Task 1:

P1.1: Explain the importance of the essential elements required for the formation of a valid contract

A contract may be defined as an agreement between the two parties that involves

various stages such as:

Offer and Acceptance

Intent

Consideration

A contract is an agreement of terms for a certain transaction free of any legal

restrictions. Under English Law, The law of contract is based on the principles of

Common Law and the decided case known as precedents. The court while

adjudicating relies on the precedents, ratio decidendi and the common practices

adopted in the similar situations. Therefore, the parties may pick and decide which

terms to be included in the contract or not depending on their needs and convenience.

This is known as freedom of contract. But under certain circumstances to protect

public interest there have been made certain exceptions to the freedom of contract.

The contracts can me made either in writing or by way of speech. Though, it is

recommended to always have a written contract as oppose to the other, to provide

evidence and facilitate any claims to be made. However, Certain exceptions are there

to this rule as some contracts are needed to be written such as deeds, bill of exchange.

The essential elements to form a contract are discussed as follows:

1. Offer and Acceptance: Though an offer, agreement, and a contract are of same

nature they still vary in a significant manner. A mere statement of intent would

not amount to an offer. A legal contract, binding on both the parties, comes

into existence when one party has made an offer and the other party has

accepted the same offer. Here the person making the offer is called the offeror

and the accepting party is called the offeree. This can be classified as an

agreement.

2. Intent: Each contract is an agreement but not the other way around. The

contracts are only enforceable by law if they are intention lies pure making it

legal. Also, The consent to the intention should be free from any fraud or

undue influence. Therefore, to decide on the enforceability of the contract, one

must find out the intent of consent of the contract.

3. Consideration: It is referred to an amount paid in return or offered for a

particular service agreed upon under the contract. It should be an act of

acknowledgement of the contract and could be partial or whole. [ Contracts

and agreements, 2014 9Online)]

P1.2- Discuss the impact of different types of contract

As per the prevailing law, there are two types of agreement:

1. Domestic Agreements and Social Agreements : According to the law, there is

no legal binding agreement amongst members of the family or a friend or

acquaintance. The courts presume that these contracts are not intended to be

legally binding. However, if the binding nature were expressly mentioned in

the contract only then would it be considered a legally binding contract.

Case Law: Balfour V Balfour (1919)

The husband came to England in search of better employment leaving his ill

wife back in Ceylon. On leaving he promised to 30 Euros every month. But

the marriage ended in divorce making her wife claiming maintenance. The

court decided the case in the favor of he husband, as there was no intent of a

legal contract. [Lawnix, 2013, 2 K.B. 571 (1919) (online)]

2. Commercial Agreements : The presumption by the courts is quite the opposite

in case of the commercial agreements. These agreements are entered into with

a particular intent of creating a legal binding because of the monetary interests

of both the parties. Such agreements include, contracts for the sale and

1

purchase of goods, contracts for services between a provider and receiver of

the services, employment contracts. However, if there is an express mention of

the not binding legal nature of the contract then the binding nature is removed

from the contract.

Case Law: Rose and Frank Co v Crompton Bros (1925)

Under this case, the parties stated in the agreement that it is not a formal or legal

agreement and therefore, are not binding legally to either of the parties. The court

adjudged the same. [Bailii, 2014, (online)]

P1.3- Analyze terms in contract with reference to their meaning and effect

Every contract has an introductory clause defining the credibility, the information of

the parties, current facts and the purpose of their existence. These are known as

representations in contractual terms. They do not form a part of the contract and as

they don’t specify a common ground of an agreement.

The terms forming a part of a contract are as follows:

Condition: The most important part of a contract on which the whole contract

stands. Any breach by either of the parties would result in the other party to

either terminate the contract or proceed with suing for the damages caused.

Warranty: This term of the contract isn’t as fundamental and therefore the

essence of the contract doesn’t get affected as much. Therefore, the injured

party does not have a right of terminating the contract for the same. Also, in

certain cases, the court has the power to decide whether a term of contract is a

condition or a warranty

Innominate Terms: The courts have begun to recognize a third set of terms

known as an innominate term. This means that the rights of either party

2

depend on the circumstances and not just restricted to a condition or a

warranty. The rights may differ from situation to situation.

