PART A: CONTRACT LAW

a) (i) Bilateral and Unilateral contracts

The bilateral contracts mean that each party takes on an obligation action usually by
promising the other something. Most contracts are bilateral. For examples, David
promises to sell the house and John to buy it. Case Carlil v Carbolic Smoke Ball Co
(1893)
BY contrast, a unilateral contract arises where only one party assumes an obligation
under the contract. See Case Great Northern Railway Co v Witham (1873) The
common example for unilateral contract is that between estate agents and people
trying to sell their houses. That is the seller promise to pay a specific percentage of
the house price to the estate agents if the house is sold, but the estate agents if is not
required to promise to sell the house. (Edexcel/BTEC 2004)

(ii) Express and implied contract

Express contracts is specially mentioned and agreed by both parties at the time of
contract expressed by verbally, either orally or in writing. (www.tutor2u.net)
Also, express breach occurs, where one of the parties declares, before the due date for
performance, that they have no intention of carrying out their contractual obligations.
Hochster v De La Tour (1853) For example, in April, De La tour employed Hochster
to act as a travel courier on his European tour, stating on 1 June. On 11 may De La
Tour wrote to Hochster stating he would no longer be needed his services. Hochster
started proceedings on 22 May. The defendant claimed there would be no cause of
action until 1 June. (ACCA F4, 2009)

Implied contracts has not be mentioned by either party will nonetheless be included
in the contract often the contract doesnt make commercial sense without that term.
(www.tutor2u.net) Implied breach occurs where one of the parties does something
which makes subsequent performance of their contractual undertaking impossible.
Omnium DEnterprises v Sutherland (1919) for example, the defendant had agreed
to hire a ship to the claimant but before the hire period was to commence, he actually
sold the ship to someone else. (ACCA F4, 2009)


(iii) Void and Voidable contracts

Void contract is not an actual contract at all. The parties are not bound by the void
contract and if they transfer property under it they can recover their goods from a
third party unless it is also illegal contract.
For example, Anne sells furniture to Bill, who then sells them to Cathy. But Bills
fails to pay Anne for the furniture and disappear without any notice. In this situation,
Anne can explain that he was genuinely mistaken to identity of Bill and recover the
furniture, which were subject to the original contract from Cathy. Furthermore, the
law takes a view that is there is no original contract between Anne and Bill and no
effect. Therefore, Cathy was an innocent third party acting in good faith, has to return
the furniture to Anne and either the loss or find and sue Bill.

Voidable contract mean, a contract which one party avoid, that is terminating at his
option. Property transferred before avoidance is usually irrecoverable from a third
party. Also, mistake, misrepresentation, duress or undue influence may render a
contract voidable.
For example Anne sells computer to Bill on 5
th
July. On 9
th
Bill sells that to Cathy.
On 11
th
, it is discovered that Bill had made a misrepresentation in the original contract
between Anne and Bill and Anne seeks to recover the goods. In this case, given these
dates, computer has been sold on to Cathy before Anne tries to avoid the original
contract, and at the time bill sells computer. Therefore, Anne cannot recover the
computer from Bill. On the other hand, Bill had not sold the computer to Cathy until
July 13, which is after Anne seeks to avoid the contract with Bill, that original
contract has already been avoided, and Bill would not be able to pass computer to
pass good title on to Cathy.


(1a) East Midlands Airways Airbus
A contract is an agreement that is legally binding upon the parties to do it. (ACCA F4, 2009)
The law of contract is mainly about the enforcement of promises. The elements that are
needed to form a valid contract are follows:
Agreement offer and acceptance
Consideration
Intention to create legal relations
Capacity and legality

