business law assignment

Acknowledgement

It is very much helpful to me the guidance and directions

of the all that makes me inspire with this great effort

and I would be very much thankful to all of them for

giving me their invaluable support here.

I would prefer to give my sincere gratitude

to......................................for him the

continuous directions and guidance as well as the well

supervision on this project completion.

Also I give my heartiest thanks for all my colleagues who

help me with their valuable efforts on this success.

Thank you.

.................

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Executive summary This is an information and logical task on business law.

The information is written as an assignment of business

law of the ............ semester for the evaluation of

our attentive and knowledge of the resource.

I have also collected the related resulting data from

various sources like magazines, books and Internet and.

Based on the relevant data, relative analysis has been

done so as to find out the areas of brightness. The areas

of quality and progress have been identified based on

accurate information.

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Table of Contents

Task 1 1.1 explain essential elements of valid contract by

relating to the above scenario

04-16

1.2 explains different types of contracts and explains

their impact any special rules need to be considered.

17-20

1.3 explain terms of contract their meaning effects. 21-24

TASK 22.1 apply the elements of contract in the scenario of

Alan and cath.

25-25

2.2 evaluate the effect of different terms in given

contracts.

26-26

2.3 evaluate the effect of different term in given

contracts.

27-28

Task 3 3.1. Differentiate tort liability with contractual

liability.

29-30

3.2 explain negligence in law of tort with other

concepts associating with it.

31-35

3.3 explain vicarious liability and its role in the

business context.

36-38

Task 4

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4.1 apply the rules on tort of negligence and comment

whether Ciara can claim damages from Arthur Anderson.

39-44

4.2 analyse the situation to decide whether the company

is vicariously liable for the action of Mr. plenty

45-48

Conclusion....................................................

..............................................................

..49-49

Reference.....................................................

..............................................................

...50-50

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Task 01

1.1. Explain essential elements of valid contract

according to contract law.

A contract is a legally binding or valid agreement between two

parties. A contract is an agreement which will be enforced be

the law. This Definition is satisfied when the following

elements are present:

There must be an agreement. Since nobody can agree with

himself (though he may resolve to do or do an act), there must

be at least two parties to an agreement. One of them will make

an offer, and other in every respect, there is agreement

between the parties.

The parties must intend their agreement to result in legal

relations. This means that the parties must intend that if one

of them fails to fulfil a promise undertaken by the agreement,

he shall be answerable for that failure in law. It is evident

that not all agreement is intend to produce legal

consequences.

If, for example,

John agrees to lend his cycle to his friend Arun but later

refuses to let him have it, an action for damages will not lie

against John because the two friends did not con-template,

when entering in to the agreement, that it should be

enforceable in law. Similarly, if a father fails to pay his

son the promised pocket money, it is obvious that the son

cannot sue the father. The former agreement is of purely of 77

social character, the latter is a domestic arrangement.

Neither of these agreements qualifies as a contract.

English law is not content with these two requirements.

It requires further that either consideration must be

present or that the contract should be in a deed.

The parties must have capacity to contract.

The reality of the contract must not be affected by

circumstances which render the contract unenforceable,

voidable, void or illegal.(charlesworth’s business law fifteenth

edition Paul Dobson Clive M.Schmitthoff p.3)

Formation of contract

The essence of contract is that there should be an agreement

between the contracting parties. This agreement is normally

constituted by one party making an offer and the other

indicating its acceptance. The acceptance must correspond to

the offer in all material aspects. The negotiations between

the parties need not always lead to a contract. Inquiries may

be made or offers invited but no offer may be made or, if one

is made, it need not be accepted. Before the concepts of offer

and acceptance can be considered in detail, it is necessary to

distinguish certain statements preliminary to the offer from

the offer itself. (Charlesworth’s business law fifteenth edition Paul Dobson

Clive M.Schmitthoff p.11)

Offer

An offer is a definite promise to be bound by specific terms.

It can be defined as–an n expressed or implied statement of

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the terms on which the maker is prepared to be contractually

bound if it is accepted unconditionally. An offer can be made

to a single individual, to a class of person or even to the

world at large. The offer can be accepted only by the person

or one of the persons to whom it is made to. The person who

makes the offer is referred to as the “offeror” and the person

to whom the offer is made to is referred to as the “offeree”

Hillas & co Arcas ltd.

The claimants agreed to purchase from the defendant 22,000

standards of wood of fair specification over the seasons of

1930.

There was also an option to purchase more in the year 1931.

The 1930 transaction took place but the defendant refused to

supply wood in 1931 saying the agreement was too vague. The

court believed that the offer was not too vague. The 1930

contract was regarded as evidence for the 1931 transaction.

The Acceptance

‘A positive act by a person to whom an offer has been made

which, if unconditional, bring a binding contract into

effect.’ The contract comes into effect once the offeree has

accepted the terms presented to them. This is the point of no

return; after acceptance, the offeror cannot withdraw their

offer and both parties will be bound by the terms that they

have agreed. Acceptance may be by express words, by action or

inferred from conduct. (Charlesworth’s business law fifteenth edition Paul

Dobson Clive M.Schmitthoff p.17)

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Brogden v Metropolitan Railway Co 1877

The facts: for many years the claimant supplied coal to the

defendant. He suggested that they should enter into a written

agreement and the defendant’s agent sent a draft to him for

consideration. The parties applied to their dealing the terms

of the draft agreement, but they never signed a final version.

The claimant later denied that there was any agreement between

him and the defendant.

Decision: the conduct of the parties was only explicable on

the assumption that they agreed to the terms of the draft.

Consideration

Consideration is an essential part of most contracts. It is

what each party brings to contract. A valuable consideration

in the sense of the law may consist either in some right,

interest, and profit or benefit accruing to one party, or some

forbearance, detriment, loss or responsibility given, suffered

or undertaken by the other. “From Currie v Misa 1875”

Example of consideration

Arun promises to give Baron GBP 100. Baron has to give nothing

in return. As there is no consideration, this is a graduations

promise and not legally enforceable.

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Valid consideration

Consideration may be executed (an act in return for a

promise) or Executory (a promise in return for a

promise). It may not be past, unless one of three

recognized expectations applies.

There are two broad types of valid consideration –

executed and Executory. If consideration is past then it

is not enforceable.

Executed consideration is an act in return for a promise.

The consideration for the promise is a performed, or

executed, act.

An offers reward for the return of lost property, his

promise becomes binding when B performs the act of

returning A’s property to him. A is not bound to pay

anything to anyone until the prescribed act is done.

Therefore in Carlill’s case, the claimant’s act, in

response to the smoke ball company’s promise of reward.

(ACCA, Corporate & business law p.68)

Intention to create legal relations

An agreement will only become a legally binding contract if

the parties indented this to be so this will be strongly

presumed in the case of business agreement but not presumed if

the agreement is of a friendly social or domestic nature.

Jones v Vernons Pools 1938

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The facts: the claimants argued that he had sent to the

defendant a football pools coupon on which his predictions

entitled him to a dividend. The defendants denied having

received the coupon. A clause on the coupon stated that the

transaction should not ‘give rise to any legal relationship…

but … be binding in honour only’.

Decision: this clause was a bar to an action in court.

Legal capacity of the parties to act Not all people are completely free to enter into a valid

contract. The contracts of the groups of people listed below

involve problematic consent, and are dealt with separately, as

follows:

People who have a mental impairment;

Young people (minors);

Bankrupts;

Corporations (people acting on behalf of a company); and

prisoners.

People who have a mental impairment Generally speaking, people are free to enter into contracts

even though they may have a mental impairment, or are

temporarily disabled by drugs or alcohol. They are, however,

sometimes vulnerable to being bound by contracts they do not

fully understand. The question of capacity to make the

contract often arises only after the contract is in place.

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People with disabilities and their advocates will find some

protection in the rule that a contract is not valid and

enforceable unless there was genuine consent to its making.

Capacity to give consent involves a general understanding of

the nature of the contract (not necessarily its fine details).

A person with a mental impairment, for example, may have the

capacity to understand some contracts (for example, buying a

loaf of bread), but not to understand other, more complicated

contracts (for example, buying a car on credit). Where a

person with a disability did not understand the general nature

of the contract, a court can intervene to set aside the

contract only if: The other party knew (or ought to have

known) of the disability or lack of capacity and it would be

unfair for them to take advantage of that; and The benefit

received by the other person has not been sold to a third

party who did not know the previous transaction might not be

valid. Generally, to escape the consequences of a contract,

the other party should be notified of the intention not to be

bound by the contract within a reasonable time.

Binding contracts and young people

Contracts for the supply of "necessaries" will generally be

binding. There are no hard and fast rules to identify what is

"a necessary", but it does include the sorts of things the

young person needs to live a reasonable lifestyle. It includes

basics such as:

Food

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Clothing

A place to live

Medicine And so on.

It will also include any contracts relating to the young

person's education, apprenticeship or something very similar,

if it can be shown to be of benefit to the young person. While

a court has not yet considered the issue specifically, mobile

phones are probably not necessaries. The young person

contracting in this situation will be held bound to pay a

reasonable price (although that may not be the contract price)

for necessaries actually sold and delivered. ("Delivery" is a

technical term. Generally, delivery takes place when the

seller has given the buyer the power to take the goods away.)

Where necessaries have been sold but there has been no

delivery, the young person does not have to take delivery or

pay for the goods.

