Aspect of Contract and Negligence - Assignment Example

Contracts on Business: Aspect of Contract and Negligence Name Institution Date Contracts on Business: Aspect of Contract and Negligence Task 1. Question 1. Using appropriate case law, identify whether all the essential elements of a contract are in place between the producer and lady Gaga and explain the importance of such elements (1.1 and 2.1). Consider the following; Essential elements: offer and acceptance, intention to create legal relations, consideration, capacity and privity of contract. A valid contract must fulfill various essential elements including; offer and acceptance, intention to create legal relations, consideration, capacity and privity of contract. Offer and acceptance is an essential element of a contact since it sets out the rules of the contract agreement between the parties. One party who is the offerer expresses an indication which is clear as an offer, of the willingness of being bound by terms that are specific, and is accompanied by another party who is the offeree who assents to the offer by acceptance. This element was supported in the case between in R v Clarke (1927) 40 CLR 227; where the court decided that, when two or more parties come into an agreement whereby one party offers and the other party accepts, that agreement forms a contract. he case of the producer and lady Gaga, it is clear that, this element is applicable, since the producer made an offer to Gaga and she accepted. The second element that parties to a contract must fulfill is the intention to create legal relations. All parties that enter into commercial arrangement, they are presumed to have the intention of creating legal relations with legal consequences. This element is important to protect the parties in case one of them refuses to continue with the agreement. It was supported by the case between Masters v Cameron whereby the court held that, parties who enter into a commercial contracts have the intention of creating a legal relationship from the preliminary agreement. In the case of the producer and lady Gaga, it is clear that the two had the intention of creating a legal relationship when they agreed on the terms that lady Gaga would perform in the events. The third element of a valid contract is consideration. This element is important because the consideration which is money or a promise made between the parties is made under seal. A promise is given in return for a promise which is received. This element was supported in the case between Woolworths Ltd v Kelly [No2] [1991] NSWCA 287, whereby the court held that, when a party to a contract makes a promise or agrees to pay a certain amount of money to the other party who promises to render their services, this is a valid element that make a contract. In the case between the producer and lady Gaga, there was a promise between the two parties that the producer promised lady Gaga to perform in a series of events. The fourth element of a valid contract is capacity. Capacity means the capability of the involved parties to enter into a contract which is legally binding. This element is important because it protects people without the capability of entering into a contract from entering to it, for example, minors, drunks and people of unsound mind. This element is supported in the case between Johnson v Buttress [1936] HCA 41, people under influence of any matter and minors do not have the capacity to enter into contractual agreements. Privity of contract is also an element of a valid contract whereby the relationship that exist between the parties to a contract determines whether that contract is enforceable by the courts. Contracts under privity only create obligations as well as liabilities between the parties to the contract and can only be enforced between the two and not a third party. However, there are exceptions to this privity rule that allow the people who suffer loss due to breach of the contract to raise claims in court. This is well demonstrated by the case between Les Affreteurs Reunis v Walford (1919) whereby the court held that, an implied trust between the parties is enough justification for the court to allow claims to be raised without withstanding the rules of privity. In the case between the producer and lady Gaga, the element of privity rule does not apply because lady Gaga is planning to sue the producer. There is no involvement of a third party in their contract. Question 2. Explain the importance of different types of contracts to the producer (1.2) Face to face contract and written contract are very important to the producer. The face to face contract is important to the producer because it is a legally binding contract since the two parties are present in the making of the contract for the purpose of discussing the facts and figures. It is important for the producer to maintain the trust and faith of the other party by not breaching the contract as agreed. A written contract is also important to the producer because the two parties are present in the same place of meeting and can get in touch with each other. It is important because the producer will be able to enter into written contract whereby all the clauses as well as conditions are written down and signed by the involved parties to the contract. Question 3 Advise on the relative importance of express terms, implied terms and exclusion clauses in line with the given scenario (2.2 and 1.3) Express terms Express terms of a contract involve the clearly stated conditions that parties agree on a contract (Danswan 2013, p.1). These terms are important because parties to a contract must consider them especially when terminating a contract. In the case between the producer and lady Gaga, the producer did not have the authority or the right to terminate the contract between him and lady Gaga under express terms. The reason is that, the terms were clearly stated in the agreement and this is considered as a breach of contract. Implied Terms Implied terms are those that are not clearly stated or understood by the other party when entering into the contract (Awesome Inc 2010, p.1). They are terms that are specifically agreed upon by both parties to a contract but they are highly related to the custom of the business. They include; terms implied by custom, terms implied by statute and terms implied by the court. They are very important to the parties into a contract because the basis of terminating contract is considered. A party can terminate a contract on the basis of implied terms. In the case between the producer and lady Gaga, the producer is entitled to terminate the contract under implied terms that he would incur extra costs by paying both performers at the specified term period. Since the producer did not know the contract would still be valid even when Gaga was sick, this implies that, implied terms entitle him to take the decision of terminating his contract with lady Gaga. Exclusion clauses The Legal Services Commission of South Autsralia (2011, p.6) denote that, exclusion