School of Business and Finances

HND Business

Unit 5: Aspects of the contract and negligence

Lul Mohamed Mohamud.
Student ID: M1009526

Assessor: Yasmin
11 / 12 / 2013
L01 and L02


1. The purpose

This work is concerned with the aspects of contracts and negligence for business. It contains the
answers to Nikhil who asked advice as he does not know what to do with the supposed breach
of certain contracts. The purpose is to apply the content of all the relevant aspects of the law
such as the elements of the contract, terms of the contract but also analyses types of contracts
and their impact on business.

2. Introduction

A business contact is always under legal obligations and must learn the business law in order to
manage the affairs of business.
Agreements between parties can lead in a legal contract that might be enforced in the courts.
The agreement creates obligations and rights from parties, the offeror and the offeree.
Most important, the objective of the agreement is to ensure that expectations created by the
contract are fulfilled and legal remedies are available when one of the parties binding by a
contract fails to comply with its obligations. The party affected can go to de court to request an
action for damages for breach of contract.
In order to avoid misunderstanding, the contract establish a set of rights and obligations to
ensure business relationships, the settlement of legitimate disputes when is affected. The
contract must be knowable, obeyed voluntarily, and must be just and reasonable according with
business law.

3. Understand the essential elements of a valid contract

The importance of all the elements of a valid contract
The elements of the contract are important because they content what of the offer can be
accepted, the intention and conditions binding in a legally agreement, fixed rights and duties of
each part, the acceptance of the contract and the legal consequences in case one of the parts
involucre into the contract do not make its obligations. The contract is required and it must exist
in order to set specific terms and conditions and in some cases include exceptions, warranties
and exclusion clauses.
A contract has these elements:
An offer made by the offeror with the intention if the offer is accepted, then both parts are
binding with a legal contract. The acceptance is made by the offeree who realise the terms and
conditions and express the willingness to continue the process.
The consideration is per example a promise to give a book but if that person kept the book
then the other part can go to the court to have the book. This person does not give consideration
to the promise. Consideration to proven that one part promise to give some benefits to the other
part and vice versa. These mutual interactions make the contract valid. Past consideration is not
adequate for a binding contract.
The Intention to create legal relations such as arrangements of commercial natural are
presumed to be intended legally binding but arrangements of social nature are presumed not to
be intended legally binding and also The object of the contract is legal. There are not restrictions
by the law or institutions to set the contract.
The contractual capacity means that no one is mental impaired or intoxicated. . The parties
must have competence to contract. Age, condition or status renders are presumed to be
limitations for certain persons to bind themselves by a contract. When a company acts outside
its power has not competence to set a contract.
The contract can be avoidable when a minor while under 18, so voidable is another element of
the contract, meaning the contract must have absence of factors that invalidate a contract such
as duress or due influence, mistake, misrepresentation or illegality. These factors are the
Absence of vitiating factors.

4. Is Nikhil liable to pay Namita 2000 that she is demanding?

Nikhil offered to Namita 3000 in full and final settlement to ended his debit. He also offered to
pay that amount the same day if Namita accepted his offer. Namita accepted and Nikhil
transferred 3000 to her account. There is an offer and an acceptance.
Namita considered the arrangement informal and demanded more money. However, she had
forgotten that commercial arrangements are presumed to be legally binding.
The intention is clear from both parts to end the contract by paying and receiving 3000 as a
final settlement of the Nikhils debit. There was a lawful object on the arrangement.
Consideration is the recompense to Namita as she had 3000 deposited into her account. The
promise from Nikhil to Namita was brought. Both Nikhil and Namita were competent to contract.
It seems no Namita neither Nikhil had any condition, mental disabilities or were under aged
when arranged the verbal contract. Both were of sound mind, conscious, when they entered into
the contract.
The bilateral agreement was not legal preceded, sanctioned by law or institutions or had legal
formalities written or required by statutes.
The oral contract between Nikhil and Namita was a perfect valid contract with all its elements to
end their commercial relation by paying and receiving 3000. Therefore Nikhil is not liable to
pay 2000 demanding by Namita. When the parties come to an end they do not have any more
obligations.

4. Discuss the impact of different types of contract

Types of contracts
Contracts by deed is a legal document signed, witnessed and delivered usually to create a
legal obligation such as sell of transfer a property.
The Unilateral contract in which only one part express promises and the other part no give
something in return.
The Bilateral contract in which two or more parts are involved. Both parts are bound
Unconscionable contract is one which one person mentally competent can accept. The case of
consumers which are exploit as they are unable to shop in a competitive marketplace. Simple
contract are informal contracts and can be in written, oral or may be implied from conduct.
When a contract is made in a written document is a formally contract and have the assumption
that contains all the agreements between parties. Prior to signing the document must be clear,
understanding and presented to the parties to be valid. The document also requires to be
recognised and must look like a contract no as a simple note or receipt. The terms and
conditions have to be read and agreed before to sign by the parties.
Verbal agreements are valid when all the elements of the contract are present. These types of
contracts rely on the good faith of the involved parts and it is difficult to be proven.

5. Explain misrepresentation in the law of contract and discuss whether Brian has a
possible claim under the Misrepresentation Act 1967

Misrepresentation exists when the information given has not warranty to be true but the other
party presumes it to be true. If a person commits a breach of duty without intention but gains
advantage for himself, he is guilty of misrepresentation.
It would be very important to know the difference between misrepresentation and fraud. While
the former has no intention, the latest is a promise with intention to not perform.
Misrepresentation occurs when one of the parties convince the other part to accept a false
statement.

