Contract and Negligence: Legal Aspects of Business Operations Report

This report provides a comprehensive overview of contract law and negligence within a business context. It begins by outlining the essential elements of a valid contract, including offer and acceptance, intention to create legal relations, consideration, free consent, competency of parties, and lawful object. The report then explores the different types of contracts, such as face-to-face, written, and distance selling contracts, and the impact of each. Key terms like conditions, warranties, in-nominate terms, and exemption clauses are defined and analyzed. The report further examines the application of contract law through case studies, illustrating concepts such as agreement, consideration, exclusion clauses, implied terms, and misrepresentation. The cases cover scenarios including online sales, employment offers, restaurant liability, property rentals, and insurance policies, providing practical examples of how contract and negligence principles are applied in real-world situations.

ASPECTS OF CONTRACT AND
NEGLIGENCE

2

INTRODUCTION
Contracts and agreements are the crucial elements of any business organization. These
can be formed orally or in written form (Butler, 2014). Written contract involves roles and
responsibilities of both the parties written in a legal document. It reduces the chances of breach
of contract. Contract is a tool that safeguards the resources of both the parties. In the given
report, Peter Abraham wants to carry his own business as a building contractor (O’Leary-Kelly
and et.al., 2014). Before starting the business, he wants to know about various legal formalities
that are needed to be done. This report includes essential elements of a valid contract and there
application as well as principles of liability in negligence in business activities . Report also
emphasizes on similarities and dissimilarities of liability of tort with the contractual liability and
elements of vicarious liability are also discussed in the report.
TASK 1
1.1
A contract is an agreement between two or more than two parties that is intended to be
enforceable by law. A contract is like a promise between two parties to do something in return
for a valuable benefit known as consideration. Following are the essential elements to form a
valid contract:-
 Offer and Acceptance: To form a valid contract, there must be an offer by one party and
a proper acceptance by another. When the offer is accepted, it becomes an agreement.
When the agreements are enforceable by law, it becomes a valid contract. All contracts
are agreements but all agreements are not contract.
 Intention to create Legal Relationship: Besides offer and acceptance, the agreement
must create a legal relationship between parties. One party can go to the court of law in
case if another party does not meet their promise. When there is no such intention, there
is no contract. This is the reason because of which social and domestic nature do not
contemplate legal relationship.
3

 Legal Consideration: Consideration means something in return for the promise. The
agreement must have lawful and real consideration. Without consideration, it will be a
bare promise that cannot be enforceable by law.
 Free Consent: The consent of parties must be free. It should not be obtained by coercion,
undue influence, fraud, misrepresentation and mistake. If consent of party is affected by
any of the above elements, contract cannot be called as a valid contract.
 Parties must be Competent: If the parties do not have ability to fulfill the conditions of
contract, then it cannot be called as a legal contract. The parties must have varied
capabilities such as age of majority, sound mind and not disqualified by the law to enter
into a contract.
 Lawful Object: The object of contract must be lawful. It must not be immoral, fraudulent,
unlawful or opposed to public policy and its welfare.
 Not Expressly Declared as Void: The contract must be enforceable by law and it must
not be declared to be void.
1.2
The impact of forming contracts can be described as:
Face-to-Face- In face to face contracts, both parties decide the norms and conditions of
agreements by sitting next to each other. These contracts are generally made in oral form where
no document work is carried out. It is a mutual agreement between the parties where chances of
breach of contract is on higher side.
Written Contract- Written contracts are the agreements between two parties where
norms and conditions of contract are carried out through documents (Mengoni and et.al., 2014).
At the time of breach of contract, written contract helps both the parties. Written documents last
for long time so, it can help as a legal proof at the time of breach of contract. Innocent party can
sue the defendant party where any misconduct happens.
Distance Selling- When the parties cannot present physically, they can go for distance
selling. Distance selling contracts generally involve buyers and sellers. They can purchase and
sell the products as per distance selling contracts. Television, Internet, Emails and telephones
help them to gain the information about products and services and then purchase and sell
4

