Analysis of Contract Law: Elements, Types, and Liabilities

This report provides a comprehensive analysis of contract law, covering its essential elements such as offer, acceptance, consideration, and intention to create legal relations. It explores various types of contracts, including verbal and written agreements, and the implications of different terms and clauses like conditions, warranties, and exemption clauses. The report further examines case studies illustrating concepts like invitation to treat versus offer, and the application of exclusion clauses. Additionally, it delves into the distinction between tort and contractual liability, discussing the tort of negligence and vicarious liability in a business context. The study emphasizes the importance of understanding these principles for effective business operations and legal compliance.

ASPECTS OF CONTRACT
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TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
1.1.................................................................................................................................................3
1.2.................................................................................................................................................4
1.3.................................................................................................................................................5
TASK 2............................................................................................................................................6
2.1.................................................................................................................................................6
2.2.................................................................................................................................................7
2.3.................................................................................................................................................9
TASK 3............................................................................................................................................9
3.1.................................................................................................................................................9
3.2...............................................................................................................................................10
3.3...............................................................................................................................................11
TASK 4..........................................................................................................................................11
4.1...............................................................................................................................................11
4.2...............................................................................................................................................12
CONCLUSION .............................................................................................................................13
REFERENCES .............................................................................................................................14
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INTRODUCTION
The relationship existing in an organizational scenario is more complex and needs
particular norms and regulations that can assist in smooth functioning. In this regard contract law
has specific application within firm through which assistance can be taken from legal framework.
Thus this leads to development of rights and duties of parties in the agreement (Kelly, Schwartz
and Partlett, 2010). All the agreements do not form legal contracts but all the contracts are
regarded as agreements. This is due to the reason that agreements is combination of offer and
acceptance however other elements like consideration, intention towards creating lawful
association as well as capability are important for creating legal contract. Along with this
particular application of tort law also prevails for regulating the relation that devoid any formal
contract.
The present report would reflect the analysis of essential elements, varied contracts and
its influence on associated parties. Further the study will lay emphasis on the difference among
tort as well as contractual liability. Along with this tort of negligence as well as vicarious
liability are also discussed with respect to business. The present study makes elaboration on the
principles relating with vicarious liability and negligence.
TASK 1
1.1
Formation of contract takes place when two or more parties enter into agreement that has
legal aim along with free consent. It is the procedure in which an offeror makes offer to offeree
that is then accepted based upon the reverse promise which is referred to as consideration. There
is greater importance for Peter Abhraham to gain insight to essential elements of contract. This
are enumerated as under: Offer: It is one of the most significant element for formation of contract. Under this one
party makes communication of desires for entering into contract with intention to bound
the parties by means of legal relationship. In case of Harvey v. Facey (1893) it was held
by the court that communication offer would be effective to unambiguously inform the
true intention to the other party. Another crucial factor that needs to be taken into
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consideration by Peter Abhraham is that offer as well as intention treat to two different
terms concept. Further latter cannot be an offer in development of valid contract. Acceptance: For the purpose of carrying out the formation procedure an offer needs to
have unconditional acceptance that needs to communicated to offeror in an effective
manner (Abn, 2009). It has been viewed in the case of Felthouse v. Bindley (1862) that
just silence in response cannot be considered as acceptance. It is important that offeree
needs to accept the offer in verbal way that implies acceptance to particular offer. Intention to create lawful relation: While making offer and acceptance the parties bind
one another in a legal relationship. In case of Jones v. Padavatton (1969) it was held that
in situation of domestic agreement an assumption is made regarding no desire towards
binding one another under legal obligations. Consideration: This element plays instrumental role as in of case absence of valid
consideration contract cannot come into emergence. The nature of reciprocity within the
contract can be owned for payment under consideration. In well known case of Chappel
v. Nestle (1960) it was presented that consideration alone is adequate by nature.
 Capacity: It is important to make sure that the parties to the contract possess legal
capacity towards entering into contract under law of Contracts. However minor,
insolvents unsound mind people cannot enter into contract.
1.2
Under the Common Law, a valid contract can be either verbal or in written form. The
needs for existence of essential elements of contract is mandated under such law system. A
contract can be comprised of implied terms or express terms (Levy, Golden and Sacks, 2015).
Further this to a greater extent depends on the nature of relationship that exists among the
parties. Under law, just an exchange of promises in a meeting can bind the parties, if there is
existence of intention of create legal relationship while making exchange of the promises.
