Aspect of Contract and negligence for business

Table of Contents
Task 2 ............................................................................................................................................................ 3
3A Differences between liabilities in tort and Contractual liability .......................................................... 3
3B Nature of liability in Negligence........................................................................................................... 4
3C Situation of Vicarious liability of a business ........................................................................................ 5
4A Application of elements of tort and negligence and defences............................................................ 5
4B Application of elements of vicarious liability ....................................................................................... 6
References .................................................................................................................................................... 7
Task 2

3A Differences between liabilities in tort and Contractual liability

If the employees of the organization is found responsible for any misconduct or misdemeanour
which can be termed as an example of unprofessional behaviour towards the consumers of the
organization the liability of the employees towards the committance of such acts would be
referred to liability in tort. The customers can be subjected to such harm either by a group of
employees or a single individual which would neither affect the reputation of the company nor
can it be held responsible for the harm caused to the consumers (Cooke., 2009). Cases can
therefore be filed not against the organization but the employee / employees who are responsible
for the harm caused to them. There are generally two theories to explain the basic principle of
liability in the Law of Torts and they are:

Wider and Narrower theory an act that is responsible for any and every kind of injury or
harm caused to one person by the other, unless recognized and justified by law, would be
considered as tort.

Pigeon-hole theory the principle relating to liability in tort is applied to only a specific number
of torts and no other kinds of tortuous liability can be included in its purview.

The liability which arises when a breach or violation of the legal clauses and terms and
conditions mentioned in the business contract happens by any one of the parties to the contract in
the process of the formation of the contract it can be referred to as a case of contractual liability
(Oman., 2010). The central element of a contractual liability is the duty to act with care and skill
which a provider or the first party to the contract owes to the customer or the second party to the
contract when delivering the service in the course of the business1. The illustration of the
principle by the following example would help in understanding the implication of such a
liability. Tesco enters into a contract with HP Computers to purchase computers worth $100,000
for its administrative office. Within the time frame mentioned in the contract regarding the
delivery of the goods, HP fails to deliver the goods to Tesco, thus committing a breach of
contractual terms and the company, HP hence becomes subjected to contractual liability to the
extent of the value mentioned in the contract i.e., $100,000. Now similarly if Tesco would have

1
Shiells & Thorne v. Blackburne [1789] 1 Hy. Bl. 159
failed to pay the price that is mentioned in the contract on the delivery of the goods a breach
would have got committed making Tesco contractually liable to HP. Therefore it is mandatory
that prior to entering into a contract, a detailed consideration about the terms of the contract
should be in place and known to both the parties to the contract.

3B Nature of liability in Negligence

By understanding the various characteristics of obligation in cases of negligence the illustration
of the nature of liability can be done in the following ways:

Direct Cause the consequence that occurs out of negligence to an individual or business entity
either by the violation of terms and conditions of contract or otherwise can be referred to as
direct cause. When the harmed individual or business entity is directly inflicted injury by the
accused individual or business entity it can be called as a direct cause.

Duty of care - The level of repentance and the level of responsibility that the accused individual
has to undergo as a part of the duty to apologise and own up to his misconduct following the
accusation in public can be termed as duty of care (Owen, 2006).

Legal Causation the factual or direct causation are entirely different from that of the legal
causation as the latter deals entirely in strict legal rules and laws.

Breach of duty breach of duty involves payment of certain amount of compensation to the
aggrieved party who has been harmed due to the act of negligence arising out of violation of the
rules of duty by the accused individual.

