BUSINESS LAW 1
1.0 Introduction 2
2.0 Aspects of Contract 2
3.0 Negligence for Business 6
4.0 Reference List 9
Aspectsof Contract and Negligence for Business
Thelaw of contract is one of the essential aspects of the business lawin the 21stcentury. This is due to the nature of business organisations promiseto provide satisfactory and safe goods and services to theirconsumers. A business organisation has the potential of sufferingfinancial losses in the future due to negligence of businessoperations. Indeed, the law of contract focuses on the enforcement ofthe promises made by the parties under the contract. Thus, it iscritical for the business organisations to understand the aspects ofcontract and elements of business negligence. The understanding onthis front has the effect of enabling the management of the businessorganisation to cushion the financial losses and reputation it maysuffer in the market. Accordingly, an intensive evaluation on theaspects of contract and negligence of business has been undertaken inthe research paper.
Aspects of Contract
Acontract is an agreement that is legally binding between parties andformed in mutual consent by the parties involved(MacIntyre, 2010, p. 112).The parties involved in the contract could know each other like a CPAfirm and a client or they can be strangers like client downloadingand installing software offered by a software company. Therelationship between the two parties in either of the scenario isboth governed and formed under the contract law. The aspect of acontract is based on five main elements of a contract that is valid,which include offer and acceptance, consideration, capacity,intention to create a legal relation, and contract privity(MacMillan & Stone, 2009, p. 5).
Theelement of offer implies the willingness expression to a contractunder specific terms. The offer is supposed to be offered under theintention that it will be binding once it is accepted by the otherparty(Marson & Ferris, 2015, p. 71).Thus, there are no further discussions or negotiations required oncethe offer is accepted by the other party. One of the classical casesdemonstrating the element of offer and acceptance in a contractinvolved the Manchester City Council in selling the houses to thesitting tenants. Accordingly, the Manchester council sent a letter totenant namely Storer on its intention to sell the house if the tenantaccepted the offer. In contrast, another communication was made toGibson asking him to send a formal invitation of buying the house andthe letter stated the council might be prepared to dispose the houseto Gibson(MacMillan & Stone, 2009, p. 21).
However,the Manchester Council reconsidered later to stop the sale of thehouses unless it was bound under the contract to sell the houses.Consequently, the two sitting tenants of the council houses decidedto sue the council for violating the contract to sell the houses. Thecourt of appeal in Storervs. Manchester City Councilin1974 found the contract to be binding on Manchester City Council tosell the house to Storer. The decision was based on the argument thatthe communication to Storer was an offer, which only required theplaintiff to accept for the contract to be binding(MacMillan & Stone, 2009, p. 21).In contrast, the court ruled the contract was not binding in Gibsonvs. Manchester City Council.The rationale behind the decision of the court was that the councilhad not made an express offer of selling the house since it hadindicated it might be prepared to sell the house in the communicationsent to the plaintiff(MacMillan & Stone, 2009, p. 21).The court found the communication sent to Gibson was an intentionstatement of selling the house rather than an offer, which would haveobliged the City Council to sell the house.
Accordingly,the two cases indicate an enforceable contract should have theelement of offer and acceptance. Similarly, an offer extended by abusiness organisation implies the contract will be binding is theconsumer accepts the offer even if the business reconsiders theoffer. In addition, a business organisation is not obliged to acontract if a consumer accepts to buy a good or service if the firmhas not expressed the willingness to offer the good or service. Thus,the management of a business organisation should be cautious of theelement of offer and acceptance in relating with the consumers.
Thedoctrine of consideration is another essential element of a contractin determining if the agreement is binding on either party. Theelement of consideration focuses on the promise made by one party toact in a certain way in the foreseen future(Emerson, 2009, p. 39). Each of the party in a contract is expected to provide somethingwhich is of value in order to induce the other party to theagreement. The exchange of the values in the agreement is the oneregarded as a consideration in law. The element of consideration isconsisted of the detriment suffered by the promisee or the benefitenjoyed by the promisor(Ashcroft & Ashcroft, 2011, p. 115).Even though the consideration is highly interpreted in term ofcurrency, it can be a promise to act or a refrain to act in which aperson is entitled to legally. Indeed, a promise to wear certainbrand name while refraining from the competitors’ brands between acelebrity and an apparel company in exchange of monetary or trainingsupport will be regarded as a consideration, making the contractbinding between the two parties. Consequently, the doctrine ofconsideration in a contract requires an exchange of value between theparties in the agreement.
