The Various Aspects of Contract and Tort Law - Essay Example

ASPECTS OF CONTRACT AND NEGLIGENCE FOR BUSINESS Table of Contents Table of Contents 1 Introduction: 3 Task 1 3 1.a Essential elements for formation of contract in UK and “invitation to treat”: 3 AC1.2 Impact of various types of contract in UK 5 Task 2: 7 2.1 Preparation of contracts for Andy TV Ltd and ABC Cafe 7 2.1.a. Application of the elements of contracts for Andy TV Ltd and ABC Cafe: 7 2.1.b. Application of the law on terms in the contracts of Andy TV Ltd and ABC Cafe 10 2.2 Terms and Representation in contract: 11 2.3 Evaluation of the different terms in Contract of Andy TV Ltd and ABC Cafe: 13 Task 3: Tort and Negligence 14 3.a. Letter to advise Brad as to whether he can recover his losses from Charles: 14 3.2 Difference between liabilities in tort with contractual liability 15 3.c: Duty of care and Tort of Negligence: 17 Task 4: 17 Scenario 1 17 4.a. Negligence, vicarious liability: 17 Scenario 2 18 4.b. Can the driver of the car sue the Star City Cabs for negligence: 18 4.c: Vicarious Liability of employers and situations where employers are not responsible: 19 Conclusion 19 Reference List 21 Introduction: As observed by Schwartz and Scott (2003), contracts form the framework for any sort of legal activity. This statement reflects the importance of contract law in the legal sphere. Contract law is one of the most important aspects in the corporate segment and defines the basis of all the transactions, deals and agreements being conducted. Similarly, another crucial factor that is being extensively considered in the corporate sector is the negligence or tort law. The tort law is used for assessing ethicalness in the operations and to identify the cases or situations when organisations tend to neglect their responsibilities (Binchy, 2004). The study will analyse the various aspects of Contract and Tort law considering the given case studies. Task 1 1.a Essential elements for formation of contract in UK and “invitation to treat”: Some common elements that are included in formation of contract signify various features incorporated in a contract and its legal clauses. The valid contract that needs to be developed in case of the corporate sector should first focus on the situation for which the contract is being made (Witt, 2007). Although the basic elements of the contract remain same in most of the cases, the nature and duty of the contract changes on the basis of the requirements. Some of the common elements required for formation of a basic contract have been evaluated below: Offer: Offer is the first and one of the two primary elements of a contract. Offer is formed on the basis of a consideration which enables the parties to the contract to develop a proposal. The offer must have clarity regarding the consideration involved and should have a specific time frame for its acceptance. The advertisement of James for selling the printing press for £50000 is an open offer. The offer for selling office computer Ann was also an offer. Acceptance: Acceptance is the second primary element of a contract and is done in response to the offer. The acceptance is based on the consideration provided by the offeree. The acceptance is also limited by the time frame and should be clearly mentioned. The reply on the part of Jenny in regard to the offer of James shows the acceptance of offer. However, as Jenny had stated in new terms in her acceptance it can also be treated as a counter offer. The counter offer was made when Jenny offered an amount of £40000 which nullified the previous offer. However, silence on the part of Jenny cannot be considered as acceptance. Intention to create a legal relation: Schwartz and Scott (2003) concluded that the foremost need of establishing a contract is the will to create a legal relationship between the parties to the contract. The parties to the contract should abide the legal aspects associated with the process of developing a contract. For instance, the contract should be written and must reflect a clear offer and acceptance to the offer. In this case, the Lawful Consideration: Consideration in a contract refers to the factor which obliges the parties to fulfil the contract (Binchy, 2004). According to Schlanger (2008), consideration can be defined as the value which is received by the parties to the contract on the fulfilment of the contract. The consideration in case of James and Jenny has focused on the services and benefits to be gained on the completion of the contract. The consideration for James will be final amount to be received from Jenny, while Jenny receives the press in return for her money. Capacity of the parties: According to the Contract Act 1999, the parties to the contract must be able to participate in the legal affairs and should be permitted by the policies of the nation to enter a contract. For instance a person who is not mentally fit or have not reached the age of 18 or has any other form of disability which hampers the decision making and thinking process of the individual cannot form a legal contract (Witt, 2007). In given scenario James, Jenny and Ann should all be capable physically and mentally to carry out the tasks needed for formation and completion of the contract. Invitation to treat: Invitation to treat is one of the terms of contract law which states that acceptance to an offer does not necessarily bound to the person the offer was made. The invitation made to Ann by James for selling