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Business Contract law
As a Junior Legal Executive of a small law firm, using the case scenario of Bill v. Liza and Bill v. Cathy, the elements of a valid business contract has been explained in this report.
An agreement between individual be it companies or persons or any there form of institution can be termed as a contract. Thus a contract can be defined as the reuisite rules that regulate the terms of the agreement. Activities such as selling products or services, exchanging interests or even the transfer of ownership constitute the need for a contract (Inbrief, 2015). Contract law therefore demands that valuable products (or objects) to the exchanged along with the drawing of an agreement (using the elements of offer and acceptance) with the clause that the agreement be between two parties, both of whom are of a sound state of mind at the time of the initiation of the contract. Further to this the law also dictates that the contract to be drawn in appropriate forms (such as written, if required) and executed in accordance (FindLaw UK, 2015). In view of this, a business contract in its existence consists of “expressed terms” (negotiations of parties) and “implied terms” (for efficacy of business). It has been deemed that the use of express terms in a contract is best (FindLaw UK, 2015).
The following is a brief on contract, its initiation, and the aspect enforceable in context to UK.
Contract law in the UK has been set based on cases i.e. the use of common law and also on the “freedom of contact” principle as applied to a business setting.
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1.1 Essential Elements of a Contract and its impact
There is a ‘lawful offer’ to create a legal contract. The ‘lawful offer’ must be given by one party and ‘lawful acceptance’ by the other party. Therefore elements are required to carry out the same. The elements include offer, a consideration, and an intention (Kumar, 2012).
An offer can be explained as the act of showing interest to the contract that are based on specific terms that has been created with the intention that once the person to whom it can has been addressed, it can become binding (see Stover v Manchester City Council, 1974). In any case once the offer is made it cannot be altered further. An offer can be made either by words or actions and be addressed to one person, a group of people or the world in general (Allen & Overy, n.d.).
Acceptance of the offer:
In conjunction to the above, an acceptance of the offer must be made to the offered agreement. This acceptance should be to each and every term of the contract and can be made either by words or actions (Allen & Overy, n.d.). In the case of Bill vs Cathy, Cathy accepts the offer made by Bill with a counter offer.
In the case of consideration, it is the most important when a contract is presented. This has been aptly projected in the case of Currie V Misa (1895). Consideration is hence the promise made in return to the promisor to pay either by being a detriment or as a benefit prospect to the promisor (Manuel, 2010).
Intention to create legal relations:
An agreement can be only legally valid if the parties intend to get into the agreement (Manuel, 2010).
“An invitation to treat”:
Invitation to treat bears reference to the start of a business dealings or negotiations. However, it is not to be confused with an offer. This makes acceptance to the agreement less likely (MacMillan & Stone, 2012)
1.2 Types of Contract law in the UK
Contract laws in the UK are usually based on the nature of consideration, formation, validity and the execution and are classified hence.
Types of Business Contract
For the business context different types of agreements exist. They are specialty, simple, standard, unilateral and bilateral.
Speciality Contract is one which can be used in cases like property lease, partnership deeds and so on. This type of contract is a formal one in which both the concerned parties are to sign consent in a written document to project that they are in a contractual binding.
A simple, is one that can be either verbal or written based on the requirement of the parties. Although the means they use must be clear to both. In this case the parties are liable to sue or be sued by the other in case a breach of contract occurs. For a verbal contract, the agreement can be made via conversation, telephone which makes it difficult to show breach as no proof of the contract exists. The written contract on the other hand requires the signature of a lawyer to have a holding in the court of law.
A standard contract is one where agreements are drawn to carry out business where the experts of the fields of both companies enter a contract. As the case of a simple contract both are liable to sue if the contract is breached.
A unilateral contract is where only one party gets into a contract known as the offer or if the party gets into contract for exchange of a service from the “offeree”.
A Bilateral contract is a transaction between two people that occurs on the basis of a promise. This makes both bound in agreement. The promisor is one who makes the promise (Manuel, 2014).
