Aspect of Contract and Negligence

Task 1

1.1 Importance of the essential elements of contract

Essential elements of a contract are:

• (a) an offer, which is made by one party to another, signifying his willingness to enter into a contract;
• (b) an acceptance, which is made by the other party, signifying acceptance to the terms offered;
• (c) an intention to create a legally binding relationship, which is seen to be an important indicator of whether a binding contract exists (RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co. [2010] UKSC 14); and
• (d) consideration, which is a quid pro quo between the parties. In other words, it is the monetary and social target sought after by the agreement and that is the same for all agreements of the same sort. To be substantial the cause must exist, be lawful and genuine. That is genuine implies that the parties must seek after the best possible reason for the agreement closed.

Offer is the first condition of a valid contract and it is signified by one party’s indication of its willingness to enter into a contract on specified terms. When the offer is accepted by the other party, it signifies acceptance, the other condition for a valid contract. There must be consideration, that is a quid pro quo where each party will do something of benefit to the other party. Most importantly, both the parties must have the same idea of the contract (consensus ad idem) and an intention to create legal relations (Collins, 2003, p.68). Furthermore, it is important that the object of the contract is lawful and not defeated by impossibility. Because contract is Contract Law PAGE 14 based on agreement, such agreement should be between people who have attained the age of majority and are of sane mind. Moreover, there should be no undue influence or coercion as that would vitiate the agreement.

The essential elements of the contract also help in complicated commercial situations such as invitation to treat which are differentiated from actual offers (Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd, [1952] 2 QB 795; Fisher v Bell, [1961] 1 QB 394).

1.2 Impacts of Oral and Written Contracts

Both oral as well as written contracts are binding in the law of contract.

In Winn v Bull (1877) 7 Ch D 29, 32, Jessel MR stated that: “where you have a proposal or an agreement made in writing, expressed to be subject to a formal contract being made; it means what it says. It is dependent upon a formal contract being prepared” (McKendrick, p.256). In all other cases, where the parties have not expressed any necessity for making a written agreement, they will be bound by the agreement that may be oral or even implied.

In Firstpost Homes Ltd v Johnson, [1995] 1 WLR 1567, the court viewed with disfavour those persons who enter into oral contracts and then do not abide by them. In Wakeham v Mackenzie, [1968] 1 WLR 1175, an oral contract was held enforceable in equity due to past performance, although it would not have been enforceable in common law, because of the defect in form (McKendrick, 2015, p.65).

One point that is of significance here is that once a contract is made in writing, it can only be changed, amended or modified in writing. Thus, parties to a contract may not amend orally the written terms of a contract. In Actionstrength Ltd v International Glass Engineering Ltd, In.Gl.En. SpA [2003] ABC, the court held that oral guarantee given by employers to subcontractors was not binding because it was not evidenced in writing (McKendrick, 2015, p.66).

Therefore, in law both oral as well as written contracts have effectiveness and will bind the parties to the contract.

1.3 Analysis of Exclusion Clause

Exclusion clause is a clause in the contract that excludes or limits the liability under the contract.(Parker v South Eastern Railway Co., [1877] 2 CPD 416; Thornton v Shoe Lane Parking, [1970] EWCA Civ 2). Such a clause is an express term of the contract and is binding on the parties, unless it contravenes the provisions of the Unfair Contract Terms Act 1977.

To be valid, an exclusion clause must be an integral part of the contract [White v Blackmore, [1972] 3 WLR 296]. Therefore, an exclusion clause must be shown to be intended by the parties to be contractual (Lawson 2011, p.3).

Exclusion clause must be displayed or informed prominently [McCutcheon v MacBrayne, [1964] UKHL 4]. Where the exclusion clause is ambiguous or was not displayed in a manner that made it clear or apparent to the other party, the court may not uphold the validity of the clause.

Where a breach of contract occurs and one party seeks to exclude its liability under an exclusion clause, the court may see the effect of the breach on the contract. The doctrine of fundamental breach is applied in such cases where the breach is of such a nature that is destroys the whole contract. Here the exclusion clause will not save the defendant from liability ( Devenney 2015). In such cases, the doctrine of strict construction will not apply. This was held by the Court of Appeal in Karsales v Wallis, [1956] EWCA Civ 4. Again in Harbutt’s Plasticine Ltd v Watne Tank and Pump Co Ltd., [1970] 1 QB 447, the defendant was not allowed to take advantage of an exclusion clause. The principle was reiterated in Photo Production Ltd v Securicor Transport Ltd, [1980] UKHL 2.

Task 2

2.1 Applying Elements of Contract

• (a) Colin and Moran

There is no agreement between Colin and Moran.

In the first instance, when Colin asks Moran how much he would sell the equipment for and Moran replies “probably £10,000”, this is merely an invitation to treat by Moran. This is as per the principle in the landmark judgement in Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd, [1952] 2 QB 795.

• (b) Colin and Jason

There is no valid contract between Colin and Jason.

Consideration is an important condition for the validity of a contract. Jason has made an offer to Colin and Colin has accepted that offer, but as Jason has said that Colin can have the equipment for free, there is no intention between the parties to enter into a legally binding contract. It is a gratuitous agreement and not a legally binding contract.