Non-binding contracts and young people Two classes of contracts are not binding on a young person,

namely:

Contracts which are not for necessaries; and

Contracts for the repayment of money lent or to be lent

(that is, any form of credit contract).

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Where a young person has already paid money under a non-

binding contract, that money will not be recoverable unless no

benefit has been received by the young person. The young

person can, however, refuse to make any further payments under

the contract. It is not certain who then own goods that are

not necessaries. It appears that they become the property of

the young person unless the young person has fraudulently

misrepresented their age. Even after turning 18, a person

cannot confirm a prior contract and then become bound by it.

Any money paid by a young person under such circumstances may

be recovered.

Bankrupt people are not deprived of their general capacity to

contract. During their imprisonment, prisoners may enter

contracts, including contracts to buy and sell prison still

apply, so that the permission of Corrections Victoria is

required before a prisoner may sign for, deliver or receive

any document.

Consent of the Parties

Entering into a contract must involve the elements of free

will and proper understanding of what each of the parties is

doing. In other words, the consent of each of the parties to a

contract must be genuine. Only where the essential element of

proper consent has been given is there a contract which is

binding upon the parties. The ultimate consequences of

establishing that no proper consent was given to enter the of 77

contract are matters dealt with when considering remedies for

breach of contract. Proper consent may be affected by any of

the following matters:

Mistake;

False statements;

Duress; and

Undue influence/un-consiconability.

Mistake

Only a few types of mistakes will cause the contract to be

non-binding on the parties to it: they must be mistakes that

go to the very basis of the agreement. For example, where

there is a contract for the sale of a car that both parties

assume to exist, although in reality it has been destroyed by

fire, this contract is non-binding on the parties. By

contrast, where the parties are only mistaken about the model

of the car, then this contract would be binding.

Another example is when a person signs a written document

mistakenly believing that it relates to something entirely

different from what in fact it does relate to, in this case

the person will not be bound by it. This means that if X is

told to sign a document which X reasonably believes to be

something like a character reference to assist Z to obtain a

loan from a finance company, and the document is later

discovered to have been a guarantee of the loan contract, then

the guarantee will not be binding on X.

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A third example is when Y cannot read, due to blindness or

illiteracy or other disability. Someone else tells Y what is

in the document and Y signs it. The document Y signed is not

what Y was told it was. The document Y signed would not be

binding on Y.

By contrast, if a person who signs a document believing it to

be a contract does not read the terms and conditions that

person will be bound by the contract and will not be entitled

to plead mistake.

Other factors may also be relevant to a successful plea of

mistake. For instance, whether or not the defence of mistake

will be allowed often depends on whether an innocent third

party will be adversely affected by a decision that the

contract is non-binding. Again, if the signer was careless and

failed to take reasonable precautions, the defence will not be

allowed to succeed. For these reasons, it is wise to seek

legal advice about whether or not a court would hold the

contract binding on these grounds.

False statements

There are serious false statements and minor false statements

that might be made by parties contracting with each other.

Different consequences flow, depending on the seriousness of

the false statement made. False statements might be made where

either:

The parties come to agree and contract because one of them has

been motivated to agree by a statement of fact (something said

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or written) that is not true. Commonly, these types of

statements have not actually been included in the contract

itself but were an encouragement to enter into the contract.

For this reason, they are viewed as though they were part of

the contract; and/or

The parties have agreed and there is a contract, but the

statements or terms in the contract exist only because one of

the parties has made a false statement.

False statements affect the question of whether or not a

contract exists. Very serious false statements mean a court

would view the contract as void (see: Glossary) and

unenforceable. The consequence is that monetary damages

sufficient to place the wronged party back to their original

position must be paid.

In other (less serious) instances, the court will find the

contract valid but the wronged party will be entitled to

reject the contract or to treat it as at an end. Here,

monetary damages sufficient to place the wronged party in the

position they would have been in, had the contract been

properly completed, must be paid.

Where a false statement has put the wronged party at a

disadvantage or caused some loss, but not enough damage has

been done to justify ending the contract, then the contract

will be valid and the wronged party will be bound to the

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contract, but entitled to sufficient monetary damages to make

up for the loss suffered as a consequence of the false

statement.

The two most important factors considered to determine the

level of seriousness at which a false statement will be viewed

are as follows.

The false statement: a condition or a warranty?

"Conditions" of a contract are so important that without them

one or other of the parties would not enter the contract. If a

false statement amounts to a condition of the contract, the

wronged party is entitled to rescind (see: Glossary) the

contract. A court may view the condition so seriously that

without it the contract is void; that is, with the false

statement taken out of the contract, there is no contract.

Less important statements are called "warranties". Where the

false statement amounts to a warranty, the wronged party will

only be permitted to receive sufficient monetary damages to

make up for any loss suffered; the contract will continue to

exist and the parties will continue to be bound by it.

What type of false statement was made?

There are three types of false statements:

fraudulent misrepresentation;

innocent misrepresentation; and

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Negligent misrepresentation.

Fraudulent misrepresentation

To prove fraud, it is necessary to show that the person making

the statement knew it was false, had no belief in its truth,

or knew it might be false and recklessly went ahead and made

it anyway, not caring whether it was true or false. It is very

difficult to prove fraud. Once proved, however, the innocent

party can rescind the contract; sue for damages for deceit, or

both.

Innocent misrepresentation

An innocent misrepresentation will be made where the false

statement is made with no intention to deceive. An innocent

misrepresentation could nevertheless be a serious false

statement (being a condition of the contract), or a breach of

warranty. The level of seriousness will be determined by an

appraisal of all the circumstances of the contract. If

innocent and without negligence, the only available remedy is

rescission

Negligent misrepresentation

A negligent misrepresentation will arise where a party to the

contract is under a special duty of care to the other party.

This special relationship will be held to exist where the

person making the false statement claimed to have some special

skill not generally possessed by an ordinary member of the

community, and where that person was prepared to exercise this

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special skill on behalf of the person to whom the false

statement was made. The wronged party must be able to show

that:

the person making the false statement could reasonably be

expected to foresee that the false statement would be

relied upon;

in the circumstances it was reasonable to rely on the

statement;

the statement was made without due care; and

The statement was false.

Once again, the level of seriousness of a false statement made

in these circumstances can vary. Where there is a serious

breach, the innocent party can rescind the contract and

recover damages for negligence.

Duress

Proper consent may be affected by duress. Duress is held to

have occurred where there has been actual or threatened

violence either to the other contracting party directly or to

their immediate family, near relatives or close associates.

The duress may be made by someone acting under the

instructions of the party to the contract. The net effect,

though, will have been that a party has been forced into the

contract by being deprived of their free will to act.

Duress now extends to contracts entered into as a result of

threats to a party's economic well being, that is, a threat to

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a person's business or trade. This form of duress is called

economic duress.

The consequence of establishing duress is often that the

contract is voidable at the election of the wronged party.

Where the wronged party elects to have the contract declared

void, monetary damages sufficient to place the wronged party in

their original position must be paid. Where the wronged party

elects to continue with the contract, monetary damages to

cover any loss suffered because of the duress must be paid.

Undue influence/Unconscionability

Proper consent may be affected by undue influence. Undue

influence is exercised by taking unfair and improper advantage

of the weakness of the other party, to the extent that it

cannot be said that that party intended voluntarily to enter

into the contract.

The main reason for the rule against the use of undue

influence is to correct abuses of trust and confidence. It is

applied where the parties are in a relationship where one

party may be able to exercise considerable influence over the

other party.

There are two categories of undue influence.

The first is where no special relationship exists, but the

stronger party will have used some fraud or wrongful act

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expressly to gain an advantage from the weaker party. The

weaker party will have to prove that undue influence was

actually exerted.

The second is where the parties are in a confidential

relationship; most cases of undue influence fall into this

category. A confidential relationship exists when one party's

position towards the others involves a dependency or trust, in

the form of authority or an expectation to give fair and

independent advice to the weaker party. Where a confidential

relationship is found to exist, a presumption of undue

influence will arise. It is then necessary for the stronger

party to show that the contract was not the result of any

undue influence.

A confidential relationship and the presumption of undue

influence can be established in either of two ways.

First, the parties may be in a well recognised special

relationship, for example, solicitor and client, doctor and

patient, religious or spiritual adviser and devotee.

Second, the confidential relationship, although not falling

within any well recognised relationship, is such that the

complaining party is able to show that the other party was in

a position of influence. For example, it could be the

relationship between a bank and its customer, because of a

special position of trust that the bank had come to occupy in

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connection with the conduct of this customer's affairs. (It

has been stressed, however, that in ordinary circumstances no

presumption of undue influence arises out of a banker-customer

relationship.)

Legality of the agreement

Being able to distinguish between the different categories of

contract is important as the consequences flowing from each

are different. Contracts can be illegal or void at both

statute and common law.

Categories of contracts

Figure 1 category of contracts

An agreement rendered void by statute is void and will not be

enforced by the courts. Any money paid or property transferred

under such an agreement may be irrecoverable. A ‘contract’

deemed illegal when it is formed is totally void. Illegality

may arise either because the contract is of a kind prohibited

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by statute, or because it is of a class regarded as contrary

to public policy. Neither party has any rights or remedies.