6. A letter from Vicky informing the intention to sue him for breach of contract

There is a counter-offer when Vicky offered to buy the van for 4000. The oral contract is valid
as it had all the elements of the contract and Nikhil accepted. However there is an anticipatory
breach of contract as Nikhil sold the van to Bryan on 5 March. Nikhil has not consideration to
Vicky as he agreed to maintain the offer open for her until 7 March. So, if Vicky sued him she will
be entitled for damages as the offer cease to exist when the time is up on 7 March and he fault
to inform her to withdrawal his offer.

7. Case law between Nikhil and Charlie

Nikhil made an invitation to treat to Charlie. After that Charlie request information (does he can
pay by statements? which is not a counter-offer and Nikhil said no.
However the first offer continued open. Nikhil did not inform Charlie of any withdrawal. Nikhil
should inform Charlie that he changed mind before Charlie accept his offer. Hence there was a
binding contract, and Charlie can sue Nikhil for breach of contract.

8. Sporta Ltd denying Nikhils claim and pointing out their exemption clause.

In this bilateral contract a document has not been signed but Sporta must demonstrate that has
done reasonable steps to attract the attention of Nikhil before the contract is made. The party
wishes exempt his liability for negligence must make sure the other party has understood that.
As soon as Nikhil accepted the conditions Nikhil remained in the premises.
The notice present ambiguities and in terms of negligence the fact that one party entered into
the contract doesnt mean the other party evade responsibility. If negligence is mentioned
explicitly then liability for negligence is excluded. The question is, if the injury is reasonable
foreseen that Nikhil might step into the Jacuzzi and cut his foot. There is certain that the broken
glass was negligently left by the Sportas cleaner. Nikhil establish that Sporta owed him a duty of
care which depends on the type of loss in relation of personal injury and property stolen. Nikhil
found strict liability as he can proof carelessness from the cleaner.
The note has ambiguous terms: All the persons use the premises at their own risk. Then the
clause is imposed by one part because the note has not been constructed by natural meaning of
the words, hence the other party was not capable to understand it completely.
There is not specification whether the injury is a result of the careless activities of the customer
which states on the large notices inside the changing room. However in this case the cleaner is
responsible and the company can be sued for negligence. On the other hand theft, loss or
damage in the exclusion clause was well informed. So the company is not liability to pay for
these damages.
The Unfair Terms in Consumer Contracts Regulations 1999, which protect consumers from
unfair standard terms in contracts. If the courts think a term is unfair, then its not binding on the
consumer.

9. Conclusions

Usually people do offers and acceptances without knowledge how a promise can be an
agreement with obligations and consequences. An offer to treat when is accepted become a
promise but if one of the elements of the contract is absent, the contract is invalid. Breach of
contract occurs when the parties binding in a contract fail to perform their obligations. In other
words the party avoiding the conclusion of the contract is obligated to recompense the party
affected for losses, thus the law gives rights to claim for compelling it to conclude the contract.
The best practice in business in order to success is to exchange ideas, ask questions about the
requirement and obligations and clearly define risks between parties. When the conclusion of
the contract is made according to the legislation and satisfy both parties the working relationship
are clearly determined by a notification of its acceptance.
The termination of an offer and acceptance which end the contract can be provoced by
revocation, withdrawal, cancellation, failure to meet obligations, death of one of the parties,
refusal of counter-offer, subsequent illegally or destruction of subject matter.
A breach of contract has actions for damages in favour of the part affected by the fall of
performance of the other part no matter what form of nature the breach of contract is. And
usually to cover damages the affected part is entitles to monetary sum fixed by the court.
However the suffered must show what they have loss and demonstrate with evidences. All
agreements are contracts when parties have the intention to bind in a contract, are competent
and are able to give free consent so the object of the agreement must be valid by law.
In the modern economy companies make few contracts with all terms characterized by
essentially, but each contract signed must be verified according to the needs of the transaction
including the essential exclusion clauses in most commercial agreements. Inability to analyse
contracts means that the organization cannot analyse its business. Business to maximise
productivity needs to be able to create contracts with customers and suppliers but most
important to analyse and minimize risk at the same time.
In general business must be aware in all areas of contract management, from creating contracts
to tracking contractual risks. When business is unaware of the risk, it cannot present accurately
certifications and disclosures to investors and regulators. Organizations can ensure better
management of contracts to help reduce cost and increase revenues. A broken contract process
slows down sales and increase corporate risk. If businesses want to increase operations,
maximise profitability and reduce contractual risks, it must improve the practice of contract
management and be able to accurately to track the contractual risk.
It is considerable and practicable in business relationships as individual agreements, to
estipulate in a written contract the obligations concerning with the kind of transaction to avoid
contractual disputes as legal regulation will evaluate the purpose of the agreements but also all
the terms included during the construction of the contract.