In the second instance, where Colin and Jason meet at the Bar and Colin is drunk, he has made an offer to Jason to pay 5000 for the equipment, to which Jason has given his acceptance. However, as Colin was drunk when he made that offer, he did not have the capacity to make an offer or enter into a valid contract. In Gore v Gibson, (1845) 13 M & W 621, it was held that a contract made by an intoxicated person who did not to know the consequences of his act is not binding on him, provided his condition is known to the other party. Such a contract is voidable. Therefore, it is binding if it is ratified by the person later (Matthews v. Baxter, (1873) LR 8 Ex 132).

In this situation, Jason must have known at the bar that Colin was very intoxicated as Colin had consumed huge quantities of liquor. Also, Colin has not ratified the contract at a later point, therefore, he is not bound by it.

2.2 Exclusion Clause

The exclusion clause in the signboard put up by Colin is not valid and is not properly incorporated into the contract.

The exclusion clause in the signboard put up by Colin is not valid and is not properly incorporated into the contract.

In order to avoid liability, Colin has placed a signboard at the exit of the park, which reads that he is not liable for death or personal injury to any guest. The question is, can the clause said to be incorporated into the contract and is it valid?

For an exclusion clause to be validly incorporated, it must be displayed prominently to the other party, leaving no room for ambiguity and doubt. In Parker v South Eastern Railway Co., [1877] 2 CPD 416, it was held that the party wanting to enforce the exclusion clause should have taken adequate steps to bring to clause to the notice of the other party.

Secondly, the exclusion clause must be apprised to the party before entering into the contract and not after. In Thornton v Shoe Lane Parking co.,[1970] EWCA Civ 2, the parking company gave parking tickets to the customers through a machine after the customer had paid the fee into the machine slot. On the ticket once purchased, the parking company had inserted a clause excluding its liability for any loss or personal injury. The court held that this was not a valid exclusion clause as the customer would know of it only after paying the fee for parking and not before.

In this case, Colin has displayed the sign which reads: ““The garden centre is not liable for death or personal injury to persons on its property or the loss of customers’ belongings however so caused irrespective of whether the garden centre’s actions could be considered negligent.” This sign is displayed at the exit of the garden centre car park. This means that the guests to the park will see the sign board only once they are leaving the park. Due to this, the guests are not apprised of the clause at the time, or before the time of purchasing the ticket.

The exclusion clause is therefore not valid. If any death occurs or any other loss or personal injury occurs to any of the guests, the exclusion clause will not save Colin from liability.

2.3 Unfair Contract Terms Act 1977

The Consumer Rights Act 2015 (CRA) has reformed and consolidated the unfair contract terms in consumer contracts regime. Part 2 of the CRA amends the Unfair Contract Terms Act 1977 (in relation to business to consumer contracts) and revokes the Unfair Terms in Consumer Contracts Regulations 1999.

An important point under the regime that is enforced by both the CRA and UCTA is that no exclusion or limitation for liability for death or personal injury arising from negligence will be valid.

Under s.65(1) of the CRA 2015, it is provided that: “trader cannot by a term of a consumer contract or by a consumer notice exclude or restrict liability for death or personal injury resulting from negligence.” It is important to note that under s.65(4), negligence would mean and include the breach of any obligation to take reasonable care in the performance of a contract where the obligation arises from an express or implied term of the contract, common law duty to take reasonable care or exercise reasonable skill and the common duty of care imposed by the Occupiers’ Liability Act 1957. Thus under the Occupiers’ Liability Act 1957, the occupier cannot exclude all liability for injury. The occupier’s liability can be excluded only if it is shown that he exercised reasonable care and under s.2(4)(a), a warning to exclude liability will be binding as an exclusion clause only where the visitor is reasonably safe at all times.

Under the Unfair Contract Terms Act 1977, which is still applicable in such cases, s.13(b) provides that clauses “excluding or restricting any right or remedy in respect of the liability, or subjecting a person to any prejudice in consequence of his pursuing any such right or remedy” are prevented.

Thus, under the new provisions of the CRA 2015, as well as UCTA 1997, Colin will not be able to exclude his liability for death or personal injury caused due to negligence.

Task 3

3.1 Tort Law and Contract Law

Tortious liability and contractual liability arise from different principles. Contract liability arises from the breach of a duty specified in a contract/agreement between two parties. The doctrine of privity of contract works to make contactual liability in personam. Breach of contractual duty gives rise to some remedies, which includes liquidated damages (Best and Barnes, 2007, p.578).

Tortious liability arises from the breach of a duty primarily fixed by law. This liability is in rem, that is, this duty is towards persons generally. When there is a breach of duty under tort, it is redressable by an action for unliquidated damages. The damages are not predetermined by the parties and may be compensatory or even exemplary. It is important to note that fault is a very important element in tortious liability. Therefore, for liability to arise, plaintiff must show that injury suffered by him is attributable to the defendant (tortfeasor).