In this case study, East midlands Airways (EMA) advertised for airbus 321 based on the
principles of an invitation to treat not an offer. Although rather an evidence that the EMA
may wish to either accept or reject any offer. An invitation to treat is an indication that
someone is prepared to the other party to make an offer. (Edexcel/BTEC 2004) It is not an
offer and cannot be accepted to form of a valid contract. The types of an invitation to treat are
advertisement, exhibition of goods for sale such as shop window and shelves displays,
auction sales and tenders. Therefore, this airbus advertisement is an attempt to induce offers
that classified as an invitation to treat. See case Patridge v Crittenden (1968)
According to the case study, Phil (the offeror) the chief executive of Zulu Aviation Ltd
made the offer with offeree EMAs managing director Joseph. In relation to the contract law,
an offer is a definite and unequivocal statement of willingness to be bound on specified terms
without further negotiations. An offer can be in any form such as oral, writing or conducts
and an offer can be made to a particular person, to a class of persons or even to the world.
Carlill v carbolic smoke ball co (1893)
In relation to the case study, there has been acceptance of the offer. Because, the offeree
Joseph accepts the offeror Phill. In contract law, offer and acceptance making the agreement
which is main elements of binding contract. Acceptance is the unqualified and unconditional
agreement to all the terms of the offer by the form of oral, written or conduct. Inaction does
not imply acceptance. Also, acceptance is not effective until communicated to the offeror.
The offeror may waive the need for communication of acceptance by making an offer to the
entire world. Carlill v Carbolic smoke ball co (1893)

Furthermore, every simple contract must be supported by some form of consideration from
each other. In this case study, Phills consideration is the promise to pay 100,000 and
Josephs consideration is the promise to not to sell the airbus to another buyer for next five
days from 15
th
October 2010. The legal meaning of consideration is and act or promise of it
on the part of one party to a contract as the price of the promise made to him by the other
party to the contract. Dunlop Pneumatic Tyre Co v Selfridge & Co Ltd (1915) (ACCA F4,
2009)

There are two types of consideration in contract law, which are executory consideration is
given where there is an exchange of promise to do something in the future. Executed
consideration means that the consideration is in the form of an act carried out at the time the
contract is made. (ACCA F4, 2009)
In addition, the basic rules of consideration are as follows:
1. Consideration must be sufficient but need not to be adequate. That means, there must
be some monetary value to the consideration and must be capable in law of amounting
to consideration.
2. Past consideration is insufficient. That is consideration is past if the consideration is
an act which has been wholly performed before the other party gives his promise.
3. Performance of an existing duty is not sufficient consideration except the existing
contractual duty is exceeded. (ACCA F4, 2009)

According this case study, the wording of the agreement clearly negated intention to create
legal relations between Phil and Joseph. In all business agreement is presumed that there is
an intention to be legally bound, unless it can be shown otherwise. This is a strong
presumption that can be only be rebutted by clear evidence to the contrary. Jones v Vernons
Pools Ltd (1938) This mean the parties intend that the agreement will be binding with
recourse to court action for its enforceability. There was a business agreement between Phil
and Joseph.
Phil and Joseph both are above age 18, which is the legal age for valid contract to be entered.
Also, there was no evidence influence of drugs or alcohol and both are both individuals are
mentally fit to enter to valid contract. Therefore, there were no vitiating factors that would
affect the validity of the contract between Joseph and Phil for the purchase of the Airbus.
From the above stages, the agreement legally binding between Joseph and Phil meet all the
elements that are needed to form a valid contract for the sale of the Airbus.




(1b) Mobile Phone contract
Contractual terms are statements that form part of the contract by word of mouth or in
writing as long as they are sufficiently clear for them to be enforceable.
A statement, written or oral, made during the negotiations leading to a contract, may be a
term of the contract or merely a representation inducing the contract. (ACCA F4, 2009)
A representation is something that is said by the offeror in order to induce the offeree to
enter into the contract. It may or may not become a term of that contract. In the case of
failure by any party, if the representation becomes a term of the contract, the innocent party
has remedies for breach of the term as well as for misrepresentation. However, the
representation does not become a term of the contract, the innocent party will have remedies
only for misrepresentation which are based on equitable remedies. (ACCA F4, 2009)
The types of contractual terms are as follows:
1. Conditions :
Condition is an important term going to the root of the contract. The breach of the
condition can result in damages or discharge or both. Also, breach of condition entitiles
the innocent party the right either to terminate the contract or refuse to perform their part
of it, or to go through the agreement and sue for damages. Poussard v Spiers & Pond
(1876)
2. Warranties :
A warranty is a subsidiary obligation which is not vital to the overall agreement, and in
relation to which failure to perform does not totally destroy the whole purpose of the
contract. The injured party has completed their own part of the agreement, and can only
sue for damages. Bettini v Gye (1876)

