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Introduction

Understand different features, rules, uses, aspects of contract and negligence is the main purpose of this report. There are lots of agreements between industries and individuals are very common in this modern area of business. Both the oral and written agreements are being used by business organizations. Written contract is a lawful contract that help to solve any problem that may be arise in future while working with other or for other. Company uses contract to defense their capitals or reputation. Use of negligence has develop speedily to compensate the loss cause for damages made by intentional or unintentional use of actions. Tort and contract laws used for compensate individuals for monetary damages where no extra cure was available. However, Business can be vicariously liable by the employees of the organization and employers should aware about the rights of the employees so that no employees can able to make organization vicariously liable.

1.1 Explain the importance of the essential elements required for the formation of a valid contract

Every agreement must have some important elements to be a valid contract. Those elements are discussed below-

Agreement (offer and acceptance): Valid contract base on agreement. An agreement must have lawful offer by one party and lawful acceptance of this offer by other party. Without offer, there will be no contract and it make sure whether the contract is legally valid or acceptable. Acceptance is important as without accepting the offer, there will be no contract (Nebbia, 2007).

Capacity of the parties: Capacity of the parties describes the capability to make a contract. A person must be major in age that means at least 18 years old, mentally stable are the main criteria of capacity of the parties. Person who cannot fulfill these criteria, are considered as unable to make contract (Peeters, 1987).

Valid consideration: Consideration of a contract refers that every person or parties must give back something in return. Valid consideration is as like as exchange of something like as cash, administrations or property between promisee and promisor (Phillips, 1948).

Free consent: Each and every parties related with the contract must willingly enter into the contract. If any party make contract unwillingly or under pressure or anything else then the contract will be void contract (Rodger, 2006).

Lawfulness: The contract must follow the rules and regulations imposed by the law and any violation of the law make contract void. Object and consideration of any contract must be lawful.

Certainty: All of the terms and regulations of any contract must be stated clearly and all of the parties must understand the terms and conditions of any contract. If agreement I not certain then it will not be considered as a contract.

1.2 Impact of Different types of contract

Face to face contract: In case of face to face contract, both the two parties- offeree and offeror should present during making the contract. If any party is absence then it will hamper making contract. All of the parties of any face to face contract can understand terms and conditions very clearly and there will be minimum possibility of breach contract (Burrows, 2007).

Written contract: Written contract refers the document in which all the terms and conditions of the contract are write down and signed by all the parties of the contract. Individual, organization or business can be the parties of this contract. Written contract protect all the parties from any sort of misunderstanding of breach of the contract. Written contract observed and examined by lawyer (Burnham, 2003).

Distance selling (telephone, internet): Distance selling refers the sale of goods, services of digital content without face to face contact. Selling by using internet, e-mail, mobile SMS, T.V shopping channel, interactive T.V, telephone and mail order are known as distance selling (Barbour, 2004). B2C (business to consumer) selling is considered as distance selling but B2B (business to business) selling is not considered as distance selling. Distance selling process should complete in a prearranged and systematic way. In a distance selling contract, certain information must provide to the consumers before making the contract and consumers agreement needed before charging for additional items. Moreover, customer helpline must contain basic rate, no extra charges should not charge.

1.3 Analyse terms in contracts with reference to their meaning and effect

Condition: Condition is a significant term for business law. Any contract formed by different types of terms such as expressed term and implied term. All the terms are not important. The more important terms are known as condition (Collins, 2008). Without condition, no party can enter into the contract. If any party make condition falsely or to breach a condition, the damaged party will be entitled to cancel the contract or sue damages for his loss caused by breach of condition. In case of conditions, the damaged party capable to cancel the contract or can sue damages.

Warranties: Warranties refers the less important terms of a contract. Importance of warranties is less than the importance of condition. If any party makes false warranties then the other party of the contract can sue monetary damages for this but cannot cancel the contract. In the case of warranties, the contract is still valid but the damaged party can sue monetary damages against the other party (Chung, 2006).

Innominate term: Innominate term refers the term of any contract that is not clearly defined as a condition or warranty. Innominate term based on the basis of effects of breach on the terms of any contract. The term treated as condition if the effect of breach is severe and the term treated as warranties if the effect of breach is less severe. Uncertainty of the innocent parties is the prime disadvantages of innominate term and flexibility of court is the prime advantages of innominate term.

Exemption clauses (including legality): Exemption clause refers an agreement in a contract that specifies that a party is limited or excluded from the liability. Sometimes exemption clause used unfairly and caused for damages of a party. Basically, there are two types of exemption clauses, ‘limitation clause’ and ‘exclusion clause’. Limitation clause limits the liability of a party where exclusion clause excluded a party from liability. Exemption clause makes the contract unfair and court want to limit the use of exemption clause to create more fairness in contract.

