Application of Tort and Contract Laws to Business Situations

This act of customer compelled Graham to push him out of there. In this process, although he breaks the customer's arm, still he cannot be asked to pay damages for the same. The claimant because of his own illegality cannot sue Graham (Beever, 2007). Also, there is no negligence in the given case, as a result of which, the employer of Graham cannot be held liable either to pay damages for the same.

Aspects of
Contract

TABLE OF CONTENTS
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
1.1 Valid contract and liability in case of Negligence.................................................................3
1.2 Types of contracts in UK.......................................................................................................4
1.3 Terms included in valid contract............................................................................................5
Task 2...............................................................................................................................................5
2.1 Preparation of contract...........................................................................................................5
2.2 Explaining terms....................................................................................................................6
Task 3...............................................................................................................................................6
3.1 Contractual liability and Tort liability...................................................................................6
3.2 Negligence: Duty of care.......................................................................................................7
3.3 Vicarious liability...................................................................................................................8
Task 4 ..............................................................................................................................................8
4.1 Advice on recovery of losses.................................................................................................8
4.2 Situation based analysis.........................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
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INTRODUCTION
In today's scenario, all kind of businesses and individuals have to deal with the legal
aspects and even a single mistake can hamper the operations of whole business. Therefore, it is
crucial for them to have some knowledge of contract law and negligence law. Contract is a
voluntary agreement between two or more parties who tend to enter into an agreement by
creating legal obligations along with a lawful object. It can be verbal or written. On the other
hand, negligence refers to failure of parties in exercising due care which any person in normal
course of action would have ensured (Zhang, 2006). It excludes intentional harm. In the present
project report, valid contracts and liability in case of negligence is explained. Further, proper
justifications of case scenarios are also given with the help of case laws.
TASK1
1.1 Valid contract and liability in case of Negligence
Essential elements of a valid contract are:
Offer: As per the contract law, in order to enter into a valid contract, there must be a
lawful offer made by one party. In accordance with the case of Harvey v Facey [1893] UKPC 1,
Offer refers to a promise which is made in exchange for the performance which is to be
conducted by another party. An offer can be general or specific. Offer must not be confused with
the invitation to offer (Pharmaceutical Society of Great Britain v Boots) (McKendrick, 2014).
Offer once made cannot be revoked or terminated except under certain conditions. Offer can also
be negotiated so as to create a counter-offer.
Acceptance: The offer made by party above must be given with a lawful acceptance by
another party without any modifications in it. Acceptance is an act of receiving something which
is offered. It should be given in the specific mode and the manner provided. When an offer is
accepted, it becomes a contract. Any condition based acceptance is called a counter-offer.
Lawful Consideration: A reward for work done is termed as consideration. It must be
appropriate (Beever, 2007). It can be in monetary or non-monetary terms as well. Any promise to
do or not to do an act is also a consideration.
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Capacity of parties: This states that the parties must not be incapable to enter into a
contract. Incapacity may deal with being of unsound mind, disqualified by law to enter into a
contract and minor person.
Privity of contract: Privity refers to a relationship between two parties that is clearly
recognised by law. It simply means that the parties must carry an intention to create a legal
binding upon them before entering into a contract. It excludes agreements of social or domestic
nature (Best and Barnes, 2007). The most important rule in privity of contract is that, only parties
to contract can sue one another. No third party can intrude in between.
Intention of parties: All the parties must have intention to create contractual relationship.
In accordance with the case facts of Jones v Padavatton [1969] 1 WLR 328 domestic and
charitable agreements are not enforceable because parties do not have intention of create
contractual relationship.
Thus, as per the given scenario, James made an Invitation to offer by posting it on the
website. Maria's response to that invitation was an offer made by her to James that James did not
accept and this resulted in the cancellation of offer. So, there was no contractual relationship
between James and Maria. James reply to Maria's offer was a counter offer which was made by
him to Maria and was not accepted by her. This clearly shows an absence of essential elements
(as stated above) which are required to enter in a contract. Further, if James wants to accept the
first offer made by Maria, then it is not possible because as soon as he made a counter offer,
Maria's initial offer got cancelled.