2.1 Discussion of Elements of Contract to Bill v Cathy and Bill v Liza
In the case scenario of Bill and Cathy wherein an advertisement of a printing press was placed by Bill in a Trading journal which entailed the cost of 100,000 pound sterling. In response to this advertisement, Cathy made a counter offer of 80,000 pound sterling. Bill further replied via post saying that 90,000 pound sterling is his final offer to which he did not receive any response from Cathy. He further wrote to Cathy stating that 80,000 pound sterling was acceptable. For this case, it is clear that an offer to sell was made by Bill and an offer to buy was made by Cathy, however, no contract was ever drawn. Hence, this scenario can be considered as one of an “Invitation to treat”. This makes the advertisement by Bill to not be considered as an offer. This is consistent with the principle of “Invitation to treat”, wherein it cannot be considered as an offer and thereby giving neither party the legal right to sue the other. In the case of Bill and Liza, where Bill wrote to Liza offering an office computer for sale priced at 550 pound sterling to which Cathy responded immediately by way of post stating that she will buy the computer at the asking price. However, before the post reached Bill, Liza changed her mind and sent a fax to him asking him to ignore the post when he received it. This case thus falls under the purview of “promissory estoppel” wherein, Liza made an offer to buy the computer but later changed her and completely ignored the deal. As per the concept of “promissory estoppel” Liza is hence subjected to be sued by Bill.
Merits and distinctions
The person given the promise (promisee) relies on the promise made to him (by the promisor) until his detriment of the promise. This can be enforced by law which is a legal principle. The purpose of this principle is to avoid injustice and its use is when there is any case of breach of contract. The legal principle comes into effect when there is a breach of contract and to avoid injustice. To better understand this principle let us consider few cases of law (Dave, n.d.).
Case law involving McIntosh v. Murphy (1970)
George Murphy, the owner of the car dealership (Murphy’s Motors) flew into Southern California to recruit personnel for the same. He flew in from Hawaii in March of 1964. At the same time, McIntosh was in search for a job.
A telephonic conversation took place between Murphy as well as McIntosh in the month of April of 1964 regarding the latter's interest in the job opening. It was agreed by both parties that employment would begin within 30 days of the conversation. A one year contract of employment was given orally by Murphy to McIntosh. A telegraph was sent by McIntosh to Murphy saying that he would be arriving in Honolulu on Sunday, April 26, 1964. McIntosh sold some items, rented an apartment and brought along personal items (Kadian-Baumeyer, 2015). And so McIntosh started his employment as assistant sales manager on Monday April 27. Suddenly McIntosh was terminated from employment on July 16, 1964 when everything was going smoothly. Murphy said that McIntosh was not able to train salespeople and unable to close deals. McIntosh then went to the court of law under promissory estoppel since he was terminated before the promised one year period. McIntosh had relocated from home to the work place on the basis of the promise. Since here the promised was breached this case truly proves the principle of promissory estoppel (Kadian-Baumeyer, 2015).
Case law Involving D & C Builders v Rees (1966)
D & C Builders agreed to building work at Mr. Rees’ residence at value of £746. D & C Builders offered a reduction of £14 after the completion of construction, Mr. Rees paid £250 and a sum of £482 was outstanding for payment (E-Law Resources, 2016a). There were no complaints for the workmanship and the former wrote to the latter claiming for payment which resulted vain. Later on, D & C Builders were in the verge of insolvency and hence claimed the outstanding amount through telephonic call to Mrs. Rees. She reported complaints for the work done and settled to pay only £300 for the entire debt based on her stated complaint. D & C agreed to accept £300 and gave her a year to repay the remaining debt. But Mrs. Reed continued to be firm and was ready to pay only £300 which made D & C Builders to give her a receipt mentioning ‘in completion of the account’ on acceptance of £300. D & C accepted the proposal but still stated that acceptance was made due to reluctant need of money and the money forfeited did not cover the cost incurred. D & C builders sought legal action through promissory estoppel to retrieve the balance. Mrs. Rees could not stick to Promissory estoppel because she has threatened D & C for ransom knowing their financial situation to accept on a lesser amount or she would offer nothing (E-Law Resources, 2016a).
Case of Waltons Stores (Interstate) Ltd v Maher (1988)
The Australian case of Waltons Stores (Interstate) Ltd v Maher states that the Walton Stores (defendants) were ready to dwell in a new building of Maher (Plaintiffs) at a place of constructing a new building on demolishing the old building on negotiation (Davison-Vecchione, 2012). The terms of agreement were on the basis of rent. The defendants sent a draft of lease agreement to Plaintiffs in October and few changes were conversed. The plaintiffs sent a revised lease to the defendants, Maher started demolition in the month of November ensuring to conclude the lease terms. At a later stage in that month, the defendants argued about the reservations in the lease and proceeded slow in the deal. The defendants never entered into a written agreement instead encouraged the plaintiffs to demolish the building and construct the new building. When the construction was 40 % complete at the month of January, the defendants communicated that they could not continue as per the planned agreement. The Plaintiffs sought an appeal on Promissory estoppel because the defendants did not proceed as per their acceptance and acted under the appearance that deal would be fulfilled. The Promissory estoppel was valid and was in favour of Maher since the defendants encouraged a path of inaction and incurred losses to the Plaintiffs.