Therefore Peter Abhraham needs to gain knowledge of the fact that valid agreement can be
developed by several modes stated as below: Face to face: It has been reviewed by Peter Abhraham that verbal contract holds certain
relevance under Common law in case it is supported by all the important elements of
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contract (Riley, 2012). Therefore it needs to be known to him that promises that are
exchanged within meeting can be enforced under law court. Written contract: In a business scenario agreement needs to be documented for future
reference (Lockwood, 2011). Thus written contracts needs to be preferred as compared to
oral one so that dispute or other conditions can be handled in an effective manner for
future.
 Distance selling: Contract which are entered through telephone are by means of exchange
of emails can result in valid contract (Bisso and Choi, 2008). It is being stated that there
needs to be existence of all the essential elements. Thus Peter Abhraham needs to be
careful when exchanging promises. On the other hand in long term written contracts are
preferred more in comparison with oral contracts.
1.3
For the purpose of formulating suitable and reliable contracts as well as gaining insight to
other contracts in a business scenario, Peter Abhraham needs to gain insight to the significance
as well as implication of several terms/ clauses that are within the contract. This has been
described in detail as under: Conditions: It includes the terms that form the crux of agreement. It plays an instrumental
role in encouraging the objective under contract. The importance of such contract can
gained through the fact that in situation of breach of condition the party victim can
repudiate the entire contract. The rationale beside such is that condition is important for
the operations of the contract. In situation of absence of such it is not possible for the
parties to exercise their respective promises. Conditions can in form of either expressed
or implied by nature. Warranties: The term which is in form of warranty is considered as the surety offered by
one party with respect to state of the product or as case might be. These are auxiliary
terms that does not have supporting role in business functioning (Orkuma and Ayla,
2015). It has been viewed by Peter Abraham that breach of warranty authorizes aggrieved
party for receiving damages but cannot breach the entire contract. Innominate terms: It is referred to as intermediate terms that lay emphasis on the extent
of damage caused by the party as a reason of breach of terms in the contract. When
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making analysis of the breach of contract the court determines the degree to which the
party suffering has sustained the loss and injuries and such has consequences of depriving
from benefits. It is essential to reflect that the nature of such terms is assessed by court
and cannot be tagged by parties when formulating contract. A similar finding has been
determined in case of Schuler v. Wichman Tools (1974).
 Exemption clause: It is regarded as one of the terms that is well known towards bringing
uncertainty within the functioning of contract. It is in performance for limiting the
liability of one party to the contract against the injury caused to other party because of
certain negligence or unlawful acts (McKendrick, 2014). The legality of the exclusion
clause is being analyzed in several cases by the court. It is being held by the court that
such clause will be used with utmost caution. In relevance to the same court in case of
Olley v. Marlborough Court (1949) repeat the incorporation test for determining the
validity of inclusion of such terms in the contract.
TASK 2
2.1
Case 1
Carol who is living in an unfurnished apartment possess desire of purchasing couch
which was being seen by her at Gumtree, an online site of advertisement. Through reference of
stated contact details, Carol by means of an email informed her wish to make purchase of couch
for £600 as demonstrated in the advertisement.
The stated set of facts attracts differences among invitation to treat and offer. Former is
referred to as the situation when any person invites to call offer from the general public.
However latter is referred to as an offer made to particular person in order to formulate a valid
contract. In case of Fisher v. Bell (1961) it was held that shopkeeper making display of the
product on the shelves is regarded as an invitation to offer. In response to this customer make
actual offer which is accepted by the shopkeeper towards formulating a valid contract. In the
instant case, Gumtree by placing an advertisement made an invitation to treat. Following this
Carol mailed her desire towards making purchase of couch for the stated amount which in fact
would be the real offer. Thus absence of any acceptance by Gumtree to offer of Carol, no valid
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contract is not presence as essential elements do not exist for forming legal contract among the
parties.
Case 2
It can be evaluated from the case that on 12th April 2015, Devi recieved confirmation
from George, Smith and Forarty, Inc, for undertaking thejob position of cyber security. Not
knowing this fact, father of Devi, Preston made an offer of £150,000 to the firm in respect to
select his son. However, such communication occurred on next day i.e. 13th April 2016 a day
after Devi recieved confirmation of the job. While, there was no other communication among
parties involved within this contract. Now firm desires to enforce the alleged contract.
