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Aspects of Contract and Negligence for

Business (ACBN)
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Table of Contents
TASK 1 – Scenario ......................................................................................................................... 4
1.1 Explain to Peter Abraham how a contract is formed and the importance of the various
elements which has to be present to form a contract. ................................................................. 4
1.2 Discuss the impact of forming contracts (as it may apply to Peter Abraham) by means of . 5
i. Face to face .......................................................................................................................... 5
ii. Written contract ................................................................................................................... 6
iii. Distance selling (telephone, internet) ............................................................................... 6
1.3 Give an analyses of the following terms in contracts with reference to their meaning and
effect (including remedies and damages) as it may apply to Peter Abraham. ............................ 6
i. Condition.............................................................................................................................. 6
ii. Warranty .............................................................................................................................. 7
iii. Innominate terms .............................................................................................................. 7
iv. Exemption clauses (including legality) ............................................................................ 7
TASK 2 - Case studies .................................................................................................................... 8
2.1 Apply the elements of contract in the given business scenarios below; ............................... 8
Case 1 – Agreement .................................................................................................................... 8
Case 2 – Consideration ............................................................................................................... 8
2.2 Apply the law on terms in the following contracts ............................................................... 8
Case 3 – Exclusion clause ........................................................................................................... 8
Case 4 – Implied term ................................................................................................................. 9
2.3 Evaluate the effect of different terms in the given contracts ................................................ 9
Case 5 .......................................................................................................................................... 9
Case 6 .......................................................................................................................................... 9
TASK 3 – Vocational scenario ..................................................................................................... 10
3.1 Explain the similarities and differences (contrast) of liability in tort with contractual
liability using an example. ........................................................................................................ 10
3.2 Explain using suitable example how liability for negligence can arise and the conditions
needed to be met for a claimant to successfully prove negligence. .......................................... 11
3.3 Explain what vicarious liability means and how a business such as your organisation can
become vicariously liable giving example. ............................................................................... 12
TASK 4 - Case studies .................................................................................................................. 13
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4.1 Apply the elements of the tort of negligence and defences in the given business scenarios
below; ........................................................................................................................................ 13
Case 7 ........................................................................................................................................ 13
4.2 Apply the elements of vicarious liability in given business situations below; ................... 13
Case 8 ........................................................................................................................................ 13
Case 9 ........................................................................................................................................ 14
References ..................................................................................................................................... 15
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TASK 1 – Scenario

1.1 Explain to Peter Abraham how a contract is formed and the importance of
the various elements which has to be present to form a contract.
The agreement which two individuals sign to form a legal relationship is termed as contract, such
that the individuals who are signing the contract have a legitimate interest in establishing the
relationship with each other. The contracts are made for various purposes like contract is made
for hiring or purchasing, contract is made for employment purpose, for the selling of the credit
cards etc. A contract is made up of different elements which have their own importance in the
formation of a valid contract have been illustrated below:

i) Invitation: Invitation is completely different from an offer. When an invitation is sent out by a
person for another person, than he has to make sure that the invitation has all the elements to
make it eligible for acceptance. Invitations are generally used by the parties to invite other parties
so that the offer can be made. For example in the supermarkets the goods placed by company on
display for viewing of the customers is treated as an invitation.

ii) Offer: The first half part of a contract is an offer. When the offeree acknowledges the receipt
of the offer then a offer can be considered as a part of the contract (lawhandbook.org.au, 2016) .
Responding to any request can be considered as accepting the offer in law. The offer can be
terminated in various ways, which are illustrated as follows:

a) An offer can be terminated via revocation of the offer.

b) When a person who has made the offer dies than the offer stands terminated.

c) If the time of the offer is exhausted than the offer can be considered as terminated.

d) Offer is also terminated when the offer is rejected by the other party.

Acceptance: The other half of a valid contract is the acceptance of the offer. An offer cannot be
ratified as a valid contract till the other party which has to sign the contract accepts the terms and
conditions of the offer. An offer can be deemed to be accepted when the offeree informs the
offeror about the acceptance of his offer.
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Consideration: For the contract to be validated there are various considerations that has to made
between the parties involved in the contract. There are also some instances when there is need
for consideration. Promises are exchanged between the parties during the consideration process.
A particular individual can be said to have some value if he/she agrees to pay for the
considerations.