Bibliographies and Links

Business study guide, Edexcel, Persons
http://www.businessballs.com/businesscontractstermsdefinitionsglossary.htm
http://www.ocr.org.uk/Images/139937-level-3-unit-16-apects-of-contract-and-business-
law.pdf
http://toolkit.smallbiz.nsw.gov.au/part/5/35/167
http://shivamlawworld.blogspot.co.uk/2012/02/essential-elements-of-valid-contract.html
http://www.fdean.com/negligence.aspx
http://www.slideshare.net/KenishaBrowning/breach-of-duty-6146745
http://www.slideshare.net/susmitarautraya/business-law-12571833


HND Business
Unit 5: Aspects of the contract and negligence
Lul Mohamed Mohamud.
Student ID: M1009526
Assessor: Yasmin
16 / 12 / 2013

L03 Understand the principles of negligence in business activities
L04 Be able to apply the principles of negligence in business situations

Understand the principles of negligence in business activities


1. Purpose
The purpose to this report is to provide law concepts related to tort of negligence and vicariously
liability which might affects business and additionally apply the elements that law requires to
establish duty of care in given situations. This is a brief explanation of tort theory and the tests
used by court to find liability under the Occupiers liabilities 1957 and 1984. A table to identify
relevant issues related to liability in tort in contrast with contractual liability was made to analyse
each case and be more willing to apply aspects of negligence. Before concluding there are
possibly suggestions about liability based on principles of tort low cases which the House of
Lord following the Court of Appeal set the modern English law.

2. Introduction

The law of tort was developed in order to establish social legislation and civil
responsibility to find liability where a citizen is harmed from others. It becomes important
to create better awareness of duty of care in the society and the law of tort objectives is
to compensate for loss or damages caused from breach the duty of care.
The word tort comes from Latin and means wrong or crooked. In law, tort means that an
individual has made something wrong. The Tort law refers to compensation for damages caused
for acts or omissions done by a civil to another citizen. A breach of a duty imposed by law such
as take care of the neighbour returns a remedy to the injury person as recognition when he has
any loss from the conduct of the wrong doer.
Lord Akin formulate the neighbour principle: You must take reasonable care to avoid acts or
omission which you can reasonable foresee would be likely to injure your neighbour,
considering a neighbour every one who can be affected from others acts.
Fault liability can be intentional or negligent. Where there is proven than the injury neither was
intentional nor negligence is described as pure accident and is not actionable.
However some torts has liability regardless of intention or negligence and are described as strict
liability and the court no need fault but the analysis of the reasonable care to avoid harm to
another person.
Negligence is a term used in common law tort and the court will considered the balance of
probabilities, if the defendant owed a duty of care by filing to meet standard of care required and
there are loss and damages as a result of negligently acts.
Pecuniary damage suffers the plaintiff and the responsible for act careless causing injury to
other person is the defendant or tortfeasor.
The elements that in the law of tort the breach of duty of care or negligence the court will
analyses:
Existence of duty of care
Breach of that duty
Injury or loss suffered
The harm was reasonable foreseeable
Relation of proximity between the defendant and the plaintiff
It is fair, just and reasonable to impose liability on the defendant

Differences between tort liability and contractual liability

Tortious liability is liability that arise by negligence Contractual liability is defined as liability under
contract or agreement
Related to the negligence of duty of care Voluntary agreement between parties
With respect to persons with whom there is not contractual
liability
Each part promise each other certain things
Is more of imposed nature Breach of contract means that one of the parties fail to
perform its obligations
The sufferer can only claim damages There are legal remedies to the injury party
More freedom in contractual law


3. Duties and Standards of care owed by an occupier under The Occupiers Liabilities
Acts 1957 and 1984

The Occupiers Liability Act, 1957 regulates the nature of the duty imposed by law and
obligations of a person occupying or having control over any premises owed to his visitors in
respect of danger due to the state of the premises or to things to be done on them and also
things have been omitted causing harm to visitors.
It also includes rules of the common law to any invitations or permission to enter or use the
premises. The purpose of the rules is to identify who is the occupier, invitees or licensees.
(1) An occupier of premises owes the same duty, the common duty of care, to all his visitors,
except in so far as he is free to and does extend, restrict, modify or exclude his duty to any
visitor or visitors by agreement or otherwise.
(2) The common duty of care is a duty to take such care as in all the circumstances of the case
is reasonable to see that the visitor will be reasonably safe in using the premises for the
purposes for which he is invited or permitted by the occupier to be there.

(3)In this section stranger to the contract means a person not for the time being entitled to the
benefit of the contract as a party to it or as the successor by assignment or otherwise of a party
to it, and accordingly includes a party to the contract who has ceased to be so entitled.
arising from any default by him in carrying out that obligation, as if he were an occupier of the
premises and those persons or their goods were there by his invitation or permission (but
without any contract)

Occupiers Liability Act 1984, 1984 CHAPTER 3

Visitors are any person and the occupier owes a duty to another (not being his visitor) in respect
of any risk he knows is danger and he has to take reasonable decisions to protect his visitors.
Any duty owed by virtue of this section in respect of a risk may, in an appropriate case, be
discharged by taking such steps as are reasonable in all the circumstances of the case to give
warning of the danger concerned or to discourage persons from incurring the risk.
(6)No duty is owed by virtue of this section to any person in respect of risks willingly accepted as
his by that person (the question whether a risk was so accepted to be decided on the same
principles as in other cases in which one person owes a duty of care to another).
(8)Where a person owes a duty by virtue of this section, he does not, by reason of any breach
of the duty, incur any liability in respect of any loss of or damage to property.

Factors to analyse the claims of John, Ashley and Glenn
The modern approach to determine whether a duty of care exist apply three test based on
Foresight relates to the neighbour principle
Proximity considering the close relationship between parties and is an important factor
concerning the extended liability for economic loss.
The consideration of justice to impose a duty based on the existence of duty of care
The three criteria will be applied separately and have to be proved.

