[PDF] Introduction to Contract Law

LAW

Table of Contents
INTRODUCTION...........................................................................................................................3
Question 1: ......................................................................................................................................4
Explain the meaning of a 'representation' and how a mere representation can be distinguished
from a term of a contract..............................................................................................................4
Question 2: ......................................................................................................................................5
What are the grounds in which dismissal from employment would be unfair at law, which
Monica should explain to the boards of directors........................................................................5
Question 3. ......................................................................................................................................7
What are the main duties governing company directors that Monica should explain to the new
members of the board? ................................................................................................................7
Question 4........................................................................................................................................9
Explain the principles governing the award of damages in the Law of Tort. In what ways may
damages be limited? ....................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Law is a system which contains rules that will governs a society. There are three legal
systems in United Kingdom viz. English law, Scots Law, and Northern Ireland law. There is no
single legal system in United Kingdom. The supreme court of UK is the apex court that has
highest authority in all criminal and civil cases in England and Wales and Northern Ireland and
for all civil cases in Scots law. The Parliament of UK consists of two houses viz. House of Lords
and House of Commons (McKendrick, 2014). This report covers, meaning of representation and
how it is different from contract, unfair dismissal grounds, duties of the boards of directors and
principles governing award of damages in Law of Tort.
Question 1:
Explain the meaning of a 'representation' and how a mere representation can be distinguished
from a term of a contract.
In the given case, Monica is a Human Research Manager at Young and Ernst LLP. She is
planning to buy a new car for which she visits a local second hand car dealership called Cars R
Us. The car salesman, Chandler convinced Monica to buy 2006 Ford Mondeo by quoting the
words “this is the best car in the world, if you do not buy it you will be missing out”. Monica
relied on Chandler’s expertise and bought the car which broke down after two weeks of
purchasing. She now wishes to sue the car dealership (Lumineau and Henderson, 2012).
From the above case, it is cleared that Monica relied on the representation made by
Chandler before entering into the contract to buy the car. “Representation” is a statement which
present a fact or an intention, that is made during contractual negotiations. The other meaning is,
an action that can be transformed into a statement of fact. It is made before entering into a
contract. If a false representation has been made and buyer entered into a contract by relying on
the representation then such buyer may cancel and claim damages in limited cases, he has
suffered from such false representation. It is necessary to know the difference between a
representation and a contractual term for the remedies available in both the cases. On the other
hand, a contractual term is a term that governs the rights or obligations of another. A contractual
term has legal binding. If a representation is a term of the contract, then party may claim the
damages and also have a right to terminate the performance of the contract. The difference
between these two are judged on the basis of various factors such as expertise or knowledge of

the parties, language used etc. The ultimate criteria to decide on whether statement is a term or a
representation lies on the context in which it was made.
In the case of Oscar Chess Ltd v Williams [1957], a second hand Morris car was
purchased by Mrs. Williams on the basis that it was a 1948 model as mentioned in registration
certificate of the car. The following year, her son used the car as a trade in for a brand new
Hillman Minx which he was purchasing from Oscar Chess. The son mentioned the Morris a 1948
model and on that Oscar Chess offered £290 off on the purchase price of Hillman Minx. The
Williams could not have had made this purchase without the discount. After 8 months, Oscar
Chess found out that the car was a 1939 model and worth much less than thought. Oscar Chess
filed for breach of contract arguing that the date of the vehicle was a fundamental term of
contract. Hence, giving the grounds to revoke the contract and claim damages.
Held: The statement regarding the age of the car was not a term but a mere representation. Oscar
Chess Ltd. As a car dealer has the greater knowledge and expertise and was in a better position
to know the age of the manufacturing date than the Williams (defendant) (Idowu and et.al, 2013).
By applying the above case in the case of Monica and Chandler, the following facts can
be determined by applying the Oscar Chess Ltd v Williams, Monica bought the car by relying on
the expertise of Chandler. In this case, after meeting Chandler, the first thing Monica mentioned
is that she has very little knowledge about the car and she wanted a reliable car that can get her to
work and back each day. Chandler suggested and convinced her to buy 2006 Ford Mondeo. By
relying on Chandler's expertise Monica got convinced and bought the car.
It can be held that, Chandler being the car salesman had more knowledge about the 2006
Ford Mondeo as compared to Monica but he provided false representation to Monica. She
bought the car on relying the false representation of Chandler. Hence, she has the right to cancel
the contract, claim the damages and sue the Cars R Us.
Question 2:
What are the grounds in which dismissal from employment would be unfair at law, which
Monica should explain to the boards of directors.
In the given case, Young and Ernst has scheduled a meeting with Monica to discuss two
unrelated issues. Other than this, the board is unhappy with the performance of an employee.
When an employer terminates the employment contract of his employee and the employer does

