Comprehensive Report: Contractual and Negligence Aspects in Business

This report provides a comprehensive overview of contract and negligence in a business context. It begins by outlining the essential elements required for a valid contract, including offer, acceptance, consideration, and lawful object, and differentiates between various types of contracts in the UK. The report then delves into the application of these elements in a given business scenario, evaluating contractual terms such as express and implied terms, conditions, warranties, exclusion clauses, and innominate terms. Furthermore, it contrasts contract and tort liability, explaining the concept of duty of care and vicarious liability, referencing relevant case studies. The report concludes with advice on loss recovery and the elements of vicarious liability in specific business situations, providing a complete understanding of contractual law and negligence in business transactions.

ASPECTS OF CONTRACT AND
NEGLIGENCE FOR BUSINESS

TABLE OF CONTENTS
Introduction................................................................................................................................3
Task 1.........................................................................................................................................3
1.1 Importance of the essential elements required for the formation of a valid contract......3
1.2 Main types of contracts that may be entered in the UK by individuals and businesses. .4
1.3 Important terms required in a valid contract...................................................................4
Task 2.........................................................................................................................................5
2.1 and 2.2 Applying the elements of contract in given business scenario...........................5
2.3 Evaluation of contractual terms.......................................................................................6
Task 3 ........................................................................................................................................7
3.1 Differences between contract and tort liability................................................................7
3.2 Concept of duty of care and neighbour principle in reference to case of Donoghue v
Stevenson-.............................................................................................................................7
3.3 How a business can be vicariously liable........................................................................8
Task 4.........................................................................................................................................9
4.1 Advice to Brad for his loss recovery from Charles.........................................................9
4.2 Elements of vicarious liability in given business situations...........................................9
Conclusion................................................................................................................................10
REFERENCES.........................................................................................................................11

INTRODUCTION
Contractual law has great impact on the business transaction. It is an official
agreement which consists of legal aspects and provisions implied on entities involved in
contract (Andrews, 2015). The parties involved in the contract are bound to comply with all
business contractual legislations. While formulating a contract, there are essential contractual
terms and principles of tort and negligence which should be imposed on the agreement. The
report herewith provides a complete understanding of aspects of the contractual law and
negligence in the business. Further, it will also explain that how a business can be vicariously
liable.
TASK 1
1.1 Importance of the essential elements required for the formation of a valid contract
For a valid contract in business transaction, there are substantial elements which are
required to be followed by the parties involved. In context to the case study, some of the
contractual terms are explained below:
Offer: An offer is a promise or kind of proposal made by one company to another. An
offer is always different from an 'invitation to treat'. With reference to the scenario, the
advertisement (made by James on an e-commerce website for the sale of HD web camera
worth £55) was just an invitation to treat (McKendrick, 2014). The concept of offer is further
explained with Harvey v Facey case in which there was no contract formed. In this case, it
was not proved whether the telegram sent by Facey was to be an offer or not.
Acceptance: There is no valid contract unless the offer is accepted by the party to
whom the proposal is made. Acceptance should be undertaken by the lawful acts and
regulations. In the above stated case, Maria accepted the treat as if it was an offer. And she
further made a 'counter offer' to James that she was willing to buy that camera only for £45.
But he expressed that he would accept the camera on original price only to which Maria did
not respond. So, the offer made by James got cancelled (Beever, 2013). It depicts that a
conditional acceptance is considered as a counter offer, not valid contract.
Consideration: Consideration is something of value given by both parties according
to the terms of a contract such as it makes them allow exchanging their mutual performances.
According to case study, James left with no option so he had to accept her offer which
compelled him to sell that camera worth £45 only. Here, there are no contractual relations

