Aspects of Contract and Negligence for Business


A contract is an agreement with specific terms between two or more parties in which there is a promise to do something in return for lawful consideration. It is the deliberate, voluntary and legally binding agreement among competent persons do or abstain from doing anything (Treitel, 2002). This report is prepared to analyze the aspects of contract and negligence in business in the given case scenario. In addition to this, different types and terms of contract and the essential elements of valid contract in the given case studies is discussed. Here in the report difference between liability in tort with contractual liability and nature of liability in negligence as well as elements of vicarious liability in given scenario is evaluated.


TASK 1 Types of contract

A purposeful engagement between two or more individuals, to do or abstain from doing anything, upon a lawful consideration is known as contract. A contract is a legal agreement which have a lawful object and each party have intention to create legal relationship (Palmer, 2014). There different types of contract that takes place between two or more parties and some of them are as follows:
Distance selling contract: The contract that takes place between professional and consumer through internet for the sale of goods and services is known as distance selling contract. In the modern era people are highly interested in online shopping as it save their transportation cost and save time (Morgan, 2011). Further government also developed various laws and regulations regarding shopping through internet in order to defend public from any risk. For example Johnson bough a watch through a shopping website on internet and also made payment through internet. It is a distance selling contract between parties as contract made on website.

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Written contract: It is an agreement between two or more parties made on printed document that has been signed by both parties. These are legally binding contract and are easier to enforce than oral (Díaz and 2012). For example John wanted to sale his car and than in this situation written contract will takes place between both parties as it will requires legally documentation in order to make it legally binding.

Face to face contract: A contract in which both the contracting parties physically present at the time of agreement is known as face to face contract. This assist parties to solve all the problems with respect to deal during the format of contract in order to protect their interest (Abbott and 2007). Face to face contract can be oral or in written format which depends upon the terms of agreement. For instance Sam wanted to sale his house than in that case face to face contract will takes place between both the parties.

TASK 2 Essentials elements of valid contract

It is important that contract should involve all essential elements in order to make it valid and to protect interest of both the contracting parties. The person those are entering into the contract should have knowledge about these fundamentals so that they effectively comply with them (Faure, 2009). The crucial elements of valid contract are as follows:

Consideration: It is referred as something in written and a contract must be supported by legal consideration. This is the essential element of valid contract and it is the price for which the promise of other is bought.

Capacity of parties: The parties entering into the contract must be lawfully competent in the sagacity that each must be of sound mind, age of majority and not expressly disqualify by any law. They must be capable of entering into the contract in order to make it valid (Best and Banes, 2007).

Offer: It is important that there must be at least two parties-one who form the offer and the other who accept it. These two parties are known as offeror and offeree. When an individual signifies to another his willingness to do or abstain from doing anything than it is known as offer (Jennings, 2010).

Acceptance: When one party gives his assent to perform the contract than it is called as acceptance. This can be verbally, in writing or can be inferred by action which indicates the performance of agreement (Deaki and 2007).

Intention to create legal relationship: The parties entering into the contract must have intention to create legal relationship. An agreement requires that the should intended to create legally binding contract and they must understand that it can be enforceable by law (Plimpton, 2007).

Mini-case A: In the given business scenario of Arnold and Fiona, there are some essentials of valid contract takes place as there was an offer made by offeror i.e. Arnold. There was legal consideration as Fiona will pay £15000 in exchange of medical equipments. The parties also had capacity to enter into the contract as they were of age of majority and are sound mind. Further both were medical professionals and hence they were not disqualify by any law. They had intention to create legal relationship (Harpwood, 2009). There were no acceptance as Fiona did not directly communicate with her uncle as she only leave a message. Acceptance was not given on time by Fiona and hence Arnold sold the equipments to another party and due to this contract did not takes place between them.
Mini-case B: Under this scenario, an offer was made by Mrs. Smith through an advert in local paper. On the other hand David sees the advert and accept that offer. Hence there was offer and acceptance takes place. It also involve consideration as Mrs. Smith promises a reward of £10 for the return of Lucky white and black cat (Camenisch, 2001). The parties entering into the contract have capacity as they were of age of majority and were of sound mind. David spends £15 for a taxi to return the cats to offeror and he claimed £25 to Mrs. Smith to pay in exchange of cats. The offeree added counter condition which was illegal and because of this offeror was not accountable to pay extra money to David.

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Mini-case C: In this context, Mrs. Harris the owner of three rented houses in Extown made an offer and ask her neighbor to collect rent from the tenants on her behalf when she is in abroad. Ted accept the offer and collects the rents. Mrs. Harris says that she will given £50 to Ted for his work but latter she refuse to pay. Hence there were no legal consideration and both parties were not intended to create legal relationship (Staudenmayer, 2003). Further Mrs. Harris was also not liable to pay any reward to Ted as there were no legal obligations on parties.

