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    Role Of Contract in Business

    Introduction to Contract

    Contract is the legal or contractual relationship which is formed between individual and party (Contract meaning, 2015). The contract binds people into lawful agreement which needs to be followed by respective parties. This report is based on different type of case scenarios. Here, in order to answer each question the facts given in case scenarios are used. This report will give detailed description regarding essential elements which firm must abide while entering into contractual relationship. Furthermore, the study will also showcase principle of liability that will be applied during the condition like negligence.

    TASK 1

    Essential elements for the formation of valid contract

    In order to form valid contract number of essential elements are identified which needs to be fulfilled by parties. The detailed explanation of same is depicted  below:

    Offer and acceptance: The contract can be considered as valid if one party will give offer to other individual to enter into specific type of legal relationship. In this respect, certain conditions are identified in which offer made by one party will lapse. One of such type of condition is withdrawal of offer before it is accepted by the party (Essential elements of contract, 2015). In addition to this, the contract will also be considered as valid when offer made by party is accepted by other individual in the same condition. The offer is of two type such as unilateral and bilateral. If the firm or individual party will give offer to the general public then it is being called by the name of unilateral offer. However, in the bilateral offer firm is obliged with regard to give performance as per the terms and conditions of the contract (Harvey v Facey [1893] AC 552). Here Facey has given offer for selling the pen to Harvey. Howver, the offer will become the counter offer when party depict some condition while getting the offer from another party.

    Intention to create legal relationship: The contract formed will be considered  as void if parties do not showcase  their intention to form  legal relationship (Jones v Padavatton [1969] 1 WLR 328).  
    Consideration: It is also necessary for the valid contract. Consideration is valuable item which one party promises to give to other party in return of doing something. As per Thomas v Thomas) (1842) 2 QB 85 the consideration decided contract must have some value in the eyes of law.

    Capacity: The contract formed by minor will be regarded as void. Thus, in order to form valid contract parties must be major or ages above 18 years (Individual who ages above 18 years).  
    Privity of contract: It is the common law of doctrine which states that third party is not entitled to take any action if parties who have entered into contract fails to fulfil specific condition of agreement (English, Cohen and Balcom, 2012). For instance A promises to B to give certain amount which will be later on given by B to C. In this condition, contract is formed between A and B. Thus, if A fails to deliver the promised amount to B at that time C does not possess any right to sue A in return of not delivering money. Thus, it can be considered as an effective situation for the privity of contract.

    Case explanation

    In the given case, James has given advertisement in e-commerce website for the purpose to sell high definition camera at £ 55. The act which is being carried out by James can be considered as invitation to offer (Hillman, 2012). This is because, here James is giving open offer to parties who want to purchase high definition camera from the firm. However, after seeing the advertisement Maria has given counter offer to James in which she is depicting that she will purchase the camera from James if he will sell it for £ 45. From the given case scenario, it can be concluded that there is no legal relationship formed between parties. This is because; the presence of counter offer in the given case cancels the validation of the first offer. Thus, it can be said that James and Maria do not contractually abide with each other.

    Types of contract

    There are different types of contract identified which are formed by parties for the purpose to enter into legal relationship. These given contracts are used by both individuals and business. The detailed explanation of the same is depicted below:

    Face to face contract: It is the type of contract in which all the conditions in agreement is decided by parties through verbal communication. In this type of contract, the probability of party to get denied from the terms and conditions of contract is high.  This type of condition occurs in given form of contract because of  unavailability of valid or written  proof regarding terms and conditions (Johnson, 2013). Generally, it has been seen that the given type of contract is formed between parties who are  closer or related to each other. This is because; the face to face to contract is thoroughly based on trust. For example, A who is the good friend of B has decided to use its car for certain period of time. This can be considered as good example of face to face agreement.

    Distance selling: In the given type of contract, legal relationship is being established by parties by using varied means of communication such as email and telephone etc. In this contract, the physical presence of parties is not necessary while formulating the contract. Furthermore, in the distance contract party who is giving offer to other individual will specify  certain time in which the particular party has to accept the offer. For example, online shopping can be considered  as best example of distance selling contract. It is due to the fact that in the given type of activity, both baying and selling party the type will not physically meet at the specific place.

