Contract Law in Indian Organizations

The assignment delves into the application of contract law within Indian organizations. It examines psychological contracts between employees and employers, analyzing their impact on workplace relations. Additionally, the assignment explores legal aspects of contract law relevant to Indian businesses, including exclusion clauses and negligence in construction projects.

ASPECTS
OF
CONTRACT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Explain the importance of the essential elements required for the formation of a valid
contract.........................................................................................................................................3
1.2 Discussing the impact of various types of contract ..............................................................4
1.3 Analyse terms in contracts with reference to their meaning and effect.................................5
TASK 2............................................................................................................................................5
2.1 Apply the elements of contract in given business scenario..................................................5
2.2 What are the consequences of classifying terms in different contracts.................................6
2.3 Evaluate the effect of different terms of law on terms and exemption clause.......................6
TASK 3............................................................................................................................................7
3.1 Comparing the liability in tort with contractual liability ......................................................7
3.2 Explain the nature of liability in Negligence.........................................................................8
3.3 How business can be vicariously liable.................................................................................9
TASK 4............................................................................................................................................9
4.1 Element of tort of negligence and defences in different situation ......................................9
4.2 The elements of vicarious liability in the situation..............................................................10
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12
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INTRODUCTION
A contract is a voluntary agreement between two or more parties that is enforceable at
law as legal binding agreement. In other words, it is also defined as voluntary, intentional and
legal binding agreement between two or more competent parties. The development of a valid
contract basically needs an offer, acceptance, consideration and mutual interest to be bound. The
contract is also treated as valid promise made by one individual to other (Owen, 2007). It is
important for the parties to follow the law of obligations specified in the contract. In the present
report, various aspects of contract will be studied. The essential elements needed for the
development of a valid contract will be discussed. The impact of various types of contract will be
described. Further , the difference between tort law and contractual liability will be highlighted.
The concept of vicarious liability will also be elaborated.
TASK 1
1.1 Explain the importance of the essential elements required for the formation of a valid
contract
All the contracts are agreements but it is not necessary that all agreement must be
contract. Only those agreements that are legally enforceable by law are contract. According to
this aspect, a agreement will be treated as contract only if it possess all the essential elements of
a valid contract (Appleman, Appleman and Holmes, 2014). The description of which is as
follows:
 Offer: It is an important constituent needed for the development of a legally binding
contract. The offer must be lawful by one party and must be capable of gaining legal
acceptance by other party (Ayres, 2012). It is also defined as expression of disposition on
certain terms made with the purpose that it will be legally binding as soon as it is
accepted by the other party to which it is addressed. For instance, a tender by entity to
sell 100 carton of bread at price of $50 will be stated as making a offer.
 Acceptance: The validity of contract depends upon the acceptance by the other party to
person or entity it is addressed. The acceptance must not carry any conditions and can be
given in writing or verbal statement ( Lehto and Nysten-Haarala, 2010s).
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 Intention: As per this aspect, the party involved must have purpose to enter into contract
to ensure its validity. The prime objective must be to develop a legal relationship and
assure that agreements can be implemented in accordance with law.
 Lawful Consideration: It means both the party should get something in return to assist
the validity of contract (Huyssteen and et.al., 2010). The consideration must have
monetary worth. “Tweddle V Atkinson [1861] EWHC QBJ57” case clearly shows that
party made contract without legal consideration could not make a valid contract.
 Free consent: The consent to enter into contract must be free and not on the grounds of
factors like, coercion, undue influence, fraud, misrepresentation etc. Therefore, parties
must be willingly agreed to enter into contract. Such as, A threatens B that he will his son
if he don't sell its property to A at less than market price. Here, contract is not free having
consent as it is caused by coercion (Kaleva and Tikkanen, 2011).
 Capacity of parties: As per this aspect, both the parties to the contract must have legal
capacity to enter into contract. In this respect, they should not be of unsound mind,
minor (below the 18 years age), insolvent etc.
1.2 Discussing the impact of various types of contract
There are different types of contract that are basically entered by party with different
purpose. The major types are explained as follows:
 Written contract: It is a written document that carries signature of bot the parties who
agree to abide by the rules mentioned in the contract. It have both advantages and
disadvantage. Such as, it serve as a evidence and facilitate in resolving the issues and
disputes easily (Fraser, 2012). The disadvantage relates to lack of understanding on key
areas of the agreement.
 Oral contract: It is a kind of contract that is verbally entered by the party. It carries
negative impact as the parties can deny later and disagree to fulfil their obligations while
the other party cannot sue it due to lack of unavailability of written record.
 Distance selling contract: It is kind of contract made through digital channels, internet,
video-conferencing etc (Webb, 2013). The parties to contract are situated far from each
other. Such type of contract is used by e-based entities like Amazon to influence the
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customers to whom it is offering various goods by depicting pictures or attributes of
product.