The analysis of the three criteria of the claim of John has not been invited
Foresight: Wayne put on the door a notice of Dangerous steps as he knew there was a
danger to anyone entering to the cellar. Wayne also, did not know that John will arrive
from the back door and fall into the cellar as a result he will smash his Rolex and break
his wrist.
Proximity: John was not invited to the party, so Wayne was not related to foresight what
would happen to John.
Consideration of justice: There is not fair and reasonable to impose duty to Wayne as he
foresight the danger and put a notice on the door warning the danger to avoid accidents.
Wayne will be discharged by taken this action and he did not know what John was going
to do. It can be said that John assumed voluntarily all responsibilities where he entered
to the premises without permission.


The analysis of the three criteria to the claim of Ashley who has been invited
Foresight: First, It can be said that the bad laid flooring could harm anyone. In this case
Wayne unintentionally did not take actions to inform his visitors of the danger. But also
the owner can be vicariously liable if he did not inform Wayne of the danger under the
Occupiers Liability Act, 1957.
o 1) Where premises are occupied by any person under a tenancy which puts on
the landlord an obligation to that person for the maintenance or repair of the
premises, the landlord shall owe to all persons who or whose goods may from
time to time be lawfully on the premises the same duty, in respect of darn.
o Secondly the bucket of bleach was placed neglected and caused burns to Ashley.
In addition bleach damages his cloths. These accidents could be foreseen but
Wayne did not take any action to avoid the accident.
Proximity: There was a close proximity as Wayne invited Ashley.
Consideration of justice: Ashley can have compensation for damages from Wayne but
also from the Landlord. All depends what factors the court will take in consideration to
establish whether Wayne have duty of care and it is fair and reasonable to impose duty.

The analysis of the three criteria to the claim of Glen who was invited
It is not foresight the action of Glen to leave the premises climbing over the garden wall.
It is assumed that Glen voluntarily assumed responsibility by taken such risk.
It was proximity as Wayne invited Glen to the party.
Glen action is not reasonable to climb the gardens wall so Wayne has not liability for
breach duty of care and it would be not fair and reasonable to impose duty to Wayne.

4. The test applied in the tort of negligence

The actual law tort is base in the Caparo v Dickman case (1990) where to find a duty situation
the case has three factors to satisfy the breach of duty.
On the other hand the common law Duty of care established negligence as a separate tort. Lord
Aitkins speech in Donoghue v Stevenson, 1932 refers to the Neighbour Principle:
The rule that you are to love your neighbour becomes in law, you must not injure your
neighbour and the lawyer's question. You must take reasonable care to avoid acts or omissions
which you can reasonably foresee would be likely to injure your neighbour.
(Foreseeability) Who, then, in law is my neighbour? The answer seems to bepersons who
are so closely and directly affected by my act (Proximity) that I ought reasonably to have them
in contemplation as being so affected when I am directing my mind to the acts or omissions
which are called in question.
The nature of liability in negligence referrers to a careless conduct of an individual and in law the
term negligence means the breach of duty.
The principle becomes law to protect citizens from acts of negligence of other citizens.
The law of tort includes:
Personal security (tort of trespass and negligence)
Personal reputation (tort of defamation)
Property rights (tort of trespass and conversion)Economic and financial interest (tort of
trespass and conversion)
The court would take into consideration if the defendant took reasonable steps to avoid harm,
loss or damages to other person and also the close relationship between parties meaning how
directly one person was affected by the intentional action or omission of other.

5. Caparo v Dickman
Facts that the court will consider to establish breach of duty of care

Wayne and Rio had invested in shares but the company Fidelity Ltd have them shown
negligently prepared accounts hiding true financial position of the company.
The three part test has basically three elements
Reasonable foresight of harm (Donoghue v Stevenson, 1932) is based on the neighbour
principle whether a reasonable person would have seen risks or damages to another
citizen. The auditors Careless & Co have reasonable foresight that the make-up
accounts will cause loss and damages to Rio. They knew the bad financial position of the
company which would harm any decision taken by investors.
Sufficient proximity of relation is between Careless & Co as they sent intentionally false
accounts to Rio to persuade him to buy shares. An also Wayne decision was based on
the same figures shown to Rio.
It is fair and reasonable to impose duty of care to as they breach de duty of care
intentionally doing negligently reports.
All three parts satisfied a duty of care may be imposed and the actions ca be proven to impose
duty to Careless & Co.
The Caparo v Dickman test says:
1. The loss must be foreseeable
2. The relationship between the parties must be sufficiently proximate
3. It must be fair just and reasonable to impose the duty. An depend on the proximity of the
relationship between that parties
6. The House of Lord establish no duty of care between Caparo and Dickman. They considered
that an annual report is to inform but could not be taken as guidance to decide to buy shares.
However in the case of Wayne and Rio, Careless and Co intentionally send the make-up report
to persuade Rio to buy shares. Negligent misstatement (Hedley v Heller, 1964) was carelessly
made to persuade as a consequence he and Wayne lost their investment. There were great
proximity and reasonable reliance, thus the person who made the statement has voluntary
assumed responsibility and then Careless & Co. is liable for the loss because they produce the
report only to persuade Rio rather that inform the public in general.
Therefore, whether the duty of care exits, where a professional adversely affect people making
false statements, they are liable under s2 (1) Misrepresentation Act 1967.

