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Contents
Introduction:.................................................................................................................... 2
Understand the essential elements of a valid contract in a business context:......................................2
1.1 Explain the importance of the essential elements required for the formation of a valid contract......2
1.2 Discuss the impact of forming contracts..........................................................................4
1.3 Analyse the terms in contracts with reference to their meaning and effect.................................4
Be able to apply the elements of a contract in business situations:..................................................6
2.1 Apply the elements of contract in given business scenarios...................................................6
2.2 Apply the law on terms in different contracts in the given business scenario..............................6
2.3 Evaluate the effect of different terms in the given contracts...................................................7
Understand principles of liability in negligence in business activities:.............................................8
3.1 Contrast liability in tort with contractual liability...............................................................8
3.2 Explain the nature of liability in negligence......................................................................9
3.3 Explain how a business can be vicariously liable.............................................................10
Be able to apply principles of liability in negligence in business situations:.....................................11
4.1 Apply the elements of the tort of negligence and defences in different business situations...........11
4.2 Apply the elements of vicarious liability in given business situations.....................................12
Conclusion:................................................................................................................... 13
References:.................................................................................................................... 13

Aspects of contract and negligence for business

Introduction:
At first, we should know what law is. Law means a combination of rules and regulations which
are mainly made by a particular state government as an authority is responsible for enforcing the
law made within its jurisdiction via using different kind of sanctions. Business organisations have
to face many criteria to maintain business in the worldwide business arena. Law helps to

determine what is right and what is wrong for managing business organisation. Contract is the
most important parts of business transactions. It is a legal agreement between two or more parties.
Contract is regulated by law which is enforceable by the court.

Understand the essential elements of a valid contract in a business

context:
1.1 Explain the importance of the essential elements required for the formation of a
valid contract
A contract is a written or spoken agreement, that is especially one concerned employment, sales,
or tenancy and it is intended to be enforceable by law. Before going to contract, Peter Abraham
should know how a contract is formed and the importance of the various elements.

Offer

Capacity

Element
s of
Contract

Acceptan
ce

Consider
ation

Contract must be valid in a business or any organisation when contact must follow some essential
elements. These areOffer:
It is an expression of willingness to contract on a specific set of terms and conditions, made by the
offeror with the intention that, if the offer is accepted, he or she will be included in a contract. The
offer must be certain and it has validity to accept the offer. Ex- A seller offers a book for $200. On
the other view a customer comes into the shop and offers $150 for that book.
Acceptance:

Acceptance is the action that is taking and receiving offered. It is an expression of absolute and
unconditional agreement to all the terms and conditions set out in the offer. The acceptance is
other half of the agreement. Because the offer is not valid if offer is not accepted by the offeree. It
can be oral or in writing agreement. Ex- Mr. Abraham gets an offer if he prefers that offer then he
will be accepted.
Consideration:
Consideration is the important element of a contract. It consists of a promise to perform a desired
act. Every contract must have some consideration. It is concerned with the bargain of the contract.
A contract is based on an exchange of promises. Each party of a contract must be both a promisor
and a promisee. Any person pays the consideration and has some value.
Capacity:
The parties must be capable for the contract. The contract will not be allowed in the contract if
any parties are infants, minors, mentally disorder persons and autistic. The contracts are voidable
when persons do not have in legal capacity.
Besides there are some other important elements need to be considered for contract.
Intention to create legal relationship:
All of the contract must be legal where there cannot be unlawful purpose between the both
parties. The parties must have the intension to make a legally binding contract in many
commercial transaction. It is one of the necessary elements of a contract. Ex- Mr. Bike has an
intention to create legal relations when he goes to buy some doors for his owner from the
furniture shop.
Certainty:
The contract must be certain, specific and precise. The contract should be stated clearly and
understood in the terms and regulations of contract by the parties of the contract.
Written:
Contract will be saved from frauds if the contract is written. Contract can be oral or written. But
written contract helps to make the best decision. The contract must be in writing, it is not
compulsory except in certain special situations such as the sale of land.

