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The Elements of Valid Contracts and Liability in Business

Jul 11, 2023 | 0 comments

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Jul 11, 2023 | Essays | 0 comments


LO1: The essential elements of a valid contract in a business context

LO1.1: the importance of the essential elements required for the formation of a valid contract

For a valid contract to be made, some principles need to be followed. The basic principles that need to be followed by Sam in making a contract agreement with Bob, who is a potential client include the following:

Offer and acceptance-this element state that there must be an offer and acceptance that is lawful as a response to the offer made by the first person. By being lawful, it means that the acceptance and the offer are conforming to the regulations outlined in the law of contract (Jabed 2015).

The intent of creating a legal relationship– this is regarded as the first element of creating a valid and formal contract amongst potential groups in an agreement. According to Jabed (2015), both parties to the contract should have the conscious intention that is clear in making a valid contract agreement with the other party.

Lawful consideration—this consideration is important for the contract to be valid and this principles violation may make it illegal

The parties’ capacity– the parties signing the contract must have the capability of creating a relationship between them that is legal. Both groups must be legally, mentally and physically sound for the contract making.

Free consent– both contract parties will freely agree in creating the contract agreement free from any form of physical or mental pressure or any coercion.

Legality of the object– the contracts agreements object should be lawful

Certainty– all the contracts conditions and terms and as much as possible should be certain.


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From case provided between Sam and Bob, the issue that need decision making is whether there is a contract between both parties and whether there are essential elements required for contract formation in this case. Regarding the scenario, the law provides and distinguishes between an invitation to treat and an offer. An innovation to treat is where the intention of the statement is not to be legally binding. Invitation to treat only is for the invitation to the other party to make their offers, and in most cases they are found on goods on display, auctions and advertisements (FindLaw UK, 2015). An offer, On the other hand, is a promise that is definite in the event some terms of the contract are accepted by the second party.

The court elaborated the differences between an invitation to treat and an offer in the court case of Fisher v Bell (1961). Therefore, the displayed goods by the shop owner for sale are regarded not necessarily an offer but as an invitation to treat. Thus, the shopkeeper is not obligated to sell the displayed goods when a shopper wants to purchase them (Fisher v Bell, 2015)

Another related court case was that of Boots vs. Pharmaceutical Society of Great Britain where the court held that by simply displaying goods in a shop together with their price tags cannot be considered as an offer but as an invitation to treat. However, the buyer picked the merchandises and took them to the cash desk making an offer of purchasing. The shopkepper then decides whether to reject or accept the offer. Therefore, the contract is entered in the pharmacist is there at the till (n.a 2015).

Based on the above analysis, it can say that in the case an offer was made for buying the book by Bob. However, the last copy had already been sold to Carl by Sam. However, by Sam making a display of the book in the shops shelf, he created an invitation to treat and therefore it was for him to either choose to reject or accept the offer from the potential buyer, Bob.

LO1.2: The impact of different types of Contract

There exist various forms of contracts like executory contracts, unilateral, bisexual, contracts under seal, implied and express contracts. Clauses are the contents of the contract. There are also several terms that are used in a contract agreement and are generally related to the contracts subject matter and the paid prices by the parties entering into a contract. The contracts also can either be oral or written contracts like mortgages and the sale of land. The parties that sign a contract are only bound by the contracts terms and not any other peripheral statements (Jabed 2015).

LO1.3: The terms in contracts with reference to their meaning and effect

The terms used in a contract can either be implied or expressed terms. The terms agreed upon by the parties in a contract are referred to as express terms while the terms placed on a contract by the courts or the statute are referred to as implied terms. Some of these terms include the following:

Collateral contracts– this term is used to refer to a contract created in support of the main agreement in a contract. It encompasses necessary but less important terms

Condition or warranties– condition terms are very important to the contract agreement parties while warranties are less important. With condition terms, one of the parties cannot enter into an agreement. Moreover, by breaching a condition term, it is considered a serious that the party wronged can treat the contract as void or annulled.

