Aspects Of Contract

Task 1

1 Essential elements for the formation of valid contract

Contract can be defined as a promise formed by consent of two or more parties by entering into a legal relationship. For the formation of valid and enforceable contract following aspects are required to be satisfied-

Offer- Agreement between parties is created by appropriate offer and acceptance. Offer is a proposal of promise given by one party to another. It must be specific and possible to perform (Nysten-Haarala, Lee and Lehto, 2010). It can be provided in general or to a specific person. However case of Pharmaceutical Society of Great Britain v Boots, invitation to treat does not have legal status of offer because it is merely a way of showing intention to create contractual relationship.

Acceptance- It is consent given by the party to whom offer was made. It must not be supported by significant modification or condition else it will consider as counter offer instead of acceptance (lucy V Zehmer, 196 Va 493 84 S.E. 2D 516).

Intention to create legal relationship- This element is assumed to be part of the contract formed by parties (Types of Contracts, 2015). In accordance with this aspect, parties must intend to form legal obligation for the fulfillment of promise (Jones v Padavatton [1969] 1 WLR 328).

Consideration- In legal terminology consideration is known as pro-quo i.e. something in return (Holmes., 2009). Agreement formed by parties must be supported by mutual benefit else it will not be valid. This benefit is not required to be at arm length price but it must be supported by consent.

Capacity- Parties forming contractual relationship should be able to do so. For this aspect they must not have qualification of minor, unsound mind, lunatic or restriction imposed by law.

Privity of contract- In accordance with this doctrine, third party to the contract is not entitled to sue contracting party for the fulfillment of promises made by them (Macneil and Gudel, 2001).

Case scenario

In the described case situation, invitation to treat was given by James through advertisement on website for the sale of camera for £55. By considering this advert, offer was given by Maria for purchase of camera at £45. On this offer counter offer was given by James that he will sell camera at £55. Maria did not responded on this offer. James did not have other offer due to which he decided to provide acceptance on the previous offer given by Maria. However, he is not entitled to do so because with the providing of counter offer previous offer is said to be canceled. Henceforth, there is no contractual relationship between parties.

2 Description of main types of contract along with their examples

Face to face contract

This form is generally selected by individuals to enter into contractual relationship to fulfill day to day needs. This contract is formed mostly in verbal manner. In this type of contract all the parties are present at common place for the negotiation of contracting terms (Devenney and Johnson, 2013). Further, offerree is required to provide quick acceptance else offer will be lapsed due to passage of reasonable time. Example of face to face contract is travelling from bus.

Business to business contract

These kinds of agreements is formed among two commercial entities and public is not involved in it. These contracts are supported by terms inserted by the entities in accordance with their requirements. Example of business to business contract is sale of goods by wholesaler to the retailer.

Business to consumer contract

This contract is created between public and business organization. In such contracts, terms are stated by the business entities which are accepted by the customers. Business organization are required to incorporate implied terms of Sales of Goods Act 1979 for fair and valid contract.

Online contract

This contract is formed though electronic sources between two or more parties. Example of online contract is shopping through e-trading websites. These contracts are governed by norms of distance selling regulations.

Distance selling

This type of contract is selected in situation where parties are not able to present at same place to decide the terms and conditions of the agreement. Due to this aspect, agreement is created by communication through post or telephone (Nysten-Haarala, Lee and Lehto, 2010). For the assessment of validity of this contract, postal rule in applicable (Powell v Lee (1908) 99 L.T. 284; Robophone Facilities Ltd v. Blank [1966] 3 All E.R. 128. ). In accordance with this rule, distance contract is said to valid if acceptance is communicated to the party to whom offer was provided (Middlemiss, 2011). Example of distance selling contract is import of goods and online contracts. This is similar to the written contract but these are conducted online as parties are not present at similar place.

Written contract

This is most formal agreement that is generally used by business entities. In this contract, parties are required to prepare deed in order to define terms (Types of Contracts, 2015). This deed is considered by law to provide damages to the aggrieved party in situation of non-satisfactory performance.

Verbal contract

These contracts are formed on the basis of trust and faith through verbal communication. In this, terms are described orally by parties. This contracts are informal in nature but are valid of law. In situation of dispute in contracting parties in verbal contract, damages are provided by considering situation as there is no evidence of deed of contract.