Mini-case D: Under this scenario, the essential elements of valid contract were exist as there was offer and acceptance which resulted in dealership agreement between Lynx Cars Ltd and Roadstar Ltd. The parties entering into the contract have capacity and they have intention to create legal relationship. Further the contract between parties involve legal consideration as Roadstar place an initial order for 2,000 cars to be delivered by the end of 2007 which was accepted by manufacturer i.e. Lynx Cars Ltd. The manufacturer were unable to fulfill the offer due to production difficulties which resulted in breach of contract (Hardey and Upex, 2006). Hence in this context, the Roadstar is allow to claim against Lynx Cars Ltd. as terms of contract were not fulfill by them and due to this offeree had the right to claim for damages.

Case Law

Harvey v Facey, (1893), in this scenario a telegram was sent by Harvey to Facey in which an offer was made by Harvey to sell the Bumper Hall pen to him. There was also legal consideration i.e. price of product but it contains lowest cash price i.e. £900 into telegram. An offer was made by Harvey on lowest prices now its depends on Facey whether he accept that offer or not.
Esso Petroleum v Customs and Excise, (1976), an promotion was ran by Esso whereby any individual purchase four gallons of petrol would get a free coins from the collection of world cup coins. It creates question for court to charge tax if they produced coins in large quantity. Esso argues that it was a free gift for promotion there not intended to have legal effect. Hence the coins were offered in a commercial context and there was an intention to create legal relationship.

TASK 3 Terms of contract

The terms of contract raise the contractual obligations among the contracting parties. It is the provision forming part of agreement which varies from one contract to another. Further representation can be referred as the negotiation at the time of agreement. The breach of contract takes place when the terms of agreement not fulfill and in that situation the innocent party is allowed to ask for damages (Bowyer, 2000). Further innocent party can bring an action for dissertation when representation turnout to be untrue. There are different terms of contract such as warranty, condition, innominate etc.

In the situation of condition, if breach of terms takes place than in that case the injured party is allowed to discharge the contract and can ask for damages. Further in the situation if breach of terms takes place than in that case hurt person can not release the contract but they can claim for compensation (Nysten-Haarala, Lee and Lehto, 2010). In addition to this, innominate terms relies on the nature of agreement and it can be warranty or can be condition. In this situation, the damages can be decided on the basis of clauses.

Mini-case E: Under this scenario, Paul is looking for second-hand car and he seen an advertisement in news paper. He visits a showrooms of Slick Cars and selects a car which priced at £3,995. The salesman tells Paul that car is a 1994 Mondeo which has done 30,000 miles and had only one owner. This was representation made by salesman if any statement from this comes untrue than in that situation Paul is allowed to breach the contract and can ask for compensation. In the given scenario the terms of contract was condition as salesman describes the car in sales agreement as 1994 Ford Mondeo, Cayman Blue and Registration number was L931 AJU. If any of the given condition was not fulfilled than in that case Paul is allowed to release the contract (Tallman and Bruning, 2008). Hence there was representation made by salesman at the time of contract and terms of sales agreement among both the parties was condition. Further breach of any terms or representation allows injured party to ask for compensation and discharge the contract.

Mini-case F: In this context, Jim agrees to takes his family to Fun Park and he gave £1 to park his car on a car park which was run by Stand Council. At the entrance of car park a notice was displayed which was partly obscured by overgrown shrubs. The notice states that car parked entirely at the risk of owner. Further Jim pays £7 for family admission ticket to Fun Park which was managed by Leisure Ltd and the back side of ticket contains the clause of agreement i.e. company does not accept the liability of personal injury or death of visitors (Moriarty and Manthorpe, 2013). However the metal bar files off on Jim and his wife and injured them. In the given scenario, the express terms takes place as all the clauses were inserted by company and the Stand Council. Under this context exclusion clause takes place which states that occupiers can exclude their liability to some extent but in case of personal injury or death of a person the occupier cannot exclude their liability. Hence Jim and his wife was allowed to claim against Leisure company and ask damages for personal injury (Wood and 2010). In addition to this, the car of Jim was also damages and they were also allowed to claim against Stand council and ask for compensation as proper warning was not given by them as notice was partly obscured by overgrown shrubs.


TASK 1 Difference between liability in tort and contractual liability

Tort is a civil wrong that unfairly cause someone else to experience loss resulting in legal liability for an individual who commits the act. It is the damage or wrongful act which is done willingly or negligently which involve strict liability but not include breach of contract is known as tort. It is the result of negligence and the injured party can ask for damages (Hernandez, 2010). The breach of duty of care cause damages which form tort of negligence. In the situation of tort the breach of duty is repressible by an action for unliquidated damages that is fixed by law. This allows claimant to recover losses without having to prove fault. In case of Topp v London Country Bus, (1993), a mini-bus in a lay-by overnight was left by defendant bus company. The key was left and it was unlocked in the ignition. The driver of bus who was expected to pick it up also did not turn for his shift. Further bus was stolen by thieves and they drove it away. Unfortunately the bus knocked a women off and killed her and an action was brought by her husband. The duty of care did not owe by bus company for the acts of third party.

