Vicarious Liability in Business: Case Studies and Analysis

The provided content discusses vicarious liability in the context of business and employment. It highlights two case scenarios where an employer (XYZ Diaries) is held responsible for the wrongful act of hiring a 14-year-old boy, which is illegal in the UK, and another scenario where a museum owner is liable for the negligence of his friend who was driving a vintage bus that hit Mrs. Smith's car. The content concludes that employers are responsible for the actions of their employees under vicarious liability and emphasizes the importance of taking care of employee actions by providing appropriate guidelines.

ASPECTS OF
CONTRACT AND
NEGLIGENCE

TABLE OF CONTENTS
Introduction .....................................................................................................................................3
Task One..........................................................................................................................................3
1.1 Essential elements required for the formation of a contract..................................................3
1.2 Different types of contract.....................................................................................................4
2.1 Application of various types of elements...............................................................................5
Task Two.........................................................................................................................................5
1.3 & 2.2 Analysis of contractual term with reference to their meaning and effects..................5
2.3 Evaluation of impact of expressed and implied terms...........................................................6
Task Three.......................................................................................................................................7
4.1 Advice to Brad for recovery of losses and provisions of defenses in negligence..................7
3.1 Difference between tort liability and contractual liability.....................................................8
3.2 Importance of case of Donoghue V Stevenson in development of concept of duty of care..9
Task Four.........................................................................................................................................9
4.2 Negligence liability of Bill and vicarious liability of XYZ diaries.......................................9
3.3 Vicarious liability of business..............................................................................................10
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
INDEX OF TABLES
Table 1: Difference Between Tort Liability and Contractual Liability...........................................8
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INTRODUCTION
In a law, contract is basic object which which is basically an agreement which is
enforceable by law. It is lawful object which is being voluntarily entered by two or more parties
and each party has a purpose of creating one or more legal obligations between them (Goldman,
2013). On the other hand, negligence in a contract refers to as the failure to exercise the
reasonable care by the prudent person which in turn result in the unfortunate circumstances. This
report is concerned about the aspect of contract and negligence and also their formation and
operation in business situations. This can be understood by analyzing several cases in this report.
Furthermore, the reader of this report will be able to understand the liability in contract, the
nature of obligations and the availability of remedies when the contract is not fulfilled as per the
required terms. In addition to this, it will enable the reader to understand the difference between
tort law and contract law (Jones, 2002).
TASK ONE
1.1 Essential elements required for the formation of a contract
In order to make the contract valid it is essential to include all the required elements
which are described as follows:
1. Offer: This is the first and foremost element of a valid contract because of this an
agreement can be entered into (Klass, 2010). If there is no offer than there cannot be any
contract. Offer should be clearly communicated to the other party so that purpose could
be properly fulfilled. Offer must specifically mentioned all the aspects because of which
the contract is being formed.
2. Acceptance: If there is an offer than there should be an acceptance because without
which contract cannot be considered as complete and valid (Four Essential Elements of a
Contract, n.d.). The acceptance should be according to the offer without any further
conditions. If there is new terms added than that is not a acceptance, that becomes
counter offer which can be either accepted or rejected. Acceptance can be done by
writing, speaking or through any action (Leone, 2011).
3. Intention to Create Legal Relationship: All the parties of a contract should have an
intention of getting bind in a legal relationship. Any of the party should not be forcefully
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entered into a contract such as by threatening or warning. Further, the parties should
make a legal contract between them so that at the time of breach, suffered party can get
remedies against the damage cased due to breach of a contract.
4. Consideration: Each party in a contract should be benefited out of the contract which
have been entered into (Lockwood, 2011). The valuable return aroused out of contract is
known as consideration. If there is no consideration than the contract cannot be
considered as valid.
The given case explains the concept of Invitation to Treat, where Bill has advertised for
the sale of printing press for £100,00. After reading the ad, Cathy offered the Bill for the
purchase of printing press for £80,000. Later, Bill gave an counter offer that he will sell it for
£90,000 which was not accepted by Cathy as she did not replied back. Again, Bill offered for the
sale at £80,000 but he is is not entitled for any because one cannot give another offer on the same
counter offer.