1.2 Types of contracts in UK
3 types of contracts are there in UK: Face to face contract: This happens only when all the parties to the contract are
physically present. In this contract, acceptance has to be given at that time only. For
example, purchasing of goods from shopping mall (Helewitz, 2010). Distance contract: Any contract which happens through post or telecommutes is
considered as a distance contract. It is generally settled between the trader and consumer
under Sales provision scheme without the physical presence of consumer and seller. It is
mostly time bound like online shopping. Example: importing goods, online contracts, etc.
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These contracts are similar to that of a written contract but the only difference is that they
take place through online portals because parties are mostly not situated at same place. Written contract: Any contract made by entering into a deed is known as a written
contract. Any claim or damage awarded by law is based on these written contracts. It can
never be dusted down if there are valid signatures. It protects the parties and states each
other's expectations. Example: Contract of employment (Milner, 2011).
 Business to business contract: These contracts are created between two commercial
organizations in which general public is not involved. In such contracts specified terms
are inserted by business organization for the contractual performance Business to customer contract: These agreements are created between public and
business entity. In these contract, terms are generally described by business entities which
are required to be complied by customers. However, validity of these terms is determined
on the basis of implied terms described in Sales of Goods Act 1979. Verbal contracts: Contracts formed verbally are known as verbal contracts. They are
different from oral contracts in the sense that they are based on trust and faith. Although
they are informal in nature still considered as valid in the eyes of law. Any dispute
between the contracting parties may be solved on the basis of situation and consequences
because there is no written deed or evidence to prove breach of contract.
 Inferred contracts: Any implied contract formed by conduct is known as an inferred
contract where offer and acceptance is provided by actions. Example: Dinner in a
restaurant.
1.3 Terms included in valid contract1. Express terms: These are the terms entered and agreed upon by contracting parties at the
time of making contract. They can be oral or written. Any act which results in violation
of the express terms may result in damages and may repudiate the contract. By
considering the case facts of Bettini v Gye 1876 QBD 183 if expressed contractual terms
are not satisfied then aggrieved party is in position to claim damages.
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2. Implied terms: There are some terms which are not mentioned by either of the parties just
for the reason that, that particular contract wouldn't be of commercial sense without those
specific terms (Middlemiss, 2011). It may be implied by law, statue or courts. Any
misconduct with these implied terms may result in the court proceedings or even criminal
liabilities against the individual or company.3. In-nominate terms: It is neither a condition nor a warranty, but an intermediary. Its
validity depends upon the benefit that the defendant has gained through the contract. If
the defendant is deprived of whole benefit, then he can repudiate the contract. But if the
defendant has gained some benefit out of the contract, then he can just claim for the
damages from plaintiff.4. Conditions: It is a condition which is necessary for fulfilling main purpose of the
contract. By considering the case reference of Poussard v Spiers (1876) 1 QBD 410, Any
breach of a condition repudiates the contract and damages becomes payable (Zekos,
2005). For example, selling mixed coconut oil by claiming it to be a pure one.
5. Warranties: A warranty is a condition which is not central to the existence of main
purpose of the contract. In accordance with the case of Bettini v Gye 1876 QBD 183
Any breach of warranty makes innocent party eligible to claim for the damages (only)
and not repudiate the contract like selling a car by telling the wrong mileage.
TASK2
2.1 Preparation of contract
Contract for the sale of Hair oil
Purchasing party Selling party
Hair 4 U Bella Ltd.
Terms of the contract:
 Expressed term: 10 boxes at the rate of 5.
 Implied term: There is an implied condition in the offer that the product is good and has
guaranteed results.
 Exclusion clause: The Exclusion which it has added states that the product may not be
effective for every user as it has 20% success only and in case of adverse result, the
seller will not be responsible.
Signature Signature
Hair 4 U Bella Ltd.
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“Hair 4 U”, a fictitious firm, can take advantage of this product only if there are certain
mixed ingredients that have not been mentioned on the product and any customer faces reaction
or allergies due to that lack of information. In such a case, he can sue the manufacturer and claim
for the damages (Mardell and Serfozo, 2014).
2.2 Explaining terms
(a) Breach of condition: Condition is a major part of the contract upon which the parties
come together and enter into a contractual relationship with each other. Any breach in
condition(s) may repudiate the whole contract and can cause damages (Perritt, 2010).
