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Contract & Negligence for Business

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Aspects of Contract & Negligence for Business

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Introduction

In present era, contractual agreements are increasing day by day, there is a need of guidelines and principles so as to avoid unfair practices (Milner, 2011). For this purpose, contractual law is established by British parliament. In absence of contractual relationships, duties are described by negligence law. Present study also highlight the key provisions of contract and negligence law. However, the report will also understand essential elements of a valid contract that act as the base for entering into a valid contract. In addition to this, it will also understand different contractual terms inserted in the contract as well as different type of contract for the business. Other part of report will focus on explaining the negligence law along with the different provision of defences and the vicarious liability.

Task 1

1. Essential Elements of Contract

A Contract is nothing but an agreement which is legally enforceable (Adams, 2010). Elements which makes agreement a valid contract are as follows:

Offer: It can be termed as situation where a person intends as well as express his wish to another person to do any act or something . Offer can be oral or write. Offer can be made in general or to specific group of people (Steele, 2007).

  • Case scenario: As per the case of Fisher v Bell [1961] 1 QB 394 the court have not consider the contractual relationship between both the parties as display of products is not consider as a offer. However, it is considered as invitation to the public.

Acceptance: A person when gives his consent to the offer made from another person, it is termed as acceptance. Conditions or terms of the offer must not be modified while accepting the offer. Acceptance must be given by the person to whom offer is made.

  • Case Scenario: As per decision provided in felthouse v Bindley, One must communicate his consent to the person making an offer if he accepts it. Silence cannot be treated as acceptance.

Consideration: Paying another person for acts done by him as per contract is a consideration. Consideration is anything either of monetary or non-monetary nature given by one party of contract to another for acts done by him (Beatty and Samuelson, 2012).

  • Case Scenario: As per decision was given in Chappell v Nestle, inadequate consideration will not make any difference but it should be sufficient to support the offer.

Intention: Agreement would be a valid contract when both parties intend to perform their respective acts. Intention can't be shown or proved, thus it is presumed that both parties intend to do their acts. No action by any of the party should question their performance (Levinson, 2005).

  • Case Scenario: According to a decision made in Ferrera v Littlewoods pools, if evidence are available which questions on the duty of parties or their performance to contract, then their intention would be questioned.

Privity of Contract: No action can be taken on any other person which is not a party to contract neither any person can take action if he is not a party to a contract.

  • Case Scenario: As per decision provided in Tweddle V Atkinson, the third party who is not in the contract cannot pay consideration.

2. Impact of different types of contract

“When one Speaks of types of contract, it is all the same under English law”, this statement is not true because each type of contract has different consequences under different situations (Bowyer, 2000). Description of different types of the contract along with their impact is enumerated below:

Unilateral Contract: In this type of contract, a single party is bound to perform his act and the other party is independent in making decision whether to perform his act or not are unilateral contracts.

Case Scenario: Say, X lost his branded watch somewhere and announced that whoever finds it will get a reward of 100$. X is bound to pay 100$ if someone returns the watch but there is no boundation on anyone who finds watch to return to X, as per judgment of Carlill v Carbolic Smoke Ball Company.

Bilateral Contract: A proposal in which both the parties are bound to perform their act can be termed as bilateral contract (Willey, 2012).

Case Scenario: As per decision was given in Brogden v Metropolitan Rainway, an offer is made and accepted by another, and a valid contract is formed then both the parties have to perform their respective acts.

Collateral Contract: It can simply be defined as a contract raised from an original contract to support some terms (Desai, 2008).

Case Scenario: In accordance with the case of when some terms are not fulfilled of original contract and damages can't be recovered on the same by the contracting parties.

Electronic Contracts: Contracts made between parties through Electronic Mode. These Contracts are authenticated by Electronic Signatures. Contract may be between two persons situated within a city, within two states or within different countries.

Case Scenario: As per decision given in Adams v. Lindsell, contract was formed through e-mail, thus is an electronic contract.

3. Terms of Contract

Terms of the contract are not easy to identify and distinguish as each carries some sort of similarity (DiMatteo, 2012). Different terms of a contract are explained below along with factors which distinguish them from other terms:

Expressed terms: Terms which are decided by both the parties with their mutual consent and are conveyed to each other. These terms can be adjusted with their consent. Contract should specify all such terms specifically. Expressed terms vary with contract to contract (Nystén-Haarala, 2010).

Implied terms: Terms which are implied by any law, statute or jurisdictional authority i.e. no need to conveying it separately. Such terms are applied to general public. These terms will never change with change in contract. Eg. Provisions of various Acts, Judgements.