Case Law: Poussard V Spiers & Pond (1876)

Under this case an opera singer had contracted to run an entire season at the producers

chambers. Due to an illness the singer couldn’t do the opening night and several

nights post that forcing the producers to hire a replacement. The opera singer tried

claiming the rest of the season but the producers refused to which court decided that

because the opening night was condition of the contract the producers had the right to

terminate the same. [Peisker, 2014, (online)]

The manner in which these terms are stated could be two:

Expressed: As discussed earlier, the terms of a contract can be mentioned in a

contract to provide an evidence of the terms agreed upon. The terms that

exclusive to the contract and binding on both the parties.

Implied: These terms are general to all contracts therefore, could be implied

even if there is no mention of these terms in the contract. These terms may be

implied by the law or may be implied by a custom such as a custom of trade.

Case Law: Hutton V Warren (1836)

In a locality of tenant farmers, one of the farmers had reached his last year of tenancy.

It was customary in the locality to claim for the cost of seed and labour from the

landowner. However, no express condition like this was mentioned in the agreement.

The court held that the condition was an implied term by customs as it is a general

practice has to be complied with regardless of any situation. [Bailii, 2015, [1836]

EWHC Exch J61 (online)]

3

Task 2:

P2.1- Apply the elements of contract in a given business scenarios 1,2, and 3

Business Scenario 1:

Under the given situation, Mrs Kaur, a keen Fine Watches, Pens and Luxury

Accessories collector, who had travelled to Manchester to London was disappointed

to find that the pen she had come looking for has been cancelled to be auctioned.

However, going into a nearby shop she found the same pen but wasn’t willing to pay

as much for the same. She bargained with the shop assistant and asked for some time

to thin over the final price being offered to which he agreed not to sell it. When she

came back to the shop she found out that the pen had been sold for a higher price than

what she was willing to pay.

We can gather from the facts that first, the cancellation was a last moment decision

independently taken by the auction organizers. Also, that the auctioneers had made a

general announcement to the public to attend the auction for the variety of products

and not just one particular product. Such an announcement is referred to as an

invitation to treat and not an offer or an agreement. To respond to such an invitation

is an offer, to which the auctioneer can reject the offer as he did.

Second, that the fact that the same kind of pen was available and Mrs. Kaur wasn’t

able to buy the same holds no relevance to the auction as both the situations are

independent of each other. Only Mrs. Kaur’s intention to the treat and offer are not

enough as for any transaction to take place the intention should be at both the ends.

As there was no agreement of legally binding nature Mrs. Kaur cannot claim any

amount of damage.

Case Law: Partridge V Crittenden

The defendant has advertised in the newspaper regarding the sale of wild birds.

However, since the sale of wild birds is illegal, the court while looking into the matter

decided that the advertisement was an invitation to treat and that no law was broken

while doing so. [Oocities, 2015 (online)]

4

Business Scenario 3:

Mia, a self-employed builder had been promised a certain sum of amounts in

exchange of providing certain service to his brother, Hakim and his friend, Jane.

However, both of them refused to pay on the completion of the work.

In the given situation, as both the parties in both the contracts had agreed to common

terms, had intent, made an offer and the same was accepted by the offeree. It was a

valid promise by way of speech. Though a promise isn’t a strong transaction in nature

but in this case, the elements being present, Mia can claim the amounts from both the

parties as he had done his share of promise with due completion of services asked of

him.

P2.2- Apply the law on terms in different contracts using a contract of your choice

For the purposes of this task I choose a Sale of Goods Contract.

A sale of goods contract has the following terms [Translegal, 2015 (online)]:

Payment - Specification like amount of payment, mode of payment, due date of

payment, and other such necessities are mentioned for under this clause. The

combinations of the aforementioned conditions in relation with the duration of

payments could also be a condition to this clause. For example: if a good is

purchased on installment to be paid every 10 days.

