Legal Aspects of Business: Contracts, Negligence and Liability Report

This report examines the legal aspects of business, focusing on contract law and negligence. It begins by outlining the essential elements required for a valid contract, including offer and acceptance, consideration, capacity, consent, and lawful objectives. Different types of contracts, such as implied, express, distance sale, and void/voidable contracts, are then discussed, highlighting their impact on legal relationships. The report further explores contract terms, differentiating between conditions, warranties, innominate terms, exclusion clauses, and express/implied terms. Case studies illustrate the application of contract elements and business law terms. The analysis extends to negligence, contrasting it with liability in tort and explaining vicarious liability. The report concludes with a discussion of the elements of the tort of negligence and the application of vicarious liability, providing a comprehensive overview of these critical business law concepts. The report also includes relevant case law to support the arguments and concepts discussed.

Aspects of Contract and
Negligence for Business

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Importance of essential elements required for the formation of a valid contract..................1
1.2 The impact of different types contract...................................................................................2
1.3 The terms in contract with reference to their meaning and effect.........................................3
TASK 2............................................................................................................................................4
2.1 Applying elements of contract in different case law.............................................................4
2.2 Applying business law terms in different contracts...............................................................5
2.3 Evaluating the effect of different terms in contract...............................................................6
TASK 3............................................................................................................................................7
3.1 Similarities and differences in contrast of liability in tort.....................................................7
3.2 Liability for negligence..........................................................................................................8
3.3 Vicarious liability..................................................................................................................9
TASK 4..........................................................................................................................................10
4.1 Elements of tort of negligence.............................................................................................10
4.2 Applying the elements of vicarious liability........................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
In modern era, it is essential for organisation as well as individual to know about laws so
that they can run their business smoothly. The acts which are framed under constitution is
providing legal framework to all human beings to protect their rights against any illegal activity.
In law there are many terms which can be used by person or entities such as contract law,
partnership act, sales of good act etc. An agreement between two parties is significant while
forming any contract. But every agreement is also not considered as contract (Appleman,
Appleman and Holmes, 2016). Agreement will be considered as a contract when there is an
enforcement of law. In assignment essential elements of valid contract has been explained.
Along with this different terms of contract are discussed in detail which can be used by parties
while forming any agreement. Further different case laws have been discussed where it is
showing validity of contract. Negligence in tort is caused by failing upon act. If negligence has
been occurred on first person, then liability will be imposed on the other party. Along with this
vicarious liability is explained where principal is liable if any act has been done by agent.
TASK 1
1.1 Importance of essential elements required for the formation of a valid contract
A Contract is a legal tool that binds two or more parties for fulfilling specified work. It is
a voluntary arrangement between different parties that is enforceable by law. A contract is
concerned with duties and rights which are there due to establishment of agreements. When all
parties agree to certain terms and conditions that time contract is formed. There are few elements
that ensures that contract is valid or not (Bashir and et. al., 2011). They are essential and if they
are absent then the agreement will be illegal. Offer and Acceptance: When one party offers a product or service to the other party it iud
considered as offer. The proposal is made as per law and if individual accepts it then it
becomes a lawful promise that has to be fulfilled. It will have explained in following
case:
Case- Carlill vs Carbolic smoke ball co [1893]: The manufacture of a flu medicine
claimed that anyone who consumes his cure will not be affected by flu in his life and if this does
not happen then maker will pay person 100 Pounds. The court held manufacturer when a person
suffered from flu even after consuming medicine. It ordered him to pay individual 100 pounds.
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 Consideration: This is a step that is taken as to state about cause of promise that has been
made. Basically consideration is done when there is an offer made by a party to other one
on basis of specified product (Bryden and Storey, 2011). For example, A wants to sell his
factor for 300,000 pounds, B agrees to pay that amount to A. The amount of 300,000
pounds is considered to be consideration. It is not legal when following situation take
place:
◦ In case of fraud
◦ Restricted by law
◦ Considered as against morals and ethics.
 Capacity of parties involved: Each and every party that is involved in the contract has to
be sound and able to pay for his liability. If a person is minor, disqualified by state law
and unsound mind then he can’t form a contract.
 Free consent: Every agreement needs to be based on free will and consent if there is any
undue influence, misrepresentation of facts, mistake or act of coercion then contract will
be invalid.
 Objectives: The agreement needs to be based on lawful objectives. It will be invalid if it
follows any points that are mentioned below:
◦ Not allowed by law of state.