The liability for negligence is civil in nature and the aggrieved party needs to prove that the act
that has been committed by the accused out of negligence arising out of breach of duty which
can result in an anticipated loss or a possible harm resulting to economic loss to the victim
(Bishop., 2005). For instance a chemical sample is inappropriately analysed and accordingly
turns up with misleading results and an individual relying on such results does not take adequate
protection and falls prey to the harm that is caused due to such act.
3C Situation of Vicarious liability of a business
A business organisation can be vicariously liable when any of the employees or the members of
the organisation perform any illegitimate organisational activity or practice any unfair
malpractice within the operational framework of the organisation. The organization can be
accused for its misdeeds, mistakes and corrupt practices put into effect by its employees by the
harmed individuals or organizations (Giliker., 2010). In such cases the organization can be
vicariously liable with regard to the indirect connotation by the acts of its employees but cannot
be held responsible in the same strain as that of its employees. It refers to a liability which is
imposed by one party to the other for the tort committed by one party to the other of which the
first party has no knowledge whatsoever and therefore cannot be held wrong fully labile for such
act2. For instance, if a store personnel of Tesco convinces a buyer to buy a product which is past
its expiry date as mentioned in the product label and the customer from its consequent use is
harmed physically, the customer can in no way hold Tesco responsible for the acts of his
employee as the employee had been instructed against any such action by the employer at the
time of appointment and as it has been expressly communicated, hence the act of the employee is
held to be outside the sphere of his employment and such an act in no way can hold Tesco to be
vicariously liable. The explicit instructions of the employer was not paid heed and ignored
wilfully or otherwise by the employee in the course of business conduct of the employer and
therefore it does not hold the employer liable for any damages caused to any third party arising
from such an act.

4A Application of elements of tort and negligence and defences

The elements of the tort of negligence can be explained in a better way through the illustration of
the case of Donoghue v. Stevenson (1932) in the twentieth century. As pointed out by Lord
Atkins during the trials of Donoghue v. Stevenson (1932), basically one should before engaging
in any act must think whether the performance of such an act could harm others and to what
extent it could affect others. The ginger beer was purchased by the friend of Mrs. Donoghue
which caused her injury and hence her friend had the right to sue under the contract, which was
solved by the House of Lords by imposing liability of negligence to the caf owner specifying
that it is possibly in case of absence of duty of care between the owner and the victim. The duty
of care is recognized by law as the circumstances or relationships that bring forth a legal duty to

2
The Twine v Beans Express Ltd (1946)
take care. If the duty of care is breached by the defendant then he becomes liable to compensate
for the damages caused by such breach to the plaintiff (Spindler., 2011). However it is
particularly dependent on the claimant to establish the magnitude of such a breach against the
defendant arising from violation of duty of care by the defendant.

In a hypothetical scenario of a product being sold from Tesco and during its consumption by a
consumer was found to have remnants of an insects body, which resulted in severe stomach
ailments ending in his hospitalization, the consumer if files a case of lack of duty of care and
liability of negligence against the firm, then at the backdrop of the judgements of the famous
case of Donoghue v. Stevenson, Tesco on the basis of the evidences of the claim would be held
guilty of negligence and would be liable to pay the damages that the customer had borne by the
consumption of the good purchased from its store.

4B Application of elements of vicarious liability

The elements of vicarious liability can be aptly illustrated by the famous case of The Rose v.
Plenty (1976)3, where the employee of a diary was taking the help of a 13 year old boy in
delivering supplies to the required destination whose limbs were partially damaged in an
accident during the course of such duty, happening without the knowledge of the employer and
in fact such an act was expressly prohibited in the contract. It was held by the court that the
employer would be held vicariously liable as even if the act was prohibited by contractual terms
between the employer and employee but it served the business interest of the employer and the
employer has allowed such an incident. The company or the employer hence should be held
vicariously liable for the acts of his employee to cause injuries to the plaintiff in the course of
carrying out the duties pertaining to the business of the employer ( Giliker.,2010).

3
The Rose v. Plenty (1976)
References
Bermingham V. and Brennan C., Tort Law, (2008) Oxford University Press

Bishop, C. G. (2005). Good Faith Revival of Duty of Care Liability in Business Organization
Law, A. Tulsa L. Rev., 41, 477.

Cooke J., Law of Tort, (2009) Longman

Giliker, P. (2010). Vicarious liability in tort: a comparative perspective (Vol. 69). Cambridge
University Press.

Oman, N. B. (2010). Consent to Retaliation: A Civil Recourse Theory of Contractual Liability.

Iowa L. Rev., 96, 529.

Owen, D. G. (2006).Five Elements of Negligence, The. Hofstra L. Rev., 35, 1671

Posner, R. A. (2006). Common-Law Economic Torts: An Economic and Legal Analysis. Ariz. L.
Rev., 48, 735.

Shiells & Thorne v. Blackburne [1789] 1 Hy. Bl. 159

Spindler, J. C. (2011). Vicarious liability for bad corporate governance: Are we wrong about
10b-5?. American law and economics review, ahq026.

The Rose v. Plenty (1976)

The Twine v Beans Express Ltd (1946)