Innominate Terms: These are the terms which somewhere lies between expressed and implied terms. These terms are not decided at time of contract but are agreed by the parties later if needed (Giliker, 2010).

Conditions and Warranties: Condition is the terms that need to be fulfilled to legally enforce a contract. These should necessarily be followed otherwise may result in damages or either contract to repudiated. Warranties, unlike condition, need not necessarily be followed up. The condition includes warranties but warranties do not include conditions (Manuel, 2011).

Exclusion Clause: Terms which excludes a person to be held responsible for certain acts or happening or to oblige him to exercise some rights are known as exclusion clause. In other words, if any term is inserted in a contract limiting rights of any party to would be termed as exclusion clause. As per the case precedent of Chapleton v Barry, clause that is being inserted into a ticket is not considered as the part of contract as ticket provided by the local attendant is merely consider as the receipt (Gray, 2010).

4. Todor and Ivan Case

Offer is when someone expresses his willingness to others to do anything but inviting someone to make an offer is an “Invitation to treat” (McKendrick, 2012). In accordance with this approach, offeree is entitled to accept or refuse the offer.

In the given scenario, a book was displayed on todor's bookshop and Ivan wants to buy the book, it is an invitation to offer as book was displayed in shop and anyone who wants to buy can make an offer to Todor. Todor refused to sell as it is the last copy and already sold to Carl. There is no contract formed as there is an offer but not an acceptance. Todor is entitled to refuse to sell the book to Ivan as its on him to accept the offer made by Ivan or not. He is not bound to sell the book to Ivan just because he had forgotten to remove it from display.

5. Case of Adam and Brain

Contracts are categorised in different types, one of them is unilateral contract. Unilateral contracts are those in which only one party is bound to perform his act, another party is free from such boundation. In these contracts, offer is made to general public (Alkhamees, 2012).

In the given case, Adam advertises to reward £1000 to first person to swim across English channel. It is a unilateral contract as Adam will be bound to pay £1000 to one swims first to English channel, but there is no boundation on any other person to swim. Brain sees the advertisement and completes the task and claim the reward from Adam. Adam refuses to pay on the basis that he places another advertisement withdrawing the reward. As per the above provisions, Adam is bound to pay reward to Brain as he had started to swim before another advertisement was placed cancelling the reward (Padhi, 2012).

According to the case facts of Carlill v Carbolic Smoke ball, Adam is accountable to provide reward that he had advertise in the newspaper to the performance that was rendered by Brian. Although revocation of offer by Adam was not in proper time as Brian has started to swim across the English channel after reading the advertisement from the newspaper.

6. Local Council v/s Barry

Liability of any person if reduced or restricting rights of a person to contract by placing any term in a contract, will be termed as exclusion clause (Bledose, 2010).

In the case given, Barry pays amount to have chair in the park maintained by local council for which he is allotted a ticket. The chair collapsed damaging Barry's cloth. On complaining about the same, attendant points out the exclusion clause written on ticket which states no liability of council on damage from hired equipments.

The contention of attendant is not valid as ticket is merely a receipt and not a contract and exclusion clause can only be inserted in a contract. To call anything a contract, it must have all the essential elements of a contract like offer, acceptance, consideration, intention etc. and all these are missing in the given case. Thus, the council cannot refuse to pay damages on the basis of the clause mentioned on the ticket (Straub, 2011).

As per the case precedent of Chapleton v Barry, clause inserted into the ticket is not part of contract as ticket is simply just a receipt. However, through considering this prospect, exclusion clause is not properly integrated by local council as per the result park attendant is accountable for providing indemnity for the injury and damages occurred to the Barry by using the faulty chair in the park.

Task 2

1. Contract and Tort Liability

Contract Law and Tort Law has many similarities such as both these laws are covered under civil law. Both laws state solutions if duty was breached. Under both laws, damages are paid on non-fulfillment of their duties. Description of differences between these damages is enumerated below:

Definition: Liability arising from breach of any of the terms of contract are known as contractual liability while liability which arise due to action of any person causing harm to another are known as tort liability (Marsh and Soulsby, 2002).

Case Scenario: In accordance with the case of Chapell v. Nestle, contractual liability was imposed as terms of the contract were not satisfied. However in case of Caparo Industries Plc v. Dickman, liability arises because general duties were not satisfied.

Relationship between parties: Parties are related to each other before the formation of contract but in tort liability, relationship arises after the occurrence of negligent action (Zoll, 2012).

Case Scenario: As per decision given in case of Winterbottom v Wright, there must exist contractual relationship between parties. However, decision given in Hedley Byrne and Co v Heller, relationship arises with occurrence of liability i.e as a person is harmed by another.