◦ Fraudulent
◦ Against ethics and morals
 Certainty of meaning: There is requirement of a meaning that gives some value to both
parties, it needs to be as per the section 29 of contracts law.
 Written agreement: A valid contract has been in written form that can be used in court of
law.
 Legal relationship: There is an establishment of legal relationship with formation of
contract.
1.2 The impact of different types contract
There are different types of agreements that are formed and are enforced by law. Each
type of contract establishes a different type of relationship. The types are stated below:
 Implied contracts: This is an agreement that is prepared by various actions of individual
involved, but it is not in written or oral form (Catão and Milesi-Ferretti, 2014). The best
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example of an implied contact can be warranty of product that is provided by law
automatically.
 Express contracts: There are agreement which are formed between two or more parties on
written or oral basis. Basically there is an evidence, offer, acceptance and consent.
 Distance sale contract: Under this type of agreement the buyer buys product from a
manufacturer that is not living within a meeting proximity. The seller has to deliver
products in specified time period. The buyer can terminate this contract if seller fails to
deliver products and services as per the established contract.
 Aleatory Contract: It is a mutual agreement that is impacted by some uncertain event.
The parties involved in this type of contract bear risk at their own ends and ensures that
situation do not make agreement invalid.
 Void and Voidable contract: Whenever there is an agreement between two parties is
formed to perform an illegal act then it is known as void agreement (Doz, 2011). For
example, a deal between buyer and seller of drugs is considered to be void as it is against
rules and regulations stated by legislation and its provisions. The voidable contract is
formed for a valid reason but in later stage it is rejected by one of parties hence making it
void. Basically it states that it is valid to a certain point of time and it nullified when
offerer fails to deliver or acceptor rejects product or service.
These are type of contract which have certain impact on legal relationship that is formed.
It is very important to ensure that agreement is analysed before it is formed so that issues can be
addressed later on.
1.3 The terms in contract with reference to their meaning and effect
The involved parties use different terms in contracts and they are bound to deliver as per
specified conditions. If any one of them fails to deliver as per requirement, then it will be
considered as a breach of contract. The terms are stated below:
 Condition Terms: There are certain terms which are set by both parties as to get benefited
by completion of promise. The contract is based on all rules and specifications that are
laid down by parties. For example, there are some conditions which are made as to
prevent any injury or causality in future.
 Warranties: It is not considered to be an important conditional term but if any party
breaches warranties and they do not compensate acceptor.
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 Innominate Terms: These are terms which were valid and present in past when contract
was formed but court did not recognise these terms and that is why they are known as
innominate terms.
 Exclusion Clause: It is a term that is applicable when breaching party limits any liability.
It is important to communicate any changes to other parties as to ensure that contract
remains valid. There are 3 types of this clause:
◦ True
◦ Limitation
◦ Time.
 Express Term: These are terms which are stated and mentioned in contract. Also they are
recognised by court if there is any dispute.
 Implied Terms: They are not mentioned in contract in any written or oral form, but these
terms are still considered by court and if any party breaches them they are held as well as
penalised.
TASK 2
2.1 Applying elements of contract in different case law
Case 1 – Agreement
In this case, Sara’s is living in apartment and it was unfurnished. She saw an online
classified advertisement ad which was offering couch. Further “moving for sale: there was a nice
brown leather couch and cost is 600$”. While selling this couch there was a one photo which is
associated with them and having all contract information. Sara e-mailed the seller and saying that
she wanted to purchase the couch.
According to provision of Contract law, agreement between parties are analysed by offer
and acceptance. One party who is offeror makes an offer to another person who is offeree. This
is creating a binding contract between them (Ellis and Zhan, 2011). The offer which is accepted
by other person is known as acceptance. While forming any contract, there is must an agreement
between two which should include all essential elements of bond. As per this provision, Jamal
makes an offer to customers, one of them is Sara who had accept the proposal to buy furniture.
Along with this, she accepts all terms and conditions which are associated with product and
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mailed to Jamal that she wanted to buy couch. So, Sara had created a contract with seller through
e-mailed.
Case 2 – Consideration
Ahmad’s son, Nabil was looking for a cyber-security position with Faten, Sameer and
Kamal, Inc, who is running a large IT firm. After several weeks, company decided to hire Nabil
on the profile of cyber-security position. They made an offer on April 12, 2015 to him and he
also accepted. On other side, Ahmad was unaware about that his son was hired and to mailed a
letter to Kamal on 13 April, 2015. In this letter he wrote that, he promised to give 1,50,000$ to
IT firm, if they will hire his son. This letter was received by Kamal and they wish to suit against
Ahmad.