not have a fair reason to terminate the contract, then such a situation is called unfair dismissal.
An employee is protected by law for unfair dismissal. Employer may dismiss an employee for
any one or combination of the following reasons, capability- when an employee lied about his
health or qualification, conduct- includes theft of the company property, or incidents of abusive
or racist behaviours, persistent in unpunctuality etc., breaking the law- if an employee breach
civil or criminal law after his working hours or for any other reason (Campbell, 2014).
Unfair dismissal are regulated by Employment Rights Act, 1996 and Equality Act, 2010.
According to Employment Rights Act, 1996, an dismissal will be termed unfair of an employee
has been dismissed for any of the following grounds:
 Due to all reasons relating to pregnancy.
 Reasons relating to family reasons, including parental leave, adoption leave or time off
for dependents.
 Acting as employee representative.
 If an employee is a member of trade union and participated in trade union activities.
 Employees working as part-time and fixed-time.
 If an employee asked for rights of pay and flexible working hours including annual
leaves.
 If an employee took action for health and safety issue.
 If an employee reported his employer for wrongdoing.
 If an employee forced to retire from the office.
Employer must follow a proper dismissal procedures. The procedures may in verbal
warnings, by serving a notice, written final warnings etc. An employer must try to resolve the
problems before dismissing the employee. However, an employer has the right to dismiss the
employee immediately without giving any warnings in case of “gross misconduct”. Employee,
who has been unfairly dismissed from his work may go to the Employment Tribunal and must
prove his arguments which are against the employer (Davidov, Freedland and Countouris, 2013).
In the case of CF Capital Plc v Willoughby:
Willoughby (claimant) wan an employee of CF Capital Plc for 18 years when the banking
crisis caused the business to suffer. The claimant was offered to go self employed and will be
paid monthly along with a percentage of the sales she made. A meeting on 1st December, 2008
was held by her manager, in which she expressed her interest in such a move, and asked her

manager to provide her with more information so that she can make her decision. This
information did not made available to her and after 3 weeks, she received a letter from her
manager confirming her to move to self employed status from 1st January 2009. The letter
contained the words “The termination of your existing employment contract will be effective
from 31st December, 2008”. Claimant sought legal advice, which confirmed that letter amounted
to termination of her contract. After a communication between the claimant, respondent and their
legal advisors, the claimant's manager sought to retrieve the position by saying that he had
misunderstood the outcome of the meeting and tried to reassure the claimant that she could
continue in employment as before. The claimant resumed her work and position and claimed
unfair and wrongful dismissal. The ET found that the claimant had resigned but that overturned
by the EAT (CF Capital Plc v Willoughby, 2011) .
EAT held that Tribunal was wrong, hence declared that the claimant was dismissed by
the respondent and forwarded the matter to a fresh Employment Tribunal.
Question 3.
What are the main duties governing company directors that Monica should explain to the new
members of the board?
Monica works as a human resource manager in Young and Ernst LLP where two new
board of directors have been appointed to the board and needs to be brief about their role in the
organisation. For this duties must be explained by Monica to these new board members. For
appointing a board director there are some rules and regulations as per companies law and also
articles of LLP contains provisions that needs to be followed for appointment (Prassl, 2014).
Directors in a company is appointed by its shareholders in general meeting but board of
directors can also appoint directors if that is permitted by articles of the company. There are two
type of directors working in a company non- executive and executive directors. A non executive
directors in a company is appointed by using Letter of Appointment(LOA). LOA consist of the
terms and conditions on which director is appointed in Young and Ernst. Executive directors are
appointed through a employment contract, as executive director is termed as an employee of the
organisation. Director is appointed for a particular term that is decided by company as per law.
Company possess status of separate legal entity and perform its activities through board
of directors. As company is an artificial person all the decisions regarding various issues in

