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Aspects Of Contract in Business Operation

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Introduction to Business Operation

Global expansion of business operation makes it difficult for the organization to update its knowledge regarding legal needs and demands. The legal obligations of the country or business units may create wide impact on the growth of the company and may impact the brand image of the company (Chen-Wishart, 2012.). Present report provides an in-depth knowledge about contract law and tort law as well. This helps in updating the legal knowledge and implications of these issues on various business firms.


Contract is a legal document which indulge the parties involved in the contract in legal obligation for meeting the purpose of a contract. It focuses on effective performance of the contractual terms to attain the objective for which contract is made. The essential elements of a valid contract are:

Offer: It is an expression of desire to enter into the contractual obligations with the parties involved. Offer is a proposal which expresses the terms and conditions of a contract clearly and specifically for the parties (DeMitchell, 2006). Case reference Harvey and Facey (1893) mentions clearly that Facey mentioned the lowest price of the pen in his telegram without actually showing the intention to sell it thus offer was not considered.

Acceptance: This represents the expression of acceptance of the terms an conditions of the contract in the exact manner without any further alterations. Any modification in the existing terms of contract is said to be a counter offer. Acceptance may be oral or written but must involve the original terms of the contract.

Consideration: A contractual relationship between the parties is developed to gain something in return (Lawful consideration,2011). Considerations is said to be a benefit that both the parties will have by performance of the contractual obligation (Faure, 2009).

Intention: This element states that the parties willing to enter in the contract must have the intention to bound into a legal obligation. The contractual obligation of the parties must not involve any outside persuasion or influence. The case law Balvour v Balvor reflects a similar situation which mentions that husband's promise to wide for maintainable was due to emotional bonding thus legality of he contract is not attained in the situation.

Contracts are categorized in different forms and types. Different categories of contracts are:

Written and verbal contracts: A contract where he terms and conditions are recorded in writing for further reference and consideration is categorized as a written contracts. This form of contract is time consuming an is formed for on terms consideration generally (Sutton, 2010). Verbal contract is the one in which the parties agrees upon the terms and conditions of the contract verbally and no written proof is developed or saved.

Distant and Face to face contract: Distant contract is one where the parties of the contracts are not physically present at the time of contact formation and that the contact is developed from distant places. Face to face contract on the other hand is the one where the parties of the contact are physically present during contract formation hence the terms of contract are well discussed developed.

Care reference:

In the given case if Gastropubs and Xs Ltd the contract was developed on the basis of written quotations and offers. Moreover both the patsies were not physically present at a common place to discuss the terms and conditions of the contract thus on the basis of given information it can be efficiently determined that the contract developed between the parties was distant contract which was in the written form.

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Case scenario

As per the given case Gartropubs is a well developed hospitality firm of UK. Xs limited focused on refurbishing the it pub. For this purpose the company contacted CP ltd which is a furniture company asking for the quotations. CP Quoted the price of ₤45000 which was not accepted by XS ltd. The company gave a counter offer of ₤42000 to the company on which was implied to be accepted as the company sent the furniture details and delivery dates. The attached contract in the mail was thus signed by the company secretary of Xs company which created a formal contract between the parties. Thus from the given case it can be determined that essential elements of the contract were attained to develop valid contract between the given parties.

Terms of the contract are the essential part to develop a valid contract. The terms of contract for the given case can be categorized as follows:

Expressed terms: These are the terms which are efficiently discussed and agreed upon by the parties involved in he contract. These terms may be verbal or written which creates an effective impact on the development of the contract (Nystén-Haarala, Lee and Lehto, 2010). The expressed terms of the contract consist of conditions, warranty and innominate terms. Conditions are the primary terms of the contract overrunning which may end the contract immediately. Warranties are the minor terms of the contract which develop the basic liability of the contract and innominate terns are those which do not fall in the either category.

Implied Terms: As the name suggest implied terms are those which are not expressed by words and written contracts but are reflected as the ultimate promise (Ramanathan, 2014).

Exclusion clause: These are the terms which are included by unfair means and practice to reduce the liability of the contract.These clause are considered unfair by the law if the representation of terms are not in the effective way.

Unfair Contract Terms Act 1977 effectively describe the provision of exclusion clause which entails that if any clause in included in the contract by unfair means is considered to be unlawful. In the given case the clause regarding and 5% increase in the quoted price of furniture due to increase in cost of raw material is argued upon. According to the case the counter offer of Xs limited was ₤42000. CP ltd by sending the delivery details implied the acceptance for the terms. Moreover the renewed contract of the company included the clause regarding 5% variable pricing due to cost of raw materials was signed by the CS of Xs ltd. Which converted the agreement into a valid contract. The given clause will be considered liable for performance by Xs company because:

Effective representation of clause: The clause was effectively included in the contract and was not deliberately hidden or was misrepresented by CP ltd.

Supported by regulatory aspects: The price variability regarding fluctuating prices of raw material is favoured by law hence this clause must be considered by he parties efficiently (Kidner, 2008). The contract is demanded to be supported by regulatory framework of the companies.


Contractual obligation and tort liabilities are the terms related to negligence of duties however according to English law the liabilities of both the aspects varies widely. The contractual obligation arises between the parties when any one of the party is unable to perform the contractual obligation while tort liability arises if the company do not perform their tasks as per the standards of duty (Lando and Beale, 2000).The major differentiation between the two is described as follows:

Relationship between parties: Contractual liability arises between the parties which share a mutual consent for contractual obligation while tort liability is the one which is imposed directly by law for neglecting the standard of care (Slapper and Kelly, 2011).