3. Innominate terms
An innominate or determinate term is neither a condition nor a warranty. The remedy
depends on the effects of the breach. If trivial, it is a warranty and the remedy is damages
only. If serious is a condition and remedy is either damages, discharged or both. (The
Hansa Nord (1976)
The terms of contract in this case study is innominate, which mean the remedy depends
on the effects of the breach contracts for the purchase of 300 mobile telephones
immediately suitable for use in the U.K.
In the case (i) the use of the telephones supplied was illegal in the UK and the failure to
modify to make legal had been a breach of a condition and the defendant supplier
company was at liberty to treat the contract as discharge and it was treat the contract has
ended. Poussard v Spiers & Pond (1876)
In the case (ii) the telephones supplied required tuning and taking two minutes for each. It
was held that there was only breach of warranty. The supplier (defendant) could not treat
the contract has ended. They were entitled to damage only. Bettini v Gye (1876)
Overall, in case (I) the supplier couldnt modify to use was breach of a condition and the
mobile company can terminate the contract and sue for damage. In case (ii) supplier can
modify to use was breach of warranty and they can claim only for delay or damage.


Case study 2 Brakes Ltd
Exemption clause is a party to a contract may include a term in a contract to exclude or limit
his/her liability in the event of a breach of contract or in any specific circumstances. Also,
exception clause is generally included in a contract to protect the party drafting the contract
from being sued by the other party for damages, negligence or other losses. Exemption
clauses can be split into two parts which are exclusion clause and limitation clause. (ACCA
F4, 2009)
Exclusion clauses excludes liability completely for specific outcomes and limitation clauses
limits a maximum on the amount of damages the party may have to pay if there is a failure of
some part of the contract.
In the case study, when the Cathy took her car to service at Brakes Ltd she had always been
required to sign a contractual document before handling her car. The contract has an
exclusion clause that clearly stated that Brakes Ltd accepts no responsibility for any
consequential loss or injury sustained as a result of any work carried out by the company,
whether as a result of negligence or otherwise.
In the common rules or judicial process, for the exclusion clause to be valid, it has to be
incorporated in the contract by signature, notice and previous dealings or custom. In the
statuary rules, it has to correspond with the unfair contract Terms (UCT) Act 1997 and
Unfair Terms in Consumer Contract Regulations (UTCCR) 1999. (ACCA F4, 2009)
In this case study, the Brakes Ltd gave the receipt which is accepted by Cathy without
reading printed the Brakes Ltd.s usual business terms, including the exclusion clause.
Therefore, the exclusion clause was incorporated in the contract by 3 previous dealings
between Cathy and Brakes Ltd and receipt contains similar clause Brakes Ltd no
responsibility for any loss or injury. J.Spurling Ltd v Bradshaw (1996).

However the Brakes Ltd exclusion clause doesnt satisfy the statutory rules for control of
exclusion clause contain in unfair contract terms (UCTA) 1977 and UTCCR 1999 act, which
is void or invalid clause that exclude liability for negligence causing loss or injury. Holliers v
Rambler Motors 1972
After considering all the aspect of the contract of the law between Brakes Ltd and Cathy, the
garage accepted that their employee was negligent but denies any liability, relying on the
exclusion clause. So, the case is favour of Brakes Ltd, Cathy is not entitled to the any
compensation.












