Contractual and Tortious Liability: A Legal Analysis of Sandoz Plc

This report provides a comprehensive analysis of contract and negligence within the context of Sandoz Plc, a pharmaceutical company. It begins by outlining the essential elements of a valid contract, including offer and acceptance, intention to create legal relations, consideration, and capacity. Different types of contracts, such as written, verbal, and distance selling contracts, are described, with a critical analysis of the impact of provisions in distance selling contracts. The report then explores the main terms of a contract, including express, implied, and exclusion clauses, and their implications. The application of contract elements and the law of terms to a hypothetical contract between Sandoz and Caterpillar are examined. The report contrasts tortuous liability with contractual liability, providing a case scenario and discussing vicarious liability. Finally, the report analyzes the applicability of the tort of negligence, including defenses, and the elements of vicarious liability in the context of Sandoz Plc. The report concludes by summarizing the key findings and implications of the legal analysis.

ACNB

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Describing the essential elements which forms a valid contract...........................................3
1.2 Describing different types of contract and critically analyzing the impact of provisions in
distance selling contract...............................................................................................................4
1.3 Describing main terms of contract.........................................................................................5
TASK 2............................................................................................................................................5
2.1 Applicability of elements of contract for Sandoz Plc............................................................5
2.2 Applicability of law of terms in the Sandoz..........................................................................7
2.3 Evaluation of effect of different terms in the contract..........................................................8
TASK 3............................................................................................................................................8
3.1 Contrasting tortuous liability with contractual liability.........................................................8
3.2 Case Scenario.........................................................................................................................9
3.3 Vicarious Liability of a company........................................................................................10
TASK 4..........................................................................................................................................10
4.1 Applicability of Tort of negligence and defenses in Sandoz Plc.........................................10
4.2 Applicability of elements of vicarious liability...................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
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INTRODUCTION
Any written or spoken agreement that are concerned with employment, sales or tenancy
which is intended to be enforced by law is known as contract. Business parties enter into contract
so that they can maintain good faith with each other. Moreover, there are verbal and written
contract through which businesses can enter into contract. In order to present the evidence at the
time of breach, they mainly prefer written contract (PADHI, 2012). Whereas, the negligence in a
contract is a duty which one party fails to perform and this causes injury to the other party. Thus,
it gives rise to tort liability. This report basically emphasizes on the aspects of contract and
negligence in Sandoz ltd Company which is a famous pharmaceutical firm in UK. Furthermore,
discussion has been made on the inclusion of essential elements which makes the contract valid.
Moreover, this report covers contractual and tortuous liabilities and the availability of remedies
when there is a breach of contract and terms. Additionally, nature of negligence and vicarious
liability has been discussed.
TASK 1
1.1 Describing the essential elements which forms a valid contract
There are basically 4 important elements which makes the contract valid. Sandoz Ltd
must understand the importance of each of them. Thus, description of them has been made as
follows: Offer and Acceptance: Offer is a primary element from where the contractual
relationship begins (McKendrick, 2015). One party must make valid offer to the other
party. If another accept the offer than it becomes the binding contract. For making the
offer, there should be a legal object for which offer is made else it would become void ab
initio (Taylor, 2011). Intention to Create Legal Relationship: Two or more parties entering into a contract
must have a clear intention for creating legal relationship. The parties cannot be entered
forcefully by threatening (Nystén‐Haarala, Lee and Lehto, 2010). If there is no intention
then contract cannot be considered as valid.
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 Consideration: It is considered as the bargain of the contract. Every contract is based on
an exchange of promises. Each party in a contract must receive benefit out of it and suffer
the detriment as well. The benefit and detriment is known as consideration. Capacity: Parties entering into a contract must be competent enough and have the
capacity to form a legal relationship (Giliker, 2010). Any part should not be of unsound
mind, lunatic, drunken, etc.
1.2 Describing different types of contract and critically analyzing the impact of provisions in
distance selling contract
Contracts are of different types and they are in different manner. However, these
contracts have an impact on different situation. Three types of contract have been enumerated as
follows:
Written Contract: Those contracts which are formed in a written format are termed as a written
contract. Moreover, it is voluntary, legally and deliberately binding agreement which helps in
maintaining good faith among the parties (Turner, 2014). Written contract is formed when all the
parties to a contract signs the legal document. It is helpful at the time of breach of contract
because, innocent parties can show the evidence about the breach of obligations and can claim
damages.
