Contract and Negligence in Business - Essay Example

Aspects of Contract and Negligence for Business Task Understanding the Essential Elements of a Valid Contract in a Business Context 1 A Discussion of the different types of contracts; written, verbal, and deeds and the importance of contract law to a modern business Since the dawn of modern civilization, there have certainly been contracts of various sorts. Before the written language, contracts were verbal and carried a great deal of legal weight. Verbal contracts are still in force today, although in a different form and with different stipulations. Over the centuries and decades, society has also adopted written contracts and deeds to more formalize the agreement process between parties on a whole host of business related matters. In essence, agreements for the basis for a binding contract. Once such an agreement is entered into, regardless of the manner in which it is executed, all parties agree to abide by the terms and conditions spelled out in said agreement. Only if all parties agree to be released from a particular clause in the contract, or an agreement is reached to null and void the entire contract, it remains in force. If violated, one party will likely have a claim against the other in a court of law. This brief section covers all three of these different types of contracts. When considering verbal agreements and contracts, it is important to remember that they are legally binding as a written contract in many situations. The key today, however, is proving the terms and conditions in question when a disagreement arises in a modern business situation. Under UK law, it has been largely determined that there are two main areas that constitute an actual binding agreement between two or more parties. The first involves whether or not an agreement was actually clearly reached as to the services that were to be performed, or goods provided. The second involves remuneration. If a figure was reached and agreed upon, it would be considered binding. Interestingly enough a verbal agreement today can be reached via either an in-person or on telephone voice exchange, or via email. Verbal contracts are more difficult to prove in a court of law. If one party states that the other party did not meet the conditions or warranties stipulated in the agreement, then problems can arise. If these are written out in a formal and written agreement, the issue is often quickly resolved. If, however, the agreement was verbal in nature, it can quickly become a ‘he said, she said’ affair that makes it difficult to prove one way or other in court. As such, it is recommended that the terms and conditions be clearly spelled out in a contract. Written agreements, quite simply, are similar to verbal agreements, except that they have a verifiable signature on them from all interested parties. Such contracts can be for any agreement where an exchange of services or good is to be conducted. To be more clear about what each party is expected to do, it is advisable to include a statement of the terms and conditions that need to be satisfied under the written agreement. When there is a dispute between and party, the more detailed a written agreement is, the better. A deed is a special type of agreement that does differ from written or verbal agreements. It is more legal, is in written form, and confirms that all parties have attested to either an interest or right in the good being discussed, usually property. To further add validity to a deed, a government authority often seals them. It considered more difficult to attest a deed in a court of law, as opposed to a written or verbal agreement. 1.2 Explain and analyze the various elements required for the formation of a binding contract In designing a contract, it is essential that it be worded correctly, include the proper information, and be binding. In order to accomplish, there are various elements that should be including in the formation of a binding contract. Upon analyzing this point, it has generally been agreed upon that there are four such elements that should be present. These include an offer, acceptance, intention of legal consequences, and consideration. An offer should be clearly worded or stated. The offer to do or buy something should be explicit in the offer. Such an offer needs to be specific, so no estimates or proposals should form the foundation of a binding contract. An offer will lapse when too much time lapses before acceptance, the party making the offer withdraws it prior to it being accepted, or the offer is rejected. If the offer is accepted, then the next vital element is an official acceptance. An offer must be accepted before a contract can become binding. To be more specific, the acceptance must be ‘as is’, which indicates that the party being offered the deal accepts the terms and conditions made in the offer. They can certainly propose changes, but that would require a rewriting of the offer and then another acceptance. This is known as a counter offer, and does often occur, but an offer has not been formally accepted until all terms and conditions have been agreed to. Acceptance can occur verbally, in writing, or by any of a number of inferred actions. This then kicks in the next element of a binding contract. For a contract to be binding, it does necessitate to all parties involve express an intent to enter into a legally binding contract. Each respective person, by expressing this intent, acknowledges that they desire to enter into a legal relationship with one another. Upon this legal relationship becoming acknowledged, the final element of a binding contract would be consideration. This means that one party will promise to do something in return for another party providing some type of benefit in return. This is known as the consideration. As long as that consideration is reached according to the terms and conditions of the contract, as agreed to in the offer, then the contract will be deemed to have been fulfilled. 