1.3 Analyse terms in contracts with reference to their meaning and effect
The varied terms used in the contract have contrasting meaning and impact. The
description of which is as follows:
Implied contract Terms: They are the terms which are provided by the UK authorities with the
indication that they must be followed by both the parties (Butler, 2014). They are not expressed
in the contracts. However, in the context of company, there long contracts must involve all
implied terms because the other party will not agree on the conditions that are not mentioned in
the contracts. the terms of contract can be implied in different ways ( Flodgren and Runesson,
2015). For example, the dealings which involves purchase of purchase of products and services,
than there will be implied warranty or after sale services on the part of provider.
Expressed terms: They are the terms which are generally part of the contract and are clearly
expressed and agreed by both the parties while entering. The expressed terms are mentioned
either verbally or in writing. There are three essential terms that must be expressed in contract
such as conditions, warranty and in-nominate terms (Chomsky, 2014). As per the warranty, the
members of contract can demand for counterfeit but cannot breach the contract. The conditions
are crucial term that must be included in contract. As per this, the party can assert for the new
product as well as breach the contract if found invalid. Other than this, in nominate term is the
term is the one that doesn't consider warranty or condition as it has its own specifications
(Barnett, 2011).
TASK 2
2.1 Apply the elements of contract in given business scenario
Overview: From the provided case study, it has been identified that Ivan enters Todor bookshop
and see a law book displayed for sale at £50.00. On asking the book at counter, it is ascertained
by Ivan that book is already sold to Carl and the displayed book is only copy left with the owner.
However, Ivan continue to show its willingness to purchase the book.
In the provided case scenario, the book kept in the store is a type of offer which is accepted by
Ivan at consideration of £50.00. Therefore, it have major elements of contract, offer, acceptance
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and consideration. since, its inception that Todor cannot sell the book as it is already sold to
Carl. Nevertheless, the contract can be still valid as there is no legal contract between Todor and
Carl. Along with this, availability of book on shelf indicate that it not purchased by Carl. Thus,
the owner after obtaining the mutual consent of Carl and Ivan can sell this book to Ivan
( Krishnan, 2011).
2.2 What are the consequences of classifying terms in different contracts
The classifying terms have different outcomes on contract. The brief explanation of which is as
follows:
 A condition: Condition is reasoned as an significant component of contract that
showcase the primary intention of exercising contract. In case of rejection of the contract
by one party, the other can claim compensation against the contract while considering it
as breach of condition (Sweet and Schneier, 2012). Therefore, the guiltless party is
required to execute the contract disregard of the breach and recovers the restitution
happened. Nevertheless, it render positive outcome upon the innocent party. In
accordance with the case of “Poussard v Spiers [1876] 1 QBD 410”.
 A warranty: It carry less importance as that of conditions but still is important part of
contract. In the case of warranty the guiltless party can demand for compensation in case
of break of warranty but cannot breach the contract (Kerber and Heine, 2008).
 An Innominate term: These terms are neither warranty nor conditions. They are further
mentioned as contractual term within the agreement. Therefore, it can be mentioned as
either a warranty or condition that relies on the impact or consequences that will be borne
by other party (McKendrick, 2012).
2.3 Evaluate the effect of different terms of law on terms and exemption clause
From the provided case scenario, it has been identified that John went to a park managed by local
council. There is notice stating the availability of chair on hourly basis at 50p. John takes the
chair and ticket at given amount. Later, the chair collapse causing injury to John and damage to
its apparels (Marsh and Soulsby, 2008). Therefore, John demands compensation for same which
is rejected by council stating they don't accept any liability for damage caused by the failure of
hired equipment. The impact of various terms of law are mentioned as follows:
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Exclusion clause: Here clause that park will not be liable for any damages was mentioned
behind the ticket and thus will not be considered valid (Exclusion and limitation clauses. 2014).
The ticket is mere receipt and the conditions mentioned on it are not part of any agreement.
Therefore, it is duty of park to communicate the exclusion clause to John.
Condition: The amount for hiring the chair for the specific time frame of 1 hour can be
considered as condition.
Expressed terms: Here the expressed terms are those mentioned behind the ticket such as, No
liability is accepted for the damage or injury caused by the failure of hired product. They can
also be considered as condition (Nikolaou and Tomprou, 2011).
Bilateral or Written contract: in accordance with the provide case scenario, it has been
identified that there is bilateral contract made by John and local council. Here, John agrees to use
the chair at 1 hour at 50 p and enters into contract.
From the critical analysis of aforementioned scenario, it has been identified that Park is entitled
to pay damages or compensation to John (Ottley and Rush, 2006).
