Analysis of Contract and Tort Law in Business Context - [Module Name]

This report delves into the intricacies of contract and tort law within a business context. It meticulously examines the essential elements required for the formation of a valid contract, including offer and acceptance, intent to create legal relations, consideration, capacity, and privity of contract. Th...Read More

ASPECTS OF CONTRACTS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Essential elements in formation of a valid contract..........................................................1
1.2 Type of contract................................................................................................................2
1.3 Different terms of contract...............................................................................................3
TASK 2............................................................................................................................................4
2.1 & 2.2 Drafting a simple contract act for purchase of product that is being advertised by
Bella UK.................................................................................................................................4
2.3 Writing report to Mr. Michael Hair, owner of “Hair UK”...............................................4
TASK 3............................................................................................................................................5
3.1 Differences between Contract and Tort liability..............................................................5
3.2 Development of concept of “Duty of care” and neighbour Principle..............................6
3.3 Way in which business is held vicariously liable.............................................................7
TASK 4............................................................................................................................................8
4.1 Draft of short letter to Brad..............................................................................................8
4.2 Solutions to following case study.....................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
The aim of this research report is to recognize the aspect of contract and negligence in a
business. This report identifies essential elements of Contract Act in different business situations.
The report has drawn key attention on different elements that are essential for the formation of a
valid contract act. Furthermore, tort law has highlighted the principles and nature of liability in
negligence. The report has assisted in drawing sharp contrast between tort and contractual
liability. It has also discussed in brief the concepts of “duty of care” and neighbor principle in
reference to Donoghue v Stevenson case study. Lastly, report has applied varied elements of
vicarious liability in respective business situations.
TASK 1
1.1 Essential elements in formation of a valid contract
For formation of a valid contract, it is important to briefly discuss the different essential
elements which are required to be fulfilled by contracting parties. The following elements are-
1. Offer and Acceptance- An offer is an expression of willingness to enter into a contract
on specified terms made with an intention which is binding once affirmed i.e., accepted
by the person to whom it is being addressed (Ward, 2010). Offer may be in expressed or
by conduct. An unqualified and final expression of assent to the terms of offer is
acceptance. An offer is deemed accepted in reference to the precise terms if it is to form
as an agreement. Acceptance has no legal status until it has been communicated to the
offeror. In addition to this, unilateral and bilateral are two type of offers. When firm give
offer to the public then it will be counted among the unilateral offer. On the other hand,
as per the case of (Harvey v Facey [1893] AC 552) party will have to
perform its duty and responsibility if it receive offer from the other party.
In the following case, James has invitation to offer on e-commerce website for sale of a
high definition web camera for £55. Maria has given its accent to the offer via e-mail with the
terms that she was willing to buy camera for £45. The counter offer has invalidated the contract
as James at first instance refused to accept this counter offer. Once both parties agree on a fair
price, the offer will stand its existence.
2. Intent to create a legal relation- An agreement is not binding until it has been made
with a legal intention (Steele, 2010). Parties are required to enter into an agreement to

become legal bound by it. In an ordinary transaction, it is presumed that parties have
intent to create legal relations (Jones v Padavatton [1969] 1 WLR 328).
In this case, James has an intention to sell the product at £55 to which Maria has shown
willingness to buy the product at £45. Maria showed intent to enter into a contract to which
James had refused. Thus, it can be said that the contract has not been entered with intent to create
legal relation.
3. Consideration- In a general contract law, a promise in not binding unless it has been
supported by any consideration. As per Thomas v Thomas) (1842) 2 QB 85 case
consideration is referred as “something in value” and is required to make the promise
enforceable as a contract (Owen, Taylor and Francis, 2000). Thus, it can be said that a
promise has no contractual existence until some value has been inserted in it.
Consideration specified need not be adequate.
In this case, consideration can be seen in the form of price money quoted by both James
and Maria.
4. Capacity- Contract entered by minor will be termed as void. Thus, to conclude a contract
to be valid, it is important that both the parties must be major (Individual above 18 years).
In this case study, it can be assumed that both James and Maria have turned t be major to
enter into this contract.
5. Privity of Contract- This is a common law of doctrine where the third party holds no
right to take any actions, if parties entering into contract have failed to fulfill their
specific condition of agreement (Campbell, 2007). For example, a contract has been
entered between A and B whereby, A agrees to pay a specific amount to B. B has further
entered into a contract with C to pass him the amount so received from A. Thus, if A fails
to deliver the specific amount to B, C at that time possess no right to sue A for non-
delivery of money.
In this case, there is no third party’s right to enforce Maria to pay the amount to James.
1.2 Type of contract
There are varied types of contracts that have been recognized by the parties that are
formed for the purpose to enter into a legal contract.
1. Face to face contract- In this type of contract, all conditions of agreement is determined
by verbal communication. The parties entering into contract are physically present at the

