Legal Aspects of Business: Contracts and Negligence in Practice

This report examines the essential elements of a valid business contract, including offer, acceptance, consideration, and intent to create a legal relationship, along with different types of contracts such as distance sale, face-to-face, and written contracts. It delves into contract terms, covering conditions, warranties, and in nominate terms, and their legal effects. The report then explores the principles of liability in negligence, contrasting it with contractual liability and addressing vicarious liability. The analysis applies these principles to a case study involving Johnson and Co. and Delta and Co., focusing on contract elements, the law on contract terms, and the legal effects of those terms. It highlights the importance of legal agreements, particularly in commercial transactions, and how they impact business operations. The study further discusses the elements of the tort of negligence and vicarious liability within the context of the case, providing a comprehensive overview of contract and negligence law in a business setting.

Aspects of Contracts
and Negligence in
Business

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LO1 Essential elements of a valid contract in context to a business...............................................1
a) Importance of the elements................................................................................................1
b) Impact of different types of contract..................................................................................2
c) Terms of the contract..........................................................................................................3
LO2 Application of the above defined factors in the given business scenario................................4
a) Elements of a contract........................................................................................................4
b) Law on terms of contract....................................................................................................4
c) Legal effect of the terms and clause...................................................................................5
LO3 Understanding the principles of liability in negligence of business activities........................5
a) Contrasting liability in tort with contractual liability.........................................................5
b) Nature of liability in negligence.........................................................................................6
c) Vicariously Liability...........................................................................................................6
LO4 Applying principles of liability in negligence of business activities.......................................7
a) Elements of the tort of negligence on Delta and Co...........................................................7
b) Elements of Vicarious liability...........................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
A contract works as a promissory note between two or more parties to stand by their
agreed terms. It is truly required in today's dynamic work culture, where there is always a sudden
change in an individual's thought. Therefore, a contract always enhances one's cooperation and
trust. Another reason of reviewing the tasks through a contract is to avoid any misconception of
terms and conditions among the parties (Simons, 2014). Contracts together play an important
role in handling and managing today's competitive business operations. It is basically a set of
varied conditions, on whose imposition one can successfully reach the attained goals. However,
there is an equal involvement of law to resolve the misuse or breach of those policies. The
present report is based on a case study between two business entities, Johnson and Delta. In
which, Johnson and Co has stated a complaint against Delta and Co to claim a fraud made by
them, asking them to refund their overall payment.
LO1 Essential elements of a valid contract in context to a business
a) Importance of the elements
A business contract is made up of an agreement to handle some sort of dealing among
two or more parties. It is enforceable by law and thus has a major importance of its stated
policies that are strictly needed to be followed by the dealt parties. A contract has its numerous
forms such as verbal agreement, written agreement, involvement of any electronic means and
websites, or even it can be in the form of an act or any code of conduct, etc. An agreement
between two parties is convertible to a contract only when it follows certain sort of terms and
conditions. These are famously known as the elements of a valid contract, as mentioned below-
 Offer- It is the foremost element to build a valid contract and without whose involvement,
a contract cannot be initiated. It is a constituent in which a party proposes an offer to
another party and states the legality of the contract (Ueda, 2012). It together consists of
certain rules and regulations that are needed to be abided by both the involved parties. In
the recent scenario, there is a contract between Delta and Johnson. In which Delta and Co
has offered Johnson and Co to supply new computers to them. A contract can however;
become null after the offer gets dissolved under various circumstances, which includes-
◦ Death of the offerer.

◦ In case the proposed offer has been rejected by another party.
◦ The time frame of accepting the offer gets over. Acceptance- It is the next important factor of a contract which together makes an
agreement after merging with offer. Hence, offer is the first part of an agreement with a
second part of acceptance by another party into the given time frame. It is important for
the accepting party to duly inform the offerer about accepting the binding conditions. In
the given case, Johnson and Co has accepted the offer made by Delta and Co and agreed
their supply of computers. Consideration- It is another main aspect of a contract by which a person is being agreed
to pay something in exchange of the goods or services. It depends upon varied cases and
can be either in the form of money or any sort of property, etc. In the present case,
Johnson and Co has agreed to pay a sum of 30, 000 dollars for purchasing new computers
from Delta and Co.
