Comprehensive Analysis of Contract and Negligence in Business Law

This report delves into the crucial aspects of contract law and negligence within a business environment. It begins by outlining the essential elements of a valid contract, including offer and acceptance, intention to create a legal relationship, capacity, free consent, lawful object, lawful consideration, and legal formalities. The report then explores different types of contracts, such as unilateral, bilateral, verbal, written, implied, and void contracts, and analyzes various terms within a contract, including conditions, warranties, innominate terms, express terms, implied terms, and exclusion clauses. The study further examines the application of these elements in real-world business scenarios, such as the sale of goods. Moreover, the report discusses the principles of liability in negligence, differentiating between tort and contractual liability, and explaining the nature of negligence and vicarious liability. Finally, it applies these principles to business activities, analyzing the elements of the tort of negligence and defenses, as well as the application of vicarious liability in given business situations.

ASPECT OF CONTRACT AND NEGLIGENCE FOR BUSINESS
STUDENT’S NAME:
STUDENT’S ID:
PROFESSOR’S NAME:
1

Table of Content
Introduction......................................................................................................................................3
LO1 Essential elements of a contract..............................................................................................3
1.1 Importance of essential elements required for forming a valid contract...................................3
1.2 Impact of various types of contract...........................................................................................4
1.3 Analysis of terms within a contract...........................................................................................5
LO2 Applying elements a contract in business...............................................................................5
2.1 Application of elements in business situations..........................................................................5
2.2 Application of law on the terms in various contracts................................................................6
2.3 Evaluating effects of various terms of law................................................................................6
LO3 Principles of liability within negligence in business...............................................................7
3.1 Differentiating liability in tort along with contractual liability.................................................7
3.2 Explaining nature of the liability in negligence.........................................................................8
3.3 Explanation of how business could be vicariously liable..........................................................8
LO4 Applying principles of liability in negligence within business activities................................9
4.1 Applying elements of tort of negligence as well as defenses within various business
situations..........................................................................................................................................9
4.2 Applying elements of vicarious liability within given business situations................................9
Conclusion.....................................................................................................................................10
Reference List................................................................................................................................11
2

Introduction
A valid contract is considered as an expressed or written agreement among two or more parties
for providing products or services. In this study, the researcher has tried to explain the aspects of
a valid contract as well as negligence. The main aim of this study is to understand functions as
well as regulations of various torts and contracts. Essential elements that are required for forming
a valid contract within a business context have been discussed in this study. The researcher has
then explained the application of those elements within a valid contract. Principles of liability in
negligence within a business context have been discussed in this study. In addition to that, the
researcher has also discussed an application of these principles of liability in negligence within
various business situations.
LO1 Essential elements of a contract
1.1 Importance of essential elements required for forming a valid contract
Essential elements of a valid contract:
Offer as well as acceptance: A contract is considered to unfold when another party (Backof,
2015, p.2178) has accepted an offer by a party. The offer that has been accepted must be definite
and without qualification. An offer should be clear, complete, definite and final, which is
communicated with the offeree. This is the initial as well as the most important part of a contract,
which starts with a proposal given by a party and is accepted by another party agreeing to all the
legal terms and conditions mentioned in the contract. A contract is formed only when a party to
another has offered it.
The intention of creating a legal relationship: Creation of legal relationship between parties is
to bind with each other legally within a contract (Brennan et al. 2016, p.156). It is also
considered one of the important parts for the formation of a contract as it involves the readiness
of the parties for binding with each other legally in a contract after agreeing to all of its terms
and conditions.
Capacity: Capacity to form a contract involves the competency of an individual for entering into
a contract. If an individual has the capacity to enter into a contract, then the agreement is
considered to be a contract (Brown et al. 2015, p.175). It is very important for parties to ensure
whether the other party has the capacity to form a contract.
3