1.2 Discuss the impact of forming contracts

There are many categories and the impact of types of contract. These are bilateral and unilateral
contract, express and implied contract, executory and executed contract and distance selling
contract etc.
Bilateral and unilateral contract: It is the bilateral contract when the both parties of the contract
agreed on to do or to make sometimes.
Express and implied contract: Express contract is the contract that the both parties in a contract
express all terms and conditions with each other.
Executory and executed contract: Executory contract is the contract when one or other parties in a
contract do not perform the obligation and they are supposed to perform.
Distance selling: Every Sellers informs certain basic information to customer, deliver goods
within 30 days and provides customers right to avoid their orders. Buyers buy the goods online or
other mediums. Under the distance sale contract, the parties cannot make inquiry about the goods
and services. Ex- Peter Abraham can go to this contract with him by mail order, the internet,
email, fax, and over telephone when Peter will be at distance from his party.
Verbal contract:
It is another known face to face conversation but it is not well documented. In this contract
physical appearance is main condition of the both parties. This contract is not required formalities
like a written contract. When the parties come in this type of contract, both have easy to
understand the terms and conditions of the contract. But there is no clear evidence in verbal
contract because there is no paper documents. This agreement is done word of mouth. Ex- Peter
Abraham can do verbal contract. There is no record for this contract. So there is no evidence to
show.
Written contract:
It is a written agreement between two parties. This contract must be included sign in document.
All the terms and conditions show in this contract. It is very effective at the time of dispute
because it is in the written contract. Peter Abraham wants to go written contract with him. Both
parties have signed and entered into in details in this contract. The written contract must be hold
in the law court.

1.3 Analyse the terms in contracts with reference to their meaning and effect
When any party goes to contract, he/she should have clear idea about the terms, conditions, fees
& charges, warranties and exemption clauses etc.; there are different kinds of terms that are used
in a commercial contract. These are considered as implied and express terms. Implied by fact,
implied in law, implied by custom and implied by trade usage occur in implied terms. Express
terms are oral, written, collateral contract and parole evidence role.
There are four types of collateral contract.
Condition:
The collateral conditions are the parties rights and obligations. A condition in an act that affects a
partys collateral duty. There are a lot of terms in a contract, that terms are root of contract. When
a party breaches the conditional term in the contract, the injured party has the right for the loss, he
suffers due to the breach. Ex- Peter Abraham says his party if you build my house within 4
months, I will give you extra payment. This agreement has a condition.
Warranties:
It is minor terms of a contract which are not central to the existence of the contract. Warranty is a
contractual term which is normally written as a promise. If a party is breached the warranty, the
innocent party may claim damages but cannot end the contract. Ex- Peter Abraham buys a car
with a warranty service contract. This warranty service will be given for specific time. If car is
damaged within specific time, seller will give free service.
Innominate terms:
It is another contractual term that can be either conditions or warranties. Any party breaches the
term, the innocent party will terminate the contract and party will get other remedies. The term is
applicable by the parties in the contract but court do not recognise the term at the time of dispute
which is used by the party. In this case, court will treat the term as innominate term.
Exemption clauses:

A contract that stipulates that any party is limited or excluded from liability. Ex- Peter goes to
park and rides a horse, it is common sense that the horse owner will not be responsible when Peter
is fallen down from the horse and injured while riding. There are three types of exclusion clause.
1. True
2. Limitation
3. Time

Be able to apply the elements of a contract in business situations:

2.1 Apply the elements of contract in given business scenarios
The contract elements depend on the nature of contract. But there are some elements is most
important for any other contracts. This elements of the contract are given below through the
business scenarios.
Business scenario 1:
Carol saw an advertisement via online ads. She needed a couch. When she saw a nice brown
couch in online, she wanted to buy that couch. That moment she mailed to seller for buying this
product. Carol offered to seller for buying that product. The seller accepted carols offer and they
go to agreement for payment. This process is a contract. Mutuality obligation is the agreement of
the two parties on a common understanding on terms of the contract.
Business scenario 2:
Prestons son, Devi was seeking a cyber-security position with George, Smith & Fogarty, Inc., a
large IT firm. After several weeks, they offered to Devi for hiring on April 12, 2015. Devi
accepted their offer. But Devi father Preston unaware that his son had been hired. His father
mailed to George on April 13, 2015 and he gave to promise the IT firm 150000 contract if the
firm would hire his son. George received his mail. And the firm wished to enforce it against
Preston. George can enforce the promise. Because his son had been hired before giving Preston

promise. Besides they made a legal contract through offer and acceptance. But there was no
relationship with Preston in time of Devis hiring contract.

2.2 Apply the law on terms in different contracts in the given business scenario
There are different cases used the law on terms in different contract. Now I am discussing the
application of law on terms in different conditions that are based on the business scenario.
Business scenario 3:
The restaurant can rely on the exclusion clause contained on the receipt. Because this clause is
valid and is not contrary to law. This business scenario is used in exclusion clause in the contract.
When the man hand over his over coat which contained his wallet with 500 inside, the porter
gave the man a receipt which has on the back an exclusion clause that states all valuables must
be removed from the jacket pockets as the restaurant will not be held responsible for items
missing or stolen. When he realises his wallet was left in the over coat and went to collect it. He
then realised the money has been taken from the wallet which he sought to recover from the
restaurant. The restaurant is refusing to refund the man. The man should be brought to attention
that receipt.
Business scenario 4:
Yes, Aaron is entitled to a compensation. When Aaron rented a warehouse from Zehphra, he made
a contract with Zehphra. He promised Aaron that he will not increase the rent for the next 5 years.
Aaron made expenses for improvement to the warehouse. After a year Zehphra died and the value
of the property have increased. Yeti inherited the property and increased the rent. But Aaron
refused to accept the increase because of Zehphra promised him. Yeti terminated the tenancy and
Aaron claimed his compensation for expenses. But Yeti refused to pay because there was not
included compensation payable in the tenancy agreement. In this case compensation payable is
implied term in the contract. It is common law include that compensation payable. This law
protects Aaron for getting compensation.

2.3 Evaluate the effect of different terms in the given contracts

Business scenario 5:

A policyholder wanted to insure his car from motor insurer. So he went to the motor insurer. And
the proposal asked some questions for the contract. The policyholder answered the negative of
that question. When the policyholders car was stolen, he claimed for the loss. But the insurer
learnt that policyholder did not disclose the information. He gave us false statement. So he was
rejected from claim for breach of contract. This contract was expressed term. For this reason the
insurer has right to void the policy. So customers should disclose all material facts.
Business scenario 6:
In this business scenario policyholder applied for motor insurance and answering negative two
questions on the proposal form. At the time insurer investigated new claim, they could know that
her car was modified and her husband claimed earlier two times. And insurer refused his claims
and cancelled the policy from its start date. But she assumed that her car all parts were original
and she did not realise that her husband had earlier claimed and rejected claims because he had
only third party at the time. For this moment the insurer has right to void the policy from the start
date. Because the insurers recognised a third set of terms that is known as innominate term. As a
result the innocent party is deprived of the whole benefit of the contract for such breach. The
inexperience man will be entitled to repudiate the contract and get compensations.

Understand principles of liability in negligence in business activities:

3.1 Contrast liability in tort with contractual liability
A tort is an action that injures and hampers anyone in any way. For this reason the injured person
may sue the liable person for the damages. Sometimes there is a breach of duty care causes a
damage which makes trot of negligence.
Tortious liability arises from the breach of duty primarily fixed by law; this duty is towards
persons generally and its breach is repressible by an action for unliquidated damages. W.V.H
Rogers, Winfield & Jolowicz on Tort (16th edn, Sweet and Maxwell, 2002)
A tortious liability creates out of damage that caused due top wrongful act that cannot be
qualified. A tort liability is the obligations of a party to the victim resulting from injury.

