An understanding of aspects of the

law of contract and tort and the

skills to apply them, particularly in

business situation

Task 1: Understand the essential elements of a valid contract in a business context

1.1 Essential elements required in the formation of a valid contract

“A legally recognized offer and an acceptance create a meeting of the minds, or mutual

assent, between the parties. The law requires the parties to a contract to demonstrate mutual

assent to the contracts' terms. The offer is the key element that defines the relevant issues in the

contract. To be a legally valid offer, the offer must be effectively communicated so that the

receiving party has the ability to accept or reject the offer. Whether or not the receiving party

reads the contract has no bearing in determining the clarity of the offer.The offer must only

provide the recipient with a clear opportunity to accept or reject the contract. Someone who signs

a contract without reading it does so at his/her own risk.”

(Munich Personal RePEc Archive,2008)

In order for a contract to be valid there must be certain definitive terms. These ones are

being taken into consideration as “definitive term” if an individual which is reasonable is having

the capability of understanding these terms. For deciding if these ones are being definitive or not,

the court is reviewing if the elements are clear:

Offer- represents the main element from the contract which must be in there because if within

the contract there is no offer than it means that it not an agreement. For making a valid offer

there must be at least two individuals and if there will be an acceptance of the offer is having the

meaning of a “legally valid contract”.

Acceptance- when the other party is accepting the offer made there constitutes between them a

valid contract. Until the acceptance is made all the parties involved must clear understand all the

contract regulations and rules. “The law takes a somewhat pragmatic approach to the question

whether the customer has accepted the terms. The customer is taken to have agreed so long as the

customer had an opportunity to read the terms and did not object to them.”

(Munich Personal RePEc Archive,2008)

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Consideration- is having the meaning that within the contract all the parties involved must

have the intention of creating a “legally binding” and for that to happen the parties involved must

give something in return to the other party.

Intention to Create Legal Relations- between an agreement which is commercial the parties

involved must have the intention of creating a contract which must be a legally valid one. If the

parties intention is enforceable, than the agreement will be a contract in its strict sense.

Certainty-“is an important element because all the terms made in contract and regulations as

well must be clearly stated and understood by all the parties in the contract. If there is nou

certainty within the agreement, the contract is not valid. The company explains very well how

the costumer can purchase the computers.”

(Munich Personal RePEc Archive,2008)

Conclusion of elements- a legally valid contract must gather all the main elements. People who

are making a contract they must be precut a making sure of knowing and understanding all the

contract terms.

1.2 Impact of different types contracts

Face to face contracts-“represent contracts in which both parties such as suppliers and

restaurant as well as linen hire companies and restaurant will be each other in front and the parts

will enter orally into the contract of supplier with meat and vegetables and hire and laundering of

table linen. Application: it will apply because the both parties involved will be in front of each

other so will be no confusions about the contract parties. Impact of the contract: this contract

also is known as a quasi contract, legally it is difficult to prove because the parties can easy deny

what they have said.”

Source(s): http://www.e-lawresources.co.uk/Contents-of-a-contract.php

Written contract- there is a standard form where all the contract terms and conditions are being

written and all the agreements parts are being bound by it when they are signing the contract.

Application: are applying because are having the meaning of a legal form regarding the contract

and all the parties involved are being required to make it in a form which is written.

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Impact of the contract: this one represent a legal contract which also is valid so for that this one

must be made into a form which is written in order to become legally binding into all the

involved parties within the contract.

Distance selling: “this requires a contract between the restaurant and the suppliers and the linen

hire companies so they are not required to be in front of each other, the contract will be made on

internet or over the phone. Application: it will apply because all the parties will have the option

to enter into a contract even when they aren’t in front of each other. Impact: this is a contract

which is valid and can be enforceable because there is a distant selling regulation which is

protecting the right of all parties involved.”

Source(s): http://www.e-lawresources.co.uk/Contents-of-a-contract.php

1.3 Terms in contract

“In general then, as long as the basic elements of an offer and acceptance with consideration

are present, the parties have a valid and binding contract. There is no requirement that the

contract be in writing except in certain special situations such as the sale of land. The problem is

that if the verbal exchanges of the parties are to be relied upon, it may prove difficult and in

some cases impossible to determine precisely the terms of the contract if there in fact is a

contract.”

(ClearRisk Inc.)

Within organizations there are various types of contract which are legal ones and who depend

of certain transactions such as “transfer of property, sale of goods” etc:

An agreement is consisting of various terms. Organizations are having standards forms in

which terms are being written. These are having the meaning of “contractual terms” which can

be implied or express ones and also can be classified as “warranties, innominate and conditions”.