Condition in the cited agreement
In the described case, condition is terms linked to price and quantity because these are directly
connected to the objective of contract.
Impact of breach of condition
Thus, any breach in described is breach of contract because as per English law, any breach of
condition repudiated the whole contract. As a result of which, the party who has suffered need
not carry out further performance and can claim for damages directly.
Applicability of legal provision in the described case
In the above case, if the product is not as per the description and does not result in hair growth
then it will be a case of breach of condition and the manufacturer can be sued upon for the same.
(b) Legality of exemption clause: Exemption clause is an agreement which ensures that
the party is excluded from certain liabilities. It can be used as a weapon by company and
customers as well if it is not properly stated.
Exclusion clause in the cited agreement
The Exclusion which it has added states that the product may not be effective for every user as it
has 20% success only and in case of adverse result, the seller will not be responsible.
Impact of Insertion of exclusion clause
By inserting an exclusion clause, the liability for providing damages in case of
inappropriate performance is reduced. Thus, an exemption clause must be properly inserted and
should be correct according to the statues (Ross, 2006). If any product or its composition is not
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mentioned on the product which is of other nature or may cause allergy to any person, then the
manufacturer may be sued on the basis of lack of information or hiding facts about the product. It
should also state that the extent to which the manufacturer or any other party can be held liable.
Applicability of legal provision in the described case
Exclusion clause in the described case is not appropriate because it not supported by the
provisions of implied terms of Sales of Goods Act. In accordance with this Act, Seller is liable to
provide qualitative products and they can reduce their obligation regarding personal injury
proposed to be occurred from the act of negligence.
TASK3
3.1 Contractual liability and Tort liability
Tort liability
Tort liability arises in situation where parties fails to act in accordance with their standard
duties and due to their carelessness injury is occurred to innocent party.
Contractual liability
Contractual liability is imposed in situation where contracting parties fails to act in
accordance with the terms of the contract.
Contractual and tort liability are the part of civil law. Both the liabilities are imposed on
faulty party to provide damages to the innocent party in order to compensate their injury.
Description of differences between obligations is as follows-
 Any breach in the terms of contract may result in the contractual liability which can be in
monetary form or in the form of a specific performance. On the other hand, tort liability
is a result of negligence.
 The victim of contractual liability must first prove that the action of tortfeasor was a clear
and recognizable reason of the harm caused and then only he is liable to get
compensation in the form of damages on filing a lawsuit (Zoll, 2012)
 In contract, any obligation between parties is a clear result of contractual relationship
between them and damages may be granted only in case of misunderstanding among the
parties or in case of any mistake in contract. On the other hand, in tort, obligations and
rights lack consent (Middlemiss, 2011). They are the result of court's decision. It happens
when any individual intrudes into the safety or privacy of the sufferer.
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 In case of tort liability, damages are provided so as to compensate the victim for his
losses. On the other hand, damages in case of contract are provided to restore the parties
back to their original positions.
 The basic difference relates to the nature and relationship between parties. Contract is a
result of mutual consent and will of parties which states that parties already know each
other (Zekos, 2005). On the other hand, in case of tort, no relation exists already because
tort is a result of negligent act.
3.2 Negligence: Duty of care
Meaning of liability from legal perspective: It can be termed as obligation occurred due to
unjustified act of the individual whether it is occurred deliberately or accidently.
Meaning of negligence: Tort in general parlance refers to a civil wrong which is a clear result of
negligence. Here, one party suffers with the loss which causes legal liability upon the person
who committed that tortuous act (Morris, 2010).
