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Analyzing Different Aspects Of Contract And Negligence In Business

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Various Aspects Of Contract

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Introduction

Contract is the written or spoken agreement which is formulated with an aim to form the legal relationship between parties (Meaning of contract, 2016). For any business relationship, contract plays a significant role. This is because, by formulating an agreement, parties can save themselves from the losses which may happen when any party to the contract fails to perform which they have decided through mutual agreement. The present report is based upon different types of case scenarios. Thus, in this context, report will depict the importance of different essential elements of the contract. Furthermore, the report will also showcase detailed explanation regarding different concepts which are associated with the contract.

Task 1

1.1 Explaining The Importance Of Essential Elements Of Contract

Contract is a legal binding between parties. However, with an aim to formulate a valid contract, respective parties will have to satisfy different essential elements of contract. Thus, detailed explanation about the same is depicted as below:

Offer And Acceptance

It is the first element of contract or it can also be said that it is the initiation phase of contract. Here, any contract starts with the offer which is being given by one party to another. Here, the offer which party gives must be clear and definite (Akintoye, Renukappa and Lal, 2012). This is because, if the given thing will be found as absent, then in this situation, the offer given by party will not considered to be appropriate. However, there are certain circumstances when offer will lapse. These circumstances could be time, when parties to the contract will have to accept the contract or it gets expire. In addition to this, offer as being made by one party needs to be accepted by other party. This is because; if this is will not happen then in this situation, valid contract cannot be formed.

Intention To Get Entry Into Legal Relationship

This second element of valid contract depict that parties must have intention to enter into contractual relationship. Thus, the given intention of party depicts that they are ready to fulfil all the terms and conditions of the contract.

Consideration

It is the base of any contract. Furthermore, consideration is also used to make contract to be binding. In this context, Kerber and Heine (2002) have defined that consideration is something in return which one party takes or gives from other. The consideration which parties decided can be in monetary and non monetary form. But, generally consideration is the payment of money. In this context, it can be said that it is essential for the parties to make the decision about effective consideration. This is because, if it is not decided then in the given situation, it will become difficult for the parties to formulate such contract which is considered to be valid (Main element constituting valid contract, 2016).

Capacity Of The Parties

The parties who have taken decision to enter into legal relationship must be capable and competent enough in forming the contract. Here, the party will be considered as competent if it is major. This means that the party must be of 18 years or more than that. Furthermore, the person should be of sound mind and he/she must not be insane.

Free Consent

The party must give their consent to enter into legal relationship without any kind of pressure. If consent is not free or has been taken through physical and mental torture then valid contract cannot be formed. Overall, it can be said that all the given essential elements have their importance within contract.

1.2 Discussing The Effects Of Different Types Of Contract

The contract is of several types and thus, it has a significant impact on the relationship which is being formed between parties. Detailed explanation of the same is enumerated as below:

Distance Contract

It is the type of contract which is being used by the parties who reside at distant places. Here, with an aim to formulate the respective contract, parties tend to use different communication means such as telephone, email and letter, etc. In this contract, parties are given with sufficient time for accepting the contract (Sumner and Williams, 2010). Thus, if parties will not give their consent during specified time limit then contract will be revoked.

Face To Face Contract

It is another form of contract in which parties meet at the specific place and mutually, they make the decision about terms and conditions of the contract. Here, offering party gets immediate reply to the offer which is being given by other party. The offer made by parties will be revoked if party to whom the offer is made does not show an intention of accepting the same (Stevens, 1950).

Written Contract

It is the most common type of contract which is being used by large number of parties. In accordance with the given contract, it can also be said that it is the type of agreement which is made on the printed document. Here, both parties have evidence in the form of written document regarding the terms and conditions which are being decided by them. Thus, it can be depicted that all forms of contract have an effect on the party only in the circumstance when parties does not fulfil the specified condition of contract (DiMatteo, 2012).

1.3 Applying Elements Of Contract In The Given Case

In case of ARBOS and Ben, departmental store is giving invitation to offer to the customers. This is being given by the firm by displaying television at the counter. The television that firm has displayed states that the respective TV is available at the special offer of 100 euros only. Here, departmental store has given this offer with an aim to attract buyers towards the product. But, by mistaken, Ben has considered that the store is giving offer and he has accepted it (Padhi, 2012). Thus, now Ben is demanding TV from the store by putting forward the point that ARBOS has breached the terms and conditions of contract. Here, due to absence of all elements of contract, there is no legal relationship which is being formed between parties. Thus, ARBOS is not liable for any claim made by Ben.

