Business Law: Contract and Negligence Aspects, Cases, and Analysis

This report delves into the critical aspects of contract and negligence within the business environment. It begins by defining contracts, outlining essential elements like offer, acceptance, consideration, and capacity to contract, and differentiating between various types of contracts such as oral, written, and distance selling. The report then explores contract terms, including conditions, warranties, and exemption clauses, providing real-world examples. Through case studies, it examines concepts such as offer vs. invitation to treat, the validity of consideration, and the doctrine of privity. The report analyzes scenarios involving online advertisements, promises, and exclusion clauses in restaurant settings, illustrating the practical application of contract and negligence principles. The analysis covers legal implications of contract formation, breach, and the rights and responsibilities of parties involved, making it a valuable resource for students studying business law.

ASPECTS OF CONTRACT
AND NEGLIGENCE FOR
BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1................................................................................................................................................1
1.2................................................................................................................................................2
1.3................................................................................................................................................3
TASK 2............................................................................................................................................4
2.1................................................................................................................................................4
2.2................................................................................................................................................5
TASK 3............................................................................................................................................8
3.1................................................................................................................................................8
3.2................................................................................................................................................9
3.3................................................................................................................................................9
TASK 4..........................................................................................................................................10
4.1..............................................................................................................................................10

CONCLUSION ............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
The various types of businesses are built up after complying various contracts that
defines the relationship between owner and stakeholders of business. The contracts have a
number of aspects that define several rules and regulations that should be followed in the
business. These rules are made under judicial law according to which every person of corporate
world is abided. The present report is based on such aspects of contract which implies assorted
legislations that are use in corporate business world (Freedland and et.al., 2016). The report will
discuss different laws in context of several scenarios which will help in understanding
application of these acts in practical situations. The business environment is composed of laws
like law of tort, negligence and so on which give rise to diverse relationships. These relationships
are defined in contracts so that each person knows his/ her limits. In case of breaching the
contracts, the law decides about such cases. The report will carry out a study on all such cases so
that necessary legislations in different scenarios along with their applicability can be understood.
Moreover, different terms that are used in law will be focussed so that their way of
implementation can be interpreted in terms of various situations.
TASK 1
1.1
The contract is formed with the association of two or more than two persons who give
their free consent for inception of a legal agreement. The contracting parties involved are termed
as offerer and offerre in which the former term is used for the person who implies the intention
of making a contract by offering something to another person (Friedman, 2011). While the later
term is used for person who gives the consent in response to offer made. To accomplish the
contract in a proper way it should also have a valuable consideration. In case of Peter Abraham,
to give him a proper guidance about contracts and its different contents, following section will
help him:
 Offer: The offer implies intention of a person to commence a contract. With this
intention, the person makes an offer to another individual or group of persons to form a
contract. The offer should also have the true intentions of entering into a contract which
otherwise will not be taken as a contract. So, Peter should take in note that by offering
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something, the intention of commencing contract should be implied rather than just
making an invitation to treat.
 Acceptance: The acceptance is an essential element of contract which expresses that the
offer made to a person should be accepted by him/her with all terms and conditions. So,
if an offer is not responded with proper acceptance cannot commence a contract. Hence,
Peter will have to take full acceptance of another party to whom offer is made so that
contract can be made (Gutmann, 2013).
 Legal relation: The contract will only be applicable if it is made with legal purpose.
The case of Jones v. Padavatton implies the example of such contracts in which parties
were not intended to make contracts on legal grounds. So, peter will have to take care
that any contract which he intends to make, should have a legal purpose.
 Consideration: Every person makes an offer to have something valuable in return. So,
it is necessary that all contracts should be made with an element of consideration in it.
The consideration may be in the form of monetary terms which can be promised to pay
as the condition specified by offerer is fulfilled. Peter can refer the case of Lucy v
Walwyn to understand the applicability of consideration.
 Capacity to contract: The contract cam be made only with the parties who are fully
capable of entering into contracts. Therefore, the party with which contract is being
made should be of more than 18 years of age, with a sound mind and not a declared
insolvent (Jose, 2012).