As per provision of Contract act, promise is made by one person for performing his
activities according to all terms and conditions (Ferreira and et. al., 2014). The promise can
become final and irrevocable until and unless it cannot return into their original position. A
person is not bound to accept the promise which has been made by other. In given case, Kamal is
not binding to enforce the promise so consideration will also not accept by them.
2.2 Applying business law terms in different contracts
Case 3 – Exclusion Clause
In given case scenario, a coupled book a table in famous restaurant i.e. Damascus. At the
entrance of restaurant one man handed over his coat which contained a wallet with 500$. The
porter gave him one receipt which is written on the basis of exclusion clause and states that “all
valuable items must be removed from the pocket of jacket, if anything is stolen or missing, then
restaurant will not liable to repay the amount”. When man was making payment for purchasing
of meal, he realises that his wallet was also left in coat and the money was stolen and he sought
to recover the amount from restaurant. But the restaurant refuses to refund amount because clear
notice was written on the back of receipt which is excluding them from any liability.
In accordance with the provision of Unfair Contract Terms Act 1977, which intends to
exclude one party from restricted liability for breaching of contract or breaking of implied terms
or misrepresentation of facts (Fried, 2015). There are three ways where one party may rely upon
such clause; by notice, course of dealing, signature should be written in contractual document.
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Legality of exclusion clause is that it protects the person from being liable of negligence
and it will be held lawful if clause is completely clear and there is intention to protect the party
from carelessness.
With references to given case, restaurant is relying upon the exclusion clause because it
contained on the back of the receipt that they are not liable for the to compensate the amount if
anything is stolen or missing from restaurant. So they are not liable to refund the amount to man.
Case 4 – Implied terms
Amer rented a warehouse from Zohir which is not occupied for a long period of time and
had fallen into disrepair. So, he made a significant change in warehouse. On other side, Zohir
promised to Amer that he will not increase the rent amount for next five years. After a point of
time, Zohir died and value of property were increased. Now the property had been inherited by
Yamen and increased the amount of rent. But Amer refused to accept the increased amount
because Zohir promised that rent will not increase for a 5 years. On the basis of this, tenancy has
been terminated by Yamen and Amer submitted a bill claiming compensation. Yamen also
refused to pay the amount while stating that nothing was contained in tenancy agreement for
paying the compensation amount.
In accordance with the provision of tenancy agreement, it is contract which is made
between landlord and person. It may be in written or oral. This agreement is made with coupled
of express and implied term (Friedman, 2011). In implied the rights of landlord and tenant are
not set down in agreement but these are implemented by law and implied into all tenancy
agreement. As per this provision, oral agreement has been created between Zohir and Amer. So,
Amer is not liable to pay the increased amount of rent to him.
2.3 Evaluating the effect of different terms in contract
Case 5 – In given case scenario, policyholder had applied for the motor insurance. In
proposal one question was asked by the policy holder that whether anyone from his family was
concerned in motor accident and had made any claim against them during last 5 years. But policy
holder said “no”. But one day, when his car was stolen, insurer want to know about that he had
made any claim in last five years under motor policy. So insurer person voided the policy. As per
this case, policyholder argued with company that the facts were not disclose by them because
they are meeting with the condition which are stated in policy. According to provision of
insurance act on motor policy, policyholder is not having any right to get additional benefit
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because he had behaved unethically. Moreover, insurer person is having right to claim against
them because they had waste their time.
Case 6, According to given case study, insurance company is not having right to reject
the policy at initial level. When insurance company is doing inspection on car, then they found
that there was no any modification made at the time purchasing the car. In this situation, lady
said that she is not having any idea about the clamming of amount which were made her
husband. So, she had not claim for the severance of warranty. But according to warranty period,
claimed was already made by the insurer person. Hence, company is not having any authority to
void policy at initial level.
From this case, it reflects that lady is unaware about the claims which were made by her
husband. So according to exclusion clause, they can make claim on the basis of this if accident
had taken place.
TASK 3
3.1 Similarities and differences in contrast of liability in tort
During the formation of contract there should be competent parties which also specifying
their rights and duties. Tort liability occurs when defendant party is intentionally or
unintentionally breaches agreement. There are many similarities and differences which is taking
place between tort and contractual liability (Furmston, Cheshire and Fifoot, 2012). If any injury
has been occurred to innocent party, then they can claim for the compensation amount if they are
occurred in contractual period. In contractual and tort liability, claimant person is having right
for entitlement of compensation amount by defendant party. However, in both condition both
parties have to considered their legal roles and responsibilities so that they can demand for the
compensation amount.
