There are many kinds of contracts and relationship in any business scenario that specifies certain rules and regulations. These norms act as a guiding principle and binds the parties to act in a particular way. The law of contract has a significant role in corporate cases that helps in explaining different rights and duties of contracting parties. The another prevalent law in business environment is headed by Law of Tort which stipulates necessary obligations in case of civil proceedings (Appleman, Appleman and Holmes, 2015). This necessitates the inclusion of all elements that are involved in these laws to have a smooth functioning of business and saving the rights of each party against any defaulter party. The present report is based on Aspects of contract where different types of contract and their elements have been discussed along with their implications. Further, the report will focus on defining the principles of liabilities and principle of negligence as well with the help of different case studies. Moreover, various terms of contract and their applicability in various types of situations have also been discussed which will help in understanding importance of these acts in practical life.
To form a contract two or more than two parties with their free consent get into a legal agreement (Braga, 2011). The two parties involved in the contract are offeror who gives some offer and another offerre who accepts the offer given by offeror. Thus, the agreement completes with a promise made to have a useful consideration in return. For a good understanding of Peter Abraham related to contract and its elements the following section will help him:
- Offer: This is the first stage of beginning of an intention to enter into the contract. Here, one of the party use to express his/ her intention to form a contract by offering something to another party. The law states that the offer made by the offeror should imply true and full intention to originate a contract. So, here Peter has to remember that to form a valid contract he will have to make a true offer which should not imply just an invitation to treat.
- Acceptance: Another another element of acceptance is stipulates that after the offer is made by offeror, it is necessary to show the willingness by offerre towards the offer inclusive of all its terms and conditions (Kreitner, 2011). The case of Day Morris vs. Voyce (2003) gives the implication of this element in a contract. Thus, any offer which is not replied by the offeree or his/ her silence cannot be taken as an acceptance of the contract.
- Legal relation: This is the important side of any contract which states that any contracting parties should have an intention of making legal contract. Hence, in case of Balfour vs. Balfour (1919) contract was not valid as they did not have any legal intention in making contract. Thus, to be a valid contract it is necessary to have a legal relationship between contracting parties (Boukredera, Aknine and Maamri, 2012).
- Consideration: Any contract which is made without valid consideration in return cannot be held as valid contract. It is necessary that each party agrees to give something valuable in return so that the contract can be made on a valid basis. The consideration may be in form of any payment or any type of act that is promised by the either party in case of fulfilling a specific condition which is evident in case of Curry vs. Mishra (1875).
- Capacity to contract: To make a valid contract the parties involved should be of age above than 18 years, should have a sound mind and not a declared insolvent.
The law has specified that the valid contract can be made in two forms that is either orally or in written way. The primary thing which should be borne in mind by the parties is to fulfil all the essential elements of a valid contract (Bochicchio, Longo and Mansueto, 2011). The contract can be made in the form of implicit and explicit forms. A bare dealing including promises from both parties can also be considered as a contract but it should have a legally binding relationship. Moreover, Peter Abraham should also keep in mind that there are some other manners as well which can give commencement to a valid agreement:
- Face to face: The promises that are made in a face to face meeting will be equally enforceable by law as in case, made in the form of written agreements. Hence, it is necessary to understand by Peter Abraham that verbal contracts have an equal effect in the eyes of law.
- Written contract: It is apparent worldwide that written contracts are more helpful than a verbal contract as it is supported by all needed documents that can be used in future references (Wills and Napier-Munn, 2015). Because of this reason, in corporate world, written contracts are always preferred over verbally made contracts.
- Distance selling: Any promises or contract entered into via emails or telephone call can also develop into a valid contract, providing all essential elements of the contract should be existing. Thus, it becomes necessary for Peter Abraham, that he remains careful while making any deal through calls or emails.
To make a valid contract that has all essential elements and enforceable in right manner Peter Abraham should have a complete knowledge of other types of contracts that may have an impact in corporate world. Thus, various sections of laws that have an inference on a contract is highlighted below:
- Conditions: Conditions are the core part of any contract as they have a significant role in binding the parties to the contract (Friedman, 2011). Thus, the conditions of a contract states various obligations of involving parties and gives them a right to deny the whole contract in case of breach of conditions by either party. Thus, the significance of conditions increases here as it forms the base of contract in absence of which no party can be enforced to fulfil their promises. The way of condition may amount in express of implied nature as per the relationship between parties.