Objectives of Law: Parties are liable to pay damages under a contract if duties are not performed satisfactorily so Contract law objects parties to perform their acts as per terms of contract (Garriga, 2013). Unlike Contract law, liability arises in tort law if negligence of law is done by person harming another, thus tort law objects a person to duly follow his duties.

Case Scenario: In case of Olley v Marlborough Court, unfair terms were exercised which result in occurrence of damages but as per case of Hinz v Berry, there must be actual injury caused by action of another giving rise to damages.

Liability to Damages: Terms of contract if not satisfied will give rise to liability to pay damages to innocent party to contract by person who made default whereas any act done to harm another person whether are bind by any contract or not will be liable to pay damages to person who is harmed (Owen, 2007).

Case Scenario: As per decision of Addis v Gramophone, damages are paid as party has breach the terms of contract but in case of Spartan Steel and Alloys Ltd v Martin, Person has not exercised duty of care and cause harm to other arising damages.

2. Negligence

A person when does not duly exercise his duties and does not reasonably take care of his acts is said to have negligence. Following elements need to be considered before saying any person having negligence :

Duty of Care: A person as per negligence law must do his acts with due care, preventing any action so as to harm or cause injury to another person (Rose, 2009).

Breach of Duty: Negligence law states that when duties are not fulfilled or done in an improper manner, it will be said to be a breach of duty i.e he fails to exercise his duties with reasonable care.

Damages: Damages are said to be incurred when duty is breached in a manner causing harm to another person. In such a case, the defendant has a right to claim damages from the claimant. Damages must have incurred in actual.

Damages need not be remote: Damages occurred should be measurable i.e they need not be too remote to identify (Clarkson, 2010).

As happened in case of Donoghue v. Stevenson, Donoghue drank beer offered by a friend. The beer was supplied by a manufacturer Stevenson. On drinking the beer, Donoghue found some remains of decomposed snail. Although there was no contractual relationship between Donoghue and Stevenson, as payment was made by her friend, she sued Stevenson. It is clearly a case of negligence by Stevenson, because while manufacturing drink, he should be careful as such carelessness by him may cause serious harm to other having his drink. He had not exercised his duty with care resulting in negligence.

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Scenario A

Negligence arises if one does not exercise his duty with care or there is a breach of duty. 
In the given Scenario, Ben is hotel owner. Roger complains about the skin rashes he had by using dishwasher for long period of time (Olander and Norrman, 2012). As a owner of hotel, its the duty of Ben to take proper measure regarding their products so as not to cause any injury to other. Ben had made available rubber gloves but employees did not use them. Law of negligence will not be applied on Ben as he has exercised his duty with care by making available rubber gloves, if employees did not use them, Ben can not be held responsible for the same. Thus Ben does not owe any non- delegable duty of care as he had provided a safe working environment. No liability in negligence arise in the given case.

3. Vicarious liability

In accordance with the provisions of vicarious liability, third party is held responsible for the actions of another person because the former exercises controlling power over the latter. Under vicarious liability, all the persons are in relationship where one is controlling others i.e. action done by others is on the influence of the controlling party (Milner, 2011). Examples of the same can be employer-employee, principal-agent, parent, child and many more where former is responsible for the acts of latter like employer is responsible for the work done by employee. Vicarious liability arises when either the controlling party or the controlled party defaults in their work. Say, controlling party had given wrong directions or controlled party had not acted as per directions given to him, vicarious liability arises. The party who defaults can also be termed as faulty party or violated party.

Controlling party is held responsible for any default and liability in general, like doing a right thing in a wrong manner by employee will make his employer responsible, because controlling party must also monitor the work given by him rather than just controlling. In contrary to this rule, in accordance with decision given in Armagas Limited v Mundogas S.A, joint liability will arise in situation of company. It is because, company is a artificial person and thus it is operated by the directors.

Scenario B

Vicarious liability arise where a person can be held responsible for action of another because he has control over him i.e one is controlling party and other is controlled party (Beatty and Samuelson, 2012). Controlling person will be liable for all the acts of controlled person done during the course of employment.

In the given scenario, Colin knocks Roger with frying pan laying him unconscious due to anger. Being the head chef, Colin sees the work of kitchen But being the hotel owner, Ben has a duty to carefully monitor the work of his employees timely. Roger brings claim in vicarious liability against Ben for Colin actions Vicarious liability arises because Roger and Ben are in employer-employee relationship, although Colin is sub-ordinate but Ben is the employer. By getting fed up with Roger attitude, Colin cannot be violent against Roger,and the actions of Roger are not being monitored by Ben, so he is responsible for Colin action as all this happened during the course of employment and with Ben negligence towards his employees work. Thus, Roger can claim against Ben in vicarious liability but can sue Colin because violent act was done by Colin.