 Intentions to build a legal relationship- It is crucial step to state a clear intention of both
the parties with a mutual understanding of getting into an agreement and building a
contract. Especially in a commercial transaction of the given case study, both the parties
have signed a legal agreement for the exchange of computers with an intention to build a
legal relationship between them.
b) Impact of different types of contract
A contract certifies the biding of an agreement between two parties which is together
imposed by the law. Therefore, a contract is of different types with its differentiated impact on
the overall business. It concludes- Distance sale contract- It is a contract between two parties where there is a distance sale
of goods or services and the accepting party is unable to physically feel the object. For
example, it can be seen when a person is booking an airline ticket or advance room in
hotels. However, the contract can be dissolved at certain circumstances upon the agreed
legal terms and conditions. Like the contract can be eliminated by the offerer in the above
stated example, if the parties are not present with a copy of their bookings. Face to face contract- This type of contract is made in the presence of both the parties. It
is the best part of ensuring the consignment among both them. In this particular format,
both parties together specify and form the conditions of an agreement to build a valid
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contract and thus; they are equally responsible to adhere by those terms (Walentin, 2014).
It usually comprises a verbal form in which they are required to orally communicate with
each other and clarify the existing doubts or issues.
 Written contract- It is a very profound way of building a contract by specifying the
policies in writing. It works as an effectual tool at the time of resolving any rising
disputes by going through the written statement. It is amongst the best recommendations
to operate a business. Therefore, most of the business contracts follow this similar aspect
of adhering by a written agreement. In the recent study, the same form of a written
agreement has been identified to file an applicable case against the offerer.
c) Terms of the contract
It is important to analyse the varied terms of a contract to avoid the breach of any
conditions by the involved parties. Therefore, in order to avoid such circumstances, it is essential
to adhere the legal terms of a contract (Adamson and Morrison, 2011). However, an injured party
has valid rights to sue the breaching party by law. Below are the varied terms which sets out the
duty and responsibility of both the involved parties- Conditions- It is the primary reason of forming an agreement. It basically consists of a set
of rules that are required to be followed by both the parties in order to avoid any breach
of a contract among them. However, the harmed party has full authority of filing a case
against the breaching party in the scenario of violating a condition term. Warranties- It is unlike the condition term with a low preface and on whose breakage a
contract cannot be made null or void. On breaking a warranty, the breaching party is only
liable to pay for occurred damages to the injured party. In nominate- It is a part of intermediate terms and generally used at the time of any
disputes among the two involved parties. For example; in the given case study of Johnson
and Delta companies, the court or law will not consider the above stated conditions and
warranty terms of their contract once after they suit a file against each other. Express- It is that form of an agreement in which the terms and conditions of a contract
are specified in written format. It is required by both the parties to be aware and follow
those predetermined terms. A formal written agreement is a most convenient way of
handling disputes among the involved parties.
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 Implied- This reflects the oral form of an agreement in which the conditions are not stated
in writing. It is a complex procedure to handle any disagreement of norms at the time of
any disputes among both the parties.
LO2 Application of the above defined factors in the given business scenario
a) Elements of a contract
After successfully analysing the given business scenario, one can clearly identify the
formulation of a written contract between Johnson and Co and Delta and Co. There is a clear
determination of an agreement among both the parties with its essential elements. Firstly, there
was an acceptance from Johnson and Co towards the offer made by Delta and Co for supplying
new computers. It was with a sound intention of constructing a legal relationship among them
along with a lawful consideration of making a payment towards the supplied computers.
Capacity has been recognized as a next element of the given case where both the parties are
equally competent to form a valid contract among them, by varied means of an agreement
(Miller, 2011). Together with an involvement of a free consent among both the parties with no
involvement of any fraud or misconception of policies into the agreement. It was due to the
formation of a valid and formal written agreement among them. Lastly, the possibility of
performance is judged as a discorded element in the given case study. In which, the computers
supplied by Delta and Co has started to give a continuous undue performance. However, the
supplier promptly addressed the issues stated by Johnson and Co.
b) Law on terms of contract
In the given case study, there's a clear recognition of varied conditions which plays as a
crucial term of any contract. It is due to the fact which states the overall formation of a contract
is on the basis of a contract's condition term. Thus, it builds the foundation of an agreement by
later converting it into a valid contract. Followed by the formation of a strong contractual base
with a legal set of conditions, warranty works as the next term of a valid contract in which the
Delta and Co has clearly defined the involvement of an after sale service to Johnson and Co.