1.2
According to law, a valid contract is made in two ways that is in oral form or in written
way. Apart from this, it should also be taken in note by all contracting parties that the contract
has all essential elements in it which are described above. The valid contracts are made on the
basis of either implicit or explicit form which also includes mere promises made between various
parties. The major thing which should be borne in mind is the legality in the promise that can
made both parties abided by law. Besides this, Peter should know some other ways as well
through which contracts can be made legally which are as follows:
 Face to face: The contracts that are made verbally in a face to face meeting is
equivalently lawful as made in written form. Thus, any contract that comes into existence
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as a result of face to face meeting without signing any written contract will also be legal
and enforceable.
 Written contract: The most common form of entering into a contract is to make it in
written form. In case of business world it is always recommended that contracts should
be made in written form as it implies a long term relationship between various parties so
the contract should be made in writing inclusive of all supportive documents.
 Distance selling: In distance selling the contracts are made without giving any physical
presence (Kreitner, 2011). The contracts are made through mails or by contacting through
telephonic conversation. Further, it should be taken care that contact is valid on the basis
of all essential elements. So, Peter can make contracts with distant parties through
mentioned mediums.
1.3
As per the above discussed elements that a valid contract should have, it is evident that
there are many types of contracts which are used in corporate world for defining various terms of
business. On this basis, various terms of contracts have been defined which are necessary for
their validity. The following section will help Peter to understand the whole concept in more
elaborated way: Conditions: Conditions form a base part of any contract according to which the contract
is built upon. These conditions use to clarify various norms and terms that should be
fulfilled by either parties to make it valid. Besides this, conditions act as a guideline
according to which the parties involved in contract use to do their work and are
compelled to fulfil their promise. If any party violates the conditions mentioned in
contract, law allows the aggrieved party to cancel whole contract. Warranties: Warranties are the promises that are made by one of the party that gives
assurance about any specific material or any condition to be true (Lacey and Lamont,
2014). This element is a supportive term in business world which helps in building trust
while making contracts. Peter should consider that warranties provided by him are true as
any breach in warranty provides right to opposite party to cover their loss from damaging
party. While it should also be taken in note that breach of warranty does not give right to
decline contract.
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 In nominate terms: In nominate terms are those implied terms of contract that cannot be
categorised as either condition or warranty. For such terms, court plays an important role
as the breach that comes under mentioned term, results in origination of different
situations. In case of any damage or loss due to breach of in nominate terms, the court
decided about compensation of loss which depends on the extent of losses caused to
suffered party.
 Exemption clause: The exemption clause makes another party excluded fro some of the
liabilities due to which the person will not be liable for any loss or damage caused
(O'Connor, 2010). Many times, this clause is used unfairly by some people to exclude
themselves for giving any compensation in case of losses. Therefore, it is necessary to
read the contract properly before entering into it. In case of Hollier v Rambler Motors
(1972) court gave a decision that while dealing the particular course was not mentioned
so afflicted party is liable to pay for damages.
TASK 2
2.1
Case 1
Carol use to live in a student apartment which is not properly furnished. She wanted to
buy a couch, therefore she found an online advertisement of Gumtree where a couch was on sale
for £600. As a response to this, she mailed the company on given address about her intention to
buy the couch.
The above case implies the condition of an 'offer' and 'invitation to treat'. Both terms have
differences in their meaning and legal nature. The offer refers to intention of entering into a
contract with a particular person including all terms and conditions. While on other hand,
invitation to treat is a general offer that is not made by specifying to any particular party. Thus,
without proper communication of offer and acceptance, the validity of contract cannot be
assumed. Consequently, this does not bind any of the party under contract. The case of Fisher v
Bell (1961) implies that the goods kept at shop on display does not form an offer, but an
invitation to treat. So, the customers who use to contact on the basis of information given by
shopkeeper can be termed as offer (Koffman and Macdonald, 2010). Likewise, the response
given by Carol by dropping mail is an offer against invitation to treat by Gumtree.
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From this discussion, it is clear that the contract has not come into existence in response of the
offer made by Carol. If said company gives consent against that offer a valid contract will be
originated.
Case 2
Devi, son of Preston is an independent guy who wants to secure the position of cyber
security in a renowned IT firm along with George Smith and Fogarty. Due to his good
performance, Devi was selected for the position on 12th April 2015. While he did not want his
father's interference he did not tell it to father and in concern for son, Preston write a letter to
George. In letter, Preston promised George to give a contract of £150,000 on hiring his son.