Prices : The prices specified in the contract does the purchaser consenting to

the contract owe. Therefore, price to be paid is binding in nature and cannot be

avoided under any circumstance.

Risk of loss : Any contract faces an equal risk of loss by a natural or a man

made disaster or situations that are inevitable. This clause however, mentions

the events under which the contract would be terminated or partially

enforceable. Also, the loss to be compensated on the occurrence of such

events.

5

Rights and Duties : There are a certain amount of rights and duties attached to

any contract and so to this. In a contract to sale of goods, both the buyer and

the seller have certain rights and duties to be carried out once they enter into a

contract. For example [OPM, 2015 (online)]:

a. Rights and Duties of the seller

- A competent price is offered

- The product is duly checked, free from every defaults

- Stopping the goods in transit in case the purchaser becomes

insolvent

b. Rights and Duties of Purchaser

- The documents and products are inspected before its acceptance

- The payment is made on time and in the manner agreed upon

Credibility of the parties: The parties at the time of signing the contracts may

mention there credit worthiness and goodwill in the market through declaring

their financial status. This is done to avoid any terminations in the future.

Return of goods: It should be expressly mentioned the situations under which

the product can be returned and the ones where it cannot be. The due date of

returns and the conditions attached to it shall be mentioned as well in order to

avoid any confusion later on.

Remedies: In any circumstance if any of the parties are unable to comply by

their duties towards each other the available remedies to them should be stated

expressly under the contract. Some remedies are as follows:

Action against non-delivery

Action against non-acceptance

Action for price

Action for breach of warranty

Choice of Law and Forum: The parties may agree upon the law to be abided

by during the functioning of the contract. In case of any disputes regarding the

enforceability of the terms and conditions mentioned under the contract the

parties may agree upon the court to be approached under the similar

6

circumstances for the damages and consequences so faced to be followed by

both the parties.

P2.3- Evaluate the effect of different terms in given contracts using business

scenario 4

Business Scenario 4:

In the given situation, the parties had entered into a written agreement with

conditions that were expressly mentioned under the contract. However the employer

had certain ideal conditions to the contract, nevertheless the employee had agreed to

those conditions making her liable in breach of those conditions.

When a condition is breached by either of the parties would result in the other party to

either terminate the contract or proceed with suing for the damages caused.

Under the present situation, the employee had failed to comply with the term of

completion of work but the implication that arises here is, what amount of work can

be completed within a given period of time depends from person to person. Though

she had put in all the hours required she wasn’t able to complete leaving it her with

the intent to finish the work but being unable to do so.

Second, that she wore trousers to work which she could have not done as, an intent

was missing or must have been an act of negligence which is again inexcusable. This

gives the employer enough reason to terminate the contract as he did. The termination

of the contract under present circumstances is valid.

Task 3:

7

P3.1- Contrast liability in tort with contractual liability

Liability in a general sense refers to an act or a service owed by a person towards

another with respect to non-fulfillment of a term or a condition. A tortious liability

however, arises out of a damage caused due to a wrongful act that cannot be

quantified. The wrongdoer must have had done an act in contrast to what was

expected out of him and the claimant poses certain damage out of the said act. The

compensation to be paid to cover the damages would be considered as a tortious

liability. It involves a liability arising out of a general promise applicable to an

unlimited and distinct people.

A contractual liability is however, different from a tortious liability as it involves only

the parties to the contract in regards with a specific promise. It is quantifiable with

respect to the value of harm done in relation with the consideration involved in the

contract and the amount of loss can be calculated depending on the terms of the

contract.

Case Law: Haley V London Electricity Board (1965)

Under this case the claimant was a blind person and the defendant was an electric

company carrying out work on the road that involved digging the hole. On one fine

day the blind person while walking by the site fell into the hole. The defendant

claimed that the any ordinary person capable of seeing would have seen and avoided

the hole because it was so prominent. The judge ruled the case in the favor of the

claimant making the defendant liable. The judgment stated that though it was a

foreseeable situation the defendant should have known that there might be some blind

or physically challenged people present on the road and therefore, should have taken

necessary step towards their safety. [A. G. S. Pollock (1964) (online)]

P3.2- Explain the nature of liability in negligence

8

It is a known phenomenon that any wrongful act that causes damage to the claimant

that can’t be quantified, is referred to as an act of tort. And the defendant would owe

an amount of tortious liability.

