Vicarious Liability in Business Contracts

This assignment delves into the topic of vicarious liability in business contracts, examining its application in negligence and employment contracts. It provides case studies and discusses the implications of these laws in managing business negotiations. The assignment highlights the importance of understanding vicarious liability in ensuring accountability and protecting employees' rights.

Table of Contents
Introduction....................................................................................................................................................3
Task 1 Understanding crucial elements of a authentic contract....................................................................3
1.1 Explaining the importance of the essential elements required for the formation of a valid contract......3
1.2 Discussion on the impact of different types of contract..........................................................................4
1.3 Analysing terms in contracts with reference to their meaning and effect................................................5
Task 2 Applying the elements of contract in business context......................................................................6
2.1 Application of the elements of contract in the business scenarios...........................................................6
2.2 Application of the law on terms in different contracts............................................................................6
2.3 Evaluation of the effect of different terms in given contracts.................................................................7
Task 3 Explanations on liabilities in businesses............................................................................................9
3.1 Contrast liability in tort with contractual liability...................................................................................9
3.2 Explanation on the nature of liability in Negligence...............................................................................9
3.3 Explanation on how a business can be vicariously liable......................................................................10
Task 4 Principles of liability in negligence in business situations..............................................................11
4.1 Applying the elements of the tort of negligence and defences in different business situations............11
4.2 Applying the elements of vicarious liability..........................................................................................11
Conclusion...................................................................................................................................................11
Reference List..............................................................................................................................................12
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Introduction
In this project, we have tried to decipher the crucial elements of valid contract explaining
the importance of these elements for formulation. We have further discussed the different types
of contracts. The implicational factors of these have been elaborated during the project.
Explanation of liabilities in business scenario has been an integral part of this project. Principles
on liabilities have also been discussed later.
Task 1 Understanding crucial elements of a authentic contract
1.1 Explaining the importance of the essential elements required for the
formation of a valid contract
A contract basically is an understanding between two parties regarding a activity in any
manner. An agreement must have essential elements in becoming an official contract.
Essential element that a valid contract should contain:
Offer and acceptance:The beginning of a contract begins with one party offering and
one party accepting his offer regarding something. When one party grabs the offer, the offer
becomes an agreement.
Mutual consent of parties:Both parties must be willingand not have any objection to the
activity of the other party in the said regard.
Legal Obligation: An agreement must create or pose legal threats to a party incuse he or
she is not able to fulfil the promised activities
Free consent of parties: Here it can be stated that if the parties don’t willingly sign the
contract it means they have been forced and not per their will. Therefore, it cannot be legal and is
void
Parties should be competent to contract: This means that legally the parties are
empowered by the legislation of the resident country to agree or disagree in this manner.
Generally, the competency depends on majority whether the agent have reached the specified age
required in making the decision. The mental state the agent is in and is fit in that regard. He is
not disqualified by law to enter any kinds of contract
Lawful object: The activity on which the parties are getting into an agreement must be
lawful and is ratified by the house of law and should not be fraudulent, unlawful or contradictory
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to the public policy. If the activity is not legal or is flawed, it is not enforceable by law
(Carrolland Buchholtz, 2014, p.133)
Not declared void: There are certain agreements which are not declared void by the
government of countries or legal authorities anybody getting into any such agreement or contract
shall be deemed to be void and hence and activity thereof will not be enforceable by law.
Possibility of performance: The agreement must be capable of being performed. If the parties
have agreed on a contract that contains any promise that cannot be fulfilled at any point of time
then the agreement in that regard will be considered as invalid. Impossibility makes an
agreement void regardless of the parties being aware or unaware.
Certainty in meaning of agreement: The meaning of an agreement must be certain or
should be capable of being made certain. If the terms of the agreement are vague, confusing or
uncertain, it shall lead to no binding obligations for parties
Legal formalities: A contract is made by word, spoken or written. The statutory
requirement defines the nature of the contract. Otherwise it shall not be enforceable by
law(MacCormick and Weinberge, 2013, p.111).
1.2 Discussion on the impact of different types of contract
Types of Contracts
Contracts under Seal:A enforceable legal document is a document if it is only stamped
with seals. The seal is representing that the individuals have intended to entail legal
consequences which adds value. The seal isrepresenting the symbol of the acceptance of the
legal effect and the consequence of the agreement.
Express Contracts:Express contracts are contracts which are acceptances which are
either verbally accepted or are accepted in writing
Implied contracts:The contracts which have implications on the people signing the
contract either legally or any measures thereof are called implied contracts.
Executed and Executor Contracts: An executed contract is one contract which has
already been signed and is complete. An executor contract is one contract where there are further
requirements for the contract to imply and be signed by the agents.
Unconscionable Contracts: An unconscionable contract is a contract where the contract
is forced on come body that has a higher bargaining power and has no say in signing it (Ng et
al.2013, p.734).
