Business Law: Assignment #1 - Contract, Negligence, and Insurance

This document provides comprehensive answers to a Business Law assignment, addressing key concepts in contract law, negligence, and insurance. The assignment explores the elements of negligence, changes in occupier's liability, the Anns case test in professional liability, and the concept of insurable interest. It delves into the right of subrogation, freedom of contract, and the elements of a valid contract. The assignment also differentiates between formal, void, unenforceable, and various types of contracts, including bilateral, parol, voidable, illegal, and unilateral contracts. Furthermore, it discusses contract formation, the impact of silence on acceptance, electronic contracts, and the contractual capacity of minors and individuals with mental incapacities. The assignment also explores misrepresentation, mistakes, and the courts' approach to contract interpretation, providing a thorough understanding of these legal principles. The answers provided are based on the textbook and relevant case laws.

Assignment #1 Due October 22nd (MIDNIGHT) in the Assignment #2 Dropbox Folder
Criteria:
 Your assignment should be no longer than 4-6 pages. The questions are to be answered in
concise paragraphs.
 Use your textbook to complete your answers and reference appropriately
 This is an individual assignment.
 Please no cover pages.
Format:
Full Name:
List Question and Answers formatted in the same way as this:
1. List and explain what a plaintiff must establish to succeed in a negligence action.
This is where you write your answer to your question. Please single space the answers and add space
between the next question. Make sure you reference your material. Also pay attention to all the
questions as some of them have two parts to them. Make sure your answers are clear and succinct.
You will be able to find all your answers in your text book.
1. List and explain what a plaintiff must establish to succeed in a negligence action.
(i) The claimant must show that the defendant ought to have known that his omission would cause
damage to the claimant.
(ii) The claimant must show that the defendant failed to do something that a person in his position
could have done to protect the claimant’s damages.
(iii) The claimant must show that the damages suffered reasonably resulted from the breach.
2. How has an occupier’s liability to persons using the property changed in recent years?
Since the case of (Kennedy v London (City), 2009), the law in occupiers’ liabilities requires occupiers to
handle minors with more care than when handling adults. The standard cares required from occupier’s
is to ensure that their premise is reasonably safe notwithstanding the erratic behaviors of minors.
3. Describe how the Anns case test can impact the establishment of a duty of care in cases involving
professional liability.
The Anns test was set in (Anns v. Merton London Borough Council, 1978). In the case of professional
liability, the first stage will look at whether a professional wrongdoer and the claimant had a satisfactory
relationship of proximity such that a reasonable person in defendant’s position (profession)would have
reasonably contemplated that the actions would harm the claimant. The second stage would look at
situation for reducing the scope of the duty of care for professionals in the same position as the
defendant.

4. What is meant by an insurable interest and how does it apply to the various types of insurance
discussed in the chapter? What remedies does an insurer have if the insured misrepresented
material facts when applying for insurance coverage?
In case of a material misrepresentation or concealment, the insurer has the option of rescinding the
insurance policy. The insurer may also use the act of misrepresentation as a defense when the insured
brings claims for policy cover.
5. Explain what is meant by the right of subrogation. How may subrogation affect not only the insured
but the person who has caused the injury or damage?
Indicate what other means insurance corporations have to keep their damages as low as possible. The
right to subrogation allows an insurer to sue on behalf of the insured to recover its loss. Other methods
of reducing cost include
Mitigation of costs: It is a duty for the insured to take all reasonable actions of averting the loss.
Reservation of rights: Allows the insurer to reject some claims.
6. What is meant by “freedom of contract?” Explain the impact of this principle on the development
of contract law. What are two types of restrictions on this principle?
The freedom of contract is a principle in law that gives the parties to mutually agree, and choice to
accept or reject the terms of a contract. The two restrictions are; (1) Government regulations on
Illegal contracts unconscionable dealings. (2) Restraint of trade clauses where one party agrees not to
engage in business or employment on specific circumstances.
7. List and explain the elements that must be present for an agreement to qualify as a contract.
Agreement: Should have an offer and acceptance based on definite terms.
Consideration: It is the item of the bargain. What one party surrenders to the other in order to secure
the promise.
Intention to form a legal relation: Contracts are enforceable if the parties contemplated that they were
making the agreement with intention to legally enforce them.
8. Explain the difference between:
Formal Contract Parol Contract
Contracts that require some formalities or form
for them to be enforceable. E.g, a contract made
under seal
A contract intended to modify an already written
contract
Void Contract Voidable Contract
Void contract means that it is not enforceable on
the fact that it did not come to existence.
It is a binding contract on one of the parties, but
the other party can request the court to set it
aside or invalidate it.
Unenforceable Contract Illegal Contracts
A valid contract, but no party can sue to enforce
it in court if the other party refuses to perform.
A contract possessing all necessary elements, but
it is unenforceable since its subject, purpose, or
mode of performance is illegal.
Bilateral contract Unilateral contract
A contract where each party must perform its
part so that it can benefit from the performance
A contract where the performance of one party is
subject to the completion of the performance of

