Analyzing Tort Law and Contractual Relationships

This assignment delves into the complex relationship between tort law and contract law. It encourages students to analyze various legal cases and theories that highlight the points of intersection and divergence between these two areas of law. The focus is on understanding how principles of negligence, strict liability, and breach of contract interact in real-world situations.

ASPECTS OF CONTRACT
AND NEGLIGENCE IN
BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. Importance of essential elements of a valid contract..............................................................1
2. Impact of different types of contract.......................................................................................2
3. Analyzing Terms of Contract..................................................................................................3
TASK 2............................................................................................................................................4
4. Case Scenario..........................................................................................................................4
5. Impact of different terms of the contract.................................................................................4
6. Case Scenario..........................................................................................................................5
TASK 3............................................................................................................................................6
7. Contrast between liability in tort and contractual liability......................................................6
8. Nature of liability in negligence..............................................................................................7
9. Vicarious liability....................................................................................................................8
TASK 4............................................................................................................................................9
10. Elements of tort of negligence and defences in different business situations.......................9
11. Elements of vicarious liabilities in given business situation.................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
An agreement between two parties which is binding by law and intends to create legal
obligation is known as a contract. For an agreement to be a valid contract, it should constitute
some essential elements - offer and acceptance, consideration, legal capacity of parties,
contractual intention and consent. The first requisite is that parties should reach an agreement
and agreement will be reached when the offer made by one party is accepted by other. This
report explains the importance of essential elements in formation of contract and impact f
different types of contract.
Tort law is a set of laws that seeks to provide remedies to the person for wrong
committed against them (Vogenauer, 2013). It deals with the wrongful actions of a person or an
entity which causes injury to another individual, property or reputation. This report compares
and contrasts liability in tort with contractual liability. Further, it also focuses on the nature of
liability in negligence. Lastly, it explains vicarious liabilities of a business. In this report, we will
apply and understand impact of contract law and tort law in different business scenario.
TASK 1
1. Importance of essential elements of a valid contract
A contract is an agreement between two parties which is enforceable by law and intends
to create contractual obligations. An agreement becomes a valid contract when it contains
following essential elements :
1. Offer : An expression of willingness to enter into a contract is known as offer. It is made
with the intention to legally bound the person who has accepted the offer. Intention
should be clear at the time of making an offer as per case of Harvey v Facey, 1893. An
offer may be expressed or implied i.e. by conduct. It can be addressed to a single person,
specified group of persons, or to whole world at large. An offer should be distinguished
from an invitation to offer (Hondius and Grigoleit 2011). The intention at the time of
making offer determines whether it would be considered as an offer or an invitation to
offer. Examples of invitation to offer includes display of goods on a shelf in a self-service
store, advertisements etc.
2. Acceptance : An offer is said to be accepted when the party to whom offer was made
gives his assent. An offer must be accepted as per the terms of agreement and all the
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terms must be accepted without any change or modification. Acceptance will be
considered effective only if it is communicated to the offeror as per Entorres v Miles Far
East, 1955. The terms of acceptance must exactly match the terms of offer because if
terms differ it will result in counter offer and contract will not be valid as per the case of
Hyde v Wrench (1840). It must be certain. An offer may be revoked any time before it is
accepted but it needs to be communicated to the offeree.
3. Consideration : An agreement cannot be binding as a contract unless it is supported by
consideration (Hillman, 2010). As per the case of Thomas v Thomas, 1842, consideration
means 'something of value' in the eyes of law which is given in lieu of a promise and
required to make such promise enforceable as a contract. There are various rules
governing the law of consideration – it must not be past, there is no requirement for the
consideration to be adequate but it should be sufficient, consideration must move from
the promisee otherwise he cannot enforce the agreement, an existing public duty or
contractual duty does not amount to a valid consideration.
4. Intention to create legal relation : An agreement is not binding as a contract and is
enforceable by law if it is made without an intention to create legal relationship. In case
of Jones v Padavatton, 1969, it was held that domestic and social agreement do not
intend to be legally binding.