2.1 Apply the elements of contract in the given business scenarios

There must have an agreement between Carol and the seller is the prerequisite of completing contract. An offer and acceptance of this offer between buyer and seller is must to be an agreement. Here, offer and invitation for offer should clearly distinguish from one another. An offer is certain and it is capable of transforming a wish into a contract whereas invitation for offer is nothing but a circulation of offer. If invitation for offer is accepted, then it cannot say as contract (Conaghan, 1999). In this case, the seller advertises that he wants to sell leather couch at a certain price, but there is no offer to create a contract. This types of advertisements are offer to receive offer; not the offer to create contract. So, in this case there was an invitation for offer and that’s the reason Carol doesn’t have any contract with the seller.

In the second case, Preston is the promisor and George, Smith & Fogarty, Inc. is the promisee. It is considered that compensation for past voluntary services is a valid agreement without consideration. Moreover according to Sec. 25(2), a promise to compensate is enforceable wholly or partly by the law for the person who has already voluntarily done something for the promisor and that’s why George can enforce the promise as George hired Devi before Getting the letter from Preston.

2.2 Apply the law on terms in the given contracts

Giving reasonable and sufficient notice of existence is a law of exclusion clause and this notice must be seen by another party of the contract. The party who implement exclusion clause should aware another party about the exclusion clause otherwise the party cannot rely on the exclusion clause. If there is any exclusion clause then it should clearly state so that it can be seen e.g. “for conditions, see back”. But in case of the situation of the restaurant, nothing was indicated on the front side of the receipt or the staff of the restaurant did not tell anything about the exclusion clause to the customer. So, according to the rule of exclusion term, the restaurant cannot rely on the exclusion clause that stated on the backside of the receipt because this exclusion clause contains unsigned documents (Elliott, 2007).

According to the law of implied term, offer and acceptance of any contract that made not in the oral or written mood such as by acts or by conducts of the parties is also an agreement and considered as enforceable by law (Davies, 2006). Thus, a uniform coolie takes up the luggage of a traveler to carried out the station without asking the traveler and if the traveler did not stop him or allows him to do so, then there is an implied contract between them. Here, Aaron repaired the warehouse after rented it from Zehphra and he did not stop Aaron to do the repairing and promised him not to increase rent for the upcoming five years and Zehphra did not increase the rent till his death as he promised. So, according to the law of implied term, Yeti cannot increase the rent for five years as there was an implied agreement between Aaron and Zehphra. If he wants to do so, he will have to compensate Aaron for repairing expenses of the warehouse.

2.3 Evaluate the effect of different terms in the given contracts

According to the Sec. 19 and Sec. 19 (A), if the consent of one parties to the contract are obtained by coercion, undue influence, misrepresentation or fraud considered as a voidable contract. Marine, fire and life insurance base on the fact that all material facts must have been communicated to the insurer. If there has been disclosure of any material fact, insurer entitled to avoid the contract. All the material facts related with the insurance policy should express to the insurer by the assured so that insurer can be concern about the risk to undertake (Fontaine, 2006). Here, the claim policyholder or any other driver involved in any motor accidents or made a claim (fault or non-fault including thefts) during the last five years was a material fact but the insured avoid the fact. So, according to the law, the insurance company has the right to void the policy.

There are the two term of the contract involved with this case. The car been altered or modified from maker’s specification (including the addition of optional fit accessories like as spoilers, skirts, alloy wheels etc.) was the first term and the last term was the policyholder or any other person who drive the car for the past five years been involved in any accident or loss (irrespective of blame and of whether a claim resulted). The insured replied ‘no’ for both the terms and after investigating the insurer found that the car had been fitted with oversized alloy wheels, spoilers, and chrome wheel arches, and that the policyholder's husband, a named driver on the policy, had made two significant claims in the previous five years. The insurer refused to meet the claim and cancelled the policy from its start date.

Sec. 18 stated that, misrepresentation of facts occurs when a representation made wrongly, either innocently or intentionally. In case of misrepresentation of fact, the insurer does not have the right to void the policy from the start date. This case was also a misrepresentation of facts. So, in this case, there are two options available for the insurer. The insurer can cancel the contract by treating it as voidable or he can continue the contract and claim that he shall be put in the position in which he have been if the representation made had been true (Sec. 19).

3.1 Contrast liability in tort with contractual liability

Contract law can be defined as the part of law that govern contractual agreements between persons or merchants. It is basically an agreement between parties about their duties and responsibilities. Tort law govern situations in which one party harmed another party. It cover violations caused intentionally.

Similarities between contract law and tort law-

There are many similarities in both contract and tort law. Generally, both the two laws deal with a breached duty. The same duty that has been listed in the contract have to do by the breach in the case of violation of contract. For example, if a person repair want to repair his warehouse by another person. The person will pay the money and another person will perform repairing services. If any party fail to perform his duty, there will be a breach of duty and the damaged person can sue for a suitable remedy.