the office computer can be referred in this relation. Although Ann accepted the offer but she also revoked and thus Ann was not necessarily bound by the offer. The invitation to treat only signifies the offer that is being made to the intended group and can be aimed at an individual or be an open offer to be accepted by any one. AC1.2 Impact of various types of contract in UK Legal contracts are based on various terms and conditions which form the basic layout of the contract and also include the legal obligations of the parties to the contract. The diversities in these terms and conditions often results in disputes created or incompleteness of the contract (Witt, 2007). Considering this and many other complicacies that may arise between the parties to contract, contracts have been classified into various types such as the unilateral contract, bilateral contract, expressed contracts and implied contracts, contracts under seal, executor contracts etc. A bilateral contract incorporates promises from all the parties in the contract. Mutual promises are needed to form a bilateral contract where both the parties agree to the terms and conditions of the contract (Binchy, 2004). For instance, a promise is made by a party when making a sale is a bilateral contract as the promise of the seller is to provide goods worth the money being paid by the customer and the customer makes the promise of paying the amount for the goods being purchased. On the other hand, a unilateral contract is made by one of the parties to the contract. The promise made by one party for performing or restrain from performing an act against a legally enforceable contract is called a unilateral contract (Schlanger, 2008). However, the traditional form of contract was the contract under a seal which signifies the authenticity of the contract and the consent of both the parties to the contract. The contract developed as a result also reflects legal obligations and consequences for the parties to the contract in case the contract is breached. Another basic form of contract is the expressed contract where the terms of the contract are clearly stated in either written or oral form. Implied contracts on the other hand has no such obligations as given in expressed contracts and are implied by facts. The primary element of implied contract is the promise to perform and the obligations related to the mutual consent. For example, the service provided by a seller to the customers is an implied contract which is based on the mutual agreement of employment. Implied contracts are often complicated because of the absence of oral or written agreements and are generally based on the expectations of the parties that the other party will perform or refrain from performing the desired act. The implication in case of an implied contact is based on the deduction of the scenarios and the circumstances faced by the parties to contract. Another effective example of implied example considering the seller should guarantee to provide the customers quality goods and fair treatment which is implied by the vision statement of the company. Another form of contract that is often used in corporate deals is the unconscionable contracts which favour the party having the bargaining power. The aspect of bargaining power also brings in the transactions taking place between a firm and its consumers. The unconscionable contract is based on the concept that a person of competent mind won’t enter in the contract. Transaction variables such as warranties and guarantees are examples of unconscionable contracts. Task 2: 2.1 Preparation of contracts for Andy TV Ltd and ABC Cafe 2.1.a. Application of the elements of contracts for Andy TV Ltd and ABC Cafe: In order to form a valid contract, all the elements stated in the previous segments should be included which highlights the intention of a legal binding between the parties to the contract. Organisations operating in various sectors have to engage in various types of contracts with different parties. For instance, there are employment contracts, contracts with their consumers, contracts with other corporate houses and regulatory authorities. The contracts are administered by the offer and acceptance of the terms developed in the contract. For example, the statue of European Union that asks for environmental sustainability in the business practices for the businesses operating in EU zone automatically includes the businesses operating in United Kingdom. Considering Andy TV Ltd is operating in EU nations, this signifies the acceptance of the offer and their business practices will define the acceptance of the offer or breach of the contract. Similarly, contract with other stakeholders of the company also bounds Andy TV Ltd for upholding the contract. In order to develop a contract between Andy TV Ltd and ABC Cafe, the contract will focus on all the business aspects along with the process of functioning and the transactions that will follow between the parties. The following contract has been prepared for the purpose: Contract Agreement For the Period of ____________________ Party 1 Part 2 Name_____________________ Name_______________________ Signature________________________ Signature___________________________ Date____________ Date_____________ Purpose of Contract: This contract is being made between Andy TV Ltd of _________ and ABC Cafe of ______ for the purpose of creating a transaction including the product named 56” TV worth £350 each. The