Business Contracts, Negligence, and Contractual Elements Report

This report examines the significance of business contracts and negligence, focusing on contract formation and adherence to contractual agreements. It includes a case study of Peter Abraham, analyzing essential elements like intention, offer, acceptance, and consideration. The report differentiates between face-to-face, written, and distance selling contracts, highlighting their legal implications. It analyzes contractual terms such as conditions, warranties, innominate terms, and exemption clauses, including their legal aspects. The report also presents case studies applying contractual elements, offering insights into contract formation and the application of legal principles in real-world scenarios. This report is designed to give a thorough understanding of the importance of contract law for businesses.

Aspects of Contract and Negligence for Business
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Introduction
The following report will be based on the relevance and on the importance of the formation
and the adherence to the different business contracts and business agreements. This is
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because without following the proper guidelines and the pre-requisites of forming of a
business contract, it is very difficult to justify and establish the validity of a particular
business contract.
Task 1 Case Study of Peter Abraham
1.1 Contract Formation and Importance of contractual elements for formation of
Contract
When two or more individuals jointly agree to enter into an agreement bound by legal
principles a contract is formed. The contract is valid only if there are certain elements which
have been included in its formation and the case scenario of Peter Abraham gives a thorough
understanding of the same. It is vital that he keeps a note of the following elements discussed
underneath in case of entering into valid contract with individuals and business organisations:
Intention to create legal obligations – the parties who are willing to enter into a valid
contract which can take place by the enforcement of the law must at the first place possess a
willingness to enter into a contract bound by law. Such an understanding makes sense as in
case any of the parties fail to meet the legal obligations indicated in the contract one of the
parties can sue or be sued by the other (MacLeod, 2011).
Offer – this refers to a person’s willingness to perform an act towards another who readily
and without any condition accepts thus ensuring the validation of a contract formation. An
offer may or may not be bound by time but offers which are specified by time are preferred
so that potential disputes can be avoided between the parties to the contract. In case of silence
of the acceptor the party who makes the offer cannot assume acceptance of the offer. An offer
cannot be considered as an invitation to treat, since the invitation to treat is merely an
invitation to offer and not an offer itself (Jewell, 2002). An invitation to treat is considered as
an indication that the party is not closed to offers and an acceptance does not symbolize a
agreement but can be considered as a consequent source of a contract to be made in future.
As for example, displays in the shop windows, goods available at the auction, goods in
catalogues etc.
Acceptance – an offer is usually validated through acceptance and is normally represented
orally or in writing unless the simultaneous performance and acceptance of the duties of the
contract is specifically indicated in the contract, in which case, acceptance can take place by
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conduct (Pryor, 2005). Acceptance must be clear as that is considered as the first step of
framing the contract (Entorres v Miles Far East [1955] 2 QB 327 Court of Appeal). The
parties to the contract must agree upon the method of acceptance and in case of absence of
any such specifications by the party making the offer the following rules are applied:
Postal rule – in case of the reasonable acceptance of postal system as the mode of offer and
acceptance, then the contract shall be considered to have formed at the time when the letter of
acceptance was posted, irrespective of its status of reaching late or getting lost in transit
(Revak., 2011).
Receipt rule –in case an e-mail or fax has been sent as message of acceptance, it shall be
deemed valid when it is received by the offeror, even if it means that such a message has not
been read by him at the same time.
A valid contract cannot be constituted by conditional or partial acceptance and therefore is
treated as a counter offer, as for example, if an offeree accepts some of the conditions
mentioned in the contract, and makes a new offer with new terms, the contract between the
parties does not get validated.
Consideration – in accordance with the law of contract, an agreement between two parties
remains unenforceable by law in case a valid consideration is missing (Thomas v Thomas
(1842) 2 QB 85), which incidentally is measured in general economic terms, such as goods,
money or services that the offeror shall receive from the recipient (Hogg et al. 2008). It
however need not be adequate as, if a lower price than the market price is offered by the
offeror to sell a good or service, the subsequent claim of the shortfall cannot be established
against the recipient in the court of law.