Privity of contract: The main purpose for the inclusion of the privity in contract term in the
contract is that the party which has suffered losses due to the breach in the contract is eligible to
sue the party which has breached the contract, because of which first party has to suffer financial
losses (lawhandbook.org.au, 2016). Like in the cases related to the motor insurance if the
insurance doesn’t pay for the damages that have been incurred by the third party then the third is
entitled by the law to file a case against the insurer to get the compensation for the damages.

Intention to establish legal relationship: Once the parties develop enough understanding about
the terms and conditions related to the contract and the implications of these conditions along
with their liabilities in the contract, then they show their intention to form the legal relationship.
The intent to form the relationship can be either expressed or implied.

1.2 Discuss the impact of forming contracts (as it may apply to Peter Abraham)
by means of

i. Face to face
The firms and the individuals signing the contract have to sit face to face or they have to be
present physically when the contract is being signed between them. There should be no unlawful
influence on the other party for signing the contract. In the face to face contract it is possible to
get the response from the other parties immediately and is also helpful in expressing the interest
feelings or ideas that are related to the signing of the contract. The coordination between the
parties improves through the face to face contract but in case of large multinational organizations
which have different departments in different locations it becomes very much difficult for
organization to have face to face contract between the various branches of the organizations
[Emanuel et. Al., 2012]. Another aspect of this type of contract is that its effectiveness is
dependent upon the attention paid by the listener.
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ii. Written contract

The contract which is in the written form is called as the written contract. In written contract the
terms and conditions of the contract are in the written forms which are helpful in preventing the
interest of the parties involved in the contract as compared to the verbal contract. Through the
written contract it is possible to enforce the contract properly as in the written contract the
liabilities of each parties are clearly written. The main drawback of this type of contract is that
such contracts takes long time to develop and the complicated legal terms used in the contract
can create confusion. The best examples of the written contract can be said to be the real estate
contract and the contracts related to the repayment of the loan or debt.

iii. Distance selling (telephone, internet)

In the Distance selling contract the parties involved in the contract are entitled to sign the
contract from the distant locations. This type of contract is also called consumer credit contract.
The various type of distance selling contract can be said to be the shopping from the e-commerce
sites, booking of e-tickets etc. The contract can be treated as invalid if the party offering the
services does not provide a valid copy of the agreement with the consumer. Through this contract
system the organizations are able to sell their services in those regions which are difficult to
reach for the organization and establish itself in new market segments. The main drawback of
such contract system is that through these contracts it is difficult to gain the trust of the
consumers and provide proper demonstration of the products and services that are offered by the
company. Online selling of goods like books and CDs can be treated as the distance selling
contract.

1.3 Give an analyses of the following terms in contracts with reference to their
meaning and effect (including remedies and damages) as it may apply to Peter
Abraham.

i. Condition
One of the most important parts of the contract is the term ‘condition’, which refers to the
various terms which will be liable for each of the parties involved in the contract and any breach
in them can attract legal action. The different actions which has been either allowed or not
allowed as per the contract are generally referred to as the conditions. In case any party involved
the contract does not oblige to the conditions mentioned in the contract then the other party has
the complete authority to sue the party which has breached the conditions and cause financial
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harm/loss to the other party. The importance of the contract conditions are dependent upon the
principle for the signing of the contract [Emanuel et. Al., 2012]. Those parties who have been
harmed due to the breach in the contract have the right to deny the agreement. The party
suffering the loss due to the breach in the conditions of the contract has the complete right to
decide on the future of the validity of the agreement inspite recouping the loss caused due to the
breach in the contract by the other party.

ii. Warranty
Warranty is considered an important part of the contract when the consumer goods are
purchased. This provides an assurance to the consumers that the services or the products will
perform as per the promised specifications. When the warranty is breached than the other party
has the complete right to claim for the damages although, the agreement is not revoked as
warranty is not a very essential term in the contract.

iii. Innominate terms

The innominate terms are generally referred to as those conditions which are related to the
warranty of the product and services offered but in case of the disputes the court can either
revoke those conditions or does not take the cognizance of those conditions. The claims which
are made in case of the breach of the innominate terms depend upon the outcome of the breach.
The claimant will be entitled to get the damages and will be entitled to repudiate the contract
only if the claimant has lost the complete benefit obtained from the contract.

