Detailed Analysis of Contract and Negligence in Business Law

This report provides a comprehensive overview of contract and negligence law within a business context. It begins by outlining the essential elements of a valid contract, including offer, acceptance, consideration, intention, and privity of contract, supported by case scenarios. The report then delves into different types of contracts, such as unilateral, bilateral, and collateral contracts, as well as electronic contracts, highlighting their implications. It also explores the terms of a contract, including express, implied, and innominate terms, along with conditions, warranties, and exclusion clauses, using case precedents to illustrate these concepts. Furthermore, the report analyzes specific case studies involving contract formation and breach, as well as negligence and vicarious liability, providing practical examples and legal interpretations. The report concludes by differentiating between contract and tort liability, emphasizing the legal and practical implications of each.

Aspects of
Contract and
Negligence for
Business
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TABLE OF CONTENTS
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
1. Essential Elements of Contract................................................................................................3
2. Impact of different types of contract .......................................................................................4
3. Terms of Contract....................................................................................................................5
4. Todor and Ivan Case ..............................................................................................................6
5. Case of Adam and Brain.........................................................................................................6
6. Local Council v/s Barry...........................................................................................................7
Task 2...............................................................................................................................................7
1. Contract and Tort Liability.....................................................................................................7
2. Negligence..............................................................................................................................8
3. Vicarious liability .................................................................................................................10
4. Case of Mark and Regent hotel..............................................................................................11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13
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INTRODUCTION
In present era, contractual agreements are increasing day by day, there is a need of
guidelines and principles so as to avoid unfair practices (Milner, 2011). For this purpose,
contractual law is established by British parliament. In absence of contractual relationships,
duties are described by negligence law. Present study also highlight the key provisions of
contract and negligence law. However, the report will also understand essential elements of a
valid contract that act as the base for entering into a valid contract. In addition to this, it will also
understand different contractual terms inserted in the contract as well as different type of contract
for the business. Other part of report will focus on explaining the negligence law along with the
different provision of defences and the vicarious liability.
TASK 1
1. Essential Elements of Contract
A Contract is nothing but an agreement which is legally enforceable (Adams, 2010).
Elements which makes agreement a valid contract are as follows: Offer : It can be termed as situation where a person intends as well as express his wish
to another person to do any act or something . Offer can be oral or write. Offer can be
made in general or to specific group of people (Steele, 2007).
Case scenario : As per the case of Fisher v Bell [1961] 1 QB 394 the court have not
consider the contractual relationship between both the parties as display of products is not
consider as a offer. However, it is considered as invitation to the public. Acceptance : A person when gives his consent to the offer made from another person, it
is termed as acceptance. Conditions or terms of offer must not be modified while
accepting the offer. Acceptance must be given by the person to whom offer is made.
Case Scenario : As per decision provided in felthouse v Bindley, One must communicate
his consent to person making offer if he accepts it. Silence cannot be treated as
acceptance. Consideration : Paying another person for acts done by him as per contract is
consideration. Consideration is anything either of monetary or non-monetary nature given
by one party of contract to another for acts done by him (Beatty and Samuelson, 2012).
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Case Scenario : As per decision given in Chappell v Nestle, inadequate consideration
will not make any difference but it should be sufficient to support the offer. Intention : Agreement would be a valid contract when both parties intend to perform
their respective acts. Intention can't be shown or proved, thus it is presumed that both
parties intend to do their acts. No action by any of the party should question on their
performance (Levinson, 2005).
Case Scenario : According to decision made in ferrera v Littlewoods pools, if evidences
are available which questions on the duty of parties or their performance to contract, then
their intention would be questioned. Privity of Contract : No action can be taken on any other person which is not a party to
contract neither any person can take action if he is not a party to a contract.
Case Scenario : As per decision provided in Tweddle V Atkinson, third party who is not
in the contract cannot pay consideration.
2. Impact of different types of contract
“When one Speaks of types of contract, it is all the same under English law”, this
statement is not true because each type of contract has different consequences under different
situations (Bowyer, 2000). Description of different types of contract along with their impact is
enumerated below: Unilateral Contract : In this type of contract, a single party is bound to perform his act
and the other party is independent in making decision whether to perform his act or not
are unilateral contracts.
Case Scenario : Say, X lost his branded watch somewhere and announced that whoever
finds it will get reward of 100$. X is bound to pay 100$ if someone returns the watch but
there is no boundation on anyone who finds watch to return to X, as per judgement of
Carlill v Carbolic Smoke Ball Company.
 Bilateral Contract : A proposal in which both the parties are bound to perform their act
can be termed as bilateral contract (Willey, 2012).
Case Scenario : As per decision given in Brogden v Metropolitan Rainway, an offer is
made and accepted by another, and a valid contract is formed then both the parties have
to perform their respective acts.