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    Written contract: It is widely used form of contract in which all the terms and conditions of contract are specified by parties in the particular document. It is the effective form of contract as this type of contract can be presented by parties in the form of evidence in the condition when one party fully denied from the terms and conditions of contract (Fontana v. Upp 128 Cal. App. 2d 205).  Here, in written contract physical presence of party is necessary (McKendrick, 2014). For example, the parties who are involved in sale of goods and trade related activities forms given type of contract. Overall, it can be said that these are being regarded as three major types of contracts which establish legal or contractual relationship between parties.
    Verbal contract: It is the type of contract in which terms and conditions of contract are decided by the parties verbally. In the given form of contract, parties do not possess any evidence of their legal relationship. The type of contract is used within many independent contracting agreements.

    Deeds: It is being consider as the action which needs to be performed by parties intentionally. Thus, the deeds confirms some act of parties with the help of which interest and right of properties will be passed by the parties. Here, for the parties it is very essential with regard to sign, seal and deliver the deeds to the respective party.

    Inferred contract: It is the another type of contract which is agreed by non verbal conduct rather than through explicit words.

    Online contract: It is similar to written contract. But, the given contract is formed by using the electronic means. Thus, in the given contract parties do not make use of some papers.

    Business to business contract: The given type of contract is being made between two parties who runs their business. It is the written type of contract in which both parties make the decision about terms and conditions by gathering at one specific place.

    Business to consumer contract: The given contract is made between the business and the customers. This contract is formed with an aim to save buyers from exploitation.

    Different terms of contract that can be included in a valid contract

    Terms are being regarded as conditions which creates legal obligations between parties (What is terms, 2015). The terms and conditions which parties specify while formulating contract are of several types. In-depth explanation of the same is depicted below:

    Express terms: It is the type of term which is agreed by both the parties at the time of formulating the contract. This type of term can be either oral or written. The given provision of law inserts implied contract. The terms which is being decided by parties needs to be presented by them in deed of contract. The express term includes the things like hours, holiday and pay etc. The express terms is of two type such as conditions and warranties. Conditions depicts about the basic or the primary duty of the parties. As per  Poussard v Spiers (1876) 1 QBD 410 case, the respective  party is required to perform opera singing more three months. However, warranty are the ancillary terms. The breach of warranty by the party will not terminate the whole contract, but in this condition innocent party has the full authority with regard to claim the damage from the other individual.

    Implied terms: It is the provision of contract which is not decided by the parties, but still it will get implied into contract. Thus, it can be said that it is the mandatory provisions which needs to be fulfilled by  parties who decide enter into legal relationship. This term is formed for the purpose to provide benefits to both parties who have planned to enter into contract. (Lewis, 2011). These terms are formed with an aim to provide protection to both the parties. In addition to this, implied term includes the varied statutory rights such as duty of care and right to equal pay etc. For example, sale of goods act depict about the implied terms. This act state that it is the duty and responsibility of supplier that it must provide the high quality of goods and services to its buyers. This is because, if not provided then respective party have full authority with respect to file the case against the company in an effective way.

    Innominate terms: It is being regarded as innominate terms which cannot be defined as either a condition or a warranty.  In addition to this, it can also be said that it is the basic contract law which  helps in making the decision that  whether the term  specified in contract is a condition or warranty (Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26). In this regard, it can also be stated that condition is the integral part of contract which bound respective parties. However, in comparison to this, warranty is the less important term and the breach of which entitles other party to get compensation for losses which is bear by the party  due to ignorance of other party member (Malhotra and Lumineau, 2011).

     Exclusion clause: This clause is used to provide the protection of defendants party. It is basically applied when contractual terms are breached by the parties. The case of  Olley v Marlborough Court [1949] 1 K.B. 532 states that these clause will be made applicable when parties properly inserted them in the deed of contract.  Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contract Regulations 1999 helps in providing protection to the aggrieved party from the given clause.

    Writing the report to Mr. Michael Hair the owner of Hair 4 U

    The report has been written to Mr. Michel Hair which is the owner of Hair 4 U. The report will cover following points:

    Breach of conditions

    In the case, when any of the following party will not fulfil specified condition and warranty of contract. At that time, party can claim for  damages which it has incurred due non-compliance of condition by other party (Treitel and Haldane, 1915). However, in general term if any individual breach the conditions of contract at that time respective individual will be held liable for the act being done by it. As result of it the individual has to pay the damages which is being incur by other party due to non fulfilment of agreement. The particular type of thing is being seen in the case of Poussard v Spiers (1876) 1 QBD 410. However, if party will not fulfil the warranty of contract at that time also they will be obliged with regard to pay the damage to the affected individual.