Tort violations also involved with some sort of breach of duty. If any damage has occurred during the repairing for the negligence of the concern party, there will be a breach of duty. Both the two laws- contract and tort laws give damages money equally. These damages money are paid by liable party to cover the losses of damaged party (Giliker, 2010).

Differences between contract and tort law-

Issue of consent is the most significant differences between contract and tort law. The parties of contract law must be known about the agreement and deal without any coercion. So, in this case damages in the contract must be a mistake or misunderstanding as both the parties aware of their duties and responsibilities.

On the other side, tort law is never based on consent but it based on coercion. It basically deal with damage done by a party into the safety, health, profit, or privacy of another party intentionally and the victim has the right to claim losses.

3.2 Nature of Liability in negligence

Nature of liability in negligence have to prove by the applicant. Applicant must demonstrate that duty of care was unsettled by the defendant. There must be four factors present to prove a person responsible of legal negligence in a non-criminal matter.

· The defendant must have some sort of duty to complainant or to the general public.

· The defendant failed to perform the duty.

· The complainant claim some sort of injury like as physical, financial or emotional.

· A reasonable person prove that the defendant is responsible for the injury of the complainant.

Generally, court adopts a three phase test to determine whether the defendant is responsible to pay the losses. The three phase are-

· Is there any close connection between the parties?

· Was the loss of the sufferer predictable?

· Is it reasonable to impose a duty?

3.3 How a business can be vicariously liable

Vicariously liability refers to a condition in which someone is said accountable for the engagements or errors of another person. In the context of workplace, an employer is the responsible for the activities and errors of its employees. Many employers are not concern about that they can be accountable for a series of activities done by their employees in the progression of their employment. These include mistreatment and harassment, vicious or biased act, racism, breach of copyright etc. (Harris, 1989). Action can be taken against an employer for the behaviour of third parties like as suppliers, clients and customers etc. as it is think that these parties are under the control of employer.

The employee either performing in an individual capability or in the progression of their employment is the main question of the case of vicarious liability. Generally this can be difficult to determine. An employer’s liability doesn’t end when the employee leaves the organization because the employee can take action against employer even if he is no longer works for them. Employers must take all rational steps such as an up-to-date equal opportunities policy and anti- discrimination training to employees to stop such actions or errors is the most needed things to avoid vicarious liability.

4.1 Apply the elements of the tort of negligence and defences in the given business situations

(a) When can the hospital be held responsible for negligence

The hospital is liable for the damages that resulted in death of Mr Brown. A doctor primary duty is to go through a check-up and then prescribed medicines to the patient. But when Mr Brown went to the hospital for his chest pain and breathing problem, the doctor didn’t check-up and instead of check-up he prescribed some medicines over the phone and the patient had died. In another sense, the widow of Mr Brown must prove that the hospital’s actions were the reason of death of Mr Brown through the traditional rules in negligence case and the hospital is liable for the damages (Havighurst, 1961).

(b) When can the hospital not be held responsible for negligence

The hospital cannot be held for negligence if the hospital did not know that there was toxic mould available in Mr Brown’s house which may be a cause for his death. Here, a “but-for” situation can be referred for the cause of fact. Simply Mr Brown death was not the responsibility of the hospital as Mr Brown died in pneumonia and there is no relation between chest pain and pneumonia.

4.2 Apply the elements of vicarious liability in given business situations

The client of the chauffeur company can sue losses against the chauffeur company. There are some reasons that made chauffeur company liable. The driver was on duty during the time while accident occurred. Moreover, the driver was hired by the company and he did work that benefitted the chauffeur company as he was at the airport to pick up a client of the chauffeur company (Merkin, 2014). So, the client can sue losses against the chauffeur company.

During the accident of next situation, health and safety was delegated to another company, who was working for an independent contractor. An independent contractor is a person who accomplishes services for another person under an express or implied agreement and who is not subject to the other's control, or right to control, over the manner and means of performing the services (Livingston, 1790). Health and safety responsibility was under the independent company and failure to perform their responsibility did not make the supermarket responsible. So, the supermarket is not responsible for the injury of the colleague.

Conclusion

Understanding the features and rules of contract and negligence and their uses at different sector of commerce and businesses is very important. Any business organization should know about the essential elements required for the formation of a valid contract and should aware about different liability such as contractual liability and tort liability. Absence of a single vital element makes a contract void or voidable. Liability in case of negligence is also an important topics to be known by any business firm or individual. Damage done by carelessness should not happen in the organization. Organization can be vicariously liable by the employees and employers must be aware to prevent vicariously liability.