Aspects of Contract and Negligence for Business - Case Study Example

Aspects of contract and Negligence for Business Module The essential elements required for the formation of a valid contract A contract is a legally binding agreement that is established through a mutual consent of two parties. The parties involved may have known each other as an accountant and a client with a business. They may also be strangers that have never met, as with person downloading and installing software from a soft ware company (Gergen, 2013). In all the situations discussed above, having a written contract signed by both parties is important in providing definition to the parties concerned. Another important element in that contract has obligations to the parties concerned. It is the terms and conditions in the contract that define the type of relation between the parties. This is why the parties have to study the contact and making the needed adjustments before signing it for they will be liable. It follows that for a contract to be legal; all the parties’ concerned need to establish legal relations and the obligations in the contract is based on having a mutual trust. The other essential element is causation and remoteness of damage, which is concerned with the level of liability that the defendant has in relations to actions that led to a breach of contract. This element is exemplified by the case of Haley v Baxendale, where the accused was given a contract to transport a broken mill shaft. The defendant was accused because he failed to facilitate the transportation of the mill shaft to the repairer at the agreed time making the mill to be idle for a longer period. The courts found him not guilty since it was expected that a mill ought to have a spare shaft for emergencies. Discussion of the impact of different types of contract The type of contract used by business partners in a transaction varies and has different impacts. Contracts establish on the basis of creation can be further classified as either being express contract, implied contract or tacit contract (Easley, 2014). The express contracts are made by spoken or written word making it have more legitimate impact to the transaction. This implies contract is made not by word or writing but can be inferred from the conduct of the person concerned. The inferred contract need to be clarified so that the parties are not confused with the terms involved. On the other hand, tacit contract is a contract agreement that is determined by the behaviour of both parties. These contracts are formed by as a result of the behaviour of the parties involved in the process of making transactions. For instance, when a customer withdraws money from Banks ATM machines, there is a tacit contract between him or her and the bank. Analysis of Terms in contracts, meanings and effects Contracts are usually started by a one of the parties who draft the statements and induce the other parties. When the party that is approached consider the statement and accept them, they are expected to sign, binding both parties to the terms and conditions of the contract. It is, therefore, important to isolate any peripheral statements or pre-contract talk (Morris, 2009). Terms of a contract consist of the statements that indicate that a valid offer was provided by one party and accepted by the other party. Terms involve a proposal by one of the parties to another person who has an interest to enter into a contract. In the evident of dispute, the courts determine which statements should be part of the contract and which should be left out (Bricker, 2013). The importance of the terms in the contract is that they provide the obligation and entitlement for the parties involved. It is very important that the contract is signed by the parties to make it legally binding. It is therefore necessary that one reads the document well and ensure that all the particulars are clear and have all the terms agreed on the preliminary statements. It is also important to note that all offers need to be made with the intention of entering into legally binding obligations. The contract only comes to existence when it is accepted and signed by the party that was approached. Applications of the elements of contract specific business situation Different business has different contracts elements. However, some of the common elements in a business contracts include an offer, which is the willingness to enter into a sale contract with the other party that may be interested (Cohen, 2013). For example, Joyce has beautiful vase that she has places on offer in her shop with a sign showing that the buyer can purchase it at $ 500. Frank passes by the Shop in the morning on his way to his office and likes the antique nature of the vase; he therefore promises to buy the vase later in the evening after work. Just to make sure that the Frank was entering into an express contract, when he was asked if he is going to buy at the indicated price, Frank said that he was ready to buy the vase for $ 500. Acceptance of the terms in the contracts takes place when the person that is approached with the preliminary statement agrees and signs it without making any alteration or counter offer. This is because any suggestion of changes would be seen as rejection of the offer. In this case, Frank acceptance of the offer is seen by accepting to pay $500 for the vase. Application of the law on terms in different contracts situation The terms in each and every contract is defined by the business interests of the parties involved hence the terms may differ from contract to contract. The most important terms in any given contract are known as conditions and are very pertinent to the type of transactions while the other terms are warranties. The conditions are important in the contracts as they are the main reasons why one or both parties enter into a contract (Cohen, 2013). When one of the partners makes a false statement or promise in the contract can it be termed null and void hence the other party would not need to honour their promise. On the other hand, when the term that is not fulfilled is a warranty, the party that is wronged is only entitled to monetary damages as compensation for the wrong suffered. Exclusion clause is some statements that are included in the contract that protect one of the parties from certain responsibilities in the contract (Convery, 1999). For instance, the contract between the builder and the home owner might have an exclusion clause that removes the liability for the damage that the builder might do to the lawn. Evaluation of the effect of different terms in given contracts When the statements made prior to the contracts are put into writing, they become terms of the contracts. These may consist of the promises that are made by the person offering the contracts that eventually forms the core of the contract. Since terms differ from one agreement to another, they will have different effects on the contracts. Contracts only bind the parties that have approved and signed it. This will affect them whether they have read and understood the terms or not (Posner, 2009). On the other hand, although they have signed a contract, one of the parties may be exempted from responsibilities in the contract if the document has some misleading information that will alter the goal of the relationship. In collateral contracts, an additional statement that is made to make the other party enter into the main contracts terms will also be