1.3 Explain ‘terms and representations’ and ‘conditions and warranties’ in relation to contract using relevant case law Every binding contract needs to have clearly defined terms, representations, conditions, and warranties. It is important to know that, in an actual contract, there are conditions and there are warranties, and the two should be clearly delineated. A condition is, in essence, a term contained in the contract that stipulates exactly what is to be done in order for benefits (such as payment) to be given. An example would be the effectively delivery of 1,000 units of a product, in satisfactory, by March 1st in order for payment of 20,000 Pounds to be made. The condition is the date and the number of units. If these conditions (terms) are not met, then a breach of contract results. Warranties are a bit different as they are relatively minor terms of a contract that are not necessary considered essential to the actual contract itself. If a warranty is not met, the party that is wronged can certainly claim damages, but the contract is not null and void, as a breach has not occurred. The terms and conditions must be explicitly stated. This is the reason why verbal contracts are more difficult to prove in a court of law. If one party states that the other party did not meet the conditions or warranties stipulated in the agreement, then problems can arise. If these are written out in a formal and written agreement, the issue is often quickly resolved. If, however, the agreement was verbal in nature, it can quickly become a ‘he said, she said’ affair that makes it difficult to prove one way or other in court. As such, it is recommended that the terms and conditions be clearly spelled out in a contract. For example, let us say that the terms and conditions for payment of 10,000 pounds is to receive the successful delivery of 1,000 units of product. Party A gets the 1,000 units to party to B and request full payment. Party B then states that the contract was not met because the units were to have been delivered one-week prior. Party B would be violating the terms and conditions of the contract because there is no condition that the units had to be delivered by a certain date. Was there to be a set timeline that would need to be spelled out in the contract. The terms and conditions section of a contract is perhaps the most important part of any written agreement because it helps serve to prevent disagreements down the road. The warranties section is also important as it states what is to happen if certain conditions are not met. These are the elements to a contract that are most often scrutinized if a case is taken to court, so it is beneficial to be as clear as possible when drawing up any agreement. 2. Task B: Be Able to Apply the Elements of a Contract in Business Situations 2.1 Advise Anthony and give your reasons as to whether binding contracts exist between himself and either Bob or Carol In essence, when Bob responded back to Anthony offering 10,000 Pounds, as opposed to the original asking price of 15,000 pounds, he was making a counter offer. The law here says that if a reasonable amount of time passes after the issuance of an offer or counter offer without a response, then it is determined to have been rejected. As Anthony responded back that he would accept 13,000 pounds, he was once again sending a counter offer back to Bob, at which point Bob did not respond. This is a rejection of the offer. With Anthony then sending yet another offer back for 10,000 pounds, it was a new offer, not an acceptance of Bob’s original counter offer. As such, until Bob responds back in the affirmative that he accepts the new offer of 10,000 pounds, there is not a binding contract between the two parties. This is because no offer has actually been accepted during this process to this point. Written agreements, quite simply, are similar to verbal agreements, except that they have a verifiable signature on them from all interested parties. Such contracts can be for any agreement where an exchange of services or good is to be conducted. To be clearer about what each party is expected to do, it is advisable to include a statement of the terms and conditions that need to be satisfied under the written agreement. When there is a dispute between and party, the more detailed a written agreement is, the better. In this case, the offer was clearly stated, and it was equally and clearly rejected. For this reason, there is simply no written agreement to speak of. In the other situation, there is an implied binding contract. The law stipulates that once an offer is made, it can be withdrawn until it is actually accepted. In this case, however, the offer was accepted. The fact that the post had not yet delivered the letter is not relevant to this particular case. In all likelihood, Anthony would accept Carol’s later change of heart, but as far the law of binding contracts goes, she had already accepted the offer and, at that point, entered in to the process of an implied legal contract with the seller. 2.2 Discuss the contracts in relation to the different circumstances of each contract Both of these situations involve the first two elements of a binding contract. An offer that is made is not accepted until both parties accept every term and condition contained in the offer. If the party that the offer is made to submits a counter offer, then the offer still has not been accepted. On the other hand, if either party changes their mind prior to the acceptance by both parties being recorded, then the offer is null and void. Another and Bob satisfy the first part of this discussion, while Anthony and Carol fall into the second part of the discussion. In the first case, an offer was never accepted by both parties, given the terms and conditions of the specific offer on the table at the time. In the second case, however, Carol did accept the offer that Anthony presented and decided to enter into a legal relationship with him. This, in essence, did create a binding contract according to sprit and intent of the law. The essential elements of a binding contract that were previously discussed form the central premise for this discussion. Whether the agreement is verbal or written is not really the issue in either of these situations. The fact that each agreement was sent via the post is the primary problem in each situation. At what point does some agree to an offer? Is it at the moment of signing, or at the moment of delivery? The courts have ruled that once a party accepts an offer, it becomes a binding acceptance. Put the offer letter in the post is similar to giving a verbal ok. To rescind it is only legally possible with the consent of the other party. Now, in this situation both parties would likely settle their differences without the need to go before a magistrate, but it is helpful to know that the first contract was not binding, but the second certainly was. 3. Task 3: Understand principles of liability in negligence in business activities 3.1 Explain what is meant by ‘duty of care’ in Negligence. Discuss the ways in which business can be held vicariously liable for the action of its employees In the United Kingdom, prior to the year 1930s, there was really no provision for ensuring that a party has a duty to act within certain confines, less the legally liable for negligible behavior. That changed back in 1932 with the issuance of new tort legislation in the UK