clauses as clauses that are written down describing that one of the parties to a contract will not be held responsible for specific happenings. These clauses are important to be included when making a contract to remove burden form one party in case a specific happening occurs. They will be valid only is they are appropriately included in the contract and are not contrary to the law. In the case of the producer and lady Gaga, it was important to include the exclusion clauses for the purpose of excluding the producer from being held to the contract between him and Gaga after she was sick. Since there were no exclusion clauses in the contract, the producer is still bound to the contract with Gaga and has to pay for losses that Gaga will incur by not giving her the opportunity to perform in the agreed events. Question 4 Explain, analyse and evaluate conditions, warranty and innominate terms in contracts with reference to their meaning and effect including availability of remedies in case of breach of such terms (2.3) give relevant case laws while giving your judgment. Conditions A condition is an express term of a contract that goes down to the root of the contract. The breach of a condition entitles the defendant to end the contract and claim for damages. This explanation is well demonstrated in the case between Poussard v Spiers (1876) 1 QBD 410 whereby the court held that, the breach of a condition entitles the aggrieved party to end the contract since the condition is usually serves an important performance for the contract. Warranties A warranty is an express term of contract which is minor and not central to the contract existence. The breach of warranties entitles the innocent party to claim for damages as remedy only. They cannot end the contract. This explanation was demonstrated in the case between Bettini v Gye 1876 QBD 183 whereby the court held that, since the plaintiff reached a warranty, the defendant could not end the contract because the warranty did not go down to the root of the contract. Innominate terms They are also known as intermediate terms that cannot be defined specifically as a condition or a warranty. Innominate terms of a contract are well demonstrated in the case between Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962) whereby the court held that, when the breach of a contract results due to deprivation of defendants benefits as entitled in the contract, the breach is does not justify the termination of that contract. The remedies available for breach of innominate terms depend on the nature of the breach. In case where the person claiming has lost all the benefits of the contract, the law entitles such a person to repudiate the contract and claim for damages. If not such as case, them the claimant will be entitled to damages only. Question 5 Difference between Liability in Tort and Contractual Liability Ludusan (2013, p.38-39) describes the following differences between liability in tort and contractual liability. Liability in Tort Contractual Liability Obligation Between two individuals Between debtor and creditor Remedy damages The offender covers the predictable and unpredictable damages, direct or indirect Debtor is liable for damages that are foreseeable only when singing the contract Civil Liability Is the common law Is the special standards Authority Operates in all breaches of legal obligation Does not operate in a legal obligations Instance of Commitment By persons who are united voluntarily By persons who are united by chance People ability to respond One is liable if can discern the date of committing the illegal action An offender is completely legally competent when is an adult at the age of 18 Proof of Guilt The injured party must proof the offender as guilt Proof the existence of a contract and failure of its fulfillment, one is presumed guilty until proven innocent Question 6 Explain the nature of liability in negligence with example (3.2). As a legal advisor in the above scenario, explain the nature of liability in negligence and inform the parties in this case of what legal options may be available to them (4.1) The nature of liability in negligence is based on relationships that are non-contractual between the parties (ACCA 2014, p.1). One party only out to have a duty of care to the other. For example, a doctor has a duty of care to a patient; failure to have a duty of care, the doctor will be liable for negligence. In the scenario presented, the liability of negligence is that of failure to take the responsibility of duty of care. The contractor would have communicated to the director about his illness that is hindering him from performing as expected to properly establish the business in U.K. The director has entitlement to claim for remedies after establishing liability in negligence for the contractor to put him back to the situation he was before the breach of obligation (Miller, Creighton & Kaminskas 2012, p.2). Question 7 Using examples and supporting text from your academic sources, you are required to explain how a business can be vicariously liable (3.3) and advise Mr. Jawad if they have a claim against Mr. Owais for Vicarious Liability (4.2) A business becomes vicariously liable when the employer lacks the care on the employee’s part with whom the employer owes a duty of care (Hall & Wilcox Lawyers 2014, p.1). The employee part of negligence must have occurred within the scope of employment. The business is held liable for the employee’s negligence to pay damages since the employee is held to be an agent of the business. For example, when a gasoline truck driver runs on a red lighton along the way to the gas station and in the course hits another car and causes injury, the gasoline company will be held liable for damages that were caused by the driver. Jawad had a claim against Mr. Owais for vicarious liability because the negligence occurred while Owaris was still in duty. References ACCA, 2014, Key Aspects of the Law of Contract and the Tort of Negligence, ACCA Global. Awesome Inc, 2010, What are the Importance of Express and Implied terms in contracts. Maximising Potential. Bettini v Gye 1876 QBD 183 Danswan, C, 2013, Importance of “Express Terms” in Contracts, Danswan Law Limited. Hall & Wilcox Lawyers, 2014, Legal Obligations of Directors of Australian Companies, Australia. PP.1-4. Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962) Johnson v Buttress [1936] HCA 41 Legal Services Commission of South Australia, 2011, Exclusion Clauses: Exclusion Clauses and the Australian Consumer Law. The Law Handbook. Les Affreteurs Reunis v Walford (1919) Ludusan, F, 2013, Contractual Liability and Tort Liability in the New Civil Code: Similarities and Differences, Academia Science Journal, Juridica Series, Vol. 1, Iss. 2, pp.36-39. Masters v Cameron  Miller, D., Creighton, G, & Kaminskas, D, 2012, A user's guide to the Civil Liability Act 2002 (NSW), Colin Biggers & Paisley Lawyers. Poussard v Spiers (1876) 1 QBD 410 R v Clarke (1927) 40 CLR 227 Woolworths Ltd v Kelly [No2] [1991] NSWCA 287 Read More