Task 2

2.1 Applying Elements Of Contract In The Case Of Carol And Arbos

In case of Carol and ARBOS, Carol has visited the store with an aim to replace her laptop with the new and latest version. Thus, on doing so, Carol has entered into an agreement with the departmental store. In this regard, there are numbers of essential elements of contract identified which are associated with the respective case. The first element of contract is offer and acceptance. Here, sales assistant of departmental store has given offer to purchase the laptop on the credit of 12 months. The offer was accepted by Carol and thus, had signed the agreement. In addition to this, intention to create legal relationship is also present in the respective agreement. Here, Carol has an intention to enter into the legal relationship and it is the reason because of which she has signed an agreement (Rush and Ottley, 2006). In addition to this, for store, consideration is money and for Carol, consideration is laptop. Hence, it can be said that due to the presence of all essential elements of contract, legal relationship is being formed between parties.

2.2 Applying Law On Terms

Different law on terms are applied to the given case. The detailed explanation of different laws on terms is depicted as below:

Express Term

It is the term which is being expressed by the parties while entering into the contract. These terms can be decided in oral and written form. With regard to the given case, Carol will purchase laptop from the store on the credit for 12 months shall be an express terms.

Implied Term

It is the term which is not being decided by the parties but it automatically comes into contract when parties make the decision to enter into the legal relationship. In the given case, implied term will include all the provisions of Sales of Goods act which states that the selling party is obliged to give high quality of goods and services to the buyers (Stone,Devenney andCunnington, 2011).

Exclusion Clause

This clause saves the party from the payment of damages. In the given case, clause 8 applies which depict that store will not accept the liability for faulty products and all the costs of repairing faulty products need to be bear by the buyers of product.

2.3 Evaluating The Effect Of Different Terms

On analyzing the given case, it can be said that Carol will not be held liable for paying laptop repairing cost even though provision of clause 8 is present in the case. This is because, implied clause overdue the clause 8. Thus, the seller of product has the authority that it should provide good quality of product to its customers. Hence, Carol can force ARBOS for repairing and replacing his laptop.

Task 3

3.1 Contrasting Tort With Contractual Liability

A contractual application is developed between the parties for attaining the purpose of the contract in a proper and well managed manner. Contractual liability adheres the legal obligations as per the terms of the contract while tort liability is broader concept which considers the act of negligence performed by one of the party intentionally or unintentionally (Van der Puil and Weele, 2014). The key difference between the stated terms is:

Axis Contractual Liability Liability in Tort
Relationship
of the parties
The parties here are obliged as per the law of contract to the extent of expected obligations and mutual consent.
Merritt v Merritt [1970]
This liability is considered under civil crime thus obligation and are stated by law. Parties do not seek mutual consent for the same.
Nature of obligation Parties are obliged to perform the activities to meet the purpose of the contract on the basis of stated terms and conditions. The performance of the activities here is expected to meet the legal obligations. There is no mutual consent about the obligation between the parties it is rather imposed by law.
Blyth v Birmingham Water Works (1856)
Causation and remoteness On the basis of Hadley v Baxendale (1854) case principle, the breach of contract occurs due to non compliance of terms and conditions of the contract. The test known as “But for” is used. The proof that negligence of one party caused the damage to the other leads to tortuous liability. It refers to negligence of standard duty of care.
Incurred damages Upon the occurrence of breach of contract the claimant is liable for the damages and the contract is nullified immediately (Appleman, Appleman and Holmes, 2013). Lack of duty for standard care results in occurrence of negligence the damages for which are determined by looking for remedies that claimant could seek if the breach of obligation in negligence would have not taken place.

 

3.2 Nature Of Liability In Negligence

Negligence is a tortuous act where the carelessness of one party results in causing harm to the other. This act is covered under the negligence of standard duty of care.

Case

The given case states that 'Express Lines' a popular bus company crashed due to negligence of its driver. The reason of the crash was that the driver of the bus had fallen asleep due to the incident happened. Moreover, driver also overheard company's policy which said that drivers must take a short break after 5 hours of continuous driving. David the passenger suffered physical damages along with financial damages by missing work for two consequent months.

Application of law

Key principles of tort liability are as follows:

Duty of care: This principle states that every individual or company is liable to take care of the duty which ensures the safety and well being of people and actions as per the government law. If claimant is able to prove that the damages caused to him/her is due to lack of standard duty of care then the application of tortuous liability is applicable in the case (Ramanathan, 2014).

Breach of duty: This principle represents that every person is supposed to perform his/her basic responsibility. The breach of duty is when the claimant is able to prove in the court of law that the damages caused are due to ignorance of his/her responsibility.

Remote damages: This principle sates that the claimant is able to prove that the physical damages caused to him/her is due to ignorance of duty by defendant (Negligence. 2015).

Causation: Means that the cause of incident was due to ignorance of the defendant, and that the proper duty of care may have resulted in ignoring the occurrence of the same (Jennings and Twomey, 2010).

Decision

The given principles represents that the damages caused to David was due ignorance of the driver. It is evident from the case that causation of the event was because the driver of the bus fell asleep while driving. Moreover, the standard duty of care was also ignored by the driver. The incident resulted in physical injury to David. On the basis of the above arguments and the principles derived from the case reference Chester v Afshar [2004] it can be determined that David is liable to claim the damages from the company as the case approves the principles of tortuous liability.