Verbal Contract: Such contracts are formed orally through face-to-face meeting. There is no
involvement of legal documents and without which parties get bind into the contract. However,
at the time of breach, no evidence could be availed. Therefore, it becomes difficult to resolve
conflict at the law court.
Distance Selling: This contract is formed from long distance through email, calls or video
conferencing and parties get bind into a contract. It is done when parties are not present
physically. As per the viewpoint of Ali and Kumar (2015) provision in distance selling is that
these kinds of contracts are controlled by DSR that is Distance Selling Regulations. People
usually does not read all the terms and condition which may sometimes lead to conflict.
However, at the time of breach, contracts are governed by DSR.
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1.3 Describing main terms of contract
Terms in a contract refer to as the contractual statements and they give rise to contractual
obligations. If any of the term is broken then it carry binding and legal consequences. Various
terms along with its impact has been described which are as follows:1. Express Term: Those terms which are inserted in the deed by the parties through the
mutual consent is known as the express term. It can be in oral or written (Marchais‐
Roubelat, 2012). This term can be bifurcated into three other terms that are: Conditions: It is a major term in a contract which has a central existence in a contract.
As per the case of Poussard v Spiers (1876) 1 QBD 410, if these terms are broken then
innocent party has a right to terminate contract and can claim damages. Warranties: It is minor term of a contract which does not exist centrally. Further, the
breach of warranties does not give right for repudiation of contract. But parties can claim
damages for the same (Bettini v Gye 1876 QBD 183). Innominate Term: This term is neither conditions no warranties but it lies somewhere in
between both the terms. However, according to Hong Kong Fir Shipping v Kawasaki
Kisen Kaisha [1962] 2 QB, the breach of this term does not give right to the claimant to
terminate the contract.2. Implied Term: It is not necessary to express every term in a contract. Several terms are
implied by statute, custom and court. Objective of implied term is to provide effect to
obvious intention of all parties. If these terms are breached then it imposes obligations for
payment of damages (The Moorcock (1889) 14 PD 64).3. Exclusion Clause: The clause which restricts the rights of one party to the contract is
termed as exclusion clause. According to L'Estrange v Graucob, it describes that one
party will not be liable or responsible for the certain happenings.
TASK 2
2.1 Applicability of elements of contract for Sandoz Plc.
Draft of contract between Sandoz and Caterpillar
The following draft has been made for the long-term lease for equipment by Sandoz Plc.
from Caterpillar. It is made on 19th March 2016 for the purpose of taking expensive equipment
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on lease for long term in order to make a particular kind of medicine for a special disease.
Description of type, lease amount and terms are described in a draft.
Equipment of caterpillar should be sent to this address
Address: Sandoz Ltd. Frimley Business Park, Frimley, Camberley, Surrey, GU16 7SR.
Phone: [phone]
Fax: [phone]
Email: [e-mail]
The receipt of lease, documents and other proceedings should be sent by the Sandoz on this
address:
Address: 501 Southwest Jefferson Avenue, Peoria, IL, 61630, 888-614-4328 toll free in
United States and Canada
Phone: [phone]
Fax: NA
Email: [e-mail]
Lease of heavy equipment for 5 years:
Product Name Per year Rent No. of Years Total price
Caterpillar-CAT £750 5 £3750
 Terms: Product should work according to the stated module. Delivery: Notice should be given in advance from Caterpillar while making the delivery
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of product.
 Acceptance: The equipment will be accepted after complete examination of the
machine.
 Governance: This contract will be governed and regulated through legislation of English
contract law.
Managing director of Sandoz Managing director of Caterpillar
__________________ ________________
(Signature) (Signature)
Date: _______ Date: _______
Sandoz company gave an offer to Caterpillar that they should give the expensive
equipment on long term lease. Thus there was a valid offer in this contract. After that, Caterpillar
accepted the offer and this is how binding contract formed between both the firms. Further,
consideration was given that is £3750 to the Caterpillar and in return the leasing company gave
the equipment (Milner, 2011). Moreover, both the parties were competent enough to enter into
the contract and also they entered in the contract with their consent. Along with that, express
terms were included in the agreement. Thus, all the elements were applied in order to form valid
contract.