- Warranties: The warranties show some conditions where one of the party gives assurance to another party about form of any product or service. In business world, warranty plays the role of ancillary terms which helps in supporting various terms of contract. Further, for the knowledge of Peter, it is essential to know that in case of breach in warranty, the suffered party has the right to acquire compensation for damages but cannot repudiate the contract (Lacey and Lamont, 2014).
- In nominate Terms: These terms use to see into the matter to check the degree of harm that is caused by the default party to plaintiff. Therefore, the court use to investigate whole case so that determination can be made about loss of suffering party due to breach of terms which also took right of party to take any privilege. The existence of these terms is decided by court of justice and hence no part can label it at the moment of making contract.
- Exemption clause: This clause makes a provision in contract according to which, one of the party use to limit the liabilities against any damage, or losses originated due to negligent or non performance of act. Thus, there are more possibilities that this clause may be used in unfair terms which may prove to be disadvantageous for other party (Friedman, 2011). Thus, law also states that exemption clause should be used with extreme care and in fair terms by both parties involved in contract. This clause was observed in case of Tilden Rent-a-car co. vs Ontario court if appeal (1978) where Tilden company was accused as it did not brought clause to the attention of customer.
Carol use to dwell in an unfurnished student's apartment thereby, she needs a couch which she found through an online ad Gumtree. On that basis, she expressed her wish to buy that couch which was priced at £600 by dropping a mail to the company.
According to the case, it is found that there is a difference between 'invitation to treat' and valid 'offer'. The invitation to treat implies the offer which is made in general and not addressed specifically, therefore it does not bound anyone until the acceptance from a particular party is not communicated. On other hand, offer expresses the intention of making a contract with a specific person. In case of Harvey vs Facey (1893), only supply of information was done which does not account to offer towards any particular person and hence it is an invitation to treat. While if some person contacts the party in accordance to supplied information it becomes an offer (Blackman, and Benson, 2010). Therefore, in case of Carol and Gumtree, the company has made an invitation to treat while through making contact with mentioned firm via email, Carol makes an offer.
Thus, there is no acceptance by the Gumtree in response of Carol which shows that there is no fulfilment of essential elements of contract which results in absence of a valid contract.
In a large IT firm Devi was confirmed at the position of cyber-security with George, Smith and Fogarty Inc. as on 12th April, 2015. As Devi did not want any intervention of his father, he did not communicate about it to his father. On 13th April, 2015 Preston father of Devi, not acknowledged about his hire, mailed to George to hire his son and offered £150,000 in return. No more communication was made between parties and now the mentioned firm wants to enforce this agreement against Preston.
As stated earlier, a contract can be based only on grounds of valid consideration (Freedland and et.al., 2016). No past object or consideration can be used as a base for contract. Apart from this, any party have rights to sue opposite party only in case of doctrine of privity is present between them. In case of Winterbottom v. Wright (1842), the court implied that the existence of privity in contract is necessary which was not in the mentioned case of Winterbottom v. Wright. Likewise, in case of Devi, the contract cannot be valid as the condition that has to be fulfilled by hiring Devi, was completed before making an offer. Thereby, it is clear that George has no right to enforce the promise made by Preston as it is not based on legal or valid contract. Apart from this, neither George nor Preston is capable to sue each other according to the law of Doctrine of Privity. So, it is clear that Preston's promise cannot be enforced by George.
In a popular restaurant of London, a couple booked a table where the man came and handed his overcoat containing £500 at entrance to attendant. In return, porter gave him receipt which clearly mentioned leaflet that the hotel will not be responsible for any valuable items that remains in jackets or pockets. After taking meal, man realised that he has forgotten the wallet in overcoat hence,went to collect it and found that money has been stolen from wallet (Cimino, 2010). Man demanded for the same from restaurant which was denied by stating that the receipt given had a clear instruction which mentioned that restaurant will not be responsible for that.
The above case expresses the application of exception clause where either party makes a clause to limit his/ her liability in case of negligence or non performance of act. The case of Houghton v Trafalgar Insurance (1954), court made a decision that parties to the contract must not create any type of ambiguity in exemption clause. Thus, insurance company was not exempted from liability. The clause mentioned here raises the possibility of uncertainty though it has a legal shape in eyes of law. This has necessitate the inception of test of incorporation so that the exclusion clause can be applied in right way. Therefore, in above case the man's act of forgetting the wallet in overcoat was the result of negligence. Apart from this, it is also necessary to mention here that, if any type of clause is included in the agreement because of a custom, the clause will be based on valid grounds. So, if the leaflet has mentioned the clause previously in clear terms, it can be said valid regardless the man has not noticed it (Chun-dan, 2011). Thereby, it can be articulated that restaurant is not liable to pay on the basis of valid exemption clause.