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 Collateral Contract : It can simply be defined as a contract raised from original contract
to support some terms (Desai, 2008).
Case Scenario : In accordance with the case of when some terms are not fulfilled of
original contract and damages can't be recovered on the same by the contracting parties.
 Electronic Contracts : Contracts made between parties through Electronic Mode. These
Contracts are authenticated by Electronic Signatures. Contract may be between two
persons situated within a city, within two state or within different countries.
Case Scenario :
3. Terms of Contract
Terms of contract are not easy to identify and distinguish as each carry some sort of
similarity (DiMatteo, 2012). Different terms of contract are explained below along with factors
which distinguish them from other terms:
 Expressed terms : Terms which are decided by both the parties with their mutual
consent and are conveyed to each other. These terms can be adjusted with their consent.
Contract should specify all such terms specifically. Expressed terms vary with contract to
contract (Nystén-Haarala, 2010).
 Implied terms : Terms which are implied by any law, statute or jurisdictional authority
i.e. no need to conveying it separately. Such terms are applied to general public. These
terms will never change with change in contract. Eg. Provisions of various Acts,
Judgements.
 Innominate Terms : These are the terms which somewhere lies between expressed and
implied terms. These terms are not decided at time of contract but are agreed by the
parties later if needed (Giliker, 2010). As per the case scenario of Hong Kong Fir
Shipping v Kawasaki Kisen Kaisha [1962] the terms into an agreement were not
bifurcated into warranty and condition. Therefore, the claimant party is in the position to
repudiate the contract.
 Conditions and Warranties : Condition are the terms that need to be fulfilled to legally
enforce a contract. These should necessarily be followed otherwise may result in
damages or either contract to repudiated. Warranties unlike condition need not
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necessarily be followed up. Condition includes warranties but warranties does not include
conditions (Manuel, 2011).
 Exclusion Clause : Terms which excludes a person to be held responsible for certain acts
or happening or to oblige him to exercise some rights are known as exclusion clause. In
other words, if any term is inserted in a contract limiting rights of any party to would be
termed as exclusion clause. As per the case precedent of Chapleton v Barry, clause that is
being inserted into a ticket is not considered as the part of contract as ticket provided by
the local attendant is merely consider as the receipt (Gray, 2010).
4. Todor and Ivan Case
Offer is when someone expresses his willingness to other to do anything but inviting
someone to make an offer is an “Invitation to treat” (McKendrick, 2012). In accordance with this
approach, offerree is entitled to accept or refuse the offer.
In the given scenario, a book was displayed on todor's bookshop and Ivan wants to buy
the book, it is an invitation to offer as book was displayed in shop and anyone who wants to buy
can make an offer to Todor. Todor refused to sell as it is the last copy and already sold to Carl.
There is no contract formed as there is an offer but not an acceptance. Todor is entitled to refuse
to sell the book to Ivan as its on him to accept the offer made by Ivan or not. He is not bound to
sell the book to Ivan just because he had forgotten to remove it from display.
5. Case of Adam and Brain
Contracts are categorised in different types, one of them is unilateral contract. Unilateral
contracts are those in which only one party is bound to perform his act, another party is free from
such boundation. In these contracts, offer is made to general public (Alkhamees, 2012).
In the given case, Adam advertises to reward £1000 to first person to swim across
English channel. It is a unilateral contract as Adam will be bound to pay £1000 to one swims
first to English channel, but there is no boundation on any other person to swim. Brain sees the
advertisement and completes the task and claim the reward from Adam. Adam refuses to pay on
the basis that he places another advertisement withdrawing the reward. As per the above
provisions, Adam is bound to pay reward to Brain as he had started to swim before another
advertisement was placed cancelling the reward (Padhi, 2012).
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According to the case facts of Carlill v Carbolic Smoke ball, Adam is accountable to
provide reward that he had advertise in the newspaper to the performance that was rendered by
Brian. Although revocation of offer by Adam was not in proper time as Brian has started to swim
across the English channel after reading the advertisement from the newspaper.
6. Local Council v/s Barry
Liability of any person if reduced or restricting rights of a person to contract by placing
any term in a contract, will be termed as exclusion clause (Bledose, 2010).
In the case given, Barry pays amount to have chair in the park maintained by local
council for which he is allotted a ticket. The chair collapsed damaging Barry's cloth. On
complaining about the same, attendant points out the exclusion clause written on ticket which
states no liability of council on damage from hired equipments.
The contention of attendant is not valid as ticket is merely a receipt and not a contract and
exclusion clause can only be inserted in a contract. To call anything a contract, it must have all
the essential elements of a contract like offer, acceptance, consideration, intention etc. and all
these are missing in the given case. Thus, the council cannot refuse to pay damages on the basis
of the clause mentioned on the ticket (Straub, 2011).