contract includes the clause under which the transactions can be performed a trade relationship can be formed between the concerned parties. Contract Terms and Conditions: The terms of the contracts are set as follows: Both the organisations should mutually agree for performance of the transactions that will follow within the given time period of the contract. The products being supplied by Andy TV Ltd to ABC Cafe should be of the price mentioned in the flyers of Andy TV Ltd and not more. In case of any breach found in the quality standards of the mentioned products as reflected in the flyers, ABC Cafe has the right to sue the concerned authority and reclaim the damages. The supply of the products is strictly based on the demand of ABC Cafe and can be managed in accordance with their needs. In no situation can Andy TV Ltd force ABC Cafe for purchasing any amount of products when not needed by the company. The price of the products being sold to ABC Cafe should as per the price shown in the offer. Any unauthorised or uninformed price changes will lead to breach of contract. In case of any uneventful circumstances happening to any of the parties, the other party should consider the scenario and treat the other party fairly. Contract Termination: The following cases may lead to the termination of contract: When any of the party refuses to fulfil the consideration made to the other party on an unethical ground, the contract will cease to exist. If any of the parties is unable to meet all the criteria discussed for developing the trade relations, the contract will cease to exist. If any of the parties creates fraudulent activities within the boundaries of the contract and the trade relation, the contract will cease to exist. If any of the party willing decides to end the contract and follows all the legal requirements for concluding the contract, the contract will cease to exist. When the time period of the contract mentioned in this contract is over, the contract will cease to exist. Authorisation: The contract is being developed between ABC Cafe of _________ and Andy TV Ltd ________ under the supervision of District Attorney Mr._________________ and Honourable Magistrate Mr. ________________. The permission to carry out the contract between the parties to the contract will be provided by the respected legal bodies associated with the process. Mr._________________________ of ABC Cafe of _________ and Mr.______________ of Andy TV Ltd ________ will authorise the formation of the contract between the two organisations for the stated duration of the one specific transaction including the sale of 10 56” television sets at the mentioned price of £350. Witnesses: 1. 2. 2.1.b. Application of the law on terms in the contracts of Andy TV Ltd and ABC Cafe The contract made for Andy TV Ltd and ABC Cafe in the preceding segment mainly included the factors that will ensure the fulfilment of the contract on behalf of both the parties. The offer, acceptance and considerations were stated in the contract. However, the contract also includes some implied terms. One of the implied terms given in the contract is that the once an order is made by ABC Cafe, Andy TV Ltd should send the exact number of goods as asked by the company. It is the responsibility of the supplier to ensure that the consignments being sent to ABC Cafe has the exact number of goods as asked by Andy TV Ltd and the invoice should also account for the same. Another implied contract on the part of ABC Cafe will be to pay for the received goods which have been received from the supplier. The clarification of the goods according to their nature and type should be maintained by the supplier during the transactions. Expressed terms provided in the above contracts state the time period for which the contract has been made. The contract also states the necessary conditions for the supplier to be eligible for entering the contract. Some of the crucial aspects expressed in the contract are the identity of the parties to the contract, the types of products being considered in the contract and the temperament of trade relationship being created as a result of the formation of the contract (Binchy, 2004). Exclusion clause refers to the circumstances which can confine the rights of the parties to the contract. Exclusion clauses focus on reducing the liability of one or both the parties to the contract in case of any liability, losses or damages faced. The aspect of the exclusion clause included in the above given contract between ABC Cafe and Andy TV Ltd states that in case of any unprecedented scenario such as an earthquake or any other natural calamities or any form of uneventful situations both the company will provide a scope for recovery to damaged party and the damaged party will be treated fairly. 