Contract and Negligence in Business Law

This report delves into the critical aspects of contract and negligence within the realm of business law. It outlines the formation of contracts, the significance of various elements, and the implications of different types of contracts. The report also analyzes the terms related to contracts, such as conditions, warranties, and exemption clauses, while applying these concepts to real-world business scenarios. Furthermore, it contrasts contractual liability with tort liability, discusses the concept of negligence, and explains vicarious liability in a business context. The conclusion emphasizes the importance of written agreements over oral contracts and the practical applications of these legal principles.

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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
1.1 Explain to Peter Abraham how a contract is formed and the importance of the various
elements which has to be present to form a contract...................................................................4
1.2 Discuss the impact of forming contracts (as it may apply to Peter Abraham) by means of..5
i. Face to face ..............................................................................................................................5
ii. written contract........................................................................................................................5
iii. distance selling (telephone, internet)......................................................................................5
1.3 Give an analyses of the following terms in contracts with reference to their meaning and
effect (including remedies and damages) as it may apply to Peter Abraham..............................6
i. Condition..................................................................................................................................6
ii. warranty ..................................................................................................................................6
iii. innominate terms....................................................................................................................6
iv. exemption clauses (including legality)...................................................................................6
TASK 2............................................................................................................................................6
2.1 Apply the elements of contract in the given business scenarios below (Cases 1 and 2).......6
2.2 Apply the law on terms in the following cases (Cases 3 and 4)............................................7
2.3 Evaluate the effect of different terms in the given cases (Cases 5 and 6).............................7
TASK 3............................................................................................................................................8
3.1 Explain the similarities and differences (contrast) of liability in tort with contractual
liability using an example............................................................................................................8
3.2 Explain using suitable example how liability for negligence can arise and the conditions
needed to be met for a claimant to successfully prove negligence..............................................9
3.3 Explain what vicarious liability means and how a business such as your organization can
become vicariously liable giving example.................................................................................10
TASK 4..........................................................................................................................................10
4.1 Apply the elements of the tort of negligence and defenses in the given business scenarios
below..........................................................................................................................................10
4.2 Apply the elements of vicarious liability in given business situations below (Cases 8 and 9)
....................................................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
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INTRODUCTION
The report will identify aspects of Contract and Negligence for Business. Various factors
are responsible for contract formation between the parties. Nowadays,for setting up any business
agreements are needed to be build so that any sort of breach in the contract can be claimed
without suffering losses. In the study , we will come to know various elements of contract and
their importance (Boundy, 2016). We will also study the importance of written agreement over
oral agreement. The study would emphasize on applying various clauses on different case
scenarios giving practical understanding of the implication of clauses. Therefore, report will
present important aspects of contract and negligence in the business.
TASK 1
1.1 Formation of contracts and its various important elements.
A legal agreement between two or more parties is known as Contract. Any contract is
said to be valid if agreement constitutes following components:
 Agreement should be legal.
 Genuine assent of the two parties.
 Offer and acceptance.
 An objective to create unbreakable relation between the parties.
 Potential of the parties to act legally.
 Compensation to be paid for the agreement.
All the agreements are not contract but all the contracts are agreement. An agreement can be oral
or written and aims at fulfilling the requirement of the two or more parties without being
imposed (Katz, 1990). When there is understanding between two parties then only contract can
be formed. Parties should agree on the terms and conditions before signing the contract.
Elements of a contract
A contract is formed between the two parties if they have agreed on their promises and
understood those promises. This is called as meeting of minds. A contract is valid or not court
will check certain elements of it. These elements are offer,acceptance and consideration.
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 An offer can be defined as the proposal for another party to be a part of agreement on
some conditions. Party that makes offer is know as offeror and the opposite party that
gets offer is known as offeree.
 Acceptance refers to agreement on the offer offered by offeror by the offeree.
 Consideration, an essential component of a contract is the benefits that each part would
receive like property, money from the another party.
1.2 Impact of different types of contracts
i. Face to face
Contacts that are formed orally without writing are known as oral contracts. Advantage of
oral contract is it saves time and easier to carry out as in written contract you have to perform
writing . But it comes with several disadvantages. In many cases according to law, contracts that
are not in written are illegal. If opposite party disagrees on the contract was made then it
becomes very difficult to prove our side of the formation of contract. When a contract is verbal it
becomes difficult to remember each and every part of the contract .
ii. written contract
Both parties have more reliability when they have written contracts. They can clearly
describe details on which they agreed . It is better and safer to have written contracts than to
depend on something said verbally (Schwartz, 2010). There are several benefits of written
contract. These are:
 Written contract provides proof of what terms and conditions both parties agreed.
 It brings transparency and prevents disputes .
 It gives security with assurance for how long you have work and what you will be paid.
 Risk of disputes of payments , work needed to be carried out I specific time frame also
reduces.
iii. distance selling (telephone, internet)
In these type of contracts the supplier and the consumer are not having face to face
contract rather they are dealing over telephone or internet etc. Their is no mediator party
involved in between. Consumers can purchase goods by spending as much time as they want
before coming to any decision. Human interaction is less in such type of contracts. Reliability is
less in distance selling contract. There might be charges for the services that sup-piers may
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charge dishonestly and if product is not satisfying it would be time consuming prices to return
the product .