Theelement of capacity in a contract requires that parties in a contractshould be of competency in enforcing the contract(Clarkson, Miller, Cross, & Clarkson, 2012, p. 67).This doctrine of element in a contract is critical in a businessorganisation due to the potential loss it might by entering into acontract if it relates with a party lacking legal capacity to enforcethe contract. The law states that a minor, intoxicated person andmentally incapacitated persons have no legal capacity and competencyto enforce a contract(Emerson, 2009, p. 126).Thus, a contract entered with a minor is voidable at the discretionof the minor if the minor disavow the contract through someaffirmative act. A minor cannot be held liable for the breach of thecontract since the law assumes a minor to be incompetent and naïveto negotiate the terms of the contract equally with an adult(Clarkson, Miller, Cross, & Clarkson, 2012, p. 69).Similarly, a contract entered with mentally incapacitated individualis voidable since the person lacks mental capacity of entering into acontract. Moreover, persons under the influence of drugs or alcoholare not liable for the breach of the contract since they had notmental capacity of entering the contract. However, the contract isruled to be voidable if the other party had knowledge on theimpairment degree of the intoxicated party.
Privityof a contract under the common law is another critical doctrine underthe law of contract. The doctrine of contract privity implies thatthe contract cannot impose obligation or confer rights arising fromthe contract on any agent or person unless to the parties to thecontract(Gillies, 2009, p. 361).This doctrine implies that the only persons who can claim for thecontractual remedies arising from a contract are the parties to thecontract. Similarly, only persons or agents party to the contract canbe sued in reference to the contract. One of the case lawdemonstrating the application of privity to contract doctrineinvolved DunlopTyre Company vs. Selfridge in1883(Gillies, 2009, p. 361).Dunlop Tyre Company had entered into a contract with the distributorsspecifying the price floors of its tire products. Similarly, thecontract required the distributors to extend the similar contractspecifications to the retailers. However, the defendant “Selfridge& Company Limited” a retailer sold the tire products of DunlopTyre Company at a lower price required under the contractspecifications. Consequently, Dunlop Company sued Selfridge Companyfor breach of the contract. However, Dunlop failed to claim damagesfrom Selfridge Company since there was no privity between theretailers and the manufacturer(Gillies, 2009, p. 361).Consequently, a business organisation should evaluate the extent towhich the contract it has entered with another party can affect it inclaiming for benefits or damages.
Intentionto create a legal relation element implies only the agreements boundunder the law and legal are binding(Richard, 2013, p. 153).Thus, a commercial agreement entered to undertake an illegalcommercial activity is not protected under the law of contract.Similarly, the element implies that a commercial agreement is assumedto have been intended to be legally binding on both parties(Richard, 2013, p. 155).Accordingly, a contract is considered to be valid if it has theintention of creating a legal relation.
3.0Negligence for Business
Abusiness organisation can be sued by another party for negligence incausing the injuries suffered(Gillies, 2009, p. 186). The act of negligence is a business environment is due to thefailure of taking reasonable care, which an ordinary and prudentbusiness organisation could have applied in a comparablecircumstance. Thus, negligence for business is based on the wrongfulomissions or acts conducted in a business organisation. The event ofbusiness negligence is based on five major elements like the elementsof a contract. The five elements of negligence include duty of care,breach of duty, proximate cause, cause in fact, and the damages(Ashcroft & Ashcroft, 2011, p. 23).Accordingly, the five elements of negligence action in a businessorganisation have been evaluated.
Theelement of duty to care implies duties that a business organisationowes to others in its operations(Cheeseman, 2010, p. 171).The case of business negligence arises under the duty of care if thebusiness owed duty to the party suffering the loss or injuries. Arelationship must exist between the plaintiff and the defendant forthe duty to care case to arise. Accordingly, a business firm will beheld to have acted negligently if it has a duty to protect theplaintiff. A case example demonstrating the aspect of duty of care inbusiness negligence is the case of Donoghuevs. Stevenson in1932(Rush & Ottley, 2010, p. 142).Donoghue had consumed a ginger beer bough for him by a friend, whichwas manufactured by Stevenson Company. Unaware to him, the gingerbeer contained a snail that could not be seen since the glasscontainer was unclear. Consequently, Donoghue sufferedgastroenteritis. The appeal court found in the ruling that Stevensonhad the duty to care to the end consumers intended to consume theproduct(Rush & Ottley, 2010, p. 142). Consequently, the manufacturers can be found to be negligent if aconsumer is injured by it product due to the duty to care for the endconsumers.