In addition the accountants were negligently in giving advice by preparing false reports and in
Candler v Crane Christmas & co 1951 established that any duty of care on behalf of the
accounts would give rise to an action under the law of contract rather than tort. The duty of care
by a professional to his clients is now ruled and the use of a disclaimer Section 2(2) of the Unfair
Contract Terms Act 1977 in relation to loss or damages (no related to death or personal injury) a
person cannot so exclude or restrict his liability for negligence. So Wayne and Rio are likely to
success in a claim for negligent misstatement against Careless & co. The duty of care is owed
because the advisor have special skills and knowledge that their advice would be relied upon
and they voluntarily assume responsibility an Rio and Wayne can prove that as the result of
negligent advice they suffered loss.
However Due to the companies Act 2006 Auditors can have limit on their liability to a certain
financial amount.

7. Davids liability to Peter and Ella. The three criteria to analyse Davids case that just
passed driving test.

David reversed negligently over Peters legs and was seriously injured. Peter was drunk this day
and Ella Peters sister was not there but when arrived was shocked and develop psychiatric
illness.
As David just passed his driving test is foreseen that he has not enough experience and
he should take more care and perhaps he should go out of the car to find out if people
was near the care at risk.
Proximity test satisfy as Peter was there when David reversed. However if peter were not
drunk exist the possibility that Peter could prevent the accident and then David has not
liability.
But it is fair just and reasonable to impose duty to David as he acted negligently.
On the other hand Ella was not in the place when the accident happened. This is not the case of
nervous shock. Ella cannot seek damages as a result of the Davids negligence (Bourhill v
Young, 1943). There was not proximity between Ella and David. So Ella was a not foreseeable
victim of the negligence of David.
Ella has to prove that she has developed a positive psychiatric illness (Lord Bridge in McLoghlin
v Obrian, 1983) including clinical depression, personality changes and post-traumatic stress
disorder with clinical evidences. In addition Ella can be a secondary victim who was not in
physical danger when the accident happened but as the result of what she saw after the
accident she was shocked. Moreover the court will take into the case the proximity to the
shocking incident in terms of time and place, the nature and cause of the psychiatric injury and
the relationship between Ella and Peter who is the primary victim to restrict liability to David.
So those who suffer psychiatric injury are owed duty of care only when they are emotional tie to
the primary victims and fill the other two tests such as a result of sudden shock and the
claimants proximity to the shocking accident.
David can breach the duty of care once reasonable foreseeability is establish plus the other
three tests are proved.

Concept of vicarious liability

Vicarious liability refers how an employer will be held liable for any tort committed while an
employee is conducting their duties. Vicarious liability considers the circumstances where the
defendant is found guilty even if they dont commit the offences themselves. It could happen that
employees commit the tort when working outside the work place going to meet a client the
employer will be liable for the action of a careless employee.
This liability has expanded in recent years following the decision in Lister v Hesley Hall (2001),
to better cover intentional torts, such as sexual assault and deceit. However the incident
occurred just before David went to the office. David was not performing his duties while the
accident happened.
Frank could not foresight that David came with his car to the office. Moreover there was not
proximity as Frank completely ignore David might come with his car. Frank may not be liable for
the wrong action of David thus it is not fair and reasonable to impose duty to Frank.
How business can be vicariously liable. Business can be affected in two ways:
1. The employer is liable where three conditions occur:
a. A tort action is committed
b. A tort was committed by an employee
c. The employee committed a tort while working

2. One person can be liable for the torts committed by another person
Vicarious liability is where one person is held liable for the torts of another, even though that
person did not commit the act itself. Though it looks easy, in practice it is not easy as we think to
determine if these conditions are met. Let us take it one by one. The employers can be held
liable if only the action committed by the employee was a tort.

8. Conclusions

It can be said that people owed duty of care to others in the society and rules impose
duty to protect any citizen from the negligence of others.
The duty of care is not a rule to help others or to look after them. In fact are duties to avoid injury
or damages, thus if there is no duty there no apply liability. However the law find liability when a
person knowing that other is in danger to harm or loss, did not act to prevent such situation.
Torts are acts causing damages or harm to another party. A tort is a civil wrong, and the
wronged person sues in civil court for compensation or an injunction against repetition. In
contrast, contractual liability exists when there is a contract that voluntarily binds parties
together. Contractual agreement is relevant to both parties which assumed voluntarily
obligations and damages are based on losses that are expected. The individual-justice of tort is
more abstract
Tort law like contractual law applies to persons and companies. The law of tort is a result of
legislation while the low of contract is a result of agreements. In law of tort, legislation applies to
everyone that is affected based on loss and gives compensation for damages.
Duty of care is a common law principle and tort actions are not agreements between parties to
bind in a contract. In addition tortfeasors are not sentenced to prison through civil courts.
Nevertheless, even when a general duty of care is owed a defendant will still not be liable unless
the type of harm sustained was also foreseen. There are some exemptions in case of dead or
severe damages but tort theory is abstract and the decision of the court depends on the
reflexion whether exist duty of care and on the reaction an intention of the defendant to the
protect other party.
Employers owed a duty of care towards employees to be safe at work and the relationship
between employers and employees is close, so any wrong act from employees while working
arise vicarious liability. An employer is strictly liable for torts committed by those under his
command, when they are found to be his employees.
In business, employers have to pay the consequences of the employees acts and thus business
must take decisions to reduce risks by employees and to ensure precautions are taken while
conducting business.
Furthermore the duty of care is a legal duty which applies to the actions of all citizens. A tort is a
branch of the civil law (as opposed to criminal law) based on a claim that the defendant has
caused injury or loss to the claimant by breaking a relevant obligation imposed by the general
law.
It can be said also that a professional owed duty to people they advise and choose to restrict
liability by warning people to not rely on their guidance. Tort law measures negligence based on
the skills of the person and the legal quality of the services, guidance or advice given. General
rules of English law tort apply to professional negligence by those who claim under the Supply of
Goods and Services Act 1982 where an implied term is included relating to the standard of care
to satisfy contractual obligation as the same as in negligence. The consequences to make
mistakes using excess of the abilities and skills to their clients and, can have huge negative
effects.
Finally the issues related to tort law and the legal process, aspects of contracts and negligence
may be useful to understand the principles imposed by law, to be better citizens, to know how
people are protected and what kind of remedies exists when someone is harm or has loss as a
result of wrong acts from others. Obligations are important before take actions but most
important is to treat others with equal respect and the law tort is set to make it true.