The similarities between contractual and tort liability is different from each other.
Contractual liability arises when any party fails to perform their duties according to terms and
conditions which are specified in contract law. This situation can be leads into breaching of
contract. In contrast of this, tort liability occurs when second party is suffering from loss due to
negligence of defendant party (Hahm, Shin and Shin, 2013). In simple words, if any party fail to
comply with their legal rule and responsibilities which are implemented by law, then there is an
occurrence of tort liability. Apart from this, while framing any relationship is also considered as
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main factor which is differentiating liabilities of people from others. In contractual liability legal
relationship is taking place when people are knowing to each other. But, in tort liability contract
is made between unknown person.
In contractual liability, parties are making contract according to their mutual consent.
Whereas, in tort liability contract is made between defendant and third party. Along with this,
injured party also have to prove this loss has been made by other person or due to negligence so
that they can recover compensate amount (Haq and et. al., 2011). Moreover, innocent parties are
not requiring to satisfy elements of negligence in contractual liability.
3.2 Liability for negligence
Negligence is a situation where a person fails to perform their duties in reasonable
circumstances. It tells about the relationship of employer and employee where proper
arrangement for workers has not been done by them. Due to relationship between employer and
worker it is accountability of business unit where they have to provide safety working
environment to them. Through this, it also became the responsibility of employer to prevent the
injury of employees if accidents take place at workplace. If higher authority or any entity fails to
comply with all these rules and regulations, then they are liable to compensate the amount to
damaged party (Karabag and Berggren, 2012). In accordance with the provision of negligence,
any person fails to take reasonable care to avoid injury of other person or causing harm to other.
If plaintiff want to compensate the loss amount, then they have to satisfy all condition which are
enumerated as below:
Duty of care – This element is considered first phase in negligence. It provides legal
framework in regards to employees (What is negligence?, 2015). In business entity, employer
has to provide safety working environment. They have to analyse all accident which could be
injured at workplace. If employer fails to comply with all these regulation, then defendant party
is having right to claim against them and recover the loss amount.
Breach of duty – In this, any party fails to perform their duty in accordance with their
contractual terms and conditions. Thus, injured party will have to prove that loss which has been
suffered by them is due to the negligence of other person and they can also demand for
compensation amount (Mills, 2014).
Remoteness of damages – It is also considered as effectual aspect in negligence in which
claimant party have to prove themselves as innocent for getting additional benefits. On basis of
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this, injured party have to prove that loss which has been suffered by claimant party is due to the
foreseeable by them.
In last, plaintiff has to prove by providing facts and valid reason that the injury which has
been suffered by them is due to failure of negligence of other party. So that they can sue against
them.
Case law, The Wagon Mound no 1 [1961] AC 388, house of lords, the vessel of
defendant's, The Wagon Mound, furnace oil was leaking at Wharf in Sydney Harbour. Due to
this, some cotton of debris became embroiled in oil and sparking from welding works. The fire
took place rapidly which is also causing destruction in boats and wharf. The decision of court
was held that, remoteness of damage was substituted which is direct consequences of test. The
test which has been done is kind of foreseeable. If foreseeable is considered as type of damage,
then defendant is liable to pay the full amount, no matter if damage is of foreseeable.
3.3 Vicarious liability
Vicarious liability is shed upon the condition in which employer held responsible for
performing nay undesirable action at workplace. According to this act, if any action is taken by
employee on behalf of them and injury had taken place, then employer is liable to compensate
the amount to damaged person. At workplace, there are many employers who are unaware that
they can become for liable if they are committing any actions at the time of employment. For
example, bulling and harassment, discrimination etc. So employees are having authority to sue
against them even if any illegal activity has been performed by their clients (Olatunji, 2014). In
this context, business entity can avoid such kind of activity by framing strict rules and
regulations along with penalty system. So it will be beneficial for them also to supervise all
activities which are performing by workers and build an effective reputation in competitive
market. Apart from this, employer has also to avoid unlawful activities in which they can
encourage employees to perform their task in appropriate manner.
There are some roles and responsibilities of employers which have to be performed by
them in order to provide safety environment. Through this they can also protect individual rights
from any illegal activity. This concept is crucial in context of health and safety, if employees is
suffering from any injury because of the action of employers, then they are seeking for
recovering compensation amount (Pateman, 2014). Besides this, if individual employee had
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caused the injury may not be worth against clamming, whereas employing organisation may
have greater resources.