Case of Hoffman v Red Owl Stores Inc (1959)
Hoffman (Plaintiff) intended to arrive in a franchise agreement with Red Owl Stores, Inc. (defendant). The Plaintiffs were in negotiations with the defendants to execute the agreement (Davison-Vecchione, 2012). With an expectation of opening a new Red Owl Store outlet, the Plaintiff has sold his early business and prepared himself to accustom with the new grocery business. Hoffman explained clearly that he could not afford more than $18000.00 and the defendant ensured the sum of amount was sufficient to progress on the deal. Later on, the terms of franchise agreement were changed on few occasions by the defendant with regard to insisting on additional terms which were not discussed early and were also entirely out of scope of the original agreement. The plaintiff suffered for reliance damages and was unable to meet the requirements additional requirements of the defendants wherein the deal failed to complete as planned. This created a situation for Plaintiff to investment $ 26000.00 for which his father-in-law offered Hoffman with an amount $ 13000. Hoffman wanted to join his father-in-law as a partner in his business with respect to his investment in the store. In that context, the defendant denied to accept the partnership and claimed to surrender the money back to his father-in–law instead. Plaintiff did not agree to terms to defendant and sought an appeal. Though the case sticks to Promissory estoppel, the Plaintiffs would be offered only with the damages incurred during the deal. The Promissory estoppel ensured that the case has nothing to do with validity of the franchise agreement between both, but recommends only repayment of expenses encountered.
Task 2: Scenario A and Scenario B
Task 2 - Scenario A
2.2 Terms of contract
Terms of contract consist of conditions, warranties and innominate term (Weitzenböck, 2012).
Major term and hard core of the contract: The bases of agreements are terms which therefore form the principle of one entering into a contract. If any conditions are broken then the any part has the right to terminate the contract and sue the counterparty and seek damage claims (Blackburn, 2015).
For the scenario of Joyce DiDonato v. the Royal Albert Company, Joyce breached the condition which entitles the company to terminate the contract. This arose as Joyce was unable to be present for a most important performance, where critics and large publicity was used to sell the programme. But, the contract was specific to Joyce as an individual and did not include her role as an opera singer for the company.
A minor term of contract is one where the term does not for the foundation for an agreement like the major term do. In this case, if the warranty is broken the party has the right to claim damages but not the right to terminate a contract.
For cases Joyce DiDonato v Royal Albert Company, it can be said that there was a warranty breach caused by Joyce. Since any missing rehearsals were not at the root of the contract the employer cannot revoke the same, but can claim damages if any. In conclusion, the company breached contract as they fired Joyce without legal grounding.
Intermediate terms (or innominate terms):
Intermediate terms, are therefore those that lie in between the major and the minor, or between the condition and the warranty. In this case it can be classified breach of intermediate terms can lead to a claim in damages but a serious breach can lead to the termination of the contract (Blackburn, 2015). Here an exception can be made in the case of “notice by display”, which can be project via document, signature or by the nature of the dealing.
2.3 The Effect of Expressed and Implied Terms
The contract contents are termed as clauses or terms. Generally, agreement contains various terms in to it. Simple forms of contract have terms. Generally, terms begin with subject matter and price paid of the contract for instance the service and goods that are provided. For businesses it is more common to maintain a standard form of written terms that is very extensive. There is no condition that terms should written in very simple contracts, even though writing is need for certain contract types for instance contracts for the sale of mortgages, customer credit agreements and land. The contract terms is classed as warranties, innominate or condition terms. The contract can be difficult when it is informed orally to create statements in exchanging the amount of contract terms and the statements that are illustrated (e-lawresources, 2015a).
Now for a description about implied and express terms that are specific to contract business law. Let’s focus towards the oral characteristics in terms of express.
The issue with the oral statement is that there made based on the discussion that are proceeding to the contract conclusion develops the term of the contract or maintain ordinary illustration/capacity. This issue is considered as question of fact. Courts looked upon various issues such as: timing of statement, importance of statement, strength of statement, skill of parties, special knowledge and written contracts (Cohen, n.d.).
The implied term is characterized into: implied by custom, implied by fact, implied by trade usage, and implied by law.
Implied by fact
The terms by fact says that court consider both the parities that are planned to contain the contract about the issue. They are implicit on a “one-off” basis.