TASK 3
3.1 Comparing the liability in tort with contractual liability
There is significant amount of difference and similarity between tort law and contractual
liability. The description of which is as follows:
Grounds for difference Contractual liability Tort liability
Reason of occurrence It arise when the parties
agreed to the contract fails to
attain the terms and condition
mentioned within the contract
(Panda and Feroz, 2014)
It arise when the members of
contract are involved in the
wrong doings that result in a
damage or loss to the other
party
Relationship between the party The parties mutually agree to
enter into contractual
relationship with outcome in
development of deed that must
Due to negligence,
government interfere and
enforce legal relationship with
the aggrieved party (Rebêlo
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be adhered strictly by both the
parties
and et. al., 2013).
Base of providing damage The restitution is given on the
basis of conditions stated in
the deed (Rodwell and Gulyas,
2013).
The consideration under the
tort liability is provided after
considering the damage caused
to the guiltless party.
Reference to case Avery v Bowden (1855),
clearly state that indemnity
must be rendered by the
aggrieved party as they fail to
perform their obligations in
accordance to contractual
terms.
Donoghue V Stevenson
The damages must be provided
to innocent party on the
grounds of negligence caused
by them resulting into damage
to other party.
3.2 Explain the nature of liability in Negligence
Negligence arises under the tort law which is caused due to carelessness of a particular party. It
does not come under the category of intentional harm. With regard to this case, negligence can
be understood through “Donoghue v Stevenson [1932] AC 562”. It shows the various aspects of
liability in negligence. There are different kinds of principles in negligence and these are as
follows: Causation – It is a kind of informal relationship established between the
performance and the actual results. It is expected to achieve only when there are chances of
getting the results to be achieved (Schulze, 2015). Foreseeability – It is one of the aspects of negligence. Evidence related to claim
has to be there within the event of transaction. However it could be fake evidence or verbal in
nature. The innocent party is liable to claim against the liability of negligence in case if there is
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no foreseeability. There is also a provision of proximity cause which can be the primary cause of
injury. Breach of duty – There will be no liability in the negligence in case if the
applicant discovers that both the parties does not own to the duty of care (Chomsky, 2014).
There is no any breach of duty. This element gets fulfilled when first element gets valid liability. Duty of care – Under the tort law, a legal responsibility is imposed on the
parties. These people are abide by the standards to take care of the reasonable situation. It is
because it reflects that playing any act will be predictable to harm the others.
3.3 How business can be vicariously liable
Vicarious liability can be regarded as the obligation which is imposed on the employers. They
are responsible for all the negligent and wrongful conducts. The legal doctrine also assures that
controlling party within the contract is eligible to prevent the neglectful actions ( Flodgren and
Runesson, 2015). These actions are performed by the other party within the employment terms.
With regard to this act it can be stated that business can be held vicariously liable and
accountable for all the wrong actions performed by the staff.
With reference to the case of Lister v Hesley Hall Ltd, it was stated that if leaders had fulfilled
their respective responsibilities in appropriate manner than the warden of the boys’ hostel will
not be able to perform the wrong activities. Along with that provisions of vicarious liability also
state that criminal offences and activity are excluded (Barnett, 2011).
TASK 4
4.1 Element of tort of negligence and defences in different situation
Case Scenario
On the basis of given case study researcher evaluated that, David drove the car at 35
MPH in the 25 MPH zone which is against the law. Further, within the areas children were play
games. However, during the play ball went towards the road side and to chase it a boy crosses
the lane. Herein, David without paying attention to the diversion and looking towards another
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lane for avoiding any accident to the nine year old children. In regards to save the child he the
telephone pole and immediately got seriously injured. The booth to which David went through,
was owned and controlled by TeleCo Company. Therefore, considering the given scenario is
company liable to pay David for the injury. In context to theoretical prospects, there are majorly
three defenses under which the party is liable for the negligence. Following is the illustration of
all three defenses than can be incorporated within the given case study.
 Contributory negligence: This statement mainly emphasize on the situation wherein both
the parties are mutually or contributory engaged in the neglectful activity. However, on
the basis of given case situation, David is driving the car at the speed which is above the
standard MPH of the given zone thus, which indeed resulted in an major accident
wherein, car hitting pole as well as TeleCo Company which led to loss for both the
parties huge as David got injured badly and booth was destroyed completely (Panda and
Feroz, 2014).
 Volenti non fit injuria: Considering this defense it can be said that the claimant
intentionally or voluntarily put themselves in situation that resulted in risk situation and
led to damage or injury (Schulze, 2015). Through the means of this, David is not entitled
to any compensation because he was driving above the average speed of 25 MPH.
 Ex turpi causa: This defense illustrates that the negligence negligent activity carried out
by employee is not unfair in the view of law.