Part B Low of Tort
3a. tortuous liability vs. Contractual liability
There are some fundamental differences between a tort and contractual liability, which are follows
The contractual liability is undertaken voluntarily and that it is assumed in return for the
benefits promised by the other contracting party. But liability in tort is not undertaken
voluntarily, rather it is imposed by the courts on the basis that certain types of behaviour
amounts to civil wrong.
In a breach of contract, it must be shown that the defendant was subject to the obligations
of a contract and did not perform his obligations. In tort no previous transactions or
relationship need exist.
Liability in contract is generally strict. That is a party will have to carry out its obligations or
face the legal consequences, while liability in tort is based on fault. A person will only incur
tort liability if his conduct does not match up to an objective reasonable standard in most of
circumstances. (legalmatch.com)
However, contract liability and tort liability share many similarities. At the most basic level,
Tortuous liability and contractual liability both give rise to a civil and usually deal with a duty that
has been breached. Also, damages awards can be obtained in both contract and tort violation.
These are monetary payments made by the liable party in order to make up for any losses that
result from their breach. (legalmatch.com)

Tort is a breach of a legal duty or an infringement of a legal right which gives rise to a claim for
damages. Tort of negligence is the breach of a legal duty to take reasonable care, which results into
injury or damage to another person. In order for an action in tort of negligence to succeed, the
claimant must prove the following elements of a tort of negligence: (ACCA F4, 2009)

(Source Stponline.co.uk)

3: Resultant loss
As a consequence of the breach, a damage or loss ( financial, physical damage ) or
otherwise has been suffered
2: Breach of Duty of Care
The claimant must show that the defendant failed to take care which a reasonable
person would have done in the circumstances
1: Duty of Care
That is a duty of care is owed to him by the defendant

3b. Case study 3: Kings Restaurant
Carlos invited Janet out for dinner in an award winning and very expensive English restaurant called
Kings. Carlos believed that the Kings restraint follow quality control such as hygienic, health and
safety. At the restaurant, after the delicious main course they ordered the cake and coffee for Janet
and chocolate ice-cream for Carlos. When Janet was eating a mouthful of cake, she spluttered and
coughed and spat out a decomposed insect. The sight of the decomposed insect caused her to suffer
nervous shock and she collapsed. This is a duty of care which Kings was unable to provide. This is
similar to the case Donoghue v Stevenson (1932). In order to avoid any further embarrassment,
Carlos paid restaurant bill and he took Janet home as she continued to feel ill. The contamination of
the cake caused Janet to suffer gastroenteritis for several days. It is prove that defendant Kings
restaurant failed to take care that is duty of care was breached. Case Blyth v Birmingham
waterworks company (1856). As consequence of the breached both Carlos and Janet were mortified
at the turn of events and their potential romance did not recover and the foreseeable type of
damage was caused by breach. Therefore they decided to sue the kings restaurant for its
negligence. This shows the last element in tort of negligence that is resultant loss.
The standard of care test for establishing breach of duty care was set out in Blyth v Birmingham
Waterworks Co (1856) which stated that the breach of duty occurs if the defendant fails to do
something which reasonable man, guided upon those considerations which ordinary regulate the
conduct of the human affairs, would do, or does something which a product and reasonable man
would do. (ACCA F4, 2009)
For a claim of tort of negligence to be successful, the must prove that he has suffered loss or
damage as a direct consequence of the breach. In the case Barnet v Chelsea and Kensington
Hospital Management committee (1969) even if the doctor had examined Mr Barnet at the
time there was nothing the doctor could have done to save him. Therefore, the hospital was
not liable as the doctors failure to examine Mr Barnet did not cause his death. (ACCA F4,
2009)
Furthermore, the claimant must able to show the type of loss that is reasonably foreseeable suffered
as a result of the defendants breach as defined in The Wagon mound (1961). If the type of damage
is reasonably foreseeable the defendant is liable.
The breach of contract however was caused by the cake not being fit for purpose, which as
mentioned earlier in the Sales of Good Act 1979, the implied terms were breached.
In the other hand Janet is a third party in this case she has no contractual agreement with the
restaurant, similar to the case Donoghue v Stevenson (1932). There was a duty on the part of the
manufacture of their products. The manufacture owes a duty to the consumer to take reasonable
care to prevent injury. Therefore Janet can sue Kings restaurant for breach of duty of care.
Therefore, Carlos can sue Kings restaurant for breach of contractual liability and Janet can sue like
the manufacturer of beer in Donoghue v Stevenson (1932), for breach of duty care, because the
Kings restraint made the cake and she was the end user. However case to be successful she needs
to prove foreseeable damage was caused due to negligence which in her case she missed work
commitment due to gastroenteritis or by the nervous shock she received.