Furthermore, it can be stated as an established legal term that contract formed only upon
the basis of valid object and consideration is lawful. However, past consideration or object
cannot be liable to form a valid contract. Moreover, a person is liable to sue another individual in
regard to form under contractual liability only if privity of contract can be established among
them. As per the case of Tweddle Vs Atkinson (1861), court held liable that doctrine of privity
mandates that parties needs to maintain a contract and empowers them to sue each other in
regard to enforce their rights within the contract. As no contract came into existence as main
condition of hiring Devi was already fulfilled while making an offer and thus there is not
contract created among parties. Thus, George is not able to enforce the promise and also it is not
supported by a valid contract. Also, it is essential to identify the doctrine of privity of contract
and thus George and Preston are not empowered under law to sue each other. Hence, George
could not enforce promise against Preston.
2.2
Case 3
A couple is making visit to renowned restaurant in London handed over the overcoat at
the entrance to the attendant. In return of this he was provided with a receipt. After the man took
meal he decided to make payment and at this he realized that he forgot to take the wallet from his
overcoat which he has handed over to the attendant of hotel. When he went to collect wallet he
found that £500 were missing from his wallet. Thus he made claim from the restaurant. At this
point the man came to know that receipt given to him by attendant is comprised of an exclusion
clause at the back. The restaurant has made invocation of the stated clause.
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For the purpose of analyzing such facts it is significant to gain insight to the concept
relating with exclusion clause. The essence of such clause was regarded by court in Parker v. SE
Railway Co. (1877) and it was being held that such clause basically functions towards restricting
the party from bearing any liability which arises out of the negligent or wrongful actions. It was
being observed that though such terms are legal in nature, they bring greater uncertainty in the
contractual relationship. Thus courts is being careful in validating the exclusion clause that is
existing within the contract and has devised the incorporation test. In case of Olley v.
Marlborough Court (1949) a general rule is being established that requires the parties to
particularly demonstrate the inclusion of such clause within the eyes of other party. Assumption
cannot be made regarded existence of such clause under normal situation. However in the cited
case negligence act of performed by man as he left his wallet in the coat. Further it has been
reviewed that in case inclusion of clauses is a custom or has been involved in the earlier
agreements then validation of exemption clause can be done. Along with this since there was
existence of clause on receipt it can be stated to be valid disregarding the fact that man has
noticed it. Thus under such situation it can be inferred that restaurant can rely on exemption
clause for avoiding the liability which is being imposed by couple.
Case 4
Aaron and Zehphra has entered into an agreement to rent a warehouse. Because of its
damaged conditions, Aaron has undertaken certain repair within the warehouse in return of
which Zehphra promised to make alteration of rent for time period of 5 years. However Zehphra
expired in an year and the property was inherited by one Yeti for increasing the amount of rent.
Aaron has made refusal to said escalation based upon the promise made by Zehphra in
consequence of which Yeti made termination of tenancy. Aaron now seeks towards reimbursing
the expenses that were incurred while carrying out repairs with which Yeti was not agreeing.
In case of Shirlaw v. Southern Foundries (1939), the court presents that validity of
implied terms and held that such terms will function at par with other express terms related with
contract. Under tenancy landlord is obliged to undertake repair until and unless contract possess
contrary clause. In the instant case, Zehphra has made promise of not increasing the rent in return
of repair undergone by Aaron. Thus contract termination by Yeti on whole is violation of
original agreement. Thus Aaron claim in pursuance to expenses borne by him on repair of
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warehouse under present condition is completely legal and arises Yeti's liability towards making
payment of compensation.
2.3
Case 5
When filling form of motor insurance the holder of policy make refusal that no claim was
made in relation to said vehicle by her or anyone else during the last 5 years. However later
when claim against the theft was made by the holder of policy the insurance company was
appraised with fact that claim was being made in stipulated span of time. Thus insurer held the
policy void. In case Poussard v. Spiers (1876) it was being held that condition is regarded as
basis for contract formulation as well as its violation would invalidate the entire contract. With
application of this law on stated fact it can be inferred that holder of policy by not disclosing the
accurate data has reached a situation important to the insurance contract. The defence that no
disclosure was made was just claim that was not granted and cannot be claimed in the stated
facts. Further a direct answer in terms of yes or not was needed which he failed to respond in
effective way. Thus decision for making the policy valid is entirely correct under law.
Case 6
As per the scenario the holder of policy failed in disclosing the accurate data with respect
to modifications and the earlier claim made in relation of the car. However on investigation of
case the insurance company came to know the truth in result of which the termination of policy
was done from its inception point. It is significant to demonstrate the need of disclosures form a
contract condition in the present case. Thus violation of same increased liability of policyholder
towards bearing losses. The fact that she has no awareness of modification and claims of her
husband one of which was rejected does not has any relevance and needs to be provided with
sufficient defence to holder of policy. It needs to be stated that her acts were in negligent way for
answering such questions. Thus it has breached condition important ton insurance policy.
