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Aspects of Contracts and Negligence for Business

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For a business to function with other businesses, it becomes essential to limit the terms and conditions of a business. As a legal binding that can be applied to the business setting, a valid contract is essential to bind the two or more companies that have decided to work together (Kubasek, Brennan, and Browne, 2014). While a contract does not define the nature of business that can be bound with each other, it binds two or more businesses of the same or different type such that the terms and conditions are well defined.

A contract is a legal document and it has various terms and legal conditions that are associated with a contract. Once, a contract is signed with consent of the participating companies, the business defined is legally bound and any non-adherence to the terms and conditions that has been mentioned in the contract can call for legal action against the party that causes the breach of the contract. A contract is formed and duly accepted and signed to cater to the needs of the business relations of the parties in the contract and involves the negligence and errors that are inevitable at times. For all times a contract is drafted, the legal aspects and formalities that are associated with it are bound by the federal and national law of the home country. Any breaches and negligence may be tested in the court of Law that deems a breach or negligence fit for compensation if the negligence is proven to be intentional. Any company may choose to reject or not accept the contract while it has been presented. But if it is once signed, it stands as the supreme regulatory document defining the terms and conditions of the business being conducted. Depending on the type of business and the nature of service delivery, there are various types of contracts that are legally made. Also, under a contract there are certain responsibilities of the binding company that have to be taken care of (Bagley and Douchy, 2011). Liability of both the parties in the contract is to be defined and maintained in the course of business being conducted.

Task 1

1. Explain the essential elements required for the formation of a valid contract [P1.1, M1] to achieve M1; you will need to demonstrate an effective approach to study and research, using appropriate examples from relevant case law, statute law and scholarly sources to support your answers.

A contract is bound by a legal enforceable obligation in which one party is bound by the business terms to provide the product or delivery against a certain pre-defined payment module, such that the working terms and the reimbursement satisfies the condition of the contractual legality. There are various contracts that are made based on the need of the business and the complexity of the nature of business. A basic segregation of the contracts may be justified with the nature of the formalising of the contract. According to this, there are basic two types of the contracts that can be made.

Verbal and non-verbal contracts refer to the way in which a contract is made. Verbal contracts are made based on mutual faith and do not necessarily involve the signing of the requisite paperwork. On the other hand, nonverbal contract does involve a proper framework of the legal contracts that are signed to confirm the participation of the parties in the contract (Twomey and Jennings, 2013). No matter in what way the contract is drafted, there are certain elements of the contract that need to be present to confirm the validation of the contract. Some of the basic elements of a contract are:

Offer and Acceptance of a Contract: When two parties confirm to work with each other, there is one party that makes the offer and other party accepts it. The party making the offer states the kind of business and that needs to be conducted and the remuneration that would be provided against it. The other party needs to understand the terms and conditions of the working and the payment associated with it. Once the offer is made by the first party, the other party accepts the offer. This is very essential for the validation of the contract. The statement of the Intent of the contract and the terms of Supply of Information are also supplied with it. A case of UK law called the Carlill VS Carbolic Smoke Ball Company was used to challenge the offer and acceptance principle of the contractual agreement (Knapp, 2013).

Intent of Legal Relations: This defines the intent and agreement of all the parties to participate in the working collaboration and agree to the terms of the contract. This also means the companies party to the contract have accepted the terms and conditions of the legal aspects that are involved in the contract. A landmark case was the Harvey VS Facey Case of 1983 that made it mandatory for all the parties to be aware of and accept the legal relations in the contract (Turner, 2014). Consideration of the Contract: This is another factor that is well defined and explained with smallest terms and conditions. This relates to the payments and reimbursements that have to be made for the services and Products that are being offered. A simple aspect is when the first company offers the second party a certain value of money for the kind of services and products that are being offered (Bender and Co, 2014). The Fisher VS Bell case of 1961 was the bench mark legal case that made the disclosure of the financials mandatory for the validation of the contract.