1.3 Analyzing the meaning and effect of different contractual terms
i. Condition
A condition is an important term in the contract and if it is ruptured by any of the party
then guilt free party can end up the contract and can claim losses.
ii. warranty
Warranties are minor terms that come along with products like mobile phones, electronic
items etc. If warranty is broken up ,the guilt free party can ask for damages and losses but
termination of the contract is not allowed.
iii. innominate terms
The innominate term focuses on the impacts of the questions and breach .When guilt free
party lacks benefit of the entire contract they can end up contract.
iv. exemption clauses (including legality)
In a contract exemption clause is an agreement that states that a party is excluded or have
limited advantages from the liability. It could be disadvantageous for opposite party if used
unfairly. Liabilities are restricted (Zoll, 2012).
TASK 2
2.1 Application of contractual elements
CASE 1- Agreement
Applicability of legal provisions
An agreement is basically a contract among two parties that occurs when two conditions
are satisfied:
 presence of offer
 presence of acceptance
For the establishment of agreement it is required to have an offer and offeror. Offeror is not
bounded to accept the offer. It is completely based on the desire of the offeree.
Decisions
Considering present case, Gumtree posted an advertisement that is an offer and Carol
who wanted to purchase is an offeree. According to the applicability of legal provisions,
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Gumtree has to sell couch to Carol by performing legal commitment as Gumtree tree gave offer
by posting advertisement . Consequently, Gumtree has entered into agreement so gumtree has to
sell couch to Carol and therefore,by acceptance via email Carol is needed to form contractual
relationship .
CASE 2- Consideration
Devi,son of Preston wished to have no interference from his father. Consideration come
with the bargaining of the contract. Contract constitutes of exchange of promises. According to
the present scenario, Preston promised IT firm to give £150,000 on hiring his son. Before
receiving letter from Preston company hired Devi making no profits for the company. Therefore,
contractual relationship was not made between IT company and father of Devi and hence
company could not impose the promise made by Preston.
2.2 Application of legal terms
CASE 3- Exclusion Clause
Acccording to exemption clause, parties are restricted to take legal action. It provides
advantage to opposite e parry to make benefit by unfair means. According to the given case,
Restaurant is not liable for compensation faced by the customer due to applicability of exemption
clause. People are responsible for their losses of valuable items. Therefore, restaurant is not
liable to pay compensation to the man for his losses (Shavell, 1980).
CASE 4- Implied term
According to the implied terms, laws are required to be followed by the individual or a
company are entailed by its nature. It do not exist in written or oral means, but it is assumed that
these contract are executed in an appropriate manner.
According to the given scenario, Yeti is liable to pay Aaron for his implicit expenses that
he suffered on the warehouse. As a result, Aaron has right to deny for the payment of increased
loan as it was not considered under the contract. However, owner has agreement that rent will
not be increased upto the 5 years. Owing to this, Aaron can easily refuse to pay the same.
Therefore, Yeti is liable to pay compensation to Aaron.
2.3 Evaluating the impacts of distinct terms
CASE 5
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Policyholder applied for motor insurance. Insurer asked the policyholder whether he had
made any claim before. Policyholder refused saying he had never claimed before (Zamore,
2016). After a while, insurer found that a claim of theft was made by the policyholder, thus,
policy became void from the very beginning.
Here, condition provision is applicable. According to this , breaching of conditions could
make injured party to cancel the contract and can claim for the losses. As per the given case,
policyholder broke the conditions of contract and is now completely liable to pay for the losses
to the insurer.
CASE 6
According to the given scenario, situation was not dealt appropriately by the insurer. In
terms of contract there was a breach of warranty. To the questions asked by insurer women's
acknowledged was because of her misconception which the insurer realized afterwards. As a
result, insurer has no right to void the policy from the beginning.
TASK 3
3.1 The similarities and differences (contrast) of tort liability with contractual liability with
example
Contractual Liability Tort Liability
 On the breach of condition or warranty,
the losses can be claimed by the injured
party, is known as contractual liability.
 It comes under Civil Law. It happens
due to negligent behavior of other party
(Borchard, 1924).
 Contractual parties are required to
follow all the terms and conditions..
 The accused party is required to follow
the standards in a significant way.
 Mutual relationship between the parties
takes place which is regulated by the
co0nditions of the contract.
 Mutual relationship does not exist
between the parties. The relationship
that takes place due to carefree
behavior and attitude is directed by the
court.
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 Example: An agreement between
company A to provide security services
to B and in return company B would
pay to company A.
 Example: occupier's liability,
defamation
3.2 The reason for the arise of liability for negligence and the conditions need to be met for a
claimant to successfully prove negligence(with examples)
Negligence is referred to as an opposite to lawfully binding contract which mainly occurs
due to a careless approach of its participants. It is in regard to state a negligent formulation
against both the contractual and tort liabilities (Marks, and et.al., 2013). Negligence is needed to
satisfy following requirements:
 Legal duty must be present to carry out reasonable care.
