Case Study on Vicarious Liability, Contract Law, and Negligence

This case study solution addresses three legal issues: vicarious liability, breach of contract, and negligent misstatement. It analyzes whether Ellen has a claim against the council for negligent advice regarding construction near her property, examines if Ellen breached her lease agreement with the landlord due to non-payment of rent caused by business losses, and determines if the council worker made a negligent misstatement. The solution applies relevant legal principles, including the requirements for establishing vicarious liability, the distinction between conditions and warranties in contract law, and the elements necessary to prove negligent misstatement, such as duty of care, breach of duty, and damages. The analysis concludes that Ellen has grounds to sue the council under vicarious liability and the council worker for negligent misstatement but has breached her contract with the landlord due to non-payment of rent.

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Contents
Solution.......................................................................................................................................................2
Introduction.................................................................................................................................................2
Issue 1.........................................................................................................................................................2
Rule.........................................................................................................................................................2
Application of law...................................................................................................................................2
Conclusion...............................................................................................................................................3
Issue 2.........................................................................................................................................................3
Rule.........................................................................................................................................................3
Application of Law..................................................................................................................................3
Conclusion...............................................................................................................................................4
Issue 3.........................................................................................................................................................4
Rule.........................................................................................................................................................4
Application of Law..................................................................................................................................5
Conclusion...............................................................................................................................................5
Reference List..............................................................................................................................................6

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Solution
Introduction
The present solution deals with the law of vicarious liability, breach of contract and the law of
negligent misstatements. All the laws are applied before reaching at the just conclusion.
Issue 1
Whether Ellen has a claim against the council in relation to the advice she had received?
Rule
Vicarious liability exits in a relationship of a master –servant or employer-employee, etc.
Vicarious liability signifies that the employer is held accountable for the acts of the employee
and any liability that is generated from it provided the acts are within the employment course.
The main requirements to prove vicarious liability include: (Sykes 1988)
i. That the parties are sharing a relationship of an employer and employee (Hollis v
Vabu [2001];
ii. That the employee is acting within the commands of the employer;
iii. That under such directions and commands an act or omission is incurred by the
employee (Deatons Pty Ltd v Flew [1949];;
iv. Because of such acts and omissions there is some loss that is caused to the outsider;
v. The employee is not acting in his individual capacity.
Since, the employee is representing the employer, thus, the liability that is originated will fall on
the employer and not on the employee.
Application of law
Ellen intends to operate her own meditation studio. She finalized premises but before making a
12 month lease she decided to inquire whether there is any construction work that is to be carried
near the area as it wills fact her mediation centre. She visited the nearby council and enquired
amount the same from the council.
It is submitted that an employee of the council was present at the enquiries section. Thus the
employee is the worker of the council so they share a relationship of master servant.
Also, the employee was working under the command and directions of the council.

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The employee after having a brief look at the computer submitted that there is no construction
word that is carried out in near time. Based on the information provided by the employee, Ellen
makes a contract for the premises to use as her mediation centre. But, a construction work soon
started which will be carried for next 6 months.
So, Ellen suffered loss of business and mental order.
It is submitted that Ellen has full right to sue the council under the vicarious liability because loss
is caused to her because of the employee who is acting within his course of employment.
Conclusion
So, Ellen has full right to sue the council under the law of vicarious liability for the advice that is
received by her from the employee.
Issue 2
Is there a breach of contract between Ellen and the landlord for non-payment of rent?
Rule
When a contract is made then every contract comprises of terms, which can be express and
implied. The terms which are mutually decided by the parties are express in nature and the terms
which are made part of the contract by implications are implied terms. The terms can further be
classified as conditions and warranties based on the importance they hold in any contract.
(Latimer 2012)
The terms which are roots and heart of any contract and without which no contract can be
operated are condition. These are essence of every contact and it is obligatory on the parties to
comply with the terms otherwise the main reason for the establishment of the contract lapse. If
any condition is not performed by the parties, then, the aggrieved party can cancel the contract
and claim damages (Poussard v Spiers and Pond (1876).
But, the terms which are additional to the main terms of the contract are called warranties. The
terms which are not the heart and soul but are required so that a contract can work effectively, if
such terms are not performed by the parties then it will not result in losing the essence of the
contract but the aggrieved party can also seek damages for the breach (Bettini v Gye (1876)
Application of Law
Elle after relying on the advice of the employee of the council enters into a 12 month lease with
the landlord. But, the advice was later found to be false as there was construction work that was
carried out in the vicinity and that will continue for t least 6 months. Because of the construction
work the meditation centre of Ellen was not working g ell which has led her into financial
difficulties. This has resulted in anon payment of the rent.