As per the case precedent of Chapleton v Barry, clause inserted into the ticket is not part
of contract as ticket is simply just a receipt. However, through considering this prospect,
exclusion clause is not properly integrated by local council as per the result park attendant is
accountable for providing indemnity for the injury and damages occurred to the Barry by using
the faulty chair in the park.
TASK 2
1. Contract and Tort Liability
Contract Law and Tort Law has many similarities such as both these laws are covered
under civil law. Both laws state solutions if duty was breached. Under both laws, damages are
paid on non-fulfillment of their duties. Description of differences between these damages is
enumerated below:
 Definition : Liability arising from breach of any of the terms of contract are known as
contractual liability while liability which arise due to action of any person causing harm
to another are known as tort liability (Marsh and Soulsby, 2002).
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Case Scenario : In accordance with the case of Chapell v. Nestle, contractual liability was
imposed as terms of the contract were not satisfied. However in case of Caparo Industries
Plc v. Dickman, liability arises because general duties were not satisfied. Relationship between parties : Parties are related to each other before the formation of
contract but in tort liability, relationship arises after the occurrence of negligent action
(Zoll, 2012).
Case Scenario : As per decision given in case of Winterbottom v Wright, there must exist
contractual relationship between parties. However, decision given in Hedley Byrne and
Co v Heller, relationship arises with occurrence of liability i.e as a person is harmed by
another. Objectives of Law : Parties are liable to pay damages under a contract if duties are not
performed satisfactorily so Contract law objects parties to perform their acts as per terms
of contract (Garriga, 2013). Unlike Contract law, liability arises in tort law if negligence
of law is done by person harming another, thus tort law objects a person to duly follow
his duties.
Case Scenario : In case of Olley v Marlborough Court, unfair terms were exercised
which result in occurrence of damages but as per case of Hinz v Berry, there must be
actual injury caused by action of another giving rise to damages. Liability to Damages : Terms of contract if not satisfied will give rise to liability to pay
damages to innocent party to contract by person who made default whereas any act done
to harm another person whether are bind by any contract or not will be liable to pay
damages to person who is harmed (Owen, 2007).
Case Scenario : As per decision of Addis v Gramophone, damages are paid as party has
breach the terms of contract but in case of Spartan Steel and Alloys Ltd v Martin, Person
has not exercised duty of care and cause harm to other arising damages.
2. Negligence
Person when does not duly exercise his duties and does not reasonably take care of his
acts is said to have negligence. Following elements need to be considered before saying any
person having negligence :
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 Duty of Care : A person as per negligence law must do his acts with due care, preventing
any action so as to harm or cause injury to another person (Rose, 2009).
 Breach of Duty : Negligence law states that when duties are not fulfilled or done in an
improper manner, it will be said to be breach of duty i.e he fails to exercise his duties
with reasonable care.
 Damages : Damages are said to be incurred when duty is breached in a manner causing
harm to another person. In such a case, defendant has a right to claim damages from the
claimant. Damages must have incurred in actual.
 Damages need not be remote : Damages occurred should be measurable i.e they need
not be too remote to identify (Clarkson, 2010).
As happened in case of Donoghue v. Stevenson, Donoghue drank beer offered by a
friend. The beer was supplied by a manufacturer Stevenson. On drinking the beer, Donoghue
found some remains of decomposed snail. Although there was no contractual relationship
between Donoghue and Stevenson, as payment was made by her friend, she sued Stevenson. It is
clearly a case of negligence by Stevenson, because while manufacturing drink, he should be
careful as such carelessness by him may cause serious harm to other having his drink. He had not
exercised his duty with care resulting in negligence.
Scenario A
Negligence arises if one does not exercise his duty with care or there is a breach of duty.
In the given Scenario, Ben is hotel owner. Roger complains about the skin rashes he had by
using dishwasher for long period of time (Olander and Norrman, 2012). As a owner of hotel, its
the duty of Ben to take proper measure regarding their products so as not to cause any injury to
other. Ben had made available rubber gloves but employees did not use them. Law of negligence
will not be applied on Ben as he has exercised his duty with care by making available rubber
gloves, if employees did not use them, Ben can not be held responsible for the same. Thus Ben
does not owe any non- delegable duty of care as he had provided a safe working environment.
No liability in negligence arise in the given case.
3. Vicarious liability
In accordance with the provisions of vicarious liability, third party is held responsible for
the actions of another person because the former exercises controlling power over the latter.
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Under vicarious liability, all the persons are in relationship where one is controlling others i.e.
action done by others is on the influence of the controlling party (Milner, 2011). Examples of the
same can be employer-employee, principal-agent, parent, child and many more where former is
responsible for the acts of latter like employer is responsible for the work done by employee.