Now, George wants to enforce the promise on Preston.
To make a valid contract, it is necessary to have all essential elements in it. With this
scenario, it is apparent that the consideration for which Preston has promised does not form a
valid consideration. Besides this, it is also necessary that the consideration in a contract should
be of present time. In present case, it is clear that the promise which is made by Preston on
fulfilling a particular condition has been accomplished already. Thus, the act that has been
completed before making an offer does not give rise to a valid contract (Van Weele, 2014).
Therefore, George cannot enforce Preston for making up the promise as it is not based on either
valid contract or legal basis. The case of Price v Easton (1833) implies the case which gives birth
to Doctrine of privity where third party tried to enforce for payment. Thus, in case of George and
Preston both parties cannot sue each other because of doctrine of Privity where no party can sue
each other by enforcing it on other.
2.2
Case 3
At a famous restaurant of London, a couple booked a table. In the entrance the man gave
his coat to attendant which was containing the purse with £500 in it. In return to this, the
attendant gave a receipt to man which has an exclusion clause on the back. The clause had
mentioned that any valuable items must be removed from the coat as in case of missing and
stealing of item, the restaurant will not take any responsibility. While paying for the meal, the
man realised of leaving his purse in coat for which he went to collect. After this, he found that
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the wallet is missing from coat which he wanted to recover from restaurant. In this case, the
restaurant refused to payback and clarified that the receipt has clear terms mentioned about the
same.
This case refers towards the clause of exclusion according to which a party attempts to
exclude him/her from a particular liability which may arise due to negligence or non
performance of any act (Bridgeman and Goldberg, 2012). The case of Darlington Future Ltd v.
Delcon Australia Pty Ltd. implies the example of exclusion clause. Though the exclusion clause
is lawful in terms of judiciary, the constitution states to be careful as many times it is used in
unfair terms. In context of given case, the act of forgetting the wallet in coat is rose as a part of
negligence. Moreover, the clause mentioned in the leaflet was according to regular custom which
makes it valid on legal grounds. Thus, the mentioned clause in receipt, though not noticed by
man, does not make him able to recover the losses. So, denying for pay the loss to man by
restaurant is completely valid.
Case 4
Aaron took a warehouse on rent basis from Zehphra's which was vacant from a long time.
This necessitated the repairs in the warehouse which was undertook by Aaron. The repairs done
by Aaron changed the look of warehouse completely. In return, Zehphra promised Aaron that she
will not increase the rent for him till next five years. After a year, she died and afterwards the
value of property also increased followed by repairs undertaken by Aaron. The property was
then inherited by Zehphra's son Yeti and he made a hike in rent of Aaron which was refused by
him. He claimed that Yeti's mother has made a promise that no increment in rent will be done till
next five years. As a result, Yeti cancelled the tenancy contract and Aaron filed a claim to
recover his expenses of repairs done in warehouse. In return, Yeti completely refused for making
compensation.
The above case is related with implied contracts that are not made in written form but
entered into by making mutual promises which comes under a valid contract (Gergen, 2013). In
the case of Atkinson v Ritchie (1809) court gave decision that any term or condition that is not
mentioned in contract but in implied form does not account into non performance by any of the
party. Therefore, in above case of Aaron and Yeti, the terms that are not made in written form of
contract but decided in implied way cannot relieve Yeti for not fulfilling the previous promise of
his mother. In case of tenancy contracts, property owner is always responsible for any repairs or
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modification costs made in his/her property until something else is mentioned in contract. Here
Aaron made all repairs and bear all expenses for which the promise of not increasing the rent
was made by Zehphra. By increasing the rent Yeti has violated the terms of implied contract
made by his mother. Therefore, Aaron is eligible to recover his expensed made in repairing of
warehouse from Yeti.
Case 5
The policy holder applied for an insurance for his motor in which some general questions
were asked like any of policy holder's family or he himself made any claim of insurance in past 5
years. Policy holder gave his answer by filling no. After some time, the policy holder claimed for
insurance amount as his car was stolen. At this time, the insurer discovered that, during the
previous period of 5 years, policy holder has made a claim of insurance. Therefore, insurer
voided the contract of insurance from the start date of contract. The policyholder argued for this
and said he was not supposed to reveal this information as the said company was not concerned
to meet it.
