Filling Gaps in Incomplete Contracts - Essay Example

Business Law Section A a). the grounds for action – open to the passengers of Lancung transit agency can be deduced from the bus and passenger guidelines on accident prevention. Some of the guidelines were formulated by the U.S department of transport and administration agents on research and special programs –which are responsible for the formulation of guidelines on accident prevention, both among transit agency staff and passengers. The grounds for action include that the agency had, apparently, not developed or put into practice an accident prevention program. Such a program encompasses the training of staff on accident prevention, promotes safety awareness – both among the passengers and the staff; covers the facilitation of the uptake of design options that help avoid accidents and offers guidance on the development of safety procedures and policies (Byman 1-5). The second area of grounds for action is the failure of the transit agency, with regards to assigning a staff member, who would oversee the safety measures to be observed while using the buses owned by the company. Further, the roles of the safety director should be clearly stated. From the case of the Lancung bus, it is apparent that the driver took the responsibility for safety, by refraining the dancing of the passengers at the bus, which was not enough to maintain safety during the duration of travel. The other area that a suit against the company could be based on is the limitation of the role of employees, towards accident prevention at the bus. First, it should be noted that the responsibility of accident prevention lies with all personnel, including higher ranking staff like the board of directors to low ranking staffs like drivers. In this area, the company holds the responsibility of hiring qualified personnel, who can aid in the prevention of accidents. The orientation and training of employees should also be carried out, with special regard to accident prevention. Particularly, in the case of drivers, the agency should have employed drivers who are knowledgeable in the area of the accident prevention system, procedures and policies, which were not observed by the driver in question (Byman 5-7). Other areas that drivers should be knowledgeable in, include federal, local and state regulation on safety, these including the OSHA, state safety belts. This is especially an important area, as the driver – from the case – only required that the passengers sit down, but did not give any regard to the use of safety belts – which may have avoided the injuries noted. The company should also have checked the driver for knowledge on safe limitation and operation of brakes and transit emergency procedures. Of particular significance to the case is the questionable experience of the driver, who should be knowledgeable in avoiding sudden stops – which were the direct cause of the injuries, on-board altercations and the action to be taken, and passenger evacuation – where there is need for that. These areas will offer the grounds for action in law to the passengers of the company in question, which may be sued for the injuries sustained by the passengers (Byman 8-15). This case is comparable to that of Donoghue v Stevenson [1932] UKHL 100, where Mrs. Donoghue drank a bottle of ginger beer, which contained a snail. After the incident, she fell ill, which made her sue the ginger beer manufacturer. During the hearing, the house decided that the manufacturer had failed to exercise their duty of care to her – as a customer of their beer. Therefore, it was noted that there was the breach of that duty of care, as the manufacturer’s failure to check the safety of the product had caused her harm. In the same line, the case of Lancung transit shows a case of breach of the duty of care, as the company, according to its accident prevention program – should have ensured that the safety of all the passengers was maintained at maximum. An example of the duties of care breached include requiring the passengers to use safety belts – as required by law internationally, as well as ensuring the competence of the driver transporting the passengers. Therefore, following the same line of thinking, it is conclusive that the agency will be sued for breaching these duties of care, thus may be required to compensate the passengers for the injuries sustained ([1932] UKHL 100). (b). Lancung the transit agency is fully liable for the actions of the driver. This is the case, as bus and passenger guidelines on accident prevention insist on the hiring of drivers that are qualified for the work of transporting passengers. The areas of care that the company should check while hiring a driver include the physical and mental capabilities of the candidate, qualification through all tests for the job of a driver and ensuring that the candidate meets the skills and requirements expected of them before they are contracted. Further checks are administered to drivers past the age of 45, due to the effects of the aging process. The company is responsible for the training and orientation of the driver, therefore the poor performance in the areas of driving capability and safety measures may be traced to poor training and orientation by the agency. The agency also holds the responsibility of training drivers on safety, therefore the incompetence of the driver in question may be traced to a lack of training or incomplete training from the company, which placed more responsibility of the actions of the driver on the company. For instance, in the current case, the driver should have been given training on on-board altercations and the action to be taken in such a case, as well as the skills to use when required to brake abruptly, like the case may have called for. Following the line of thinking depicted in the case Donoghue v Stevenson [1932] UKHL 100 and the judgment reached, the transit company is fully liable for the actions of the driver – as it had failed in executing the duty of care, especially in the areas of recruiting skilled drivers, training and orienting the driver and educating them on the action to take, in the case of the conditions that led to the injuries ([1932] UKHL 100). (c). Lancung transport would have grounds of defense against the passengers claim, on the basis that the passengers were directly to blame for their action, as they had been warned about standing during transit by the driver; the passengers neglected the warning. The agency would also argue that the warning passed to the passengers was clear, as the remaining 15 had heard it and observed it, thus remained safe, even after the driver’s act of braking to avoid the accident, which led to the injury of the 25 who were standing against the directive of the agency’s representative. Therefore, based on such grounds, they would argue that they had exercised their duty of care of informing the passengers that they had to sit, which they disregarded, thus sustained the injuries after the driver braked. 