2.2 Terms and Representation in contract: The terms in contract reflects the rights of the parties to the contract. The development of a contract based on a simple transaction is done with the help of the receipt of bill of payment being issued by the seller to the buyers. The invoice serves as a proof of the transaction and can be used by both the parties for reclaiming any sort of breach that may take place in the contract. Apart from this, advertisements being made by an organisation are also liable to be termed as a contract. The case of Carbolic Smoke Balls Vs Carlill is an apt example of afore said statement. Carbolic Smoke Ball was offered to the consumers of UK as a remedy for flu (Schlanger, 2008). The company also announced that in case any consumer found that the smoke balls are not effective, they are liable for a reward of £100. Mrs. Loisa Elizabeth Carlill purchased this product and used them for around two months before contracting flu. When Mrs. Carlill sought for the reward the company refused to pay and demanded that she should proper provide evidence in their office to confirm her claim. On this note, the issue was taken to court by Mrs. Carlill and the advertisement of the company was treated as a contract between the Carbolic Smoke Balls and Mrs. Carlill (Schlanger, 2008). The judgement went against the company as the court stated that the nature of offer was not unilateral and targeted only those who purchased and used the product. Furthermore, the purchase of the product was termed as the acceptance of the offer and rejected the company’s claim on the ground as the advertisement confirmed that a sum of £1000 had been deposited in the Alliance Bank which reflected the intention of the company to consider the offer seriously. The above given case also applies on Andy TV Ltd when they are giving an advertisement which does not compromise a unilateral contract. Also considering the responsibilities of Andy TV Ltd towards their internal stakeholders, the employment contracts imply that firms should take care of their employees and provide them with all the necessary benefits such as work environment and protection of their details. The contract elements that will primarily affect the activities of Andy TV Ltd are the considerations, their fairness and authenticity. Andy TV Ltd must provide a fair deal to their stakeholders and refrain from forming an unconscionable contract which will signify undue influence of bargaining power. 2.3 Evaluation of the different terms in Contract of Andy TV Ltd and ABC Cafe: The contract formulated above reflects the cases in which the contract between both the parties can come to end or can be exempted. The contract will focus on the development of a fair relationship between both the parties. When any of the parties fail to perform the acts in accordance with the regulations provided in the contract, the contract will be breached. For instance, if the Andy TV Limited fails to provide the sufficient amount of goods as demanded by ABC Cafe for a continuous period or there is some sort of dissimilarity between the invoice and the products received, the contract will be breached. Also the contract states that the party facing the loss is liable to sue the other party or can end the contract. Another factor that will reflect breach of contract is that if any party creates any sort of fraudulent activities such as misinformation or any other grievances towards the other party to the contract. Exemption clauses have not been included in the contract as the contract has been developed considering mutual benefits of both the parties. However, there can be events where an exemption clause can be utilised. For instance, ABC Cafe has the responsibility of measuring the quality of the products being sent however the standard of the quality has not been set. This creates an opportunity for ABC Cafe to implement an unfair advantage against Andy TV Ltd and devoid them from their dues. This will be one instance of exemption clause that can be used in the trade relations between ABC Cafe and Andy TV Ltd. In case of performance of any sort of exemption clause in the contract or any other deformity in the performance of the contract acts, both the parties have the option to sue the party responsible for their losses. As stated under the breach of contract segment in the contract, the parties to the contract are liable to claim the damages from the other party or end the contract or sue the party in a court of law. However, the natures of the remedies that can be claimed have not been specifically mentioned based on the diversity in the performance of the trade activities mentioned in the contract. The remedies can be in the form of monitory compensation or in the form of goods or legal documents which will allow both the company to design their remedy according to the nature of their losses. Task 3: Tort and Negligence 3.a. Letter to advise Brad as to whether he can recover his losses from Charles: To Brad, Hello, In order to understand the rights against Charles based on the above events, it is necessary to understand the factors of duty of care, negligence and tort law. Liability as defined by Bix (2008) means the legal obligations towards which an individual, group or an organisation is responsible to perform. In case where the number of persons involved is more than one or the liability falls on multiple persons, the liability is called joint liability. The liability of an individual towards any cause may arise from the inability to perform the terms and conditions of the contract whereas in tort law the liability rises from negligence towards responsibilities and legal jurisdictions. Nottage (2007) made a more specific definition stating that the obligations created as a result of one’s acts and activities is called liabilities. The form and nature of liability of an individual can again be implied or expressed depending on the nature of performance or scenarios. Negligence has been defined as the activities which fail to satisfy the terms and conditions set by the legal bodies for protection of others and results in harm to others (Kontautas, 