Consequences of statutory illegality depend upon when the

contract becomes illegal

Consequences of statutory illegality depend upon when the

contract becomes illegal. If it is illegal as formed, the

contract is void ab initio and property is only recoverable if

disclosure of illegality is not essential to the cause of

action. If the contract is illegal as performed, the contract

is void, but not void ab initio. The guilty party has no

rights, but the innocent party is little affected.

Contracts which would violate the social or moral attitudes of

the community and are void ab initio include:

contracts to commit a crime, a tort or a fraud on a third

party;

contracts that are sexually immoral or which prejudice

the status of marriage;

contracts prejudicial to the administration of justice

Contracts which would violate the social or moral attitudes of

the community and are void ab initio include:

contracts to the prejudice of public safety, or of good

relations with other countries;

contracts which tend to promote corruption in public life

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contracts to defraud the revenue; and

Contracts that involve a breach of duty.

Three types of contract are void at common law: Contracts which attempt to oust the jurisdiction of the

courts.

[Distinguish between contracts which are binding in

honour only (where the parties expressly declare that

they do not intend to create legal relations, e.g., Jones

v Vernon’s Pools Ltd ( [1938]) from contracts which

attempt to oust the jurisdiction of the courts];

Contracts prejudicial to the status of marriage; and

Contracts in restraint of trade.

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1.2. Explain different types of contracts and explains

their impact. Any special rules need to be considered.

The law recognizes that legally binding contracts can be

written, verbal, or a mixture of both. However, for business

purposes, written contracts are usually preferred due to the

following reasons:

The contents (‘terms') are in writing for all to see

They can ensure that precise language is used in

describing the terms of the agreement

There is, therefore, less opportunity for

misunderstandings and conflicting assumptions

There is less need to rely on memories of what was

originally agreed

The individuals involved in the transaction may change

over time.

Here are various types of contracts in business law depending

upon various legal transactions like transfer of property,

sale of goods, etc. A formal legal advice is always

recommended prior to making or accepting a business contract.

Let us take a look at the different types of contracts in the

words of business law.

Written contracts

If the contract has been formally written and signed by the

parties, there is an assumption that all the terms of the

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agreement are contained in the written document regardless of

what may have been verbally agreed. Additionally, contracts

can be a combination of written and verbal agreements if the

written agreement lacks detail and only covers very few terms.

Prior to signing, a written contract must:

Be presented to and understood by all parties to be

valid; and

Be recognized by all parties as a contract, that is, it

must look like a contract and not simply a receipt or

docket.

Also, once a contract is signed, it is assumed that all the

terms have been read and agreed to.

Express Contracts

In this type of contract, the parties to the contract state

the terms and conditions either by word of mouth or in script,

at the time of forming the contract. A definite written or

oral proposal of the contract is accepted by an offeree in a

way that plainly defines legal consent to the terms of the

contract.

Implied Contracts

Contracts indirect in actuality and contracts implied in law

are both an element of implied contracts. Other than a real

implied contract consists of firm obligations that arise from

a mutual agreement and goal of promise, which is not expressed

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orally. An implied contract cannot be labeled as implied in

law because such a contract lacks the requirements of a true

contract. The term “Quasi Contract”, is however, a more

specific recognition of contracts implied in law. Implied

contracts depend on the reason behind their existence. Thus,

for an implied contract to expand there must be some

transaction, act or conduct of a party in order for them to be

legally bound. A contract will not be implied if there are any

chances of harm or inequity. If there is no clarity of

message, implication and understanding between the two

parties, the court will not conclude any contractual

relationship between the two parties. If the parties continue

to follow their contractual terms, even after the contract has

ceased to exist, an assumption arises that the two parties

have mutually agreed to a new contract that has same

provisions as the old contract and a new implied contract is

formed.

Executed Contracts

An executed contract is termed as an agreement in which no

other business is missing out to be executed by either party.

This explanation could be incorrect to a certain point, since

completion of occupation will mean that the contract has

ended. But in case of executed contracts, there exists some

act or transaction or an obligation that has to be performed

at various point of time in the future according to the

contractual conditions.

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Bilateral and Unilateral Contracts

If two entities exchange a mutual and give-and-take promise

that implicates the completing of an act, an obligation or a

transaction or self-control from execution of an be active or

an obligation, with respect to each party involved in the

contract, is termed as bilateral contract in the verbal

communication of law. It is also called a two-sided contract

for the reason that of the two-way promises made by parties

concerned in the contract. An independent contract is agree

made by only one party. The offeror promises to execute a

definite act or an obligation if the offeree agrees on

performing a requested act that is understood as a legally

enforceable contract. It just requires an acceptance from the

other party to get the contract executed. Thus, this is a one-

sided contract since only the offeror is spring to the court

of law. One important point of this category of contract is

that, the offeree cannot be sued for abstaining, abandoning or

even failing to execute his act, since he does not promise

something.

Aleatory Contracts

A common agreement which comes into consequence only in case

of a happening of an uncertain event or a natural misfortune

is termed as an aleatory contract. In this type of contracts,

both the parties may take for granted risks. For example, a

fire insurance policy or a travel insurance is a type of

Aleatory contract as the procedure holder will not accept any

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benefits of the contract unless in an event of fire occurrence

or a plane crash (in case of travel insurance).

Unconscionable Contracts

Unconscionable contracts are persons that are unfair and

excessively one-way favors of the party who stand at a

superior end of the bargaining power. The word unconscionable

means an insult to impartiality and decorousness. No mentally

healthy and honest person would ever accept an unconscionable

contract and enter into it. Unconscionability of the contract

is gritty by analyzing the situations and circumstances of the

parties involved in the contract, when the contract was made.

This policy is applied only in cases, in which it would be

unjust or an affront to the integrity of the law system to

enforce a contract like that. The court of law has found that

unconscionable contracts are a result of utilization of

illiterate and bankrupt clients.

Adhesion Contracts

Union contracts are the ones that are drafted by a party who

has a better benefit in bargaining. This means that the party

who has a bargaining advantage leaves the other party with no

other option than to either accept the contract or to reject

it. Generally known as “take-it or leave-it” contracts, they

are often considered because for most of the businesses, it is

difficult to negotiate and bargain all the terms and setting

of every contract. It is not necessary that all adhesion

contracts are unconscionable contracts, since in some cases it

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is quite coincident for one party to have a superior

bargaining advantage leaving no alternative for the other

party. This often happens in monopolistic markets. However,

courts of law refuse to implement such contracts of adhesion

on the grounds that there was no mutual understanding or an

acceptance between the two parties involved in an adhesive

contract.

Void and Voidable Contracts

A void contract implies that the involved parties are not

liable to any legal obligations or rights, meaning that the

parties are not legally bound with reference to that contract.

In fact, a void contract means a contract has ceased to exist

and that there is no contract existing between the two

parties. A voidable contract, on the other hand, is an

agreement between any two or more parties that has a legal

binding. A voidable contract can be treated as never been

lawfully bound on a party that has been a casualty of

fraudulent execution or if that party was distress from any

legal disability. In addition, a contract is not void unless

and awaiting any of the involved parties, choose to pleasure

it as a void contract by confronting its execution.

Verbal agreements

Verbal agreements rely on the good faith of all the parties

involved and can be difficult to prove as opposed to written

contracts. The following are some ways in which verbal

agreements can be supported:

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The conduct of the other party both before and after the

agreement

Specific actions of the other party

Past dealings with the other party

As desirable as a written contract is, in certain situations

it may be counter-productive, such as:

If the value of the transaction is not particularly high;

and/or

The presentation of a substantial document, possibly with many

provisions, may raise more questions and uncertainty in the

minds of the parties involved than it resolves, often ending

in the transaction not proceeding.

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1.3. Explain terms of contract their meaning effects.

Earlier than toward the inside into a contract, a variety of

statement will often be made by one party in order to support

or induce the other party to enter into the contract. A

divergence may later arise as to which of the statements made

should be measured a part, or a term, of the agreement, and

which should be taken as simply pre-contract talk, and

consequently not a part or term of the contract. Parties to a

contract are bound only by its terms, not by any secondary

report that may have been ended. The judges can look at

verification of aim by one or other of the parties that the

ruling should be part of the contract. For form, the longer

the rest is between the assembly of the statement and the

success of the final contract and contract, the less likely it

is that the declaration will be considered to be a term of the

contract. The fact that the maker of the statement had a

special information or skill compare with the other party will

make the statement more likely to be a term. Anywhere the

agreement was subsequently reduced to writing and the report

was not included, it is less likely to be an experience.

Express term and implied terms.

As a general rule, the parties to a contract may include in

the agreement whatever terms they choose. This is the

principle of freedom of contract. Terms clearly included in

the contract are express terms. The law may complement or

replace terms by implying terms into a contract.

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Express terms

An Express term is a term expressly agreed by the parties to a

contract to be a term of that contract. In examining a

contract, the courts will look first at the terms expressly

agreed by the parties.

An apparently binding legal agreement must be complete in its

terms to be a valid contract.

Scammell v Ouston 1941

The facts: the defendants wished to buy a motor- van from the

claimants on hire- purchase. They placed an order ‘on the

understanding that the balance of purchase price can be had on

hire - purchase terms over a period of two years’. The hire –

purchase terms were never specified.

Decision: the court was unable to identify a contract which it

could uphold because the language used was so vague.