2. (a). Counter Offer The formation of a contract requires an offer, the acceptance of the offer, and consideration which is termed as the value for the goods or services. In this case, there was an offer which was made when Mr. Gan called the restaurant for reservation, and the restraint captain, Nisah, confirmed the acceptance of the offer by reserving. The fact that Mr. Gan called the restraint does not mean that he entered into a valid contract for the reservation. The captain informed him that a reservation can only be made for 10 minutes. This reply is a counter offer to the original offer. This has the consequences of making it a new offer, since it rejected the first offer that Mr. Gan made to the captain. This is illustrated in the case of Hyde v. Wrench (1840) 49 ER 132 CD, where it was held that a counter offer cannot give effect to a valid contract. A counter offer can only give effect to a contract, if the original terms are accepted by the offeror in this case, Mr. Gan. The captain informed Mr. Gan that, the guest must turn up on time, owing to the fact that the reservation lasts for a maximum of 10 minutes. It is clear that Mr. Gan was aware of the terms of the contract, and by getting late, the terms of the contract were breached and he cannot claim from the captain, because he failed to exercise his duty of being at the reservation in 10 minutes. However, if upon being informed of the new terms of reservation, Mr. Gan decides not to accept the offer, there is no valid contract with the restaurant. On the other hand, if the captain had failed to inform him of the new terms, then there would have been a valid contract, and Mr. Gun is entitled to claim for damages against the restraint. (b). Similar to the case Fisher v Bell [1961] 1 QB 394, the case of the advertisement over the internet and the poster advertising the package of a Pelahap steak accompanies by a belacan sauce was only an invitation to sale or treat, as opposed to an offer – whose acceptance amounts to a contractual agreement. Therefore, there is no legal liability on the part of the Makan Paradise hotel, as the advertisements served as invitation to treat – thus the offer was to be made when the customer expresses interest in the advertised package. Further, the hotel could also prove that it had met the requirements of the invitation to the treat, as it had sold earlier orders of the Pelahap steak accompanies by the belacan sauce. However, the case would have been different if Mr. Jom would have contacted the hotel for the reservation of the package, which was to be reserved for him. In the current case, the offer starts at the point where Mr. Jom requested that they should get the steak, which was to be accompanied by the belacan sauce, which in the current case was to be accompanied by the sauces available. In that case, Mr. Jom was supposed to accept the offer or fail to do so ([1961] 1 QB 394). Section B 1. (a). Nert and Wom should be aware that they hold unlimited liability over the activities and the obligations of the partnership. In general, each of them is jointly and fully liable to the actions of the other partner. This shows that the failure of the business will be absorbed by the partner, whose actions led to the failure of the business, and that the same failure will be born by the other partners. Also, any acts or deals leading to the failure of the business, executed by the employees of the business will be borne by both partners. Further, they may be sued for the failure of the business, as well as required to pay the obligations of the business using their personal belongings. This shows that their continuation of the partnership can be greatly disadvantageous in the case the business fails (Hillman 27). The advantages of remaining in the partnership in running the business include that they can raise more funds through prospective employees, who may be attracted to the business, due to its success. The different partners offer complementary skills and managerial models, thus increase the pool of knowledge, contacts and skills. Running the partnership is cost-effective, as each partner specializes in a given area in the business. The partnership business allows for more creative brainstorming. However, these advantages can be achieved even in the case the business was a limited liability partnership or company, where more advantages will include the limited liability utility. Further, remaining in partnership yields a lot of concerns over the running of everyday business, like the case was in Meinhard v. Salmon, 164 N.E. 545 (N.Y. 1928), where it was held that the partners in a partnership venture are obligated to offering fiduciary duties to each other, in the case of a business deal that arises during the term of the partnership (249 N.Y. 458). b). Incorporating the venture into a private limited company, the partners will be protected from the liabilities of the company. This is simply to mean that the property of the shareholders (presently partners) will be secured from those of the business. This is the case, in that in the case the business is not able to meet it financial obligations, the shareholders can only lose the value of their investment in the venture, as opposed to the current case, where their properties can be used to clear the debts of the venture. Forming a private limited company is disadvantageous in their case, as the move may require the addition of more shareholders, which will lead to dilution of the profits enjoyed by the two partners before the conversion of the venture. From the conversion, they will also be required to pay taxes and insurance packages for their employees – which will reduce the profit levels enjoyed before. The conversion of the partnership into a PLC can be very costly, the information on the business is made public, and the shareholders will not be able to sell their capital holding to the public (House of corporate & IPR Laws 1-3). 