5. Capacity : The parties to the contract must be legally capable to enter into a contract. A
minor i.e. person below the age of 18 years and a person of unsound mind are
incompetent to enter into a contract and any contract entered by them will be void in the
eyes of law (Stone, 2013).
2. Impact of different types of contract
There are different types of contract and their impact on business depends on the type of
contract entered by it. The different types of contract includes face to face contract, written
contract and distance selling contracts. Face to face contracts : Generally, face to face contracts are entered when both the
parties are present in the same location. This enables them to meet and discuss all the
facts and figures related to the contract. This type of contract reduces the chances of any
ambiguity and ensure smooth execution of contract. The parties can satisfy themselves
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regarding the quality and fitness of goods by inspecting them before entering into
contract. Written contracts : Usually, face to face contracts only take the form of written contracts
as parties are able to get in touch with each other (Whittaker, 2011) . The terms of
contract, conditions and clauses are written, agreed and signed by the parties. This
ensures that there are reduced chances of conflicts and disputes among the parties in
future. Written contracts can act as best evidence that can be produced in court of law in
case of breach of contract.
 Distance selling contracts : When the parties are situated in different locations, they
usually enters into distance selling contract. As the parties do not get a chance to meet
each other in person, such contracts are based on trust and faith. Parties cannot inspect
the goods before entering into agreement. Some organised means of communication like
phone, post or internet is used to negotiate and agree on the terms of contract.
3. Analyzing Terms of Contract
A contract is comprised of terms, which is essence ascertain the rights and obligations of
the parties involved in the contractual relationship. These terms are included in the following
form: Express and Implied Terms: The express terms of the contract are explicitly included in
the contract, after a mutual agreement of the parties. On the other hand, implied terms are
the ones which are made applicable through custom, by statute or in fact. In the case of
Hutton v. Warren (1836) the court upheld the validity of terms implied through the
common business parlance. Moreover, in the case of Moorcock (1889), it was opined that
the test of business efficacy shall be applied for including implied terms in fact. Conditions and Warranties: The former constitute to be a major term, which plays an
instrumental role in fulfilment of the purpose of the contract (Sullivan, 2011). On the
other hand, Warranties are the minor clauses, violation of which entitles the other party to
claim damages. On the contrary, breach of a condition repudiates the entire contract.
 In-nominate Terms: These are the intermediate terms which were first established in the
case of Hong Kong Fir Shipping (1962). The classification of these terms is on the basis
of impact of breach of these terms. In the case of Schuler v. Wickman Tools (1974), it was
opined by the court that the classification of these terms undertaken by the court can be
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contrary to the opinion of parties. However, these terms have been criticized for making
the commercial contracts uncertain in nature.
TASK 2
4. Case Scenario
The given case scenario highlights a situation wherein Ivan intends to purchase a specific
book which is displayed for sale in the bookshop of Todor. At the payment counter, Ivan was
informed that the book in question was already sol to another person, and was forgotten to be
removed from display. To determine whether an enforceable contract has been formulated in
these circumstances, it is important to understand the concepts of 'offer' as well as 'invitation to
treat'. The court in case of Harris v. Nickerson (1873) held that acceptance of offer, results into
formation of a valid contract. However, an invitation to treat cannot be accepted, as it is purely a
statement made by a person and hence cannot be considered as an offer (Furmston, Cheshire and
Fifoot, 2012.). Further, it was observed that invitation to offer is a statement delivered by a
person, to invite the public to make an offer in respect to the specific goods. In the case of
Pharmaceutical Society v. Boots (1953), display of goods in shops was characterized as an
invitation to treat. The court while deciding this case also quoted an example, wherein the
customer visiting a store was in fact considered as the original offeror, and the same shall be
accepted by the store owner to form a valid contract. Hence, in light of this law, it can be
concluded that in the present case, display of book for sale at £50 was an invitation to offer.