Therefore insurer is correct for making policy void ab initio.
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TASK 3
3.1
Common law makes the wrongdoers liable either under the Contract law or Tort law. The
liability imposed under the two laws can be termed as Contractual Liability or Tortious Liability,
respectively. Various similarities and distinctions can be established between the two liabilities.
 Firstly, both contractual and tortious liabilities are civil in nature. In other words, the
wrongdoers are imposed with the obligation of payment of damages only (Solomon,
2009).
 The obligation for payment of damages or compensation arises out of privity of
contract i.e. presence of a valid contract between the parties (Van Dam, 2013). On the
other hand, Law of tort imposes a general duty towards the public, which in essence is
the source of this liability.
 The purpose behind imposition of this liability is to restore the condition of the
aggrieved party to its original condition (Spindler, 2011). With the same rationale, Law
of Torts also aims to make all the loss good through the means of damages or
compensation. The parties in both the cases are awarded monetary benefits to the extent
they have sustained losses or injuries.
 The damages awarded are liquidated in nature, which means the amount or the manner
of calculation of the figure, is generally pre-determined in the contract. While, Tortious
Liability awards un-liquidated damages, which are determined by the courts after the
damage has been done.
 For instance if A deviates from the term of contract for delivering product of a specified
quality to B, then a contractual liability shall be imposed, whereas, if A who is a
shopkeeper sells a contaminated drink to B, then A shall be liable for the tort of
negligence.
3.2
One of the leading common law case of Donoghue v. Stevenson (1932) established the
principle of Negligence. The facts of the case indicated that the defendant supplied a
contaminated ginger beer to the plaintiff containing a snail. On discovering this fact the Plaintiff
suffered mental trauma and ill-health. It was held by the court that the defendant was under an
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obligation to provide a healthy product and on failure to abide by this duty, he was liable to pay
damages to the Plaintiff (Smits, 2016). It was also observed that the consequence of providing a
contaminated drink could be easily foreseen by the defendant and hence he has acted in an
unreasonable manner. Moreover the court evolved the following conditions to establish a case of
negligence: Duty of care – Under this segment the Plaintiff is required to prove that the defendant
was in fact under an obligation to act in a particular manner (Rangaswamy, 2015). That a
duty or responsibility was imposed on him to act in a way which does not harm others in
the society. Breach of the duty – Once the duty to act in a careful manner is established, the plaintiff
shall prove that the said duty was breached by the defendant. It shall be proved that he
acted in an unreasonable manner to violate the said duty (Busch, 2015).
 Causation - The breach of the duty shall be directly linked with the injuries sustained by
the Plaintiff. The nexus between the two shall be proven before the courts.
3.3
Vicarious Liability in essence refers to making a person liable for the negligent act of
some other person. It could be any person or entity which shares a specific relationship, which in
effect make the other person to act on his behalf. In addition, the elements of control, supervision
etc. shall be established to make a person vicariously liable for the acts of the other
(Vasiliauskiene and Snieska, 2015). One of the best and most common examples of this
relationship is that of employer-employee. It is a known fact that an employee is an agent of the
employer and acts under his control and supervision. Thus, in the event an employee undertakes
a negligent act while acting on behalf of the employer, then they can be held vicariously liable.
The courts in the case of London General Omnibus Co. (1862) analyzed this particular
relationship to state that an essential element of 'course of employment' shall be considered while
making the employers liable for the acts of employees. In other words, the employees while
undertaking a negligent act shall be acting within the course of employment. It was further
opined that, the work is authorized or un-authorized in nature does not hold any relevance while
deciding the vicarious liability of the employer (Weiss, 2003). It is important to note that a strict
liability is imposed on the employers which is in the form of a primary liability. Some other
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relationships which are capable of imposing a similar liability are that of parent-child, principal-
agent and so on.
TASK 4
4.1
Case 7
In accordance to the given facts, Mr. Brown went to Goodmayes Hospital to see a doctor
for his chest pain and breathing issues. To his amusement, none of the doctors checked him and
instead prescribed some pain killers on phone. On the following day, he expired due to
pneumonia which was allegedly caused by toxic moulds.
(a) The authorities of the Hospital can be held responsible for the death of Mr. Brown if
is it established that Mr. Brown after consumption of those pain killers sustained internal harm,
which led to his death. In addition, the hospital can also be made liable if it is proved that the
actual cause of the death was heart attack and the chest pain was a symptom. The fact that he did
not receive a proper treatment, caused his death. In such circumstances the authorities of the
hospital can be held responsible.