The unliquidated damages form an essential part of the law of tort as the recoverable

amount depends from person to person and situation to situation and cannot be

quantified at the time the damage had occurred.

Not all wrongful acts are intended as some such acts are without the best knowledge

of the wrongdoer and lack of awareness care. Such a wrongful act is called negligence

act. The liability arising out of such an act is referred to as a liability in negligence.

The nature of liability of such an act is dependent on the following factors:

The wrongdoer had a duty of care

The wrongdoer should have not complied with the duty of care

The wrongdoer out of his acts has created a liability towards the damages.

The said duty of care may be explained with the following examples:

Manufacturer-Consumer : A manufacturer has a certain level of duty of care

towards the customers using his product

Employer-Employee: It is the duty of the employer to provide a safe and

healthy environment to hi employees.

Driver-Passenger: A driver of a public transport vehicle has a duty of care

towards his passengers as well as the pedestrians.

However, it is necessary to establish a duty of care in order to claim a liability of

negligence such as in the case of a manufacturer and consumer. For example, it is a

duty of the medicinal manufacturer to the prospective consumers that he mentions all

the salts of the medicines on the pack to be sold in order to provide any damage to the

health. For a certain act to be done out of non performance of duty of care the

wrongdoer should have been obligated to perform such a duty, and that out of the said

wrongful act the claimant suffered a loss or damage. Also, it is the duty of the

claimant to establish the foreseeable nature of the wrongful act. In order to claim a

certain amount of damages out of a negligent act one must establish the

aforementioned facts.

9

P3.3- Explain how business can be vicariously liable

Vicarious means to be held responsible for the actions other than your own. Vicarious

liability means any liability arising out of such actions to be taken care of the person

representing or responsible for the same. In business, the liability of the company to

be responsible for its employees or sub contractors actions is known as the vicarious

liability of that business. In certain cases where the employer or the business owner

controls the clients or customers, then also he may be el vicariously liable for their

actions. Under the following circumstances the business may be liable:

Harassment: if a sexual harassment at work takes place, the court may hold the

business vicariously liable even if the owner had no information regarding the

same.

Medical Practice: If medical practitioner rents out a space to a friend with

same skills to practice his own and that in his due course of business over

there he faces a legal action then the owner could be held vicariously liable for

the same.

Under any business there are abundant of circumstances where in the business owner

may be held vicariously liable ranging from harassment, discrimination, libel,

copyright infringement and the likes. The extent of employer’s liability depends from

situation to situation. If the employee were working out of his duty to maintain his

primary duty then the employers would be held vicariously liable. Therefore, unless

the law mentions other wise the employer is ruled by the common law saying, that the

one that acts through another acts in one’s own interests. But in case of the employee

acting out of whims then the employer would not be held vicariously liable. [Allen,

The Law Society Gazette, 2014. Vicarious Liability- the two-stage test (online)]

Task 4:

P4.1- Apply the elements of tort of negligence and defences in different business

situations using business scenarios 5 and 6

10

Business Scenario 5

In the present situation the ship carrying the oil had a malfunctioning and eventually

the oil was spilled onto the water. The wharf functioning 200 yards away came in

close contact with the spilled oil. The owner was advised that any sparks from the

welding equipment would not set fire to the oil. The more precise use of the word

‘unlikely’ tells us that the owner was not completely sure of the fact.

Therefore, it is observed that the ship did not practice the first, the duty of care.

Secondly, that the wharf owner being unsure of the flammability of furnace oil still

carried out his functions which could have been stopped. Although, the said situation

is an act of negligence, the burden of the said act lies on both the parties as it could

have been foreseen and avoided. Therefore, as per the principle of tort the owners of

the wharf cannot sue the chatterers of the ship.

Business Scenario 6

In the present situation the employee Bell had lost the sight of one of the eyes.

