A business organization has to face many criteria to conduct business in the worldwide business arena. Different domestic and international rules and regulations help to expand business and sometimes create barrier to the business. The law has an incredible effect over the business organization and others social working groups of the organization. Law helps to determine what is right or what is wrong for conducting a business organization. Contract is a part of the business transaction. Contract is an agreement between two or more parties each of whom has the intention to create a legal relation to have a lawful object between them. Contract is regulated by law that is enforceable by the court and legal jurisdictions. Contract is more used in the partnership business where each party has a common goal, trust one another and a specific time period.
Q1.1: What are the essential elements of forming a valid contract? Explain the importance of each element by providing relevant legal principles derived from decided cases: An agreement that can be enforced by law is considered as a contract (Jones v.Daniel 1894). An agreement is enforceable by law when it fills up certain conditions that are regarded as essential element of valid contract. Essential elements are: Offer and Acceptance, Lawful Consideration, Intention to create Legal Relationship, Certainty:
Offer is crucial element for a contract, is very important that the offeror to intend to for a term as an expression of willingness to enter in to a contract, contract which will became lawful upon acceptance. (Gibson V Manchester City Council (1979)1 WLR 294 HL)
An acceptance is a willingness that the offeree agree to all the terms of the offeror has made. Also the acceptance must be ‘mirror image’ of the offer. (Day Morris Associates v Voyce 2003 EWCA civ 189). If the offeree try to set up new terms on the offer, this normally is a counter offer which will kill the original offer. (Hyde v Wrench 1840).
Consideration is defined as an acts or a promise of a payment or charge or value which is called ‘Consideration’ made from promisor to the promise or both. (Currie v Misra 1875) An agreement should be based on the ‘freedom of contact theory’ of all parties. Free consent is hampered when coercion, mistake, fraud and misrepresentation are made. (Chappell & Co. v Nestle 1960 AC).
Intention to create Legal Relationship:
A legal relation is created through the agreement that is intended. An agreement to sell or buy a product is agreement intended to make legal relationship and is therefore contract. A contact may not be valid if the participants they are not intending to create legal relation. (Balfour v Balfour 1919). Domestic and Social contracts are not considered to be a legal relation. (Jones v Padavatton 1966). Also commercial agreements is normally considered that is made in a business context and automatically is an intention to create legal relation. (Case: Esso petroleum v Commissioner of customs and Excise 1976). Family agreements can be enforceable if there is a clearly made in to a ‘business contect’(Snelling v John G Snelling ltd 1973).
As a contract to be valid it must contain terms of the contract and if a important term is hidden that contract will not be lawfull. Q1.2: Describe different types of contract usually undergone in business context. Critically analyze the legal impact of distance selling contract. Sales contracts, Employment contracts, Marketing contracts, Licensing Sales contracts are made between companies to companies and to private person to a private persons, can be goods or services. Employment contracts is an agreement from employer to employee with terms of payments, benefits, period of time, rights and obligations. Marketing contracts are normally made from business to business or from persons to business to promote products and services to the general public or to business. Licensing contract is used normally to transfer rights to an individual to be able to licensee goods and services in regime of trade mark.
Distance selling contract regulations: sellers give certain basic information to customer, deliver goods within 30 days, and provide customers a right to cancel their order. All business must comply with the ‘Sale of Goods Act’ Q1.3: Analyze the contrasting aspects of different kind of terms generally used in a commercial contract. 200 words The lawfulness of commercial contract based on different kind of terms. These terms are considered as implied and express terms. Four categories of implied terms (Porter v Tottenham U.D.C1915) are: Terms Implied by fact: Under this term court believe that both parties of the contract know about the fact. Terms implied in law: Under this term court indicate a specific law of defined type in the contract. That law protects the weaker party in the contract. Terms implied by custom: In this term, local custom is applied on the contract. Terms implied by trade usage: Terms regularly used in contracts within a particular business can be implied on other such contract.
Express terms are:
a) Oral contract
b) Written contract
c) Parole evidence role
d) Collateral contract
There are three types of contractual terms:
a) Condition: Major term of contract. Serious consequence occurs when it is broken. (Poussard v Spiers and pond 1876) b) Warranties: Under this term an affected party can sue for damage when it is breached but cannot terminate the contract. c) In nominate term: If this type of term is breached serious or negligible result can occur depending on the particular fact.