considered in case of dispute. Contrasting of liability in tort with contractual liability The relationship in the contractual liability is established by the parties that have engaged in making the terms and agreeing to them. There is need for mutual agreement for a contract to be exist. The contractual liability on the other hand is a relationship that is defined by existing law. This means that one party is owed duty of care (Zimmerman, Kramer & Trowbridge, 2013). The nature of obligation in liability in tort is based on the requirement that parties to a contract comply with the set terms failure to which it leads to breach. Liability in tort however provides that the defendants act according to the level of care expected by a person or professionals. When it comes to causation and remoteness, the contractual liability provides that a party will lose in the event of a breach making the person responsible liable. The liability in tort provides that the defendant is only liable in the court if the damages that a partner has suffered was foreseeable and could be prevented especially when the contract was being drafted. The claimant has therefore the burden of proving that loss suffered is a direct result of the negligence of the partner. The negligence of the party in the contract should be lined to some elements in the contracts that should have prevented such behaviour. While the contractual liability will only compensate the claimant by restoring them to the position, they were before the damages occurred. Nature of liability in negligence Most cases in negligence are based on the relations ship among the parties that are none contractual. Although the parties may know each other like in the case of a doctor and a patient, or, they may be strangers like the case of drivers that are involved in a road accident. The common element of liability negligence is that there is no agreed relationship between the parties concerned. In the event that one of the parties has to be held liable for negligence, it would be as a result of being a duty of care in a relationship. The liability in the negligence cases is not based on the relationship of the parties but is based on the law that govern business transactions. The duty of care in such a relation may result in one being liable for the damage that is caused (Slovenko, 2005). The elements that leads to the establishment of a duty of care include relationship of proximity between the two parties and harm having been foreseen before the contract started. The duty of care just for all the parties in the contracts and should not favour one of the parties. Explain how a business can be vicariously liable An example in which a business can be liable is seen by a situation in which a shareholder in the company and company auditors has entered into an agreement for auditing services. As a result of the auditor’s reports, shareholder dependent on the report to execute a successful takeover bid of the company. But after successfully taken over the company, the shareholders realised that the company had made $ 500,000 and not the $ 800,000 profits that are indicated in the financial statements. The auditing company is liable for the damage caused since the harm that is caused is reasonably foreseeable and can be avoided, there is a relationship between the auditors and the shareholders and it is fair that the duty of care be imposed on the defendant that made share holders to lose money by taking over a company that was actually losing money. Applications of the tort of negligence and defences in different business situations The event of a tort of negligence case, the plaintiff needs to prove beyond any reasonable doubt that the harm is a direct result of the negligence of the defendant. Some of the elements that have to be proved include the defendant owing duty of care to the plaintiff (Blackwell & Sarlo, 2013). Negligence is therefore seen as the failure of a party to operate according to the legal and ethical requirements. It occurs when one of the parties in a transaction does not take care required when performing some duties. It is also seen as somebody not performing as any reasonable person would perform under the same circumstances. In tort of negligence, the nature of the responsibility is established by the specific law and not determined by agreement between the parties concerned. For example the driver of a track transporting products from the manufacturer to the customers has a duty of care to the final consumer of the products. As a professional driver transporting goods and services from the factory to the end consumer, professionals are expected to portray professionalism and skill while on the road and any accident can result in careless driving is not acceptable. Applications of the elements of vicarious liability in given business situations Taking an example in which the business rents an office space to conduct its transaction. The occupiers of the premises, the business owners, have obligations to ensure that the health and safety of not only the customers coming for services, but also the employees work in the offices. In the event that a customer or staff get injured as a result of the slippery floor, the management would be held responsible for the injury that is caused. Other related damages like the payment of the hospital bills and other damages related to the business that is affected due to the injury (Epstein, 2009). This is a form of tortuous liability as it is fixed by the law as opposed to the two parties involved in the transactions. The strict liability makes the business or person responsible for all the damages that are caused by omissions of the actions that would have prevented such harm. In this scenario, the management of a business that causes customers or workers harm due to the slippery nature of the office makes the company liable for all the harm. Bibliography Bricker, M., 2013. The Arbitral Judgment Rule: Using the Business Judgment Rule to Redefine Arbitral Immunity. Texas Law Review, 92, 1, pp. 197-229. Cohen, MR., 2013. A Partnership Gone Bad: Business Relationships and the Evolving Law of the Cairo Geniza Period. Journal Of The Economic & Social History Of The Orient, 56, 2, pp. 218-263. Convery, J., 1999. Standard Form Building Contracts and Duty of Care. Modern Law Review, 62, 5, p. 766. Easley, DF., 201. Floridas New Jury Instructions in Contract and Business Law Cases: A Primer. Florida Bar Journal, 88, 4, pp. 40-44. Epstein, RA., 2009. The Many Faces Of Fault In Contract Law: Or How To Do Economics Right, Without Really Trying. Michigan Law Review, 107, 8, pp. 1461-1477. Gergen, MP., 2013. Negligent Misrepresentation as Contract. California Law Review, 101, 4, pp. 953-1011. Morris, PE., 2009. Contractual Limitations on the Auditors Liability: An Uneasy Combination of Law and Accounting, Modern Law Review, 72, 4, pp. 607-627. Munyon, L, Blackwell, A, & Sarlo, P., 2013. Tort and Contract Actions: Strange Bedfellows No More in the Wake of Tiara Condominium. Florida Bar Journal, 87, 10, pp. 41-43. Posner, EA., 2009. Fault In Contract Law. Michigan Law Review, 107, 8, pp. 1431-1444. Slovenko, R 2005. Malpractice, non-medical negligence, or breach of contract. Journal of Psychiatry & Law, 33, 3, pp. 445-467. Zimmerman, S, Kramer, K, & Trowbridge, M., 2013. Overcoming Legal Liability Concerns for School-Based Physical Activity Promotion. American Journal of Public Health, 103, 11, pp. 1962-1968. Read More