LO2: Application of the contract elements in a business situation

LO 2.1: Application of the elements of contract in given business scenarios

In the given case between Brian and Adam is an example of a unilateral contract. According to LII (2015), unilateral contracts the party that makes the offer makes a promise to another party (offeree) in exchange for an act. Therefore, in a unilateral contract, if anyone does something based on the offered promises, the party that made the promise is bound legally to fulfil the contract. Therefore, if the offeree performs the act stated by the other party that made the offer, there exists a promise between both parties that is legally enforceable. LII (2015) further stated that unilateral contracts are generally given in reward offers form. In such scenarios, the party offering the prize or an award cannot force anybody to satisfy the requirements for the rewards. However, if the stated actions have been fulfilled by the potential party, and the party that offered the reward fails to give the promised reward, he can be sued for breaching a contract. Therefore, in a unilateral contract, when the potential offers decide to act, an agreement is formed between both parties. Take a case example of R v Clarke (1927) that a contract agreement was made when Clarke decided to offer information leading to the arrest of the wanted murderers (Austlii 2015).

From the given case, Adam made an offer of £1000 through an advertisement for anyone who would paddle successfully across the English Channel using a bath. Brian accepted the offer, but Adam withdrew the reward when Brian was halfway the channel and did not see the advert of withdrawing the offer. Therefore, when Brian started the journey from Dover, he had accepted the offer. There was a legally enforceable contract when Brian became the first person to paddle to Calais from Dover between Brian and Adam. Therefore, from the given case, Brian is legally right to claim the award from Adam.

LO 2.2: application of the law on terms in different contracts

From the given case, the issue is whether the local council is liable for the damages bar suffered after renting chair from the council at the park, in which it collapsed and destroyed Barry’s clothes, given that the issued ticket has clause stating that the Council bears no liability for any damage or injury obtained as a result of the hired equipment’s failure. The given case is comparable to another case of Chapelton v Barry UDC [1940]. These court cases are related to the exclusion clause and the elements of offer and acceptance that might exist in a contract. The court held that the council did not incorporate the exclusion clause in the contract. According to the court, anyone who is reasonable would treat a ticket as nothing less other than a coupon or receipt and, therefore, would not suppose it to have some terms of a contract. Moreover, the content of the notice indicated that a person could get a chain and later get a ticket. Therefore, the notice created an offer and by taking the chair amounted to acceptance. The council, therefore, would not be open to introducing new terms after the formation of the contracts (Chapelton v Barry 2015).

LO 2.3: evaluate the effect of different terms in given contracts

From the given case, the local council has indicated at the back of the tickets that they are not liable for any injury or damage suffered by the user of their chains due to the failure of the equipment hired. Based on the analysis presented above, it is evident that the exclusion clause was not part of the contract formed by Barry and the local council. Therefore, from the given case, the local council has no valid grounds for relying on the exclusion clause written behind the ticket so as to exclude the council from the liability concerning the damage and injury suffered by Barry.


LO3: Principles of Liability in negligence in business activities

LO 3.1: Contrast liability in tort with contractual liability

There are some similarities between tort and the law of contract, for instance, they are both grouped under the civil law. In both tort and law of contract cases, a claimant initiates an action against the defendant. The petitioner is needed to show its situation on the probability balance. Similarly, in the situation law of contract and tort, the claims can be evaded if the suffered loss by the plaintiff is not too much of the defendant’s reach. Moreover, Ludusan (2013) stated that in both tort and law of contract, the remedies generally are for claimant compensation rather than punishing the defendant.

On the other hand, there are some major differences between tort and the law of contract. Under tort, in the circumstance of a claim, there is a possibility that the defendant did not have transaction or association with the plaintiff previously. However, under the law of contract, in the situation of a claim, it is essential that the defendant and the plaintiff be both parties that signed a contract agreement.