2.2 Applicability of law of terms in the Sandoz Expressed terms- It can be referred as situation where Sandoz Plc have agreement with
any other firm in context to description of products ie. rate, price and quantity. It is
considered as terms and conditions that management needs to follow because it provides
a warranty in respect to activity (Middlemiss, 2011.). Implied terms- In this respect, it can be said that the situation where management of
Sandoz Plc and other party performs activity in fair and transparent manner. It is
necessary for organization to follow all considerations in proper way top meet objective
of contract.
 Exclusion clause: It is a clause that facilitates in decrease of responsibility when party
breach the contract. It is necessary for management of Sandoz Plc to ensure that the
exclusion clause is added in the contract during the signing and drafting of contract
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(Morris, 2010). If any kind of these terms are inserted after the formation then
authoritative signature of party and authorities is required. Defendant does not have any
kind of accountability in respect to damages if all terms and conditions are properly
followed.
2.3 Evaluation of effect of different terms in the contract Breach of condition- In situation of dissatisfaction due to performance then aggrieved
have liability towards the terms and conditions of the agreement. Party can also claim in
respect of damage (Morris, 2010). If any kind of breach activity is performed by other
party then management of Sandoz can clam for the damage. If warranties are not satisfied
then innocent party can claim damages but they cannot repudiate the contract. It is
necessary for Sandoz to ensure that all terms and conditions are followed in appropriate
manner. Legality of exclusion clause- In situation where Sandoz provide goods to other party
under the avoidance of exclusion clause then other party can clam for damage. It is
significant for Sandoz to ensure that the activities are performed in fair and valid manner
so that mutual acceptance can be take placed (Ali and Kumar, 2015).
1. Remedies available to organization- Sandoz can get replacing of products if order is
different as per the details provided during formation of contract. In this respect, the
organization can cancel the agreement and demand a clam against damage (Turner,
2014.).
TASK 3
3.1 Contrasting tortuous liability with contractual liability
Tort Liability
The liability which arises from the act of negligence by the person who commits tort is
known as tort liability (Steele, 2014). Further, the tortfeasor is liable to pay the damages to the
injured party because they failed to take reasonable duty of care while carrying out any activity.
Contractual Liability
This liability arises when on party in a contract breach the contractual term by not
fulfilling the contractual obligations (Perritt Jr, 2010).
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Contrasting both the the liabilities
Tortuous and contractual liability both are covered under civil law in order to provide
damages to the innocent or injured party for the purpose of recovering losses. In tort liability
relationship between the parties is imposed by law whereas in contractual liability all the parties
enter into the deed with their on consent (Home Office v Dorset Yacht Co Ltd, (1970) AC 1004
House of Lords). Further, in tort, damages is provided in order to bring claimant in a position in
case performance was not given by party. However, damages are provided in liability in contract
in order to bring claimant in a position if satisfactory performance was given by party (Porrini
and Ramello, 2011).
3.2 Case Scenario
Case: In a given case, Sandoz was having a warehouse in Central London which was situated
nearby gas station and that station was owned by another company. Due to this gas station,
warehouse of Sandoz was burnt completely.
Implication: In this case there is a tort of negligence by a gas station (Hernandez, 2010). In order
to prove there is a liability in negligence Sandoz Plc are required to understand the 4 elements of
negligence. The 4 elements are as follows:
 Duty of Care: This refers to as the circumstances and relationship that has been
recognized by the law and give rise to a legal duty of care. As per the case of Donoghue
v Stevenson [1932] AC 562, Gas station owes the duty of care towards the warehouse of
Sandoz Plc. because of the hazardous product they possess. They need to take care of
their neighbors according to the Neighborhood Principle.
 Breach of Duty: when plaintiff fails to take care of their duty which leads to the breach
of duty. The blast of gas leads to the burning of Sandoz warehouse. Thus, it can be
inferred that gas station breached the duty of care as the firm did not perform their duty
in an expected manner (Lockwood, 2011).
 Causation: In order to demonstrate the causation in tort law, a injured party must prove
that they are suffered because of the negligence by defendant. Further, in this case,
Sandoz have proved that their warehouse has been burnt by nearby gas station
(Aggarwal, 2010).