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1.3 Analysing terms in contracts with reference to their meaning and effect
Terms in contract are the clause and promises that the parties are bound to and to other
statements made in pre-contract promises that have been made. Contracts contains different
types of points here the conditions are more important than the rectification measures. Basically,
first letter of specific terms needs to be in a capital letter in order to make understandable for
both parties. In business contracts, terms are known as responsibilities, duties, confidentiality,
dates, payments and all the expectations which were expected by two parties that are involved in
a specific agreement (Durkheim, 2014, p.102). Thus, some of the major terms are discussed as
follows which is common in each or every contracts.
 Conditions- One of the most indispensable term in contract is condition on which entire
agreement is going to based such as; third parties are not allowed to involved, minors are
not allowed to engage in legal contracts and so on. Thus, conditions is consider as most
necessary element in forming a legitimate contract as it helps in maintaining the dignity
as well as clear all the doubts between two parties. It means, conditions in a contract are a
major influence as parties are work on the basis of conditions in order to maintain
confidentiality. For example; official agreement between business partners is based on
partnership deed in which some of the major conditions are clearly stated that; profits and
losses are shared by both partners as well as both are having rights to make decision on
the behalf of whole business.
 Warranties- It’s all about assurance or guarantee which is given by parties to their
partners to fulfil the conditions which is written in their legal contracts. In fact, these
warranties are given in distinct manners such as; either by signing some legal papers,
depositing something very precious or costly materials as a warranty likes gold, paper of
houses and so on. Thus, it shows that this term is also having influence on both the
parties as they become bound to fulfil the terms of the contract. For example; acquiring
loan by businessmen’s for their projects by giving papers of organization as a warranty or
security that they will definitely fulfils the order.
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Task 2Applying the elements of contract in business context
2.1 Application of the elements of contract in the business scenarios
Business contracts are mainly bind between two or more organizations which is based on
specific terms and conditions. In fact these agreements are really complex one due to the
involvement of legal member as these are mainly long term contracts. Therefore, specific
elements of business contracts are discussed as follows-
Offer and acceptance: First or foremost element of business contract is offer which
means “invitation to treat” by expressing the word out that company is going to offer specific
contract. On the other hand, acceptance is a second element which means someone is getting
ready to accept the offer. Acceptance process done by second party and after acceptance
procedure both parties is liable for the particular agreement or situation. For example; ALDI is
going to offer a contract to IKEA for launching a new or totally unique product in foreign
country as a joint partner.
Parties: In an agreement, the two or many people are involved and those members are
bounded by some terms and conditions. It means, this element shows that in order to form a legal
contract there must be two parties because without two members an appropriate agreement will
not form. For example; both are having capability to involve in an agreement and similar
compatibility between each other. For example; an organization can offer their contract to their
suppliers, business partners, shareholders, competitors and other businessmen which are able to
understand the terms of contract.
Consideration: This is the third stage of a legal agreement. Basically this term shows
that parties needs to consider specific things before entering into a certain agreement
(Cartwright, 2016, p.127). In fact, an organization must consider necessary elements before
forming a contract or before offering process. For example; parties analyse the legal papers and
inquired the necessary information or data before entering into agreements.
Intention to create legal relations: According to this element, parties which are
involving in a contract needs to having a same intention as well as understanding about the
contract in order to minimize the probabilities of misunderstanding. Along with this, must have
legal intention for maintaining the formal relations. It is intention for creating legal relations in
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both parties who are participated in a valid agreement. This is important for both parties for
maintain the legal relationship.
Terms and conditions: Terms of condition of a business contract specify the rights and
duties of the two parties and violation or failing to one such would bring implications on the
other and how the other will compensate that. Basically, terms and conditions are clearly states
the rights and duties of both the parties in order to clear the doubts. In fact, both the members are
liable for breaching the contract and responsible to fulfil each terms and conditions.
Competent Parties: A competent party is a party who can enter a contract and is legally
permitted to do so. It means, both are liable to fulfil the terms and conditions of agreement as
well as compatible with each other. For example; ALDI want to hire marketing manager to
handle their promotional department for maximizing their sales volume. Thus, company will
offer this proposal to marketing qualified people instead of medical student. This show the
competency of parties which are going to involved in a contract.
Legal purpose: A contract should have a legal purpose so that in case of any failure legal
binding can be imposed on the parties. This show that business contracts are always having
legitimate involvement in order to maintain the goodwill of an association as well as follow
specific norms of an organization (Harmon et al. 2015, p.500).
2.2 Application of the law on terms in different contracts
Business is surrounded with various legal laws and norms which helps an organization to
run their association in smooth manner. However, several laws are designed by legal bodies for
corporate world in order to minimize the probabilities of conflicting situations. Thus,
Employment contract is used as example to show how laws guide terms and condition in any
regard.
