Foundation of Business Law - Assignment Example

Running Header: Business Law Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Question 1 Kosmo can sue Gerry for negligence and recover damages. According to Miller (2012, p. 579) professionals can be held liable for negligence under the common law in the performance of their services. The professional must owe the plaintiff a duty of care which must have been breached thus causing the plaintiff to suffer injuries. The injury or damage must have been caused by the breach of the duty of care on the part of the professional. Meiners Ringleb and Edwards (2008, p. 84) note that the defendant can be held liable for breach of duty of care if the type of harm had been reasonably foreseeable. This means that Gerry would have foreseen that his advice to George could be passed to Kosmo. Gerry could have taken steps to ensure that his advice did not reach Kosmo as a third party. Nasir (2002, p. 13) states that the notion of proximity holds defendants liable for breach of the duty of care especially in economic loss. Proximity refers to the relationship or casual connection between the person or property of the plaintiff and the person or property of the defendant. Gerry could have predicted that George would pass on his suggestion to Kosmo regarding the Facebook shares given the fact that they were in close proximity because of their business relationships. Moreover, the fact that they had realized large profits meant that they would share ideas on how to invest their profits hence this meant that Gerry’s idea was to be brought out by George. In ADT Ltd v. Binder Hamlyn (1996) the House of Lords held that there was a breach of duty when the auditors specified to ADT , given that they knew their statement would be relied upon, that the account of the company which ADT wished to take over were reliable. The accounts were not really reliable hence ADT suffered huge losses and was awarded damages. The fact that Gerry was a financial advisor meant that his idea could be relied upon by Kosmo to make his investment decision. Thus, Kosmo can sue Gerry for negligence and be successfully awarded damages. A duty for financial loss arises from the assumption of acting or rendering professional services. The person for whom the benefits of services were rendered should be known to rely on them to make a financial decision (Marsh & Soulsby 2002, p. 84). In Hedley Byrne & Co. Ltd v. Heller & Partners Ltd (1964) the house of Lord held that a person who makes a negligent statement owes a duty of care to a person who endures economic loss by relying upon the statement. In this case a firm of advertising agents sought a credit reference for one of their customers. The reference was sought from the customer’s bank. The bank issued a favorable reference although it was negligently issued and this made the advertising agents to incur heavy losses. This was due to the fact that they entered into transactions by relying on the reference. The House of Lords held that damages could be awarded for financial loss which was brought about by the negligent misstatement. Under this case, the requirement of a special relationship was held to be one of the proximity hence it focused on the foresee ability of damage (Nasir 2002, p.15). This decision meant that a person can recover damages for financial losses incurred as a result of relying on an advice of a negligent financial advisor. Therefore, Kosmo can sue Gerry for negligence and recover damages because he relied on his negligent misstatement to make the investment decision. Gerry failed in his duty of care to Kosmo and this made him to suffer injuries. Miller and Jentz (2010, p. 115) state that if the defendant breached the duty of care making the plaintiff suffer ultimate loss then this is referred to as a factual loss. A factual loss requires the court to establish whether the act was causation in fact. Causation in fact involves considering whether the injury occurred because of the defendants act or it would have occurred even if the defendant didn’t act. Kosmo incurred the losses because he acted upon Gerry’s suggestion to invest in facebook shares. The loss could not have occurred if Gerry had not offered the proposal hence this case contains causation in fact. In Roberts v. Bettany (2001) the plaintiff wanted compensation for damage to his property which was caused by subsidence. This was after the actions of the authority to excavate and restore an embankment. It was held that the plaintiff act of causing underground fire constituted an act of negligence thus the authority actions to excavate the embankment could not constitute causation in fact. Therefore, Gerry was negligent and this made him breach his duty of care towards Kosmo. Gerry could have foreseen that his suggestion could be used by Kosmo given that Kosmo and George were in proximate relationship. Moreover, the fact that Gerry was seen as a professional meant that his suggestion could be relied upon in making investment decisions. Kosmo suffered financial losses because he relied on Gerry’s negligent suggestion. Thus Kosmo should go ahead and sue Gerry for negligence and demand