of the other. the other.
An Offer An Invitation to Treat
A promise that one party to an agreement makes
to the other in exchange of the other party’s
performance.
A request for the other party to come and make
the offer.
9. When is a contract formed? When will silence be considered an acceptance of an offer?
A contract is formed when there is acceptance of an offer, and the acceptance is communicated to the
offeree. The general rule is that silence cannot amount to acceptance. The only exception to this rule is
when one party remains silent, but continues to perform as per the requirements and terms of an offer.
i.e acceptance by conducts.
10. What two factors do the courts consider when deciding whether to enforce an electronic contract?
Under s 6(1) IN (Electronic Commerce Act, 2000), the law provides that electronic information for a
contract muse be in writing, a document that the other party can download and retain. Under s 17, an
enforceable contract must bear an electronic signature.
11. “In determining whether a child has contractual capacity, the court will attempt to determine if
she actually understood the transaction.” True or false? Explain your answer. Explain the
circumstances in which an infant may escape liability for a contract and the circumstances in which an
infant is bound by a contract.
It is True. In (R v Oldham Metropolitan BC, 1993), Justice Scott stated that where a minor enters into a
contract, he/she he must be on an age that can understand the scope of the transaction.
When infants' contract enforceable
Section 19 (1) (INFANTS ACT, 1979) provides that a contract with an infant is
19 (1) Subject to this Part, a contract made by a person is unenforceable unless (a) if the contract is
specified to be enforceable in different enactment or law. In this case, a contract for necessity. (b) The
contract can be enforceable upon the ratification of the person when he reaches an age of the majority.
(c) Continued performance or partial performance after reaching an age of the majority (d) There was no
repudiation after reaching an age of majority. In (Johnstone v. Marks, 1887), it was stated that a contract
for necessaries of life is enforceable to a minor, but it is upon the plaintiff to proof that the items were
necessaries of life, and the transaction was fair.
12. In addition to debts incurred for necessaries, when will a minor be liable for a debt he incurred?
A minor can be liable for debts he incurred upon ratification.
13. What are the three stages of a contractual relationship? Describe the legal situation of a minor in
each of these stages.
Stage 1: Contract formation. Even if minors can legally form the contract, they have unilateral authority
to set the contract aside.
Stage 2: Enforcement. The contract may not be enforceable against the minors. However, minors can
enforce the contract against an adult if they want.
Stage 3: Termination. Both parties can terminate the contract performance. While a minor can
terminate the contract by neglecting the duties (disaffirming) without any liabilities, and adult would
have the liabilities for breach.
14. What must an insane or drunk person establish in order to escape liability under a contract?
A way to escape liabilities is by proving that the person was intoxicated or insane during the formation
of the contract, and the other party was aware of the insanity or intoxication. However, if the contract