iv. Exemption clauses (including legality)

The exemption clauses basically puts a limit to the damages which has to be paid incase there is
a breach in the contract. While signing of the contract the exemption clauses are mutually
discussed between the parties and there are three forms of exemption clauses:

a) True

b) Limitations

c) Time
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TASK 2 - Case studies

2.1 Apply the elements of contract in the given business scenarios below;

Case 1 – Agreement
From the given case study it can be said that the seller offered to sell the leather couch for £600,
for which gave an advertisement. Carol decides to accept the offer given in the advertisement
and decides to contact to the seller via e-mail, confirming him the acceptance of the offer. This
contract then comes under the distance selling contract as both carol and seller of the leather
couch has not seen each other face to face physically in front of each other> No carol still does
not have the contract as the seller has still not acknowledged the acceptance of the offer which
was made by Carol.

Case 2 – Consideration
As given in the case study the son of Preston was looking for a job and he gave an interview in
an organization George, Smith & Fogarty, Inc for the position of the cyber security. It took
George few weeks to consider the job application of Devi and come to a decision to hire Devi for
the position. On 12th, April, 2015 an offer was made by George accepting Devi for the position.
Devi also accepted the offer the same day. On the other hand Preston didn’t knew about the
status of his son’s job application and thus he makes an offer to George that he will provide
George a contract of £150,000 if the company decides to hire his son (E-lawresources.co.uk,
2016). On the 13th April the offer was sent by Preston but since George has already made the
offer to Devi prior to that date, thus since the offer made by Preston has bypassed the date of
consideration thus it can be concluded that George won’t be able to enforce the offer made by
Preston in his letter.(Re McArdle, 1951).

2.2 Apply the law on terms in the following contracts

Case 3 – Exclusion clause

From the above given case study it can be said that the table in restaurant was booked by the
claimant before coming to the restaurant. When the claimant entered the restaurant he handed
over his coat to the porter, which also contained his wallet. After that the claimant took a receipt
from the porter. On the back of the receipt it was written clearly that the restaurant is not liable
for the loss or missing of any item. After finishing the food when the claimant realized he has
left his wallet in the pocket of his coat but on searching the wallet claimant found that about
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£500 has been stolen from his wallet. Thus claimant filed a suit against the restaurant to get the
damages for the loss of £500. But, claimant failed to read the receipt properly where it was
written clearly that the restaurant is not liable for the loss or missing of any item.This term can
be treated as the exclusion term of the contract and thus the demand made by claimant to get paid
for the damages he incurred due to the theft of his money will not be accepted. A similar case on
the category of the exclusion clause was “L'Estrange v Graucob [1934] 2 KB 394”.

Case 4 – Implied term

Applying the concept of the implied term on the above case study after studying the details of the
case, there is complete possibility for Aaron to receive the compensation. In a similar type of
issue “Hutton v Warren [1836] EWHC Exch J61”, the compensation was received by the
claimant as the terms were implied by court into the contract made for tenancy [Oocities, 2015].
The main reason given by the court to include the implied term into the contract for tenancy was
it is a normal practice to have such clauses in case of the tenancy contract.

2.3 Evaluate the effect of different terms in the given contracts

Case 5
In the above case study it is given that the policy has also made an earlier claim. Thus,it can be
said that the policy holder did not provided the true information that was mandatory while taking
the policy. The form has clearly asked to disclose the earlier claims that have been made by the
person applying for the policy irrespective of the outcomes of the claim. This misinformation has
led the insurer to cover undue risk while providing policy to the insurer which makes the insurer
eligible to make the insurance policy void.

Case 6
In the above given case study though it can be said the claim made by the policy holder related to
her ignorance on the part that the parts which were provided with the car was part of the original
specification as provided by the car manufacturer and were not added later, is genuine. However
the claimant could not disclose the claims that have been made by her husband on the previous
occasions. It was properly mentioned in the policy form that the policy holder has to fill in the
details of the loss that has been incurred in the past without taking into account the demands that
has been made previously [Oocities, 2015]. Hence it was clear that for the holder of the policy
should have told the insurer about the complete details of the claims which has been sought by
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her husband on the previous occasions. Thus, it can be concluded that the insurance policy
holder has mislead the company into accepting a risk which either would have been charged
under a heavy premium or would not have been covered completely. Thus, insurer can make the
policy void.

