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Aspects of Contract and Negligence of Business


Aspect of contract and negligence of business is the imperative field which a business always consider for conducting all business activities. It provides standard for business as well as all parties entering into contract. Present report is based on different case studies which ensure inclusion of negligence legislation which facilitate to ensure ethical conduct of business. Further, negligence of business has also been explained in the light of principles. In addition to this, vicarious liability is explained in order to secure the right of third party. Furthermore, essential elements have been explained which leads to form a valid contract among two or more parties.


1.1 Essential elements required for the formation of contract and their importance

The major elements of contract are explained as follows with facilitate to form valid contract and protect the right of two different parties. These are as follows-

  • Offer and acceptance-It is the most imperative aspect for a contract because on party must offer something to other in order to enter into valid contract. On the other hand, other party must accept the offer in same manner. After completion of the process of offer and acceptance, the agreement exist among parties.
  • Consideration-There must be consideration in contract which is valuable for both parties. It is given by both parties which serve as the basis for the formation of legal aspect.
  • Intention to create legal contract -Under this parties entering into contract must have intention to do the same. Both parties such as offerer and offeree must know about the offer as well as acceptance of the same.

Invitation to treat

According to the give case scenario, Bill offered printing press for £100,000 and Cathy another party shown intention to purchase the same in £80,000. here, bill again replied that deal can be completed in £90,000 when he heard nothing from Cathy. At this juncture, inviting party has right to accept the counter offer or to reject the same. However, the advertisement placed by Bill was just an invitation of sales of printing press.

1.2 Different types of contract and their impact

The main types of contracts are explained as follows along with their potential impact on parties associated with contract-

  • Face to face contract- This kind of contracts are more reliable in the nature as it consists of present of evidence. Under this, both parties remain present at the same place and discuss the terms and condition of contract. They mutually discuss the standard of the contract and accordingly work for fulfillment .
  • Written contract-This is another form of contract wherein written deed is made. The example of such kind of contract is sales of non-movable property where parties relay on the standard terms and condition. They are entitled to pay for the damages in case of loss to innocent parties .
  • Distance selling-Such kind of contract take place where distance matter a lot and parties are not present at the same place. These are completed by using several means like emails, telephones etc. However, such kind of contract remain valid for certain time span. For example a person live in Chicago wants to sell his car in London through placing advertisement. Here, parties interested in the product will be communicate by telephones or email.


2.1 Applying various elements of contract

The several essential elements applied in contract are explained in accordance with given case scenario-

Bill and Cathy: As per the given case Bill advertised for the printing press for £100,000 which was just a invitation to offer. Here, by seeing the advertisement Cathy reply to purchase the same product for £80,000. Here, Bill replied that he would accept £90,000 but when he did not get any response then Bill agree to complete the deal in £80,000.According to English Law, an offer is said to be lapsed when counter offer is made by offeree. In the given case counter offer was made by Cathy and which was cancelled by Bill by offering the another amount of printing press. At this juncture, no any contractual relationship exist among both of them as they both do not accept the offer.

Bill and Liza: According to the given case scenario, Bill wrote the letter to Liza for sale of computer in £550 which was received by Liza in the next day morning. However, she accepted the offer and posted letter later day. Under this approach postal rule will be applied by focusing on validity of contract. According to the postal rule acceptance will be considered on the day when letter of acceptance is dispatched by offeree. Thus, contract exist among parties is enforced by law and it can be said that both parties are entering into legation relation on the basis of presence of all essential element of contract.

1.3 & 2.2 Analysing of contractual terms with reference to their meaning and effects

The contractual terms play vital role in a contract because it defines the standard of contract and accordingly both party need to perform their duties. These are explained as follows-

  • Conditions- These are major terms of contract which has direct relevance with the aim of contract. In case of breach of condition there will be breach of contract. Here, it is very important to pay for the damages to innocent party. Also, the innocent party has right to repudiate the contract after claiming for the losses.
  • Warranties-It consists of minor terms of contract which do not play significant role as conditions. Here, in case of breach of warranties, innocent party has right to claim for the damages but not to repudiate the contract.
  • Exclusion clause-This consists of certain terms which support parties to reduce the their contractual obligation to some extent. However, such terms must be supported by legal provision so as to give relaxation to both parties and do not hamper to existence of contract in any means.
  • Innominate terms- These are another kind of term which are neither considered as term nor warranties. Under this, if parties are facing losses from the whole benefits of contract then they have right to terminate their legal relationship.