1.2 Different types of contract
There are different types of contract which are used in different situations in order to
enter into a legal relationship. The discussion about them are discussed as follows: Face-to-face Contract and Distance Contract: Those contract which are agreed by the
parties at same place and same time are termed as face-to-face contract. It has the
advantage that all the term and conditions are agreed on the spot and confusions does not
get arises (Magnus, Casals and Boom, 2004). On the other hand, distance contract are
those which are agreed upon by the parties at a distant point. All the parties of a contract
are not necessarily face each other but they can interact using phones, mails, video
conferencing, etc. It enhances the scope of contractual agreement and saves time but
however, leads to confusion and breach of contract.
 Verbal and Written Contract: Those contract which are agreed orally and by speaking
are termed as verbal contract. It is an easier way to enter into a contract as it lacks all the
formalities but such contract ignores the evidence and damages cannot be claimed at the
time of breach of contract. While at other side, written contract is one which is made by
writing each and every term or condition (Manuel, 2011). This type of contract help in
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maintaining proof so that claim could be made. Moreover, this type include many legal
formalities which become uninteresting for the parties.
2.1 Application of various types of elements
There are two cases given in this report wherein, first case discussed that Bill gives
advertised about the availability of printing press for £100,000 which is an invitation to treat. For
this, Cathy offered that she want to buy the press for £80,00, for this Bill again gave a counter
offer for £90,000 but Cathy didn't gave any reply. After that Bill again accepts its earlier offer for
£80,000. As per the law, after giving counter offer one cannot accept earlier offer and the
contract cannot be considered as valid (Marsh and Soulsby, 2002). In this case, there is no
contract between Cathy and Bill.
Further, in another case, Bill gave an offer to a specific person Liza, that he wants to sell
a computer of £550 and Liza wrote the letter in acceptance to the Bill. Letter was supposed to
reach on a expected date but before that Liza sent a fax and wrote that Bill should ignore the
letter of acceptance. Thus, this implies that there is no contract between both the parties as one of
the essential element 'acceptance' was not there so contract cannot be considered as valid
(Morris, 2010).
TASK TWO
1.3 & 2.2 Analysis of contractual term with reference to their meaning and effects
Terms of contracts can be defined as a provision which forms the part of the contract.
Contractual obligations are created by these provisions and if these provisions are breached than
legal action can betaken against it. Terms of contract are described as follows:
 Conditions: Condition is linked with the objectives of contract and it is considered as a
major term of contract. If there is a breach of contract than the entire contract get
breached (Nystén-Haarala, Lee and Lehto, 2010). For this purpose, breach of condition
makes suffered party entitled for the rejection of contract and can also claim for the
damages.
 Warranties: As against the condition, warranty is considered to be a minor term in a
contract and if there is a breach of warranties than than only damages can be claimed by
the innocent party.
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 Exclusion Clause: Terms which are inserted by the parties are known as exclusion
clause (Olander and Norrman, 2012). It is included in order to reduce the contractual
obligations in such situations where appropriate performance is not provided by the
parties. Exclusion clause is considered as a relief terms if its incorporation is properly
done and supported by legal provisions. Innominate Terms: Introduction of this term is done for those contractual term which is
not considered as either condition or a warranty. Innominate terms therefore lies between
conditions and warranty. According to this term, party can terminate terminate the
contract if there is loss of entire benefit (Olmos, 2011).
Case Scenario
As per the present case, Joyce DiDonato who is a opera singer had entered into a contract
and consequently she was terminated by two employment contract due to her poor health. First
contract was terminated because she didn't attend the first four nights of main program due to
which the employer hire another singer (Pesqueux, 2012). Joyce DiDanto sued them.
Subsequently she entered into another contract and there again she fall sick and she missed 6
rehearsals nights. There she was replaced by another singer and her employer terminate the
contract.
According to the case of Poussard v Spiers (1876) 1 QBD 410, for the first breach of
contract, Joyce cannot sue them as there breach of condition was there and breach of condition
leads to breach of contract. However, in another employment she only missed rehearsals nights
which is considered to be warranty and her employer cannot terminate the contract. So, as per the
case scenario of Bettini v Gye 1876 QBD 183 , Joyce can sue the second employer for the
termination of contract.
2.3 Evaluation of impact of expressed and implied terms
Contractual terms can be either expressed or implied. At the time of entering into a
contract expressed terms are included by the consent of the parties. Further, these terms can be
divided into conditions, warranties and innominate terms (Rosly, 2010). However, implied terms
are those which are assumed to be a part of contractual deed as these are not specifically stated.