2010). The negligence is mainly included in Tort Law and forms the basis of the decisions being made by the court of law. The nature of negligence also differs as does the types of harm being caused by the activity. Negligence has also been related to the aspect of liability in the English Law. However, in order to prove that negligence has been committed on the part of the alleged that resulted in harm or loss or damages, the plaintiff should be able to prove that the defendant had a duty towards the plaintiff (Binchy, 2004). For instance, in the given case, Charles was responsible for checking the financial details of Albert and reports it to Brad in all its truthfulness. However, the report provided by Charles was not appropriate and led to the loss suffered by Brad. Thus under the clause of Negligence, Brad can sue Charles for recovering his losses. The liability in negligence refers to the liability for the defendant that rises due to the negligence of law (Reynolds, 2010). This also acts the opportunity provided to the defendant for proving that the act has not been performed intentionally (Bix, 2008). The liability of negligence as defined by Schlanger (2008) is the compensation which will be imposed on the alleged individual, group or organisation for neglecting the legal responsibilities towards the victim. Yours Sincerely, __________________ 3.2 Difference between liabilities in tort with contractual liability In the words of Schlanger (2008), Tort liability is the legal obligation of one party towards another party in case of civil wrong or any form of injury or losses caused. The main function of the Tort law is to ensure that the victim party is able to claim some sort of remedy from the legal court through the court. Witt (2007) mentioned that tort liability can arise when one party ignores the rights of an individual causing damage or any form of private offence performed against one of the parties. However, in order to implement the Tort law, the victim party must produce some sort of evidence that highlights or justifies the claims against the alleged party. On the other hand, the alleged party is also able to produce evidences that will help in proving the innocence against the allegations. Often civil offences, corporate offences and other sort of wrong doings are considered under the Tort Law. The Tort law mainly evaluates the negligence in the performance of the act. Contractual liability has been defined by Bix (2008) as the liability which is estimated by the parties while entering into a contract which be paid by the party who failed to execute the acts according to the terms and conditions of the contract. The Contract Act 1999 also incorporates the breach of contract and is often called contractual liability. In legal term, the promise to perform or deliver a service which can be enforced with the help of legal influence is termed as contractual liability. According to Schlanger (2008), contractual liability is often found in corporate projects where failing to meet the deadline or inability to complete the project within the given financial resources may result in a contractual liability. Another aspect where contractual liability is often found is in the employment contract where inability to perform or provide the mentioned benefits on the part of the employee or employer will create a contractual liability for both the parties. The contract developed between Andy TV Ltd and ABC Cafe (studied in previous case study) also has the clause of contractual liability which may result in breach of contract or termination of contract and will also provide the victim party an opportunity to reclaim the damages as a result. The contrast liability in Tort is related with the process of reclaiming the damage induced by one party to another party in case of negligence of duty or performance of an illegal act leading to injury or damage to another party. Schlanger (2008) stated that performance of the act in Tort also has the condition that the intention of the party should be judged before delivering the verdict. On the other hand, in contract law the roles and responsibilities of both the parties are stated. The contract law as opposed to the Tort law mentions the clauses which will be included in the responsibilities of the parties to the contract. 3.c: Duty of care and Tort of Negligence: Duty of care is entrenched in the Tort Law. It forms an obligation on individuals and organisations engaged in activities which can cause harm to others and states that the concerned people have a duty of care towards their customers or stakeholders. In the English Law, Duty of care has been bluntly presented as a reasonability to ensure others are not harmed while performing any self concerning act. The case of Donoghue v Stevenson 1932 AC 562 is an apt example which focuses on the aspects of duty of care of the owner of a ginger beer producer Mr. Stevenson towards the customers which in this scenario was Mrs. Donoghue. The verdict asked the producer to compensate for the loss of Mrs. Donoghue as it was duty of Mr. Stevenson to consider the wellbeing of the people consuming their product. It was found that the company was unable to ensure the safety of their consumers. Task 4: Scenario 1 4.a. Negligence, vicarious liability: To Norfolk Farms, Subject: Case of Alan: Negligence and Vicarious liability In the scenario, as it occurred that Alan had employed a teenager to help him in his services and kept this