Case Study in Business Law: Examining Contract and Tort of Negligence

This case study delves into two distinct legal scenarios within the realm of business law. The first scenario examines the potential contract formation between Jack and Ann, focusing on the legal implications of offer, acceptance, and revocation, particularly in light of postal rule and counter-offers. It applies relevant case law such as Smith v Hughes, Pharmaceutical Society of Great Britain v Boots Cash Chemists, Carlill v Carbolic Smoke Ball co, Entorres v Miles Far East, Adams v Lindsell, Byrne & Co v Leon Van Tien Hoven & Co, and Hyde v Wrench to determine whether a valid contract exists. The second scenario explores a negligence claim against Qualal Motors by Betty, analyzing the elements of duty of care, breach of duty, and causation, referencing cases like Grant v Australian Knitting Mills, D'Arcy v Corporation of the Synod of the Diocese of Brisbane, Caparo Industries pIc v Dickman, Donoghue v Stevenson, Hodge v CSR Ltd, Barnett v Chelsea & Kensington Hospital, and The Wagon Mound no 1. The analysis determines the potential liability of Qualal Motors and the enforceability of liability limitation notices. Desklib provides students access to similar solved assignments and study tools.

Running Head: BUSINESS LAW
Business Law
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Question 1
Issue
 The question which needs to be addressed with respect to the scenario between Jack and
Ann is whether there has been a legally binding contract formulated between them.
 The issue is to be addressed based on relevant legal authorities.
 The provisions of offer, acceptance and revocation are to be specifically addressed.
Rule
The formation of a valid contract at law requires a legal offer and acceptance. Offer and
acceptance requires compliance with legal guidelines to be considered as valid.
An offer with respect to the law of contract is a statement or expression which is made by one of
the potential parties to the contract who is referred here as the offeror. The offeror initiates the
process of the formation of a contract. An offer consists of words which making up terms which
would be binding on the other party referred to here as the offeree if such offer is accepted. An
offer would only be considered as valid at law if it is complete and a reasonable person would be
induced by it to get into a contract. The offer in order to be valid also requires intention of
offeror to legally bind the offeree to its terms. Such intention is derived in an objective manner as
stated by the landmark case of Smith v Hughes (1871) LR 6 QB 597. An offer can be made in
person or through post but not in form of an advertisement as it would be considered as an
invitation to treat which had been done in the case of Pharmaceutical Society of Great Britain v
Boots Cash Chemists [1953] 1 QB 401.

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The offer is only valid till the time provided by it. Once the time period stipulated by the offer is
over it cannot be accepted and is said to have elapsed by time.
An acceptance is the latter stage of an offer. Once the offer has been made the offeror waits for
the offeree to accept the offer for the purpose of contract formation. As soon as the offer is
accepted it results in the formation of a valid contract. There are three primary requirements for
an acceptance to be valid.
1. The acceptance has to be communicated to the offeror
2. The acceptance has to be unequivocal (the terms of the offer cannot be altered by the
acceptance)
3. There must be free consent on the party making the acceptance (No duress, undue
influence, misrepresentation or mistake)
The communication of the acceptance is of utmost necessity for the formation of a valid contract
unless it is an unilateral offer as found in the case of Carlill v Carbolic Smoke Ball co [1893] 1
QB 256. In the case of Entorres v Miles Far East [1955] 2 QB 327 it was provided by the court
that the acceptance has to be made by the offeree in the same way as asked by the offer. Where
there is no express way of making an acceptance any reasonable mode can be used by the
offeree. The offeree can make an acceptance by pose unless it is not expressly prohibited by the
offer. Where the acceptance has been made by post the “postal rule” of acceptance is applied.
This rule had been provided via the landmark case of Adams v Lindsell (1818) 106 ER 250. It
has been stated by the judge that acceptance through post would be deemed to be completed
when the post is made and it does not actually require to reach the offeror. The postal rule will be
valid if the post has been correctly addressed.