It is always possible for the parties to leave an essential

term to be settled by other means, for example by an

independent third party. (ACCA, Corporate & business law p.89)

Where an agreement appears vague or incomplete, the courts

will seek to uphold it by looking at the intention of the

parties: Hillas &Co Ltd v ARCOS Ltd 1932. If the parties use

standards printed conditions, some of which are inappropriate,

such phrases may be disregarded.

Nicolene v Simmonds 1953

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The facts: the claimant offered to buy steel bars from the

defendant. A contract was made by correspondence, in which the

defendant provided that ‘the usual conditions of acceptance

apply’. The defendant failed to deliver the goods and argued

that there had been no explicit agreement.

Decision: the words should be disregarded. The contract was

complete without these words; there were no usual conditions

of acceptance. (ACCA, Corporate & business law p.90)

Implied terms

Terms may be implied by the courts, by statute or by custom.

There are occasions where certain terms are not expressly

adopted by the parties. Additional terms of a contract may be

implied by law; through custom, statute or the courts to bring

efficacy to the contract. Implied terms may override express

terms in certain circumstances such as where they are implied

by statute.

An Implied term can be defined as follows.

A term deemed to form part of a contract even though not

expressly mentioned. Some such terms may be implied by the

courts as necessary to give effect to the presumed intentions

of the parties. Other terms may be implied by statute, for

example, the sale of Good Act.’

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Terms implied by custom

The parties may enter into a contract subject to customs of

their trade. Any express term overrides a term which might be

implied by custom.

Hutton v Warren 1836

The facts: the defendant landlord gave the claimant, a tenant

farmer, notice to quit the farm. Ha insisted that the tenant

should continue to farm the land during the period of notice.

The tenant asked for ‘a fair allowance ‘for seeds and labour

from which he received no benefit because he was to leave the

farm.

Decision: by custom he was bound to farm the land until the

end of the tenancy; but he was also entitled to a fair

allowance for seeds and labour incurred.

Terms implied by the courts

Terms may be implied if the court concludes that the parties

intended those terms to apply to the contract.

The Moorcock 1889

The facts: the owner of a wharf agreed that a ship should be

moored alongside to unload its cargo. It was well know that at

low water the ship would ground on the mud at the bottom. At

ebb tide the ship settle on a ridge concealed beneath the mud

and suffered damage.

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Decision: it was an implied term, thought not expressed, that

the ground alongside the wharf was safe at low tide since both

parties knew that the ship must rest on it.

A term of a contract which is left to be implied and is not

expressed is often something that goes without saying ; so

that, if while the parties were making their bargain an

officious bystander were to suggest some express provision for

it, they would say ‘why should we put that in? That’s

obvious’: this was put forward in Shirlaw v Southern Foundries

1940. The terms are required to give efficacy to the contract,

that is, to make it work in practice.

The court may also imply terms because the court believes such

a term to be a ‘necessary incident’ of this type of contract.

(ACCA, Corporate & business law p.91)

Liverpool City Council v lrwin 1977

The facts: the defendants were tenants in a tower block owned

by the claimants. There was no formal tenancy agreement. The

defendants withheld rent; alleging that the claimants had

breached implied terms because inter alia the lifts did not

work and the stairs were unlit.

Decision: tenants could only occupy the building with access

to stair and/or lifts, so terms needed to be implied on these

matters.

Where a term is implied as a ‘necessary incident’ it has

precedent value and such term a will be implied into future

contracts of the same type. (ACCA, Corporate & business law p.91

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Exclusion of responsibility terms

It is reachable to have a phrase in the contract which

excludes one of the parties on or later than accountability

for rather that may go incorrect in the concert of the

contract or borders that responsibility. It is called an

exclusion clause or an exemption clause. For example, an exclusion

beginning liability for dent done to the lawn by a builder's

backhoe might be included in a contract between the planner

and a home owner who is having an extension built to their

residence. The courts have normally taken the view that

exclusion clauses are unfair and have tried to limit their

giving in. Courts will by and large take to mean the exclusion

clause touching the meeting annoying to rely on it and, at the

smallest amount, comprehend it by a whisker. Everywhere a

contract is a manuscript signed by the parties, they will

generally be bounce by the exclusion clause in it. Anywhere a

contract is an unsigned document e.g. tickets, receipts and

dockets, the court will look at what a reasonable person would

take for granted the document to be. Only anywhere a

reasonable person would assume the document to be part of the

contract between the parties will the exclusion clause in the

document be able to be relied on. It must also be exposed that

the exclusion clause was brought to the notice of the other

party.

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http://www.lawhandbook.org.au/handbook/go01.php#id4590660

http://www.lawhandbook.org.au/handbook/go01.php#id4589267

Task 02

2.1. Apply the elements of contract in the scenario of

Alan and Cath.

An agreement must contain four essential elements to be

regarded as a contract. If any one of them is missing, the

agreement will not be legally binding. They are offer,

Acceptance, intention of legal consequences and Consideration.

The requirement of intention to create legal relations in

contract law is aimed at sifting out cases which are not

really appropriate for court action. Not every agreement leads

to a binding contract which can be enforced through the

courts.

Commercially based agreements will be seen as including a

rebuttable intention to create a legally binding agreement.

However, the law presumes that domestic or social agreements

are not intended to create legal relations. For example, an

arrangement between siblings will not be presumed to be a

legally binding contract. A person who wants to enforce a

domestic or social agreement will need to prove that the

parties did intend to create a legally binding agreement.

Given task 2, there is a written agreement between husband and

wife however depending on the circumstances even in domestic

agreements sometimes the intention to create legal relations

is presumed. These facts are same as Merritt v Merritt case.

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Merritt v Merritt [1970] EWCA Civ 6 is an English contract law

case, on the matter of creating legal relations. While under

the principles laid out in Balfour v Balfour, domestic

agreements between spouses are rarely legally enforceable;

this principle was rebutted where two spouses who formed an

agreement over their matrimonial home were not on good terms.

The Court of Appeal held that nature of the dealings, and the

fact that the Merritts were separated when they signed their

contract, allowed the court to assume that their agreement was

more than a domestic arrangement. Held that the decision in

Balfour v Balfour will not apply to this case, because in

Balfour v Balfour, the parties reached their agreement when

they were living in amity, but in this task 2, they negotiated

the terms when they decided to separate. Therefore a

reasonable person would regard their agreement as intended to

be binding in law. Therefore the husband wants to transfer the

house to wife’s name.

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2.2. Evaluate the effect of different terms in given

contracts.

Contractual terms can either be conditions, warranties or in

nominate terms. Traditionally, contractual terms were

classified as either conditions or warranties. The category of

in nominate terms was created in Hong Kong Fir Shipping. It is

important for parties to correctly identify which terms are to

be conditions and which are to be warranties. Where there has

been a breach of contract, it is important to determine which

type of term has been breached in order to establish the

remedy available.

A condition is a major term of the contract which goes to the

root of the contract. If a condition is breached the innocent

party is entitled to repudiate (end) the contract and claim

damages in poussed V spiers (1876) 1 QBD 410 case, Madame

Poussard entered a contract to perform as an opera singer for

three months. She became ill five days before the opening

night and was not able to perform the first four nights.

Spiers then replaced her with another opera singer.

The court held that the defendant’s refusal was justified and

that they were not liable in damages. What chiefly influenced

the court was that poussard’s illness was a serious one of

uncertain duration and the defendants could not put off the

opening night until she recovered. The obligation to perform

from the first night was a condition of the contract. Failure

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to carry out this term entitled the producers to repudiate

poussard’s contract.

Warranties are minor terms of a contract which are not central

to the existence of the contract. If a warranty is breached

the innocent party may claim damages but cannot end the

contract: in Bettini v Gye (1876) QBD 183 case Bettini agreed

by contract to perform as an opera singer for a three month

period. He became ill and missed 6 days of rehearsals. The

employer sacked him and replaced him with another opera

singer. The court Held that, Bettini was in breach of warranty

and therefore the employer was not entitled to end the

contract. Missing the rehearsals did not go to the root of the

contract.

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2.3. Evaluate the effect of different term in given

contracts.The provided facts are same like Hong Kong Fir Shipping v

Kawasaki Kisen Kaisha [1962] 2 QB 26 case. Hong Kong Fir

Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] EWCA Civ 7

is a landmark English contract law case. It introduced the

concept of in nominate terms, between "warranties" and

"conditions". Diplock LJ emphasised that some terms could lead

to either the right to terminate a contract as a remedy, or to

the mere entitlement to damages (or no right to terminate).

What mattered was not whether you call a particular contract

term a "warranty" or a "condition" but how serious the breach

of the term was.

The meaning of the term "seaworthiness" has a very broad

meaning ranging from trivial defects like a missing life

preserver or a major flaw that would sink the ship.

Accordingly, it is impossible to determine ahead of time what

type of term it is. Thus, the type of breach must be

determined by the judges. "Seaworthiness" is defined both by

common law and by statute. In McFadden v Blue Star Lines

[1905] 1 KB 607 it was stated that, to be seaworthy, a vessel

must have the degree of fitness that an ordinarily careful and

prudent ship owner would require his vessel to have at the

commencement of a voyage, having regard to all possible

circumstances. And the Marine Insurance Act 1906 s 39(4)

provides that "a ship is deemed to be seaworthy when she is

reasonably fit in all respects to encounter the ordinary

perils of the adventure insured."

