ACNB Law Report: Contractual and Negligence Liabilities Analysis

This report provides a detailed analysis of contract and negligence law, essential for understanding legal obligations in business contexts. The report begins by outlining the essential elements of a valid contract, including offer and acceptance, consideration, intention, and capacity, emphasizing their importance in forming legally binding agreements. It then explores various types of contracts, such as unilateral, bilateral, and electronic contracts, detailing their impacts on business operations and providing relevant case examples. The analysis further delves into the classification of contract terms, differentiating between conditions, warranties, expressed and implied terms, and innominate terms, while also examining the consequences of classifying these terms in case of a breach. The report includes case studies of Ivan and Todor, and John and the local council to illustrate the application of contract law principles. Finally, it contrasts contractual and tort liability, highlighting the nature of liability in negligence, including vicarious liability, and provides case scenarios to illustrate these concepts. The report aims to provide a comprehensive understanding of contract and negligence principles, equipping readers with the knowledge to apply these concepts in different business situations.

ACNB

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1. Importance of essential elements of a valid contract...............................................................3
2. Discussion on the impact of different types of contract..........................................................4
3. Analysis of terms in contract...................................................................................................5
4. Case study of Ivan and Todor..................................................................................................6
5. Consequences of classifying the terms....................................................................................6
6. Case study of John and local council.......................................................................................7
TASK 2............................................................................................................................................7
1. Contrasting the liability in tort and contractual liability..........................................................7
2. Nature of liability in negligence..............................................................................................8
3. Vicarious Liability...................................................................................................................8
4 Case scenario of David and Company TeleCo.........................................................................9
5. Case scenario of Colin and Regent Hotel..............................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
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INDEX OF TABLES
Table 1: Contrast between Contract Liability and Tort Liability....................................................8
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INTRODUCTION
Every agreement which is enforceable by law is termed as a contract irrespective of the
format whether it is oral or written. Now days, every business environment requires agreement in
order to form a legal relationship between other businesses and individuals. Contracts are
basically used as a tool which companies often use to safeguard their interest (Hunt, 2015). On
the other hand, negligence has been rapidly developed under the English Law for the purpose of
compensating people for accidental damage and injuries. It allows the court to award damages in
tort (Marks, Marks and Jackson, 2013). It has also been used to compensate people for financial
losses in business where other remedies are not available. This report is mainly focused on the
aspects of contract and negligence so that reader can understand the essential elements of a valid
contract so that it can be applied in the business context. Further, description has been made on
the principles of liability in negligence in business activities and the application of these
principles in different business situations.
TASK 1
1. Importance of essential elements of a valid contract
Essential elements which have been described by the English law in order to make the
contract valid are highly important. It is very crucial to include all the elements while entering
into a contract. Essential elements are described as follows:
1. Offer and Acceptance: While entering into a contract, there must be a lawful offer and a
lawful acceptance by offeree in response to the offer given by offerer. The use of
adjective lawful describes that offer and acceptance should be aligned with the rules laid
down in the contract law (Entorres v Miles Far East [1955] 2 QB 327).
2. Consideration: Contract has been made on the basis of getting anything in return. Thus,
consideration can be referred as the price or anything in kind which one party is going to
make to other party. It is said that both parties should get benefit out of it and both should
suffer the detriment (Chappell v Nestle [1960] AC 87).
3. Intention: The contract can be only made with full intention of both the parties. Any of
the party cannot be involved in it forcefully by threatening other party (Balfour v Balfour
[1919] 2 KB 571).
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4. Capacity: The parties of contract should be capable of creating a legal relationship by
entering into a contract. Any of the party should not be minor, of unsound mind and
partial or full lunatic (Johari, 2014).
If any of these elements are not present in the contract then the contract becomes invalid
in the eyes of law. Thus, it becomes important to include all the elements in a contract so that at
the time of breach of contract, a suffering party cannot claim for the damages from other party as
law will not consider this as a valid contract (Contract consideration, 2015).