Especially when Delta has promptly addressed Johnson about recognising certain ongoing issues
on the computers supplied to Johnson (Colino, 2011). Along with it, not involving any explicit
clause was clearly stated by Delta and Co towards refunding the payment made by Johnson and
Co. Another remarkable fact was the inclusion of the in nominative term which dissolves both
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conditions and warranties of the contractual agreement. However, any breach of warranty does
not affect the contract by fully dissolving it. Like in the above case study, the firm is only
responsible to work as per its given warranty towards the product.
c) Legal effect of the terms and clause
After a brief analyses of the above business scenario, a clear influence of in nominative
term has been verified. In this state, all the above mentioned conditions and warranty terms of a
contract automatically dissolves at the time of any dispute among the parties. Followed by
suiting a file in the court, the law determines and builds certain policies with new terms and
conditions in regard to resolve the raised issue. Sale of goods acts, 1979 can be applied on the
above stated case between Delta and Co and Johnson and Co (Elliot and Quinn, 2009). In this
act, the manufacturer is liable to construct faulty product for the users. Accordingly, Johnson has
right to get replacement, repaired or refund of its product by Delta company in a reasonable time
frame. However, if the supplier refuses to do so, then Johnson has full authority of repairing
computer from others and compensate the charges from Delta. But in the present scenario, Delta
has claimed by stating that their employees were mistreated at Johnson and was not allotted a
sufficient period to repair the damaged computers. Hence, Johnson will require proving the fault
of Delta at the court by stating an exact recognition of the arising issues and whether it was
initially from the time of purchase or not.
LO3 Understanding the principles of liability in negligence of business
activities
a) Contrasting liability in tort with contractual liability
Contractual liability and liability in tort directly states the negligence made by the parties
against a smooth administration of business operations. The key aspects of both the terms
signifies a clear difference among their relationship with both the parties, nature of duties and
responsibilities along with the root-cause of damage and necessary measures or steps one need to
accord in resolving the arisen issues. An agreement among the two or more involved parties into
a contract effectively states the term of contractual liability. A contract creates an outline of
varied duties that are required to abide by both the parties. It defines what a party can does or
cannot does for operating a smooth business activity. It also consists of the remedies required at
the time of breaching any clause. Therefore, contractual liability too discovers responsibility of
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the parties towards each other (Manuel, 2011). However, liability in tort is contrary to the
contractual liability, which is seen as an offensive task and is thus considered as civil wrong. It is
basically a breach of contract by breaking the trust of a person. Both the above stated concept has
a remedial measure of applying an action by the common law. In which, tort remedy is to pay a
compensatory amount to the injured party for causing damages or harm.
b) Nature of liability in negligence
Negligence is clearly stated as failure in taking appropriate measures at a reasonable time
frame. However, human nature often comprises such varied level of issues. But it is important in
a business to avoid the negligence up to a great possible extent. A negligence is too based on
certain elements of avoidance, which are as mentioned below- Duty of care- In the present case, it is when the manufacturer has the sole responsibility
of constructing an appropriate good to avoid any harm caused by the final product.
However, the failed party that is Delta and Co is liable for a compensation to the injured
party which is Johnson and Co in case of failure towards the duty (Middlemiss, 2011). Breach of duty- The harmed party needs to provide sufficient evidence to prove its claim
against the negligence of the breaching party in court. The court will further consider two
main aspects of judging the personnel's skill and situation of emergency at which the
damage was caused. In the present example, Delta has refused to pay the compensatory
amount stating that the employee of Johnson has been seriously injured by his own
negligence.
 Damages- Therefore, Johnson and Co as the claiming party will only get compensated if
it has actually suffered any serious loss or injuries preceded by the intention of Delta and
Co (Carby-Hall, 2003). The injured party is also supposed to prove its facts against the
breaching party in order to get a compensation.
c) Vicariously Liability
As per the given case study, Delta and Co has been held in the position of vicarious
liability. It is basically a situation in which either an individual of a business entity has been
stated as the major responsible person for causing some sort of damage. Similarly, in the present
situation, the manager of Delta and Co is equally accountable for overlooking the matter of rising
complaints by Johnson and Co. As a result to which, an employee of Johnson and Co has
suffered a serious harm and health injury. However, in contrary to that the Delta firm has also
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made major remarks of criticism against Johnson and Co. It was stated by Delta that their
employees were treated badly at the workplace of Johnson and were not given sufficient amount
of time to repair the computers supplied to them (Colino, 2011). To determine the above stated
facts of both the companies, court is liable to ascertain the exact relationship to among the parties
and whether there was an involvement of any tort activity by the employees with a clear
intention of causing harm.