The person who commits tort is called the tortfeasor. In order to make successful claim
of negligence, following principles are required to be satisfied-
 Breach of duty
 Damage caused
 Proximate cause (remoteness of damages)
 Duty of care
Duty of care refers to the legal obligations that are imposed on any individual according
to which he is expected to adhere to reasonable standard of care and diligence before carrying
out any activity which may harm others. For this, the claimant must first prove that there was
negligence from defendant's side and it was his legal duty to take care; then also, he did not take
proper measures. This concept was first set out by House of Lords in Donoghue v Stevenson
case and is also known as the ''neighbour-ship principle''. It revolutionized the concept of
negligence by stating the concept of duty of care. In this case, Mrs Donoghue along with her
friend ordered ginger beer in a cafe in Paisley. It was only after consuming that beer, one of them
discovered a decomposed snail in the ginger bottle on pouring it into the tumbler. She fell ill and
sued the manufacturer, Mr. Stevenson. She argued that it was the duty of manufacturer to take
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certain precautionary measures as his negligence may harm others. From then onwards, duty of
care is imposed by the operations of law no matter whether there is any direct relationship or not.
It is a kind of social contract with implying individual’s responsibility towards the society. It is
important to understand that it does not have anything to do with distances of space and time.
3.3 Vicarious liability
Vicarious liability is a strict and secondary liability that comes under the doctrine of
agency. It states that all the acts related to the business that subordinates commit in course of
employment are under the responsibility of their superiors. However, the employer cannot be
held liable in case of assault or battery committed by employees and also, this does not apply on
the employers of independent contractor (e-lawresources.co.uk, 2015). In the given case, Alan, a
local milkman, who had clear specifications from his employer for not hiring any minor,
disrespected the orders and hired a minor, Matthew, to help him in delivering milk on
Wednesdays. He further asked Matthew to keep this job proposition between them only. As soon
as there is an involvement of any minor, the whole law turns upside down. There are certain
specification as to when can a minor be held responsible and when not. Reason simply is being
that minors cannot be kept on employment as per the legal norms.
(a)While delivering milk, Alan reversed the van and accidentally injured Matthew for
which Alan can be held liable because as per the case, both already knew that Alan was a minor
and was not supposed to work or drive, still he was kept on employment secretly.
(b) Secondly, Norfolk farms could not be held liable under vicarious liability in this
situation as he already gave clear and express instructions to Matthew for not hiring any minor.
Matthew hired Alan without giving any intimation to Norfolk. Thus, Norfolk cannot be sued
upon.
TASK 4
4.1 Advice on recovery of losses
In the given case, Brad, the owner of flat, wants to rent it out to someone. He receives an
application for the same from Albert in which he named Charles as his referee. Upon receiving
the application, Brad asks Charles about the financial position of Albert. Mistakenly, Charles
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gave Albert a green chit after seeing his financial information. Later on, Brad notices that Albert
disappears taking the flat keys and several thousand pounds worth of rent arrears.
Reference of previous case precedent
The current situation is based on the provision of negligent misstatement. Thus, as per the
case of Ross v Caunters, it was inferred that the receiver to a will filed a claim against a solicitor
firm failed to provide advise to the testators that if a will is witnessed by a person who has
interest in the will, will render the same invalid because of relying on the misstatement. This
claim by the beneficiary was declared successful.
Applicability in present case
 In the given case situation there is special relationship between claimant and defendant.
Further, opinion regarding Albert by Charles was provided in formal context.
 As a consequence, accountant will be held responsible to pay for the damages and thus,
Brad can recover all his losses from Charles. If Charles had properly looked into the
accounts of Albert, then he would have never referred Brad to keep Albert as his tenant
because Albert was already in heavy debt and overdraft with various banks for many
years.
4.2 Situation based analysis
Situation A
As per the given case law, Graham is an employee (doorman) in Macho Men plc's night
club. He was already alert about the drunken customers. One day, he saw a drunken customer
arguing with the bartender and damaging club's property. He ejected that customer and in that
process and broke the customer's arm. This is a clear clause of negligence and the negligent
person must be liable as per the negligence act. But there are three exceptions to the negligence
clause:
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 Voluntary non fit injuria: As per this law, if a person intentionally commits any act
knowing about the harm that may be caused to him out of that act, then he is not liable to
file a claim against the other party (Negligence Torts, 2015). Contributory negligence: As per the law, it is a general defence to a tort which can be
claimed against negligence. This happens when both, plaintiff and claimant, have
suffered some injury, loss or harm because of the actions of one another. The burden of
proof lies on both of them and both have to contribute to the harm that they have
suffered. The defence is not available if the act of tortfeastor is a result of malicious or
intentional wrongdoing.