same place while entering into this contract (Beale and et.al., 2010). It is difficult to
identify the evidence of terms and condition as stated by individuals while entering into
the contractual relationship. This is because there is no written proof to determine its
validity. Often in these contracts, immediate responses are recorded otherwise they are
considered to be lapsed. For example, in case of retail purchasing.
2. Distance Selling- Such contracts are formed whereby parties are not present physically at
the same place to undertake the contract. The contract validity is signified by the postal
rule. In this rule, the offer is deemed accepted only when it has been communicated by
valid means to the offeree. Moreover, in distance contract, the party who is giving
invitation to offer will serve certain time to which particular party can accept the offer.
For example, online selling can be the best example for distance selling (Chen-Wishart,
2012).
3. Written Contract- Here, a contract deed is entered between the parties whereby both
parties specify their terms and conditions. Whenever case of conflict arises in this deed
act for judicious purpose, the remedy is sought through this report. In some cases, written
contract is a mandatory requirement form like for lease of immovable property.
4. Verbal Contacts- Further, verbal contracts can be evidenced by actions, if not written in
words. Any verbal promise to execute a service that individual is agreeing is valid to a
contract. However, sure and definite types of contracts should be in written and if the
contract is not in written form than it is not valid legally.
5. Deeds- A deed is a legal instrument in written form, which confirms an interest/ right or
property that is signed or attested in some jurisdiction sealed. Deeds are commonly used
for transferring titles to property.
6. Inferred Contracts- These contracts are defined as an agreement 'implied in fact' or as
'founded upon the meeting of minds, which although not embodied in a contract. It is
from the behaviour of parties showing, in the focus of the circumstances or understanding
of the people.
7. Online Contracts- Moreover, Online contracts are the contracts which governs the use
of web sites by people and published on website. Online contracts are used as a term of
agreement.

8. Business to business:It is in a written form and being made when two individual who
runs varied business has decided to enter into some contractual relationship.
9. Business to consumer contract: This type of contract is established between customers
and business.
Herein, these contracts are considered as the major forms of contract which defines the
legal or contractual relationship between these parties.
1.3 Different terms of contract
Contractual terms are entered into a contract to state the degree of obligation of parties.
Such terms make it obligatory on parties to abide by their performances. These contracts involve
the following terms in it-
1. Expressed terms- These terms are inserted by the parties which are mutually agreed
upon by them while formulating the contract (Gray, 2010). Such terms can be either oral
or in the written form. These terms include condition or warranties. Herein, this contract
clearly states the offer, acceptance and consideration. Such contract are clearly stated and
without any ambiguity in them.
Condition is the major term of contract. If the condition is breached, party aggrieved is
entitled to repudiate the entire contract and claim for subsequent damages (Poussard vs
Spiers (1876) 1 QBD 410). However, in case of warranty, the party is entitled to claim for the
damages but doesn't hold the right to repudiate the contract.
2. Implied terms- These terms hold significance by legislation and customs to provide
justice and provide fairness to the contract (Hannabuss, 2000). These terms are
mandatory which is required to be followed by the parties. These terms are stated by law
with bona fide intentions for the parties. Where the terms and conditions of a contract can
be inferred then these may be considered more of implied terms. The implied contract has
a legal obligation. This also cover the sale of goods act. The given act depict that supplier
must provide the high quality of goods to its buyers. It is due to the fact that if not
provided then the affected party can file the case against the defendant.
3. Innominate terms- Such terms are neither a condition nor a warranty. These are known
as intermediate terms (Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB
26).). In Contract Act, innominate terms are considered to be more flexible which are
inserted in contract in the favor of parties (Koenig and Rustad, 2003).