Case study 4: Marys Redundancy Money.
Mary is a retired nurse from Barnet hospital and she received large sum of money from redundancy.
Afterwards she is offered, highly paid position in Comfort home with reference of Barnet hospital.
However the job offer was withdrawn because Barnet hospital gave the reference regarding another
person with same surname. Furthermore, Mary bought some shares in her private primary school
according to her friend Joe an investment adviser. Unfortunately the share price falls intensely and
directors of the company are under investigation for fraud and corruption. Also, Mary purchase
shares in newly floated internet company MGS.com recommended in article written by Thomas, an
investment guru. The article fails to mention the highly speculative nature of the investment and
proven record of performance. Six months later, Mary finds out the MGS.Com shares are worthless.

Negligent misstatement is simplest relates to a representation of fact, which is carelessly made,
and is relied on by another party to their disadvantage (ORiordan, 2007, p.1).
Liability in Negligence misstatement is a legal liability that arises from negligence misstatement
causing financial or economic loss in circumstances where there exists a special relationship
between the parties (ACCA, 2009)
In (Hedley Byrne & Co Ltd v Heller & partners Ltd: 1964) the defendants disclaimer was adequate
to exclude the assumption by them of the legal duty of care. However, in the absence of the
disclaimer, the circumstances would have given rise to a duty to care and for misleading statement
on account close proximity in spite of the absence of a contractual relationship. Cases involving
negligence misstatement are usually concerned with establishing where or not duty of care arises
and it is difficulty to establish clear principles to apple as the law progressed on a case by case.
(ACCA, 2009)
A duty of care arising from negligent misstatement can only be established if the following criteria:
There must have been a special relationship of close proximity between the claimant and
the defendant.
It must have been reasonable for the claimant to rely on the defendants statement.
It would be fair, just and reasonable in all circumstances for the courts to impose a duty of
care.
Furthermore, the court set out three criteria which are to be fulfilled in order to give rise to a duty of
care
The standard test of foreseeability applied
Proximity or special relationship
Whether it is just and equitable to that a duty of care should be imposed so that imposing it
would not be contrary to public policy (ACCA, 2009)

i) Mary and Barnet Hospital
When these above criteria are applied in the Mary v Barnet hospital it is find that the Barnet
hospital no duty of care was owed because of lack of proximity between them. The prime
reason for lack of proximity the reference was given to Comfort company about Mary who rely
on the company was wrong. Here the advice is acted upon to the claimants retirement. Related
case Caparo Industries PLc v Dickman &others (1990)
Here he decision is directly applicable to the problem that there was sufficient proximity
between Mary and Barnet Hospital and that it just, fair and reasonable to impose a duty. See
case Spring v Guardian Assurance
Therefore, Mary can take an action against Barnet Hospital in the tort of negligence.

ii) Mary and Joe
If advice is given for a specific purpose, then a duty of care is owed to those who are relying on them
for that specific purpose for a special relationship. Although Joe is an investment advisor, he is
aware that Mary intends to act on his advice has been given in social setting rather than a business
setting. It could be argued that the assumed responsibility by claiming to know about the
investment. Also, it will be necessary to test whether there has been reliance. That means the
shares bought merely on Joes advice or there is any sentimental reasons for her old school. Mary
can get the problems of the social relationship and reliance, the fact to consider in establishing
whether a duty of care exist in giving professional advice assumption of responsibility that the
defendant Joe had to the claimant Mary.
iii) Mary and Thomas
In this situation, the factors to consider in establishing whether a duty of care exists in giving
professional advice are special skill and reasonable reliance. It is unlikely that there is special skill as
Thomas is not in the business of giving investment advice, neither is he aware that Mary was seeking
considered advice and intends to act on it. Further there is no duty of care would arise in the
decision. Related case Caparo Industries PLc v Dickman &others (1990)
In addition, Thomas doesnt know anything about Mary or fact that Mary read his article with
intention of acting upon it. Given the number of individuals likely to read the article, it would also
not be just, fair and reasonable to impose a duty of care on Thomas in the circumstances.