Inferred contract

These contracts are also known as implied contract which is formed by conduct. In this contract offer and acceptance is provided by actions. Example of implied contract is lunch in a hotel.

Expressed terms

These terms are inserted by the mutual will of all the contracting parties in order to requirements to be fulfilled while performance by other parties. Further, bifurcation of expressed terms is enumerated below:

Conditions- These terms are linked to the essence of contract which describes primary obligation of parties (Howells, 2011). In accordance with the case of Poussard v Spider breach of conditions is treated as breach of contract thus aggrieved party is not entitled to provide performance.

Warranties- Warranties are secondary terms linked to the conditions of the contract. In situation where parties fail to satisfy these terms they are liable to provide damages to the innocent term. For this aspect case of Bettini v Gye can be considered.

Innominate terms- These terms are not distinguished as condition or warranty. In the breach of these terms impact of damages is considered that party is deprived from whole benefit or not to provide relief (Nysten-Haarala, Lee and Lehto, 2010).

Implied terms

In order to protect interest of weaker party implied terms are inserted by legislation and custom. These terms are presumptive in nature as it is not expressly stated. These terms are necessary to be fulfilled or party can challenge the validity of the contract.

Exclusion clause

These clauses are included in the contract to make reduction in obligations in situation where party is not in position to provide satisfactory performance (Palmer, 2014). These terms are considered for relief only if it properly inserted in the contract and it is supported by legislation (Chapleton v. Barry Urban District Council (1940).

Task 2

1 Draft of contract and description of contractual terms

In the given case description, Bella UK had produced a miracle oil which helps in hair growth to the user. For the promotion of their product, they had sent out the flyers with as statement i.e. “offer of half price is valid for limited time period. Price of the ten boxes is 5 and results are guaranteed.” Term of guarantee is supported by exclusion clause i.e. seller will accept only liability for the adverse consequence and success probability of product is 20%. Hair 4 U is planning for taking the benefit of this offer (Warren, 2012).

Impact of breach of condition

In situation where conditions of the contract are not satisfied by the company Bella UK, then owner of Hair 4 U is able to repudiate entire contract (Friedman, 2011). Breach of condition will be considered as breach of contract. It is because, English law states that breach of condition repudiates entire contract. As a consequence, aggrieved party is not required to provide performance and they can also make claim for damages.

Case reference

For this aspect case of Poussard v Spiers(1876) 1 QBD 410 can be considered. In accordance with this case, condition is the major terms which is directly connected to the root of contract. For the breach of condition, innocent party is entitled to repudiate entire contract and they can make claim for damages.

Exclusion clause

Exclusion clauses are considered to repudiate the damages only if properly inserted in the contract and it is justified in accordance with the provision of law (Appleman, Appleman and Holmes, 2014). In the present agreement, exclusion clause is the statement that seller will not accept liability for the adverse consequence and success probability of product is 20%.

Impact of Exclusion clause

By the effect of exclusion clause, obligations of parties is reduced of providing damages while inappropriate performance is provided by them. In the given case situation exclusion clause is described prior to the formulation of contract however it is not completely valid in accordance with the provisions of Sales of Goods Act. In accordance with its Act, seller is required to provide qualitative goods to customers by which possibility of injury can be reduced.

Task 3

1 Differences between contract and tort liability

Liability in contract arises in situation where terms and conditions are satisfied in accordance with the contractual deed by parties (Herring and Milosevic, 2001). On the other hand, liability to provide damages in tort arises in situation where party fails to take duty of care due to which another party is injured.

Contractual and tort liability covered in provisions of civil. Provision of liability has been inserted to provide compensation to the innocent party for the damages occurred to them. However, there are certain differences between these liabilities.

Major difference between contract and tort liability is of relationship. In contract relationship is created by the mutual will of parties. Parties are already familiar to one another. However, in tort, parties do not know each other does relationship is imposed by law (Milosevic and et.al, 2004). They are not in relationship until and unless some negligent action occurs.In both these liabilities damages are provided by considering different aspects. In contractual liability damages are provided on the basis of deed prepared by parties. On the other hand, in tort damages changes as per the situation. Case example of contractual liability is (Hochster v De la Tour (1853) 2 E & B 678) and tort liability is (Topp v London Country Bus [1993] 1 WLR 976).