‘Implied terms are more sensitive to deal with than express terms in a business contract’ – how far would you agree with this comment?
In contract implied terms refers to terms that are not directly written in the contract but are introduced into contract by the court or by statute. Express terms are conditions that are directly written and agreed by both parties at the time of contract made. As the terms are not mentioned in the contract, it is more sensible to deal with during conflict than express terms.
Task 2: Application of Contracts in Business Situations
(a) Green Pharma put an advertisement in a trade journal stating: ‘for the wholesale buyers only, our ‘new moisturizing creams’ are now at a special low price of £10 per dozen.’ Mr Khan, one of Green Pharma’s trusted vendors, rushed to one of your show room and wanted to place a large order. Meanwhile the company made a new decision not to sell the creams any more. Mr Khan became cross and he wished to pursue a legal action against the company. Advice Green Pharma about the possible legal consequence. Justify your comments with reference to similar case precedents.
In the given business scenario Green put an advertisement to sell its new moisturizing cream at a special low price Green Pharma was making only an invitation to treat. ((Partridge v Crittenden (1968) 1 WLR 1204). As a result Mr. Khan one of the trusted vendors rushed to one of the show room and wanted to place a large order but he was refused to give order. As a result he wished to pursue a legal action against the company. Mr. Khan wanted to make an offer to Green Pharma to buy the goods but was no acceptance from the company therefore was not valid contract, in event of seeking legal action from Mr Khan will not affect Green Pharma in any way legally.
(b) You work into the night to complete ‘an important report’ for your immediate boss, Tania. Tania is very pleased with the report and says ‘I know you have worked very hard on this, I will make sure there’s an extra £200 in your pay at the end of the month. Can you enforce this promise? 100 words
In the given situation you can’t make lawsuit against Tania although it is a oral promise that is done with spoken words. Tania makes a statement or promise which we can call consideration but that consideration was completed before Tania has made her promise. We called this situation past consideration so it can be a lawfull consideration (Re McArdle 1951).
(c) Joe works in the purchase department of Green Pharma. He lives near to you. By an agreement he provides you with a lift to work in return for a contribution towards the petrol. Would this contract be legally enforceable? Justify your answer with legal arguments.
In the above situation Joe can’t be enforced in this contract legally due to lack of intention to create legal relation, furthermore the agreement was done in a social context, if in event to seek legal action the court will not enforce this agreement (Balfour b Balfour 1919) Q2.2:
Alban is the business development manager of Green Pharma. Four months ago he bought a ‘Landmaster’ car from Brenda’s Garage Ltd for use in his business activities. He paid £12,500 for the car and was given a written guarantee in the following terms. ‘Brenda’s Garage Ltd guarantees that, for three months from the date of purchase, it will put right free of charge any defects in the vehicle which cannot be discovered on proper examination at the time of purchase. Thereafter all work and materials will be charged to the customer.’
The sales manager recommended to Alban that he should take out the ‘special extended warranty’ under which, for payment of £350, the car would have been guaranteed in respect of all defects for a further two years, but Alban declined. Last week the engine and gearbox seized up. The repairs will cost £2,000. Advise Alban. Would your answer differ if he bought the car only for his personal use?
In the given scenario I think there would be difference between contracts whether it is made with personally or commercially. All contracts are made up with the essential elements. When Alban purchases a Landmaster car from Brenda’s Garage ltd for use in business activities, he made a legal contract through offer and acceptance, and a written agreement. It also includes the consideration in the contract that defines each party to the agreement gets something. There was the existence of the certainty element of the contract through which Brenda indicates for three month from the date of purchase they will provide warranty service of the car. If Alban purchase the car for personal use he would make a contract with the seller of the by maintaining the element of the valid contract. Alban can not make a claim for compensation of the car if want it to do that because was outside of the warranty was given. Although if Alban would buy the car for personal use he has the right to lawsuit against the Brenda’ to recover the cost repair due to Sale Goods Act implied terms of satisfactory quality.
Q2.3: Explain the effects of the following in the running of a Pharmaceutical company such as Green Pharma: a) Breach of conditions, and, innominate terms
Breach of condition:
Condition is the basic term of contract we also can call it hart of the contract. When condition is breached, the affected party can sue as well as end the contract and claim for damages. Warranty: Warranties as a secondary condition can be a specific kind of terms representation of fact that the law can enforce against the warrantors. If a warranty is breached the victim party can only demand for compensation but cannot end the contract, therefore Green Pharma offer replacements which will conduct to damages only.