2. Discussion on the impact of different types of contract
There are different types of contracts which have distinct impacts on the business
organization. Types of contracts are described as follows: Unilateral Contract
Meaning: This is a contract which is created by a single party and if they make express
promise than its acceptance can only be received at the time of performance. In this, one party
pays the other party to perform a certain duty (Kreitner, 2009).
Impact: In this, one party gives an offer and that person cannot bind the offeree to
perform the task. However, the offerer cannot deny after the performance of the act by the
offeree.
Case: The case of Carlil V Carbolic Smoke Ball can describe this type of contract in the
best way. In this, if offering party refuses the performance after the completion of act by
opposing party or acceptor then it can claim for the damages by filing a suit against the offerer.
 Bilateral Contract
Meaning: This is the basic type of contract in which two or more parties are involved
and every party is bound for the reciprocal obligations.
Impact: All the parties who are involved in the contract are obliged to fulfil the terms of
contract so that contractual obligations can be removed. If they fail to do so then they have to
provide damages in order to compensate the injury of innocent parties (Veljanovski, 2007).
Case: According to the case of Ward v Beham [1956] 1 WLR 496, both the contracting
parties are entitled to provide performance against the completion of promise made by them. Electronic Contract
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Meaning: Electronic contract is also termed as E-contract and it is a form of contract in
which agreements are made between parties through electronic means. These contracts are
covered in the provisions of E-commerce.
Impact: Contracting parties should comply with the distance selling regulations in a
justified manner. Moreover, acceptance has to be provided by electronic signature in case of
formal contracts (Tovino, 2008).
Case: As per the case of Challenger Navegante SA v Metalexportimport SA (2004), court
held that formal contracts with a name typed on electronic means will be considered as valid and
enforceable by law.
3. Analysis of terms in contract
Term of contract cannot be easily bifurcated because the non-fulfilment of any term leads
to liability for the payment of damages. For this reason, terms are segregated on the basis of their
effects on contractual relationship. Description of contractual terms is described as below: Conditions and Warranties: Condition is basically a fundamental provision of contract
while warranty is considered as an additional provision. If there is a breach of condition
than it gives effect to the breach of contract (Lipshaw, 2011). Due to this, innocent party
is in position to terminate the contractual relationship along with the claim of damages.
On the contrary, breach of warranty refers to the non-fulfilment of minor terms thus,
innocent party can make claim for damages only. Expressed and Implied Terms: Express term is specifically mentioned while entering
into a contract and inclusion of these terms can be in the form of oral or written format.
Whereas, implied term is that which comes out of an obligation for the contract which
one or the other party has to perform (Caruso, 2007).
 Innominate Terms: This term is also considered as intermediary term because it lies
between condition and warranty terms in contract. According to this, party can terminate
the contractual relationship only in situation where entire benefit of the contract is lapsed
(Faems and et.al., 2008).
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4. Case study of Ivan and Todor
Inn this case, Ivan sees a HND book which was displayed at Todor's bookshop and he
took that book to the cash counter to pay for the same. At tat time Todor denied accept the
payment and said that this book is already sold and he forgot to remove it from the display shelf.
Thus, Ivan could not sue for this aspects because books displayed on the shelf is not an offer as it
is an invitation to treat. This has been supported by the case study of Pharmaceutical Society of
Great Britain v Boots [1953]. In the given situation, negotiation is done in verbal manner so it is
clear that there is a verbal contract between parties. Further, in invitation to treat, it is up to the
trader to whether accept or reject the offer. Moreover, price was a expressed term in this case.
Thus, it is clear from the case that there was no contractual relationship between Ivan and Todor
(Yan-qing, 2007).
5. Consequences of classifying the terms
Classification of terms assists in knowing the remedy available to party who is innocent
for the breach of contract which has taken place due to faulty party (Abn, 2009). Further, the
overall consequences of terms have been shown below:
Condition: It is regarded as the stipulation of contractual agreement which highlights core terms
of the contract. Breach of condition is regarded as the breach of contract. As per the case
provided of Poussard V Spiers 1876, if the party is unable to carry out the duties assigned then
innocent party is entitled for the breach of contract.
