Aspect of Contract and Negligence - Case Study Example

Aspect of Contract and Negligence Elements of the contract in a given business scenario A contract for service refers to any agreement verbal, written, implied or expressed whereby one person is engaged as an independent contractor to execute an assigned duty or the project for the company (Riches & Allen, 2009). Every legal agreement involves terms and conditions that make the contract binding. Prior to the signing of the agreement the parties make various statements intended to induce the other party into forming the agreement (Peel & Treitel, 2011). In the case of any dispute the parties will review those statements to establish the remedies for a breach of the agreement but such statement should not be treated as terms of the contract. This section focuses on legal and statutory arguments upon which Lady Gaga can develop a case against the producer and sue for compensation the breach of contract against the conditions established under the contract of service. Gaga has to consider the three principles set by the judges in the case of Transatlantic Financing Corp. v. United States, 363 F.2d 312 [D.C. Cir. 1966]. In the case the Transatlantic Financing Corporation (Plaintiff) sued the defendant (the United States) on the claim that they were forced to take longer route from Texas to Iran through Cape of Good Hope instead of taking the shorter route through Suez Canal. The claim arose in a contract involving shipping of wheat for the defendant from Texas to Iran. Although the contract defined the destination, it did not mention the route to be used. In this case the defendant could use any route as long as they deliver the goods to the destination. During the transportation of the goods, the plaintiff established that Egyptians had blocked the shorter route through Suez Canal due to armed conflict thus compelling the plaintiff to divert the route through Cape of Good Hope. Since the use of longer route resulted to additional cost to the plaintiff, they should the defendant in order to recover the additional cost. The principle of the rule of law in this case was to establish whether the performance of contract was impracticable as a result of legal impossibility that could render the contract voidable (Peel & Treitel, 2011, 63). In deciding the case, the court established three principles that could be used to determine the impossibility of the contract (Collins, 2003). Therefore, in order for the plaintiff to succeed in the claim of impossibility of performance of contract there should be evidence of occurrence of something unexpected, the risk associated with the unexpected event should not have been stated or predetermined by the contract or custom, and that the unexpected occurrence must have resulted to commercial impracticability of performing the contract (Riches & Allen, 2009, p. 64). The court established that there was an unexpected occurrence that was not specified in the contract even though it did not render the performance of the contract impracticable. Therefore, only the cost of shipping the goods through the longest route there was no additional cost or risk associated with the unexpected changes that occurred (Collins, 2003). Legal terms of a contract Conditional or warranty terms: The terms of the contract may ether be written or through word of mouth. The two types of terms include conditions and are the most important while the less important terms are known as warranties (Harpwood, 2009). Conditions are so important that without them the parties cannot get into an agreement. Furthermore, conditions determine the existence of the contract and breach of any condition by either of the parties gives the party right to treat the agreement as less rescinded, void or voidable (Law Society, 2014). Collateral contract: This refers to a contract established to support the main terms of the agreement. This contract includes even some of the less meaningful terms of the agreement (MacMilan & Stone, 2012). 2.2. Law on terms in different contracts The formation of a contract involves making an offer by one party to another party in which the offer promises to deliver the promise at a price or in exchange for something of value (Jenny, 2007). The arrangement between the producer and Lady Gaga depicts a formation of a contract whereby Lady Gaga had offered to provide services by singing a series of performances and the terms of the agreement included performing during the opening night. The offer was accepted by the producer without changing the terms specified in the offer. The formation of a contract also involves the exchange of something of value between the parties (Horsey & Rackley, 2013, p. 112). In the case of Lady Gaga and the producer the consideration was the promises the parties had exchanged with each other whereby Gaga had offered to sing in the Opera while the producer promised to pay for the services provided. In this scenario, it is apparent that both parties had the intention to enter into a legal agreement with each other. The contract require only those with legal capacity can form a contract (Hess, K., Hess, C. & Cho, 2014). For example, the parties must have attained the age of majority, be of sane mind, not drunkard during the contract formation, etc. (Richard, 2014, p. 223). Furthermore, they had the capacity to contract thus they had formed a valid contract with each other. When parties form a contract, they are bound by the terms in it and must discharge their responsibilities for each other (Simon & Gillian, 2005). Once each of the parties has performed their part of the agreement the contract is said to have been discharged by performance. In the case of Lady Gaga and the producer, the performance of the contract was not possible because of unexpected illness Gaga suffered. Where the performance of a contract is not possible for various reasons the other party is at liberty to terminate the contract at any time and claim for claim for damages they may have suffered because of lack of performance by the other party (Riches & Allen, 2009, p. 92). In this case the producer did terminate the contract though he did not claim for any damages from Gaga. However, he entered into another agreement with Rihana to continue with the performance in place of the Gaga. According to the he doctrine of privity of contract under English common law only the parties to the contract can raise a claim against the other party for breach of contract or lack of performance (Beatson, 2010). In this case Lady Gaga or the producer can raise a claim against each other in case of breach of contract Applying the three principles established in the case of Transatlantic Financing Corp. v. United States, to the case involving Lady Gaga and the producer, Lady Gaga has to demonstrate there was an unexpected occurrence caused by her illness and that the unexpected occurrence was not stipulated in the contract. As to whether the unexpected occurrence rendered the contract impracticable, Lady Gaga has to prove that she could not be able to perform her songs in the first day and a few other days at the after the opening of the show. Considering the issue was beyond her control it is clear there was not guarantee that she could manage to perform at all