Innominate terms: As a result of such breach the innocent party is deprived of the whole benefit of the contract. The inexperience vendors will be entitled to repudiate the contract and to get compensations (Hong kong fir shipping co. ltd v Kawasaki kisen kaisha ltd (1962)
b) Legality of exemption clauses. Please include relevant examples to explain different aspects of the terms. 200 words An exemption clause is a term in the contract made by one party to protect them from lawsuit done by other party for damage,loss,negligence or non-performance etc. It is done usually by the party who draft the agreement.
For example, a digital camera shop use exemption clause in their selling document where they accept no liability for any damaged camera after selling it to customer. Thecourt generally describes exemption clauses narrowly to see if it is logical in specific perspective. An exemption clause can be included and bound into a contract if it is written in a signed contractual document; it does not fact whether the party understands it.
Task 3: Principles of Liability in Business Negligence
In what aspects, liabilities in tort are different from contractual liabilities? Give examples of ‘duty of care’ in the context of someday- to- day situations. Explain the concept of ‘causation’ and ‘remoteness’ in the tort of negligence. 220 words Tortuous liability is more imposed in nature whereas Contractual liability is freedom. Contractual liability holds more privacy than liabilities in tort (Fleming, 1984). Sole proprietorship and Partner in partnership are responsible for the tort committed by them and torts committed by the business.
In the contractual liability parties are engaged with one another by mutual consent which is conducted by the contract. On the other hand, the relationship in the tortuous liability is imposed by the law, the defendant must responsible the claimant a duty of care. The basic contrast between the contractual liability and the liability in tort is that the first is the result of agreement whereas the second is the result of law.
Day to day examples of duty of care:
a) Keepers of dangerous pets will hold a duty of care to people who will be likely to be affected. b) Lorry drivers owes a duty of care to his goods that it’s delivering. According to the law, duty of care is a legal responsibility that is applied on an individual requiring maintains a reasonable care during completing a specific task to overtake any acts that make jeopardize others. Duty of care is done by a employer to his employees, by a traffic police to the pedestrian, by a supplier to the manufacturer for the quality of the raw materials etc.
Causation defines and determines the extension of liability. Causation is the indicator through which one party proves that another party makes loss to them that is considered before damages. It may be difficult to prove when there is more than one cause. Remoteness determines how much a defendant is responsible for his wrongful doings. A defendant must make up the damages or loss if it is within the reasonable consideration.
Q3.2: Explain the nature of liability in negligence by giving reference to different scenarios. Negligence is not intentional tort but accidental. Negligence liability holds that defendant know about the probable risk that can occur damage largely to the injured party. Here the injured party does not know about the risk before it happens. Negligence liability also assumes that the defendant has control power over the probable risk of harms that caused the plaintiff injury. (Lewis, R., Morris, A. and Oliphant, K.2006).For example, negligence liability occurs when a landlord sell a portion of his property to a customer although knowing about the legality problem in the property documents that may cause serious damage in future if any legal issues increases.
In this situation the buyer of the property will know about the problem and damages after the occurrence happens. Another example, negligence liability occurs when a nurse does not mention the medicine to the patient who has no knowledge about the medicine causing the patient take wrong medicine.
Q3.3: Explain the legal requirements to hold employers vicariously liable for the torts committed by their employees.
Vicarious liability in English law is a doctrine that applies rigorous liability on the employers for the wrongdoing of their employees (CRC-Evans Canada Ltd. v. Pettifer1997). In this perspective, the person who is vicariously liable is free from blame although the person is legally responsible. An employer is vicariously responsible for doing the conduct of employees or a group of employees, agents, supervisors or managers, a person deployed by the firm disturbing a member, workplace participant etc. The provision of the vicarious liability refers to the to the legislation that applies if the person was an employee and not from a contractor or agency. (Mersey Docks & Harbour Board v Coggins and Griffiths Ltd 1947).