Case scenario

According to the above scenario Opera singer Joyce DiDonato entered into contract to perform for 3 months for the Royal Albert Hall company. However she became ill five days before opening night. Owing to this, Royal company replaced Joyce DiDonto. This in turn Joyce DiDonato sued the Royal Albert Hall Company for Breach of contract. Also, the second scenario depicts that employment contract was terminated as again she was not able to attend the rehearsals.

Here, case of Poussard v Spiers (1876) 1 QBD 410 will be applied because conditions are breached by Joyce DiDonato and she did not perform her duty as per the contract. Owing to this, innocent party has right to repudiate the contract. Thus, action taken by The Royal Albert Company is fair. On the other hand, action taken in second case is not valid because she remained absent only in rehearsals. Thus, contract can be repudiate and corporation do not have right to terminate the employment.

2.3 Evaluating the impact of expressed and implied terms

There are two types terms such as expressed and implied. Here, expressed terms are clearly stated in the contract with mutual consent of parties. These are divided into three parts such as warranties, conditions and innominate terms. Apart from this, implied terms are not stated clearly but inserted by law, statue and customer for providing protection to weak party.

Case 1(Expressed terms)

According to the given scenario two parties Scammell and Outson was in agreement to supply van on hire purchase terms. Here, Ouston was to trade in his old van £100 but because of disagreement he did lost the opportunity. It reflect the break of expressed terms and thereby he is entitled to claim on Scammel for the opportunity loss.

Case 2 (Implied terms)

According to the given scenario landlord denied to pay for due to absence of expresses term from contract. However, this contract has implied terms . Although the agreement of tenancy was terminated before harvesting process. In this regard example of Hutton v Warren [1836] EWHC Exch J61 can be considered where court stated that claimant has right of compensation for all his efforts made for the contract. Thus, farmer will get the benefits from landlord.


3.1 Advise Brad if he can recover his losses from Charles applying the elements of tort of negligence and state possible defenses from different cases

From the case study, it has been evaluated that Albert has taken flat on rent Brad and while giving the flat, Albert assured that his financial condition is good and he is able to pay for the rent. Brad has considered his nominee's statement and he trusted on the same; however after a few month, Albert ran away without paying for the rent and this caused loss to Brad (Klass, 2010). In this particular situation, Brad is entitled to recover the loss from Charles since he relied on his statement and gave flat to Albert on rent. The credit of entire fault goes to Charles because he did not look properly on the actual financial statement of Albert.

Charles dis not look properly on the account details; thus negligently he gave wrong statement to Brad. It was the duty of Charles to give proper and accurate statement and he must have to properly check the statement which he gives to to anyone while acting as a nominee. Hence, the entire amount of loss can be recovered from Charles because he is liable for the negligent act happened to Brad. Brad is entitled to recover the entire amount of loss from the nominee. From the above discussion, it is evident that Charles has given negligence misstatement which is the reason of loss to Brad. It is essential for all the accountants and auditors to give proper statement to the clients because people rely on their statement. Thus, to protect the clients from loss and damage, nominee must have to avoid giving negligence misstatement.

3.2 Contrast how nature of liability in contract differs from the nature of liability in tort

Contract law specifies all the acts and aspects that needs to be considered while developing the agreement and concerned parties have to consider all those aspects especially afterwards entered into the contract. Parties have to specify all the roles and responsibilities so that they can fulfill the major requisites of the contract. Conditions of all the parties have to be mentioned properly so that at initial level, all the aspects can be clarified. Prior developing the contract, one has to look upon the type of contract. As per the contract act, parties are required to fulfill all the responsibilities and at the time of breach of contract, damages have to be paid by the negligent party. Contract law specifies remedies in the case when any of the contractual party fails to oblige the conditions mentioned. On the other hand, tort law includes all the aspects related to negligence and breach. It integrates all the basic aspects that are concerned with legal facets and that limits the liabilities of contractual party. This can be used at the time when general legal framework is not followed in the contract.