4. Exclusion Clause- Such term defends the faulty party in site of non-satisfactory
performance. Such terms are reasonable only if it has been mentioned prior to enter in the
contract through mutual affirmation. It is important to ensure that the exclusion clause
must not be in contradictory to the statutory laws (Hemraj, 2003). Olley v Marlborough
Court [1949] 1 K.B. 532 state that all the consitions must be specified by the party in the
deeds of contract. Unfair Terms in Consumer Contract Regulations 1999 and Unfair
Contract Terms Act 1977 are also covered under the given clause.
TASK 2
2.1 & 2.2 Drafting a simple contract act for purchase of product that is being advertised by Bella
UK
Bella is a UK fictitious company. It is selling beauty products and is planning to launch
its new shampoo which is aggressively being advertised by Bella. The contract is drafted to
purchase the shampoo which is being advertised by company.
The contract is entered into by and between …..Bella UK......................... (First Party) and
…....Hair 4 U.................... (Second Party). The term of contract shall begin on [23-nov-2015]
and shall be terminated on [31-nov-15].
Following are the terms of contract:
1. Express terms: Wherein, this contract order is being placed by Hair 4 U Company to
Bella UK, it is the expressed term of contract. In this regard, express term of contract is
10 boxes of Miracle oil at the price of 5 which is stated by Bella (Ole Lando and
Commission on European Contract Law, 2003).
2. Implied Terms- Parties involved must abide by the terms stated in the contract. In any
case, if party is not abiding by the conditions and regulations, then in the given
circumstance, the aggrieved party can claim for the rights for damages which are
incurred by them.
3. Exclusion Clause: The seller of Oil, Bella UK has clearly mentioned that it shall not be
responsible for the adverse results as it guarantees only 20% success of the product.
Thus, this exclusion clause is entered in prior to agreement for the above contract.
The given contract applies all the contract of UK law. Shampoo named Miracle Oil is being
exchanged by the seller in consideration.

…............................................ …............................................
(Signature) (Signature)
….............................................. …..............................................
(Printed name) (Printed name)
….............................................. …..........................................
(Address) (Address)
…............................................. …............................................
(Date) (Date)
2.3 Writing report to Mr. Michael Hair, owner of “Hair UK”
a) Breach of condition
Where the party breaches any condition of contract, then Hair 4 U has the right to rescind
the contract. The party is discharged from buying the product and from its obligation to
undertake future performance as well (Poussard v Spiers (1876) 1 QBD 410)
In this case, the condition provided by Bella UK is that it will provide 10 shampoo of
Miracle Oil at the price of 5. If in any case it breaches this condition or sets back from its words,
Hair 4 U has the right to rescind the contract. Here, the party who has breached the contract will
be consider as liable for its act. Thus, due to this the defended party has to pay the damage of not
fulfilling the conditions of contract to other party. For instance, the party cannot terminate the
contract if defendant party will not fulfil the warranty of contract. But, in the given condition
party can claim the damage from the defendant.
b) Legality of exemption clause
Exemption clause is a term whereby Bella protects itself from the consequences of
contract such as sue, loss, negligence etc. In this contract, Bella has clearly mentioned that it
takes no responsibility for any adverse results; the product has 20% success.
If there is no hair growth from using this product, Hair 4 U cannot sue company. On the
other hand, if any skin irritation occurs out of using this product, company can be sued in context
of Sale and Good Act. The Hair 4 U has the right to claim damages and seek for remedy in court.
The legal implication in case of exemption clause lies withstanding in any case (Goldberg and