information from the organisation. Now because of the reckless driving habits of Alan, the boy was injured while Alan was delivering milk. This event has been taken to the court and now the position of both Alan and Norfolk can be evaluated. Under the vicarious liability clause, it can be considered that Norfolk Farms did not keep proper details and monitor of the activities of which lead to the accident. Also the business process can be sued as one of their employees had hired a minor which was against the judicial and the company policy. Moreover, the accident occurred when Alan was performing the duty of Norfolk Farms and hence the company is also responsible for the accident. Yours Sincerely, __________________ Scenario 2 4.b. Can the driver of the car sue the Star City Cabs for negligence: In the given case, it can be observed that Star City was facing shortage of staffs and the employees were trying to make it up for the customers by working double shifts which was against the company policy. However, the company did not take any actions for stopping this process and hence the accident was committed by Mr. Adler because he fatigued from work. This gives the other cab driver to sue the company. Furthermore, Mr. Adler was also working for the company when the accident took place and hence Star City Cabs is responsible for the damages of the cab driver and is vicariously liable. 4.c: Vicarious Liability of employers and situations where employers are not responsible: Vicarious liability of an organisation is based on the responsibility of the organisation towards the activities being performed by its employees. Reynolds (2010) stated that vicarious liability held’s an organisation or individual responsible for the actions of another person. The aspect of vicarious liability is mostly implemented in case of employer-employee relations where the employer is responsible for the acts performed by their employees. However, there are certain conditions which also acts as remedies for the employers such as if the actions were performed or not performed during a time period when the defendant was not working with the company, the employer is not responsible for the acts of the employee. Another situation which can arise in case of vicarious liability is failure to establish a direct relation between the employer and the acts performed by the employee. For instance, if the employee performs an illegal act after the work hours the employer will not be responsible for the actions of the employee. This signifies that the activity must be committed during the working hours which allow the victim to sue the employer. Vicarious liability of an organisation depends on the performance or non-performance of any illegal or unfair action by the employees of the firm. However, the company is responsible for the activities of the employee only when the activity has been performed during the working hours of the company. Conclusion The legal aspects related to corporate activities are dense and authoritative in nature. The activities of a business organisation performed with all the stakeholders are governed by the legislation of the company, society and the nation. Contract law forms the basic foundation for the operations of a company and its trade with all of its stakeholders. The cases used in the study have focused on the aspects of contract law. Tort and negligence and also considered the responsibility of employers by including the vicarious law. On the other hand, the contract developed with a hypothetical company also focused on the various responsibilities of both the parties to the contract. The contract has been further improved by including Tort aspects such as negligence and vicarious liability of the organisations. Tort law unlike contract law focused on the negligence of an individual in a action and the intention of causing harm to other persons. Tort is also as essential aspect which signifies the liability in the contract law. Overall, it can be considered that both tort and contract are essential aspects in the corporate activities. Reference List Binchy, W., 2004. Recent Developments in the Law of Torts, Judicial Studies Institute Journal, 4(1), pp. 8-77. Bix, B. H., 2008. Contract Rights and Remedies, and the Divergence between Law and Morality*. Ratio Juris, 21(2), pp. 194-211. Bix, B. H., 2008. Contract Rights and Remedies, and the Divergence between Law and Morality*. Ratio Juris, 21(2), pp. 194-211. Commission on European Contract Law. 2003. Principles of European contract law. Ole Lando (Ed.). Kluwer Law International. Kontautas, T., 2010. Principles of European Insurance Contract Law: Law and economic insights. Economic analysis of the DCFR: The work of the economic impact group within CoPECL, pp. 227-234. Nottage, L., 2007. Changing Contract Lenses: Unexpected Supervening Events in English, New Zealand, US, Japanese, and International Sales Law and Practice. Indiana Journal of Global Legal Studies, 14(2), pp. 385-418. Reynolds, W. L., 2010. Back to the Future in Law Schools. Md. L. Rev., 70, pp. 451. Schlanger, M. 2008. Operationalizing Deterrence: Claims Management (In Hospitals, a Large retailer, and Jails and Prisons), Journal of Tort Law, 2(1), pp- 1-50. Schwartz, A., and Scott, R. E., 2003. Contract theory and the limits of contract law. Yale Law Journal, pp. 541-619. Witt, J. F., 2007. Contingency, Immanence, and Inevitability in the Law of Accidents, Journal of Tort Law, 1(2), pp. 1-41. Read More