Innominate terms: This term takes into consideration which neither warranty considers nor
condition. Further, considering the case of Hong Kong Fir Shipping v Kawasaki Kisen Kaisha
[1962] damages for the breach of contract are rendered by undertaking the influence on benefit
of innocent party.
Warranty: They are regarded as the secondary stipulations which highlights contractual
obligations. Further, in case of breach of warranty only entitlement is being delivered for the
claim of damages. As per the scenario provided of of Bettini V Gye 1876 innocent party in the
contract will be gratified for the completion of promise which has been made by them to the
other party (Bisso and Choi, 2008).
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6. Case study of John and local council
In this case, John visited a park which is managed by local council. He hired a chair for
50p by buying a ticket. The hired equipment broke down which damaged him and his clothes
badly. Further, he claimed for the damages but the local council denied stating that this was
already mentioned on the ticket that damaged caused with the hired equipment cannot be claimed
(Zoll, 2012). As per the case, there was a bilateral contract between John and local council.
Ticket was provided to him hence it is a written contract. However, as per the case of Chapleton
v Barry, ticket is merely a receipt provided after the formation of contract. Thus, statement
mentioned on the ticket is contractual term. Therefore, exclusion clause is not proper
incorporated by the defendant party and thus they will be liable to compensate the injury to John.
TASK 2
1. Contrasting the liability in tort and contractual liability
Table 1: Contrast between Contract Liability and Tort Liability
Basis Contractual liability Tort liability
Meaning Liabilities that have been
identified and discussed at the
time of entering into a contract
and that has been failed to
perform according to the terms
mentioned (Raz, 2010).
This is basically a legal obligation
aroused due to the civil wrong or
injury caused to one party through
one party. These actions require a
form of remedy from an English
court.
Relationship between
parties
In this, all the parties have an
existing relationship because
contract is formed by their
mutual consent.
In this, liability is imposed after
occurrence of negligent action by
defendant and this way relationship
is formed (Twerski, 2006).
Basis of damages Damages are provided for the
compensation of the injury
caused to innocent party due to
the non-fulfillment of contractual
terms. Avery v Bowden (1855)
Damages in this case is provided
from the objective to bring injured
party in a position where negligent
action has not been conducted by the
defendant. Henderson v Merrett
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Syndicates [1995] 2 AC 145
2. Nature of liability in negligence
Negligence is regarded as the tortuous action in which it is not possible for defendant to
take care of duties assigned which are expected from person in particular condition
(McKendrick, 2008). Further, negligence claim is acceptable in court if the principles stated are
satisfied:
 Breach of duty: It takes place in negligence when defendant is not in position to carry
out the duty assigned in appropriate manner. Further, with the establishment of breach of
duty defendant is accountable for negligent act. Considering the case of Vaughan v
Menlove (1837) 3 Bing. N.C. 467, objective test has been implemented with the motive
to know its existence. In this scenario defendant was judged by undertaking standard of
reasonable person.
 Duty of care: It is considered as the obligation obliged by law on every individual to take
reasonable care while conducting actions which can adversely affect another party in the
form of injury(Taylor, 2011). For identifying the existence of duty of care neighbour
stated by Lord Atkin in Donoghue v Stevenson has been applied. As per this test it is
required for individual to take care of action that can lead to injury to another party
(Hunt, 2015).
 Forseeability: As per this term claimant damages must not be too remote with the motive
to claim for remedy. It must be foreseeable from the act being undertaken by defendant.
Considering this scenario, case of Re Polemis & Furness Withy & Company ltd. [1921]3
KB 560 can be undertaken.
 Causation: Claimant is required to represent that loss has been suffered due to negligent
act of defendant. Causation is applied as test in tort law. This test was introduced in
scenario of Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428. In this scenario it
has been highlighted that defendant must be primary cause for damages so as to claim for
negligence (Johari, 2014).