was made for goods necessary for his/her life and such goods have already been delivered, the person
cannot escape liabilities of paying the price.
15. Describe the test the courts will use in determining whether the parties had an intention to be
bound when they made an agreement. With respect to the element of intention, explain how the
courts’ treatment of domestic agreements differs from their response to commercial transactions.
The court first categorizes the agreement into either (i) agreement arising from domestic and social
settings or (2) agreement arising from commercial or business settings. The presumption for domestic or
social agreements is that they are made without the parties’ intention to form legal bond while the
presumption for commercial or business agreements are that the parties’ intended to form legal bond.
16. Explain how fraudulent, negligent and innocent misrepresentations differ. Identify the remedies
that are available for each type of misrepresentation.
Fraudulent Misrepresentations: Happens when one party intentionally gives the other party an untrue
statement intending to lure it to the transaction. The innocent party recovers all the damages under the
tort of deceit. Rescission can be awarded if damages are not adequate relief.
Negligent misrepresentations: A party makes false statements to the other believing that it is true but
there are no reasonable grounds for believing in the statements. The innocent party recovers all the
damages incurred. Rescission can be awarded upon the court’s discretion.
Innocent misrepresentations: Happens when the maker of the statements provides false statement but
with reasonable grounds for believing that the statements were truthful. The innocent party recovers
all the damages incurred. Rescission can be awarded upon the court’s discretion.
17. What happens when a misrepresentation becomes a term of the contract? Under what
circumstances can silence or a statement of opinion become misrepresentation?
If misrepresentation turns to be a term, the innocent party can elect a suit for a breach. Silence becomes
a misrepresentation on ground where there is a fiduciary relationship exists. (b) Where it misrepresents
a constructive representation such as withholding facts. (c) In contracts that necessitates Uberimma
Fides.
In (Smith v. Land and House Property Corporation, 1884), the developed principle was that if the person
giving the opinion is in a reasonable grounds to provide a statement, any of his/her untrue statement
would become a misrepresentation.
18. A mistake may result in a contract being declared void or voidable. What difference does it make if
a contract is merely voidable?
By voidable, the contract is valid until when the innocent party may decide to set it aside due to the
mistake. Void is when the mistake was operative to set aside the entire contract.
19. Distinguish among shared mistakes, misunderstandings, and one-sided mistakes.
Shared mistakes: Both parties make similar mistakes.
Misunderstandings: Both parties think and agree on different facts so there is no agreement on the
required facts.
One-sided mistakes: Only one party make the mistake.
20. What approach will the courts usually take when the mistake involves disagreement about the
meaning of the contract?
In most cases, courts take an objective analysis of the core facts of the contract. Where the court finds
it, it will rule that the parties should perform on the terms the court may deem fit to capture both
parties’ intentions. Where the court finds no answer, the court will declare the contract as void on
grounds for mistake.

21. Under what circumstances would a breaching party who had partially performed the terms of the
contract be entitled to receive part payment?
When there is substantial performance. When the party completes nearly but not all the obligations.
22. Describe the differences between a condition and a warranty. What is the distinction significant?
Conditions are the main terms that goes to the core of the contract, and their breach would cause the
innocent party to end the contract and sue for damages (Taylor & Taylor, 2015, p. 105).
Warranties are insignificant and their breach cannot cause the innocent party to end the contract, but
that party can still sue for damages after completion of its performance (Taylor & Taylor, 2015, p. 105).
23. What options are available to the victim of an anticipatory breach? Explain the advantages,
disadvantages and risks associated with these options.
The first choice for an innocent party when there is an anticipatory breach is to treat the contract as
fully breached, quit its performance and sue for damages. The second option is to wait for the actual
breach to happen. The disadvantage is that if a frustrating event such as a war or ‘act of God’ occurs, the
innocent party loses the chance of suing for damages.
24. What is an exemption clause? When might an exemption clause be unenforceable?
An express clause in a contract that attempts to dismiss or limit the breaching party’s liabilities once the
contract is breached. These clauses may be unenforceable if;
(i) They are ambiguous
(ii) Not incorporated in the contract.
(iii) If they are, unfair, unconscionable or against public policy.
25. What is meant by fundamental breach? What remedy is available to the victim of a fundamental
breach of contract?
It is a breach of the main terms of the contracts. Where there is a fundamental breach, the innocent
party is entitled to rescind the contract and sue for the incurred damages.

References
Anns v. Merton London Borough Council, 1978 AC (1978).
Electronic Commerce Act (2000).
INFANTS ACT, Pub. L. No. CHAPTER 196 (1979).
Johnstone v. Marks, 19 Q. B. D. 509 (1887).
Kennedy v London (City), 58 M.P.L.R. (4th) 244 (2009).
R v Oldham Metropolitan BC, 1 FLR 645 (1993).
Smith v. Land and House Property Corporation, 28 Ch D (1884).
Taylor, R., & Taylor, D. (2015). Contract Law Directions. Oxford University Press.