3.2 Requirements of Negligence

The tort of negligence provides a remedy for an injury or loss caused to a person due to the failure of another person to abide by a legal duty to take reasonable care (Donohue v Stevenson, [1932] UKHL 100). It is pertinent to note here that in cases of tort of negligence, along with the injury, harm also has to be endured by the victim of the negligence. That is because negligence is not actionable per se (Haynes v Harwood, [1935] 1 KB 146).

The neighbour principle was articulated by Lord Atkins in Donoghue v Stephenson, in order to provide an alternative route of claim for an injured party who was not privy to the contract, but was injured nevertheless. Lord Atkins held: “You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour.” Thus foreseeability is an important element of negligence.

Basically, for negligence suits to be successful, the claimant has to prove three things in general: existence of a duty of care, breach of the duty of care and direct damage as a consequence of breach which is not too remote (foreseeable).

3.3 Vicarious Liability

Vicarious liability is the liability of one person for the tort of another. This liability arises due to the relationship between the two persons and is especially seen in employer- employee, master-servant and principal-agent contexts.

In such cases, amongst many other ingredients, the important ingredients are that the employee must have committed a tort and the tort must have been committed in the course of employment (Storey v Ashton, (1869) L. R. 4 Q B 476). Salmond’s test was usually employed for determining liability in such cases. According to Salmond, a tort will be committed in the course of employment if it is either (a) a wrongful act authorised by the master, or (b) a wrongful and unauthorised mode of doing some act authorised by the master (Lunney & Oliphant, 2013, p.838). As per this, the basic rule that the courts apply in such cases is that tort should be the direct result of an action of the employee being performed during the course of employment.

In recent times, the close connection test has been developed to fix employer liability as the Salmond test was found to be inadequate to deal with situations where the tort was committed by an employee without authorisation or against authorisation (Mattis v Pollock, [2003] 1 WLR 2158). Now even if the employee is not authorised to do a particular act, the employer can be held liable for tort if it can be shown that there is a close connection between the tortious act and authorised acts (Rose v Plenty [1976] 1 WLR 141).

Task 4

The question here is whether Orin would be able to claim for damages. Three things have to be proved by Orin:

• (a) existence of a duty of care from Colin to Orin;
• (b) breach of the duty of care by Colin; and
• (c) direct damage as a consequence of breach which is not too remote (foreseeable).

As occupier, Colin owes a duty of care to Orin, who is a visitor on the premises (Occupier Liability Act 1957). This duty cannot be excluded through exemption clause, where Contract Law PAGE 14 the breach of duty leads to death or personal injury (CRA 2015, s.65(1)). In common law also, the duty of care exists.

There is a breach of duty to take care in this case because the equipment has not been set up properly. This has caused the accident of Orin.

When the injury is foreseeable, there is a duty to take care (Donohue v Stevenson, [1932] UKHL 100); Caparo Industries plc v Dickman, [1990] 2 AC 605).

Colin may however use the rule of contributory negligence to avoid liability in this case. The facts of the case clearly show that Orin turned to wave at Ross after having him reach the ground safely. Orin lost his footing because he was not holding onto the equipment with both hands. In an effort to right himself Ross then trod on a rope which gave way because the equipment had been incorrectly set up. As both are at fault, and Orin also had contributed to his injury, Colin’s liability may be excluded under principles of contributory negligence. In Butterfield v Forrester, (1809) 11 East 60, this principle was used by the court to exclude liability of the defendant. Although there is change brought in by the Law Reform (Contributory Negligence) Act 1945, due to which contributory negligence will not preclude all liability, there may be apportionment of liability between the claimant and defendant (s.4). In Jones v Livox Quarries, [1952] 2 QB 608, damages were reduced due to contributory negligence.

Therefore, Colin may use the defence of contributory negligence to limit his liability to pay damages for the injury caused to Orin.

4.2 Applying rules on Vicarious Liability

Vicarious liability of an employer arises in cases of torts committed by their employees. This is based on the principle- qui facit per alium facit per se, which means that he who does an act through another, does it himself. Recently this principle was also justified on the basis of economic factors in the Supreme Court case of Various Claimants v Catholic Child Welfare Society, [2012] 3 WLR 1319 (Lunney & Oliphant, 2013, p.801)

In such cases, amongst many other ingredients, the important ingredients are that the employee must have committed a tort and the tort must have been committed in the course of employment (Storey v Ashton, (1869) L. R. 4 Q B 476). The classic Salmond test is applied in such cases and a tort will be committed in the course of employment if it is either (a) a wrongful act authorised by the master, or (b) a wrongful and unauthorised mode of doing some act authorised by the master (Lunney & Oliphant, 2013, p.838).

In this case, the act of putting up the equipment is authorised but the Manager, Bill, has performed this act in an authorised way when he has given wrong instructions to Jackie for putting up the equipment as a joke. In Lister v Hesley Hall Ltd, [2001] UKHL 2, it has been held that when the employee performs an authorised act in an authorised way, the employer is still liable for the tort. This principle has been upheld in a number of cases (Warren v Henleys [1948] 2 All ER 935).

Thus, in the present situation, Orin can sue Colin under the principles of vicarious liability for the injury caused to him due to the negligence of Bill (manager) in giving wrong instructions to Jackie and causing the equipment to be set up incorrectly.

References