9. Bibliography and Links

Business study guide, Edexcel, Persons
http://www.markedbyteachers.com/international-baccalaureate/
http://www.lawteacher.net/contract-law/essays/contractual-and-tortious-liability-analysis.php
http://www.legislation.gov.uk/ukpga/1984/3
http://books.google.co.uk/books?id=KwtpCC7U-
U8C&pg=PA29&lpg=PA29&dq=Part+3+fair+just+and+reasonable&source=bl&ots=YDEPYJ1Cc
G&sig=nyOfSzkIapftMKpRwUahft89EuM&hl=en&sa=X&ei=bcTBUva2EoOrhAed34DgBw&ved=
0CEkQ6AEwAw#v=onepage&q=Part%203%20fair%20just%20and%20reasonable&f=false
http://www.oup.com/uk/orc/bin/9780199299997/taylor_chap06.pdf
http://en.wikipedia.org/wiki/Professional_negligence_in_English_law
http://duhaime.org/legalresources/contracts/lawarticle-88/part-3-consideration-deeds.aspx
http://www.law.northwestern.edu/lawreview/v103/n4/1765/LR103n4Solomon.pdf
http://www.frc.org.uk/Our-Work/Publications/APB/ISA-450-Evaluation-of-misstatements-
identified-dur.aspx
http://www.findlaw.co.uk/law/government/constitutional_law/500400.html
https://www.google.co.uk/webhp?tab=mw&ei=FovEUufUFYznPN3lgZAC&ved=0CAUQqS4oAg&
gws_rd=cr#q=Hedley+v+Heller
http://www.legislation.gov.uk/ukpga/1984/3








HND Business
The importance of the law of contract
Lul Mohamed
Student ID: M1009526
Assessor: Yasmin
20 / 12 / 2013


UNIT 1 AND 2

1. Understand the essential elements of a valid contract


a. What are the elements of the contract
Offer
Acceptance
Intention to bind in a contractual agreement
Capacity
Voidable = legal agreement

b. Missing words
Bilateral all part assume
Unilateral only one part assume

c. Types of contracts
Unilateral
Bilateral

d. What are the types of terms in the contract
Condition
Warranty
Implied
Express
Innominate
Exclusion clauses










e. Differences between Term and Condition in a contract


Terms Condition
Is an statement to be included as part of one
agreement
Only if a condition is performed the contract is valid
Term can have more meaning Very important term in a contract and the breach of it entitles
the other party to terminate
Could determine time: mortgage can have 5
years
Can covering not every element of the contract
Can compass all the elements of the contract
or can be very specific
Is an information required to validate the contract
Can be written or verbally agree Express condition is specific and define term in a contract
Required by law such as the National
Minimum Wages
In collective agreements such as trade unions
or staff associations
Implied condition is presumed by a low upon a nature of the
particular transaction and what is reasonable to do if any
particular event occurs
Implied term
Employees not stealing companys belongs
Employer provide safe and secure
environment to staff
Precedent is a requirement to make the contract
enforceable, per example a signature is necessary to its
effectiveness
Subsequent example is a ring engagement as a gift which is
considered a condition upon a marriage. The ownership
revers to the Groom and the Brides must returns it as she
does not married him
Concurrent conditions affects both parties which must
perform simultaneously
Condition is a term which has as objective: modify the
principal obligation praying for specific performance so the
contract can happen








What is the effect of the following within a contract?
Breach of
condition
Warranty
Assurance from the
seller to buyer
Indemnity Limitations on
liability
Misrepresentation
Occurs when a party agree a false
statement induced to think it is true
Injury to
reputation
The offeror is only
responsible for the
loss and damage of
what he sold
Indemnity means the
provider has to pay
every loss
usually dont
apply to
indemnities
Representation means parties are present
during negotiations and make a contract
Event of default Subsidiary &
collateral provision
Collateral contract
gives the affected the
right to claim damages
Number and
form depend on
the nature of the
business and
the agreement
of the parties
Innocent misrepresentation
Both parties believe the statement is true
Legal fees can
be exorbitant
Avoid risk and liability
between the buyer
and the seller
The period in
which claim can
be brought
Negligence misrepresentation
The remedy depends of the type of
misrepresentation
Damage of
relationship
Buyer is obliged to
mitigate any loss
It is not obligation
under indemnity
UK negotiation
tax indemnity
only
Indemnities are
negotiated on a
case-by-case
basis
Remedy may be rescission and or
damages
The buyer can
end the contract
at the result of the
breach
Disclosures can be
made against
warranties but the
buyer could not bring
a claim under the
warranties
Disclosures allow the
buyer to claim under an
indemnity
If the seller is
not able to fulfil
warranties and
indemnity the
contract is
worthless
Rescission is the cancellation, revocation
of a contract or agreement
Proof of loss must be
provider from the
buyer which cannot
end the contract
Disclosures transfer
the commercial risk for
information disclosed to
the buyer
The Misrepresentation Act 1967 provides
details if the contract is voidable
Innominate terms
refer to the effect of
the breach and if the
buyer was deprived of
the substantially
benefits of the
contract s
Buyer can recover any
loss with out to prove