Free and genuine consent: Free consent is considered another important element of a contract.
A contract should be formed by free consent from parties and it would be considered as void if
any type of mutual mistakes has been made. A contract is also considered void if it has been
obtained through any type of unfair means.
Lawful object: Objectives mentioned within a contract should be lawful and not illegal, immoral
or opposed to the public policy (Cartwright, 2016, p.21). It would be considered as lawful only if
its objectives are not forbidden by law and considered as void if it is not lawful.
Lawful consideration: Consideration is something that would be received in return. In each
contract, an agreement should be supported by the considerations and it should be real and
lawful.
Legal formalities: This is another important element for forming a contract, as every legal
formality must be followed while forming a contract such as writing, registration, etc. Writing is
important for effecting a sale, mortgage, lease, etc., whereas registration would be required in
these cases. Legal formalities relevant to such cases according to the legislations should also be
followed strictly.
1.2 Impact of various types of contract
Unilateral Bilateral contract: A unilateral contract is considered as a one-sided contract,
whereas, a bilateral contract is considered to be a two-sided contract. In a case of a unilateral
contract, only one party has made a promise and only law for completing his promised job
(Clarke et al. 2015, p.409) legally binds the offeror. However, in a case of a bilateral contract,
two parties under the considerations have made a promise and law legally binds both the parties.
Verbal contract: This type of contract is made orally or verbally, which is made with the
consent of both parties that is mainly based on faith and trust on each other. A verbal contract is
also backed with appropriate legal documents and could be done through telephones or emails.
Written contract: Written contract is a type of contract that is made on a printed document and
both parties have to sign on it. These agreements or contracts contain valid terms and conditions
that have been added with mutual consent of both the parties. Breaching these terms and
conditions mentioned in the written would result in legal proceedings.
Implied contract: An implied contract is considered such type contract in which actions are not
mentioned within the contract or agreement, rather are subject to be implied automatically by
law (E-lawresources.co.uk. 2017).
4

Void contract: A void contract is a type of contract that does not impose any legal rights as well
as obligations on the parties and is not enforceable by the court. It is actually not contracted at
all. A contract is considered void if any party considers opposing its enforcement.
1.3 Analysis of terms within a contract
Condition: The condition is considered as the basis for forming a contract or an agreement.
Every party within a contract is obliged to fulfill their promised duties according to the terms and
conditions mentioned in the agreement (Elliot and Quinn, 2010, p.32). In case a party has broken
its promise from completing its duties, the party has the right to deny fulfilling its promise as
well and even making the other party face legal proceedings. The victim party could end the
contract and claim for the damages caused.
Warranty: Warranty is considered a minor part of a contract or an agreement. In case a party
has breached the terms and conditions of a warranty, the other party could claim for the caused
damages.
Innominate terms: Intermediate term or innominate term is considered neither as a warranty nor
as a condition, rather lies somewhere in between. The implied terms operate as condition based
on the consequences of the breach. An agreement or a contract could be ended only in case a
party has been deprived of all the promised facts.
Express terms: Express is considered as a term that has been mentioned within a contract and
has been agreed by both parties during the formation of the contract (Fallah and Kheirandish,
2016, p.202). These terms include both oral as well as written conditions.
Implied terms:
Implied terms in a contract are considered as such terms that are applied to both parties by
default and need not be mentioned within the contract (Wright, 2016, p.37). These terms may not
be mentioned verbally or in written within any part of the agreement.
Exclusion clauses: Exclusion terms are considered terms that has been mentioned within a
contract, which helps in restricting provisions of parties within a contract or an agreement
(Feinman, 2015, p.127). Several common laws could be associated along with this clause.
LO2 Applying elements a contract in business
2.1 Application of elements in business situations
In the given case study, it has been observed that Ivan has visited Todor's bookshop and wishes
to purchase a book that has been kept on the shelf for display. He expects to purchase the book
5

for 50 euros. When he has taken the book to the counter for making a purchase, he comes to
know that it has already been sold to Carl the earlier day and Todor has the only piece of that
particular book and had forgotten to remove it from the display shelf. Ivan still insisted on
buying that book and became upset on not being able to purchase it. In this case, Todor is not
liable to be punished by law, as he has already informed that the book has been sold to Carl. Ivan
also does not have any right to sue Todor for not allowing him to purchase the book. Carl also
would not have any right to file any complaint against Todor as he has informed Ivan of the
earlier purchase and the book still belongs to Carl. In this case, breach of any type of condition
has not occurred.
2.2 Application of law on the terms in various contracts
Condition: Conditions and terms are considered as a set of rights as well as obligations for the
parties within a contract that have been mentioned in the contract (Hair, 2015, p.25). These
conditions are considered general conditions that are common to every contract. Breaching of
these conditions by any party would lead to legal proceedings by another party. In an application
of these terms in law, the party who breached the mentioned conditions would be punished
legally and would be asked to pay compensation for the damage and loss caused due to the
breach.
Warranty: In terms of law, a warranty is considered as a minor term. Warranty is a type of
guarantee produced by the manufacturer promising to replace or repair the product if necessary
(Robbennolt and Hans, 2016, p.249). In a case of breach of producing party, another party has
the right to claim for compensation. When applied to law, warranty gives a party to claim for
caused damages in case of condition breach.
Innominate terms: Innominate terms are also known intermediate terms that are neither a
condition nor a warranty. It is considered condition or warranty according to the results of a
breach.
2.3 Evaluating effects of various terms of law
The contract is considered an agreement between one or more than one parties, which is a legal
agreement that is bounded by law. An agreement made between parties fall under legal
obligations and in a case of any breach by any of the parties, legal the parties might take actions.
Exemption clause excludes a party from liability due to an occurrence of any type of breach
6