Capacity – according to the law of contract a minor person who has not attained the age of
18 years and or is unstable mentally and is under the influence of any sort of intoxication
does not qualify as the person having the capacity to enter into a valid contract ((Hermalin et
al., 2006). Such contracts as and when are formed shall be treated as null and void and hence
neither of the parties shall bear any contractual liabilities for the same. An exception however
has been incorporated in case the contract that has been entered into is for necessaries, where
the party who makes provision for necessities such as clothing, food items, etc to a minor and
is not reimbursed, the minor is liable to get sued for the imbursement of such necessities.
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1.2 Impact of different types of contract formations
i) Face-to-face
This kind of contracts has no legal validity therefore it is vital for Mr. Peter Abraham to
establish contractual relation with any individual or business concern vide proper
documentation. In this kind of contract the details of the contract that the parties are agreeing
to enter into remains largely obscure since details of the contract may be in the mind of the
parties and thus in case of any kind of breach of terms, none of the parties to the contract
would be able to establish claim on the other in the absence of evidential documents
(Holmes., 2009).
ii) Written Contract
The contracts that are written are far more certain as the agreed matters are set out with
details of the payments, time limits, and the process that is followed for resolution of disputes
(Schmerler, 2008). The formation also reduces the risk because of its being secure and
therefore more reliant than mere words. It can be enforced lawfully and the parties can
establish claims against each other in case of breach of any of the terms mentioned in such
contracts.
iii) Distance selling (telephone / Internet)
In the present age of technological evolution in the field of communication, most of the
contracts take the form of distance selling agreements that is brought into effect over the
internet or telephonic conversation and such contract are treated on the same line as the face-
to-face contracts. These kinds of contracts being devoid of the primary documentation lacks
legal validity and also fails to provide adequate support to the aggrieved parties in case of any
kind of breach (Ward., 2012). Then absence of a signed document displaying the consent of
both the contractual parties makes it invalid in the eyes of law. It can therefore be said that
such contracts are formed on the grounds of mutual trust between the contractual parties and
as such is devoid of legal bindings and can be terminated at the mere whim or fancy of the
involved parties.
1.3 Analysis of Contractual terms with meaning and effect
i) Condition
The contract formation clauses with a view of the future probable contingencies and its
subsequent handling are referred to as Conditions (Poussard v Spiers (1876) 1 QBD 410). For
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contract execution the conditions must be fulfilled either orally or through writing within the
ambit of law. The party who suffers from the unfulfillment of the condition of the contract
may terminate the contract and the breach of one of the conditions shall be regarded as the
breach of the entire contract (Ayres., 2012).
ii) Warranty
Warranties refer to the stipulated time limit of the business contract after the lapse of which
the contract becomes null and void (Bettini v Gye 1876 QBD 183). It is the truthfulness of
the information received by the buyer from the seller during the sale about the product. There
are two kind of warranties-express or implied. Express means the explicit claim made by the
producer of the product and implicit claims are legal in nature. In case of a warranty
infringements the contract cannot be terminated but the party that suffers can claim damages
for the occurrences of any inconveniences (McMillan and Stone., 2012).
iii) Innominate Term
The approach of the innominate term highlights on the infringement effect so that an the
extent of the infringement of the benefits of the contract suffered by the claimant can be
understood (Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26). In case
benefits have been deprived to a large extent to the claimant, the contract can be terminated
(Jewel., 2002). This term thus could be either a warranty or a condition which makes it
mandatory for the contractual parties to separate them either as warranty or condition. The
criticism of this approach is rooted in its compromise of certainty. The liability of wrongful
nullification of the contract can also fall on the aggrieved party in case of an insubstantial
deprivation of the contractual benefits (Posner., 2006). In certain cases the term is considered
as minor term by the courts on the basis of its declaration of being a condition by the parties
stating that its infringement leads to its cancellation.
iv) Exemption Clauses (including legality)
The Contract Law in UK confers the application of the Exemption Clause in cases where the
Contractual parties has limited power or are not included to bear the contractual liabilities.
The three kinds of Exemption clauses are time limitation clause, true exclusion clause and
limitation clause. In cases of contractual breaches restrictions on the claimed amount can be
imposed through the application of limitation clause and exclusion clause is applied when a
contractual breach of contract can be apprehended (Smith., 2011). The time limitation clause
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on the other hand is applied when an action related to claim is commenced within the time
specified for the act.