Defenses available in negligence

In accordance with the provisions of the negligence law, defendant will try to reduce the claims put up on him by defenses available in negligence (Levinson, 2005). One will never be quite when any claim is put on him, he will try to prove that claims put on him are wrong, he can defend himself by any of the the following ways explained below :

Volenti non-fit injuria: Defendant had taken proper measures to aware claimant of risks attached but injury is caused to claimant due to his own ignorance, then claimant will not be able to recover damages from defendant.

Case scenario: In accordance with case of Wooldridge v Sumner, defendant can make defense only if he is injured by claimants action, negligence should be done by claimant only.

Contributory negligence: Claimant and defendant when are equally responsible for any loss or injury occurred, it would be termed as contributory negligence (Bowyer, 2000).

Case scenario: As per decision given in capps v. Miller, both the claimant and defendant are injured due to their own mistakes.

Ex turpi causa: Illegal action taken by defendant but act was done for the sake of claimant. As per decision given in Tinsley v Milligan, action was taken by defendant to avoid adverse consequences.

4. Case of Mark and Regent hotel

Occupiers liability means when one owns any premises or property (they have a control over that property), then they have to fulfill certain responsibilities towards those who want to use that property. If any loss or damage occur to other due to non-fulfillment of the occupier's duty, he will be liable to pay damages.

Occupier's Act 1950

As per Occupiers liability act,1957, a person would not be able to claim damages caused to his personal properties due to his negligence (Giliker, 2010). However, Occupiers liability act, 1984 states that if person is injured badly due to irresponsibility of occupiers liability then he can claim damages for the same from occupier. In the given scenario, Mark, guest in Regent hotel enters the pool even after reading the sign which reads that ‘Pool closed between 7.00pm and 7.00 am. No entry to visitors during these hours; ‘Dangerous when unattended’. Mark reads and ignores the sign and got badly injured and breaks his designer sunglasses. In this case situation, Mark would not be able to claim any damages for his designer swimming trunks as per occupiers act 1957 because damage is caused to personal asset because he ignored the sign. In this situation, defense of volenti non fit injuria will be applicable (Marsh and Soulsby, 2002). 
Occupier's Act 1986

This Act had extended the obligation of the occupier for the property damages. In addition to this, provisions of this Act was associated with the sections of Health and Safety Act. Mark can claim for damages as per occupiers act 1984 because note written by hotel authorities is merely a warning, no measures are taken to stop visitors from entering the pool. However, he is still not entitled for the property damages as he voluntarily put himself in risk of injury (Alkhamees, 2012).

Conclusion

From the above report it can be concluded that for enabling a legal contract between the parties it essential to have certain elements like valid offer and acceptance, legal consideration for entering into a contract etc. however, the report has also measured certain terms of the contract that is essential to prevent the parties from unfair situation. In addition to this, report has also measured that contractual liability is distinct with the tort liability but they are consider as a part of civil law. The liability in valid contract arises when the party renders unsatisfactory performance as well as breaches the terms and conditions while, the tort liability arises when the party follow the negligent acts. Furthermore, it has also concluded that employer is duty-bound to take care of their activities of employees else they will be held vicariously susceptible to render remedies or compensate the injury of innocent party.

References

  • Adams, A., 2010. Law For Business Students. 6th ed. Pearson Education Ltd.
  • Alkhamees, A., 2012. Private action as a remedy against market manipulation in the USA", Journal of Financial Regulation and Compliance.
  • Beatty, J. F. and Samuelson, S. S., 2012. Business Law and legal Environment. Cengage.
  • Bledose, A., 2010. Business law for Business Men. BiblioBazaar.
  • Bowyer, M. L., 2000. Insurance contract law and regulation and competition in the UK insurance industry: The missing link. Journal of Financial Regulation and Compliance.
  • Clarkson, K.W., 2010. Business law. Text and Cases: Legal. Cengage learning.
  • Desai, N., 2008. May. Checking correctness of business contracts via commitments. In Proceedings of the 7th international joint conference on Autonomous agents and multiagent systems.
  • DiMatteo, A. L., 2012. False dichotomies in commercial contract interpretation. Journal of International Trade Law and Policy.
  • Garriga, E., 2013. Corporate social responsibility theories: Mapping the territory. In Citation Classics from the Journal of Business Ethics.
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