2. The case of Boon Chit while eating the chicken prepared at the Garden of Kashmir is a case depicting the case of failure of the duty of care or the negligence of the duty on the part of the hotel. This case is similar to that of Donoghue v Stevenson [1932] UKHL 100, where the judgment held that the condition suffered from the consumption of the drink containing a snail led to her illness, thus she was entitled to damages. In the current case of Boon, the Indian hotel served him with the food he ordered for, which implied acceptance by selling food to him after he expressed an offer, by ordering for the chicken meal. However, the hotel did not effectively execute its duty of ensuring that the food was safe for consumption – a case that led to injuries on Boon’s mouth. As a result of the injuries, he lost a week of work, therefore can claim that the accident resulting from the hotels food caused the loss. Therefore, from the case, it is clear that Boon can sue the hotel for damages on the basis of the lost time of work, which translates into cash value as well as the injuries caused by the badly prepared food. Further, the medical expenses borne resulted from the injuries, therefore he has grounds to claim compensation for the expenses, the suffering caused and the pain sustained as well (Palmiter 192). 3. (a). This is a question of agency law, which involves the agent Mr. Jolok, who holds the authority to order food on behalf of the training firm, which is the principal. Therefore, the agent is allowed to create a legal exchange and relationship between the principal and a third party, for instance Frowning Rose Catering Pte. Based on the contractual relationship between the three, there is actual authority conferred on Jolok, which specifies that the agent shall be indemnified by the principal – only, on the basis that he was acting within the scope of the conferred authority. This case is comparable to the case Watteau v Fenwick [1893] 1 QB 346, from which the decision was that the acts of the agent are binding on the principal, as long as the agent is acting within the authority conferred to them by the principal. In this case, the training firm is liable for the Jolok’s acts, therefore should pay Frowning Rose Catering Pte the full amount, then recover the overpayment from him – as the wrongfully acting agent (Ayres and Gertner 87-92; [1893] 1 QB 346). b). Agency authority is created through express awarding of authority to the agent or implying the awarding of authority, through consensual acceptance between the two parties. It can also be created through the expression offered through the principal’s conduct or words, which can be directly translated by a third party, to deduce that the agent is authorized to act on behalf of the principal, though the two may never have discussed such a relationship. Agency authority can also be created through ratification, where the principal agrees to an act that was not previously commissioned by them, yet executed by the agent – as binding between them and the third party. c). Whether the firm is liable to pay the full amount to Frowning Rose Catering Pte Ltd An agent is a person who is employed to perform a particular act or to represent another person in their dealings with third persons. The law of agency provides that the principal is responsible for the acts of his agent; this forms a special contractual relationship between the agent and the principal. In this case, Jolok was employed as a catering services manager, and the express terms of his employment authorized him to order food on behalf of the firm, for the purpose of their catering conferences. Whether the firm is liable to pay the full amount to Frawning Rose Catering, is a question of law as opposed to facts. In this case, it is clear that there is an agency relationship between Jolok and the firm. The firm of Frawning Rose is dealing with Jolok as an agent of the firm, and it is not their duty to establish otherwise. The existence of the agency relationship is informed by the circumstances of the case and the conduct of the parties. The firm is stopped from submitting that Jolok was not their agency, because the firm of Frawning has been engaging with the said agent as a representative of the principal. The doctrine of estoppels states that: “Where a person by his words or conduct has willfully led another to believe that certain set of facts exist, and the other person acts on such belief, that person is stopped from denying the truth of such statements, although such statement did not exist.” In this case, the agent, Jolok, without the authority of his principal, acted and caused the other firm to belief that he was acting on behalf of his principal. The principal is bound by such obligation. It is clear that he induced the other firm, to believe that he was acting under the obligations and within the scope of his agent’s authority. In this case, the agency estoppel was created when Jolok’s employer in his conduct, permitted the other party to believe that Jolok has his authority to order for the food. This is illustrated in the case of Ireland v. Livingstone (1872) LR 5 HL 395, which showed the express authority of an agent by his principal, while in Rama Corporation Ltd v. Proved Tin and General Investments Ltd [1952] QB 549, Slade J held that ostensible or apparent authority, is a form of estoppels, and one must rely on representation, reliance on representation, and an alteration of the position upon such reliance. Works Cited Ayres, Ian, and Gertner, Robert. “Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules,” 9 Yale Law Journal, 1989: 87–92. Byman, Judith. Bus and Passenger accident prevention, 1st edition: final report. Washington, DC: U.S. Dept. of Transportation, Federal Transit Administration, 1994: 1-15. Hillman, Robert. "Limited Liability in Historical Perspective." Washington and Lee Law Review, Spring, 1997: 27 Holmes, Oliver, Jr. “Agency II.” 5 Harvard Law Review, 1891. 1–3 House of corporate & IPR Laws. “Advantage of Being a Private Limited Company under the Company Law of India – A Business Perspective.” S Eshwar Consultants House of Corporate & IPR Laws, N.D: 1-3. Accessed on July 16, 2012 from http://www.eshwars.com/advantages_pvt.pdf Palmiter, Alan. Corporations: Examples and Explanations, 5th ed. New York: Aspen Publishers, 2006: 192. List of Cases Donoghue v. Stevenson [1932] All ER562 Fisher v Bell [1961] 1 QB 394 Hyde v. Wrench (1840) 49 ER 132 CD Ireland v. Livingstone (1872) LR 5 HL 395 Meinhard Vsalmon (1928) 164 N.E 545 Rama Corporation Ltd v. Proved Tin and General Investments Ltd [1952] QB 549 Watteau v. Fenwich [1893] 1 QB 346 Read More