Task 2 Case Studies
2.1 Application of contractual elements
Case-1 Agreement
The offer which was advertised by Gumtree was not an offer but an invitation to treat as it
lacked clarity and transparency for Carol to consider it as an offer (Harvey v Facey [1893]
AC 552 Privy Council, hence there was no formation of any kind of contract between Carol
and the company, furthermore the reply of Carol to acquire the furniture from the company is
to be treated as a counter offer as there was no former communication between the parties.
Case-2 Consideration
The given case of Devi is quite interesting in a way since although the request was made by
Preston on the following day i.e., on the 13th of April, 2015, who was completely unaware of
deliberation which continued for weeks, George’s company hired Devi a day before on the
12th of April, 2015. Hence the interest of the company stands can be seen quite clearly by its
imposition of the interest on Preston, however it becomes obligatory for Preston to pay the
company the promised sum of 150,000 pounds. The element of confusion can be clarified in
the light of the case of Lampleigh v. Braithwaite [1615] EWHC KB J17, where the
accusation of murder and a subsequent penalty for death was accorded to the defendant,
while the defendant had pleaded to the plaintiff that he would be given 100 pounds if he can
successfully save him from being executed, which incidentally was not fulfilled by the
defendant even when the claimant did all possible actions to earn the defendant a pardon
from the death sentence. The court decreed that as the defendant’s consideration preceded the
promise hence it would be treated as a past consideration however the request that followed it
makes such a consideration valid and makes it obligatory for the defendant to pay the amount
he had promised ( Beatson et al., 2010). Therefore the case of Preston in this light brings
forth the fact that on the company’s fulfilment of the consideration had preceded the request,
the amount promised by Preston must be paid to George.
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2.2 Legal Application on contractual terms
Case-3 Exclusion Clause
The aspects of the given case scenario have to be considered carefully since it is laced with a
lot of contradictions. It has been mentioned that the individual carried a wallet in his coat
pocket, and the restaurant is imposing the exclusion clause when refund is sought by the man.
The facts of the case can be highlighted in the backdrop of the Parker v. South Eastern
Railway (1877) 2 CPD 416 case, where the exclusion clause came to Parker’s view after the
bag was lost. Hence if we examine the given case scenario it can be said that if the exclusion
clause has escaped the vision of the man that entitles him to get back his lost wallet in the
restaurant, he would have no knowledge of such a clause, whereas if his belief on the clause
dwindles even after he is fully aware of such an exclusion clause, the restaurant can defend
itself on the ground that the existence of such clauses in the receipt states establishment of the
clauses even if the there is disbelief on the part of the plaintiff (Scott & Triantis, 2006). The
case of L'Estrange v Graucob [1934] 2 KB 394, states furthermore that the case can be fought
by the company if there is mention of the exclusion clause on the content box. Hence, the
laws on exclusion clause would not allow the man to claim money from the restaurant.
Along with this, it is also stated that through reviewing the case scenario the exclusion
terms is implied in the case as it assists in defending itself on the ground that the existence of
such clauses in the receipt states establishment of the clauses even if the there is disbelief on
the part of the plaintiff.
Case-4 Implied Term
In the given case Aaron and Zephara had a verbal contract and they trusted each other and
had accordingly agreed about the rent verbally hence after the death of Zephara, it was
wrongful act by Yeti to take possession of the place and follow it up with an increased rental
sum. In the light of the case of Hutton v. Warren [1836] EWHC Exch J61, where the plaintiff
had accepted the compensatory sum in lieu of the labour that he had invested in acquiring
seeds and grow crop before the termination of the contract by the landlord the court in the
present case shall imply terms that are customary citing the fact that the fulfilment of the
verbal terms between Aaron and Zephara went on quiet smoothly as had been decided
between them.
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2.3 Effect of Contractual Terms
Case-5
The formation of a contract is based on the basic premise of agreement of certain terms that
are a part of the contract between the parties also having clarity about the presence of the
different clauses in such a contract (Hogg et al., 2008). The given case scenario reflects
breach of contract since the insurance had clarified that the claimant must be free from all
kinds of claims such as claims of theft etc and at a later stage such a claim was found against
the claimant.