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The acceptance has to be “Unequivocal”. This signifies that the acceptance cannot have any
alterations in regards to the original content of the offer. The original content of the offer if
altered it is not a valid acceptance and is considered to be a counter offer as ruled by the ratio of
the landmark case Hyde v Wrench (1840) 49 ER 132. The court in this case further provided a
clarification that the initial offer made by the offeor would be considered to have been rejected
once a counter offer is made. The rejection of the offer makes it unavailable to be accepted again
and it comes to an end. Counter offer however needs to be distinguished from mere inquires as
they do not bring an offer to an end.
Revocation of a valid offer is possible on the part of the offeror. This is a process through which
the offeror signifies that they do not want to carry on with the offer and bring it to an end. It has
been provided through the case of Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344
that revocation in order to be valid needs communication to the offeree prior to the acceptance
being made by them. The offer will not be considered to have been revoked as soon as the
revocation has been sent via post like the postal rule of acceptance. The case clarified that the
offer will only be successfully revoked once it has reached the offeree.
Application of law
A letter had been provided by Ann to Jack in 1st march in which she stated that she has the
intention of selling him his car at a price of $12000. Firstly it is t be determined that this letter is
considered to be a valid offer not. An offer would be valid at law it is complete and has the
intention of binding the offeree in an objective manner. In the present situation the offer is valid
as it has description of the product, price and time. The offer was valid till the date of 7th March
and as per the above discussed rules if the offer is not accepted before time it will elapse.

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In the present situation it has been provided that after sending the letter Ann had changed her
mind that she does not want to continue with the offer. She had posted a letter for the same to
Jack before any acceptance has been made. As discussed in the case of Byrne & Co v Leon Van
Tien Hoven & Co revocation in order to be valid needs communication to the offeree prior to the
acceptance being made by them. Thus here the revocation may have been valid. However it has
been further provided through the case that the offer will not be considered to have been revoked
as soon as the revocation has been sent via post like the postal rule of acceptance it has to
actually reach the offeree to be successfully revoked. However in this case the letter has not
reached Jack before he sent a acceptance letter. Thus the offer is not revoked and was available
to be accepted.
In the letter sent by Jack to Ann in 3rd March 2:00 PM a request had been made by Jack that he is
willing to accept the offer at the given price but he would be paying the amount in instalments.
Through the application of the postal rule in the situation it can be stated that a valid acceptance
has been made as soon as the letter is posted.
However, the acceptance cannot have any alterations in regards to the original content of the
offer. The original content of the offer if altered it is not a valid acceptance and is considered to
be a counter offer as ruled by the ratio of the landmark case Hyde v Wrench. Here the letter sent
by states that he wants to purchase the car at instalments of $1000. This is to be considered as a
counter offer and not a mere inquiry which has rejected the original offer. This means that the
original offer cannot be accepted again. Thus the attempt of Jack to accept the offer again after
getting a check of $16000 would not be valid under the principles of Hyde v Wrench.
Conclusion

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A valid contract has not been formed between Ann and Jack as the rules of offer and acceptance
are not met.

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Question 2
Issue
 The question which requires addressing in the situation with Betty and Qualal motors is
that whether Qualal motors would be liable for the damages which have been incurred by
Betty a under the rules of Negligence
 The question is also to determine whether Qualal motors can limit their liability through
the notice at the garage and at the back of their vehicle.
Rules
The tort of negligence can be established when its three major elements have been identified in
the situation. The case of Grant v Australian Knitting Mills HCA 35, (1933) 50 CLR 387 stated
that there three major elements which establish the tort of negligence include a duty of care, a
breach of the duty of care and causation.
These elements can be indentified in any situation through deploying common law tests which
have been used by various legal cases. In the case of D'Arcy v Corporation of the Synod of the
Diocese of Brisbane [2017] QSC 103 the court clarified that negligence would only be
established if all three elements have been satisfied and not otherwise. The establishment of any
one element alone does not prove negligence. The elements have to be proved step by step
manner. The claimant first needs to prove that there was a duty of care, the duty of care has been
violated and the claimant has suffered injury because of such violation. `
The duty of care can be established through applying the proximity test and foreseeability test as
provided by the case of Caparo Industries pIc v Dickman [1990] 2 AC 605 and donoghue v