“The contract is put down in writing, so any statement appearing in that written agreement

will usually be regarded as a term, and any prior oral statement that is not repeated in the written

agreement will usually be regarded as a representation, due to the assumption that if a statement

is left out of a written agreement, the parties did not view the statement as important.”

(Routledge v. McKay (above); Duffy &Ors v. Newcastle United Football Co. Ltd. (2000))

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“Implied terms are terms which the law requires present in certain types of contracts (i.e. not

just on one-off basis and sometimes irrespective of the wishes of the parties). E.g. tenancy

agreements will include implied term that the landlord must take reasonable care to keep

common parts of property in good repair.”

(Liverpool City Council v. Irwin,1977)

Task 2: Be able to apply the elements of a contract in business situations

2.1 Apply the elements of contract in given business scenario

Business scenario 1

In the contract between Miss Kaur and “Limited Edition Patron of the Art’s” there are being

required various important elements:

“One of the essential elements of an agreement is a promise. Only a promise made with the

intention of creating a legal relationship may be enforced. But in the normal course of

negotiations, a person (the promisor) seldom makes such a promise unless some condition is

attached to it, requiring the other party (the promise) to do some act or give a promise in

exchange.It is important to note that an offer must be communicated by the person who offer to

the other party (the offerer) before the offer can be accepted. From this observation, we have the

first rule for offer and acceptance: An offer must be communicated by the offeror to the offeree

before acceptance may take place.”

(McGraw-Hill Higher Education,Chapter3)

“This rule may appear to be obvious, but an offer is not always made directly to the offeree by

the offeror. Consequently, it is important for the offeror to know when the offeree becomes

aware of the offer. This is so because an offer is not valid until it is received by the offeree, and

the offeror is not bound by the offer until such time as it is accepted. The essential point to make

here is that no person can agree to an offer unless he or she is aware of it.”

(Giulio Giannini )

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Consideration is having the meaning that the parties must give something in return and represent

an important element which must be present within the contract. Miss Kaur had paid ₤950 in

return for the fountain pen which represent a sign for the acceptance of the offer.

Certainty represent an element which is imposing that the contract terms must be understood

by the parties involved and must be clearly stated in order for them to be easily read which

represent an important element which parties must follow.

Miss Kaur is taking an action against the auctioneer because did not mention in the notice

which has given that he is having the “legal authority” for cancelled it. On the other hand Miss

Kaur cannot take an action against the shop assistant because this one did not mention the hour

of she’s return and also there was the possibility yet she may not return and the shop assistant

had not the obligation to wait for her.

Business scenario 2

“Charles had bought a grade 1 listed building with the intention to convert it into a guest

house. Charles has made an offer to Murphy to make the necessary renovations for the fixed

price of ₤50.000.Murphy had accepted the offer to renovate the building at the initial price of

₤50000. The acceptance had been made with the fully understanding of the rules and regulation

between the contracts as it must be finished at 1 March 2012.Consideration-in return of its work

Murphy had received the payment established in the contract made with Charles for the

renovation of the building.” (case study)

Murphy is able for taking actions against Charles because this one had made him a promise

of payment of extra £10,000 because this one agreed to make this payment to Murphy and the

agreement presented and the received confirmation from Charles, for completing on time the

work. So regarding this Charles is “legally bound” to pay Murphy the additional money.

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Business scenario 3

Hakim and Jane had made an offer to Mia to repair a bathroom and a roof in their properties.

Because Mia is had the need for experience he accepted the offer made. This one is having the

right to make an action for legally enforcing Hakim and Jane to pay him the required amount of

money because Hakim and Jane said that will give some money to Mia in return from its job. But

when the work has been completed he did not received the promised money.

2.2 Apply the law on terms in different contracts

Within the valid contract between the parties involves are being founded certain express and

implied terms but also exclusion clauses.

“Express terms are terms that have been specifically mentioned and agreed by both parties at

the time the contract is made. They can either be oral or in writing. However, sometimes a term

which has not been mentioned by either party will nonetheless be ‘included’ in the contract,

often because the contract doesn’t make commercial sense without that term.”

(Contract Law)

These terms can are being called as “implied terms”. In addition to implied terms of general

application, the courts can also imply terms into specific contracts if it’s necessary to give them

“business efficacy”, in other words to make them work.

Implied terms-“is it reasonable to hold that the parties entered into the contract on the basis,

and with the knowledge, that their agreement would be on the terms set out in previous contracts

entered into”.

(Henry Kendall & Sons v William Lillico & Sons)

The “exclusion clauses” are being brought into the parties’ attention for the effectiveness of

the contract.