Capacity of the Contract: Another very important aspect is the capacity of the contract. This is done to ensure that the parties that are getting into the contract are well aware of the contractual terms and stand at the right capacity to hold the contract. If on one hand, the company can be willing to enter the contract, the other cases may include bankruptcy and leases. Patridge VS Critenden of the 1968 case was the ruling case for this aspect making it mandatory. Confidentiality and privacy of the contract: Apart from the other factors, to maintain the confidentiality and the privacy of the terms and conditions of the contract in terms of business and monetary transactions is also a validating element of the contract (Majumdar, 2014)

2. Explain and discuss the different types of contract [P1.2]

Drafting a contract is a critical task and a complete contract can be drafted by the experts who have enough knowledge of the legal aspects that have to be incorporated into the contract. There are various types of contracts such as: Verbal Contracts: These contracts are confirmed on word of mouth and have the basic underlying principle of trust. These contracts do not include any formal contractual documents and are finalised with discussions and communication. Formal Contracts: These contracts are drafted on formal legal papers and include a legal language that is categorically applied to the contract drafting. These contracts are valid in the courts and need to be duly accepted and signed for them to stand valid (Guide, 2011).

Distance Selling: This is a contract where in the terms of sales and conditions that are defined between two parties’ that involve in sales business. In this contract both the parties may be located in different countries.

Employment Contracts: Such contracts define the terms and conditions of the employment and job responsibilities. A Non-Disclosure agreement may also be a part of such a contract where in the employee is bound under the contractual obligation of retaining the confidentiality and privacy of the employer.

Lease Agreements: These contracts are made on the letting out and sublet of the properties or spaces that are paid against by the tenant. Terms and conditions of occupation and payments are predefined. Fixed Reimbursement Contract: In this type of the contract one company agrees to pay a specific reimbursement sum of money against the services that are provided by the other company. The reimbursement and nature of services is fixed in this type of a contract (Murray, 2011)

3) Explain and analyse the different forms of contractual terms [P1.3, D1] To achieve D1, you will need to demonstrate critical analysis of the different forms of contractual terms, including exclusion clauses.

A contractual term is defined as the "Validating or forming” term of the contract. Most of the terms of a contract are predefined and included into the contract. This helps in making both the parties aware of the terms and conditions and the acceptance of the specified terms is essential to contain the validity of the contract.

Implied terms: These are terms that are not necessarily discussed but are nevertheless included in the contract. There are various implied terms thatcan be applied to contract such as the terms implied by the statute and terms implied by the courts (Deakin and Morris, 2012). This may also be defined as the practice of setting up and applying the default rules that can be applied to the contracts. The main aim of the implied terms is to seal the contract (Kleinschmidt, 2012).

Expressed terms: These are the terms and conditions that are specific, to the contract and the companies that are mentioned in the contract at the time of the signing of the business terms. These conditions may pertain to the services being offered and the other terms and conditions of the business contract.

There are contractual terms that can be implied to the contract. These terms of a contract that are made by the legislator authorities and courts make a term compulsory in cases of all contracts. Take for instance the Sales of Goods Act of 1979. In this case the quality of the products and services that are provided against a contract have been made compulsory.

Exclusion Clauses

These are also categorised as a contractual term where in either of the parties can be excluded from the services and conditions of the contract depending upon certain conditions that can be applied. In such a case, if the exclusion clause is justified, the breach of the contract may not be a punishable act and the party can be exempted such that the party can be excluded from the contract.