3.3 Explain nature of liability in negligence with reference to “Donoghue v Stevenson 1932”

The case scenario (Donoghue v Stevenson) reflects the nature of liability along with the condition, when parties are held liable for the act of negligence. The case shows snail in the bottle where in the House of Lords established a civil tort of negligence under which the manufacturer is unable to provide quality products to the customer. However, in the present case, Donoghue is not entitled to claim Stevenson for breach of contract because she had not purchased drink and her friend did that. Donoghue faces loss because Stevenson failed to consider the liability towards the consumers; thus he is held liable for breach of contract.

The ruling body has come up with the decision and confronted that negligence is a tortious act and it provides plaintiff the rights to claim against the negligent party. Plaintiff can claim for the loss and damage caused under the scenario of negligent act. Therefore, in the present case, Donoghue cannot sue Stevenson for the act of negligence because she directly had not purchased drink from the manufacturer. However, as per the duty of care, it is essential for the manufacturer to deliver quality goods to the consumers. In terms of conclusion, it produced the law of neighbor principle for the tortfeasor along with the plaintiff. Donoghue could have sued Stevenson if she directly had purchased the bottle from the manufacturer; however in the present case, her friend brought him the bottle. Hence, she cannot claim for the damage.


4.1 Discuss if Bill is liable of negligence and if XYZ Dairies can be held vicariously liable

As per the present case, Bill who is working with XYZ Dairies has employed a 14 year old boy to deliver milk with him and while driving for the delivery purpose, the boy met with an accident. In the particular case, Bill can be held as negligent party since he is under fault of employing minor person in the dairy. This also reflects that Bill had not followed any kind of employment related laws because if he would have followed the norms, them he might not have employed 14 year old boy for milk delivery purpose. As a result, the owner of XYZ Dairies can suspend Bill because of the negligent act.

Further, the dairy cannot be held as vicariously liable since the owner had no idea regarding the employment of 14 year old boy for business purposes. Bill has to pay for the damages and injuries caused to the boy and along with this, he can be suspended from the employment period as well. The accident happened because of the negligent action by Bill; thus he can be held liable for the accident and damage caused. At the same time, the business cannot be held liable for the wrongful acts of employee because the employer had no idea regarding the employment of a minor person in the diary. Owner of XYZ Dairies would be held vicariously liable if the accident happened by any of the employee during the period of employment.

4.2 Explain when businesses are and are not vicariously liable for the wrongs of employees

In order to make the party held liable for the claim, it is mandatory to showcase direct relationship between both the concerned parties. For instance- there should be proper and direct relationship among employer and employee. Employer can be held vicariously liable if the action of negligence is happened during the period of employment else it would not be lie under vicarious liability. While delivering services to the clients, the employers have to make sure that all their employees are fulfilling the legal aspects and they are not omitting anything. Similarly, this should be present in the case of workplace also. Employee conflict when results to violent act in the course of employment comes under the duty of employer as he has to look upon the situation. Harassment is also one of the serious issues for which employer can be held liable if it happens in the course of employment. Thus, considering the case scenario, owner of Vintage museum is not entitled because his friend drove the car and because of his negligence, Mrs Smith's car damage. Thus, she can take the amount from owner's friend since he drove negligently. Hence, owner is nowhere entitled for the damage to Mrs Smith.


Concluding the entire case, it can be articulated that while doing any act, the contractual parties have to consider their duty of care. The situations regarding the breach of contract needs to be avoided so that contractual parties can remain in the contract for longer period. While claiming any negligent party, plaintiff has to make sure that all the legal aspects are considered appropriately and that should not lie under limited liability aspect. While preparing the study, several factors related to vicariously liability and tort liability have been found out. The contractual parties have to consider each other's interest all the time and they should fulfill legal obligations as well in the case of negligence and breach of contract both.


  • Bennett, L. and Gibbeson, C., 2010. Perceptions of occupiers' liability risk by estate managers:A case study of memorial safety in English cemeteries. International Journal of Law in the Built Environmen.
  • Defences to the Tort of Negligence. n.d. [Online].
  • Emerson, W. R., 2009. Business Law. Barron's Educational Series.
  • Gillies, P., 2004. Business Law. Federation Press.
  • Goldman, A., 2013. Business law: Principles and Practices. Cengage.
  • Klass, G., 2010. Contract Law in the USA. Kluwer Law International.
  • Manuel, M. K., 2011. Contract Types: An Overview of the Legal Requirements and Issues. DIANE Publishing.
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