LO 3.2: Explain the nature of liability in negligence

From the given case, Neil the gardener working for the Poshplace hotel entered mark’s room at night using a master key that is stolen and made away with Marks jewellery. The issue that needs decision is whether Mark has a claim according to negligence’s ordinary principle against Poshplace hotel. Similarly, another issue that needs decision is mark has a claim in vicarious liability against the hotel. Employer is regarded as liable vicariously according to Acas (2015) for its employee’s actions during the period of their employment. However, from the given case, Neil committed the theft using a master key stolen from the same hotel. Therefore in accordance to the principles of ordinary negligence, mark can make a claim against the hotel. This is because it was the hotels responsibility to safely accommodate its guests. However, from the given case, the hotels gardener was behind the theft. Furthermore, the hotel was also negligent when their gardener stole the master key that belongs to mark’s room successfully in which he managed to access the room at night and committed the crime.

However, from the given case, the hotel cannot be held liable vicariously for actions of Neil, the gardener of the hotel. The reason is because an employer is liable vicariously for the employer’s actions that have been done during the employments course. In the given case, to establish Poshplaces hotels vicarious liability, it is essential to determine that the actions of Neil within his course of employment.

LO 3.3: Explain how a business can be vicariously liable

The employers under the law have an obligation of providing safe working environments for their employees. From the given case, two issues are eminent and need to be addressed. The first issue is whether Ben, the owner can be regarded as reliable vicariously to Roger for the injuries he sustained from Colin. The second issue that needs decision making is whether Roger has a claim from Ben for the suffered skin rashes due to long washing periods.

Based on that scenario, the law states that the employers in a company have a duty of caring for their staff. This implies that they are required to take all the necessary measures reasonable to ensure safety, health and wellbeing of the employees. Similarly, employers also have a legal duty of being concerned for the mental and physical health of the employees (Acas 2015). Acas (2015) elaborated that by employers being concerned with their employees’ health, it creates some trust amongst the employees as well as reinforcing their commitment. Such duties also help the employers in boosting or improving the staff productivity, creating an environment for engagement with employees and improving retention of staff.

Therefore, the law provides in this regard that the employers to follow health and safety laws, and employment laws that are relevant. Furthermore, the employers have also the duty under the common law of caring towards their employees. Similarly, they have an ethical and moral duty that indicates that they should not fail to prevent or cause injury to the employees. Lastly, they should also fulfil their duties in claim cases linked to negligence and personal injury at the workplace.

From the given case, Roger, who is the hotels dishwasher was hit by Colin, the hotel’s head chef. Consequently, it can be concluded that Ben, Rogers’s employer who is also the hotel’s owner is vicariously liable for the inflicted injury on Roger. Similarly, Ben as Rogers’s employee has also a duty of care that is non-delegable that requires that a working environment that is safe is provided to all the hotels employees. From the provided case, Roger suffered skin rashes as a result of washing dishes over a long period. However, it should be noted that the hotel management provided rubber gloves for protection but most employees never use them

LO4: Application of the principles of liability in negligence in business situations

LO 4.1: application of the elements of the tort of negligence and defences in different business situations

In the present case, Mark, a hotel occupant tore his expensive designer swimming trunks and also suffered an injury after ignoring the warning/cautionary signs and jumped into the hotel’s pool. Regarding that, the Occupiers’ Liability Act, 1957 relates to the responsibility of care that the occupant of the premise has towards the people who trespass or visit their building structures. This legislation covers with the occupier’s liability that may come up as a result of accidents caused by defective or dangerous conditions on the premises. Therefore, this act covers the occupier’s liability to the premises visitors. This legislation echoes another case of Rochester Corporation vs. Phipps (1955).

The Occupiers’ Liability Act, 1984, on the other hand, extends the occupiers liability also to the visitors. Regarding this, the act states that the occupier has a responsibility of care if they had constructive or actual knowledge concerning certain present danger on the premises and also that the visitor or the trespasser may be around it (n.a 2015). Similarly, the provisions of 1984 Act provides only for a claim in situations of personal injury or death of the trespasser and do not cover personal property damages. This is clearly elaborated in the case of Roles v. Nathan (1963).