3. Vicarious Liability
Vicarious liability refers to as the liability in which employer is held responsible for the
illegal act conducted by their employees. The employer also carried his/her own share of the
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liability (Kreitner, 2009). This kind of situation arises when one party is supposed to be
responsible for the third party because the third party is negligent to carry out that responsibility
and exercising that control. For instance, employer is held liable in business situation for the
unlawful act conducted by their employees such as getting violent at workplace, harassing the
female candidate mentally or physically, carrying out the practice of hoarding of goods, etc.
Further, employees can avoid the vicarious liability by adopting reasonable care in order to
prevent the unlawful behaviour of employees (Veljanovski, 2007).
As per this approach, business is said to be vicariously liable in practice of agency,
employment and partnership. In these relationships business is held responsible for the
negligence occurred by the side of employees, partner or agent. Thus, in order to transfer this
obligation following conditions should be satisfied:
 Controlling relationship: Business organization should be in a position to control the
actions of employees.
 Negligence should occur in course of employment: Act of negligence should be
occurred during working hours. It is because after the completion of working hours
controlling power of employer is not effective .
As per the case of Lister v Hesley Hall Ltd [2001] UKHL 22, business was held
vicariously liable because of the act of sexual harassment by warden. Furthermore, it was the
duty of business organization to monitor and control the actions of employees to prevent
harassment and discrimination at work place. However, employer failed to satisfy them.
4 Case scenario of David and Company TeleCo
Defendant will not be held responsible for payment of damages in case if they are in
position to avail the defenses which have been stated below: Volenti non fit injuria: Provision of volenti non fit injuria is implemented where claimant
himself in condition where chances of risk of injury is high and they are well aware of
such risk (Caruso, 2007). Contributory negligence: provision of this type of defense is applicable if negligence has
taken place through the contribution of both defendant and claimant.
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 Ex turpi causa: Advantage of this type of defence is provided to the defendant in case if
act of negligence being carried out by them is justified in the court of law. Considering
this aspect case of Davies v Swan Motor co [1949] 2 KB 291 can be undertaken.
In the scenario provided , injury was occurred to Kevin and David and the main reason
behind same was telephone pole of the firm named Teleco. Further, in the scenario highlighted
injury has been taken place due to negligent act of Kevin as it was individual responsibility to
drive at standard speed so as to avoid situation of accident. Therefore, this duty has breached due
to his carelessness (Faems and et.al., 2008). Apart from this it was also the responsibility of firm
to undertake qualitative materials and doing proper arrangements in case of emergency. Further,
they were not at all satisfied with their duty and David and Kevin were injured. So, by
considering this scenario firm will not be responsible to pay damages to David as they were not
eligible for defence of contributory negligence. Injury of claimant took place due to his negligent
act and in this case he will not be entitled to claim for remedy. Apart from this, both David and
Teleco will be responsible to pay damages to Kevin for his injury due to negligent act.
5. Case scenario of Colin and Regent Hotel
By considering the case scenario of Colin and Roger, Regent Hotel is held vicariously
liable. It is obliged on the hotel to provide proper guidance to employees so that employees
should not get engaged in unethical practices that is physical abuse. However, the hotel failed to
do so because Colin the head chef, hit the Roger from the frying pan. As a consequence of which
hotel owner will be held vicariously liable for the payment of damages to the injured party.
Furthermore, both the conditions of vicarious liability is satisfied that is negligence occurred in
the course of working hours and Colin had the status of employment. Therefore, Roger can make
claim of vicarious liability against Colin (Abn, 2009).
Alternative to this, Roger can also claim on the Colin by considering the act of
negligence. It is because, Colin has standard duty to not use physical violence. Act of hitting
with frying pan on Roger shows that there is a breach of duty on his part. Further, due to
negligence of Colin, injury is occurred to the Roger. Above described provisions show that all
the points of negligence are satisfied in the given scenario; thus Colin is entitled to make direct
claim of negligence (Twerski, 2006).