TASK 3 – Vocational scenario

3.1 Explain the similarities and differences (contrast) of liability in tort with
contractual liability using an example.
In the legal terms tort may be explained as any type of action which is taken by an individual or a
firm and damage, loss or injury is caused to any person or firm due to that action. When a person
commits any activity of tort then he can be sued in any civil courts and injunctions can be issued
by the courts so that the person committing the act of tort can be prevented from repeating the
same act again. In tort if any person faces any damages, then the other party compensates for
those damages. The contractual liability can be explained as in case there is breach in the
conditions of the contract by any party then the party breaching the conditions of the contract is
entitled by the law to pay up for the damages that has been incurred by the other party. Thus tort
can be explained as any act which is legally wrong. If the person facing the damages is not
properly compensated than, the criminal proceedings might be started by the state against the
party breaching the contract. The tort arises when ever there is any case of violation of duty.

In order to consider the contractual liability, it is important that the parties are legally bound to
each other through a valid contract. The contractual liability is dependent upon the loss which
has been incurred by the other party. The below given points are two main areas where the
livability in tort and the contractual liability differs:

a) The outcome of the agreement

b) The outcome of the law

In case there is any case which is being filed by the party in the court against the defendant, as
per law the defendant has to provide compensation to party suffering the damages occurred due
to the action of the defendant. Though, if no loss is proved than there are no provisions to
provide compensation to the claimant by the plaintiff [Translegal, 2015]. The liabilities in case of
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contractual liability are generally taken up on voluntarily basis but the liabilities are not taken up
on voluntary basis in case of the tort of liabilities.

3.2 Explain using suitable example how liability for negligence can arise and
the conditions needed to be met for a claimant to successfully prove
negligence.
The negligence can be said to be done by a firm when it fails to take reasonable action in a
reasonable timeframe. In the cases which are related to tort, when a wrong act is committed by a
person then it can be termed as negligence. The plaintiff has to prove that he/she has suffered
damages due to the negligence of the other party and seek compensation accordingly. The
different elements that have to be taken for consideration in cases of negligence are illustrated as
follows:

a) Duty of care: As per the duty of care the product manufacturers are legally bound to take care
of the security and safety of their products and services so that it does not cause any type of harm
to the public. A similar case is the Donoghue v Stevenson [1932], where the claimant made a
claim that her friend brought a beer from a beer shop for her. The beer manufacturer David
Stevenson and the manufacturing of the beer were done in Scotland. The claimant found a
decomposed snail in the beer while drinking it and thus a lawsuit was filed by the claimant
against the beer manufacturer [Translegal, 2015]. But, as there was no formal contract signed by
the claimant and the defendant thus, the claimant was denied for any damages. Also privity
action was taken against the beer manufacturer.

b) Breach of Duty: A case can only be treated under the breach of duty if and only if the
claimant is under the duty of care of the defendant. The individual and the parties are not the
only ones who are responsible for the breach in duty. In a common a society also has the duty of
care of the members to look after the properties of other members.

c) Direct Cause: In case the damages are suffered by the claimant due to the direct action of the
defendant than the claimant are liable to get the compensation. But the claimant has to prove that
the damage is caused to him/her and that act is due to the negligence of the defendant.

d) Remoteness of the damage: In case of the wagon mound case the owner of the Wharf was
basically held responsible by the lords for the accident causing the fire outbreak as he there was
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negligence on the part of the owner of the Wharf to not pay any heed to the warnings of the
owner of the oil ship. Hence the case about the liability of the owner of the ship to the owner of
the Wharf was quashed by the House of Lords.

e) Harm and Damages: In case related to the liability for negligence the claimant has to show
that it was due to the omission of the act by the defendant that the claimant has suffered the loss.
The claimant will not be entitled to receive any compensation for the damages if he/she is not
able to prove that they have incurred financial losses due to the act of omission done by the
defendant“Constantine v imperial Hotels[ 1944]”.

3.3 Explain what vicarious liability means and how a business such as your
organisation can become vicariously liable giving example.
Under the vicarious liability, a person is held responsible for the acts which are done by the other
person. For example if there is any accident committed by any employee then it is also the legal
liability of the employer for the negligence which has been committed by the employer of the
company.