(b) As provided in the given facts the real reason behind the death of Mr. Brown was
pneumonia which was caused by some toxic elements present in his surroundings. Therefore, the
negligent act of doctor and consumption of pain killers was not even remotely related to the
cause of his death. Hence, in such a case Hospital cannot be held liable.
4.2
Case 8
The Chauffeur Company has vicarious liability for the actions of its driver who
performed in negligent way when carrying out his duties. The fact that he makes consumption of
alcohol on duty and met with an accident is referred to as act of negligence while performing the
duty. In case of London General Omnibus Co. (1862) the court held that employee's actions at
the time of employment course are vicariously liable by the employer. This is no matter to the
fact that whether the employee is carrying out the work in an unauthorized way or in illegal
manner. Application of such principle in the facts of case presents that the driver through picking
up the client from airport acts in the course of employment. Further he made decision regarding
drinking and drive in an unauthorized way. Thus this reflects laid down of law which makes
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Chauffeur company vicarious liable for the unlawful acts of the driver. Further the firm has to
make compensation against the damages caused to the injured party.
Case 9
When the injury was imposed bu Jones he was carrying out performance during the
course of employment. In accordance with the case he was assigned towards delivering the job.
When carrying out an ancillary activity related with loading of material an accident took place
and such has resulted in causing harm to one of colleague. It has been held in several cases that
employers possess responsibility for the acts of the employees only when they are being carried
out during the course of employment. In presence of such circumstance it can be stated that
supermarket would be vicariously liable towards paying damages to colleague who has sustained
injuries.
CONCLUSION
It can be inferred from the present study that Law of Contracts and Law of Torts play a
significant role in a business scenario. Therefore, it is imperative for the players of the corporate
world to gain knowledge of various aspects of contract such as elements of contract, types of
contract and the terms contained in it. A significant understanding and knowledge of these
concepts shall enable companies to stay away from legal liabilities and make maximum benefit
out of these laws.
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REFERENCES
Journals and Books
Abn, A. J., 2009. Finding Vicarious Liability in US Patent Law: The" Control or Direction"
Standard for Joint Infringement. Berkeley Technology Law Journal. 24(1). pp.149-177.
Bisso, J. C. and Choi, A. H., 2008. Optimal agency contracts: The effect of vicarious liability and
judicial error. International Review of Law and Economics. 28(3). pp.166-174.
Busch, C., 2015. The Future of Pre-Contractual Information Duties: From Behavioural Insights
to Big Data. Research Handbook on EU Consumer and Contract Law (Edward Elgar
Publishing 2016) Forthcoming.
Kelly, K., Schwartz, V. E. and Partlett, D. F., 2010. Prosser, Wade and Schwartz's Torts: Cases
and Materials. Foundation Press/West Academic.
Levy, N. M., Golden, M. M. and Sacks, L., 2015. General Principles of Liability and Immunity
of Public Entities and Employees (Vol. 5). California Torts.
Lockwood, G., 2011. The widening of vicarious liability: implications for employers.
International Journal of Law and Management. 53(2). pp.149 – 164.
McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).
Orkuma, J. A. and Ayla, O. N., 2015. Ethico-legal aspects of hospital-based blood transfusion
practice; implications of professional negligence to medical practitioners: a review.
International Journal of Medicine and Biomedical Research. 3(3). pp. 219-235.
Rangaswamy, M., 2015. Conflictual aspects of Contracts Law in UK.
Smits, J. M., 2016. New European Union Proposals for Distance Sales and Digital Contents
Contracts: Fit for Purpose. Zeitschrift für europäisches Privatrecht.
Solomon, J. M., 2009. Equal Accountability Through Tort Law. Northwestern University Law
Review. 103. pp.08-010.
Spindler, J. C., 2011. Vicarious liability for bad corporate governance: Are we wrong about 10b-
5?. American law and economics review, p.ahq026.
Van Dam, C., 2013. European tort law. OUP Oxford.
Vasiliauskiene, L. and Snieska, V., 2015. The impact of transaction costs on outsourcing
contracts: theoretical aspects. ECONOMICS AND MANAGEMENT. (14). pp.1018-1025.
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Weiss, M., 2003. Contract and industrial relations: the German case. Managerial Law. 45(3/4).
pp.163-174.
Online
Riley, J., 2012. Contract - Express & Implied Terms. [Online]. Available Through:
<http://www.tutor2u.net/law/notes/contract-express-implied-terms.html>. [Accessed on 5th
October 2016].
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