We can consider tort of an employee if occurs to connection with the person’s employment. Without taking all responsibilities the employers may be held liable for the actions of the employees. (Limpus v London General Omnibus Co 1862) Also we may have another situation where the driver of a bus company is not in his course of employment where is injures passengers it can not be responsible for the accident. (Beard v London General Omnibus Co 1900) Courts attribute to the employer where the employers’ objectives do not reach in the absence of the employee’s serious risk which has committed.
So, there are some close connection between the tortuous act of the employee and the circumstances of his employment to establish a vicarious liability. Examples of vicarious liability are: employees seize the goods of the firm. Task 4: Application of Principles of Liability in Business Situations Q4.1:
By applying the relevant legal principles answer the following: (a) what is the level of duty of care to be shown by (1) a learner driver (2) a Chinese herbal doctor working in England and (3) Junior doctor in a hospital? The duty of care refers to the principle that the duty to take responsible care to avoid foreseeable injury to a neighbor.
A learner driver
Must know the rules and regulations of the traffic and level of care is not been different from all other drivers. (Nettleship v Weston 1971). Understand the possible magnitude of the probable harm or injury occurred on roads. Know the importance of the social value of this activity.
Chinese herbal doctor
A doctor must mention reasonable harm and can not be considered a full doctor therefore is not grade of comparison. (Shakoor v Situ 2004). The relationship between the defendant and the claimant about proximate cause.
A junior doctor
To practice under the supervision of senior doctor (Bolam v Friern Hospital Management Committee 1957). Maintain reasonable standard of the profession.
Avoid negligence actions for medical malpractices.
Know the bad effect of malpractice that causes harm or injury. (b) Green Pharma engages Mr Ken, a local electrician, to rewire its office. Two weeks later Leo, a visitor, is electrocuted. Discuss Green Pharma’s liability in tort. Would your answer differ if Green Pharma put the following notice at the entrance: ‘Persons entering these premises do so at their own risk’? 125 words A tort liability is the legal obligation of a party which causes to suffer or loss someone as a result of a civil wrong or injury. Green Pharma has experience in defending clients, variety of personal injury. In this scenario it is found that one of the visitors has attacked by the electrocuted. There was a rule to set up a notice for awareness.
But due to negligence of the employee the notice was not hung. As a result, the Green Pharma is responsible for the accident of the visitors. The visitors can sue for getting the compensation of the damage. If there was the rule in the entrance: ‘Persons entering these premises do so at their own risk’. In this perspective the visitor should follow the notice in the entrance. If not follow Green Pharma will not responsible for the accident. The visitor cannot sue against the company for getting the compensation for the damage.
(a) John is a van driver employed by Green pharma. While on his rounds, he stops to collect his own television from a repair shop. He parks his van carelessly and it moves off, injuring Kelly, a pedestrian. Is Green Pharma vicariously liable? Vicarious liability indicates a situation where someone is liable for the acts of another person. In this business scenario John is van driver employed by Green Pharma who use the van for his personal use to carry a television from a repair shop. As he parks the van carelessly that resulting injured Kelly a pedestrian, the pedestrian can sue against the Green Pharma because the owner of the van is the Green Pharma who not is vicariously liable for the injury of the pedestrian.
Beard v London General Omnibus Co 1900 (b) Robert, who is a security guard in Green Pharma’s head office, has been encouraged by the company to keep order by force – if necessary. One night he grabbed one MrMattis on suspicion and stabbed him in the back. Discuss the potential vicarious liability of Green Pharma. 100 words Here Green Pharma plays the role of the employer and Robert is the employee of this. Green Pharma is vicariously liable for the act of the Robert because he has done the action encouraged by the company to protect his job.
Seemingly, Green Pharma is free from the blame but it is legally liable for the negligence of the employee. As a result Mr.Mattis affected by stabbing can demand for the compensation that must be paid by the company. Many employers are not aware that they can be liable for a range of actions done by their employee in the course of their employment.
To regulate and expand the business the importance of law is increasing day by day. The capacities and culture of the different organization and nations are not same. Law provides the fundamental understanding of the negotiation deals that is required in the business. Legitimate contract helps to debate settlement of the business organization in the court by legal jurisdictions. Top management of a organization should know the reasonable information about the various elements of the agreement to understand and get important point in the business arena.
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11. CRC-Evans Canada Ltd. v. Pettifer(1997)
12. Porter v TottenhamU.D.C(1915) Jones v.Daniel (1894) 2 Ch. 332].