Any party takes responsibility under contract. When parties bind voluntarily together in a
contract, the contractual liability arises.
Both those liabilities are form civil liability and responsibility have an identical structure. The
idea of repairing the prejudice caused by the legal action on the assets dominate in contractual and
tort both liability.
There are many differences between tort liability and contractual liability. Civil tort liability will
be used when the prejudice is caused by any person in breaching of a general obligation. Civil
contractual liability occurs when the creditor suffers a prejudice due the failure to fulfil of
contractual obligations, the breached obligation being a real contractual obligation. Contractual
liability is committed by any person voluntarily united, while tort liability unites people as a result
of chance. In case of tort, a person is liable if he/she had discernment on the date of committing
the legal action. In case of proving the guilt, for contractual liability, debtor is presumed guilty. As
for tort liability, the guilty of the party must be proven by the injured and damages individual. So
we can understand that the main difference between tort and contract liability areNature of duty. Duties in the trot is fixed by law but duties in the contract is fixed by
parties
Contract is made with the consent but tort is made without the consent
The court measures the damage on the stipulation but the damages are measured which
is not limited.

3.2 Explain the nature of liability in negligence

Negligence means to a failure of person to exercise a level of care necessary to protect others.
Negligence comes into play concerning a persons actions. When there is a duty, it may also be
failure to act. Negligence involves damage caused by carelessness. There are some elements of
the negligence. These are- duty of care, breach of duty, direct cause, remoteness of damage and
harm. Example- When a man was going to office by his car, he caused accident and someone
injured or damaged other things; because man was driving in sleeping situation. Then the injured

man could be sued for his negligence. If the claimant is successful in a negligence claim, the
claimant must be prove1) The defendant owed them a duty of care:
The circumstances and relationships which the law recognizes as giving rise to a legal duty to take
care that is called duty of care. According to the law, if the defendant losses to take such care to
the claimant, the defendant will be liable to pay compensation for claimant. The defendant had
breach of duty of care. In some circumstances the relationship between the plaintiff and defendant
might make legal duty.
2) The defendant was in breach of that duty:
If the claimant gives the evidence for the breach of duty, the claimant will be successful in the
claim of negligence.
3) The breach of duty caused damage and:
If the claimant suffers injury, actual loss and damages as consequence of another action, the
claimant will get compensation.
4) The damage was not too remote:
If there are some elements could be proved, the claim for the compensation will succeed. These
elements are

The breach of duty gave rising on the damages

The damage was not too remote from the breaches

3.3 Explain how a business can be vicariously liable

Vicarious is a situation where anyone is held responsible for the actions of another person. At the
work place the employers held under the liability for the act done by the employees. These are
included in violent, harassment, discriminatory acts and bulling etc. Vicarious liability holds

employers accountable for the wrongful negligent or intentional tort actions of their employees,
while they are acting in the course of their employment. It is whether the employee was acting in
a personal capacity of their employment. This can be difficult task to determine. If any employee
of an organisation leaves the employment place and not going for any employment work. Then
employer does not liable for the act which is committed by the employee or any act which is not
permissible by the employer. Example- employer make latest equal opportunities policy and
provide training on anti- discrimination to their staffs. And they practise it in the workplace.
Employees know that their employers will be existed vicariously liable to third parties for their
wrong. While they may be sued civilly for their wrongs, rough employees have less incentive to
avoid the harm and damages. Sometimes vicarious liability means to as strict, or no fault, liability
because the employer itself is not actually or personally at fault. Indeed, vicarious liability does
not apply only to employers and employees. The law holds a person responsible for the
misconduct of another because of the relationship between them.
For the reduced of the vicarious liability the employer has to take necessary steps1) Employers should give opportunities without any discrimination.
2) Employer gives active commitment to the employee.
3) He should prohibit the discriminatory activities which are held at the workplace.