LO 4.2: application of the elements of vicarious liability in given business situations

Based on the discussion and analysis presented, it can be concluded from the given case that despite the fact that Mark ignored the poolside warning signs, the Poshplace hotel still can be liable for the suffered injuries by mark. Similarly, as stated by the 1957 Occupies Liability Act provisions, the Mark can also make a claim for the damages costs for his swimming trunks. Regarding the danger warnings, Occupies Liability Act, 1957 Section 2 (4) states that a warning cannot be regarded as excusing the occupiers liability except when the warning sign can be regarded as reasonably adequate to enable the guest to remain safe sensibly. Therefore, although the warning sign was positioned by the poolside, Mark can make a claim reasonably against the Poshplace.

Similarly, according to Occupies Liability Act, 1984, section 1(5) the owner can perform the care responsibility by implementing sensible mechanisms under the present situations to offer warning signs regarding the hazard. But, by merely giving a warning sign, the responsibility of care has not been performed. It is essential that the warning sign is perfect so that the danger become too noticeable to the visitors. Therefore, under the Occupies Liability Act, 1984 provisions, the hotel can apply the warning sign to exclude their liability.


Acas, (2015). Understanding what vicarious liability means for employers | Workplace snippets | Acas. [online] Acas.org.uk. Available at: http://www.acas.org.uk/index.aspx?articleid=3715 [Accessed 25 Nov. 2015].

Austlii, (2015). R v Clarke [1927] HCA 47; (1927) 40 CLR 227 (22 November 1927). [online] Austlii.edu.au. Available at: http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/HCA/1927/47.html [Accessed 25 Nov. 2015].

Chapelton v Barry, (2015). Chapelton v Barry UDC. [online] E-lawresources.co.uk. Available at: http://e-lawresources.co.uk/cases/Chapelton-v-Barry.php [Accessed 25 Nov. 2015].

FindLaw UK, (2015). What is an invitation to treat in contract law? | Find Laws, Legal Information, News & Solicitors – Findlaw UK. [online] Find Laws, Legal Information, News & Solicitors – Findlaw UK. Available at: http://findlaw.co.uk/law/small_business/business_contracts/500564.html [Accessed 25 Nov. 2015].

Fisher v Bell, (2015). Fisher v Bell. [online] E-lawresources.co.uk. Available at: http://www.e-lawresources.co.uk/Fisher-v-Bell.php [Accessed 25 Nov. 2015].

Jabed, A. (2015). Aspects of Contract and Negligence for Business-2. [online] Academia.edu. Available at: https://www.academia.edu/7448256/Aspects_of_Contract_and_Negligence_for_Business-2 [Accessed 25 Nov. 2015].

LII, (2015). Unilateral Contract. [online] LII / Legal Information Institute. Available at: https://www.law.cornell.edu/wex/unilateral_contract [Accessed 25 Nov. 2015].

Ludusan,, F. (2013). CONTRACTUAL LIABILITY AND TORT LIABILITY IN THE NEW CIVIL CODE. SIMILARITIES AND DIFFERENCES. [online] Available at: http://academica.udcantemir.ro/wp-content/uploads/article/juridica/j2/J2A8.pdf [Accessed 25 Nov. 2015].

n.a, (2015). Occupiers Liability Act 1984. [online] Legislation.gov.uk. Available at: http://www.legislation.gov.uk/ukpga/1984/3 [Accessed 26 Nov. 2015].

n.a, (2015). Pharmaceutical Society of Great Britain v Boots. [online] E-lawresources.co.uk. Available at: http://www.e-lawresources.co.uk/Pharmaceutical-Society-of-Great-Britain-v-Boots.php [Accessed 25 Nov. 2015].

Phipps v Rochester Corporation, (2015). Phipps v Rochester Corporation. [online] E-lawresources.co.uk. Available at: http://www.e-lawresources.co.uk/cases/Phipps-v-Rochester-Corporation.php [Accessed 25 Nov. 2015].

Roles v Nathan, (2015). Roles v Nathan. [online] E-lawresources.co.uk. Available at: http://www.e-lawresources.co.uk/cases/Roles-v-Nathan.php [Accessed 26 Nov. 2015].

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