(Hughes et al. 2015, p.36). This clause might cause disadvantage to a party. Still, the victim
party is not able to file a complaint against the other party. In this case, John has gone to a park
that has been managed by a local council and noticed a statement that states that chairs are
available for hire at 50p per hour. Therefore, he pays for it and gets one along with a ticket from
the parking attendant. After some time, the chair collapsed, leaving him injured and damaging
his clothes. When John claimed for a compensation for such incident, the attendant points out the
exemption clause that states that council would not be responsible for any type of damage or
injury caused due to a failure of the hired equipment. In this case, John has no right to claim or
make any type of complaint against the council, as they have already mentioned it in exemption
clause in the ticket. It was the responsibility of John to read all the terms and conditions
mentioned in the clause before hiring a chair. The exemption clause mentioned in the ticket, in
this case, saved the council members from being punished.
LO3 Principles of liability within negligence in business
3.1 Differentiating liability in tort along with contractual liability
Three different types of organisations are partnership business, sole trading business and
company. In a case of sole trading organisations, the sole responsibility of the profitability or
loss from the business activities lies on the businessperson alone. A sole trader should have a
trade licence from a designated authority and oblige with the set of rules and regulations (ICLR.
2017). The trader is responsible for producing appropriate transaction details as well as tax
computations along with bearing the loss by him. In a case of the partnership business, all the
partners of the business face the risk, as well as liabilities, and no single member is responsible
for any type of loss or profit gained by the organisation (McKendrick, 2014, p.24). In this case,
the conditions are written as well as abide conditions mentioned by the Limited Liability
Partnership Act. In a case of a company, it might be public as well as a private company, in
which no particular individual or shareholder is responsible for any type of risks, loss or profit
gained by the organisation. The job has been done by the company itself and the risks are
limited.
For instance, in a case where a supermarket called Tesco would be built over a railway. They
were about to build a tunnel that would enclose railway line and build the store over it. After a
few days, the tunnel collapsed and the train operation faced loss, as he was the sole trader of the
station and had to face all the loss alone.
7

3.2 Explaining nature of the liability in negligence
Negligence is termed as a condition when an individual does not perform a job that he is
supposed to do. In every tort, liability is based on negligence and intentions. An act is considered
to be negligent if its results are not substantially certain or are not expected or desired. The action
would be negligence if the consequences are very much probable and could be foreseen as well
as avoided by a reasonable person (Bis.gov.uk. 2017). Therefore, in many cases, the defendant
might not have any knowledge about his conduct and consequences and in some cases; he might
have knowledge of both. It is considered as an element of expectation or desire for results that
could differentiate between negligence and intention. In a case of intention, presumptive or
actual desire is present, whereas, in a case of negligence, desire or expectation for results could
never be present.
For instance, damage to property is considered a case of negligence. If the damage has been
caused unknowingly, then the responsible person should pay compensation for the damage. The
potential legal complaint could be filed against the individual who has caused the damage if he
tries to injure or harm any closed ones of the complainant, especially in a case of missed work or
medical purpose (Miller, 2016, p.37).
A case of negligence has been filed in 1837, where claimant Plaintiff has warned defendant from
not burning the hay, instead, it was ignored by the defendant and burnt by him, which resulted in
the burning of the cottage of Plaintiff. However, the defendant would be punished for his doing
and legal proceedings would be followed against him.
3.3 Explanation of how business could be vicariously liable
Vicarious liability is considered as a type of liability in which a person is considered responsible
for the actions done by another person. For instance, in a particular organisation, activities of the
employees are held responsible for the omission of an employer of the organisation. Liability of
the employers refers to the responsibilities of the employers in case of any occurrence of
accidents because of a general course in employment. Vicarious liability is a liability between
two individuals who are bound under jurisdiction. The concept of vicarious liability is said to be
rooted in the fact that superiority party to act of agent has done induction or contribution.
As per mentioned in a case of vicarious liability, a case has been filed by Lange on Nabisco
Biscuit company. In this case, an employee has been hired by the company for looking after a
particular area and taking care of stock of biscuits present at the store (Bailii.org. 2017).
8