On the other hand when parties entering into the contract fails to perform as per the terms of agreement than is called as breach of contract and than contractual liability takes place. When liability assumes by one party on behalf of another through a contract is known as contractual liability (Whincup, 2008). This imposed on a contracting party by the terms of agreement. Rose and Frank Co v Crompton Bros, (1925), the defendant and claimants entered into an agreement for the supply of some carbonized tissue paper. In the U.S. until March 1920 the claimant was the sole agent of defendant. The contract among the parties contained an honorable pledge clause which states that contract was not a legal or formal agreement and shall not be jurisdiction of the courts in neither US. nor England. The agreement was terminated by defendants and the action brought by claimant for breach.

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TASK 2 Nature of liability in negligence

The duty of care takes place in the agreement when there is legal relationship among parties. Further when parties not performing the legal, ethical and other legal obligations in the agreement than breach of duty of care takes place. When an individual fails to take proper care during the performance of contract than in that case party is held liable for negligence (Owen, 2007). Causation comprise the elements of guilty and it can be referred as the negligence. It is the relationship between conduct and result.

In addition to this, different types of defenses available to a defendant facing an action in tort like common or statutory law justification, illegality, consent, contributory negligence and necessity. Further when damages experienced by one partly results from its own fault than it is known as contributory negligence (Luo, 2002). When known risk taken by claimant that may arise from express agreement than it is referred as consent. The contracting party is able to rise the necessity defenses when he commits a tort only to prevent a larger harm from happen.

Under the scenario of Donoghue v Stevenson, (1932), Mrs. Donoghue and his friend went to a cafe and they brought a ice cream and ginger beer. The beer was came in an opaque bottle and due to this content was not seen. The half content of bottle was drank by Mrs. Donoghue and half poured over the ice cream and a decomposed snail emerged from the bottle. She suffered from personal injury because of negligence of beer manufacturer. The claim was commenced by Mrs. Donoghue against the manufacturer and she was successful (Heine and Kerber, 2002). In the given scenario breach of duty of care takes place as negligence of ginger beer producer cause personal injury to Mrs. Donoghue. The manufacturer was unable to take proper care during the performance of contract and due to this he was liable to pay damages to injured party.

TASK 3 Vicarious liability

The situation in which one person is held liable for the illegal acts of third party than it is known as vicarious liability. In this obligations arises from the relationship of one person to another. It is the responsibility or accountability for the criminal or negligent acts of any more person that is assigned by law due to legal relationship (Levinson, 2005). In the situation of employer employee relationship, the vicarious liability takes place in which organization is held liable for the acts of their staff due to legal relationship.

In the context of Mersey Docks and Harbour Board v Coggins and Griffiths (Liverpool) Ltd, (1946), one of the Board's Cranes and an operator i.e. Mr. Newell was hired to unload a ship. During the course of unloading the ship, a person was injured because of negligence of newly hired operator (Daniels, 2004). The Board of Coggins and Griffiths were vicariously liable as Mr. Newell was their employee and there was legal relationship among both the parties. Organization argues that Mr. Newell was not truly employed by them and due to this they were not liable for their acts. However he was proper worker of organization and due to this organization was held liable for the acts of their staff. Hence employer was continues to be liable to pay damages for the acts of their employees and to satisfy court.


From the above report it can be concluded that parties entering into the contract should have proper understanding about the legal obligations and the essentials of valid contract as this will assist them to protect their interest from any sort of damages during the practices of agreement. Further there are different types of contract and terms that takes place between two or more parties. The vicarious liability takes place in the situation in which one person is accountable for the acts of third party.


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  • Best, A., and Banes, W. D., 2007. Basic tort law: cases, statutes, ad problems. Aspen Publishers Online.
  • Bowyer, M. L., 2000. Insurance contract law and regulation and competition in the UK insurance industry: The missing link. Journal of Financial Regulation and Compliance.
  • Camenisch, P., 2001. Business Ethics: Getting to the Heart of the Matter. Business & Professional Ethics Journal.
  • Daniels, K., 2004. Employment Law for HR and Business Students. CIPD Publishing.
  • Deaki, and, 2007. Markesinis and Deakin's Tort Law. Oxford University Press
  • Díaz, V. G. and, 2012. Contractual and quality aspects on warranty: Best practices for the warranty management and its maturity assessment. International Journal of Quality & Reliability Management.
  • Faure, M., 2009. Tort law and economics. Edward Elgar publishing.
  • Hardey, T. S. and Upex, R. 2006. Employment Law for Business Students. SAGE.
  • Harpwood, H. V., 2009. Modern tort law. Routledge.
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