2 Conceptual description of duty of care and neighbor principle

Meaning of liability

Liability can be defined as obligation imposed by court of law in situation where individual does not provide satisfactory performance and due to which injury is occurred to the innocent party.

Meaning of negligence

Negligence is a misconduct in which party fails to take care of their general duties. Due to their carelessness, an innocent party is injuring (Friedman, 2011). In order to make successful claim of the negligence.

Concept of duty of care was established with the case of Donoghue V Stevenson. In this case, defendant went to the cafe for the consumption of beer and ice-cream. In her beer, a decomposed snail emerged due to which she suffered from injury (Macneil and Gudel, 2001). In this case, Lord Atkin said all individuals should love their neighbor and should act accordingly to prevent injury of the parties related to them. As a consequence, manufacturer of the beer has duty to take care of consumers in their manufacturing process by making use of suitable ingredients. Further, in negligence damages are provided for both economic losses and personal injury.

3 Vicarious liability

In accordance with the law of vicarious liability, other party is liable for the negligent action committed by faulty party. Obligation is transferred from one party to another because of the influential relationship between them (Collins, 2003). By considering this concept, business is also held liable for the negligence of their employees. For the transfer of the obligation on employer following conditions are required to satisfied-

• Tortfeasor must have status of employee
• Negligent action should be conducted in the employment duration.

Due to this aspect, employer is obliged to take care of health and safety issues in workplace. By considering the provisions of Health and Safety Act, they will be able to prevent situation of negligence (Macneil and Gudel, 2001). In addition to this, they should guide employees in proper manner so they work in more responsible way.

Task 4

Applicability of liability in negligence

In the described scenario, Albert is planning to rent a flat from the Brad. For this purpose, Brad made an application to the Charles (accountant of Albert) to provide the statement of his financial position. Charles got confused by the name and he had provided information of other client that their financial position is extremely good without opening the books. However, in actual, financial position was very poor as he was heavily indebted (Sweet and Schneier, 2012). On relying on the statement made by Charles, Brad had rented his flat. Afterwards, Albert escaped from the flat by making arrear of several months.

Present case situation, is based on the provision of negligent misstatement. For this aspect case of Ross V Caunters 1980 can be referred. In this case, receiver to a will launched a claim against the firm of solicitors for failing to advise the testator that having a party witness the will who had an interest in that will would invalidate it as she had relied on the negligent misstatement. Claim made by beneficiary was held successful.

In this case, Brad can sue Charles for negligent misstatement. It is because, Charles had provided recommendation regarding Brad in a formal business context as banker of Albert. In accordance with case reference of Similarly, Ross V Caunters 1980 an action for negligent misstatement will be held successful due to presence of special relationship between author and injured party.

2 Applicability of vicarious liability in given situations

In situation where defendant is able to avail benefit of one of the following defense then they are not entitled to provide damages for the injury-

Volenti non fit injuria- In situation where claimant deliberately themselves in situation where there is risk of injury. As a consequence they are not entitled to make claim for the damages from the defendant.

Contributory negligence- This defense is applicable in situation where party had contributed to the negligent action (Murdoch and Hughes, 2002). Henceforth, they are self responsible for their injury.

Ex turpi causa- In accordance with this defence, negligent action committed by tortfeasor is justified in nature thus they are not required to provide damages for the same to the party.

Conclusion

In accordance with the present study, it can be concluded that parties are obliged to act in responsible manner by fulfilling their obligations and duties. In absence of contractual obligation, tort law is applicable for guiding individuals to operate in fair manner. Henceforth, parties should provide satisfactory performance else they will be liable to provide damages for the injury of innocent party. Employers are required to monitor the actions of subordinates and for complying guidelines of Health and Safety Act. In situation where, they are not able to do so they will be held obliged to provide damages as per the provision of vicarious liability. Liability in negligence can be relinquished if they are able to avail benefit of defense.

References

• Gardiner, S., 2006. Contract and negligence law. London: Cavendish Pub.
• Herring, C. and Milosevic, Z., 2001. Implementing B2B contracts using BizTalk. IEEE.
• Holmes, O. W., 2009.The path of the law. The Floating Press.
• Howells, G., 2011. European Contract Law Reform and European Consumer Law–Two Related But Distinct Regimes. European Review of Contract Law.
• Macneil, I. R. and Gudel, P. J., 2001.Contracts: exchange transactions and relations: cases and materials. Foundation Press.