Aaron entered an agreement to take a rented house with Zehphra which needed a repair as it was not in good condition. It was promised by Zehphra that rent of house will not be raised till next five years, but she died after a year. Due to good repairs done by Aaron, value of the property raised and Yeti, son of Zehphra inherited the property. He increased the rent which was refused by Aaron stating the promise made by his mother. Consequently, Yeti ended the contract of tenancy, for which Aaron has put forward a bill and claimed compensation for the expenses. Yeti refused it and specified that contract does not carry any term according to which compensation for expenses is payable.
The case of Courtaulds Northern Textiles Limited v Andrew  has stated the case of implied contracts where it was stated this type of contract is mainly based on relationship and trust. But this does not take away the rights of an individual as it is an essential element of valid contract (Jose, 2012). In tenancy, the landlord is liable to make any kind of repairs unless the contract specified anything else. Here, Aaron undertook the repairs responsibility for which Zehphra has promised not to increase the rent for five years in return. This makes the termination of contract by Yeti as violation of contract. Therefore claim of compensation made by Aaron for repairs is liable to be paid by Yeti.
The form of insurance filled by a policyholder, mentioned that he has not claimed any type of insurance in last five years in response to the asked question by the insurer. Later on, insured made a claim against theft for which insurance company found that the policyholder has previously made a claim in five years period of time. Therefore, the insurance company made the contract void.
The case of Carbill v. Carbolic Smoke Bail Co. (1893) states hereby that any promise made by nay of the party should be fulfilled failing to which makes the contract void. In above case, the policy holder did not revealed the necessary information asked by the insurance company which is a necessary condition for a valid contract (Andersson and et.al., 2010). Therefore, on such grounds, the insurer can make the contract void as the insured failed to give right information asked in terms of 'yes' or 'no'. Thus, the decision taken by the insurance company to make the contact void was right.
The above case states that, information furnished by the policy holder was not right ion response to modifications in car along with any kind of claims in previous 5 years. The insurance company refused to make any claim and terminated the contract from the start date after founding the reality that car has been modified and also claimed two times in stipulated time period. The policy holder cannot claim for losses as she failed to supply true and valid information to the insurer. Apart from this, as she clarified that she was not known to the fact related to modifications and claims one of which was rejected cannot serve the purpose of saving her from loss (Abebe and et.al., 2013). Thus, the essential condition of contract that implies disclosure of true information was not fulfilled and hence, insurance company can make the contract void from inception date.
Liability of tort and contractual liability has some fundamental differences which has been enlisted below:
The contractual liability is based on making contract valid in accordance to free consent.
The tortious liability originates involving the party to entering into any health and safety of the victim.
The damages in case of this liability is compensated by restoring the party to the same position as earlier before the damage.
In this liability, the damages are compensated by punitive means.
For instance, Two parties ABC ltd. And XYZ co. came into contract and former company agreed to deliver 500 cartons of toys to XYZ on a payment of £1500 (Pierce, Stacey and Wander, 2010). The toys were delivered but the payment was not received hence, the XYZ co. is liable to be compensated by the same amount agreed upon.
For instance, a man sued a motor company as he met with an accident due to his own negligence and carelessness. The company is not liable to pay as any person is supposed to drive with due care and safety for which any motor company is not liable if met with any accident.
Apart from above stated differences there are some similarities as well which are as follows:
- Both the contracts use to come into play in the situation of breach of duty.
- Both the contracts use to compensate in case of breach.
- The contracts make liable to the default party to pay damages and reward the aggrieved party for losses. Bone by him/her.
Negligence comes into existence due to a breach of duty because of failure of a party in taking care of something. For instance, Mary was driving car and meanwhile she was hit by a car which was in over-speed and also running in red light (Parzefall and Hakanen, 2010). Due to accident, Mary's head skull was damaged and she is able to claim compensation from the car driver. In this case, some of the points are helpful to support the principle of negligence:
- Duty of care: The primary requirement of negligence is to prove the duty of care according to which it should be evident that the suspected party was under a reasonable duty to perform which he/ she has failed to comply with. For an illustration, a person is responsible to drive slow in the areas nearby a school. Thus, this makes an individual bind by the duty of care to be performed violating which a person is liable for all kind of losses made to anyone due to accident.