Vicarious liability arises when either the controlling party or the controlled party defaults in their
work. Say, controlling party had given wrong directions or controlled party had not acted as per
directions given to him, vicarious liability arises. The party who defaults can also be termed as
faulty party or violated party.
Controlling party is held responsible for any default and liability in general, like doing a
right thing in a wrong manner by employee will make his employer responsible, because
controlling party must also monitor the work given by him rather than just controlling. In
contrary to this rule, in accordance with decision given in Armagas Limited v Mundogas S.A,
joint liability will arise in situation of company. It is because, company is a artificial person and
thus it is operated by the directors.
Scenario B
Vicarious liability arise where a person can be held responsible for action of another
because he has control over him i.e one is controlling party and other is controlled party (Beatty
and Samuelson, 2012). Controlling person will be liable for all the acts of controlled person done
during the course of employment.
In the given scenario, Colin knocks Roger with frying pan laying him unconscious due to
anger. Being the head chef, Colin sees the work of kitchen But being the hotel owner, Ben has a
duty to carefully monitor the work of his employees timely. Roger brings claim in vicarious
liability against Ben for Colin actions Vicarious liability arises because Roger and Ben are in
employer-employee relationship, although Colin is sub-ordinate but Ben is the employer. By
getting fed up with Roger attitude, Colin cannot be violent against Roger,and the actions of
Roger are not being monitored by Ben, so he is responsible for Colin action as all this happened
during the course of employment and with Ben negligence towards his employees work. Thus,
Roger can claim against Ben in vicarious liability but can sue Colin because violent act was done
by Colin.
Defenses available in negligence
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In accordance with the provisions of the negligence law, defendant will try to reduce the
claims put up on him by defenses available in negligence (Levinson, 2005). One will never be
quite when any claim is put on him, he will try to prove that claims put on him are wrong, he can
defend himself by any of the the following ways explained below : Volenti non fit injuria : Defendant had taken proper measures to aware claimant of risks
attached but injury is caused to claimant due to his own ignorance, then claimant will not
be able to recover damages from defendant.
Case scenario : In accordance with case of Wooldridge v Sumner, defendant can make defense
only if he is injured by claimants action, negligence should be done by claimant only. Contributory negligence : Claimant and defendant when are equally responsible for any
loss or injury occurred, it would be termed as contributory negligence (Bowyer, 2000).
Case scenario : As per decision given in capps v. Miller, both the claimant and defendant
are injured due to their own mistakes.
 Ex turpi causa : Illegal action taken by defendant but act was done for the sake of
claimant. As per decision given in Tinsley v Milligan, action was taken by defendant to
avoid adverse consequences.
4. Case of Mark and Regent hotel
Occupiers liability means when one owns any premises or property (they have a control
over that property), then they have to fulfill certain responsibilities towards those who want to
use that property. If any loss or damage occur to other due to non-fulfillment of the occupier's
duty, he will be liable to pay damages.
Occupier's Act 1950
As per Occupiers liability act,1957, a person would not be able to claim damages caused
to his personal properties due to his negligence (Giliker, 2010). However, Occupiers liability act,
1984 states that if person is injured badly due to irresponsibility of occupiers liability then he can
claim damages for the same from occupier. In the given scenario, Mark, guest in Regent hotel
enters the pool even after reading the sign which reads that ‘Pool closed between 7.00pm and
7.00 am. No entry to visitors during these hours; ‘Dangerous when unattended’. Mark reads and
ignores the sign and got badly injured and breaks his designer sunglasses. In this case situation,
Mark would not be able to claim any damages for his designer swimming trunks as per occupiers
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act 1957 because damage is caused to personal asset because he ignored the sign. In this
situation, defense of volenti non fit injuria will be applicable (Marsh and Soulsby, 2002).
Occupier's Act 1986
This Act had extended the obligation of the occupier for the property damages. In
addition to this, provisions of this Act was associated with the sections of Health and Safety Act.
Mark can claim for damages as per occupiers act 1984 because note written by hotel authorities
is merely a warning, no measures are taken to stop visitors from entering the pool. However, he
is still not entitled for the property damages as he voluntarily put himself in risk of injury
(Alkhamees, 2012).
CONCLUSION
From the above report it can be concluded that for enabling a legal contract between the
parties it essential to have certain elements like valid offer and acceptance, legal consideration
for entering into a contract etc. however, the report has also measured certain terms of the
contract that is essential to prevent the parties from unfair situation. In addition to this, report has
also measured that contractual liability is distinct with the tort liability but they are consider as a
part of civil law. The liability in valid contract arises when the party renders unsatisfactory
performance as well as breaches the terms and conditions while, the tort liability arises when the
party follow the negligent acts. Furthermore, it has also concluded that employer is duty-bound
to take care of their activities of employees else they will be held vicariously susceptible to
render remedies or compensate the injury of innocent party.
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