 Failure should be there to perform that duty.
 An injury or loss must be faced by the plaintiff.
 The negligent act is needed to be proximate cause of the damage. If proximate cause has
not happened then harm would have not happened.
Before a court announces losses,there are certain elements of negligence that is needed to be
present.
Defenses Against Negligence
The negligence that is caused by plaintiff and defendant is known as contributory negligence. If
injury is caused by plaintiff then plaintiff would not receive losses for it (Cornish, 1998).
The plaintiff ca collect some losses but the amount would be reduced as comparative to others
due to its contribution in the damage. This is known as Comparative negligence.
Damages
There are three types of damages:
 Special damages: This is provided to those where financial impact can be itemized. Eg,
income loss
 General damages : Losses that cannot be compensated with money. Eg, pain Punitive damages: Losses that are correctional that is should be not be committed again.
Liability Insurance
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Liability Insurance is also known as third party insurance and protects damages from
liability lawsuits. The court decides the damages upto a certain limit, which is to be paid by
liability insurance.
3.3 meaning of Vicarious liability, How a business can become vicariously liable (with example)
Vicarious liability is a legal conviction that assigns to a person who is liable, who did not cause
any injury but has legal relationship with the person who acted negligently. It is also known as
imputed relationship (Negligence, 2015). Eg, Parent-child relationship, Owner-driver
relationship etc. Employers are considered as the vicariously liable for any act conducted by the
workforce during the course of employment or during working hours. Another example of
imputed negligence is assigned liability to the owner of a car , where the driver committed
negligent act. The situation can be that someone else is responsible for the actions. Eg, The
employer is responsible for the all the actions which is being performed by the employee during
the employment period. Some the actions could be bullying or violent acts or copyright
breaching.
TASK 4
4.1 Applying the elements of the tort of negligence and defenses in the given business scenarios
below
CASE 7
a) In reference to the given case, widower of Mr. Brown can directly charge hospital for
their careless approach of attention to Mr. Brown. Doctor who was on duty was instructed the
nurse to him medicines without doing diagnosis of health traumas (Rizzo, 1980).
b) If medicines are purchased from outside outlet of medicines other than hospital then
hospital is not payable to any losses. It would be then considered as fault of medical store
representative who has given expired medicines to Mr. Brown because of which he died at his
home .
4.2 Elements of vicarious liability according to the given cases
CASE 8
According to the given scenario, cab driver's enterprise is responsible under the vicarious
liability. It is due to the appointment of the driver by their enterprise who made consumption of
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liquor at duty hours which resulted into accident that had severely injured client. Hence, client
can now legally claim for damages from the enterprise, who is responsible for the activity.
CASE 9
The supermarket is not directly responsible for the intervening to take charge of health
and safety measures on behalf of another firm. However, it is suspected to pay compensation
towards the indemnities caused to the innocent party (Levinson, 2005.) . The fact is that their
employees also have suffered from various severe injuries. Thus, the supermarket is liable to pay
probable medical insurance to its employees
CONCLUSION
The study has helped to understand the various aspects of contract and negligence in a
productive manner. It enabled to learn elements of contract , its theoretical concepts and its
implementation in different case scenarios. The report has gained rel event knowledge on
essentials required to form a contract. It has also focused contractual and tort liability. Practical
implementation of vicarious liability has been carried out. The report identified various aspects
of agreements and it's types such as oral, wri9irten , distance selling. Written agreements provide
proof to claim if any losses are incurred , thus making advantage over oral agreement.
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REFERENCES
Book and Journal
Borchard, E. M., 1924. Government Liability in Tort. The Yale Law Journal, 34(1), pp.1-45.
Boundy, C., 2016. Business Contracts Handbook. CRC Press.
Cornish, J., 1998. Liability for Negligence. New Zealand Engineering, 53(8), p.32.
Katz, A., 1990. The strategic structure of offer and acceptance: game theory and the law of
contract formation. Michigan Law Review, 89(2), pp.215-295.
Marks, R. J., Marks, R. J. and Jackson, R. E., 2013. Aspects of civil engineering contract
procedure. Elsevier.
Rizzo, M. J., 1980. Law amid flux: the economics of negligence and strict liability in tort. The
Journal of Legal Studies, 9(2), pp.291-318.
Schwartz, V. E. and Rowe, E. F., 2010. Comparative negligence. LexisNexis.
Shavell, S., 1980. Strict liability versus negligence. The Journal of Legal Studies, 9(1), pp.1-25.
Zamore, J. D., 2016. Interference with Lawful Business (Vol. 2). Business Torts.
Zoll, F., 2012. The binding power of the contract: Protection of performance in the system of the
Common European Sales Law. Journal of International Trade Law and Policy. 11(3).
pp.259 – 265.
Online
Levinson, J., 2005. Vicarious liability for international torts. [Online]. Available through:
<http://www.1cor.com/1158/?form_1155.replyids=282> [Accessed on: 15th May 2017].
Negligence. 2015. [Online] Available through: <http://e-lawresources.co.uk/Negligence.php>.
[Accessed on:15th May, 2017].
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