Implied by law
This involves certain types of contracts like tenancy agreements will include implied term that the landlord must take reasonable care to keep common parts of property in good repair (Liverpool contracts of employment will include implied term that employer will give departing employee a job reference and implied term that employer and employee will not act in ways “likely to undermine the trust and confidence required if the employment relationship is to continue” (Cohen, n.d.).
In the agreement whatever terms they choose, as a general rule, the parties to a contract may include in the agreement, which is referred as the ‘freedom of contract’. However, at later period there is a possibility of divergence in the opinion due to the terms introduced in the agreement which should be taken as pre-contract talk.
Task 2 - Scenario B
The risk of a contract can appropriately be distributed between parties, if each other exclude liability towards one another in case a default of the contract occurs. This is to reduce the cost of any damages payable. This introduces the concept of the exclusion clause which is usually placed as the last recourse to the law of negligence. This excludes the chance of liability in case a breach of contract occurs. The liability may be in the form of losses and claims (e-lawresources, 2015b).
For contract law, exclusion law must form a part of the contract and therefore be incorporated either by notice, signature or a course of dealing. In the present scenario, Adriana signed the terms and conditions before she hired the car. Later on, she discovered the subsection of limitation of liability which in itself is an exclusion clause that stated that the City Car rentals cannot be held responsible for the any damage or injury to person that is caused by the defects of the car if any, unless it was a defect that resulted due to the rental service company. But, the cars airbag inflated while she was driving that caused her to crash. Therefore, it can be deemed that any document that serves as a contract can have an exclusion clause (Nolan, 2011). It further states that, even an unsigned document can contain the exclusion clause in notice form. But the condition must be satisfied with the following requirements. It should be brought to the notice of the client before or at the time the contract is entered into. Also, that the contract should hold, the utmost clarity for understanding of the exclusion clause (Legalmax, 2015).
In the case of death or personal injury involving death or personal injury, omitting liability is not a solution or confining in the scenario of damage or loss, due to negligence, it becomes feasible to constraint the liability to the extent of the clause or notification gratifies the Unfair Contract Terms Act 1977 (UCTA) test of sensibleness. Irrespective of situations, this rule could be applied; same is the case for the clause, i.e. if it is subjected to bind by contract or non-contract doesn’t matter. In addition, this rule is applicable even if the individual is presented with the exclusion involves a business or consumer (Turton, 2012). Any clause that is added in a contract and attempts to omit or limit liability for distortions of any kind before framing the contract; otherwise, contract that makes an attempt to limit the available solutions will serve no purpose. However, there is one exclusion in this regard as it gratifies the reasonability requirements in UCTA. This is significantly in context to the clauses involving the entire contract that makes initiatives to omit all depictions and varied information that are disclosed before framing the contract. These are the terms taken into account as justifiable in scenarios where negotiations before to the contract were highly intricate’ this is on the basis of the fact that the parties involved have the opportunity to get the benefit from the inevitability of predefining all requisite rights and liabilities in a single document without bothering about a claim that is on the basis of collateral warranty (Turton, 2012).
Exclusion clauses are taken into consideration as clauses and those are subjected to documentation. Moreover, this clause ensures releasing one of the concerned parties in a contract from any kind of untoward incident that could happen during the period of the contract. Consider the case of Adriana and City Cars Rental in this regard, where the statement of exclusion clause is that City Cars Rental doesn’t come under the purview thereby it is not responsible for any injury. Reason, injury could be due to any mechanical problem; otherwise, if the injury is due to negligence, then it could be prosecuted. Nonetheless, the relevant thing is that the validity of clauses is subjected to confirmation, provided those refrain from contradicting the law. Thus, they have been added in accurate within the terms and conditions as mentioned in the contract. The clause of exclusion is null in the case of the contract involving Adriana and City Cars Rental. This is due to the fact of exclusion of clause in the actual contract thereby it was documented separately having the title ‘Limitation of Liability’. This document was present in the vehicle. There is a condition of validity related to exclusion clause, provided it is included accurately in the contract. Thus, inclusion of clause in the contract is binding in nature. It is illegal to add an exclusion clause, once the execution of a contract is done. This clause could be valid in the case if there is no sign over the binding contract but the party involved (City Cars Rental) presents documents to that effect or has signs demarcated clearly within their premises where the customer is aware of the exclusion before executing the contract (Bellamy, 2015). An exclusion clause will always be the last option for the negligent only when the liability limitations are not provided before utilizing the contract terms. Moreover, the exclusion clause can be valid and reasonable for Adriana if the City Car rentals have not issued any limitation terms. Adriana can claim only for the breach of signed contract whereas actual losses cannot be claimed because the City Car Rentals has already introduced the liability conditions during the accomplishment of contact (Smyth, 2004).