damages. Question 2 Newman can also sue Kosmo for negligence and be awarded damages. According to Emerson (2009, p. 440) when a certain accidents occur particularly because of negligence and the defendant had exclusive control of the instrument that caused the accident an assumption arises that the defendant was negligent. This rule is referred to as res ipsa loquitur that is ‘the thing speaks for itself’. Kosmo caused Newman to incur injuries through his actions of slamming the door in Newman’s face hence this caused Newman to be unable to participate in the golf tournament where he had the possibility of winning $ 40, 000. Bryan (2005, p. 2) notes that the principle of res ipsa loquitur applies under three conditions that is; the defendant had the power over the object that caused the damage, the accident would not have occurred in case the defendant was careful and the cause of the accident was unknown by the plaintiff. In Easson v LNER (1944) the plaintiff was an infant boy aged five who travelled on a train from Newcastle to London in the company of his mother. Shortly after leaving the Grantham station, the boy’s mother permitted him to visit the bathroom. The boy went down the hallway of the train but he fell through a door on the side of the train thereby getting seriously injured. It was held that the door was under the control of the railway company hence the principle of res ipsa loquitur would apply. Kosmo was negligegent when he failed to close the door which was under his control with ultimate care and this means that the principle of ipsa loquitur would apply. According to Roach (2012, p. 379) for the principle of res ipsa loquitur to be applied the accident must have been caused by the defendant breach of duty. This means that the defendant carelessness can be attributed to be the cause of the accident. In Bryne v. Boadle(1863) a barrel of flour fell from the defendant on the plaintiff who by then was passing through the street and thereby injured him. It was held that the defendant carelessness caused the plaintiff to incur injuries. Therefore, the rule of res ipsa loquitur was applied. Kosmo was negligent because of the fact that he closed the door without care and this made him to injure Newman. For the res ipsa loquitur maxim to apply the accident must not occur in such a way that indicates the normal way of things and this requires the plaintiff indicate that the accident occurred from the desire of care (Emerson 2009, p.440). If Kosmo has exercised his duty of care in closing the door he would not have injured Newton. Thus, Newton can prove that Kosmo was careless and thus negligent in order for the res ipsa loquitur maxim to be applied. Res ipsa loquitur principle requires that there should be no complete explanation of the incident that made the plaintiff to incur injuries (Roach 2012, p. 379). This means that the plaintiff must be unaware of reasons that led to the occurrence of the accident. The plaintiff must not be responsible or contribute to the occurrence of the accident. In Ward v. Tesco Stores (1976) the plaintiff slipped and injured herself while shopping at the defendant supermarket. The plaintiff brought an action against the defendant claiming damages for injuries allegedly caused by the defendant’s negligence in the maintenance of the floor. It was held that the defendants had the duty to keep their floor clean and the plaintiff was not responsible for the occurrence of the accident hence the defendant was liable for negligence hence she could go ahead and recover damages. Newman was not responsible nor was he aware of the reasons that made Kosmo to slam the door on his face. Therefore, this meant that the principle of res ipsa loquitur could be applied. Newman should bring an action against Kosmo for negligence and claim damages. Kosmo was negligent because he failed to exercise due care and this led to the occurrence of the accident. This case satisfies the three conditions required in the principle of res ipsa ioquitur and this means that Newton can successfully recover damages from Kosmo for negligece. References ADT Ltd v. Binder Hamlyn (1996) B.C.C. 808 199 A.L Bryan, J 2005, ‘Res Ipsa Loquitur’, Newsletter of the Law Library, vol. 16, no. 3, pp. 1, pp. 1-4. Byrne v Boadle (1863) 2H & C. 722; New Reo Easson v LNER [1944] 2 All ER 425. Emerson, R 2009, Business Law, Barron Educational Series, New York. Herdley Bryne Co. Ltd v. Heller & Partners Ltd (1964) AC 465. Meiners, R, Ringleb, A & Edwards, F 2008, The Legal Environment of Business, South-Western Cengage Learning, Mason. Miller, R 2012, Fundamentals of Business Law, South-Western Cengage Learning, Mason. Marsh, S & Soulsby M 2002, Business Law, Nelson Thomes Ltd, Cheltenham. Miller, R & Jentz, G 2010, Business Law Today, South-Western Cengage Learning, Mason. Nasir, K 2002, ‘Duties Owned by Professional Advisors to Third Parties’, Professional Negligence, vol. 18, no. 1, pp. 12- 26. Roach, L 2012, Card & James Business Law for Business, Accounting and Finance Students, Oxford University Press, Melbourne. Roberts & Anor V Bettany & Anor(2001) AII ER (D) 128. Ward v Tesco Stores [1976] 1 All ER 219, CA Read More