Subject to normal
legal requirement of
proving loss
Buyer knowledge of a
breach enter to the
contract regardless can
claim under an
indemnity

Amount necessary to
compensate the
purchaser from any
loss resulting from the
breach

Negotiate a price
reduction


Seek specific
contractual protection
such as an indemnity













Effects to breach a contract: Litigation and dispute

Injury to reputation when it had not performed its part of the agreement
Event of default: Sometimes breaching a contract, especially involves payment of money can
affect the smooth business operation.
Legal fees and compensation are expensive when the subject matter is serious enough
Damage of relationship especially with intention




2. Remedies available to breach a condition
Breach a term Remedy
Legality of
exemption clauses
The Unfair Contract Term Act 1997 The unfair Terms in consumer Contracts Act 1999
Exemption clauses
are unfair terms used
to avoid liability
Can be seen as unreasonable in
case of negligence
Rules surrounding liability in business.
Liability will be present as a result of activities
during business or from business premises
That acts state that if the contract is unfair if there is
significant imbalance in the contract to the disadvantage of
the consumer
Limitation clause
might limited a part of
liability
Limiting liability do not apply in
case of fraud
section 12 outlines consumer is a person who
is not part of the business
section 5(1) states a contractual term which has not been
individually negotiated shall be regarded as unfair if,
contrary to the requirement of good faith, it causes a
significant imbalance in the parties the consumer is subject
to a detrimental case
Exclusion clause
exclude the party from
liability
The contract must to include the
exclusion clause and be signed
Section 2(1) person injury or death that result
from negligence in a contract cannot exclude
or restrict liability

The court will see
fairness within the
contract when
considering liability
A Notice must be a contractual
document
An exclusion can be incorporate
during a course of dealing
Section 2 (2) states if it is fair then a contract
can exclude or restrict liability as a result of
negligence


Breach a condition
Condition is a major term of the contract
Damages, law remedy, terminate(repudiate), the loser pay the cost of
the both parties under UK law, specific performance
Warranty
Is a minor term
Damages, the affected cannot reject the contract, replace the good , the
seller can be sued for breach of condition instead of Warranty
Substitution of the article
Remedy provided is expressed in the exemption clause, repair or
replacement
Innominate term refers to the effect of the breach and
how affected was the innocent party to have the right
to end the contract
Contractual term can be condition, warranty or
innominate terms
Total repudiation of the contract as also if it is seen as a condition or
warranty would not give rise to the right to end the contract
Legality of exemption clauses which their purpose is
to change the nature of the contract, exclude or
restrict obligations or liability or rights and remedies
Are reasonable clauses or unfair contract?
Limit liability under the contract
1. Those which want to exclude express or
implied terms
2. Attached to the breach of contract by to
exclude or restrict liability
3. To exclude or restrict the duty of the party by
limiting the amount of damages recoverable
The UK Law Commissions in their 1975 Report
on Exemption
Clauses: The result is that the risk of
carelessness or of failure to achieve satisfactory
standards of performance is thrown on to the
party who is not responsible for it or who is
unable to guard against it. Moreover, by excluding
liability for such carelessness or failure, the
economic pressures to maintain high standards of
performance are reduced."
However the intention to avoid responsibility is
clear as there is a notice offering a service or
leaving it in most of the premises, car park,
restaurants, hotels and usually the consumer has
not change to negotiate.
It depends on the nature of the contract to claim damages in
compensation or discharge of a contract
Usually the court looks exemption clauses with disfavour an tries to
analyse the intention clause to find its effectiveness
The contract and exemption clause must be reading and signed at the
time of the contract and might require a notice in addition to the
document.
When terms are printed on the back of the document, the front of the
ticket must give a notice that conditions are on the back.
Because of the exception clause customers cannot sued but they can
claim damages under negligence.

Misrepresentation
1. Fraudulent = intention to, recklessly as it is
true
2. Negligent misrepresentation = carelessly or
without reasonable grounds as to it is true
3. Innocent representation = made entirely
without fault thinking it is true


Rescission in cause of fraud and has limit time
Rescission when is innocent time might before the affected know it
And or Damages
For innocent misrepresentation damages in lieu of rescission where the
damages are calculated on the tort principle = out of pocket or on the
contract principle = loss of profit
Damages in lieu of rescission- Section 2(2) & (3) Misrepresentation Act
1967




4. How can damages be calculated?

Damages refer to the financial compensation pay for a breach of a contract

Measure of lost includes economic value lost between what happened and what would have
happened except for the disruption.
Damages are assessed at the date of breach of contract and the loss must not be too remote to
be recovered. Taking a review of the language used in a section that contains breach of contract
can give an estimate of the amount of money for damages. Usually is equal to the amount the
affected party have received which is very fact-specific what the contract worthy, plus punitive
damages when the breaching was excessively wrongful.