according to the contract. Peter can also form distance selling contract with other parties with the
help of these mediums, but somewhere, there exist a possibility of happening misinterpretation
among contracting parties.
1.3
Meaning and effects of the following terms are:
Conditions- Conditions are the major terms used in the contracts. It defines the roles and
obligations of parties of contract. It is a fundamental term where parties cannot go beyond the
conditions of contract (El-Sayed, Tang and Jones, 2015). At the time of breach of a contract,
these conditions help innocent party to ask for his claim against the defendant party in the court
of law. In the given case, Peter can go for a contract with the bank in which he can take a bank
loan for constructing the building. There will be some conditions that Peter need to follow. The
impact of breach of condition can be analyzed with the case of Possard v Spiers.
Warranty- Warranty is a promise which provides assurance by one party to another that
the specific facts and conditions are true. The condition is fundamental stipulation of contract
whereas warranty is an additional specification. In warranty, faulty party will only be able to
seek monetary damages for the suffered losses. Same case happened with Bettini vs Gye in 1876
where the innocent party was only asked to claim for the damages from defendant party
(Offerdahl, Hodgson and Krupke, 2016).
In-nominate terms- In-nominate terms are different from conditions and warranty. It
questions whether innocent party to the breach was deprived of substantially whole benefit of the
contract. In-nominate terms provide assistance to the injured party on breach. Hence, Peter is
required to have knowledge regarding the implications of these terms while contract takes place.
Exemption Clauses- Exemption clauses stipulate that a party has limited liability or
excluded from the liabilities. When it is used in an improper way, it may affect a party. Peter
should know about the implication of exemption clause to take advantage of the clause (Thomas
and et.al., 2016).
5

TASK 2
2.1
Case-1 Agreement
In the given case, Carol saw the online classified ad and advertisement of a brown couch
on TV. She wants to buy it for her unfurnished apartment. The price of the couch was also
mentioned in the ad, it was £600. She E-mailed to the given contact to purchase that couch.
(Ralston and Weber, 2014).
In this case scenario, all the necessary elements that makes a contract valid are present.
There was a proper offer and acceptance between both the parties. Gumtree has offered and
Carol has accepted that offer. The brown colour couch was the legal object in the given case.
There was a real lawful consideration worth £600. Both the parties are capable to contract. The
meaning of the contract was also certain that Gumtree wants to sell and Carol wants to purchase
that brown couch. The acceptance of the offer was freely given. Both the parties are competent
and wants to create legal relationship. There was an agreement between both the parties and
these mentioned elements make it legally enforceable by the court of law. Agreements that are
enforceable by law is called as contract. Therefore, there was a contract between Carol and
Gumtree(seller).
Case-2 Consideration
In the given case, Devi the son of Preston was looking to get a job at cyber-security
position in a large IT firm. Devi didn't want any interference of his father in case of employment.
The firm has decided to hire Devi after several weeks. Firm offered Devi for the job and he
accepted the same. Devi's Father Preston was unaware about this situation and offers £150000
through Email to George to hire his son. When George received that email, he wishes to enforced
it against Preston.
In this case, the consideration was not legally enforceable as it was considered to be a
bribe offered by Preston to George. A Contract requires a legal consideration that makes it
enforceable by the court of law. In this case it will not be considered as a valid contract between
Preston and George. Therefore, George can not enforce the promise.
6

2.2
In the given case, A couple booked a table and went to the restaurant in London. At the
entrance the man handed over his jacket to the porter. The porter gave him a receipt which has
mentioned the exclusion clause that states that all the valuable items must be removed and
restaurant staff will not be responsible for missing or stolen items. But the man forgot to remove
his wallet from the jacket that contained £500. After having dinner, when the man was about to
make payment he realizes his wallet was left in the pocket of jacket. When he collected the
jacket, he realizes the money has been stolen from the wallet. He sought to recover it from the
restaurant but the restaurant refused to refund the money stating about the exclusion clause
mentioned on that receipt. In such case the man is not entitled to make claims as he should have
noticed that exclusion clause before entering into the contract. there is the responsibility of the
man to take care of his belongings and also responsibility of the restaurant to communicate the
exclusion clause in proper manner. Therefore, the restaurant is liable to pay the compensation
amount to the couple for their stolen money.
Case-4 Implied Term
In the given case, Zehphra rented a warehouse to Aaron. It was not occupied for long
time as result it requires maintenance. Aaron made required changes and improvements to the
warehouse. Zehphra, the landlord of the house promises Aaron that he will not increase the rent
for next five years. A year later Zehphra died and Yeti got that warehouse in inheritance. Yeti
immediately increases the rent and Aaron refused to accept the increased claim. Therefore, Yeti
terminated the tenancy and Aaron has claimed for the amount that he has spent on the
improvements of the property. Yeti denied to pay the amount saying that there was nothing
mentioned in the agreement. In this case Aaron can not claim against Yeti. It was an implied
contract, he should not repair the warehouse as he was the tenant. Implied contracts are not
legally enforceable. Aaron does not posses any authority to make any changes or improvements
in the warehouse. He is not entitled to get any compensation for the improvements he has done.
There was not any legal contract between Aaron and Zehphra so he can not claim against the
increased rent.
7