Case law, Gravil v Carroll (2008). In this c was a semi-professional rugby player which
was employed by rugby club. During the course of his match, Carroll punched Gravil and causes
serious injury to him (Vicarious liability: recent case law developments, 2017). Now G claimed
for the compensation amount from Carroll and club. For this, this question was asked by court
whether club was responsible for vicarious liability for the consequences of Carroll while
injuring to Gravil. The judgement of court was held that an employer is held for vicarious
liability under the tort because this has been committed at the time of employment. Along with
this, there was a close relation between C's employment and punch. So, club held liable to pay
the compensation amount.
TASK 4
4.1 Elements of tort of negligence
In tort of negligence, any unlawful activity has been act by the person and causing
damage to others. In simple words it can say that, who fails to take care of other person and not
performed their responsibility and causing damage as a foreseeable risk. It includes the
relationship between doctor and patient, bank and customers which is existing in a contractual
relationship in order to claim for negligence (Razman and et. al., 2013). Below mention are some
elements of tort of negligence which are described in detailed.
Volenti-non-fit-injuria – In this defendant party is intentionally performing those
activities which are unlawful manner. According to this, claimant party can suit against on them.
so, employer held liable to provide reimbursement amount to claimant party or vice versa.
Necessity – In this term, employees are performing their activities in unethical manner so
that they can restrict unethical practices which are performing by other employees. in this case,
employer and entities are not liable to compensate the amount to injured party.
Justification – In this concept, defendant party has to justify all those allegations which
are not entitled for paying loss amount in injured person.
Illegal or unlawful activity – The small or large organisation are liable to pay
compensation to damaged party who is suffering by the illegal action of managers.
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Case 8, as per given case scenario, employer is held liable for vicarious liability because
they had caused the damaged to other person. Moreover, there is a direct relationship between
employer and driver, so employer held liable to compensate the amount. In this case, driver of
Chauffeur company was sent to pick the client at airport. While waiting for the flight he decided
to take few glass of alcohol. Due to incident, accident taken place and client was injured and he
demand for the company from company. In this case, Chauffeur company is held for responsible
to pay the compensation amount to injured person because their driver had conducted an
unethical practice. This should also include strict punishment for him. With the help of this,
business entity can reduce unethical practices which is done by any other employees.
Case 9, Mr. Jamil is working under supermarket company as a delivery driver. One day,
when he was loading pallets into trucks and he slipped on tail gate and due to this pallet had
fallen over and injured to other employee also who are standing over there. One of them injured
person require to do surgery and they demand for the special treatment from rehabilitation
centre. In this case, damaged party is having right to compensate the amount from company or
sue against them. Moreover, this injury had taken place during the course of employment so,
supermarket company is held liable to compensate the amount to injured person.
4.2 Applying the elements of vicarious liability
Vicarious liability occurs when employer is liable for paying compensation if any worker
is behaviour unethically with other at workplace (Ryan, Callaghan and Large, 2015). The
following are some conditions which has to be satisfy by employee for recovering of loss
amount.
 There must be an existence of relationship between employee and employer among the
defendant party.
 Employers should have power to control unethical practices which are conducted at the
time of job or duty.
In first case, company is liable for vicarious liability because driver has behaved
unethically. In this regard they are also liable to provide compensation to damaged party. They
held liable because, there is an existence of relationship between employer and driver. Along
with this they have to made strict rules and regulations so that they can reduce the risk of
unethical practices which are performing by other workers.
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In second case, according to the provision of Occupiers Liability act, it is responsibility
of organisation to provide safety environment for employees so that they can prevent from
workplace. It given case scenario, it is recognised that colleague had been suffered from heavy
losses due to failure of employer. So according to rules and regulation of this act, supermarket is
liable to provide amount to injured person so that they can get best medical facility and also offer
him some monetary compensation.
CONCLUSION
After summing up of assignment, it has been concluded that competent parties can make
contract and it should undertake all essential elements of valid contract. Through this they are
also forming legal relation. Moreover, if there is any absence of one party, then they cannot
make agreement as well as enforceable by law. It is essential for parties to perform their all roles
and responsibilities according to terms and condition which are specified by law. Further, it can
also be stated that different types of contractual terms are providing various relief to damaged
parties. In case of tort of negligence if person is causing damage to other party, then claimant is
having right to sue against them. Along with this, employer will be held for vicarious liability if
any wrongful act had been performed by employee.
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