“Exclusion clauses are always valid, regardless of when introduced to a contract.”
The clauses related to exclusion remains valid, even if an exclusion clause is included within the contract or found place after the execution of contract. To make sure the effectiveness of an exclusion clause, there is no need that the clause should be included in the actual contract between two parties. Rather, the clause could be presented later as a sub-clause like the case of Adriana and City Cars Rental, where an exclusion clause was mentioned in a different document having the title ‘Limitation of Liability’ that came with the product rather than being included in the contract. As a result, any clause within a contract or beyond the scope of a contract including an exclusion clause can be in effect, provided the party depending on the contract might frame that the other concerned party has implicitly agreed to the terms and conditions mentioned in the contract (Bellamy, 2015). Once a party becomes signatory to the contract, he or she is liable to provide support documents or notices that have been served after the effectiveness of contract. There is no need the exclusion clause should remain within the actual contract; the party involved has the option of providing t as supporting documents or can issue appropriate notice to that effect. Once the formality of is done, it becomes incumbent on the part of the lessee to all conditions added to the contract or after the execution of contract. Now consider the case of Goldstein v Pattinson, both the parties were signatories to a contract with respect to leasing a house. Goldstein was interested in leasing a house on rent for residential purpose. On the other hand, Pattinson had the property that was matching to the requirements of Goldstein. The condition of contract between them was on the basis of the payment amount towards security deposit and that to be paid monthly basis as rent. However, there was an exclusion of payment towards maintenance charges to the society. The date of execution of contract was May, 2012. In June, 2012 Goldstein got information through mail communication from Pattinson that he should furnish maintenance charges. This is where; Goldstein decided to file a case in the court as it was not mentioned in the contract. In this regard, the court ordered that since Pattinson had mentioned to give maintenance charges to be furnished by Goldstein during negotiation, Goldstein must oblige. However, the court cited that it was a mistake on the part of Pattinson for not including the exclusion clause in the contract. Later Pattinson, made correction to it and served Goldstein with an add on to the same contract. Two more cases are mentioned below to have better evaluation of validity of exclusion clauses.
Case of Olley V Marlborough Court (1949)
Mrs Olley booked a room in Marlborough Court at Lancaster Gate in London for a long stay. The contract of staying was already made at reception before entering the room. Mrs. Olley left her the room key in a rack placed in the reception. One day when she returned to Hotel, she found that key was missing at reception. After entering the room, Mrs Olley found her fur coat was stolen. Mr. Colonel Crerer resting in the lounge, was a witness who saw a person getting in and coming out fifteen minutes later with a bag. Other workers were busy in cleaning work, did not notice the incident. Mrs. Olley complained to Marlborough Hotel to pay for the stolen court. The Hotel in charge pointed out an exclusion clause notice placed in Mrs. Olley’s room at a place behind the bedroom door towards the washroom. Marlborough Court proposed exclusion clause to Mrs. Olley stating that it was her own liability for the items placed in the room. The visibility of the exclusion clause is invalid because Mrs. Olley was never aware of such exclusion during the agreement of contract and moreover, the statement of limitations of liability was not placed visibly in the premises of stay. Hence, here the liability notice is inappropriate and it does not form a part of the contract made (E-Law Resources, 2016b).
Parker v South Eastern Rly (1877)
Mr. Parker and Mr. Gabell left their luggage in cloakroom of South Eastern Railway at Charing Cross station in United Kingdom. On placing their bags, they received tickets on a small sheet which was sprinted on both sides. The front side of the ticket contained a word stating to look back side. The front side of the ticket stated that Railway Company does not hold liability for item worth of more than £10. This depicts an exclusion clause. But Mr. Parker had items of worth more than £10 and as well failed to read the limitation clauses mentioned at the rear side. Mr. Parker thought that ticket was only a receipt for payment. Later on, when Mr. Parker returned he found the bag was stolen and hence sued the railway company claiming for the damages incurred. The exclusion clause is not valid in this case because the claimants have failed to read the exclusion clauses which were very well mentioned in the ticket. South Eastern Railway is no way responsible for the theft because the exclusion made already during the execution of the contract but the theft has caused due to the negligence of the claimants (Gutenberg, 2016).