company is taken through board of directors in meetings. Directors of the company are
responsible for strategic and operational decisions of the company. When a new director is
appointed in the company in the first meeting after appointment roles and duties are explained to
them. In this case Monica will explain both the new directors about their duties which are as
follows-
 Care and diligence- This duty of director requires to act with the degree of care and
diligence as per common law. Financial statements prepared by the company are
approved by board of directors and it is directors duty to analyse these statements
carefully before approval. Any breach in duty by director leads to put company into risky
situation (Marshall and Ramsay, 2012).
 Good faith- A director of Young and Ernst requires to act in good faith in the best
interest to company. For this purpose situations that creates conflict into interest should
CF Capital Plc v Willoughby be avoided and proper process is followed to solve and
manage conflicts arises. This is the duty of 'fiduciary and trust' that makes director to
work in certain manner that is beneficial to company.
 Act within power- Directors appointed by Young and Ernst must work within the
powers assigned to them on the basis their position. Director should act with the
companies constitution and powers that are provided by the company law and articles of
association. Directors duties and powers are mentioned in articles of association of
company and every directors needs to follow that.
 Works for success of the company- Success mean a long-term increase in the value of
the company but fundamentally it is up to director to decide what actions needs to be
taken that are appropriate for Young and Ernst. To promote success of the company a
director must concentrate on interest of employees of the company, business relations
with its suppliers, consumers and creditors. To make a business successful impact of
operations of business, company must also be taken care to improve image of Young and
Ernst (Schoenbaum, 2012).
 Use reasonable skills- Every director have different skills and area of expertise. General
knowledge, skills and experience is used by a director reasonably so that functions in a
company can be performed effectively. Director must use actual understanding and

abilities with set of organisational rules to make use of skills to be productive (Gerner-
Beuerle and Schuster, 2014).
 Not to misuse information and position- Director of a company possess various
information regarding company which can affect business in a negative manner.
Information possessed by director is very sensitive and director should not disclose this
information to other person for personal benefit. Decision in a company is taken by
directors only and no director should miss-utilise position to gain personal benefit.
These all duties will be explained by Monica to recently appointed directors in Young
and Ernst as manager of human resource. Together with this while performing duties director
should also take care that when any decision is taken corporate responsibility is followed. When
decision in meeting of directors is taken then it should not be biased and all the records must be
maintained by directors. Director should also find weakness in organisational system and
relevant steps should be taken to solve these issues.
Question 4
Explain the principles governing the award of damages in the Law of Tort. In what ways may
damages be limited?
The word 'Tort' in law means a wrong or injury. Tort is the violation of a right of a person
or a breach of duty of another towards him/her. In current situation Monica's brother Ross was
driving his car while talking on his mobile phone and looking down at radio list. As a result of
this Ross car crashed into a pedestrian, Joey who suffered from a broken leg. Joey admitted that
at the time of collision he was walking on the road as repairing is going on pavement. He could
have crossed the road through pavement but feeling lazy and decided to walk through the road
(Lewis and Morris, 2012).
In tort law, a remedy is paid in the form of monetary compensation is given to the
aggrieved party. Damages, in the legal sense, is the sum of money, the low impose for breach of
a duty or violation of some rights. Damages are money claimed by or ordered to be paid to a
person as compensation for loss and injury. Damages are divided into two categories:
a) Compensatory
b) Punitive