Incontrast, the breach of duty to care implies defendant has breachedthe duty it owes to the plaintiff(Statsky, 2012, p. 123).Under this element, the defendant is held liable of breaching theduty to care for failing to meet the standards required under the lawor an agreement. The negligence element under the breach to careentails the proof of fault under the legal tenets because of thedefendant(Harpwood, 2012, p. 23).The legal fault implies that the act was unreasonable in a certaincircumstance(Kelly, Hayward, Hammer, & Hendy, 2010, p. 89).Thus, a business organisation has the potential of been held liableof negligence in a contract, if the plaintiff suffered losses due tofailure of meeting the basic standards in implementing the contract.
Theremoteness and causation of the damage suffered is another essentialcharacteristic involved in the breach of duty to care element. Thecausation or proximate cause element implies linking the damagesuffered to the breach of the duty(Harpwood, 2012, p. 24). Thus, the proximate cause element implies a legally sufficientcause, which a liability can be imposed due to the wrongful omissionsor act resulting to the damage. In demonstrating the breach to dutyis responsible of causing the damage two components of causation canbe applied. The two components of causation include the legal causeand the actual cause(Statsky, 2012, p. 126).The claimant carries the burden of proofing the damage he or she hassuffered is due to the defendant’s breach of duty. Similarly, theissue of remoteness on the damages suffered arises in the case ofbreach of duty.
Theremoteness of damage implies significance of the damage suffered bythe claimant. A defendant cannot be held liable for a damage that isremoved too far from the omission or act of negligence since he couldnot have foreseen the specific damage the plaintiff suffered(Harpwood, 2012, p. 24).However, the foresight concept has the effect of holding thedefendant liable even in a remote damage. One of the scenariosdemonstrating the application of foresee-ability in holding adefendant liable in a remote damage involves the Haleyvs. London Electricity Board in1965. The involved a blind person, Harley, who fell and got injureddue to a trench dug by London Electricity Company. Even though thecompany had undertaken precaution, the court found the precautionswere only sufficient for sighted persons(Rush & Ottley, 2010, p. 144).Consequently, the court ruled the defendant was liable for breach ofduty to care since the company should have foreseen the injury blindpersons might suffer due to the trench. Consequently, a businessorganisation should be cautious of negligent acts or omissions itmight be faced due to duty to care principle.
Ashcroft,J. D., & Ashcroft, J. E 2011. Lawfor business.Mason, Ohio: South-Western Cengage Learning.
Cheeseman,H. R 2010. Businesslaw: Legal environment, online commerce, business ethics, andinternational issues.Boston: Pearson Prentice Hall.
Clarkson,K. W., Miller, R. L., Cross, F. B., & Clarkson, K. W 2012.Businesslaw: Text and cases : legal, ethical, global, and corporateenvironment.Mason, OH: South-Western Cengage Learning.
Emerson,R. W 2009. Businesslaw.Hauppauge, N.Y: Barron`s Educational Series.
Gillies,P 2009. Businesslaw.Sydney: Federation Press.
Harpwood,V. (2012). ModernTort Law.Machester: Psychology Press.
Kelly,D., Hayward, R., Hammer, R., & Hendy, J 2010. BusinessLaw.New York: Taylor & Francis.
MacIntyre,E 2010. Businesslaw.Harlow, Essex, England: Pearson Longman.
MacMillan,C., & Stone, R 2009. Elementsof the law of contract.Retrieved March 22, 2016, fromhttp://www.londoninternational.ac.uk/sites/default/files/programme_resources/laws/ug_subject_guides/elements_law_contract-subjectguide4chapters.pdf
Marson,J., & Ferris, K 2015. Businesslaw.Oxford: Oxford University Press.
Richard,S 2013. TheModern Law of Contract.London: Oxford.
Rush,J., & Ottley, M 2010. Businesslaw.London: Thomson.
Statsky,W. P 2012. Essentialsof torts.Clifton Park, NY: Delmar.