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In the Hong Kong case, the issue was not whether the

unseaworthiness was "serious" or "minor"; rather the question

was whether the undoubtedly serious unseaworthiness had had an

effect sufficiently grave to allow the charterer to repudiate.

On the facts, given that the charterer had had the

"substantial benefit" of the contract for some 80% of the time

period, the court held that the breach was adequately remedied

by damages.

The Hong Kong Fir decision was met with some alarm in the

shipping world, where certainty is crucial. The problem was

the delay element; one had to "wait and see" the effect of the

breach. The enormous costs involved in chartering mean that

parties cannot afford to leisurely loiter, whilst pondering

the consequences of the breach. Soon after, in The Mihailis

Angelos [1971] 1 QB 164, it was held the impossibility of the

ship owner to meet the "expected ready to load" date, ipso

facto entitled the charterer to repudiate for anticipatory

breach of condition. (The charterer was relieved to be able to

cancel, as his proposed cargo of apatite had not materialized)

PS. Lord Denning used the word "warranty" in a very different

way. Therefore the defendants are liable for wrongful

repudiation. Here we can apply the in nominate term approach.

Rather than seeking to classify the term itself as a condition

or warranty, the court should look to the effect of the breach

and ask if the breach has substantially deprived the innocent

party of the whole benefit of the contract. Only where this is

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answered affirmatively is it to be a breach of condition. 20

weeks out of a 2 year contract period are not substantially

depriving the defendants of whole benefit and therefore they

are not entitled to repudiate the contract.

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Task 03 3.1. Differentiate tort liability with contractual

liability.

Winfield defined tortuous liability as follows: “Tortious

liability arises from the breach of a duty primarily fixed by

law; this duty is towards persons generally and its breach is

repressible by an action for un liquidated damages” The main

purpose served by the definition is to distinguish the law of

torts from other branch of the law and we now examine the main

area of difference between the law of tort and the law of

contract.

A contractual obligation differs in nature from a delictual

obligation in three aspects. Firstly contractual obligations

arise only from agreement between parties. However, delictual

obligations are contractual obligations that are imposed by

law on the party bound. Secondly, duties arising from contract

are owed to the parties to the contract (or their assignees),

whereas delictual obligations are owed to a large and

indeterminate class of persons. Thirdly, a delictual

obligation imposes negative duties, while a contractual

obligation may impose positive or negative duties.

According to Winfield one distinction between the law of tort

and the law of contract is that the scope of the rights and

duties of parties in the former is wider than in the latter.

In case of torts and duties are imposed by law and are owed to

persons in general while in the case of contracts the duty is of 77

created by prior consent and agreement by the parties and is

owed by one party to the other. However, such a general

statement must necessarily be qualified in some respects.

There are several instances where the prior consent of the

defendant is a relevant factor in cases of tortuous liability.

Under the English occupiers Liability Act of 1957, a

distinction is drawn between the duty owed by an occupier to a

trespasser and that owed by him to a visitor whom he has

permitted to enter his premises.

Conversely, in the law of contracts the increased use of

standard form contracts and ‘implied terms’ which the law

deems the parties to have agreed to, has to a great extent

eroded the true freedom of the parties to make independent

decisions regarding the terms of such contracts. Therefore,

the parties may find themselves bound by terms imposed on them

by the law rather than by prior agreement between them.

However, we could argue on the other hand that no person is

bound by a contract against his will, may find himself subject

to terms imposed by the law rather than the agreed terms of

the contract alone.

We could also argue that in spite of the increased use of

standard of the contract is still determined by agreement

between the parties. For example, the question whether A

delivers to B 100 or 200 tons of fruit, depends on the terms

of the contract agreed upon by them. On the other hand, in the

case of the occupiers Liability Act, while the occupier of

premises will owe a duty of care to visitors whom he permitted

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to enter his premises, the extent of that duty is determined

by the act in question.

We can see a further distinction between the law of tort and

contract when we examine the aims of these two branches of

law. The primary aim of the law of tort is to grant redress or

compensation to the victim of a tort for the harm caused to

him. In other words the law seeks to put him as far as

possible in the same position as if he had not suffered any

damage or injury.

The aim of the law of contract on the other hand is to enforce

the promises made by one party to the other, and in the event

that this is not possible, to grant damages to the latter, or

in other words put him as far as possible in the same position

as if the contract had been performed. However, this

distinction too has been somewhat blurred in recent times and

it is now possible for a plaintiff to bring an action in both

tort and contract on the same facts. In the law of contract

the rule that a promise is not legally binding without either

consideration or the formality of a seal has been relaxed in

many instances and in the area of tort several cases have held

that a negligent defendant is liable even though he has not

caused damage to the plaintiff by any positive act [Rose v

Caunters where a solicitor who negligently executed a will was

held liable to a disappointed legatee].

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3.2. Explain negligence in law of tort with other

concepts associating with it.

The concept of negligence or culpa is one of the foundations of

the Aqulian acting on the Roman Dutch law. In the English law

however, it is of much later origin. The early common law

concentrated almost entirely on intentional harm and moreover

was more concentrated with the nature of the injury caused

then with the basis of the defendant’s conduct. so long as the

loss or injury was of a kind recognized in law as being

compensable, it was immaterial whether it was caused through

the defendant’s intentional or negligent misconduct.

It was during the 19th Century and the advent of the

industrial revolution that the concept of negligence began to

evolve as a basis of Tortious liability in the English law.

The development and expansion of industries and machinery and

new modes of transport etc. resulted in a wider range of loss

and injury suffered by individuals. The old stereotypes

remedies available were insufficient to provide a solution to

the problems which began to arise as a result of the social

and economic upheaval which prevailed at the time, and the

courts increasingly began to rely on the concept of negligence

in confronting them. Further the basis of negligence being

‘fault liability’ it proved to be more advantageous to the

proponents of industrialization than the concept of ‘strict

liability’ or liability without fault. However, the principle

of negligence also resulted in expanding liability in other

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directions as for example, liability for nervous shock,

negligent misstatements, omissions, etc. the importance of

this basis of liability can be seen in the fact that the vast

majority of litigation in the law of depict involves

negligence.

Negligence is not a tort in itself but a basis of liability in

Tortious actions, it may be defined as” the failure to

exercise towards another, in given circumstances that degree

of care which the law considers that a reasonable man should

exercise in these circumstances”

In order to establish negligence as a Cause of Action under

the law of TORTS, a plaintiff must prove that the defendant

had a duty to the plaintiff, the defendant breached that duty

by failing to the required standard of conduct, the

defendant's negligent conduct was the cause of the harm to the

plaintiff, and the plaintiff was, in fact, harmed or damaged.

The concept of negligence developed under English Law.

Although English Common Law had long imposed liability for the

wrongful acts of others, negligence did not emerge as an

independent cause of action until the eighteenth century.

Another important concept emerged at that time: legal

liability for a failure to act. Originally liability for

failing to act was imposed on those who undertook to perform

some service and breached a promise to exercise care or skill

in performing that service. Gradually the law began to imply a

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promise to exercise care or skill in the performance of

certain services. This promise to exercise care, whether

express or implied, formed the origins of the modern concept

of "duty." For example, innkeepers were said to have a duty to

protect the safety and security of their guests.

The concept of negligence passed from Great Britain to the

United States as each state (except Louisiana) adopted the

common law of Great Britain (Louisiana adopted the Civil Law

of France). Although there have been important developments in

negligence law, the basic concepts have remained the same

since the eighteenth century. Today negligence is by far the

widest-ranging tort, encompassing virtually all unintentional,

wrongful conduct that injures others. One of the most

important concepts in negligence law is the "reasonable

person," which provides the standard by which a person's

conduct is judged.

Proximate Cause Proximate cause exists where the plaintiff is injured as the

result of negligent conduct, and plaintiff's injury must have

been a natural and probable result of the negligent conduct.

In order for a defendant to be liable, the plaintiff must

establish both negligence and proximate cause.

Please note that the law speaks of the defendant's conduct as

being "a proximate cause" of an accident, as opposed to "the

proximate cause". Many accidents have more than one proximate

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cause. It is typically not necessary for liability that the

defendant's negligence be either the only proximate cause of

an injury, or the last proximate cause. A defendant may be

liable even where an injury has multiple proximate causes, and

whether those causes occur at the same time or in combination.

A plaintiff may be able to bring a cause of action against two

or more defendants by proving that the acts of each were

proximate causes of the plaintiff's injury, even where the

defendants' negligent acts were distinct.

Imagine a situation where a plaintiff is driving down the

road, and is suddenly cut off by a person who runs through a

stop sign on a side street. The plaintiff slams on her brakes,

and is able to avoid striking that car. However, the plaintiff

is rear-ended by another driver who was not paying attention

to the events in front of his car. The plaintiff may be able

to bring an action against both drivers - the one who cut her

off and the one who rear-ended her - on the basis that their

negligent acts, although independent, were both proximate

causes of her injuries.

The Elements of a Negligence Action A typical formula for evaluating negligence requires that a

plaintiff prove the following four factors by a "preponderance

of the evidence":

The defendant owed a duty to the plaintiff (or a duty to

the general public, including the plaintiff);

The defendant violated that duty;

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As a result of the defendant's violation of that duty,

the plaintiff suffered injury; and

The injury was a reasonably foreseeable consequence of

the defendant's action or inaction.