Task 2 1. Apply the essential elements of contract to the scenario [P2.1, M2] To achieve M2, you will need to demonstrate the ability to apply the law to the scenario in a clearly structured and coherent manner

In the case scenario that has been provided, the prime factors that need to be considered are: Mary bought a Television Set from a retail outlet. Therefore Mary can exert all consumer rights in this regard Mary signed a form or a contract at the time of sale of the Television Set without reading it

The two clauses that have been mentioned exempt the company from bearing the liability in case of faulty merchandise or in case of personal injury that has been caused

Mary has suffered physical injuries and loss of income for three weeks, both of which are claims for compensation

Offer and Acceptance of the contract can be considered to be complete and validated since, Mary signed the Document (without reading it). By signing the contract Mary has unknowingly accepted all the terms and clauses mentioned in the contract. Fixed reimbursement principle was also met with Mary accepting to pay a fixed amount of Money to Sales Are Us for a television set (Inderst and Ottaviani, 2013). Also, the terms and conditions of the sales and after sales service of the product have been clearly mentioned in the Agreement that was signed by Mary. It is also essential to note that Proper Incorporation of the clauses in the contract such that it was informed in writing.

Also the clauses that the company has decided to use in defence against the claims that are made by Mary have been clearly written and defined in the sales contract of the company.

2. Apply the law on terms to the scenario (P2.2]

There are various laws that can be applied to the scenario. Some of the commonly applicable laws are: Sales of Goods Act 1981: According to this Law it is imperative for the company to be able to provide a good quality product to the consumer and the standard of the product or the service needs to be maintained (Ayres, 2012)

Remoteness of the Damage Act: According to this Act, as per the case of Hadley v Baxendale 1854, the normal damages can be the damages that can arise out of natural conditions and mishaps where neither of the parties are held responsible for the damages. On the other hand, abnormal damages can be claimed to be the negligence of either party therefore, can be claimed. The Damage of the loss can be calculated by the mitigation from the victim and the expected losses and reliance losses can be calculated Unfair Contract terms Act of 1971 would consider the terms and conditions of the contract void and null since it has caused personal and financial loss. Also the terms that are dealing with the Breach of the contract can be subjected to a reasonableness test that would define the limits of liability of the either parties.

By carefully applying the laws mentioned above, the company and Consumer can test their claims in the court of law (George, 2013). While Mary would be intent on claiming the damages, the company would focus on refuting the claims that have been made.

3. Evaluate what remedies are available to Mary [P2.3, D2] To achieve D2, you will have shown responsibility by managing the activities on time

A breach of contract may be defined as the non-adherence and negligence of one party or the other in adhering to the terms and conditions of the contract that have been duly accepted and signed. There are certain remedies that can be claimed and applied to this case where Mary has sustained Physical and Financial Damages (Schwenzer, Hachem, and Kee, 2013). Task 3

1. Contrast liability in tort with contractual liability [P3.1]

Contractual Liability may be defined as the exemption or the various exclusion clauses that can be sued to limit the liabilities of the parties that are involved in the agreement that has been signed between the two parties. It is the mandate of the application of the common law that contractual Liability has to be compulsorily incorporated into the terms of the contract. Signatures, notices and public display of the terms has to be made. Contractual liability may be applied to the loss or damage to property as well. And it stands null and void, when the damages are made to health and finances of an individual (Krauss, 2012). Alternatively, law of tort holds the wrongdoer responsible for a personal injury that may be caused to the individual and is a part of the English Common Law. Therefore upon the breach of Duty of care, the liability of Tort has been fixed by law, applicable to the Un-liquidated Damages. Both the Tort and Contractual Liabilities are different aspects of the English Common law. Apart from the similarity of both being the civil laws, the claimant can sue for compensation. However, in both the cases no punishments are accorded whatsoever. On the other hand, the contractual liability creates and governs the relationship formed between the parties. The party that has suffered the damages can sue to regain their position in the contract and the liability is based on Consent of both the parties. In tort liability, the relationship is non contractual in nature and the consent of the parties is not needed (Chou and Spier, 2014). Moreover, Tort allows a victim to sue for compensation based on the extent of damage.

2. Explain the nature of liability in negligence [P3.2]

The nature of liability can be understood on the following terms and conditions.