between James and Maria so consideration is not enforceable by law. James is responsible for
his exchange of treat.
Lawful object: In order to make contractual relations, the contract should be valid and
enforceable by law. In the above stated case, James did not make valid contract with Maria.
So there must be legal relation between both parties while formulating a valid agreement.
1.2 Main types of contracts that may be entered in the UK by individuals and businesses
Main types of contracts according to forming, binding and enforceable by law in UK
are stated below: Face-to-face contact: Face-to-face contract are those contracts which are formed by
verbal conversations between two parties. This is an oral contract in which party
declare all legal terms and provisions of agreement face-to-face. Both the parties left
with no evident documents, moreover this contract is not considered as a conventional
contract. Like, selling a mutual fund scheme or any insurance policy to the customer
is best example of face-to-face contract. Written contract: The contract which is expressed in written form within the
contractual parties is known as a written contract. This contract should be endorsed
with all personalised documents of entities. A well drafted written contract is formed
in order to minimize the risk associated with it. Moreover, it reduces the risk of
ambiguity and outlined the rights and obligations of contracts clearly. Verbal contract: Verbal contracts and arguments are legally binding if an agreement
is made to perform the services. It can be executed by a verbal communication via
telephones and emails. For instance, sale of property and copyright transfer are some
verbal agreements.
 Inferred contract: A contract is said to be implied if two parties entered in an
agreement from their own conduct or it may also be possible that there is existence of
mutual consent between them. There is no written record or verbal communication
between parties.
1.3 Important terms required in a valid contract
Once the contract has been formed then it is necessary to identify important terms of
the contract which imposed obligations on both parties (Singhvi, 2014). Some of them are
stated following below:

Express terms: These terms are key elements which are outlined in the valid contract.
Before entering into the contract, the terms and conditions of the contract are clearly
mentioned such that all parties are bound by these terms.
Implied terms: Implied terms consist of legal obligatory and lawful provisions which
are professed by the court of country. Implied terms are those terms which are not expressed
by parties in the contract but they are obliged to follow them.
Conditions: Conditions are fundamental terms of any agreement made between
parties. These terms are considered as very substantial as on the breach of the condition, one
of the parties got injured and claimant is allowed to repudiate the contract (Fried, 2015).
Warranty: It is not as primal as 'condition' terms. On the breach of the contract or in
case of loss and damage, the claimant can claim against it but certainly is not able to
terminate the contract. The injured party has to go ahead with the agreement (Merkin and
Gürses, 2015).
Exclusion clauses: An exclusion clause is a term which is used in a contract that
seeks to limit the rights and duties of parties. These terms should be included in the contract
as it provides a remedy to the claimant in case of any damage or loss. According to this term,
one party restrict the liability or an act of performance of another party in case of breach of
contract.
Innominate terms: Situations that are excluded in 'condition' or 'warranty' terms will
be covered by innominate terms. According to various situations and case, these terms will be
taken into consideration. It is further explained by the case of Hong Kong Fir Shipping which
concluded that the defendant is not liable to repudiate the contract as 20 weeks out of 2year
contract period did not allow him to take whole benefits.
TASK 2
2.1 & 2.2 Applying the elements of contract in given business scenario
Purchasing party: Hair 4U
Selling party: Bella UK
Contract: Supplying ten boxes of Miracle Oil for the price of 5
According to present case, Bella UK is promoting its new shampoo, named 'Miracle Oil'
which claims for rapid hair growth As it was very beneficial offer, so 'Hair 4 U' shows its

keen interest to take the advantage of that.
Terms of the contract:
Express term: In the formation of the valid contract, it is essential for Bella UK to specify
the legal acts and regulations before enter into the contract. As, Bella UK already claimed
that its product provide rapid hair growth and also it would be offering its product at
discounted rate to Hair 4 U. So it should adhere to its statement while executing a contract.
Implied terms: After entering into the contract, it is necessary for both Bella UK and Hair 4
U to uphold the provisions of contract and quality of the product so that other party should
not suffered by its side-effects. In order to build the customer loyalty, it is very essential for
the organisations to comply with legislations and legal acts.
Exclusion clause: These are important terms which should be included in the contract. As
Bella UK already outlined that there is only 20% success of the product and seller will not
be liable for any adverse results. Thus, Bella UK has already announced its limited liability
on the quality of the product. So it will not be liable for any kind of consequences.
Director of Hair 4 U Director of Bella UK
(Enclosed Signature) (Enclosed Signature)
2.3 Evaluation of contractual terms
Breach of a condition: A breach of conditions notice will be given to one of the party
involved in the contract to secure compliance with the terms and conditions, standard
provisions and acts, specified by regulatory authorities (Issa, 2015). On the breach of
condition or if any steps have not been taken then, recipient will be given a breach of
condition notice.
Impacts of breach of condition: If any party does not complied with the legal acts
and conditions, then it will guilty of an offence and legal actions would be taken against that.
So it is required for each party to ensure the full compliance with the terms and conditions
mentioned in the contract (Newcomer and et. al., 2014). It is further depicted with the case
study of Poussard v Spiers that as she already missed the important performance, so, she was
in breach of contract and Spiers were entitled to repudiate the contract.
Legality of the exemption clause: An exemption clause limits or excludes the
liability for breach of contract. It is a remedy which is provided to the claimant against any