However, Shell, the employer, still employed Bell onto a task of vehicle maintenance

that had a small risk of eye injury. Yet, the employer didn’t take the necessary steps

towards the safety of the employee. The employer had a duty of care and did not

comply by the same that caused damage to the good eye of the employee. All the

three elements of an act of negligence under tort are present making the employer

liable to pay the damages. Bell can claim damages for the said accident.

P4.2- Apply the elements of vicarious liability in given business situations using

business scenarios 7 and 8

Business Scenario 7

11

In the present situation Alf the employee was a caretaker of a ward of children under

the employer who had a business of a care homes for vulnerable children in London.

However, it was found out that he had sexually abused boys while they were under his

care. Now, being an employee and present at the premises of the employer one may

conclude that the employer must have had the knowledge about the said act or that

even if he could have known that such a thing could happen he didn’t carry out the

necessary steps for the elimination of such a situation.

Going by the general definition of vicarious liability one may infer that if an act takes

place under the premises of the company then the employer may be liable even if he

had no such information regarding the acts being carried out. However, the employee

was not carrying out acts of sexual harassment to fulfill his duties, rather he did it at

his own will. Therefore, even if the acts were being carried out under the premises of

the employer, it would not vicariously liable for the same.

Business Scenario 8

In the present situation Amos Bridge is a pump attendant and has the responsibility of

filling up the fuel and collecting money. However, he had a belief that one of the

customers had no intention of paying off and wanted to drive away to which the

customer was offended. The customer and Amos Bridge after a long heated

discussion Mr. Khan, the customer accused him of disrespecting and misconduct and

threatened that he would report such an act to the manager. After, the things were said

Amos Bridge got angry and fisted Mr. Khan’s chin. Mr. Khan being the affected party

wants to sue both the employee and the employer for the same acts.

Here, the vicarious nature of the acts is partial with the employer. Though Amos

Bridge was acting in the best interest of the company to fulfill his duty, he became

emotional and hit Mr. Khan at his own will. Vicarious liability lays only when the act

was done in order to fulfill the primary duty and not when the employee acts out of

whim.

Therefore, the employer would only be liable for the accusations made to Mr. Khan

and not the act of physical hurt.

References:

Bailii, 2014, [online]

12

Available: http://www.bailii.org/uk/cases/UKHL/1924/2.html

Accessed- 30 May 2015

Peisker, 2014, [online]

Available: http://peisker.net/ffa/Terms.htm Accessed- 30 May 2015

Bailii, 2014, [1836] EWHC Exch J61, [online]

Available: http://www.bailii.org/ew/cases/EWHC/Exch/1836/J61.html

Accessd- 30 May 2015

Oocities, 2015, [online]

Available: http://www.oocities.org/the_law_page/offer/inv2treat.html

Accessed- 30 May 2015

A. G. S. Pollock (1964). Negligence—Duty of Care to Blind. The Cambridge

Law Journal, 22, pp 189-191. doi: 10.1017/S0008197300085202. [online]

Available: http://journals.cambridge.org/action/displayAbstract?

fromPage=online&aid=2953608 Accessed- 30 May 2015

Contracts and agreements, 2014, [online]

Available: http://www.contractsandagreements.co.uk/law-of-contracts.html

Accessed- 30 May 2015

Lawnix, 2013, 2 K.B. 571 (1919), [online]

Available: http://www.lawnix.com/cases/balfour-balfour.html Accessed- 30

May 2015

Allen, The Law Society Gazette, 2014. Vicarious Liability- the two-stage test

[online]

Available:

https://portal.solent.ac.uk/library/help/factsheets/resources/referencing-law-

harvard.pdf Accessed- 30 May 2015

13

Translegal, 2015, SALE OF GOODS CONTRACT, [online]

Available:

https://www.translegal.com/wpcontent/uploads/sale_of_goods_appendix_1.pd

f Accesed-31 May 2015

OPM, 2015, THE SALE OF GOODS ACT, Chapter 82

Available: http://opm.go.ug/assets/media/resources/337/SALE%20OF

%20GOODS%20ACT.pdf Accessed-31 May 2015

14