Be able to apply principles of liability in negligence in business

situations:
4.1 Apply the elements of the tort of negligence and defences in different business
situations
Business scenario 7:
We previously explained the tort of negligence. We know that torts are legal. A party suffers at the
hands of another. Negligence is form of tort which evolved because some types of damage occur

between parties that have no contract between them and there is nothing for a party sues the other
over. In this scenario, a doctor who performed a big mistake in his patient. We saw that Mr Brown
went to the hospital for his illness. But he was seen a nurse because of the doctor being duty that
time. The nurse telephoned doctor, the doctor said, prescribed some pain killer for him. The nurse
did it. After a day Mr. Brown died, from pneumonia which caused by toxic mould in the house.
a) Here the doctor was liable for died of Mr Brown. When patient came to the hospital, the
hospitals doctor did not examine him but gave prescription. If doctor examined him then
gave prescription, Mr Brown would not die. Doctor should observe him. It is the duty of
doctor that examine the patient properly.
b) On the other hand the hospitals doctor cannot be held liable for the negligence. When Mr
Brown came to the hospital, he should not take that prescription from the nurse. He should
wait for doctor until doctor came to him. Then he shared the doctor of his problems. Then
doctor could examine him properly and prescribe rightly.

4.2 Apply the elements of vicarious liability in given business situations

Business scenario 8:
When Chauffeur Companys driver came to the airport for pick up a client, driver waited
sometime for arrival of his client. Then he drank alcohol. When he came to back from airport to
the clients hotel with his client, the driver crashed into a lamp post. That moment his client
suffered from serious injury.
Now the client is suing the Chauffeur Company. Yes, the Chauffeur Company must be liable for
their drivers negligence. The Chauffeur Company is vicariously responsible for the action of
their driver. Because, in this business scenario driver is employed by the Chauffeur Company. As
the driver was over the drink, he drove the car carelessly. So he crashed into the post lamp that
resulting injured his client. For that reason the client can sue against the Chauffeur Company.
Business Scenario 9:

In this business scenario Mr Jones, of Billercay in Essex worked as delivery driver for
supermarket. One morning loading pallets into his truck, he slipped and the pallets fell over and
injured another colleague. His injury was so severe that he was left with a torn rotator cuff which
required surgery and months of rehabilitation. But he did not get that facilities for damages from
the supermarket. So the colleague sued against the supermarket.
In the case the supermarket is liable for the action that resulted into the accident. Because
supermarkets healthy and safety had been delegated to another at the accident time. So the
supermarket cannot give treatment to the colleague. But the supermarket must not be more
conscious about their health and safety system of work. Employers have a duty of care to their
employees under the health and safety at work. This duty of care provides safe and competent
fellow employees. That means every employees of organisation must be adequately trained,
instructed and supervised in their duties. It is the compulsory duty for the supermarket to develop
and increase the facility of health and safety.

Conclusion:
Every business or any organisation often use law. In our every business sectors we use business
contract. Business law gives the basic negotiation deals that is required every businesses. For that
reason we should understand the aspect of contract and negligence. Sometimes many people dont
understand clearly liability in tort and contractual liability because there are some basic
differences between these two things.

References:
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ISBN9781408278802
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9781408278765
4. Riches S and Allen V (2011), Keenan and Riches Business Law, 10th Edition, Pearson
Education Ltd, ISBN 9781408278839
5. Mark Lunney, Ken Oliphant, Trot Law Texts, Cases (2003) 2nd Ed. Oxford University
Press, ISBN 0-19-926055-9

6. Randy E. Barnett, Contracts (2003) Aspen Publishers, ISBN 0-7355-6525-2

7. Scott Fruehwald, Reciprocal Altruism as the Basis for Contract, 47 University of
Louisville Law Review 489 (2009).
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2015)
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2015)
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