4.1 Letter to Brad (advise)
You seem to be in a very sticky situation, where since your tenant has defaulted on the contract you stand to lose thousands of pounds. As the law goes, you are absolved as you opted to recover the loss of money that was caused by Charles (accountant), as you had specifically passed on the task of the verifying your tenant’s (Albert) financial background to him. However, Charles did not do so and proved his negligence on this matter as he wrongly verified another person financial information thinking it was Albert’s. Based on the impeccable finding he recommended Albert to be your tenant, which you thus embraced and leased your property to Albert, which subsequently led you to this predicament. You can thus appeal with the law of tort negligence on Charles’ part. This law states that if a party has not displayed a care in a situation where a practical person would otherwise show, which leads to loss, damage or injury due to either the action or the lack thereof. To seek damages with the employ of the law several elements are to be kept in mind. These elements are, if the defendant did in fact owe care in the situation, if he failed to carry himself within reason to show this care, if the plaintiff as a result suffered loss or injury, if the negligence led to gross monetary loss and the case of a proximate cause.
There is a very clear evidence that the accountant erred in following his duties and responsibilities. Moreover, he presented the report without verifying the facts. Thus, negligence on the part of accountant led to recommendation were accepted thereby yielded in financial loss. There were various instances, where plaintiffs have been compensated on the basis of tort of negligence. Consider another instance of case involving Spartan Steel & Alloys Ltd v Martin  (Denning, Davies & Lawton, 1973). In this case, the contractors were Martin & Company that was involved in road work. Their nature of responsibility was to dig up a certain portion of the road and they were informed about presence of the electric beneath the road. However, the workers did not take into cognizance of instruction rather ended up damaging the electric cable that was in the business of supplying electricity to Spartan Steel. As a result, the electricity board had to shut down power to carry out repair work. This was how financial losses occurred. Thus, the defendant decided to file a case to recover the losses. However, the court didn’t entertain their plea and held them responsible for the total loss of £1767 (Spartan Steel and Alloys Ltd. v Martin & Co, 1972) (Denning, Davies & Lawton, 1973).
3.1 Liability in “contract” and “Tort”
Differences exist between the nature of liability of a “contract” and the nature of “liability” in ‘Tort’. In the case of former, extensive negotiations is required for executing a comprehensive contract. Keeping into cognizance of this aspect, the England courts have developed an array of methods to address the behavior of concerned parties at the time of negotiations, since behavior is significantly bears on the structuring and exact contents of the contract. Thus, the discussed things by parties remain binding in a contract and makes significant impact on the establishment and l validity of the contract. This reflects about outlining the terms of the contract containing the intention behind the contract. Again, it is subjected to revelation responsibilities evolving out of the distinct nature of the contract have been broken or followed through dishonest behavior before the execution of the contract, or is intimidating or infers in the activities to influence within a fiduciary relationship (Banakas, 2009).
Now the need is to differentiate between contract and law of tort. In a contract, , the parties involved are intentionally supposing obligations; other hand, in the law of torts, liability is an aspect that is levied by law without fail. The explanation given by P. H. Winfield clearly outlines the difference between liability in contract and tort. As per the statement by Winfield, liability in tort evolves with a break in duty that has been imposed through law. This duty is channelized towards people and a break in duty is repressible by the plaintiff claiming damages. Liability in contract on the other hand forms an aspect of an agreement, in which a legal obligation is developed and outlined by the requisite parties (Law Teacher, 2015).
3.2 Donoghue v Stevenson: Nature of liability
For the legal scenario of Donoghue v Stevenson, ginger beer was sold to the retailer by the defendant who manufactures ginger beer. The bottle of ginger beer was purchased by the plaintiff who had not seen the contents of the bottle since it was in dark color. The friend of plaintiff served the drink to her. However, plaintiff fell ill due to presence of snail in the bottle. As a result, the plaintiff decided to sue the defendant for negligence. In this case, the defendant was not bound by contractual duty particularly towards the plaintiff. But, the House of Lords upon hearing the case cited that the defendant owed a duty to make sure that the bottle was devoid of unwarranted substances. This reflects about a breach in duty, to which the House found the defendant was responsible for paying damages to the plaintiff (Donoghue v Stevenson, 1932).