However, when Lynch visited the store he found that no stock of biscuits of their company is
available at the store. This made him angry and caused him to lose his temper. Out of anger, he
exchanged harsh words with the employees of Lange and threw some products. This incident
about the behaviour of Lynch has been reported to Nabisco Biscuit company. Since, Lynch, who
was an employee of Nabisco, has broken rules; the company also had to face the consequences
of this misconduct.
LO4 Applying principles of liability in negligence within business activities
4.1 Applying elements of tort of negligence as well as defenses within various
business situations
In the given case study, David had been driving at 35 MPH in 25 MPH lane, where many
children had been playing. Suddenly a child named Kevin came in the way of David. Trying to
avoid Kevin, David hit a telephone pole, which left him seriously injured. The pole then broke
into two pieces, hit Kevin, and caused him serious injuries. This incident has been caused due to
the negligence of David and driving in 25 MPH lane at 35 MPH, which caused him as well as
Kevin seriously, injured. However, he tried to avoid Kevin from getting hurt; Kevin had been
still injured severely. The responsibility of this incident goes to David as it has caused due to his
negligence.
4.2 Applying elements of vicarious liability within given business situations
In the given case study, Colin, head chef in Regent Hotel has been fed up with Roger, a
dishwasher for his anger and attitude. On a particular day, Colin hit Roger with a frying pan
resulting Roger to be unconscious. Roger also refused to go receive medical service by going to
a hospital. Due to this action of Colin, Roger could file a complaint against Regent Hotel, as
Colin has been an employee of this hotel. The hotel would also have to face legal consequences
due to the vulgar actions of Colin. Alternatively, Roger could also sue Colin directly for harming
him and leaving him with severe injuries. Roger would claim for compensation for his injuries
from Colin. This is a case of vicarious liability, in which the organisation has to face legal
consequences due to the vulnerable actions of Colin.
9

Conclusion
In this study, the researcher has tried to explore the aspects of contract as well as negligence on
business. For conducting the study in a better and efficient manner, he has explained the
importance of various elements required for forming a valid contract along with the impact of the
various types of contracts. The researcher has applied the various terms of a contract on the law
relating to several cases. Principles of liability in negligence within business activities have been
discussed in this study. At the end of the study, the application of principles of liability in
negligence within business activities has been discussed.
10

Reference List
Backof, A.G., (2015). The impact of audit evidence documentation on jurors' negligence verdicts
and damage awards. The Accounting Review, 90(6), pp.2177-2204.
Bailii.org. (2017). British and Irish Legal Information Institute. [online] Available at:
http://www.bailii.org/ [Accessed on: 23 Mar 2017].
Bis.gov.uk. (2017). Consumer rights and issues - Policy areas - GOV.UK. [online] Available at:
http://www.bis.gov.uk/policies/consumer-issues [Accessed on: 23 Mar. 2017].
Brennan, M., Märzheuser-Wood, B., Mellerio, R., Reufels, M. and Turitto, F.R., (2016). JOINT
LIABILITIES FOR FRANCHISORS: EMPLOYMENT, VICARIOUS LIABILITY,
STATUTORY AND OTHER LIABILITIES. International Journal of Franchising Law, 14(1),
pp.152-159
Brown, C.A. and Ackerman, D.T., (2015). Abating the Bounds of Commerce: A Quantitative
Analysis of Transnational Contract Formation. J. Int'l Bus. & L., 15, p.175.
Cartwright, J., (2016). Contract law: An introduction to the English law of contract for the civil
lawyer. London: Bloomsbury Publishing.
Clarke, E., Leaver, L. and Gilbert, B.J., (2015). Morality, not markets: a manifesto for the NHS;
Response to Pollock, Frith, and Cox. International journal of health policy and management,
4(6), p.409.
E-lawresources.co.uk. (2017). e-lawresources.co.uk. Available at: http://www.e-
lawresources.co.uk/ [Accessed on: 23 Mar. 2017].
Elliot C and Quinn F (2010), Tort Law. London:Longman.
Fallah, M.R. and Kheirandish, F.S., 2016. Sail Right in Iran Law Electronic Contracts about
International Regulation. International Journal of Humanities and Cultural Studies (IJHCS)
ISSN 2356-5926, pp.202-203.
Feinman, J.M., (2015). Liability of Lawyers and Accountants to Non-Clients: Negligence and
Negligent Misrepresentation. Rutgers UL Rev., 67, p.127.
Hair, J.F., 2015. Essentials of business research methods. New York: ME Sharpe.
Hughes, W., Champion, R. and Murdoch, J., (2015). Construction contracts law and
management. London: Routledge.
11

ICLR. (2017). UK Law Reports & Case Law Search | ICLR | The Incorporated Council of Law
Reporting. Available at: http://iclr.co.uk/ [Accessed on: 23 Mar. 2017].
McKendrick, E., (2014). Contract law: text, cases, and materials. Oxford: Oxford University
Press.
Miller, R.L., (2016). Business Law Today, Comprehensive. Boston: Cengage learning.
Robbennolt, J.K. and Hans, V.P., (2016). The psychology of tort law. In Advances in Psychology
and Law (pp. 249-274). Berlin: Springer International Publishing.
Wright, D., (2016). Making the Contract Part 1–The Requirements. Using Commercial
Contracts: A Practical Guide for Engineers and Project Managers, pp.37-54.
12