year old
child was running into the street as he wanted to chase his ball. In order to save Kevin, David
swerved into another lane without watching over his shoulder. As a bad result, he suffered from
serious ans permanent injury by hitting a telephone pole. The pole get snapped into two pieces
and hit Kevin, due to this he also faces severe & permanent injuries. He is still in unconscious
condition. By going through this case, elements of tort of negligence can be applied easily. There
are mainly four elements to a negligence action. This has been further discussed below :
 Duty : Defendant comprises of a duty to other people considering plaintiff in order to
exercise effective and reasonable care. Here, the defender is David since he was riding
vehicle at much high speed. He should also take care of people travelling at lane in order
to avoid accidental cases. The claim against his negligence of duties will be done under
these circumstances.
 Breach : Breaching of the duty can be explained through the defendant via censurable
omission. David has violated the duty of care by doing blame - full crime (de Wardt,
2014). It was his responsibility to check the signage present at that lane and ought to
drive carefully by following the direction mentioned there. But he did not do so whose
result come as dangerous accident of Kevin.
9

 Damages : Consequences of those acts or omissions i.e. complainant would suffer an
injury. Because of the negligence of David, Kevin was faced serious injury and was still
present at unconscious state at accidental location. Additionally, the pole was also broken
as it was hit by higher force of vehicle.
 Causation : Ultimate causes which associates to whether the damages happened were
foreseeable. Since, severe accident had occurred due to hitting of car from pole the
plaintiff can predict that he may even loose his life and has right to claim against
defendant.
On the other hand, culprit (David) can defend itself by stating that he was trying to save
child and during this he has gone into another lane without thinking and observing anything. He
also get injured while saving the sufferer which can save him from the additional charges.
4.2 Apply the elements of vicarious liability in given business situations
Vicarious liability generally arises when a worker commit an action of negligence which
caused harm and damages to third party (Burnham, 2014). Here, that employer has to bear
liabilities. This can be interpreted by following case :
As per the given case, Roger is working as a dishwasher in a company named as Regent
Hotel. He is performing under Colin who is the head chef of organisation. Roger is short
tempered and is also full of attitude. Because of this quality, Colin always remains disturbed.
One day, he knocked Roger with frying pan after getting too much irritated. Due to this, Roger
had faced terrible injury but he was not ready to take treatment. In this situation, he is having
right to claim against Colin as per the norm of viscous liability. In-fact, he can also directly
knock the door of court for suing Colin and request judges for giving justice.
The three element of vicarious liability can be applied here which is explained below : Employment : An individual who committed any tort have to be a staff (Blaskovic,
2013). Colin was an employee so can charge case against his head. A tort must be affianced : Herein, illegal action was done by Roger as he hit badly to his
worker by frying pan.
 Tort or misconduct must be committed during the time frame of employment : Hereby,
tort has been committed by Roger in the course of employment.
All the components are being applied in this business scenario, therefore, vicarious
liability can be refereed by plaintiff i.e. Roger.
10

CONCLUSION
By going through above based report, it can be summarised that each and every
contractor have to follow the rules and polices framed by legal bodies in order to conduct their
businesses in ethical and disciplined way. They also have to focus on their duties in respect to
any task. In this context, organisations or individuals should obey each laws and regulations
associated with forming a valid contract. This will assist them in creating an effective
environment where every contracts within business world are built on the foundation of truth and
reliance. Additionally, different other legitimate terms like Warranty, Vicarious liability,
Offeree, etc. are considered under the aspects and negligence of contract.
11

REFERENCES
Books & Journals
Blaskovic, I., 2013. Certain Legal Aspects of the Himalaya Clause in the Contract of
International Carriage of Goods by Sea A critical perspective on legal challenges raised
by the clause under international uniform law and general contract law principles
(Master's thesis).
Burnham, S. J., 2014. Are You Free to Contract away from Your Right to Bring a Negligence
Claim. Chi.-Kent L. Rev. 89. p.379.
de Wardt, J. P., 2014, March. The drilling business model: driver or inhibitor of performance and
innovation. In IADC/SPE Drilling Conference and Exhibition. Society of Petroleum
Engineers.
Gomtsian, S., 2016. Private Ordering of Exit in Limited Liability Companies: Theory and
Evidence from Business Organization Contracts. American Business Law Journal.
53(4). pp.677-744.
Hargreaves, J. and Price, I., 2015. Bounded rationality, negligence or corruption: The effect of
emergent malfeasance in procurement practice.
Idowu, S. O. and et. al., 2013. Encyclopedia of corporate social responsibility (Vol. 21). New
York: Springer.
Kehoe, D. P., 2013. Law, Agency, and Growth in the Roman Economy. Paul J. Du Plessis, ed.,
New Frontiers: Law and Society in the Roman World. pp.177-91.
McInnes, M., Kerr, I. R. and VanDuzer, J. A., 2013. Managing the Law: The Legal Aspects of
Doing Business with MyBusLawLab. Pearson Education Canada.
Miller, S. K., 2013. The best of both worlds: Default fiduciary duties and contractual freedom in
alternative business entities. J. Corp. L. 39.p.295.
Odinet, C. K., 2016. The Unfinished Business of Dodd-Frank: Reforming the Mortgage
Contract. SMUL Rev. 69. p.653.
Pathak, A., 2013. Legal Aspects of Business. Tata McGraw-Hill Education.
Patten, B. and Saunders, H., 2018. Professional negligence in construction. Routledge.
Potter, S., 2012. Food for thought: legal aspects of food provision. Worldwide Hospitality and
Tourism Themes. 4(3). pp.277-287.
Reddy, K. and Rampersad, R., 2012. Ethical business practices: The consumer protection act and
socio-economic transformation in South Africa. African Journal of Business
Management. 6(25). pp.7403-7413.
Rohrmann, C. A., Cunha, S. R. and Falci, J., 2015. Some legal aspects of cloud computing
contracts. J. Int't Com. L. & Tech. 10. p.37.
SALAMEH, A., 2013. The FDIC as Receiver of Failed Banks: A Primer. Journal of Taxation &
Regulation of Financial Institutions. 26(6).
Thompson, A., 2012. Architectural design procedures. Routledge.
Weber, R. H., 2017. Liability in the Internet of Things. Journal of European Consumer and
Market Law. 6(5). pp.207-212.
Online
Negligence. 2016. [Online]. Available through<https://negligence.uslegal.com/>.
12

13