Further, Ivan by communicating his interest to purchase the said book, made the actual offer to
Todor, which was rejected by him. Therefore, in accordance to the law laid down in
Pharmaceutical Society case, no contract could have been formed in such a situation.
5. Impact of different terms of the contract
(a) Condition: This is one of the crucial terms of a contract, which is instrumental for
fulfilment of the basic object for formation of a contract. In the ruling of Poussard v. Spiers
(1876) it was reiterated by the court that condition constituted to be vital for addressing the
purpose of the parties. In the event, any of the parties act in violation of these conditions, the
other party is rendered incapable to perform the contract (Whittaker, 2011). Therefore, breach of
condition repudiates the entire contract. The rationale behind the same was highlighted in
L'Estrange v. F Graucob Ltd. (1934) wherein it was held that in consequence to violation of a
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condition, the parties are rendered in capable to perform the contract, and therefore it made void
ab initio.
(b) Warranty: These are the terms which play a supporting role in formation of a
contractual relationship between the parties. Hence, these are the collateral terms, which impose
obligations not very critical to the process of performing a contract. Non-compliance of
warranties is considered less serious, and only harms the other party (Posner, 2011). Therefore,
breach of a warranty only entitles the aggrieved to claim damages for the injuries sustained in
pursuance to violation of the warranty.
(c) In-nominate Terms:These are the intermediate terms which may not be easily
classified into a condition or warranty, and may occupy a position somewhere in between.
Hence, the nature of such clauses are determined only on the basis of consequences imposed on
either of the parties. The resulting impact is severe enough to restrict the parties to further
perform the contract, then it shall be classified as a condition. Therefore, in such a case the
contract shall be liable to be repudiated (Trakman, 2010). However, if the consequences are not
fundamental in nature, the aggrieved shall only be entitled to receive damages for the losses
realized.
6. Case Scenario
The given facts of the case are in relation to the validity of exclusion clause which was
present on the receipt given to John, after he hired a chair in the park of the local council. The
hired chair collapsed after John sat on him, in consequence to which John sustained serious
injuries.. however, the local council, who manages the park, is relying on the exclusion clause
present on the receipt. In pursuance to the same, it is important to analyze the legality and
validity of such clauses. Courts in various judicial pronouncements have observed that
exemption clauses are completely legal, if incorporated and constructed in a proper manner. In
the event parties enter into a contract after signing the document, which is comprised of an
exclusion clause, it shall have a binding effect on the parties. This shall stand true even if either
of the parties have not read the said clause. In the case of L'Estrange v. Graucob (1934) the court
held an exclusion clause to be invalid even after being signed by the parties (Bix and Bix, 2012).
The rationale behind the same was that one of the parties had made a misrepresentation to
include the said clause. However, in the case of unsigned documents, it is imperative for the
parties to reasonably and sufficiently communicate the fact of inclusion of such a clause. In the
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case of Parker v. SE Railway Co. (1877) it was specifically held by the court that documents in
the form of ticket or acknowledgement receipts, cannot contain legally valid exemption or
exclusion clauses (Dagan, 2013).
In light of the laid down cases, it can be inferred that the exclusion clause in question is
not valid, as it was mentioned on the receipt. John is no circumstances could have assumed
application of such a term in present circumstances. A similar approach was also upheld in
Chappleton v. Barry (1940), wherein it was also held that in the case of unsigned documents,
inclusion of exclusion terms shall be specifically communicated to the other party.