compensatory damages are intended to relieve the injured party for his loss or injury.
Actual damage is synonymous to compensatory damages but do not include punitive damages.
Punitive damages are assessed in order to punish the defendant for wrong conduct to reform or
deter the defendant and others who are engaged in similar conduct. Aim of tort damages is to put
the injured back into the position in which he/she was before damage incurred. Damages are
awarded based on nature of injury, relation between parties and type of risk, liability of
individuals and liability rules. Damages are the most important remedy which is plaintiff and can
be availed by tort. Various types of damages are:
Nominal damages- Nominal damages are awarded to an individual in an action where
the person has not suffered any substantial injury or loss for which he or she must be
compensated. Nominal damages may be recovered by plaintiff who is successful in establishing
that he or she has suffered a loss or injury as a result of defendant's wrongful conduct.
Contemptuous damages- Contemptuous damages are awarded when level of harm
caused to the claimant is low and court feels that the claimant was wrong to bring a claim. These
damages are awarded when the plaintiff has suffered some loss but does not deserve to be fully
compensated (Gerner-Beuerle, Paech and Schuster, 2013).
Compensatory damages- These damages are recovered in payment of actual injury. It is
the sum awarded in a civil action by a court to indemnify a person for the particular loss or
injury. This damage provide a amount to injured person which is necessary to replace loss.
Aggravated damages- Damages awarded by court to reflect the exceptional harm done
to a plaintiff of the tort action. When damages is caused due to insult and feelings of plaintiff got
injured then compensation is increased for this. Aggravated damages are an award and this is
paid for intangible elements such as pain, humiliation, anguish, damage in self confidence and
loss of faith.
Punitive damages- Damages that are awarded by court when the court feels that
compensatory damages are not sufficient and injured person needs more funds to compensate
damage. This damage have no relevance with what is the amount of compensatory damages.
In the given case Joey is injured by Ross and compensatory damages in the Law of Tort
will be allowed to him. Amount of compensation will be decided by court as both Joey and Ross
was wrong at their part.

Damage may be limited by court up to the amount of loss incurred by the injured person.
When loss is intangible then limit of damage is not certain and the amount that is considered by
court reasonable will be allowed as damage (Oliphant, 2012).
CONCLUSION
From the above report it is concluded that when consumer relies on expertise of seller to
buy a product and misrepresentation is done then buyer can sue seller for misrepresentations
made by seller. When employees are dismissed from organisation because of poor performance
or for any other reason then proper notice must be provided to them before dismissal. Directors
are working body in a organisation and proper duties must be assigned to them at the time of
appointment to manage organisation effectively. A injured person needs to be compensated up to
damage incurred and damage can be limited by court on the basis of injury.

REFERENCES
Books and Journals
Campbell, D., 2014. Good Faith and the Ubiquity of the ‘Relational’Contract. The Modern Law
Review. 77(3). pp.475-492.
Davidov, G., Freedland, M. and Countouris, N., 2013. The Subjects of Labor Law:'Employees'
and Other Workers.
Gerner-Beuerle, C. and Schuster, E. P., 2014. The evolving structure of directors' duties in
Europe. European Business Organization Law Review (EBOR). 15(2). pp.191-233.
Gerner-Beuerle, C., Paech, P. and Schuster, E.P., 2013. Study on directors’ duties and liability.
Idowu and et.al, 2013. Encyclopedia of corporate social responsibility (Vol. 21). New York:
Springer.
Lewis, R. and Morris, A., 2012. Tort law culture in the United Kingdom: image and reality in
personal injury compensation.
Lumineau, F. and Henderson, J. E., 2012. The influence of relational experience and contractual
governance on the negotiation strategy in buyer–supplier disputes. Journal of
Operations Management. 30(5). pp.382-395.
Marshall, S. and Ramsay, I., 2012. Stakeholders and directors' duties: Law, theory and evidence.
UNSWLJ. 35. p.291.
McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).
Oliphant, K., 2012. Cultures of tort law in Europe.
Prassl, J., 2014. Members, Partners, Employees, Workers? Partnership Law and Employment
Status revisited. Clyde & Co LLP v Bates van Winkelhof. Industrial Law Journal.
43(4). pp.495-505.
Schoenbaum, T. J., 2012. Liability for damages in oil spill accidents: evaluating the USA and
international law regimes in the light of Deepwater Horizon. Journal of environmental
law. 24(3). pp.395-416.
Online
CF Capital Plc v Willoughby. 2011. [Online]. Available
through:<https://www.employmentcasesupdate.co.uk/site.aspx?i=ed9521>