2.3
Case-5
This is a case of Motor Insurance company and a policy holder. In the given case, the
proposal form ask policy holder that in last 5 years, is there any case when he or anyone from his
family has involved in any motor accidents and made a claim for that. The answer of policy
holder was 'No'. Later when the car of policy holder was stolen, the insurer come to know that
he had claimed for his lost car under the previous motor car insurance policy. Soon after
knowing that the policy holder lied to him, insurer voided the policy and reject the claim.
Therefore, in the given case the insurer has all the rights to terminate the policy and breach the
contract because the policy holder lied and did not disclose the fact that he has claimed during
that 5 year period. The policyholder is not entitled to claim against insurer and can not get
advantage of that policy. He should have disclosed the fact.
Case-6
In the given situation, the insurer has identified that after purchasing, the car the
policyholder didn't make any modification in car. At the initial stage the insurance company can
terminate the policy. The car has already been insured from the accidents. The lady can not
breach of warranty as her husband has already claimed it earlier. The lady was unaware about
this situation. As per the exclusion clause claims can only be made by the party for accidents at
the time when they insured the car. The lady was unaware about the claim made by his husband
earlier but the insurance company has assumed that all the information provided by the lady
regarding the losses occurred by her during the 5 years was correct. The lady was unable to
provide proper information regarding the loss of the car. She felt that the insurance company
might reject her claim and failed to specify the losses.
TASK 3
3.1
The following are the similarities between Liability in tort and Contractual Liability:-
 The duties in both the laws are dealt by the breached contracts.
 In both the laws breach of duty takes places in case of violations.
8

 Contracts laws provides a fair solution when either party fails to perform similarly in case
of tort it provides remedy to the injured party in case of any violations.
 Contracts and Torts both obtain damages awards.
The following are the differences between Liability in tort and Contractual Liability:-
 Issue of consent is the major difference between tort and liability. In case of contract,
Parties enters into a contract knowingly, accept the offer with free consent, they can not
force other to enter into the contract therefore the only mistake or misunderstanding
becomes the issue in damage or breach of any contract.
 On the other hand, in torts the parties enters for the purpose of safety, health, profit or
privacy. All these elements prevents them from recovering the damages. It usually
awards the victim for their loss.
 In order to punish the defendant, punitive damages are awarded in torts whereas punitive
damages rarely issues in contract claims.
3.2
Negligence is a failure to take care by the responsible person. In includes doing
something that an ordinary person would not do or not doing something that an ordinary person
would do in certain circumstances. It is a situation where the employer doesn't care his
employee. In an organisation employer-employee relationship is the accountability that offers
clean and safe working environment. If the management is unable to provide that kind of
working environment to employer and employee then they can get compensation in case of any
damage due to unsafe working environment. As per the Negligence Act, it is a prime
responsibility of the employer to prevent its employees from the possible injuries at the
workplace. If the employer is not able to provide proper safety to the employee at the workplace,
then employee is entitled to claim for the compensation against the loss or any injuries at the
workplace. These following conditions need to be fulfilled before making any claim:-
 Duty of Care: It is the prime responsibility of the employer to provide safe and healthy
environment to the employee. Employer can give training to the employees for the uses
of machinery so that the chances of injuries can be reduced at the workplace. If the
employer doesn't provide the same, employee is entitled to claim against the losses or
injuries.
9

 Breach of Duty: When one party of the contract failed to perform as per the terms and
conditions then the other party has all the rights to claim against that faulted party and get
compensation.
3.3
Vicarious liability is a situation where one party of the contract held responsible for the
action and omission of the other party. In an organization where employee makes any mistake
then the employer is liable for that mistake. Peter Abraham need to know all the laws and their
implication that he can be held responsible for range of actions committed by his employees such
as workplace harassment, inequality in wages, inequality between genders, breach of copyright,
violent or discriminatory acts etc. He can take strict actions against those employees who
misbehaves or interrupts the smooth flow of business. He can manage his employees by
encouraging them to perform, he can motivate them with various of rewards like cash benefits,
promotions, bonus, salary increment or by providing gifts to them. Through implication of these
elements he can ensure safe and healthy workplace environment.
Example:- when the organization brings new machinery enhancing the productivity, the
employer need to ensure that proper training about the uses of that machinery should be given to
the employees. If they use the machinery wrongly, employer is liable for that. Therefore, he
should provide proper training and learning regarding the uses of the machinery. When they use
it correctly, there are lesser chances of any accidents or injuries at the workplace. Even if they
got injured they are entitled to make claim for the injury by blaming the employer.
10