3.3 Analyzing How Business Can Be Vicariously Liable

Vicarious liability is defined as the legal situation where the actions of one person lead to implication on the other person. This is part of the tort law however the actions of employees leads to the implications for the employers (Levinson, 2005).

Case

The given case mentions that a renowned bus company 'Express lines' crashed due to negligence of the driver. The event of driver falling asleep while driving bus for more than seven hours caused occurrence of the event resulting in causing physical injuries to David. The company however had a policy that the drivers must take a short break after continuous driving for 5 hours. However, the bus driver did not comply to the policy resulting is crashing the bus and causing damages to the passenger.

Application of Law

The elements which shapes and develop vicarious liability includes:

  • The term of employment is valid which makes the parties share employee employer relationship for the given event (Levinson, 2005).
  • Employers has the authority to control the actions of his/her employee
  • Action of employees are done as per the scope of employment
  • The above elements assure that the terms and conditions of the contract results in the occurrence of the event.

Decision

The case states that the driver of the bus was in active employment terms while the accident took place. However, it is clearly mentioned that company developed a policy to avoid such incidences. The policy claimed that drives should take a short break after continuous driving for 5 hours. The driver of the bus did not comply with the policy which resulted in occurrence of accident. Hence, Express line cannot be sued by David for loss occurred to him. Thus, vicarious liability is not applicable in the given case (Zoll, 2012).

Task 4

4.1 Considering Occupier's Liability For The Given Business Situation

Tort liability is caused by the negligence of the duty of one party which results in causing physical or monetary damage to another person.

Case

The given case mentions that Elena visited Bell Hotel for a job interview. The floor of the hotel was slippery because of which she fell in the reception area. There was no notice or warning provided about slippery floors which resulted in developing undue impact of the same. However, Elena was also taking medications for virus which she was supposed to consume after food. She somehow consumed it before having food which may have resulted in her slipping on the floor.

Applicability Of Law

Occupier's liability defines the duties of the land owners towards the visitors who visit their land. The rightful ownership of the land is not the principle condition of the contract as this may create a confusing impact on the people. The owner may transfer the duty of care to another individual who may be later responsible for the liability of visitors and their safety as well. Occupiers' liability is perhaps a distinct form of negligence in that there must be a duty of care and breach of duty, causing damage (Clarke, 2015). The rule of negligence is applicable for the same which demands the following elements to ensure the liability for occupier.

  • Duty of care
  • breach of duty
  • Causation
  • Damage

Presence of the above mentioned elements assure that negligence of occupiers may be sued against which the visitors may claim compensation.The defendant in case of occupier's liability is not liable for the damages caused to the visitors. This law falls under contributory negligence. It states that the parties involved in the case had or had not a participation for the damages caused to them (Caiado and Salgado, 2010). This helps in finding out the extent to which the claim can be made.

Application Of Law

For the given case Elena can claim the damages caused to her for the minor injuries as she fell on the slippery floor of the hotel. There was no warning or sign of caution displayed out there. However, she should also consider the fact that the reason of her falling was improper intake of the medication. This can cause hotel in defending themselves thus she may not receive any claim for the Hotel (Warren, 2012).

Conclusion

Legal aspects of contract are the significant part of developing business relations and bounding into contractual obligations. The thorough knowledge of legal aspects helps the individuals in taking effective actions for the non compliance of obligation and terms of contract. The above report provides a clear explanation of different aspects of contract and negligence in business. This helped in analyzing the laws and legal freedom of the parties (Nystén-Haarala, Lee and Lehto, 2010). This is effective for carrying out an effective and well developed measure of business operations in the competitive and complex working environment.

References

  • Akintoye, A., Renukappa, S. and Lal, H., 2012. The abolition of the “contracts in writing” rule in the 2009 Construction Act: Potential implications for UK adjudication. International Journal of Law in the Built Environment
  • Appleman, J. A., Appleman, J. and Holmes, E. M. 2013.Excuses for Nonpayment and Defenses to Actions for Premiums(5). Appleman on Insurance Law and Practice.
  • Caiado, V. N. and Salgado, M. S., 2010. Contract Management and its Influence Over Design Quality. Architectural Engineering and Design Management.
  • DiMatteo, A. L., 2012. False dichotomies in commercial contract interpretation. Journal of International Trade Law and Policy.
  • Jennings, M. and Twomey, D., 2010. Business Law: Principles for Today's Commercial Environment. 3rd ed. Cengage Learning.
  • Kerber, W. and Heine, K., 2002. European Corporate Laws, Regulatory Competition & Path Dependence. European Journal of Law and Economics.
  • Nystén-Haarala, S., Lee, N., and Lehto, J., 2010. Flexibility in contract terms and contracting processes. International Journal of Managing Projects in Business.
  • Padhi, K., P., 2012. Legal Aspects of Business. PHI Learning Pvt. Ltd.
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