4.2 The elements of vicarious liability in the situation
Case scenario
According to the given case researcher analyzed that, Colin head chef of the hotel was
irritated by the attitude of Roger who was dishwasher. Due to constantly increasing such
incident, Colin knocks frying pan on the head of Roger due to which he got injured but refused
to acquire the medical treatment. In this regard, Roger is accountable to claim for the vicarious
liability on the hotel owner as he is responsible for the actions of his employees i.e. Colin’s
actions. It is because of the fact that, Colin has executed illegal activity during the tenure of
employment at the hotel which indirectly makes hotel owner vicariously liable for the actions.
Therefore, hotel is liable to pay compensation to the claims of Roger on the illegal actions Colin
(Panda and Feroz, 2014).
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CONCLUSION
From the above study it can be concluded that fulfilment of certain elements is essential in
formation of contract. There are different kinds of contracts which all have different impacts.
There is also a difference between contractual liability and tort liability. Contractual liability
arises on the party when breach of condition occurs. In case of injury the parties are liable to
make the claim. Vicarious liability arises on the employers for the wrongful actions of the staff
members. It does not come under the category of intentional harm.
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REFERENCES
Books and Journals
Appleman, J. A., Appleman, J. and Holmes, E. M., 2014. Excuses for Nonpayment and Defenses
to Actions for Premiums. Appleman on Insurance Law and Practice.
Ayres, I., 2012. Studies in Contract Law. Foundation Press.
Barnett, R. E., 2011. Contracts is Not Promise; Contract is Consent. Suffolk UL Rev. 45. pp. 647.
Butler, B. E., 2014. From Social Contract Theory to Sociable Contract Theory. Contemporary
Pragmatism. 11(2). pp.1-17.
Chomsky, N., 2014. Aspects of the Theory of Syntax. MIT press.
Flodgren, B. and Runesson, E. M., 2015. Contract Law in Sweden. Kluwer Law International.
Fraser, R., 2012. Moral Hazard, Targeting and Contract Duration in Agri‐Environmental Policy.
Journal of Agricultural Economics. 63(1). pp. 56-64.
Huyssteen, V. F. L. and et.al., 2010. Contract Law in South Africa. Kluwer Law International.
Kaleva, H. and Tikkanen, I., 2011. Contract award procedures and award criteria in the catering
services in Finland. British Food Journal. 113(8). pp.952-964.
Kerber, W. and Heine, K., 2002. European Corporate Laws, Regulatory Competition & Path
Dependence. European Journal of Law and Economics. 13, pp. 43–71.
Krishnan, N. T., 2011. Understanding employment relationship in Indian organizations through
the lens of psychological contracts. Employee Relations. 33(5). pp.551-569.
Lehto, J. and Nysten-Haarala, S., 2010. Flexibility in contract terms and contracting processes.
International Journal of Managing Projects in Business. 3(3). pp.462 – 478.
Marsh, B. S. and Soulsby, J., 2002. Business Law. Nelson Thornes.
McKendrick, E., 2012. Contract Law: Text, Cases, and Materials. 5th ed. Oxford University
Press.
Nikolaou, I. and Tomprou, M., 2011. A model of psychological contract creation upon
organizational entry. Career Development International. 16(4). pp.342–363.
Ottley, M. and Rush, J., 2006. Business Law. Cengage.
Panda, A. K. and Feroz, M., 2014. Evolution of Contract Labour Law in India: A Critique of
Regulatory Objectives and Development Post-SAIL Judgment. Review of HRM. 3. pp.276.
Rebêlo, H. and et. al., 2013. Quantifying the effects of aspectual decompositions on design by
contract modularization: A maintenance study. International Journal of Software Engineering
and Knowledge Engineering. 23(07). pp. 913-941.
Rodwell, J. and Gulyas, A., 2013. The impact of the psychological contract, justice and
individual differences: nurses take it personally when employers break promises. Journal of
Advanced Nursing. 69(12). pp. 2774-2785.
Schulze, R., 2015. The New Shape of European Contract Law. Journal of European Consumer
and Market Law. 4(4). pp. 139-144.
Sweet, J. and Schneier, M., 2012. Legal aspects of architecture, engineering and the
construction process. Cengage Learning.
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Webb, C., 2013. Principle and Policy in Contract Law: Competing or Complementary
Concepts?. University of Toronto Law Journal. 63(3). pp. 527-532.
Online
Exclusion and limitation clauses. 2014. [Online]. Available through:
<http://www.out-law.com/en/topics/projects--construction/construction-claims/exclusion-
and-limitation-clauses/>. [Accessed on 15th July 2016].
Owen, G. D., 2007. The five elements of negligence. [Online]. Available through:
<http://law.hofstra.edu/pdf/academics/journals/lawreview/lrv_issues_v35n04_i01.pdf>
[Accessed on 15th July, 2016].
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