TASK 4
4.1
As per the detailed study, it can be said that there are number of key factors that need to be
consider in reference to tort of negligence. Classification of factors can be as unlawful, necessity,
justification and volenti-non-fit-injuria. It has been noticed that the unlawful is key aspect in
which employer is accountable against the claim. It means if any kind of loss is being occurred
by under illegal practice then innocent party can claim for the damage. Necessity states that, if
innocent party deals in illegal activities then it will not be held liable for compensation. Along
with this, justification is considered as factor that is defendant of the action. It can provide
easiness to activity in some context. In volenti-non-fit-injuria, innocent party holds the right to
claim for the damage so that issue can be overcome in desired way.
Case-7
According to detailed analysis of given case study, A individual named Mr, Brown has visited to
the Goodmayes Hospital. Individual was facing health issue such as breathing problem and chest
pain. But doctor was not available in the hospital so nurse has conversation with doctor through
telecommunication. As per the discussion with doctor the nurse has give him some painkillers.
At the next day the Mr Brown was found dead due to impact of respiratory disease. In present
case, the hospital is responsible for the act of negligence because the appropriate treatment was
not provided to him. Unavailability of doctor and in-responsive action will be considered under
the tort of doctor (Marks, Marks and Jackson, 2013). It was significant for doctor to provide
appropriate guidance to the nurse so that quality of treatment process can be improved. Along
with this, lack of availability of doctors in the hospital is also one of key issue because every
hospital is accountable to meet the demand of treatment service. Hospital need to focus on
treatment services by hiring sufficient number of doctors so that key standards of health care
sector can be accomplished in desired way.
A situation where doctor is not permanent employee of hospital then health care institution will
not carry kind of accountability in respect to negligence. It is because the absence of direct
11

relationship between hospital and doctor. Along with this, if further treatment is provided to Mr.
Brown from any other health care firm then hospital does not hold any kind of liability in respect
to the negligence act. It means hospital will not cover any kind of vicarious liable in regard to
activity (Sweet and Schneier, 2012). It is necessary for hospital administration to make sure that
the services provided to patient is according to key standards so that legal and ethical values can
be well maintained. If doctor is respective employee of firm and treatment provided is not
appropriate and damage has been caused to patient then hospital administration will hold liability
against the damage. It may lead hospital to legal issues which may affect overall working.
4.2
Case-8
In respect to the given case study, it can be said that Chauffeur company is accountable for the
unlawful practice. It may impact the working of organisation in diverse manner as per
consideration of legal values. In other aspect, the liability against the unlawful practice
performed by employee is also accountability of company. Driving a car under alcohol
consumption is illegal practice and as per investigation, it can be stated that the driver was over
drunk. It indicates that the practice accomplished by the driver will hold the liability of company
(Hunter, 2015). In this, it is significant for business firm to make sure that key aspects are under
control. If company is not concerned about the act or performance then legal issues may be
occurred. Financial and legal punishment can be provided to the employer so management need
to ensure about it. Case also indicates that the presence of employer and employee relationship is
key reason that the company is responsible for the act performed by worker. It means Chauffeur
is liable for giving compensation against the damage held due to negligence of its personnel.
Case-9
According to presented case learning of Donoghue v Stevenson (1932), it can be said that the
supermarket is account for the act if safety measures are not properly installed. It has been
noticed that the management of supermarket need to ensure that the employees are well protected
so that legal values can be promoted effectively. Hence, in the present case, the security and
12

safety measures were not appropriate that has harmed the employee. It means company is
holding liability against the damage which is beard by employee. It is essential to make sure that
at the workplace the employees are safe from any kind of hazard. If any employee get injured at
the workplace then company have to provide compensation against the damage and provide
appropriate treatment to employee.
CONCLUSION
As per the detailed study, it can be concluded that the legal values must be considered by every
organization because it assists in meeting key goals and objectives. With an improved focus on
key elements of contract the businesses can promote ethical working. Offer and Acceptance and
Lawful Consideration are key factors that allows to have effective formation of contract so that
issues can be overcome in desired way. If business is not concerned about key values then
overall development may get influenced. Along this, business can also have contract formation
in diverse ways such as Face-to-Face contract and written documents. If key values are not
developed that the overall result might be in the breach form. In addition to this, it can be said
that the impact of written contract is positive as there is presence of written document and hence
the chances of breach reduces automatically. Moreover, key features like condition, warranty, etc
also need to be discussed effectively to meet objectives.
13

14

15