Contract under seal: This is the term, which is involved, in valid contract that shows the
legitimate seal of specific agreements. Basically, an organization makes a contract with
employees by using seal of an association as company seal is already registered. For example;
offer letter of employees are stamped by company seal before offering it to the employee in order
to fulfil all the necessary terms and conditions of corporate act 2001.
Express terms: Express terms describe the situation where both parties are agreed with
the agreement. Per express term it is observed that if one of the participated party from an
agreement is not fulfilled his terms and conditions, then the party punished as per the law. For
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example; in the offer letter of employee all the conditions, warranties, norms, rules and
regulations of an organization are clearly stated as well as consequences of breaching those
elements as well. Hence, it shows that employment law is totally applied in the hiring process of
employees at workplace.
Implied terms: Implied terms is the term, which is put into an agreement or contract by
the courts. It means, according to legal bodies of UK there are some rules and regulations as well
as rights are implied in the employment act which must followed by an organization while
performing specific actions.
For example; The contract should comply with:
 Minimum wage requirement for all employees
 9 to 5 as the set hours for work in factories
 Pension for all employees in government jobs,
Along with this, some of the following acts and laws in United Kingdom guide
employment contract are described below-
 Health and safety act 2005 for the safety of the employees and arrangements to be made
in that regard. It means, an organization needs to create a safe and secure environment for
their employees.
 Employee’s right act 1996 under which the employee or the workers have to be paid in
accordance to the recommendations and guidelines of the act and has to be included in
the terms of employment contract. For example; minimum wage must be offered by an
organization to their employees for living their livelihood in proper manner.
 The institution will be held responsible for any damage to the employee within the
property of the organisation under the Employer's liability (defective equipment) act 1969
(McKendrick, 2014, p.121).
 Notice to be served before any kind of service termination in case of breach in
employment contract by either party.
Conditions:
The workers are entitled to take leave under employee right act 1996 and provisions have
to be made in the contract itself
Warranties:
Equality act 2010 warrants any anomalies thereof (Cruz and Marques, 2013, p.477).
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Hence, all the above laws and acts of employment are showing the application of these
norms on business contracts as well as its impact on an organization.
2.3 Evaluation of the effect of different terms in given contracts
According to the given case study, mistake of shopkeeper create misunderstanding to the
buyer. Thus, it shows that little bit difference in contract creates major issue between both the
parties such as; stock which is already cleared was still display at shop creates misunderstanding
to buyer. Here in this case of Evan and Toder is that of negligence as the shopkeeper has forgot
to take the book off from display. In this case, it is observed that the express term is playing an
important role for analysing the affectivity of the contract. Therefore, state of negligence is
applied in this contract which affects the whole incident and creates misunderstanding to the
buyer.
Per this term, it is observed that there is basically not present any kind of legal binding.
Express term refers the delivers the information that the shopkeeper must compensate the buyer
as he insists on buying the book in a manner per the provision of law as per warranties act that
rectification. For this reason, the party who is not maintain the term and the condition is under
punishable offence. According to law, shopkeeper is responsible for the whole situation as he
forget to remove the advertisement from display which create problem. Thus, law of negligence
is totally applicable in this situation because elements of negligence are identified in the whole
situation.
Warranties are one of the terms, which is used in this context. In addition, the product
condition is another term, which is present in this contract. To resolve the situation between the
customer and the supplier of the product, it may be in different form, providing a fresh book for
him or giving him extra discounts and arranging a copy for him because of the delay, which suits
him. However, proving this in court of law will be difficult for both the parties (Miller, 2016,
p.122).
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Task 3 Explanations on liabilities in businesses
3.1 Contrast liability in tort with contractual liability
Law of tort is a common English law. This is a civil wrong which is based on the failure
of an individual to act in a reasonable way to not harm others. Liability of tort is held to a party
when its act causes harm to others and in this regard the accused is expected to pay
compensation to the injured. The tort law is applicable to the party even at times when their
actions are unintentional (Davidov, 2015, p.34).
The common case of tort law is carelessness shown towards the other party. The case of
Lie beck vs. McDonald’s Restaurants, 1992 is an example of liability in tort, where 79-year-old
Stella Lie beck suffered 3rd degree burn injuries due to spilling of coffee onto her lap. The judge
awarded $200,000 as compensation and $2.7m in punitive charges to Lie beck as it found
McDonald's failed in maintaining customer’s safety is an example of such event.
Each party must consent with the terms mentioned in the contract and are liable to legal
actions if the contract is breached. Therefore, contractual liabilities arise out of responsibilities of
each party set in the terms of the contract binding them (Geistfeld, 2016, p.204). In the case of
Haley v London Electricity Board, the appellant, who was blind, tripped over an obstacle placed
on the pavement by the workers of the London Electricity Board, who owed a duty of care
towards the blind people.