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2.3 Effects of different terms in given contracts

“The law gives you certain (sometimes referred to as statutory) rights under this contract. If

the goods do not conform to the contract, in other words are not of satisfactory quality, fit for

purpose or as described, you are legally entitled to one of the remedies. You are entitled to ask

the trader to repair or replace the goods at their expense. The trader can refuse to do so if the

repair or replacement is impossible or disproportionate (too costly) when compared to other

remedies.”

(Sale of Goods Act 1979)

Business scenario 4

X had engaged with Y within a contract which is written and which include various clauses.

Until it sign the contract Y knows the various clauses which must be meet such as do not wear

trousers because this form of dress was not an acceptable and working the necessary hours in

completing their assignment.

In this case study “there are two clauses which are important such as 6 and 7 in which we

must focus as they are being a part of these agreement and they are written one. Besides that,

these clauses have been accepted by Y when she had joined as being an assistant for X.

According to the clause 6, Y must not wear trousers under any circumstances. For that, X is

having the legal right to terminate the contract as Y did not respect this clause. On the other hand

according to clause 7, there was the 30 minutes times left for getting the work done so X had to

wait until, that 90 minutes had passed to find out if she, Y, are able to do it by the give time. But

there weren’t any clauses or terms, but X must follow the two clauses in order to terminate the

contract.” (Case study)

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Task 3: Understanding the principles of liability in negligence in business

activities

3.1 Contrast liability in tort with contractual liability

“Contract law is that body of rules that govern contractual agreements between persons or

merchants.  A contract is basically an agreement between parties outlining their duties and

responsibilities to one another. In contrast, tort laws govern situations where one person has

harmed or injured another person.  Tort laws cover violations where the party intentionally

harmed the other person, such as in a battery claim. In the case study we can see a tort liability

because is a civil wrong, were the driver of the train negligently operates the company vehicle

and injure someone.”

(LegalMatch Law Library Managing Editor and Attorney at Law)

Within a tort interaction there is no consent as a base. In this case tort is involving an

intrusion by a party in the “shealth of the victim”. This tort is serving into defending and

preventing the victim in order for this one to recover he damages. In contrast with tort in

contractual liability one party is not able to force the other one into entering into an agreement

without giving their consent.

  “Before the breach occurred in a contract liability, the damaged award means they restore the

parties to their position. In contrast in a torts law, there is damages award to compensate the loss

of the victim. So this is another thing that makes this case a tort liability.”

(Contract Law)

In a lawsuit there are situations where both liabilities are intertwined and are being seen in

the same situation.

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3.2 The nature of liability in negligence

“A claim in negligence is based on the assumption that the manufacturer owes a duty of care to

all those who can reasonably be expected to make use of its product. In the case of 'dangerous'

products such as those which, if defective, could cause extensive harm this duty may be owed to

anybody who may reasonably be affected by a defect in the product.This means that a claim in

negligence is not limited by the doctrine of privity of contract, which states that only a party to a

contract can sue under it. A claim may be brought by a consumer-purchaser of the product, a

person who uses the product or a third party bystander who is injured by the product.”

Source://www.out-law.com/en/topics/commercial/supply-of-goods-and-services/product-

liability-for-negligence/

In order for being liable for negligence and being responsible in various ways for certain

outcomes which are having their results in the law violation or in injury production to other

people and is requiring an intent in which people are not responsible for some actions which they

did not meant. But, the law is taking into consideration the negligence concept which represents

a way for holding someone accountable when people are failing into taking decisions even when

people does not have the intention of making harm.

“A failure to take such care can result in the defendant being liable to pay damages to a party

who is injured or suffers loss as a result of their breach of duty of care. Breach of duty in

negligence liability may be found to exist where the defendant fails to meet the standard of care

required by law. Once it has been established that the defendant owed the claimant a duty of

care, the claimant must also demonstrate that the defendant was in breach of duty. The test of

breach of duty is generally objective; however, there may be slight variations to this.”

(Case studies Bolam v Friern, 1957)

Also there is a “proximate cause” which is being related to defendant responsibilities in cases

which involved negligence. An individual is being responsible for loosing and injuring which

may foresee through their action.

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“To help determine the proximate cause of an injury in Negligence or other TORT cases, courts

have devised the -but for- or -sine qua non- rule, which considers whether the injury would not

have occurred but for the defendant's negligent act. A finding that an injury would not have

occurred but for a defendant’s act establishes that the particular act or omission is the proximate

cause of the harm, but it does not necessarily establishes liability since a variety of other factors

can come into play in tort actions.”

http://legal-dictionary.thefreedictionary.com/proximate+cause

Task 4: Be able to apply principles of liability in negligence in business

situations

4.1 Apply the elements of the tort of negligence and defenses

“To successfully defend against a negligence suit, the defendant will try to negate one of the

elements of the plaintiff's cause of action. In other words, the defendant introduces evidence that

he or she did not owe a duty to the plaintiff; exercised reasonable care; did not cause the

plaintiff's damages; and so forth. In addition, a defendant may rely on one of a few doctrines that

may eliminate or limit liability based on alleged negligence.”