TASK 3
7. Contrast between liability in tort and contractual liability
Tort is an act of wrong done by one person which causes injury to other. It is a civil
wrong when one party fails to perform his duties in a reasonable manner so as not to harm
others. It involves an intrusion by one individual into safety, health, profit or privacy of the
victim. The liability in tort is held when one party cause injury or damage to other with their
wrongful act for which they have to pay compensation to injured party (Posner, 2013). As per the
case of Reyland v Fletcher, 1868, people are liable for the consequences of their action even if it
was intentional or accidental, if they cause harm to other person or entity. The main aim of
liability in tort is to compensate the party who has suffered loss, damage or injury by the
wrongful act of another person. There are five important characteristics of liability in tort – civil
wrong, infringement of right in rem, right infringed should be aright fixed by law, remedy
available should be a common law action and remedy of a tort should be damages or
compensation in money (Helveston and Jacobs, 2014). Other remedies provided by tort law
include injunction, restitution of land, ejectment of trespasser etc.
A contract is an agreement between two parties which is enforceable by law. The duties
and liabilities of parties in case of a contract are clearly defined in the agreement of contract.
Contract law outlines what can or cannot be included in the agreement and provide for the
remedies available with the parties in case of breach of contractual duties.
The similarities between contract law and tort law are :
 Both of these laws are civil in nature
 Defendant will be sued and would be liable for compensation not punishment
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 Claimant should bring an action against defendant and prove that damage caused is not
too remote.
Following are some areas of difference in liabilities in contract and tort law :
 Relationship between parties : In tort liability, relationship is non – contractual and is
imposed by law whereas, relationship between parties is created and governed by
contract in contractual liability.
 Consent : The contract is formed and considered valid only when both the parties give
their consent about every term of contract (Epstein, 2010). While, the liability in tort is
not based on consent. Tort involves an intrusion by one person into health, safety, profit
or privacy of other.
 Purpose of damage award : As the contract is based upon balance in position and profit,
so in case of breach of contract, party will try to restore its position. The compensation
for breach is generally defined in the contract (Friberg, 2010). On the other hand, in tort
liability, compensation is generally for claimant's loss and is based on the extent of
damage caused.
8. Nature of liability in negligence
Negligence is failure to exercise reasonable care that a prudent person would have taken
in like circumstances. It is unintentional i.e. harm is caused due to carelessness. The claimant
need to prove following for negligence claim to be successful :
 A duty of care is owed to him by defendant
 There is breach of such duty
 Such breach of duty caused damage to claimant and; The damage caused is not too remote.
Duty of care : It refers to circumstances and relationships that are recognised by law which gives
rise to a legal duty to take care (Bell, 2011). A breach of duty of care can held defendant liable to
pay compensation for injury or loss suffered by the other party. Thus, it is necessary for the
claimant to prove that defendant owed him a duty of care. The existence of duty of care depends
on the type of loss and it was originally decided in the case of Donoghue v Stevenson, 1932.
Two points are considered -
a) if the harm or damage was reasonably forseeable then, defendant owe a duty of care to the
claimant.
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b) If the claimant is successful in proving relationship of proximity with the defendant, at the
time of incident, then he will be liable of duty of care (Kelly, Schwartz and Partlett, 2010).
Breach of duty of care : The claimant must prove that there was a breach of duty of care which
caused damages to him. The court will ensure that whether the action of defendant is under
standard of reasonable care ; he is acted in the same manner as a man of reasonable prudent
would have acted in the same situation (Eggen and Laury, 2011).
Damage to the claimant : Defendant will be liable to pay compensation only when claimant has
suffered actual loss, injury or harm because of his actions. The claimant need to prove that there
was breach of duty of care which caused damages and such damage is not too remote.
9. Vicarious liability
Vicarious liability refers to circumstances when someone is held responsible and
considered guilty for the actions of another person. It is a form of strict liability.
The most common type of vicarious liability is during the course of employment; an
employer can be charged for the action or exclusion of his employees at the workplace.
Employees are an vital element for the success of a business both in terms of value and profit
(Yang and et. al., 2012). Therefore employers have some responsibilities towards their
employees like providing insurance, recruiting and training right staff in the organisation and
listening and understanding concerns of employees regarding their job and providing a safe and
healthy working environment at work place. Following points are necessary to make employer
liable for the action of his employees :
 Employer – employee relationship : Generally, three tests are used to identify relationship
between employee and employer (Goodwin, 2010). These are control test, integration test
and multiple test.