that paved that way for a party to be held liable of negligence. This duty of care in negligence has many components, of which some are described below specifically in terms of the various ways that businesses can be held liable for the actions of its employees. In easy terms, duty of care involves the legal idea to a person or company is to take any reasonable steps possible to avoid any acts of omissions that they can foresee would cause possible injury or hardship on another party. Naturally, the courts determine what those ‘reasonable steps’ are, but the is the basis of this tort. One case of negligence could be judged the principle of foreseeability and proximity. This is one of those grey areas of the law, but it stipulates that if a reasonable person should have foreseen the damage that was done, then they will certainly be deemed negligible in the eyes of the court. The key here, however, is the parties must also be determined to be in ‘proximity’ to one another, usually defined in a legal context. This can include two parties that have entered into a legal relationship with one another, at which point the court would see that one party does have a duty to care for the other. There is also the role of policy to consider. As the tort has been defined over the years, it became apparent that certain provisions needed to be implemented in order to assure that parties were not sued for every reason imaginable. Not only would this cause a backlog of cases in the court system, but it would place an undue burden on would be defendants as they would worry at every turn about negligence, when in fact it was another party who truly bought harm upon themselves. One example of policy that has been written that would not result in being deemed negligence in matters of duty of care is if the claimant is the cause of his or her on misfortune or misstep. This was confirmed in the case of Philcox v. Civil Aviation Authority in 1995. Another issue of the policy is the protection to guard against parties having their own performance affected, or to have their public duty be called into question, because of fear of being deemed negligent. If this policy were not in place, many businesses would simply not be active in certain areas out of fear of not expressing adequate duty of care. In all of the aforementioned situations, and others, businesses can certainly be held liable for the actions of their employees. In essence, if an employee does something related to the job or at the job site that harms another parry, not only did they fail to satisfy the duty of care provision of the tort, but the business itself can ultimately be held to liable and negligent as well. Consider an a car salesman that willfully omitted certain components of a contract and did not adequately disclose potential problem areas. If someone purchases the car, drives it off the lot, only to get an accident due to some fault of the car that the salesman knew about, then that employee has failed in his or her duty to take appropriate precautions to protect the customer. Also, if they failed to take any action, deemed by the court to be inaction, they will be found to be negligent as well. Acting as an agent of the company, however, the business itself is negligent for the actions of their employees. 4. Task 4: Be able to apply the principles of liability in negligence in business situations 4.1 Advise Brad as to whether he can recover his losses from Charles, stating the reasons for your decisions In this situation, Charles would be determined to be negligent because he undertook a task and agreed to perform it for Brad. Brad, therefore, had the capacity to be reasonably assured that the information provided by Charles was accurate. The undertaking provision of the duty of care in negligence tort is designed for cases such as this. If a person aggress to perform a task, they assume a duty to act carefully in fulfilling the task. In this case, Charles did not carefully perform his duty, as he sent in the wrong information altogether. Brad then used this information, that he rightfully assumed was accurate, to let the flat, resulting in thousands of pounds of damages. He would certainly have a case to pursue in the court system. 4.2 Consider and advise whether Terry could sue Mr. Roger for negligence and explain your reasoning In this situation, duty of care in negligence has also been violated and Terry would be permitted to sue Mr. Roger. Mr. Roger owns the amusement park, so he has the obligation to make sure that any visitor to the location is safe. This includes the equipment that is on the park grounds, such as the swing. The duty of care in negligence requires him to perform adequate maintenance on any piece of equipment that could reasonably be known to cause in injury if not properly kept up. Now, Peter is the one that was injured, but Terry, as his father, rightfully suffers from nervous shock as a result of the accident. If this is an actual diagnosis given be a registered psychiatrist, then the House of Lords has ruled that Mr. Roger would be liable for the psychiatric injury of Terry. Now, the grey area is that the courts to this point have been hesitant to award psychiatric claims to individuals who were not the actual victim of the initial injury, but they have been awarded in the case of Duileu v White, Hambrook V Sokes Bros, and others. As such, Terry is welcome to sue and, as the boys father, he would likely have a strong case. 4.3. Could Celtic Railways in some way be held responsible for the child’s injury? Give reasons for your answer. Part of the duty of care involves a person’s control over the land. If a person who is occupying the land does not make it safe for individuals the might gain access, then they can be determined to be negligent. Cases such as Dominion Gas v Collins and Holian v United Grain growers illustrate this point. In both cases, the defendant had control over an object on their land that was likely to be dangerous if a third party came into contact with it. In this case, the child gained access to the line via a badly maintained and broken fence. The fence, however, was not the responsibility of the railway line as it is public land. As such, this is a grey area where the railway line will likely not be seen as negligent due to the fact that they did perform their duty of care by notifying the proper authorities – in the case, the police. References Bell, J. (2004). European contract law. International and Comparative Law Quarterly, 58(1), 250. Henney, C. (2012). Breaching the contract? Privacy and the UK census. Law and Financial Markets Review, 4(5), 485-489. Townsend, J. (2008). Contract terms. Common Law World Review, 37(2), 204. Read More