- Breach of duty: In this duty, the person is liable to make up for losses that has been caused due to not acting in a reasonable manner (Gutmann, 2013). The case of Donoghue v Stevenson (1932) implies the act of negilgence where a snail was found in ginger beer drink and Mrs. Donoghue fall ill. The company was liable to pay as they were owed for duty of care according to which they were abide to serve safe product and service to customers.
- Causation: At this stage, the plaintiff is liable to prove that the act of defendant has caused injury or harm to the complainant. For instance, a taxi driver will not be liable to pay for losses caused to a party whose mobile has been stolen while talking sitting in taxi by a thief.
- Damages: By this element to be enforceable, the loss or damage should be capable to make up by any monetary or non monetary medium. For instance, after taking a meal in a famous restaurant a lady fell ill as the food was stale. The losses that were caused to lady in her treatment is liable to be compensated by restaurant (Appleman, Appleman and Holmes, 2015).
The doctrine of vicarious liability takes place when any person is held liable for the acts which has been performed by him/ her on the behalf of some other person. This relation comes into existence as result of parties who are acting on behalf of other person where the main party cannot make the contract directly. For instance, relation between parent and child where parents enter into a contract on behalf of their children, employer and employee, where employee use to make contracts with third parties in the behalf of his/ her employee. For instance, a person on behalf of his employer is taking the passengers on ride on boat. The boat met with an accident due to which passengers were injured. For this loss, the employer company was responsible for losses as the employee was working on the behalf of his principle.
Therefore, this doctrine principle infers that any person who is acting under the control of any individual, the individual person will be liable for the acts that are performed by the person on his/ her behalf (Kreitner, 2011). For instance in case of Valles v. Albert Einstein Medical Centre, (2000) the hospital was held responsible for damage cause to the claimant party as the doctor was acting on behalf of hospital and not acting as an independent doctor.
Mr. Brown went Goodmayes hospital, due to a chest pain and some breathing problem. A nurse attended him and called a doctor on duty to inform about the patient. Doctor did not come to see patient and replied on phone by instructing the nurse to give him some pain killer tablets. On next day, Mr. Brown died due to pneumonia caused as a result of toxic mould in his house.
According to above case, the hospital is liable for the damage and death of Mr. Brown which was caused due to the negligent act of doctor. The doctor did not come to attend the patient which shows the negligence of doctor and if it is proved that the death was caused due to chest pain problem, the hospital can be held liable for losses according to doctrine of vicarious liability (Bochicchio, Longo and Mansueto, 2011).
In case, if it is not proved that the death was caused due to pain killers and was the result of pneumonia, the hospital will not be liable to pay the damage.
The driver of a chauffeur company was driving after drinking alcohol and consequently, he met with an accident. This makes the chauffeur company to be vicarious liable for the losses as he was acting in a negligent manner. The court of law has explained that an employer company is liable for any of the act made by their employee who was acting in the power of rights given by employer, regardless of the act is authorised or illegal. The driver has gone to pick up the passenger from airport ion the behalf of company where the driver had a drink and met with accident. This makes the chauffeur company vicariously liable for the damages caused by driver (VICARIOUS LIABILITY - EMPLOYERS’ LIABILITY FOR WRONGDOING OF EMPLOYEES, 2016).
In the mentioned case study, it is evident that accident happened at the time when Jones was acting on the behalf of his employer. Jones was carrying out his duty of loading palettes where the accident caused a serious injury to his one of the colleague. The occurrence of event which caused harm to another colleague sued the supermarket company which is right as the company is vicariously liable for the losses made to claimant.
The aspects of contract is a basic subject where all the essential elements of a contract can be understood. The aspects of contract helps in understanding the concept of valid contract which comes into existence on fulfilling some necessary conditions. The present report has discussed different elements of contract like offer and acceptance, consideration, legal relation etc. which makes a contract legal and valid. Further, with the help of different case studies, various subject matters related to vicarious liability, validity of contract and exclusion of liability is discussed which helps in knowing the applicability of these acts in practical situations.