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Stevenson 1932 AC 562. The combined application of these tests suggests that a duty of care
would be owed if it is reasonable possible for a person to foresee injury to another person who is
in close proximity. In case injury can be foreseen a duty of care will be present.
The breach in duty of care can be best derived in at common law by the applying to the situation
an objective test. This test is also based on the notion of reasonability but in terms of care. The
test has been deployed by many cases such as the case of Hodge v CSR Ltd [2010] NSWSC 27.
The application of the test places a reasonable person in the place of the defendant. The judges
analyze that given the probability of the injury and the seriousness associated with it whether
such reasonable person would take into consideration taking additional care to prevent the injury
as compared to what had actually been taken by the defendant. in case the answer is positive the
duty of care will be taken as breached by the defendant.
The factor of causation is derived at common law by applying the “but for” test. Until the
element of causation is satisfied there would be no negligence. As provided in the case of Barnett
v Chelsea & Kensington Hospital [1969] 1 QB 428 the test determines whether the primary
cause of the injury is the breach of the duty or not, If the injury is caused only because of the
breach then the test is positive and if the injury would have been caused otherwise then the test is
negative. Thus a person has to be injured because of the duty breach only to claim negligence.
The notion of reasonable foreseeability is also used for the purpose of analyzing the damages
which can be claimed by the aggrieved party. All damages which can be reasonable foreseen are
to be compensated as per the case of The Wagon Mound no 1 [1961] AC 388.

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An implied term can be added into the contract in case it is necessary and obvious to give
business efficacy to an contract not because it is just and fair as provided by the case of The
Moorcock (1889) 14 PD 64
An exclusion clause is applied by the parties to limit their liability. This clause has to be
incorporated into the contract in a proper manner in order to be valid. Liability can be limited
through this clause in both contract and tort law. The clause would only be valid if it is clear and
properly added.
The clause can be incorporated through Notice. The notice of the clause has to be visible to the
party. In the case of Olley v Marlborough Court (1949) it had been stated by the court that the
clause will be incorporated into the contract if it is visible to the party before the contract is
formed.
Application
Batty is referred as the claimant and Qualal motors as the defendant (vicarious liability). The
scenario provides that the car of Betty required to be towed to the workshop for getting repaired.
In the given situation Jane can make a claim from the defendants under contract law and tort law.
Under the provisions of the case of The Moorcock it can be stated that the court would
incorporate implied terms into the contact if it is necessary and obvious. Thus it is an implied
term that the car would be towed with care and diligence and no damages would be caused. The
term has been breached and thus damages can be claimed.
Under the principles of tort law by applying the foreseeability and proximity test it can be stated
that the defendant has a duty of care to the plaintiff. This is because any reasonable person would

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foresee that if there is any defect in the towing van it can damage the carried vehicle and provide
cause injury to any person in proximity.
The duty of care has been breach as a reasonable person would have ensured that there is no
defect in the towing vehicle and thus the objective test is positive according to the case of of
Hodge v CSR Ltd.
The car would not have suffered damages and there would not have been any injury caused to
the claimant in case it was ensured that the vehicle is in good position to carry the car. Thus the
injury and damage has only been caused due to the breach of duty of care and therefore “the but
for test” as provided by the case of Barnett v Chelsea & Kensington Hospital has been satisfied
by the claimant.
It is also reasonably foreseeable for the defendant to foresee that if there is any defect in the
towing van it can damage the carried vehicle and provide cause injury to any person in
proximity. Thus the damages which have been caused to the car and the claimant are foreseeable
which means that they are eligible to be compensated. It can be stated that the defendant is liable
for negligence and to pay the damages caused to the car and the injury caused to the claimant.
In addition it has been provided that there was an exclusion clause which stated that the
defendant would not be liable for any injury caused to a person using their services. This clause
is not valid. This is because it neither it is validly incorporated nor is it reasonable. The clause
would have saved the defendant if the plaintiff had been duly notified about the existence of the
clause as the clause being present at the back of the towing van and at the garage was not visible
to the claimant. In addition the nature of the clause as it used the word “any injury or damage” or
“howsoever caused” which were ambiguous is not reasonable.

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Conclusion
The claimant has the right to claim damages from the defendant for the loss caused to the car and
personal injury.

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References
Adams v Lindsell (1818) 106 ER 250.
Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428
Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344
Caparo Industries pIc v Dickman [1990] 2 AC 605
Carlill v Carbolic Smoke Ball co [1893] 1 QB 256.
D'Arcy v Corporation of the Synod of the Diocese of Brisbane [2017] QSC 103
Donoghue v Stevenson 1932 AC 562
Entorres v Miles Far East [1955] 2 QB 327
Grant v Australian Knitting Mills HCA 35, (1933) 50 CLR 387
Hodge v CSR Ltd [2010] NSWSC 27
Olley v Marlborough Court (1949)
Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] 1 QB 401.
Smith v Hughes (1871) LR 6 QB 597
The Moorcock (1889) 14 PD 64
The Wagon Mound no 1 [1961] AC 388

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