Zipursky, 2006). This clause will be consider as applicable when both parties have thorough
knowledge about the inclusion of same in contract. However, in the circumstance when given
clause will be found as absent at that time the clause made will not be consider as valid.
Outline remedies: as per Kpohraror v Woolwich Building Society [1996] 4 AER 119 individual
have full authority with regard to create obligation upon the other members of party if they will
not fulfil the deeds terms and conditions.
TASK 3
3.1 Differences between Contract and Tort liability
Contractual Liability is present when the parties fail to pursue their contractual obligations.
Tort Liability is an act of negligence or party inability to take due standard of care in their
actions.
Differentiation between contractual liability and tort liability are-
1. In contract, the obligation is taken on voluntarily basis whereas in case of tort, obligation
is imposed strictly by law.
2. Legal relationship arises on voluntary basis in case of contract but this is not the same in
tortious act (Fairgrieve, 2003). The parties are aware of one another’s liability in case of
contract act. But in case of tort, parties are unaware about each other and are impelled by
the law to bind by legal relationship.
3. In contract, parties are free to choose whether they wish to bind themselves to the
contract or not. On the other hand, in Tort law, there is no such choice provided.
4. Claim of damages in case of tort are ascertained on the basis of court of law. In case of
contractual agreement, these are ascertained as per the deed entered by the parties.
5. There is any breach of duty in case of tort as specified in case of Vaugham v Menlove
(1837) whereas contractual liability arises as a consequence of breach of term.
6. Tortious liability arises out of faults and mistakes whereas, Contractual liability is more
stringent. The law of contract has been formed out of 3 actions i.e., debts, sumps and
covenants.
7. In case of tort, the person owes responsibility on everyone. For example, in defamation
(as per case of Berkoff v Burchill [1996]). On the other hand, in contract, the liability is
restricting on the contracting party (Smith and Atiyah, 2006).

8. In liability to tort parties do not possess any information about each other. However, they
get know each other when something wrong happens (Home Office v Dorset Yacht Co
Ltd, (1970) AC 1004 House of Lords). However, in the case of contractual liability
parties know each other very well. In the condition of tort liable parties are eligible for
unliquidated damages.
3.2 Development of concept of “Duty of care” and neighbour Principle
In Tort Law, a duty of care is a legal obligation which is binding on individual requiring
adherence to specific standard of reasonable care while performing an act. Duty of care is a legal
obligation which ensures the safety and security of others (Geistfeld, 2002). This term has been
inserted into the contract to assure that there is no unreasonable harm or loss. If such duty is
found to be breached, a legal liability is imposed upon the tortfeasor to provide adequate
compensation to the victim for the losses so incurred.
Usually, duty of care occurs when one individual or group undertakes an activity which
can harm another, either economically, physically or mentally. The first component of
negligence is a legal duty of care. This is concerned towards the relationship between defendant
and claimant, whereby an obligation is drafted upon the defendant to undertake proper care in
order to avoid causing injury to plaintiff (Trebilcock and Leng, 2006).
Donoghue V Stevenson was a decision pronounced by the house of lords of Scots Delict
Law and English tort Law. It is a part of concept of negligence, where one person owes a duty of
care towards another person. Hereby, in this case, Donghue had suffered with illness due to
negligence of the Ginger Beer manufacturer, Mr Stevenson. The bottle served was opaque and
had snail in it. The House of Lords in this case held the manufacturer responsible for the harm
caused to the consumer due to its negligence in ensuring the product’s safety.
This law of negligence had established the neighbour test (Schwartz and Scott, 2003).
The rule here clearly expresses that you are to love your neighbour, and in law, it is stated that
you must not injure your neighbour.
Negligence is persisting whereby one fails to provide utmost care to the other individual.
In this act of negligence of party, the aggrieved party has the right to claim for damages to the
claimant. The act of negligence is valid only if following conditions are fulfilled-
1. Duty of care- It is the due responsibility of person to undertake adequate measures to
safeguard the person’s interest and to get protected from any harmful consequences. In

the above case, Donghue V Stevenson, Stevenson is in the position to assure duty of care.
It was his due responsibility to assure the quality of product.
2. Causation- This imposed a condition on the party. Here, claimant party is entitled to
claim for the damages which have arisen due to the act of negligence by defendants.3. Breach of duty- The duty of offending party will be deemed breach when it fails to
provide utmost care. In the Donoghue V Stevenson case, Stevenson has breached the
duty to provide high quality of drink to their customers.4. Remote damage: This state that the damage which is being given to the party must be
effective. Thus, here party can claim the damage when injury is being caused to the other
party. In the given case, Donoghue got injured due to the act of Strevenson. Thus, it has
full right to claim the damage from Donoghue.
5. Forseeability: The act must be forcible as per the in accordance with the negligent act.
3.3 Way in which business is held vicariously liable
Harbour Board -v- Coggins & Griffith (Liverpool) Ltd; HL 1946 case depict that it is the
duty of individula that it must ensure the safety and security of its customers. The given thing is
also stated under Occupiers liablity act. If the given thing will be followed by the individual at
that time he/she will be held liable for the act.
Alan, a local milkman, has hired Matthew which is a minor for delivery of milk on
Wednesdays. He did so even after the clear expression of Norfolk farms to not hire any minor.
On the very first day of job, Matthew accidentally got injured during the reversal of car by Alan.
On the basis of this scenario, the nature of vicariously liability shall be checked in the following
points-
a) Can Matthew sue Alan
Matthew holds full responsibility to sue Alan for his act. This is because Alan is the
person who has hired Alan for the assistance on Wednesdays. He held due responsibility to make
sure that he has taken all measures to secure his safety and security (Blecher-Prigat and Shmueli,
2009). Though, it is seen in the given case, Alan’s act led to Matthew accident, resulting in
injuries. Thus, Matthew can sue Alan.
b) Can Norfolk farms held vicariously liable in this situation