Duty of Care

A legal duty of care is defined as the legal duty of one party to take care of the other party in a line of duty as described by a contract. If the party fails to adhere to the duty of care, the other party can sue them and claim compensation for the loss and damage or injury sustained. This was streamlines by the Donoghue vs. Stevenson 1932 case. Also the Health and Safety at work case of 1974 dictates the adherence to the duty of care of an employer.

Breach of The Duty

There are certain cases where the breach of duty could fall under the exclusion clause. However, at all other times, the breach of duty has to be proven for the claims that are made against, loss, injury or damage that has been caused.

Remoteness of Damage

There could be direct or indirect damage that has been caused and the factual assessment of the damage can be ascertained to claim its impact. The injured party is allowed to be compensated for the breach as well as the damage to the party (Bublick, 2013)

Occupier Liability

If a person is in charge of any premise, they automatically are held responsible for the location. As per the Occupier Liability Act of 1957, the occupier is held responsible for any damages, losses or injury that may be caused to the premise or the visitors to the premise.

3. Explain how a business can be vicariously liable [P3.3]

This liability deals with a situation where in one party is held responsible for the tort liability that has been committed by the other party. This might also apply to a case where in that tort may or may not be committed by the party. In many cases, that happen, the tort may relate to the employers paying to the liability of the tort that is committed by the employees of the company. However, in certain cases, there are a few requirements that have to be fulfilled in order to state that the employer is vicariously responsible for the tort that is committed. The main criteria are that the tort has to be committed by the employee while he or she is on job. Being in the job and committing the Tort while on duty is essential to prove the vicarious liability. It was only after the study of the case of Hall VS Lorimer that the use of vicarious liability was established (Fried, 2015). There have been different rulings that have been given under different circumstances.

4. Apply the elements of the tort of negligence to the scenario [P4.1, M3] To achieve M3, you will need to demonstrate a coherent, logical development of principles/concepts/arguments for the intended audience.

Applying the tort of negligence it can be clearly seen that the harm that was caused was accidental and not intentional. Also, the claim to the damages needs to be proven before any claims can be made. With the element of accidental damage, other surrounding factors also need to be considered. Accidental injury has been caused to the plaintiff in this case. However, in this case, the harm could have been avoided had the employee not been intoxicated. This is why this case dips in the favour of the plaintiff who can assert a claim of physical injury and mental harassment on the employer which is Flip Flops. There has been direct injury to the plaintiff in this case where it is also evidently clear that the Duty of Care was compromised with. Also there has been a breach of duty by the employee by reporting intoxicated at work. Hence, under the laws of tort of negligence, the company is liable to compensate for the injuries that Tim has sustained.

4. Apply the law on vicarious liability to the scenario [P4.2, D3] To achieve D3, you will need to demonstrate convergent and lateral thinking by considering the possible defences that "Film Flops” might raise.

In the scenario that has been provided, the customer Tim has been injured accidentally while he bought the ticket to watch a movie.

In this case there are two things that need to be considered. One is that it was the employee on duty that accidently poured hot coffee over the victim’s arm that caused burn injuries. Secondly, it makes a lot of difference with the fact that the employee was intoxicated at the time of service. As per this finding, it is easy to conclude that the company Flip Flops is definitely liable to pay and compensate for the physical injury caused. As per the national laws it is not allowed for an employee to be intoxicated at work during the working hours. But since this employee was intoxicated, it further tilts the case in the favour of Tim. His claim to compensation is justified and can be tested in the court of law (Guay and Cummins, 2013).


This report discusses the liability and the tort of negligence in detail and also discusses the situation where the exclusion clauses may be applied. Also, while a claim of compensation is being put up, it is also essential to validate the claim by the individual and negligence needs to be evaluated. While all national statues can be applied to the cases, a brief study about the earlier rulings also helps in understanding the liability ant tort in the present scenarios.

Tue Sep 04 14:56:31 +0000 2018

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