In the contractual liability, contractor creditor should prove the existence of contract and
the breach of it to proven the debtor guilty. For tort liability, the fault of the offender must be
proven by the victim who is facing the effects of the wrong activity (Fried, 2015, p.173).
3.2 Explanation on the nature of liability in Negligence
The act of carelessness towards the other party can be considered as negligence. It involves
failure to exercise care to an individual in circumstances where it may cause unintentional harm.
In that case, the offending party is liable to legal actions and the injured party can sue him in the
court of law (Sterk, 2012, p.2132). For claiming compensation proof of the activity needs to be
placed.
1. The duty of care was owed to the person by the offender
2. That he has failed to carry out his duty.
3. And because of that damage has been caused to the party,
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Duty of care is circumstantial which civil code of law deems as a legal duty to take care of
the customer employee or the subject. If the defendant fails to perform such duty, he is liable to
pay damages to the claimant as it is breach in duty of care (Bell and Barker, 2016, p.49). The
duty of care involves two requirements,
Reasonable foresight of harm: the defendant will owe the duty of care to the claimant if the
damage that caused injury to the claimant can be foreseeable, and preventive measures have not
been taken.
Reasonable of proximity: if claimant proves there is proximity in relationship with the
defendant, then he will be liable of duty (Shavell, 2013, p.283).
Therefore, it shows that negligence of elements is fully determined in the case due to which
this law is purely applied in the situation.
3.3 Explanation on how a business can be vicariously liable
In business terms, it refers to employer liability for behaviours and actions of supervisors
and managers, such as a hospital is liable for its doctor’s actions (Morgan, 2015, p.51). In the
workplace, an employer can be charged for actions or inclusions of its employee during
employment. For the actions to be considered ‘during employment’, the employer must have
authorised or directed the act or be connected to it (Bowal and Bontorin, 2014, p.182). However,
the employer is not responsible for the employee behaviour or action carried outside. For
example; Megan is an employer who is doing the business of sculpture designing and her
employee Jill who is supporting her in the process by cutting distinct woods. Thus, in one
incident Jill destroyed the most expensive wood in place of pine which resulted in heavy loss of
Megan. Therefore, according to vicariously liability master is responsible for the mistake of
his/her servant due to which Megan is liable for the mistake of Jill as well as entire business is
responsible for the mistake of single employee in front of customer. Hence, entire situation of
Megan and Jill shows that business is vicariously liable for the mistake of business.
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Task 4 Principles of liability in negligence in business situations
4.1 Applying the elements of the tort of negligence and defences in different
business situations
Here, in this case the tort is in form of negligence as the driver driving the car was not
careful enough to look at the sides whether, there were any body there while turning even though
his activity did not directly result in permanent injury of the kid Kelvin but still the driver. In this
case, David can be held responsible if he would have been careful he could have stopped and this
would not have happened plus the kid is not an adult. However, it is his duty to look and drive it
would be difficult to prove the entire situation in the court of law and it would be difficult for the
kid. Moreover, his family to procure compensation from him as the witnesses if any would not
be able to state that whether he has neglected it or was it an accident (Meiners et al. 2014,
p.133).
4.2 Applying the elements of vicarious liability
Vicariously liability is all about allegations of employer due to employee actions as
person who works under authority then authority is responsible for whole situation. In fact,
legitimate bodies also believe in this scenario that master is liable for the mistake of his/her
servant because he/she is working as per the order of master. However, number of situations and
examples are determined in which these kind of issues are arises and vicariously liability handle
the whole situation. Here under the vicarious liability act regent hotel must pay a part in the
compensation as they have failed to provide adequate atmosphere of work and which has
resulted in this anger of the person and in consequence to that the assault. But at the same time
the accused person is also to be held responsible for the act as it is his responsibility as an adult
to control his anger so that it does not cause injury to others and himself in this case the same has
happened.
Therefore, it is wise on behalf of the victimised person to claim compensation from the
regent hotel as it is employer responsibility to guarantee safety and security of employees which
the firm has failed to provide it for the affected employee. It is in part of their duty that they help
the person in this regard, in case they ignore to do so the affected person can file against both the
company and the accused for compensation. Therefore, after assessing the whole situation it has
been understood that employer is liable for compensating the loss which is incurred because of
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employee. In fact, legal bodies of UK are also favouring this decision by considering necessary
terms and conditions.
Conclusion
Therefore, it is very evident that business and employment contracts are maintained as
well as violated through different factors. All of these legislations are made to instruct engaged
professional heads in a flexible negotiation. However, some case studies are mentioned in the
case study those are not supportive by such acts and legislations, but still the implications of
these laws are highly prevalent while managing business contracts and negotiations.
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