No, Norfolk farm is not held vicariously liable in this situation. This is because farm had
clearly stated in their regulations that no minor shall be employed for the job. Further, Norfolk
was unaware of Matthew appointment for the job.
Besides, there are some conditions which can be identified in business as condition for
vicarious liability-
1. Employee-employer relationship must persist
2. Injury must be caused during course of employment (Godhard, 2006).
As it can be seen specifically that Norfolk Farm can be help liable as he was supposed to hold
the responsibility to direct Alan for his actions. Though he was unaware but it was important for
him to remain vigilant about the activities that were being performed by Alan. Both the
conditions of being in employee-employer relationship and injury caused during course of
employment are justified that make it obligatory for Norfolk to be liable for the actions
committed by his employee Alan.
TASK 4
4.1 Draft of short letter to Brad
To
Brad,
Respected Sir,
After analysis of the case, it is advisable that Brad has the right to claim for the damages
caused to him due to Charles negligence. Charles holding Albert's account was liable to serve
correct information to Brad. Thus, in this case, all provisions of negligent statements are
applicable. Due to faulty information given by Charles, Brad had to suffer the losses in terms of
rent arrears. Thus, Charles is liable to pay for the damages incurred by Albert to his client due to
its negligence act. Ross V Caunters 1980 case also give support to the given case. In this case,
court has made decision in the favour of disappointed beneficiary. Thus, here solicator is
consider as liable for its ineffective act.
Yours Faithfully,
ABC
4.2 Solutions to following case study
a) Case of Graham and Macho Men Plc

Yes, in this case, consumer can claim for his injuries to Macho Men. This is because
Graham and Macho Men plc hold employee-employer relationship. The actions served by
Graham were in the interest of company. In this case, though Macho Men Plc holds due
responsibilities for the action of Graham, it can serve illegality defence under the Ex turpi causa
non oritur actio. This term relieves one from the legal binding if the defendant plead that it had
taken due care (Cane, 2002). The defence can be claimed because Graham is personally held
liable for the act whereby he breaks the customer’s arms. Graham employer is yes vicariously
liable because it has satisfied the two key conditions i.e., Employee-employer relationship must
persist and njury must be caused during course of employment
b) Case of Carla and Link Ltd.
Yes, Carla is liable for the damages happened to George's car as she was using it during
non-working hours. Moreover, the Link Ltd. will not consider it as a vicariously liable to pay for
the injuries caused to Carla. In both the situations, Carla is liable for her fault as it happened
during course of employment.
CONCLUSION
It can be articulated from the report that it is important to comply with the essential
elements of a contract to assure their validity. The terms must be clear and specifically inserted
in the contract. Contractual obligation arising out of breach of contract and tort liability arises out
of breach of duty. The different case studies are analysed to determine the liability of negligence
and vicarious liability stating terms of employee-employer relationship.

REFERENCES
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Smith, S. A. and Atiyah, P. S., 2006. Atiyah's Introduction to the Law of Contract. Oxford
University Press.
Trebilcock, M. and Leng, J., 2006. The role of formal contract law and enforcement in economic
development. Virginia Law Review. pp. 1517-1580.

Steele, J., 2010. Tort Law: Text, cases, and materials. Oxford University Press.
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Online
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through: <http://www.goodstart.edu.au/files/file/Resources/008._DutyofCare.pdf>.
[Accessed on 26th October 2015].