because she could not be of when she would recover from illness (Giliker, 2010). Therefore, it is clear that the unexpected occurrence in this case rendered the performance of the contract impracticable, and the defendant had the option to terminate the contract. On the other hand, the producer made another contract with Rihana perform the requirements of the contract with condition that she would be involved during the entire contract period. Gaga should demonstrate that the producer did not communicate to her about the intention to terminate the contract and award it to another party. However, considering the situation I believe Gaga may not win against the producer because she may be unable to prove that she could continue with the contract during the last part without resulting to additional cost and there was a breach of privity of contract (McKendrick, 2014). On the other hand, the producer can argue that there was foreseen failure of performance of the contract since Gaga had declared she would not be able to continue with the contract as agreed and so the producer was compelled to take precaution so as to avoid incurring foreseen loss (Steele, 2014). 2.3. Effect of different terms in a given contract The contract for service provides the terms and conditions between the contractor and the client by whom the parties are engaged in a contract (Simon, Johnston & Basil, 2003). It defines the conditions each party must fulfil the rights of each party and terms for breach of the agreement. Before the parties engage in a contract for service they should take into consideration a number of factors such specification of the services the contractor should offer to the client, the requirements for completion of the project in accordance to the terms, obligation to provide quality services in accordance to the terms of agreement, responsibility for personal mistakes, c contractors right to get remuneration for the work completed successfully, right to provide substitute to complete the work, client’s obligation to ensure safe working environment for the contractor and any other safety appropriate for the contractor (Adams, 2014). 3.1. Liability in tort with contractual liability For example, employee may cause injuries to customers or visitors during the performance of duty such as when a driver runs over a pedestrian in their course of duty. Liability in tort is the liability incurred by a business because of the wrongs caused to other parties other persons during performance of duty (Faure, 2009, 137). Contractual liability refers to liability incurred by a party in contract relationship for acting negligently or breaching the contract (Faure, 2009, p. 137). Contractual liability arises when one or all parties neglect their responsibilities for each other as stated in the agreement (Faure, 2009, p. 136). Liability in tort is imposed by the law or Statutes contractual liabilities are voluntary and arise from an agreement (Faure, 2009, p. 136). Contractual liabilities depends on expected loses (Faure, 2009, p. 139). Tort liabilities are compensatory (Faure, 2009, p. 138). 3. 2. Nature of liability in negligence Negligence occurs in a non-contractual relationship whereby the acts or omission of one person result to loss to another person as may be the case between the doctor and patient (West, 2008). In order for one party to claim for negligence by another party, they should prove the existence of responsibility by that other party and that they breached the duty of care they owned the wronged person. The duty of care as a determinant of liability of negligence was developed in the case of Donoghue v. Stevenson [1932] AC 532. 3.3. How a business can be vicariously liable Vicarious liability is a responsibility that the superior party owes a third party due to acts or omissions of their subordinate (McKendrick, 2010, p. 78). A business becomes vicariously liable when employees working under the instructions of the employers cause harm to third parties. The company has a responsibility to hire competent contractors and can discharge them of their responsibilities in case they are incompetent to perform according to the terms of the agreement (Atiyah, 2000). The negligence of duty of care should cause unforeseen harm to the plaintiff, and the harm should not be remote (McKendrick, 2010, p. 83). There should be a direct relationship between the breach of duty of care and the harm caused to the plaintiff. 4.1. Elements of the tort of negligence and defence in different business situations The plaintiff can raise a claim of negligence against the defendant for breach of duty of care (Elliott & Quinn, 2007, p. 14). However, the defendant can raise the defence of impracticability of the contract due to unforeseen circumstances such as those caused by an act of God. In order to have a legal claim of negligence, there are requirements for duty of care (Goode & McKendrick, n.d, p. 71). For example, the harm caused by negligence must be foreseeable, there should be proximity between the plaintiff and defendant, and the duty of care imposed on the defendant must be fairly, justly and reasonably imposed. The plaintiff must prove that they suffered a loss due to defendant’s action. For example in the case of Caparo Industries plc v Dickman (1990), the accountants released misleading information to the public concerning the company’s performance. The information lured the investors who suffered severe loss after making the investments (Mathews, 2002). The court held that the company neglected their duty of care to the pubic who upon depending on that information suffered loss. The loss should be foreseeable, and the damages resulting from negligence should not be too remote (Simon, Johnston & Basil, 2003). 4.2. Elements of vicarious liability in given situations Mr. Jawad is vicariously liable for the wrong committed by Mr. Owais against the company. As an executive director, Mr. Jawad is required to exercise a lot of care to ensure the investor’s resources are utilized efficiently in order to generate more income. The target of the company was to establish itself in various companies besides UK. However, the executive director hired an independent contractor (Mr. Owais) who failed not only to establish a business in other countries but he also failed to establish a business in UK. Though he blamed illness for his failure, he did not inform the company of his inability to establish business in UK in accordance to the agreement. The executive director is vicariously liable for loss the independent contractor caused the company (Mark Jefferson, 2003). Bibliography Adams, A. (2014). Law for Business Students. Pearson Education, Limited. Pp. 1- 154. Atiyah, P. S. (2000). An Introduction to the Law of Contract. Clarendon. Beatson, J. (2010). A Burrows and J Cartwright, Ansons Law of Contract. OUP, 29th ed. Caparo Industries plc v Dickman (1990) Collins, H (2003). Contract Law in Context. 4th edition. Donoghue v. Stevenson [1932] AC 532 Elliott, C. & Quinn, F. (2007). Contract Law. Pearson Longman. 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(2003). Markesinis and Deakins Tort Law. Oxford University Press. Steele, J. (2014). Tort Law: Text, Cases, and Materials (3rd Ed.). UK: Oxford University Press. Pp. 1-213. Read More