Importance of Tort Law for Businesses

Running Head: BUSINESS LAW
Business Law
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1BUSINESS LAW
The importance of tort law for business
There are several laws which businesses are subjected to with respect to their operations.
Knowing such laws is significantly important for the business owners. Where they do not have
idea about the legal guidelines they may intentionally or unintentionally commit a breach which
would lead to unwanted losses for the business. One of such areas of law is that of tort law and
thus it is very important for business owners and operators to have an idea about tort law to
successfully carry out business operations without being subjected to financial losses and legal
claims (Kubasek et al., 2015). The application of tort law with respect to businesses is broad. The
area of law covers various aspects such as negligence, occupiers’ liability, assault battery,
negligent misstatement and nuisance. There have been various instances in Australia where the
businesses have been made liable for the injury caused to a third party because of the actions of
their employees. The principles which make the businesses liable for the actions of their
employees are known as vicarious liability. This paper provides a discussion with respect to the
importance of understanding the law of torts for businesses and how can they minimize the risk
associated the law.
In Australia there have been various occasions where business had been subjected to legal
actions for negligence. Claims under common law negligence have dramatically been reduced
after the enactment of the consumer laws. The negligence claims in Australia is governed by the
Civil Liability Acts as well as common law negligence. These claims include slip and fall cases,
professional negligence, accidents claims, medical negligence and occupiers’ liability. The law
of negligence as primarily come to existence through the case of Donoghue v Stevenson 1932
AC 562. The case provides an important lesson for business owners. It clarifies that a business
does not have to have a contractual relationship with a person to be liable for negligence. The

2BUSINESS LAW
establishment of a “duty of care” is sufficient for making a claim for negligence (Mann &
Roberts, 2015). The duty of care is a principle of law which had been coined by this case. The
principle makes a person liable to another person if he or she can foresee that because of his
actions and omissions the other person may probably or foreseeably be subjected to injury. This
injury can be any form of injury such as physical injury, injury to property, mental injury and in
certain situations financial injury or pure economic loss. The case of Grant v Australian Knitting
Mills HCA 35, (1933) 50 CLR 387 had discussed the principles related to duty of care in
Australia jurisdiction. Here an employee had been provided compensation due to the negligence
of the employer which had caused him to sustain injuries. The duty of care can be identified by
the court through the application of a few legal tests (Halliday & Shaffer, 2015). The application
of these tests are done based on the kind of injury which has been sustained by the plaintiff.
When a person suffers physical injury or injury to property the court may implement the caparo
test or the proximity test as used in the case of Caparo Industries pIc v Dickman [1990] 2 AC
605. The court may deploy the Alcock test as per the case of Alcock v Chief Constable of South
Yorkshire [1992] 1 AC 310 when the person making the claim has been subjected to mental
injury. At common law it is generally recognized that there is no duty of care when the claimant
has suffered a pure economic loss. However as suggested by Hedley Byrne & Co v Heller [1963]
3 WLR 101 where the loss has been caused because of a negligent misstatement there is a duty
of care.
The Australian High court held that the retail giants Woolworths have been negligent as they
had not removed a greasy potato chips from the fool of their shopping centre. As the chip was
present their the plaintiff who was an amputee and used crutches to walk had fallen heavily on
the floor of the shopping mall and had been subjected to spinal injury. The plaintiff had brought