For example, a person driving a car has a general duty to

conduct the car in a safe and responsible manner. If a driver

runs through a red light, the driver violates that duty. As it

is foreseeable that running a red light can result in a car

crash, and that people are likely to be injured in such a

collision, the driver will be liable in negligence for any

injuries that in fact result to others in a collision

resulting from the running of the red light.

Gross Negligence

Gross negligence means conduct or a failure to act that is so

reckless that it demonstrates a substantial lack of concern

for whether an injury will result. It is sometimes necessary

to establish "gross negligence" as opposed to "ordinary

negligence" in order to overcome a legal impediment to a

lawsuit. For example, a government employee who is on the job

may be immune from liability for ordinary negligence, but may

remain liable for gross negligence.

Similarly, where a plaintiff signs a release (as may be

required, for example, before entering a sports competition),

for public policy reasons many jurisdictions will apply the

release only to conduct which constitutes "ordinary

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negligence" and not to acts of "gross negligence". The reason

for this is quite simple: It is not good public policy to

allow a defendant to escape liability for reckless

indifference to the safety of others, particularly in contexts

where the defendant is responsible for creating unsafe

conditions, or is profiting from their existence. Consider,

for example, a commercial venture engaged in a high risk

recreational activity, such as a company that offers rock

climbing tours. If a tour member is injured when safety

equipment provided by the company unexpectedly fails, a valid

release may protect the company from a lawsuit. However, if

the company knows up front that the equipment is defective and

uses it anyway; it would not be protected by the release.

Children and Negligence

Minors are typically held to a different standard of care than

adults. For example, a minor's negligence may be evaluated

against what reasonably careful person of the same age, mental

capacity and experience would exercise under the same or

similar circumstances. Very young minors (e.g., minors under

the age of seven) are typically presumed to be incapable of

negligence.

Most jurisdictions also consider the fact that minors act upon

childish instincts and impulses when considering injuries to

minors. As a consequence, a defendant knew or should have

known that a child (or children) were present, or were likely

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to be present, in the vicinity, the defendant may required to

exercise greater vigilance. By way of example, a person

driving by an unfenced playground where children often play

baseball should be on alert that a child may impulsively chase

a ball into the street.

Comparative Negligence

When comparative negligence applies, the damages a plaintiff

is awarded will be reduced in proportion with the plaintiff's

fault for his own injuries. (e.g., a jury determines a

plaintiff's damages to be $100,000.00, and finds that the

plaintiff is 40% at fault. The plaintiff would thus be awarded

$60,000 against the defendant.)

Contributory Negligence

Where "contributory negligence" principles are applied, if the

plaintiff in any way contributed to his or her own injury, the

plaintiff is barred from recovering damages. The extreme

consequence of this approach has led to its being limited or

abandoned in many jurisdictions.

One historic limitation has been to examine the context of an

accident to determine who had the "last clear chance" to avoid

its occurrence, and to excuse a plaintiff's contributory

negligence where the defendant is found to have had and to

have failed to exercise that "last clear chance".

Mixed Comparative and Contributory Negligence

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Some states follow a mixture of comparative and contributory

negligence, whereby a plaintiff who is less than fifty percent

at fault may recover damages reduced by the plaintiff's

proportion of fault, but a plaintiff who is more than fifty

percent at fault may not recover damages, or may recover only

a percentage of economic damages, against the defendants. (For

more explanation of damages, please see this associated

article.)

Vicarious Liability

Vicarious liability occurs when one person is held responsible

for the negligence of another. Typically, this applies in an

employment context, where the employer (master) is responsible

for the negligent acts of the employee (servant) which occur

within the context of the employment relationship. For

example, an employer may be liable for an accident caused by

an employee as the result of the negligent operation of a

delivery vehicle. (For more information on liability in agency

relationships, please see this associated article.)

Often, parents may be held vicariously liable for the

negligent acts of their children. However, many jurisdictions

have limited the vicarious liability of parents, and some have

eliminated it.

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3.3. Explain vicarious liability and its role in the

business context.

It is a generally accepted principle that a person is liable

only for the wrongs that he himself has committed. However, a

rule of tort law knows as vicarious liability creates

situations in which one person is held legally liable for the

wrongs of another although he himself is personally blameless.

The liability of one party for the action or inaction of

another party, even though the party held liable is not

directly responsible for any injury. For example, an employer

of an employee who injures someone through negligence while in

the scope of employment is vicariously liable for damages to

the injured person. In contrast, a defendant who engages an

independent contractor is not liable to others for the acts or

omissions of the independent contractor. An independent

contractor is a person who performs services for another

person under an express or implied agreement and who is not

subject to the other's control, or right to control, over the

manner and means of performing the services.

The doctrine of vicarious liability generally operates within

the law of torts. It has become well-established in English

law and historically has been called “Master and Servant

liability,” which clearly indicates the circumstances in which

the doctrine becomes applicable in tort law.

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The general rule in tort law is that a person who authorizes a

tort will personally be liable for damage or harm as a result.

However, vicarious liability defines the circumstances in

which a person is liable for the torts of another without

express authorization or ratification. The most common example

of vicarious liability is the liability of an employer for the

torts of his employees committed in the course of employment.

It is not necessary in such circumstances for the employer to

have breached any duty that was owed to the injured party, and

therefore it operates as strict or no-fault liability. It is

possible that the injured party could be either an employee or

a stranger, and the employer can be held vicariously liable in

both situations. The most important element to establishing a

case for vicarious liability is that the wrongdoer be acting

as a servant or employee, and that the wrong done be connected

to the employee's course of employment. Vicarious liability

can only be imposed if it is proved that the employee was

acting “in the course of employment.” This criterion is

essential, and requires a clear connection between the

employment duties and the employee's acts complained of. As

such, most employers will be insured in order to avoid such

liability. In addition, in order to establish vicarious

liability, it is necessary to show that an employee was

employed under a contract of service, or in the case of an

independent contractor, a contract for services. English law

has also established that an employer can be held vicariously

liable for a breach of statutory duty by an employee, for

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example in circumstances such harassment or bullying within

the workplace.

Vicarious liability “in the course of employment” The

principle of vicarious liability is only applicable in the

case of servants and not in the case of independent

contractors. For an employer to be held liable, the wrong must

be committed “within the course of employment.” This criterion

is a question of fact, and it is immaterial whether the wrong

committed by the employee was authorised or not. An employer

will only avoid liability in this situation if it can be shown

that an employee acted “on a frolic of his own,” or in other

words, if the employee acted in a way that was unconnected

with his employment. Recently, the courts have been willing to

impose liability in far-reaching circumstances on the issue of

whether the wrong was committed “in the course of employment.”

Important in this context is the case of Lister v. Hesley Hall

Ltd. This case establishes that an employer cannot avoid

liability by showing that an employee engaged in an

intentional and unauthorised wrongdoing. Thus, the important

factor in establishing vicarious liability is the connection

with the “course of employment.” However, it is important to

note that an employer cannot avoid liability if an employee

acts in a way that could be described as “incidental” to his

employment and the duties to which he is entrusted with.

Therefore, in establishing whether vicarious liability exists,

the question to be asked is firstly, whether the act

complained of was committed “in the course of employment” and

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secondly, whether the act is reasonably “incidental” to the

employee's employment duties. If there is a connection, it is

irrelevant whether the employee's act was unauthorised. In the

wake of Lister, a more recent trend has been to impose

liability upon an employer for violent acts committed by

employees. In the Court of Appeal case of Mattis v. Pollock

(t/a Flamingos Nightclub) a nightclub owner was held

vicariously liable for the violent acts of an employed

doorman. The Court of Appeal applied the rationale of Lister

and held that a “broad” approach was required in assessing

whether an individual’s acts were sufficiently connected with

the duties of his employment so as to justify imposing

vicarious liability.

Vicarious Liability under a statutory duty -An employer can

also be held vicariously liable for an employee's breach of a

statutory duty. This duty differs to that of a common law duty

in that the duty does not rise by operation of common law

principles, but by statute. As such, the statute imposes a

duty on the employee personally and makes no reference to the

employer. An employer can be held liable for the breach of a

statutory duty even where the statutory duty is owed by the

employee personally and individually. This circumstance would

potentially arise in the context of harassment within the

workplace, where one employee has been harassed or bullied by

another- see the case of Majrowski v. Guy's and St Thomas's

NHS Trust. However, emphasis will be placed on the intention

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of the legislature in creating the statute in deciding whether

vicarious liability should be imposed.

Conclusion Where vicarious liability is imposed on an employer, both the

employee and employee will be held jointly liable. This

operates to allow the employer to claim a contribution from

the employee under the Civil Liability (Contribution) Act

1978. It must be noted that in the context of an independent

contractor, an employer would be held vicariously liable where

he authorised or ratified the tort.

It is clear that vicarious liability will continue to operate

significantly for an employee's acts committed within the

“course of employment.” However the case of Lister has

expanded the approach taken by the courts in determining the

circumstances for the applicability of vicarious liability,

and has broadened the extent of the “in the course of

employment” criteria. Although essential, this criterion has

expanded to the point of allowing claims for vicarious

liability in cases where liability would not have arguably

been imposed. The extension of the liability to statutory duty

only highlights this point. In turn, the expansion of

vicarious liability will have far-reaching implications for

employer's in the future.