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It is submitted that the payment of the rent is the main aim of any lease agreement. It is one of
the essential terms of the contract the non compliance of which render the contract inoperative.
Thus the landlord has the right to cancel the contract and sue Ellen for balance rent and damages.
Conclusion
Thus, the landlord can sue Ellen for rent and damages and has right to terminate the contract as
one of the essential term of the contract was breached.
Issue 3
Has there been a negligent misstatement by the council worker?
Rule
The law of negligence is a tort law wherein the defendant is answerable to the losses that are
caused to the plaintiff because of the careless acts on the part of the defendant and is held in
Donoghue v. Stevenson [1932].
This law of negligent is also applicable when there is some kind of negligent statement that is
made by one party and is relied upon by the other party (Hedley Byrne & Co Ltd v
Heller & Partners Ltd [1964]. In order to prove that negligent statement is made by the
defendant the main elements that must be prove are:
i. Duty of care – Whenever a defendant is making any statement then he must make
sure that no plaintiff must be affected by relying on the said statement. This duty of
care only exist when:
a. Special relationship – There must be special relationship that must exist amid the
defendant and the plaintiff. That the defendant who is making the statement is
aware that the plaintiff is relying on the said statement and thus it is the duty of
the defendant to make sure that the statement so made by him must be accurate.
Thus, the defendant is at superior position then the plaintiff and he must cater his
responsibility adequate (Esanda Finance Corporation Ltd v Peat Marwick
Hungerfords (1997).
b. Proximity – The plaintiff must be close to the defendant so that any statement
made by the defendant will make an impact upon the plaintiff Mutual Life and
Citizens Assurance Co Ltd v Evatt (1968).
c. Foreseeability – That the defendant is aware that the plaintiff is relying on the
statement made by him and thus he can reasonably foresee the presence of the
plaintiff.
ii. Breach of duty – When the defendant is imposed with the duty of care then it is his
duty that the statement so made by him must be furnished adequate, that is. Like a
prudent man in the given situation considering the level of cater that is expected in

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the given situation. If the level is not met then the duty is considered to be breached
(Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Limited [2009].
iii. Damages – Because of the breach there is loss that is caused to the plaintiff. The loss
must be caused by relying on the statements made ( Lindeman Ltd V Colvin [1946]).
Also, the defendant can reasonable foresee that if any wrong statement is made by
him then it will cause damage to the plaintiff, thus, the damage must not be remote
San Sebastian Pty Ltd V Minister Adminstering The Enviromental Planning And
Assessment Act (1986).
Application of Law
Ellen before entering into the lease contract with the landlord wants to make sure that there is no
construction work that is to be carried near the area as she is starting a mediation centre which
requires peace.
So, she went to the council of the area where one employee of the council was present. It is
submitted that the employee is held liable for causing negligent misstatement because:
i. The employee is aware of all the construction work that is to be carried out in near
future in regard to which Ellen is seeking information. He is also aware that Ellen is
relying on the advice provided by him before making any lease contract. thus, there
exist special relationship amid the employee and the council;
ii. The employee is also in proximate relationship with Ellen as any advice furnish by
him will impact Ellen directly and the employee can reasonably foresee Ellen. Thus
there exist duty of care on the part of the employee to make sure that genuine advice
must be given by him;
iii. The employee knowing that he must cater his duty adequate furnishes the advice by
just glancing at the computer and without making any efforts like a prudent man in
the given situation. Thus, there is breach of duty on the part of the employee;
iv. That because of the wrong advice Ellen business of meditation centre was not
working well. The loss to the business was due to the wrong advice of the employee
and is not remote. Thus the employee is liable for such loss. But, the employee is not
liable for the loss of nervous disorder as such loss was remote.
Conclusion
Thus, Ellen can sue the employee for negligent misstatements as the loss is caused to her is
because of the wrong advice that is furnished to her.

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Reference List
Books/Articles/Journals
Latimer, P 2011, Australian Business Law 2012. CCH Australia Limited.
Sykes, Al, 1988, The Boundaries of Vicarious Liability: An Economic Analysis of the Scope of
Employment Rule and Related Legal Doctrines, Harvard Law Review
Case laws
(Bettini v Gye (1876)
Deatons Pty Ltd v Flew [1949];
Donoghue v. Stevenson [1932].
(Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997).
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964].
Hollis v Vabu [2001];
Mutual Life and Citizens Assurance Co Ltd v Evatt (1968).
Poussard v Spiers and Pond (1876);
Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Limited [2009].
San Sebastian Pty Ltd V Minister Adminstering The Enviromental Planning And Assessment Act
(1986).