Case-6
In the second instance, in answering both the clauses the policy holder had concealed the
truth from the insurer which were later found out to be untrue in the course of investigation
by the insurer and hence it not only resulted in refusal of claim but also in cancellation of the
policy. Although the lady claimed that she had no knowledge about the modifications and
hence on the basis of the assumption of considering the modifications as a part of the product
she had answered in affirmative to the clauses of the policy the court would still hold it as a
breach of contractual terms thus nullifying the claim as well as the contract between the
parties.
Task 3 Vocational Scenario
3.1 Differences and Similarities between Tort and Contractual Liability with Examples
The liability arising out of breach of contracts and that of any tortuous action is essentially
civil in nature and is identically structured requiring the fulfilment of the elements of guilt
and prejudices, illegality of the action, causal relation between prejudice and guilt and that of
illegal action (Shapo and Shapo, 2003). The idea that dominates both the form of liabilities is
restoration of the prejudice caused by the illegality of action on the asset and thus the benefits
that remains to be received and the damage that has been caused in the course of such action
must get covered. In case the damage cannot be refurbished in kind then the monetary value
of the prejudice is taken into account. Both the form of liabilities can be imposed on
organisations as well as individuals.
The basic liability principle in Tort Law can be generally explained by the help of dual
theories that are given below:
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Wider and narrower theory – only if the act is justified and recognized by law would it be
exempted otherwise all kinds of injuries inflicted by one person to the other would be
regarded as torts (Schmerler, 2008).
Pigeon-hole theory – the liability in tort principle is applied to a definite number of torts
outside the purview of which no tort exists (Kidner., 2008).
In case of an valid contract between more than one two individuals, if one of the parties fail
to fulfil the terms of the contract, the occurrence of contractual liability happens, which can
be illustrated by an example where S contracts with T to acquire a furniture costing $15,000,
which T fails to deliver at the time leading to the breach of the contract and subjected to a
contractual liability worth the amount of the furniture. Similarly if X fails to pay he would
also incur a contractual liability for the loss sustained by Y.
The tort liability is put into use in case of a person who is in breach of the obligation of not
inflicting harm on others by undertaking illegal actions while in case of a liability arising out
of contracts takes place when the suffering from the unfulfillment of the obligations of the
contract falls on the creditor (Routledge-Cavendish., 2008). People who have united
voluntarily commit contractual liability whereas the event of tortuous liability brings the
people together by chance. The presumption of guilt falls on the debtor in case of liability
arising out of contracts while in the case of a tortuous liability the person harmed is required
to prove the guilt of the offender. From the viewpoint of compensation, the offender must
cover direct and indirect as well as predictable and unpredictable costs but in the case of
contractual liability only the foreseeable damages at the time of contract formation is payable
by the debtor (Bishop., 2005). In case of illegal action being committed by several offenders’
tortuous liability holds solitary liability of the offenders but in case of contractual liability the
obligation is divided among the offenders.
3.2 Conditions for Liability for Negligence with example
In cases of negligence the nature of liabilities can be enumerated under the following heads:
Direct Cause: - The direct cause refers to the consequence occurring to the individual or the
business entity out of negligence which can arise with or without the violation of the terms
and conditions of the business contract (Kappeler, 2006).
Duty of Care: - The duty of care denotes the repentance level and the responsibility level that
the individual who has been accused must go through as a part of the duty of the individual
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who has been accused so that he can ask for apology and confesses when he is subjected to
personal or public accusation (Owen, 2006).
Legal Causation: - This is kept separate from the factual or direct causation since the former
has its basis on laws and legal rules.
Breach of Duty: - it is required that a certain amount of reimbursement be given to the
person who has been harmed for infringement of duty that has been negligently committed.
In the case of Donoghue v Stevenson (1932) AC 562 in the 20th century, Lord Atkin had
articulated a principle that determined the limitations of the duty of care in negligence. Mrs.
Donoghue’s friend had purchased the drink that caused her injury and therefore under the
contract the cafe owner could be sued by her friend and the House of Lords resolved the case
by imposition of a liability of negligence that specified a possible case of lack of duty of care
towards the victim. The suggestion of the limitations of care duty stated that care must be
reasonably taken so that certain acts can be avoided which could be injurious to the
neighbour where the term neighbour implies the closeness of the person or persons who could
get affected by a negligent act or decision that is visible before hand and considered prior to
the happening of the incident (Cooke.,2009). The liability for an infringement in the care duty
towards the sufferer and a subsequent claim of damages has to be therefore faced by the
defendant.