    Legality of exemption clause

    The legality of exclusion clause is analysed. In accordance with the given context, it can be said that the exclusion clause which is specified in above contract is valid if it is properly inserted and supported by law (Stone, Devenney and Cunnington, 2011). However, as per the sale of good acts the seller possesses full responsibility of providing high quality of goods and services to its respective client. Thus, in the given case scenario Bella UK is responsible for providing high quality products and services to Hair 4 U. In addition to this, the exclusion clause will be consider as valid if both parties have information about the same. Thus, it is being consider as invalid if one party has the knowledge about the same but other party does not possess any information regarding the same.

    Outline remedies

    Here, party can terminate the contract if other party will not give its performance as per the terms and conditions of deeds. However, they can also demand from other party with regard to perform in a specific way (Kpohraror v Woolwich Building Society [1996] 4 AER 119 ).

    Development of the concept of duty of care

    Duty of care is the legal obligation which make sure the employers fulfills its  responsibility of maintaining the safety and security of its workers in an effective manner. Prior to 1932 when the case of Donoghue V Stevenson has come up with the court, there is no standardized duty of care related provision is formed in cases of negligence. However, the wrong and tort being conducted by parties was acknowledged in certain situation. However, the presence of   Donoghue V Stevenson has aroused opportunity for Lord Atkin to form general or new principle for the negligence related act in an effective way. Thus, it can be said that the given case has given contribution in the form of developing new provision for the act of negligence by party (Milner, 2011).

    Besides this, negligence is the type of condition wherein one party fails to give  utmost care to  other individual. In the act of negligence by party, offended party has to pay damage to the claimant one. However, the act being offended party will be considered as negligent if following principles are satisfied:

    Duty of care: The person who has the responsibility to take measure to protect employees tends to reside in the given position. With respect to Donoghue V Stevenson, Stevenson resides in the duty to care position. In this regard, it has the responsibility to increase the efficiency of the production process which is being used by it to produce drink (Nysten-Haarala, Lee and Lehto, 2010).

    Breach of duty: The duty of the offended will be breached when they fail to give utmost care to the respective person. In the Donoghue V Stevenson case, Stevenson has breached his duty to give high quality drink to its customers. Due to this, while drinking Donoghue has discovered snail in its bottle.

    Remote damage: The damage must be reasonable. Thus, as per the given case  Donoghue has  suffered from mental trauma because of the act as being done by Strevenson, thus her is libale with regard to claim the damage from the other party.

    Foreceablity: The act as being done by defendant must be foreceable in accordance with the negligent act. This is  because, if it is found as inforceable then in the given circumstance claiment cannnot claim the damages.

    Causation: This imposes condition upon party. Here, the claimant party can claim for damages which are caused to it if the act of negligence is being done by defendants.

    How business can be held vicariously liable

    Vicarious liable occur when innocent party will be held liable for the act which is being done by its employee. Thus,  Harbour Board -v- Coggins & Griffith (Liverpool) Ltd; HL 1946 case state that firm must make efforts with regard to provide utmost care to its workers, because if not provided then respective individual will be held liable due to vicarious liability. The  Occupiers Liability Act also state that the firm must ensure the helath and safety of its workers.

    Alan has hired Mathew who is 13 year boy to help him in delivering milk on Wednesday. On  first day of job, Mathew has got accidentally injured when Alan was reversing the van. On the basis of given scenario, following questions are answered.


    It can be stated that, for the parties it is very necessary that they must check validness of the contract which is being formed by them. This is because, if not checked then in the given condition huge losses will be incurred  by the respective parties. However, the appropriateness of the agreement which is being made by parties can be checked by taking assistance from the Global assignment help Australia. In addition to this, by improving the knowledge regarding terms of contract an effective contract can be formed by parties.


    • Chen-Wishart, M., 2012. Contract Law. Oxford University Press.  
    • English, S., Cohen, R. and Balcom, R., 2012, April. Contract Drafting and Negotiating: Pitfalls and Strategies. In CCCA National Spring Conference, Montreal.
    • Hillman, R. A., 2012. The Richness of Contract Law (Vol. 28). Springer Science & Business Media.
    • Johnson, M., 2013. The body in the mind: The bodily basis of meaning, imagination, and reason. University of Chicago Press.
    • Lee, R., 2001. Negligence.  Property management.

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