Conclusions


It is therefore important for all parties to involve thinking carefully and tries to avoid breaches of
contract as the price you will pay to remedy the situation will far outweigh any good you can
possibly receive from an intentional breach.
As it is often said, you should never burn your bridges and having a bad relationship with a
commercial partner will not do well for ones business and should be avoided at all costs.
Contract breaches bring nothing but negative consequences, and as far as possible, parties
should try to stick to their contract obligations to the best of their ability.
The use of the exemption clauses limit negotiations as the party with power might abuse the
position and knowledge of the consumer. This freedom of contract might cause disadvantages
on the offeree because of the lack of knowledge about law and exemption clauses limitations.


Links


https://www.gov.uk/employment-contracts-and-conditions/contract-terms

http://www.hkreform.gov.hk/en/docs/rexemption-e.pdf



HND Business
Aspects of contract and negligence
Unit 5
Lul Mohamed Mohamud
ID M1009526
Assessor Yasmin
10/12/2013

Aspects of contract individual presentation (made in Power Point)
Elements of a valid contract
An offer
The acceptance
The intention to create legal relations
Consideration
Competence: age, conditions, limitations of one party
Absence of vitiating factors
o Influence
o mistake
o Misrepresentation
o Illegality
o Voidable, no limitations from law or institutions.

CONTRACTS

Aspects of consideration
o Invitation to treat is a preliminary step to do transactions but is not a contract
o Request for information about an offer is not a counter offer. The initial offer remain open
o When the invitation to treat is accepted become a promise
o Invitation to buy is not a contract
o A contract is open until the offeror withdrawal of his promise and communicate his
decision
o If one of the elements is absent the contract is invalid
Types of contracts
Unilateral
Only one part promises
Promise is not exchange for another promise but for an act
Unilateral contracts are accepted by conduct completely performed
Both contracts are equally enforceable in court.
Advertisements are offers
Bilateral
Promise is exchange for another promise
Two parties are contractually bound and mutually understanding of the terms and condition.
It is valid where the offer has an acceptance
It is not enforceable if the type of contract is unclear
Advertisements are invitation to treat = shopping

Contracts examples
Unilateral
An offeror who promise 100 in exchange of the act to return his missing dog maybe sued for
breach of contract as the reward promised is not Sale of stolen paid
Bilateral
A bilateral contract to sell stolen goods cannot be enforced in court because is calling for an
illegal act
Oral
The acceptance of an offer is the most important type of promise legally enforced
All are legally enforceable but more difficult to prove
Written
When a contract is made in a written document is a formally contract and have the assumption
that contains all the agreements between parties. Prior to signing the document must be clear,
understanding and presented to the parties to be valid
Express
Both parties state exactly the terms of the bargain either oral or written at the time the contract is
made.
Implied
Suggest an agreement from the facts and circumstances of the offer and acceptance
The shop owner expects to be paid for his services there is no formal agreement but an implied
contract exists

Advantages of contracts:
Contracts allow people to reach agreements
To understand terms, conditions and excluded clauses
To be entitled for damages, as a result of dead, fraud, misrepresentation from the other party
To be protected against false contracts

Disadvantages of contracts:
Without contracts, promises become vulnerable
Misunderstanding
Forgetfulness
Oral contracts

Terms including in a contract
The simplest business contract has standard form written term.
The main term is the subject of the contract and the price, warranties, conditions, and
innominate terms are contract terms and may be express or implied.
In an oral contract is difficult to choose which one is a contractual terms or a representation thus
is better a written contract to analyse and agree with the terms and conditions that satisfy each
party.
Condition
Is imperative to the contract being valid?
Breach of the condition the contract end
Warranty
Is a promise that some conditions are true?
Express or implied
Implied warranties depend of the nature of the transaction
In the sale of goods implied is usually written.

Termination of the contract

The offeror communicate his revocation of one offer before the acceptance
Dead of the offeree/offeror
Rejection of the offeree
Failure of the conditions
Time remain open until the specific length the time set by the offeror run out

Negligence

Negligence is the omission to do something reasonable
It is the most common cause of loss to trust
The duty of care is breach when someone fails to reach the standard of care required
Reasonable is a person who is expected to be reasonable competent to perform a task
The person is expected to take more care when the risks of harm is greater
If the person cannot know the standards of care required is in fact dangerous because this
person does not know and protect against risks.
Once the risk is known there may be a breach of duty for omission

Exclusion clauses validity

Two parts are only bound by the terms when the attention is brought before the acceptance
Must to be legal
Cover the 4 corners of the contract only
As soon the contract is signed, the exclusion clause has effect.

Conclusions

Most of contracts are bilateral. One acceptance will bind both sides with a legal contract.
Offers can be addressed to one person or a group as the public at large
You should never sign any contract unless you have read, understand and agree the terms and
conditions written in a contract

The terms and conditions are legally enforceable
The goods must meet the satisfactory quality given
However more evidence is required about the intention of the parties to refuse or recognize a
breach of contract
In the modern economy are few contracts including a term characterized by essentially but each
contract signed must be verified according to the needs of the transaction including the essential
clauses in most commercial agreements.

Links
http://www.businessballs.com/businesscontractstermsdefinitionsglossary.htm
http://www.ocr.org.uk/Images/139937-level-3-unit-16-apects-of-contract-and-business-law.pdf
http://toolkit.smallbiz.nsw.gov.au/part/5/35/167
http://shivamlawworld.blogspot.co.uk/2012/02/essential-elements-of-valid-contract.html
http://www.fdean.com/negligence.aspx
http://www.slideshare.net/susmitarautraya/business-law-12571833