loss or damage, such that it can be disadvantage for defendant. There are two types of
exemption clauses: limitation clause and exclusion clause. In limitation clause, a party is
limited from any kind of liability (Einstein and Davis, 2013). On the other hand in exclusion
clause, entities are excluded from liabilities. The case of Thorton v Shoe Lane Parking is an
example of exemption clause which states that the acceptance was itself made by machine
and therefore, the clause was not unified into an agreement. The case of Hollier v Rambler
Motors demonstrates a perfect example of exclusion clause in which it is not reasonable to
anticipate that claimant had any remembrance of those clauses from one transaction to the
next.
TASK 3
3.1 Differences between contract and tort liability
Contract law consists of legal regulations and obligatory duties which is to be
followed by parties involved in a valid contract. It governs the legal relations made between
two or more parties within an agreement. On the contrary, tortious law concerns about the
wrongful acts or violations, damages and losses made by one party by another. In both laws,
there is a principle of duty of care arise in case of negligence (Jendrock, and et. al., 2014).
Moreover, on the breach of contract they provide compensation to injured party. Besides the
similarities between contract law and tort law, they also share some differences which are
stated as below:
In contract law, both the parties enter into the contract with mutual consent on terms
and conditions of the agreement (Dow and Han, 2015). Whether in case of tort law, there is
no legal contractual relationship between two parties (Grigoryan, Best and Dellavalle, 2015).
The person should be reasonable and having some standards of care. Unlike tort law, entities
entering into the contract should follow all legal acts and legislations of the contract. On the
breach of contract, the suspect is liable to recover the damages and loss caused. Whereas in
tort law, the loss occurred should be result of the breach of contract if it is not then it would
not be taken into the consideration. Here, exemplary damages or loss are also rewarded in
case any maliciousness is revealed. But in case of contract law the injured party is always
rewarded or compensated. In case of tort law, if defendant is making his efforts to reduce the
damage or harm then losses can be ablated to some extent. However, in contract law, if
defendant is not able to take responsibility of the claimant's losses then claimant will be
compensated by some amount (Sentell Jr, 2016).

3.2 Concept of duty of care and neighbour principle in reference to case of Donoghue v
Stevenson-
Duty of care: Duty of care is a legal obligation or responsibility of a person or
organization to avoid acts or omissions to be likely to cause damages to others (Levy, Golden
and Sacks, 2015). In case of Donoghue v Stevenson, it was a duty of defendant to provide a
system of working in his business which would not allow snails to get into ginger beer bottles
and also provide a system of inspection of the bottles before ginger drink is filled into them
for the purpose of their product is to be consumed. Stevenson is failed in performing his
duties and had caused serious injury to Donoghue.
Neighbour of principle: Neighbour of principle is developed by Lord Atkin which
states that one must take reasonable care to avoid acts or omissions that could reasonably be
foreseen as likely to injure one's neighbour (MacCormick and Weinberger, 2013). A
neighbour is known as someone who is closely affected by the acts. In Donoghue v
Stevenson, it is necessary for defendant party to overcome the problems generated by privity
of contracts in order to provide an alternative source of claim to injured party. Neighbour of
principle also opens the door to claims in negligence for Donoghue to identify the people to
whom a duty may be owed in a particular scenario (Price, 2013). In this case, Neighbour of
principle provides an adequate basis on which duty of care questions can be resolved and
offered subsequent judicial decisions to the issue.
3.3 How a business can be vicariously liable
In a present case study, Alan a local milkman hired a 13 years old boy named,
Matthew to help him with the delivery of milk. Alan also told him to keep it confidential. On
day when they both went for delivery of milk, Alan accidentally inured Matthew. Now
regarding to this case study, Norfolk farms held liable for this situation of Matthew which can
be explained below:
Vicariously liable: Vicariously liability arises in the business contract when one party
is liable for tort or breach of a contract to another party (Mukherje and Anchayil, 2015). In
vicarious liability, employer is held responsible for the breach of the contract done by his
employees (Bell, 2013). Moreover, there has to be an employment relationship such as
tortious liability has to be committed during the course of employment in a business.