3.3 Conditions for Vicarious Liability in business with example
It is a form of liability which arises in cases where there are two parties and one of them
commits a tort on the other without the former’s knowledge of any such act by the latter and
therefore the former cannot be held liable or responsible for any such wrongful act by the
latter. The case of Twine v. Bean’s Express Ltd (1946) 62 TLR 155 stated that the company’s
employee had given lift to a stranded person on the van owned by the company without
informing the company’s owner and the person was injured in an accident where the
employer could not be held responsible for the negligent act of the employee as it was done
without the knowledge of the employer and also as it fell outside the purview of the express
instructions of the employer at the time of appointing the employee prohibiting him from any
such acts in the course of business. As the incident was not connected to business hence the
owner could not be held vicariously liable for the act. If the employer has instructed the
employee explicitly the employer cannot be held liable in case the actions of the employee
cause any kind of damages in the course of his employment (Dobbs et al., 2009).
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Task 4 Case Studies
4.1 Case Scenarios of Tort of Negligence
Case-7
a) The given case scenario reveals that Mr. Brown’s demise took place at his residence out of
a pneumonic infection from the toxic mould present at his residence it is indeed possible for
his widow to hold the hospital responsible on certain grounds such as if death had happened
after his arrival at the hospital or if any kind of negligence in duty of care was evident in the
actions of the doctors on duty towards Mr. Brown. It is important that an intervening cause
must be present following the act of the one who commits a tort thereby causing damages to
the subject in question (Owen., 2006). Hence for the hospital to be held liable for negligence
causing Mr. Brown’s death the conveyance of a lack of duty of care must be established,
evidences supporting the establishment of duty of care must be present and a relation between
the results of the breach and the cause of the damage must get established (Cooke., 2009).
b) It is vital to understand that the evidential details of the death of Mt. Brown points at the
toxic mould present at his home as the factor that caused his death. As there are no evidences
of any kind of breach of duty of care by the hospital so no responsibility can be imposed on
the hospital authority on legal grounds. A balance is also evident in case the court looks into
the probability of injury which is highlighted by the fact of over the counter prescription of a
medicine to Mr. Brown thereby judging the gravity of the risk that reflected sufficient level of
care which could be given to the man (Dobbs et al., 2009). The claim for compensation can
be defended on the grounds of the damage being caused by a remote cause which can be
argued in the backdrop of the case of Lamb v. London Borough of Camden LBC [1981] 2 All
ER 408. Therefore there cannot be any kind of legal claim made on the hospital authority for
the death of Mr. Brown.
4.2 Case scenarios of Vicarious Liability
Case-8
The given case scenario in the light of the case of Lynch v. Binnacle Ltd. t/a Cavan Co-op
Mart, (2011), brings up certain facts such as the driver was lacking in duty of care and was
highly negligent which had caused physical injury to the claimant. Since the injury was
caused during the tenure of his employment the aggrieved party has the legal claiming rights
for harm caused by the enterprise. Therefore the enterprise can be held vicariously liable for
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the driver’s negligent action which caused injury to the aggrieved party in the tenure of his
service in the company (Giliker., 2010).
Case-9
It must be considered that the supermarket store shall not be held vicariously liable for the
injury caused to Mr. Jones’s colleague since in case the organisation delegates the safety and
health issues related to workplace to any other company, the supermarket owner cannot be
held directly responsible for such an incident. However the supermarket can be held
vicariously liable if it can be proved that it was negligent in monitoring the level of
competency of the delegated organization in delivering the delegated duties of health and
safety at the store. The case of Glasgow Corporation v. Taylor (1992) is apt to be deliberated
and cited in connection to the above case scenario.
Conclusion
The above discussion entailed a detailed study of the contractual elements along with
liabilities for breach of the same in the context of various given business scenarios. In
addition the aspects of vicarious liability, tort of negligence, duty of care and its applicability
in the practical business scenarios has also found a place in the above discussion.
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