From above analysing, Mary has no right and remedies to succeed against Joe and Thomas for the
financial loss suffered for relying on their advice.


Case study 5: Drug Company

Vicarious liability is used to indicate that the law holds one person responsible for the misconduct of
another, although the first person is free from any personal blame worthiness or fault.
Joint and several liabilities means that where one person commits a tort, another person may be
liable jointly with the Tortfeaser who commits a tort, or even separately on his own if the Tortfeaser
has disappeared. (ACCA, 2009)
The most important application of the principle of vicarious liability is to the relationship of
employer and employee. The legal principle of vicarious liability here means that an employer may
be liable for torts committed by their employees in the course of their employment. (ACCA, 2009)
There are some tests applied by the courts to establish relationship between employee and
employer, which are the control test, integration test and the economic reality test.
The control test help to check whether there is the employer control over the way in which the
employee performs his duties. In the drug company situation, clearly expressed all experiments
involving the application of heat are not allowed by the drug company. Here the employee research
chemist is subject to control by his employer drug company as to how, where and when to do his
work. Therefore there is employment relationship between chemist and company. Related case
(Mersey Docks & Harbour board v Coggins & Griffiths (Liverpool) 1947) (ACCA, 2009)
If the employee is so skilled that cannot be controlled in the performance of his duties, was he
appointed and assigned to his duties by the employer was he integrated into the employers
organisation. In this circumstance proper test was whether the drug company appointed the
chemist, selected him for his task and so integrate him into the Drug Company. Here employer the
drug company made the choice and so it was liable. For example case study (Cassidy v Ministry of
Health 1951) (ACCA, 2009)
The employer is only liable for the employees torts committed in the course of employment.
Broadly, the test is whether the employee was doing the work for which he was employed. If so
employer is liable while engaged on his duties, the employee does something for his own
convenience. See the related case (Century Insurance v Northern Ireland road Transport Board
1942). In this situation, the chemist made the explosion during his research to see the reaction of
suddenly heat. Therefore the employer drug company was liable since the chemist was, at the time
of his negligent act, in the course of his employment. (ACCA, 2009)

Furthermore, the court also considers whether the employee can delegate all his obligations
whether there is restriction as to place of work. See case study (OKelly v Trusthouse Forte Plc
1983). In this case, there was no mutuality of obligations.
From the above, the drug company can be vicariously liable for the tortfeasor chemists behaviour.
There are three main defences to charge negligence that are contributory negligence, volenti von fit
injuria and exclusion clause. If the claimant is partly responsible for his own injuries, the defendant
can pleads the defence of contributory negligence. It is not a completed fence but reduces the
damages payable to the claimant. Relevant cases are Jones v Livox Quarries (1952); sayers v Harlaw
(1958); Capp v Miller (1989). Therefore, Chemist is partly responsible for his own injuries; the drug
company can plead the defence of contributory negligence. (ACCA, 2009)
Volenti von fit injuria literally means to one who volunteers, no harm is done. This applies where
the claimant has freely consented to the negligent act. Consent can be given expressly where the
claimant agrees to the risk of injury, or may be implied from claimants. Volenti von fit injuria can a
act as complete defence, the assumptions in this defence that the claimant is aware of the risk and
that he accepts the risk. Therefore, Chemist had impliedly consented to the risks of his actions and
therefore,the defendant drug company was not liable. Case ICI v Shatwell (1964)
Therefore the drug company could use to defend vicarious liability action.






References

ACCA (2009) Paper F4 Eng, Corporate & Business Law (CL Eng), Exam Kit, Kaplan
Edexcel BTEC HNC/D Business Essential: business Law, BPP Publishing Professional
Education.
http://www.tutor2u.net/law/notes/contract-express-implied-terms.html

http://www.legalmatch.com/law-library/article/contract-and-tort-law.html