 Ex turpi clausa non oritur action: It is a Latin term which states that any action arising as
a result of a dishonourable behaviour or activity of plaintiff does not create any legal
remedy against the defendant. It is also known as illegality defence (Negligence, 2015.).
In relation to this case, the Ex turpi clausa non oritur actio can be applied. The customer
causes a dishonourable act by shouting at the bartender and damaging club's property. This act of
customer compelled Graham to push him out of there. In this process, although he breaks the
customer's arm, still he cannot be asked to pay damages for the same. The claimant because of
his own illegality cannot sue Graham (Beever, 2007). Also, there is no negligence in the given
case, as a result of which, the employer of Graham cannot be held liable either to pay damages
for the same.
Next analysis is based on the second part of situation according to which if Graham
would have been held responsible if committed the same act after being expressly prohibited by
company from manhandling troublesome customers, then, Graham would have been held
responsible because then would have committed an act which he was not supposed to commit in
course of employment. In that case, Graham could not have taken shelter under Ex turpi causa
non oritur actio and he would have been held responsible to pay damages to the customer
(Zhang, 2006).
Situation B
Vicarious Liability is a doctrine that imposes a responsibility on the master or guardian
(depending upon the case) of the person who negligently commits the act, for example, master-
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servant relationship. As per the case law given, Carla whose work is to deliver courier for Links
Ltd. took a day off and went to drop her friend Lucy to the railway station in company's van.
Although it was a holiday, still on her way back, she thought of delivering some parcels. After
the first delivery, she broke into a car driven by George. For this, Links Ltd. cannot be held liable
as Carla went for her personal work and she was not on employment at that time. Thus, Carla is
liable to pay damages to George. Link's Ltd. could only be held responsible if company had
asked Carla to drop the parcels on her way back. At that point of time, she would be considered
to be on employment by company.
CONCLUSION
From the entire study, it is found that business laws and contract laws play an important
part in its success and overall performance. So, it is important to note that all the laws are
complied and adhered by an individual or company. Any person aggrieved by an act of another
party can seek redress-al by claiming an appeal against it. Thus, laws ensure behaviour and act as
a binding force.
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REFERENCES
Books
Beever, A., 2007. Rediscovering the law of Negligence. Bloomsbury Publishing.
Best, A. and Barnes,2007. W. D. Basic Tort Law:Cases,Statutes and Problems. 2nd ed. Aspen
Publishers.
Helewitz, A. J., 2010. Basic Contract Law for Paralegals. Aspen Publishers.
McKendrick, E., 2014. Contract Law:Text,Cases and Materials. 6th ed. Oxford University Press.
Zhang, M., 2006. Contract Law. Brill.
Mardell, J. and Serfozo, K., 2014. Personal Injury and Clinical Negligence Litigation. College of
Law Publishing.
Journals
Zoll, F., 2012. The binding power of the contract:Protection of performance in the system of the
Common European Sales Law. Journal of International Trade Law and Policy. 11(3). pp.
259-265.
Milner, A., 2011. Contract interpretation. Potential for relaxing the exclusionary rule. 3(3). pp.
205-221.
Morris, J. R., 2010. The teaching of law to non‐lawyers. An exploration of some curriculum
design challenges. 2(3). pp. 232-245.
Middlemiss, S., 2011. The psychological contract and implied contractual terms:Synchronous or
asynchronous models. International Journal of Law and Management. 53(1). pp. 32-50.
Perritt, H. H., 2010. Tort liability. The First Amendment,equal access and commercialization of
electronic networks. 20(4). pp. 436-460.
Ross, G. M., 2006. Concurrent liability in tort and contract. 5(3). pp.288-299.
Zekos, I. G., 2005. Conflict of laws and the contractual role of bills of lading. 40(3). pp.1-20.
Online
Negligence Torts:Definition and Cases. 2015. [Online]. Available through:
<http://study.com/academy/lesson/negligence-torts-definition-and-cases.html>.
[Accessed on 20th October 2015].
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e-lawresources.co.uk. 2015. [Online]. Available through:
<http://e-lawresources.co.uk/Contract.php>. [Accessed on 20th October 2015].
Negligence. 2015. [Online]. Available through:
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