These terms are inserted by statute, custom and court of law from the objective to provide
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protection to the weaker party from unfair terms. Impact of both the terms can be understood by
considering the following cases:
Case Scenario 1 – Expressed Term
According to the given case, Scammell and Ouston had agreed upon the supply of Van on
hire purchase terms. Through this agreement, Ouston proposed to earn £100 out of it but due the
breach, he lost this opportunity. Form this, it can be understood that there is a breach of
expressed terms and Ouston is entitled to claim for the opportunity loss due to the disagreement
from Scammell.
Case Scenario 2 – Implied Term
As per the given case situation, farmer and landlord had a tenancy agreement between
them. Farmer planted corn and barley on the field and prior the harvesting of crops, tenancy
agreement was terminated by the landlord. Farmer claimed for the expenses and efforts he put on
that field but landlord refused to pay and said that there was no such expressed term mentioned
in the agreement (Sumner and Williams, 2010). In light of the case of Hutton v Warren [1836]
EWHC Exch J61, it can be explained that court of law has stated that claimant is entitled for the
compensation for the efforts made by them. Thus, farmer is entitled for the compensation from
his landlord for the efforts and expenses.
TASK THREE
4.1 Advice to Brad for recovery of losses and provisions of defences in negligence
According to the given case scenario, Albert applied for the Flat on rent and asked him to
consult his banker Charles for the financial status. Brad took advice from Charles and mistakenly
he replaced the Albert with another client and advised to Brad that his financial status is quite
strong and recommended him to enter into a tenancy agreement. This was a case of negligence of
Charles because he did not took due care to check the report and provided him wrong
information because in reality Albert was under serious debt and had bank overdraft on and off.
Due to this negligence, Brad had to suffer form economic losses as a consequence of which he is
liable to provide damages for the financial injury (Tomasic, 2011).
There are three defences available for the defendant in order to prevent the liability for
the negligent actions. Defences are described as below:
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 Volenti non fit injuria: This defence has limited application in tort law. This defence is
applied in such situations where individual voluntarily put themselves in such situations
where there is a possibility of injury to happen (Tomprou and Nikolaou, 2011). Contributory negligence: This defence act as complete defence in a common law. The
name depict that claimant and defendant both have contributed for the act of negligence.
 Ex turpi causa: This defence is applied in a situation where not a single action of
defendant is considered to be immoral or illegal (Twigg-Flesner, 2013).
3.1 Difference between tort liability and contractual liability
Under English Law, provisions of liability has been given in order to ensure satisfactory
performance by the parties of a contract. Provision of civil law govern the obligations of contract
and negligence (Weiss, 2003). Because of this provisions, innocent party is entitled for the
compensation from the defendant. However, there are certain criteria which distinguish tort
liabilities against contractual liability which are described below:
Table 1: Difference Between Tort Liability and Contractual Liability
Basis Contractual Liability Tort Liability
Reason of occurrence When one or party does not
fulfill it obligations which
were arise out of the contract
and due to which one or more
party get suffered (Babb,
2001).
When the defendant failed to
act in accordance with their
standard duty and due to which
other party get injured that
time tort liability get arise.
Relationship between parties There is an existing
relationship between parties
because contract is created by
the mutual consent of parties.
In this liability, relationship is
imposed by law after the
occurrence of negligent action
(Manuel, 2011).
Basis of damages Damages are provided in order
to bring claimant in position if
satisfactory performance is
In tort liability, damages are
provided so as to bring
claimant in position if
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provided by the parties. negligent misconduct has not
been occurred.
Case reference White v Blackmore [1972] 3
WLR 296
Clunis v Camden and Islington
Health Authority [1998] 3 All
ER 180
3.2 Importance of case of Donoghue V Stevenson in development of concept of duty of care
For making successful claim for the negligent action claimant should satisfy following
aspects:
 Duty of care: Every defendant should take reasonable care while performing its duty. It
refers as the circumstances and relationships which the law recognizes and give rise to a
legal duty of taking care.
 Breach of duty: The negligence of liability where defendant fails to meet the standard of
care which is required by the law (Leone, 2011).
 Causation: To demonstrate causation in tort law, the claimant must explain the loss
which they have suffered due to negligence caused by the defendant.
 Forseeability: Damages should be foreseeable in nature which was occurred to claimant.