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 Remoteness: It is related to the requirement that the damage should be of foreseeable
type. Therefore, in this case, damage caused due to fire was of foreseeable type so
Sandoz Plc. can make a claim against the gas station.
Thus, it can be advised to the company that they can make a legal claim against the gas
station company in order to take the compensation for the damages caused. Further, the firm can
prove that gas station breach the duty of care and the damages is caused by them. Along with
that, losses are of foreseeable type which means that liability in negligence have aroused (Sam
Middlemiss, 2011).
3.3 Vicarious Liability of a company
Vicarious liability is that situation where innocent party is held responsible for the
wrongful act of tortfeasor (Lister v Hesley Hall Ltd [2001] UKHL 22). Such liability mainly
arises in a course of employment where employers are held liable for the illegal act of their
employees. In the case of Sandoz, the company will be liable for the wrongful act of their
employees (Giliker, 2010). There are two cases when company was held responsible for the
misconduct of employees. Two situations are described as follows:
1. The scientist of the company wrongly put the quantity of certain ingredient from 0.5% to
0.10% and those medicines were sold in the market. Many of the consumers fall ill due to
this medicine and this caused serious injury to them (Lankford and Blaze, 2015). For this
aspect, Sandoz company was held responsible due to the wrongful act of their employer.
It is because, company was in position to control and prevent act of negligence of their
employees.
2. The operational manager of the company violently injured the subordinate because he got
frustrated from his working style. The subordinate file suit against the company because
he got severe injury. For this aspect, Sandoz Plc. was held liable for the illegal act of its
employee (Imlak Shaikh and Padhi, 2014).
TASK 4
4.1 Applicability of Tort of negligence and defenses in Sandoz Plc.
Tort of negligence and its elements are discussed in former questions. Those have been
applied in three situations of Sandoz Plc.
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Case 1: It is a general duty of the company to safely keep all its chemical so that any visitor does
not get in contact with them. However, the organization did not keep the chemicals closed and
during that time a visitor arrived and he by mistake got hit by some thing and due to which
chemical go spread on the floor and his leg got burnt. Sandoz has a duty of care which was
breached by their employees. Along with that, causation was also provided and damages were
foreseeable. Thus, claim can be made by the claimant for which company has to pay the damages
caused.
Case 2: If the sign was put outside the room “Caution: Visitor's entry is restricted”. Even after
the caution signboard one of the visitor entered into a room and due to this, chemical burnt his
leg. This time, company can take the defense of volenti non fir injuria. It means that, a person
put themselves in such situation where they know that harm exist. Therefore, a visitor entered the
room even after the caution signboard so he could not claim against the company.
Case 3: 3 months back, this company supplied some medicine to one of the supplier. After an
hour the firm informed that medicine supplied were wrong and does no sell in the market. But
even after knowing the fact, dealer sold it in the market. And the consequences were not good as
many customers fall ill. Consumers sue the dealer but dealer put the blame on the organization.
Company can take the defense of contributory negligence which means that both the parties are
equally liable for the occurrence of tort. Therefore, in this condition both company and supplier
were liable.
4.2 Applicability of elements of vicarious liability
In a pharmaceutical industry, many misconduct happens for which company is held
responsible. However, there are two elements of a vicarious liability which helps in
demonstrating that whether employer can be held liable or not. Negligence must happen during the course of employment contract:When the scientist
put wrong quantity of ingredient in a medicinal solution that time he was bound under the
employment contract. Thus, company could be held liable for his wrongful act (Tanha,
Dempsey and Hallahan, 2014.).
 Negligent action must happen during the working hours: However, the scientist was
performing this activity at the office during public holiday. This signified that, negligent
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activity was not carried out during working hours. Thus, company could be not held
liable for the actions of its employee (Mo, Zheng and Lin, 2012).
CONCLUSION
According to the present report of aspects of contract and negligence, it can be concluded
that contract is a legal agreement among two or more parties which is enforceable by law
whereas negligence refers to tortuous act due to which innocent party get injured. For making the
valid contact it is important to to acknowledge that all essential elements are present in it. All the
parties are required to fulfill terms of the contract in order to prevent contractual liability. As per
vicarious liability, Sandoz is obligated to take care of acts of their workforce so as to prevent
statutory penalties. Additionally, they are required to take proper precautions of health and safety
of visitors to prevent their injury.
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