- Control test is made to check whether the way employee's performs his duty can be controlled
by the employer.
- Integration test is applied to ensure that employee is so skilled that employer cannot control his
performance and he was integrated into the employer's organisation.
- Economic test is done to know if the employee is working for his benefit and numerous factors
are to be taken into account for this test.
 Employee's tort is committed in the course of employment : The employer can be held
liable for the tort of his employee only if such act was done during the course of
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employment. But as per the case of Ministry of Defence v Radcliffe, 2009, employer can
be held for vicarious liability even employee's act is not committed during course of his
employment.
TASK 4
10. Elements of tort of negligence and defences in different business situations
In the present case, David was driving car above the speed limit on the lane where Kevin
was playing (Chamallas, 2011). In order to avoid Kevin, he took other lane and hit a telephone
pole. The telephone pole snaps into two pieces and hits Kevin who was still in the street and
knocked him unconscious resulting in permanent injuries.
According to the tort law, following elements are required to be considered in this case : Duty of care : David owes a duty of care to both Kevin and Teleco, the telephone
company whose pole was hit by him. Breach of duty of care : There was a breach of duty of care as per case of Vaughan v
Menlove, 1837. As David was driving above the speed limit i.e. 35 MPH in 25 MPH
speed zone at a four lane street. Causation : As per the case of Barnett v Chalsea & Kensington Hospital, 1969, David
caused injury and damage by breach of duty of care. He hit the telephone pole which
damaged it and as a result it snapped into two pieces. The pole hit Kevin and caused him
permanent injuries.
 Remoteness of damage : The damage caused by David was not too remote. The telephone
pole snapped into two pieces which caused damage to Teleco, the phone company. The
injury caused to Kevin is not remote as it knocked him unconscious resulting in
permanent injuries.
11. Elements of vicarious liabilities in given business situation
In the given case, Colin is the head chef of Regent Hotel who is fed up with anger and
attitude of Roger, who works as a dishwasher in the same hotel. One day Colin hits Roger with a
frying pan knocking him unconscious. Roger was seriously injured and refused to go to the
hospital.
Vicarious liability refers to circumstances when someone is held responsible and
considered guilty for the actions of another person. The most common type of vicarious liability
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is during the course of employment (Huber and Litan, 2010). The employer is held liable for the
actions of his employees during the course of his employment. The employer cannot be excused
even if the injury is caused due to the actions of fellow employees and employer took reasonable
care at the time of choosing the employee in question. The supporting case Wilson and Clyde
Coal Co. v English (1938), states that even when employees are selected with duty care and skill,
it is not enough for an employer to entrust fulfilment of its duty of care to his employees. It is the
responsibility of employer to provide a competent staff, healthy working environment, adequate
plant and machinery and a safe system of work.
In the present case, Roger is an employee of Regent Hotel and this can be checked by
applying three tests namely control test, integration test and multiple test. The way Roger
performs his duty can be controlled by the Regent Hotel management so it passed the control
test. Secondly, Roger was integrated into the employer's organisation i.e. the mentioned hotel.
Here the injury caused to Roger was during the working hours and in normal course of
employment. Therefore, it can be articulated that Roger can bring a claim in vicarious liability
against the Hotel Regent.
CONCLUSION
From the above report, it can be concluded that contracts are legally binding agreements
and written contracts can act as an evidence in the court of law. It is important for an
organisation to consider the importance of essential elements for formation of a valid contract.
The impact of contract on a business varies according to the type of contract entered. Further, it
can be articulated that tort is a civil wrong done by one person which causes injury to other
party. Liability in tort differs from contractual liabilities. The main aim of tort liability is to
compensate for the damages caused by the wrongful act of a person. Lastly, it is concluded that
employers are vicariously liable for the acts done by employees in the course of his employment.
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