It means that damages can be predictable form the action of negligence.
In the present case of Donghue V Stevenson, defendant was a manufacturer of beer. Due
to the carelessness of manufacturer, decomposed insects incurred in the drink of consumer. Due
to this, claimant suffered from the personal injury. As per the case, Lord Atkin had established
the provisions for duty of care. From this case, it has been inferred that an individual is
responsible to take reasonable care about their actions to prevent possibility of injury of related
parties. For this aspect, they had developed the principles of neighbour love and in accordance
with this principle, individual should take care about the avoidance of omission act or negligence
for the reduction in risk of injury.
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TASK FOUR
4.2 Negligence liability of Bill and vicarious liability of XYZ diaries
Vicarious liability basically refers to as a liability of an employer due to the illegal act of
their employees on a third party (Lockwood, 2011). Also, employee is also liable for his part of
mistake due to which third party got injured or damaged. As per the case, Bill, a milkman hired
14 year old boy for the milk delivery in order to express prohibition form XYZ Dairies. This
information was known by the dairy but they ignored. One day due to the careless driving of
Bill, a boy got injured at the time of milk delivery.
As per the law, Bill fails to perform the duty of care due to negligence and Bill can be
held responsible but he has hired a minor and according to the English Law, if one of the party is
minor than contract becomes void and in the eyes of law that contract is voidable. So, a boy
cannot sue Bill for the negligence (Klass, 2010).
On the other hand, XYZ Dairies are held responsible under vicarious liability because,
Bill was their employee and he did the wrongful act of hiring a 14 year old boy for working
which is illegal in UK. Even after knowing about the fact, they did not respond towards his
action, thus, XYZ Diaries are held responsible under vicarious liability for the illegal act of Bill.
Although, Bill is responsible for hurting a boy under vicarious liability.
3.3 Vicarious liability of business
As per the case, museum owner asked his friend to drive a vintage bus because they were
taking part in a rally but due to the negligence of his friend, a bus hit the car of Mrs. Smith.
Under the vicarious liability, museum owner will be held responsible because a person who was
driving the bus was given permission for driving from the owner and thus, due to the negligence
wrong act happened (Goldman, 2013).
On a contrary, an owner cannot be held responsible because the person who was driving
was not his employer and he was only his friend. Thus, under vicarious liability owner is
responsible for the wrongful act of his employee only and not of other's wrongs (Jones, 2002).
CONCLUSION
As per the above report it has been concluded that parties of a contract should satisfy the
contractual terms in proper manner else they will be held liable to provide compensation for
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breach. In absence of contractual relationship, individual has to act according to the standard
duty so that possibility of injury caused to innocent party can be prevented. Further, employers
are responsible for the negligence of employees thus they have duty to take care of their actions
by providing appropriate guidelines.
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REFERENCES
Journals and Books
Goldman, A., 2013. Business law: Principles and Practices. Cengage.
Jones, M., 2002. Textbook on Torts. Oxford University.
Klass, G., 2010. Contract Law in the USA. Kluwer Law International.
Leone, M., 2011. Legal controversies about the establishment of new places of worship in
multicultural cities: A semiogeographic analysis. In Prospects of Legal Semiotics.
Springer Netherlands.
Lockwood, G., 2011. The widening of vicarious liability:implications for employers.
International Journal of Law and Management. 53(2). pp.149–164.
Magnus, U., Casals, M. and Boom, M., 2004. Unification of Tort Law: Contributory Negligence.
Kluwer Law International.
Manuel, M. K., 2011. Contract Types: An Overview of the Legal Requirements and Issues.
DIANE Publishing.
Marsh, S. B., and Soulsby, J. 2002. Business law. Nelson Thornes.
Morris, J. R., 2010. The teaching of law to non‐lawyers:An exploration of some curriculum
design challenges. International Journal of Law in the Built Environment. 2(3). pp.232-
245.
Nystén-Haarala, S., Lee, N., and Lehto, J., 2010.Flexibility in contract terms and contracting
processes. International Journal of Managing Projects in Business. 3(3). pp.462 – 478
Olander, M. and Norrman, A., 2012. Legal analysis of a contract for advanced logistics
services. International Journal of Physical Distribution & Logistics Management. 42(7).
pp.673–696.
Olmos, F. M., 2011. The moderating role of trust in contractual choice. British Food Journal.
113(3). pp.374–390.
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