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Task 4 4.1. Apply the rules on tort of negligence and comment

whether Ciara can claim damages from Arthur Anderson.

We want to analyze whether Ciara can claim damages from Arthur

Anderson for that purpose we have to decide whether can get

pure economic lose for negligent misrepresentation in tort law

or not. Ciara bought Danial dine with the misperception of

Arthur Anderson’s information.

A misrepresentation is a forged declaration of reality or law

which induces the representee to go through a contract. Where

a statement made during the course of negotiations is classed

as a demonstration relatively than an expression an

accomplishment for misrepresentation may be accessible where

the declaration turns out to be incorrect. There are three

types of misrepresentation guiltless misrepresentation,

neglectful misrepresentation and deceptive misrepresentation

involve of a judgment of misrepresentation is the indenture is

voidable i.e. the agreement exists but might be set apart by

the representee. The solution available depends on the kind of

misrepresentation, but commonly consists of rescission and or

compensation. The correct to withdraw the contract may be

missing in some situation. The law unfolding to

misrepresentation is mostly found in common law with the

Misrepresentation Act 1967 as long as a number of further

information.

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The popular of professionals are attentive that the

stipulation of negligent advice or a negligent misstatement

may depiction them to liability. However, such professionals

may not be aware of the amount of their possible liability.

Negligent misstatement recounts to a representation of fact,

which is carelessly completed, and is relied on by another

party to their inconvenience.

For several time it has been probable to claim for financial

loss arising out of an inattentive misstatement where no

contractual or fiduciary affiliation exists between the

parties. This is provided but that a special connection or an

adequate proximity exists among the parties.

Duty of care in negligent misrepresentation

A particular is definite as a being practicing a career, the

quantify to be applied by the court in significant whether a

defendant has acted with concern is essentially strong-minded

by orientation to;

What could be logically expected of a person professing

that ability (and not a greater level of skill), and

The applicable conditions as at the day of the made-up

negligence and not an subsequently date.

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A proficient can pass up liability if it is well-known that

the professional acted in a behaviour that was extensively

acknowledged in Australia by peer proficient opinion as

knowledgeable professional preparation. However, if the court

determines that the judgment is difficult or there is a

responsibility to warn of risk, then the practised will not

getaway liability.

For an applicant to recover compensation for a neglectful

misstatement Ciara must establish; a duty of care, this is

well-known during a connection or immediacy between the

parties. This may be incidental, e.g., a trained relationship,

or informal. Policy considerations, such as the public

interest, may also be important.

A breach of duty, Ciara must establish that;

Arthur Anderson made a representation or statement,

Arthur Anderson knew, or ought to have known, it was

being requested for a serious purpose,

The representation and statement by Arthur Anderson would be

acted upon; if the statement was inaccurate they could suffer

loss. Damage, Ciara must establish that there is a connection

between Ciara’s omission and the damage they have suffered,

the element. This means establishing that they have relied to

their detriment on Arthur Anderson’s information or advice.

The influence of Denning LJ in the cases Candler v Crane

Christmas & Co are proved completely when the House of Lord

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was ready to make longer the duty of be disturbed in the

Hedley Byrne cases.

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] (HL) in

this case, House of Lord held that the plaintiff was

unsuccessful to claim the economic loss to the defendant,

since the advice given by the defendant was prefaced by

disclaimer of dependability for the accurateness of the

declaration. Besides that, House of Lord held that they are a

few suggestion of situation that the duty of care could begin

in pure economic defeat caused by inattentive misstatements

which are:

Plaintiff economic loss should be reasonably

foreseeable

Have a “special relationship” between the defendant and the

plaintiff. Consequently, the responsibility of care owed by

the defendant for neglectful misstatement is not as broad as

the general duty of care (Neighbourhood Principle) created by

the container Donoghue v Stevenson. The responsibility of care

was owed in the negligent misstatement when the position that

the parties are in “Special relationship”. the main expansion

in ‘special relationship’ came into the case above Hedley

Byrne & Co Ltd v Heller & Partners Ltd [1963] (HL).To compel

the duty of care into the tort law, there had to be a ‘special

relationship’ exists among the plaintiff and defendant. But,

create a ‘special relationship’ not necessary is a contractual

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client relationship. There is need of judicial agreement to

give an exact meaning of ‘special relationship’ therefore the

‘special relationship’ was treated in a slender term. The

special relationship just can exist into the commerce

relationship. In the Hedley Byrne case, reviewer decides that

there are few situation needed to achieve to constitute a

‘special relationship’ between the self who gives an

suggestion and another person that who wanted on the advice.

Plaintiff must rely on the advice given by the

defendant

Defendant must responsive that his suggestion will be relied

on by the plaintiff. Plaintiff reliance on defendant’s advice

must practical in all circumstances. Mutual existence and

citizen’s Assurance Co Ltd V Evatt [1971] AC 793, [1971] All

Er 150, PC the Privy Council held the plaintiff can’t claim

their economic expenditure loss cause by the negligent

misstatement to the defendant. Because the defendant was

Insurance corporation although they provide an advice but the

financial advice they had given was not a specialist in their

specialized. After this container happened, it restricted the

“special relationship” standard that ascertain in the case

Hedley Byrne. In this case Privy Council added an additional

condition that essential to constitute the special

relationship.

When the defendant who given the recommend must expert in the

part of their business or proficient.

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This situation had been established by the cases Esso

Petroleum Co Ltd v Mardon [1976] QB 801, [1976] 2 All ER 5, CA

in this cases, Esso provide an advise regarded the specialist

number of annual petrol trade to the Mr. Mardon, however Mr.

Mardon’s new filling station are fail to realize the expert

number given by Esso because of the rerouting of a highway.

House of lord held that, a duty of care will arise to the Esso

Company because the recommendation they give to the Mardon was

in their part of qualified and business. Therefore, the Mr.

Mardon can claim the economic loss cause by the negligent

misstatement to the Esso Company. (Richard Card & Jennifer James, 1990,

pg 323)

Moreover that, in the Caparo Industries v Dickman state that

the responsibility of care will arise not only that the

declaration will be relied on, and the result of the person

who relied on the declaration must suffer in economic loss.

Besides that, the defendant must have information that their

declaration would both be communicated to and be relied on by,

the plaintiff. (Vivienne Harpwood, 2000, pg83)

Caparo Industries v Dickman [1990] 1 All ER 568 case, House of

Lord held that no duty of care owed by the defendant as an

auditor to plaintiff who was real or potential shareholder.

(Richard Card & Jennifer James, 1990, pg 347)

The principle of the statement made by evaluator is to help

the corporation to manage all the money business and protect

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the company existing shareholder as remnants. Therefore, the

individual shareholder cannot use it as in sequence that

deciding to purchase more divide and make the profit on it. As

a result, the assessor was not owed duty of mind to

shareholder because the announcement was not including in

investing reason. Unless, the auditor are fully aware that the

shareholder would relied on his declaration. This can be shown

in the case below.

JEB Fasteners Ltd v Marks, Bloom & Co [1981] 3 All ER 289 in

this case, a firm of accountant, who carelessly made a

economic statement of Y company, and the plaintiff relied on

it. The court supposed that, the firm of accountant impose the

responsibility of care to plaintiff because the defendant

fully aware that the plaintiff will spending in or taking over

Y company thus, defendant will knew that the plaintiff will

rely on the available accounts. (Richard Card & Jennifer James, 1990, pg

323)

In the case Caparo Industries v Dickman the House of Lord

establish the contemporary three stage of duty of care. It

condition that, the duty of care would happen they are three

factors:

Level-headed Forcibility

Immediacy between the defendant and plaintiff

Is it fair, just and realistic to impose a duty of heed

to defendant

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Exception ‘Special relationship’ in negligent

misstatement

After the two cases Esso Petroleum Co Ltd v Mardon and Mutual

life and citizen’s Assurance Co Ltd V Evatt, the special

relationship no longer just exists into a business connection

and existed into professional affiliation too. Even as social

relationship still barred, unless the parties can be obviously

prove that carefully considered advice for organism sought.

Chaudhry vs Prabhakar [1988] 3 All ER 718 the court of appeal

held that the duty of mind will arise on the defendant who are

the friend of plaintiff that give a negligent recommendation

to the plaintiff to assortment of a second car. The defendant

will answerable on it, although defendant not as a specialized

in the mechanic area.

This is an exemption existed the responsibility of care in a

social relationship. Because the Court of application clearly

measure that the case above was a strange case, the judgment

in this case was complete in a special facts. Consequently,

this judgment not consists into universal rule of liability in

all cases

Exception ‘Special relationship’ in tort

In the all-purpose rule of “special relationship” in tort,

there is no duty to control the act or conduct of third person

for prevents their behaviour resulting injury to an extra.

While, there had two exceptions state that the person (actor)

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has a duty to control the act of third person which are state

in the Section 315 of the Restatement.

First exemption, when particular affiliation exists into actor

and third person. Second exception, when performer has a

particular relationship with the other that the performer has

owed a duty of care to defend gets injured by the act of Third

person.

Pure Economic Loss

Economic loss is a term of art which refers to monetary loss

and injure suffered by a person such as can be seen only on a

equilibrium sheet rather than as physical injury to the self

or destruction of property. There is a fundamental distinction

between “pure economic losses” and “consequential economic

loss”, as pure economic loss occurs self-regulating of any

physical damage to the person or property of the victim.