Merits and Distinctions
When someone intentionally causes wrong doing one another there arises the liability. However, cases like recklessness, negligence and intention does not take part in the requirement that establish the law in action. This is considered as an offense to the “strict liability” wherein even normal conduct can account for wrongfulness and increase the chance of the claimant in his ask for damages. Negligence is nothing but its commitment to legal wrong doing that is irrelevant. In these cases, the defendant is not entitled to calculate for the action to cause damage, act in good faith, or if all the care was exercised. Therefore, to show the liability of the defendant a rational element need not be enhanced
This indicates that no defense has been built to show strict liability. In the same way the claimant need not display his intent to the defendant. This leads to the mention of mens rea, which describes this type of rational element. Mes rea in conjunction with actus reus leads to the offense itself as per the critical law. For strict liability if the claimant cannot show the damage that was caused as a direct result, then he is entitled to claim only nominal damages. The strict liability of offence is better understandable by studying the case study in the following (Drukker Solicitors, 2015).
Case study- Fletcher v. Rylands
Ryland possessed a piece of property but he did not have ownership over the coal mines that run beneath the surface. Adjacent to Ryland’s property were some coal mines which Fletcher owned. Ryland constructed a reservoir which ran through an abandoned coal mine in his property and was connected to the coal mines below in Fletcher’s property. Ryland was not aware of this fact that since the abandoned coal mines in his property were filled with soil. Fletcher’s mines were flooded by the water from reservoir and so he sued Ryland for the damages incurred and loss of profits.
Issue: Because the party did not know of the defect in his land and so damage was caused to the neighbor’s land, will he be liable for damage caused by trespass on the neighboring land.
Holding and Rule: No. In order to create a liability there must be negligence. Damaged party is to blame and loss falls upon them when there is no negligence by the other. Since there was no trespass by Ryland, Ryland is not liable for the damages caused to the neighbor’s land. The damage would have had to have been immediate for liability for trespass by Ryland. There was no trespass by Ryland since the damage was consequential rather than immediate. Ryland did not know about the damage caused to Fletcher’s land and so Ryland was not liable.
Disposition: For Ryland; no trespass
This case is one of dispute between two people, Rylands and Fletcher. From the perspective of strict liability in tort, there are several issues in this case that needs to be interpreted. One of the issues is total responsibility imposed on a landowner, even when he brings something legally on his land. If water escapes, though harmless, it needs to be ascertained whether this act will lead to damage. The second issue is that whether it is appropriate to bring something into the land which is considered unfitting and dangerous in the first place and if so whether the owner is liable for damage.
Therefore in response to the issue, yes the landowner is liable for damage even though he brought something legally into his land which is harmless, if it stays put and causes damage if it escapes. The landowner should have checked before whether this will affect any of the neighbor’s land. Since water escaped and caused damage to Fletcher’s property Ryland before closer inspection is liable for the damages caused to Fletcher. Fletcher need not show negligence. Fletcher can argue that the escape of water was Ryland’s fault or by act of nature. Damage should thereby be expected from his neighbor, if where the owner of land, uses his land normally without negligence and consciousness and so the owner will be liable for mischief. Where as in the case, where an owner legally brings something on to his land that is dangerous and abnormal and it causes damage to the neighbor then he is liable for suing.
This is the case showing the concept of strict liability and finally the judgment was in favour of Fletcher. This concept of strict liability makes the defendant liable during the absence of their negligible conduct. A liability cannot be imposed without having a proof for negligence; hence a restrictive liability is approached in Ryland’s v Fletcher (E-Law Resources, 2016c). The considerations on imposing liability can be accounted as
- Accumulation on defendant’s land
- The strict liability is only valid if the defendant brings any hazardous material to the land and the law is strictly invalid if the land itself has hazardous materials prior to the arrival of defendant.
- Chances of mishap if ignored
- This specifies forecasting the occurrence of mishap if the hazardous material is not stick to safety measures.
- Damage in the land
- Damage occurred due to the defendant’s negligence is accounted under strict liability whereas the damage caused due to land itself (if land has hazardous materials) is not considered.
- Unnatural land usage
- A natural fire accident in the land cannot be taken under strict liability rather than accident happened due to carelessness
- Predictability of damage
- This is an extended approach to tortious liability where the defendant is liable for losses only when it directly breaches the duties of defendant. Not all occurred losses can be accounted through tortious liability. If the damage is predictable to happen, liability is valid whereas unforeseeable damages through accidents cannot be considered under tortious liability.
Hence, this exhibits a strict form of liability in torts with special reference to Ryland’s v Fletcher.
4.2 Liability for negligence and vicarious liability (Bill and XYZ diaries)
Negligence is termed as the failure takes care about the damage or injury to another person. From the negligence law there are two different types. The first type is the person who performs the action which a practical person renounces from doing. The second type is person fail to recruit in a normal environment which a practical person safeguard the view to prevent injury. The law of negligence generally states that the injury is caused by the other to negligent the action of an organization, the organization query is found to be responsible (Turton, 2012). In the other hand vicarious liability could pertain the scenario in which the third party is liable for the actions by another person. The organization is liable for the action of the employee in to context to employee and their organization. When the circumstance the lapses occurred during the course of employment the liability can be confirmed (Acas, 2012).