Duty of care: Duty of care is the act which provides protection to injured party
against any loss or damage or tortious act caused by defendant. It the act of care in which one
party is liable to take care of another party (Pollock and Roderick, 2015).
a) Yes, Matthew can sue Alan as according to duty of care he is responsible for his injury.
Matthew only heir him to help him with the delivery of milk, and in the employment duration
he got injured. So, Matthew have right to sue Alan according to the act of duty of care. To
which that milkman should provide protection and consideration to that boy.
b) Yes, Norfolk farms can be definitely held vicariously liable for Matthew's injury and harm.
According to vicariously liability, it is an employer responsibility to take care of his
employee. Moreover, authority of Norfolk farms was not aware of his presence in the farm
with Alan. It is because; this is the responsibility of Norfolk farms to get aware about the
activities that are going on without its permission. As Matthew was minor, so it is against
legislations to hire any person under the age of 18. To perform this action, farm's authority is
liable to take legal actions against Alan, either they can terminate him or take strict actions.
TASK 4
4.1 Advice to Brad for his loss recovery from Charles
To Brad,
Sub: Advice regarding recovery from loss and damages.
As per the scenario, Brad provided accommodation services on some rental charges
to Albert. He gave this service by relying on Charles's statement. However, Charles did not
know the financial position of the Albert and due to his unawareness, he gave advice to Brad
to provide flat on rent to Albert. Brad born loss because of irrecoverably of debts from
Albert. In this case, Charles is the person who will be responsible to compensate for the
Brad losses. It is because the rent agreements have been made on relying with Charles
statements. His unawareness is the reason of negligence henceforth; he will be liable to pay
to Brad for incurred losses.
The reason behind this decision is as per negligence act's provisions; Claimant was
expecting to get rental benefits through providing accommodation services to the Albert.
But still, due to unfavourable advice of Charles, Brad's profit expectation has been turned
out into debt loss. Therefore, according to the negligence act, person who is responsible for
negligence will be liable to pay for damages to claimant party.
Along with this, if Charles performed duty of care and provide a correct statement to

Brad than he can protect himself and will not be liable for any losses caused by Albert.
However, in the present case study, Charles provided inappropriate advice results in breach
of duty of care. Due to this, Brad faced loss which Charles needed to be pay to Brad.
However, This case can be understood with the case of Ross v Cunters which states that
solicitor was responsible for the cause of damages as he failed to ensure the financial
position. So, this case comes under the negligence of misstatement.
Regards,
legal advisor
4.2 Elements of vicarious liability in given business situations
a) In present case, a company named Macho Men plc owns a chain of night clubs
within UK. This firm hired a doorman. While working in the club, he is alerted of a drunken
man arguing with one of the barman and also become violent in the club. Graham, the
doorman chuck out the customer but his arm gets broken while removing him. Though he
was hired to protect against miscellaneous activities happening around the club but he is not
proposed to manhandle troublesome customers. During this entire course, legal actions can be
taken against his behaviour and mistreat. This case study comes under the principle of
'Volenty non fit Injuria' which states that Macho Men plc is liable to come under the principle
of vicarious liability as it was not asked from Graham to manhandle someone. So, company
is liable to compensate for injury and harm.
b) In this case study, a lady Carla works in courier organization named Links Ltd.
During his non-working day, she used company’s van for personal issues and decided to
deliver some parcels and couriers at the same non working day. But during her delivery, she
met with an accident due to her negligence and that van crashes, caused serious damages.
Now in this situation, Carla is entirely liable for the damage caused to George's car and liable
to make payment for the recovery of damaged car. As it was already non-working day, so she
should not have used company’s van for her personal use.
Links Ltd can also be held vicariously liable for the misconduct of the duty of
obligations. As per the law, employer should be aware about the activities undergone by their
employees and need to control and manage the activities performed in company.

CONCLUSION
With the above study, it can be concluded that contractual law and tortious liabilities
is very important for conducting business operation. Moreover, it is also inferred that there is
great impact of contractual terms and principles in the formation of valid contract law. The
importance of rights and liabilities of parties involved in the contract is also very important
for the successful execution of contract.

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