LO4 Applying principles of liability in negligence of business activities
a) Elements of the tort of negligence on Delta and Co.
Imperial Chemical Industries v Shatwell [1964] All ER 999
In the above stated incident, both plaintiff and defendant were brothers but claimed one
another for the accident. However, further investigations proved that their criticism were based
on few ineligible factors to implement the vicarious liability on them (Key, 2013). It was due to
the fact which stated both of them as a well experienced employees of the firm with prior
knowledge in the fields of wiring and testing. Along with which, there was a free consent of
working with an informed risk to both of them with initial warning of opting the necessary
compliance measures by the firm. Therefore, relating it to the similar aspect of Delta and Co,
they too asked for sufficient amount of time to repair the damaged computers.
Lister v Romford Ice and Cold Storage (1957)
This case states the relationship between an employee and his employer by which the
vicarious liability can be proven against a tort activity (Liu and Aron, 2014). By following the
above scenario, Delta and Co has defended itself by recommending Johnson and Co to be
conscious of their own contractual responsibility of handling a work.
Davie v New Merton Board Mills [1959] AC 604
In it, a manufacturing defect has been detected as the main cause of the accident in
which, neither the employee, nor his employer can be criticized for the damage. Similarly,
relating it to the present context of given case study, Delta and Co is not directly responsible for
the harm Johnson and their employees (Mullis and Oliphant, 2011).
b) Elements of Vicarious liability
Considering the two major elements of vicarious liability is to determine the relationship
between the injured party and the defendant followed by identifying the course of committing the
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tort activity. The first factor consists of detecting an integration test by checking the skills and
levels of the employee and an economic test to conclude the fact of the working environment
(Owen, 2007). The second elements comprise defending the employer by researching the
employees course of employment into the organization.
Therefore, both the elements are stated valid in the given business scenario where Delta
and Co has directly charged Johnson and Co by stating that their employee was injured at the
workplace and due to their own act of carelessness.
CONCLUSION
This report effectively broadcast the importance of utilizing a formal written business
contract for a healthy and cooperate work environment. It showcases that how the chosen form
of biding into a contract helps to eliminate the destructive aspects by promptly handling the
rising disputes among the involved parties. However, it also defines the con's of neglecting the
terms and conditions of a contract. It too helps in detecting the major elements for resolving the
negativity of negligence.
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REFERENCES
Books and Journals
Adamson, J. and Morrison, A. 2011. Law for Business and Personal Use. 19th ed. Cengage
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Elliot, C. and Quinn, F., 2009. Tort Law. Longman.
Twomey, D., and Jennings, M., 2010. Business Law: Principles for Today's Commercial
Environment. Cengage Learning.
Manuel, K. M., 2011. Contract Types: An Overview of the Legal Requirements and Issues.
DIANE Publishing.McKendrick, E., 2012. Contract Law: Text, Cases, and Materials.
Oxford University Press.
Middlemiss, S., 2011. The psychological contract and implied contractual terms: Synchronous or
asynchronous models?. International Journal of Law and Management. 53(1). pp.32-50.
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& Lehto, J., 2010. Flexibility in contract terms and contracting processes. International
Journal of Managing Projects in Business. 3(3). pp.462 - 478.
Mullis, A. and Oliphant, K., 2011. Torts. Palgrave Macmillan.Tikkanen, I. and Kaleva, H., 2011.
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Key, N., 2013. Production contracts and farm business growth and survival.Journal of
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Transfer in Offshore Business Process Outsourcing. Information Systems
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Simons, J., 2014. The end of'unfairness' in commercial contracts: Proposed extension of'unfair
contract terms' laws to business to business transactions.Governance Directions. 66(7).
pp.431.
Ueda, K., 2012. Banking globalization and international business cycles: Cross-border chained
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pp.1-16.
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