In the instance, Bill is legally responsible for the negligent action done by him. First, the organization bill of employing ‘XYZ Dairies’ made externally clear to bill that is not supposed to serve any person who are underage in order to execute his tasks. Conflicting towards this detail, bill employs a teenager and during the sequence of the delivering milk, as a result of careless driving the bill causes injury to the boy. Hence, ignoring the term employment bill causes serious damage to the youth and so it is held towards negligence. Vicarious liability responsibility falls upon XYZ Dairies they are cognizant of the bill that is employed that person who are underage to deliver milk have not initiate to an action to prevent the bill from possession the boy under employment. Vintage liability is appropriate to vintage vehicles museum. As an alternative of task assigning to one of the employee in the vintage bus to Barnstable in Devon the owner chose to assign the task to his friend. Negligent driving of his friend causes accident that damage Mrs. Smith’s car. However, the owner aware that he needs to assign the task of transporting bus to one of his employee. Yet, he ignored the fact and gave the task to his friend who was not his employee.
3.3 Vicarious Liability with Respect to a Business and its Employees
Vicarious liability is applicable to the organization to the event of unlawful action that takes place outside the employment course. This is considered as a evident in the case among Lister vs. Hesley Hall Ltd., in which the lords of house are ruled in favor to the defendant Hesley Hall ltd. The appeal by the plaintiff Lister was dismissed on the basis that “If wrongful conduct is outside the course of employment, a failure to prevent or report that wrong conduct cannot be within the scope of employment so as to make the employer vicariously liable for that failure when the employer is not vicariously liable for the wrongful conduct itself” (Steyn, 2001).
Merits and Distinctions
The Occupiers liability is a distinct structure of negligence for the duties and responsibilities of the employer and it also pertains to the breach of duty and damages incurred due to it. The employer’s duty is to take responsibility for the premises, employees, vehicles / objects associated to employers, safety at premises and other third part entering into the premises. Safety of the premises should be given priority and care should be taken on offering security and safety to the visitors and other employees. There are two acts namely Occupiers Liability Act 1957 which states that employer’s liability can be extended to ‘lawful visitors’ who already possess certain duties and responsibilities of the employer; the second act is Occupiers Liability Act 1984 which offers liability of employers towards the third parties entering the premises other than his/her employees (E-Law Resources, 2016d).
A premise owing to the defective construction of the premise, unsafe work, presence of hazardous materials and several other factors contribute to injury. There is every likelihood that a visitor might be injured in an artist’s studio or gallery. A gallery or studio is not visitor friendly and mostly serves only for the purpose for which it was built. An art gallery is designed to house many art installations. Safety and security of visitors is only secondary obligation and the primary obligation is to house works of art. A large number of visitors in addition to various art works, pose the possibility for mishaps even if gallery is designed keeping visitors in mind. Instead of the owner of the premise it is the responsibility of the person who rents the premise to take care of visitors. It is the renter’s duty to care for visitors on all practical situation and they are not harmed in any way. It is the renter’s responsibility to ensure that no harm comes to visitors solely because premises were unsafe or simply because the occupier didn’t initiate appropriate action or overlooked certain facets that concerned the overall condition of the premise (Simpsons, n.d.).
The following steps can be done to ensure that the occupiers execute their duty of care towards visitors (Law Resources, 2015): A third party can be used to conduct a structural check of the building by the occupier with the help of the owner. The occupier or the owner can get the flaws in the building rectified by analyzing the structural viability of the building on analysis by the third party. Next, restricting the number of persons visiting the premise at any given point of time can be ensured by the occupier. The occupier can allocate appropriate time to accommodate different visitors in case of an art gallery. The next can be, accident prone areas within the premise like staircases, escalators etc. should be taken note of by the occupier. While in such areas occupier should advise visitors to take specific care and also display appropriate warning signs to indicate the risk of accidents. In case of emergency appropriate warning signs should be displayed at the emergency exits by the renter. Visitors must be educated as to the potential safety hazards by the occupier. In case of major hazards like fire, earthquake etc, the visitors must be instructed as to the precautionary steps to be taken at that time. Finally, occupier should advise visitors to accompany children at all times and not to let them move unattended since children are more vulnerable to accidents and are often responsible for accidents and to prevent such accidents.
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