(Personal Injury Law)

Business Scenario 5

Regarding this situation there be accusations of negligence because the UK ship for taking

various precautions for avoiding starting a fire. According to the fact that the organization owe

the duty of care which is having the meaning that if the UK ship could foreseen the risk of

starting any fire within this situation. Other said, they had failed into doing certain which

reasonably careful people who are doing.

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“Reasonable person would have foreseen a risk of injury to the plaintiff under the

circumstances. If such a duty exists, the standard of care is that of a reasonably careful or prudent

person. In other words, a person's act or omission is measured against that of a reasonably careful

person in similar circumstances.”

(1999 FindLaw Inc.)

The owner of the wharf is having the right into taking actions against the UK ship for the

happened loss of the wharf because this one had given various advised about the possibility od

certain losses which may happen. “So, the chatters of the ship had the responsibility to ensure

that their oil does not spill. As they are failing to take these responsibilities, now they must pay

certain loss which has been caused to the wharf owner.” (Case study)

Business Scenario 6

Shell can be accused of negligence because the company did not make sure that their

employees haven’t taken the required protection in certain situation. For that Bell their

employees had lose its sight because he had an accident as a chip of metal flew into its eye

because this one hadn’t any protection.

“Negligence is the omission to do something, which a reasonable man, guided upon those

considerations, which ordinarily regulate the conduct of human affairs, would do, or doing

something, which a prudent and reasonable man would not do. The standard demanded is thus

not of perfection but of reasonableness. It is an objective standard taking no account of the

defendant's incompetence - he may do the best he can and still be found negligent”.

(Blyth v Birmingham Waterworks (1856) 11 Exch 781)

Shell is being liable for negligence because the organization breaches that owes to the plaintiff.

This one is breaching the owed duty when it failed into taking reasonable care of their workers

and did not ensure that its workers are using the protection equipment.

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“The issue of proximate cause is conceptually one of the most difficult areas of torts. Although

most students become reasonably conversant with the basic concepts, this requires a lot of hard

work and advance preparation. Part of the difficulty lies in the fact that the fundamental issues of

proximate cause have little to do with scientific causation, and everything to do with social limits

on liability. Thus, many torts scholars prefer the term legal cause, rather than proximate cause, to

denote that the principle is socially imposed rather than scientifically determinable. Nevertheless,

most courts continue to use the proximate language, and we shall too.”

(John Nockleby's Fall 2002)

4.2 Apply the elements of vicarious liability

“Vicarious liability is legal responsibility imposed on an employer, who may himself be free

from blame, for a tort committed by his employee in the course of his employment.  In this sense

it is a species of strict liability. The key question of any case of vicarious liability is whether the

employee was acting in a personal capacity, or in the course of their employment. This can often

be difficult to determine.”

Source(s)://www.law.cornell.edu/wex/vicarious_liability

Business Scenario 7

“Safe Care Homes Ltd” is having the responsibility of the sexual abuse made by its employee

Alf because it is the warder and “Safe Care Homes Ltd” had employed him. As the organization

had recruit Alf and also had provided him training now must take the responsibility regarding the

actions made by him.

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Business Scenario 8:

In this case study “AB and Sons garage Ltd” is not having the responsibility for the enterprise

actions of Amos Bridge within the filled case by Mr. Alex Khan because this one is taking

actions against Amos for hitting him. “But if Mr. Alex Khan filed a case for showing disrespect

to him at that time AB and Sons garage Ltd will be vicariously responsible for the action of

showing disrespect to their customer Mr. Alex Khan.” (Case study)

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REFERENCES

Case studies from:

Routledge v. McKay; Duffy &Ors v. Newcastle United Football Co. Ltd.,2000)

Liverpool City Council v. Irwin,1977

Rabin v Gerson Berger Association Ltd [1986])

Henry Kendall & Sons v William Lillico & Sons

JGE v English Province of Our Lady of Charity and Trustees of the Portsmouth Roman

Catholic

shivamlawworld.blogspot.co.uk/2012/02/essential-elements-of-valid-contract.html

http://definitions.uslegal.com/a/adhesion-contract/

www.law.cornell.edu/wex/vicarious_liability

http://www.lawteacher.net/tort-law/vicarious-liability.php

http://www.acas.org.uk/index.aspx?articleid=3715

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