  • Nature of obligation: The obligation of parties under contractual obligation is restricted till the terms of contract while in case of tort liability the obligation of the act is imposed by law.
  • Reason of occurrence: The contractual obligation occurs in case of breach of contract which defines the non performance of contractual liabilities. However tort liability occurs due to negligence of defendant's duty (Whincup, 2008.).
  • Basis of damages: The damages are defined by the terms of contract however the act of negligence lead the claimant liable for the damages and injuries caused.

The act of negligence is imposed on a company or a person if the claimant is able to prove the following essential elements:

Duty of care: This elements defines that if the cause of damage to the claimant os caused due to act of negligence of the company in terms of adopting the basic duty of care then the act will be considered to be an act of negligence. Case reference Donoghues v Stevenson (1932) mentions a case where by consumption of contaminated ginger beer form opaque bottle claimant caused a physical sickness thus defendant was liable for the act of negligence (Appleman, Appleman and Holmes, 2013)

Breach of duty: This element defines that the company's breach of basic duty of care led to the event of damage for the claimant.

Remote damages: this defines that if claimant is able to prove that physical or financial loss caused to them was caused due to negligence of the defendant. For example in the given case Fiona's physical harm was caused by negligence of CP Company regarding water spill.

Forseeability:This element defines that that defendant was aware or could assume about the possible loss yet did not take effective measures to avoid the same then it is considered to be act of negligence (Giliker, 2010)

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As per the given case, Fiona visited CP ltd for purchasing furniture for her business. She slipped on the floor in the premises on CP ltd and caused leg fracture. The element of negligence attained for the same are:

  • Duty of care: The safety of consumers and employees which the premises of the company is the responsibility of the company. Water spilling cased the injury to Fiona which makes company responsible for negligence.
  • Breach of duty: The company breached the duty of care regarding physical safety of the company which implied breach of duty.
  • Remote damages: Fiona broke her leg in the firm which clearly fulfils this elements as well.
  • Forseeability: Spilling of water on floor makes the floor slippery which may lead to damages for visitor was obvious for the company.

Hence on the basis of above description Fiona is liable to claim for the loss caused to her from CP ltd.

The case mentioned that CP ltd has repeatedly informed its employees that in case of wood jamming the employees should never remove the safeguard. Bob the employee of the company, while working to achieve the target removed the safeguard to unclog wood jamming. This caused him some major injuries on his arm and hand.As the case mentioned CP company followed the duty of care by repeatedly telling employees not to remove the safeguard of the machine. However Bob removed the same to achieve his target which caused him the injury. Thus CP company is not liable for the same.

Vicarious liability is the act of damage caused to one party due to negligence of the other. In other words vicarious liability is the one where the actions of one person results in the responsibility of the negligence for the other (Treitel, 2002). This is a common example in the terms of employment as well. The act of negligence of employees may make the employer responsible for the same. The principles vicarious liability are:

  • Tenure of employment is applicable for the employees who are the part of the firm
  • The actions of the employees are in control of the employers
  • The action of negligence occurred on he basis of rights and authorities of employer (Levinson, 2005).

As per the given case Jason who was working for the delivery of furniture for CP ltd. In order to ensure timely delivery of furniture Jason crossed the speed limit and met with the accident. While driving a child stepped in the way of Jason and to avoid the harm Jason crashed into a shop causing damages (Owen, 2007).

The case clearly mentions that the accident caused by Jason was not in control of his employer. Thus this action of the Jason will not be liable under vicarious liability. The party damaging the claim cannot sue CP limited for the same.


The above report efficiently provides an in-depth understanding about various organizational actions and its legal implication as well. Various cases helps in evaluating the legal implication of theoretical law. Thus the report develops an effective means to develop applicability and enhance the theoretical knowledge for the given topic.


  • Appleman, J. A., Appleman, J. and Holmes, E. M. 2013. Excuses for Nonpayment and Defenses to Actions for Premiums (5). Appleman on Insurance Law and Practice.
  • Chen-Wishart, M., 2012. Contract law. Oxford University Press.
  • DeMitchell, T. A., 2006. Negligence: What Principals Need to Know about Avoiding Liability. Rowman & Littlefield Education.
  • Faure, M., 2009. Tort law and economics. Edward Elgar publishing.
  • Giliker, P., 2010. Vicarious liability in tort. Cambridge University Press.
  • Kidner, R., 2008. Casebook on Torts. Oxford University Press.
  • Lando, O. and Beale, H., 2000. Principles of European contract law: Parts I and II. Kluwer Law International.
  • Nystén-Haarala, S., Lee, N., and Lehto, J., 2010. Flexibility in contract terms and contracting processes. International Journal of Managing Projects in Business. 3(3). pp.462 – 478
  • Ramanathan, T., 2014. Law as a Tool to Promote Healthcare Safety. Clinical Governance: An International Journal. 19 (2).
  • Slapper, G., Kelly, D., 2011. The English Legal System. Taylor & Francis.
  • Sutton, M., 2010. Record rewards: the effects of targeted quality incentives on the recording of risk factors by primary care providers. Health economics. 19(1). pp. 1-13.
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