Usually, "pure economic loss" in tort, particularly in

negligence, is not recoverable as damages or otherwise. It has

also been optional that it be called "commercial loss" as

injuries to person or possessions could be regarded as

"economic".

From interpretation several cases, the term ‘pure' suggest

that a loss must be wholesome and self-representative, rank

separately from other losses such as personal damage. This is

a shape of loss experienced by a claimant that is not

consequential due to a result of bodily damage to a person or

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property. Ordinary categories of pure economic loss are

spending, loss of profit, profitability or loss of some other

shape of financial increase. It is so important to decide

whether a claim is in fact consequential or pure financial

loss, as the latter is usually not recoverable in-law as

damages. In a claim for personal injury following negligence

of the defendant, the claimant may be unable to resume work

suffering a loss of wages which is a usual head of damage. We

can see that this is clearly a manufactured goods of personal

injury thus representing consequential loss not pure economic

loss. From preceding readings, economic loss is recoverable

using the law of contract, and unless contractual provisos or

agreements have been breached, there cannot be declare for

loss. Even so, there are other categories of torts known as

‘economic torts' that act as a vehicle of improvement for

economic interests.

4.2. Analyse the situation to decide whether the company

is vicariously liable for the action of Mr. Plenty It is generally accepted principle that a person is liable

only for the wrongs that he himself has committed. However, a

rule of tort law known as vicarious liability creates

situations in which one person is held legally liable for the

wrongs of another although he himself is personally blameless.

This is another instance of strict liability and is usually

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invoked to hold a master liable for the wrongs committed by

his servants.

This early concept of vicarious liability changed and evolved

over the centuries into the present day rule of tort law that

an employer is liable for the acts of his employees committed

in the course of their employment.

Before discussing the task, it is important to note that it is

not applicable in the case of all employees but only as

regards those who fall within the legal definition of a

‘servant’. In other words it is incidental only to a “master

and servant” relationship. Secondly, it must be remembered

that it is not based on any breach of duty owed by the

defendant but on the fact that his servant’s tort is imputed

to him.

The principle of vicarious liability is only applicable in the

case of servants and not in the case of independent

contractors. Therefore it becomes important to distinguish

between the two. Two theories have been formulated to do so,

namely control test and organization test. Here it is clear

Mr. Plenty is a servant not an independent contractor. It

should be noted that a master will not be liable only for

those torts which were committed by him in the course of his

employment. “A wrong falls within the scope of employment if

it is expressly or impliedly authorized, or is necessarily

incidental to something which the servant is employed to do”.

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Once it is established that the enough relationship of

employer and worker exists, it is necessary that any tort be

staunch in the course of employment. As with distinctive an

employer and employee association, there is no one test which

adequately establish which acts employers are vicariously

liable for. Such determinations rest upon precedent, and the

facts of each person case. A favoured test of the courts was

formulate by John William Salmond, some 100 years ago, which

conditions that an employer will be held liable for either a

unlawful act they have official, or a wrongful and

unauthorized mode of an act that was authorized. The rationale

for this is policy based; if an employer could simply issue

detailed and long prohibitions on what an employee was not to

do, they could never be found vicariously liable for the

wrongdoings of their employees. However, a distinction can be

drawn between acts which are prohibited, and acts which take

employees out of the course of their employment. An

illustration of the test is provided by two contrasting cases,

Limpus v London General Omnibus Company and Beard v London

General Omnibus Company, both involving road collisions. In

the former, a driver pulled in front of another rival omnibus,

in order to obstruct it. Despite express prohibitions from the

employer, they were found liable; this was merely an

unauthorized mode of the employee carrying out his duties

(driving), not an entirely new activity. By contrast, in the

latter case, London General Omnibus Company were not liable

where a conductor (employed to collect fares on board the bus)

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negligently chose to drive the vehicle instead; this was

completely outside of his duties. A wilful wrong of a servant

may still be held to be in the course of employment even if it

had been expressly forbidden by the employer. The latter would

be protected from liability only if the act which had been

forbidden actually restricted what the servant was employed to

do. “It is a question of fact in each case whether the

prohibition relates to the sphere of the employment or to the

mode of performance”. In the case of Limpus v London Omnibus

Co, a driver of the defendant’s omnibus had specific

instructions not to race with or obstruct other omnibuses on

the road. He disobeyed these orders and obstructed the

plaintiff’s vehicle and damaged it. His employers were held

liable because his act was a wrongful and unauthorized mode of

carrying out an authorized job, which was to promote their

business in competition with their rivals. The surrounding

circumstances of wrongdoings are often important in deciding

whether an act is in the course of employment or not.

For example, where a professional rugby player was expressly

prohibited in contract from assaulting another player, it was

held that as it had been contemplated by the drafters, such an

act was in the course of his employment. Where in Century

Insurance Co v Northern Ireland Road Transport Board an

employee set alight to a petrol station, by throwing a match

carelessly away while refuelling a petrol tanker, this was

adjudged to have been in the course of his employment.

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There have been contrasting judgments where employees have

given lifts in their vehicles, during hours of employment, as

to whether their employers can be vicariously liable. Two

similar cases demonstrate this problem. The first, Conway v

George Wimpey & Co Ltd involved a driver, who, despite express

prohibitions, gave a lift to an employee of another firm, and

negligently injured him in an accident. No liability was

imposed on the employer, as this was deemed to be an activity

outside of the employee's duties. This can be compared to Rose

v plenty, where liability was imposed where a small boy was

injured in a road accident, while helping a milkman on his

rounds. It has been stated that these two decisions are not

reconcilable. However, Lord Denning offered some justification

in Rose v Plenty for the distinction, stating that the

employee, in allowing the boy to assist him, was not acting

outside of his employment, but acting in furtherance of it

(through the boy assisting his duties).

Rose v Plenty [1976] 1 WLR 141 is an English tort law case;

this case’s facts are same like provided case study. Vicarious

liability was tenuously found under John William Salmond's

test for course of employment, which states that an employer

will be held liable for either a wrongful act they have

authorized, or a wrongful and unauthorized mode of an act that

was authorized. On appeal to the Court of Appeal, this

judgment was reversed, with Lord Denning making the leading

speech. It was established that, as in the case of Limpus v

London General Omnibus Company the employee was merely acting

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in an unauthorised way, whilst still going about his duties of

delivering milk: In the present case it seems to me that the

course of the milk roundsman's employment was to distribute

the milk, collect the money and to bring back the bottles to

the van. He got or allowed this young boy to do part of that

business which was the employers' business. It seems to me

that although prohibited, it was conduct which was within the

course of the employment; and on this ground I think the judge

was in error. I agree it is a nice point in these cases on

which side of the line the case falls; but, as I understand

the authorities, this case falls within those in which the

prohibition affects only the conduct within the sphere of the

employment and did not take the conduct outside the sphere

altogether. I would hold that the conduct of the roundsman was

within the course of his employment and the masters are liable

accordingly, and I would allow the appeal.

Whilst the majority of Lord Denning and Scarman LJ agreed upon

this interpretation, Lawton LJ dissented, arguing that

precedents set in two earlier cases, Twine v Bean's Express

Ltd and Conway v George Wimpey & Co Ltd, could not be

distinguished from the instant case. In these cases, no

liability was found on the part of the employer where

passengers taken by employees - against specific instructions

- were injured. Lord Denning distinguished the cases on the

grounds that Leslie Rose had been furthering the employee's

duties, keeping Mr Plenty within the course of his employment.

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Conclusion

By doing this first task got clear knowledge about

elements of valid contract, different types of contracts,

and terms of contract. And second task is about elements

of contract in the scenario of Alan and Cath, different

terms. With the task 3 differentiate tort liability with

contractual liability, negligence in law of tort,

vicarious liability and its role in the business. Task

four is mentioned rules on tort of negligence, elements

of vicarious liability in business situations.

I have also collected the relevant secondary data from

various sources like magazines, books and Internet. Based

on the relevant primary and secondary data, a four

comparative analysis has been done so as to find out the

areas of excellence and improvement in future.

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Reference k.t chitrasiri,2004, law of contract

w.v.h rogers, Winfield and jolowicz on tort, 1984 London

sweet &Maxwell press.

e.d. pitchfork, law of tort, 10th edition, HLT

Publication

Catharine MacMillan Richard Stone, 2012, Elements of the

law of contract, University of London

Richard Stone,2002, The Modern Law of Contract

P. Ebow Bondzi-Simpson, 2002, Law of contract, Excellent

Pub. & Printing

Justo P. Torres, 1987, Obligations and contracts,

Booksellers, Inc.

Justo P. Torres, 2000, The Law on Business Organization:

Partnerships & Corporations, Published & distributed by

Rex Book Store

Avtar Singh, 1980, Law of contract, Eastern Book Co.

Sir Frederick Pollock, India, Sir Dinshah Fardunji Mulla,

1972, Pollock & Mulla on Indian contract and Specific

relief acts

Hugh Collins, 2003, The Law of Contract Cambridge

University Press

Richard Stone, 2005, The Modern Law of Contract

Cavendish,

[Online] available at<www.slideshare.net> [Accessed on

10th of august at 10.00 am]

[Online] available at<www.lawteacher.com> [Accessed on

13th of august at 8.30 pm]

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business law assignment

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