The case of Bannerman v White (1861) implies the case of terms in contract that should
be disclosed truly by both parties in absence of which contract may have not come into existence
(Ford, 2010). In above case, the policyholder was responsible to reveal all relevant information
truly to insurer which was not done by insured. Such concealment of information is entitled for
cancelling of contract. Therefore, the decision of insurance company for void ab initio is right.
Case 6
The information furnished by policy holder in response to any changes or modifications
done in motor vehicle during past five years was given in negative. Along with this, it was also
answered in no that no member of family and the policy holder has met with an accident
accounting to claim of insurance in past five years. In discovery of new claim, insurer found that
the information supplied were wrong and hence cancelled the contract. The policy holder
claimed that she was not acknowledged by all the changes made in car and claims of insurance
done. Here, it is clear that the insured did not equipped the company with credible information
which makes the contract void. Though, she has claimed that she was not aware of all the stated
information and she gave the asked subject matter true to her best knowledge does not make the
contract valid. The essential element of disclosure of true information for contract was not
fulfilled which makes the contract repudiated.
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TASK 3
3.1
The Liability of tort and contractual liability has some major differences which can be
tabulated as under:
Contractual liability Liability of Tort
The contractual liability refers to obligations
that should be fulfilled by both the parties
contained in contract with consent of either
parties (Rancourt, 2011).
The tortious liability refers to any damage that
is caused by any of the party due to illegal
practice or an act.
The violation of contract by not fulfilling or
delaying in fulfilment results in making up the
loss by fulfilling it in the way suffered party
wants or by paying losses in monetary terms.
In case of tort liability, the damages caused
should be fulfilled by compensating in
monetary terms.
This contract is eligible for making claim only
when the party has suffered any loss from the
non fulfilment or act of another party.
Here, the contract becomes eligible for making
up loss as soon as the terms of contract are
breached.
For instance- X and Y agreed to make a
contract where X will supply 200 boxes of
books at £500 for each. On successful delivery
of boxes, Y refused to pay for which X can
recover the amount.
For instance- A lady burnt her hands in a
coffee shop due to coffee spilled on her was
too hot than mentioned temperature and she
had to undergo severe surgeries. For these
expenses she has right to claim on company.
The major similarities between both laws are:
 Both are the forms of civil liability and responsibility.
 Both laws are based on similar structures that need fulfilment of some legal actions
(Afsharipour, 2016).
 In both laws, the compensation is made in monetary terms or by act of fulfilling terms of
contract.
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3.2
Any kind of act which is done in a careless way and results in harm or damage to another
person comes under negligence. There are four elements of negligence that are necessary to
prove for making a claim under this law. These four elements can be described as under:
 Duty: This refers to look into matter by court to find whether, the defendant has owed a
duty of care to claiming part according to which he/she was supposed to take care of the
suffering party in a certain manner. For instance, if a person while loading bags of grain
stroked the child from bag at a public place, the person will be liable for such loss as he
was supposed to take care while loading bags as he was at a public place.
 Breach of duty: The breach of duty occurs when a person does not fulfil his/her
reasonable duty because of a careless act. For instance in above instance the person is
liable for breach of duty as he was supposed to care for child as the public area is filled
with people and hence he should have acted with more care so that his act may not result
in loss to any person (Elements of a negligence case, 2016).
 Causation: This element requires the plaintiff to prove that the act of negligence has
caused damage actually to person. Therefore if a person's act has caused injury to a
person then only the recovery for loss can be made. For instance, if the plaintiff proves
that the act of loading by throwing the bags carelessly by person has caused and injury to
child will be liable for compensation.
 Damages: The last element that plaintiff requires to prove before court is damages that
can be recovered in monetary terms. So, the expenses of medical care in case of child
injured from bag of grain is completely recoverable by child.
3.3
The doctrine of Vicarious liability refers to the condition when an individual is made
responsible for any act that is not done by him/her. In other words from a business point of view,
it can be said that an employer will be responsible for the act that is done by his employee on
employer's behalf (Bajari, Houghton and Tadelis, 2014). This type of situation arises as and
when an individual is acting on some other person's place and thereby the contract is also entered
into by that other person. For instance, an employee of a supermarket company sold a food
product which was expired. This resulted in health issues of the customer. Thus, in such case the
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