In general, the employers are not fully aware about the liabilities which they have to face at their
workplace because of the acts which are performed by their employees (Findlaw.co.uk, 2016).
The employers can take the steps that has been iluustrated below to address the issues of
vicarious liability in their organization:

a) Equal opportunities has to be provided to all the employees by the employer.

b) Proper commitments has to be maintained by the employer towards the employees.

c) The different discriminatory activities has to be identified and stopped by the employer at the
workplace.

d) The different health and safety regulations has to be followed at the workplace by the
employer.
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TASK 4 - Case studies

4.1 Apply the elements of the tort of negligence and defences in the given
business scenarios below;

Case 7
The case study depicts that when Mr. Brown was not feeling well he decided to get admitted into
Goodmayes hospital. At the hospital on being enquired about his problem by the nurse, Mr.
Brown told the nurse that he is having severe pain in chest and he is also finding it difficult to
breathe properly. The nurse who was attending to Mr Brown called up a doctor who after
listening to the conditions of Mr. Brown, prescribed certain medicines to the patient. Though,
after one day Mr. Brown contracted pneumonia from a toxic mould that was already present in
his home and he died the same day. The hospital in this case can only be held responsible if
proper care was not provided to Mr. Brown and he died because of the wrong medicines
prescribed by the doctor (Findlaw.co.uk, 2016). But as it was found that the main cause of death
of Mr. Brown was the toxic mould in his house thus hospital cannot be said to be responsible for
the death of Mr Brown “Barnett v Chelsea Hospital Management Committee (1969) QBD”.

4.2 Apply the elements of vicarious liability in given business situations

below;

Case 8
In the above given case it is said that the client hired the executive chauffeur company to drop
him from airport to hotel. While waiting for the client at the airport, the driver of the car
consumed alcohol at the airport. While driving back to the hotel, the driver of the car could not
control himself and he met with an accident as he crashed his car into a lamp post which caused
injuries to the client. On conducting the investigation, it was found by the agencies that the driver
had taken alcohol while driving. Thus, the client registered a case against the executive chauffeur
company. On taking into consideration the various merits of the case the courts decided that the
accident by the driver of the car can be termed as the act committed by the employee during the
active duty and thus the liabilities of the act of negligence by the employee is on the employer.
Thus it can be concluded that the damages to the claimant will be paid by the executive
chauffeur company.
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Case 9
In the case study it is given that Mr Jones lives in the Billericay in Essex and he was employed
by a supermarket as delivery driver. While loading the materials he slipped and he fell on the tail
gate. All the pallets fell on his colleague who suffered from serious injuries cause of this. The
injured colleague of the driver suffered from torn rotator cuffs and has to undergo surgery. He
also has to undergo several years in rehabilitation (Findlaw.co.uk, 2016). The supermarket
cannot be held liable in this case to pay up for the damages that have been incurred by the
colleague of Mr. Jones as the work place as the supermarket has delegated the responsibility to
lookafter the health and the safety regulations at the workplace to another firm.
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References

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Lawhandbook.org.au,. 'Elements Of A Contract'. N.p., 2015. Web. 13 June 2016.

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2016

OPM, 2015, THE SALE OF GOODS ACT, Chapter 82Available:

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13 June 2016

Allen, The Law Society Gazette, 2014. Vicarious Liability- the two-stage test [online] Available:
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Findlaw,. 'Proving Fault: What Is Negligence? - Findlaw'. N.p., 2015. (Assessed 13 June 2016)

Findlaw.co.uk, What Is Tort Law? - Law And Government (2015) (2)( Accessed- 13 June
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E-lawresources.co.uk,. 'Duty Of Care'. N.p., 2015. Web. 13 June 2016.

E-lawresources.co.uk, Terms Of A Contract (2015)(2)( Accessed- 13 June 2016)http://e-

lawresources.co.uk/Contents-of-a-contract.php

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<http://www.legislation.gov.uk/ukpga/1979/54/part/II/crossheading/the-price>

Oocities, 2015, [online]Available: http://www.oocities.org/the_law_page/offer/inv2treat.html

Accessed- 13 June 2016