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CONCLUSION
After preparing this report it can be concluded that this report is focused on the
provisions of contract and negligence law. By considering description in present report,
conclusion can be drawn that individual are required to provide satisfactory performance as per
the pre-determined contractual terms. This law ensures omission of act that can cause injury to
the innocent party. Employer is liable for the actions of employees thus they should assure that
operational activities in workplace is accomplished in a proper manner.
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REFERENCES
Journals and Books
Abn, A. J., 2009. Finding Vicarious Liability in US Patent Law: The" Control or Direction"
Standard for Joint Infringement. Berkeley Technology Law Journal. 24(1). pp.149-177.
Bisso, J. C. and Choi, A. H., 2008. Optimal agency contracts: The effect of vicarious liability and
judicial error. International Review of Law and Economics. 28(3). pp.166-174.
Caruso, D., 2007. Contract law and distribution in the age of welfare reform. Ariz. L. Rev. 49.
p.665.
Faems, D. and et.al., 2008. Toward an integrative perspective on alliance governance:
Connecting contract design, trust dynamics, and contract application. Academy of
management journal. 51(6). pp.1053-1078.
Hunt, M. K., 2015. CloudConsumer: contracts, codes & the law. Computer Law & Security
Review. 31(4). Pp.450-477.
Johari, V., 2014. Professional misconduct or criminal negligence: when does the balance tilt?
Indian journal of medical ethics. 11(2).
Kreitner, R., 2009. Fault at the Contract-Tort Interface. Michigan Law Review. pp.1533-1549.
Lipshaw, J. M., 2011. Contract as Meaning: An Introduction to Contract as Promise at 30.
Suffolk UL Rev. 45. p.601.
Marks, R. J., Marks, R. J. and Jackson, R. E., 2013. Aspects of civil engineering contract
procedure. Elsevier.
McKendrick, E., 2008. Contract Law: Text, Cases, & Materials: Text, Cases, and Materials.
OUP Oxford.
Mello, M. M. and Joffe, S., 2007. Compact versus Contract-Industry Sponsors' Obligations to
Their Research Subjects. New England Journal of Medicine. 356(26). p.2737.
Patil, A. M. and Anchinmane, V. T., 2011. Medicolegal aspects of consent in clinical practice.
Bombay Hospital Journal. 53(2).
Raz, J., 2010. Responsibility and the negligence standard. Oxford Journal of Legal Studies.
30(1). pp.1-18.
Tovino, S. A., 2008. Incidental findings: a common law approach. Accountability in research.
15(4). pp.242-261.
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Twerski, A. D., 2006. Chasing the Illusory Pot of Gold at the End of the Rainbow: Negligence
and Strict Liability in Design Defect Litigation. Marq. L. Rev. 7. pp.90.
Veljanovski, C.G., 2007. Economic principles of law. Cambridge University Press.
Volokh, E., 2010. Tort Liability and the Original Meaning of the Freedom of Speech, Press, and
Petition. Iowa Law Review, pp. 10-15.
Wong, G. M. and Deubert, C., 2010. The Legal & Business Aspects of Disability Insurance in
Professional and College Sports. Villanova Sports and Entertainment Law Journal. 17.
p.473.
Yan-qing, L. Y. J. N., 2007. An analysis into elements suitable for enterprises under the model of
psychological contract duality classifies. Journal of Beijing University of Posts and
Telecommunications (Social Sciences Edition). 6. p.011.
Zoll, F., 2012. The binding power of the contract: Protection of performance in the system of the
Common European Sales Law. Journal of International Trade Law and Policy. 11(3).
pp.259 – 265.
Online
Contract consideration. 2015. [Online] Available through:
<http://e-lawresources.co.uk/Consideration.php>. [Accessed on 22nd February 2016].
Taylor, A., 2011. Offer and acceptance online. [Online] Available through:
<http://www.seqlegal.com/blog/offer-and-acceptance-online>. [Accessed on 22nd
February 2016].
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