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Table of Contents
Executive Summary ................................................................................................................................ 2
1 Task 1 – Essential Elements of a Valid Contract ............................................................................ 3
1.1 1A) Essential Elements of a Valid Contract ........................................................................... 3
1.2 1b) implications of different types of contracts that can be entered, particularly distance
selling. 4
1.3 1c) Analyzing the outcome towards certain condition, warranty, in nominate, express,
implied term ........................................................................................................................................ 5
2 Task 2 – Specific Terms in a Business Contract (LO2) .................................................................. 7
2.1 2a) rule on capacity, an important factor towards a valid contract ......................................... 7
2.2 2b) legal position on any miss description, quality and after sale services issues with online
clients (distance selling) – implied terms ............................................................................................ 7
2.3 2c) legal effect of Clause “any express or implied condition or warranty is hereby excluded”
3 Task: .............................................................................................................................................. 10
3.1 Summary of essential elements of a valid contract in a business context ............................. 10
3.2 Principles of liability in negligence in business activities .................................................... 10
References ............................................................................................................................................. 12

Executive Summary
The report on aspect of contract and negligence of business has three main parts. The first
part explains essential elements of contract between Gateway and its customers. It explains
the implications of different types of contract between Gateway and its customers giving
special attention to the contract in relation to distance selling. It analyses the effects of terms
of contract whether express or implied in relation to condition, warranty, and innominate. The
second part explains why the rule of capacity is an essential element in relation to the contract
between Gateway and its customers. It advices Gateway about the implied terms to, on its
legal position in relation to mis-description, quality and after sale services for contracts of
distance selling. It explains the effect of clause related to small print. The third part
summarises about the essential elements of contract and principle of liability in relation to

1 Task 1 – Essential Elements of a Valid Contract
1.1 1A) Essential Elements of a Valid Contract
A Contract is a documentation that carries valid, legal information about the fundamental
elements required to make an interpretation. If desired elements do not meet the required
criteria then that contract could be stated as invalid, void, null or unenforceable contract for
instance case law.
1.1.1 Offer and acceptance;
If one party through meetings and discussions acknowledges offer provided by second party
then only an agreement could be designed. Clear view and specific understanding must be
there for the offer to be accepted and valid this means each terms and rules listed on the offer
should be accepted by parties. With the acceptance of the offer both the parties are under
stubborn and carried satisfactory termination towards single view. Like for instance if you
invite your mate for a celebration conducted at home would not be an valid offer even though
it would approved by your mate, an binding agreement cannot be created with such offer.
Such communal and household contracts are assumed as such which cannot be given lawful
results (LawResources, a2013).
1.1.2 Intention to create legal relations;
Only law based agreement are made into consideration as a legal objective under every law.
Like for instance if two human being are interested in making purchase and sales of goods
then this would be treated as legal contract and if two human being are interested in making
purchase and sales of goods with illegal object then this would be treated as illegal or
unlawful objective. Like if, goods are either robbed, human trafficking, hired from murder,
infant pornography then these would come under illegal objectives.
1.1.3 Consideration;
Consideration is termed as anything that carries worth in replacement of products or services
and are utilized to bring another party towards making participation under contractual
agreement. It could be either money or any objective that would carry currency value. Thus
to form a valid agreement there arises need towards consideration and if consideration do not
exists then it would be a void or invalid contract (LawResources, b2013).
1.1.4 Capacity;
The initial component towards a valid contract is that any parties, which are involved, should
reveal their officially authorized expertise. Like the parties must be capable to understand i.e.
they should either be 18yrs or above to be an authorized member entering into legal contract,
should be mentally stable, should be emotionally fit and fine to meet the terms, condition and
requirements of the agreement. Like for example if a person is addicted towards alcohol or
drugs then he is ineffectual towards lawful agreement (Legislation UK, 1991).
If all these requirements are included under the contract then it could be said as valid or legal.
If criteria listed above do not exist then the agreement is worthless, void, and invalid or
unenforceable. The agreement among Gateway and its customers could be stated valid if the
offer they represent carried acceptance from both the parties. If both the parties do not agree
or encompasses illegal products then the offer is void. As there does not exists any illegal
things available among Gateway and its customers towards their purchase, sales and services
their offer is valid and lawful. The alumnae should be above 18yrs and capable in
understanding. Thus, in general the agreement is stated as valid.
1.2 1b) implications of different types of contracts that can be entered, particularly
distance selling.
Types of contract:
1.2.1 Face to Face;
Face to face contract by just a handshake or verbally made is still considered as a contract. By
it cannot be taken to court as laws are not considered and thus cannot be judged in the
courtyard. Fraud and misunderstanding could be reduced under written contract but not under
face to face contract. If both the parties/either of the parties disagree or refuses to meet up
with their contractual responsibility and saying then in this case lawful judgments cannot
1.2.2 Written;
Written contract is made on documentation with simple English that is made understand by
the parties. It is a secured kind of agreement in which if any misconception, clashes or
divergence occur are reduced among the contractors. If any of the two parties do not accept
either of the law set under agreement then they could take the matter to court for legal
obligation and things could be settled among them.
1.2.3 Distance selling;
Distance selling contract is such that the goods or services are purchased and sold without
either parties dealing in person i.e. no face-to-face contact exists as well as written contract is
made. DSR (Distance Selling Regulations) which are set of rules are followed under such
buying and selling of products. The various modes under such dealing are through text
messages, interactive TV, cellular phones, internet, emails etc. if either of the parties which
are involved under distance selling’s make foul or do not agree on any issue then it could be
taken to court for legal judgments.
Business to business agreement cannot implement DSR. Like for example companies like
ESLC, Gateway and ETGS are big businesses and thus they cannot imply Distance Selling
Regulations in their contract. Such contract cannot make decisions when huge buying or
selling exists or telecom operators are included. USLC that deals in renting business and
Gateway as a telecommunications operation cannot apply DSR.
1.3 1c) Analyzing the outcome towards certain condition, warranty, in nominate,
express, implied term
In nominate, conditions, warranty, implied or express are various terms used under any
Types of contract term as listed as follow:
1.3.1 Condition;
Conditions are the base or the root towards any contract so it should be thoroughly viewed
initially and accepted by both the parties while signing any contract among them. If any of
the parties try to foul the other then it is lawfully judged and the innocent party could claim
for their damage. For example contract among Poussard v Spiers (1876) 1 QBD 410
(LawResources, x2013).
1.3.2 Warranty;
Warranty is a term, which does not carry more influence under any contract like if a
particular warranty is been violated then the guiltless party could claim damages however at
the same time end of the contract cannot take place. For example, contract among Bettini v
Gye 1876 QBD 183 (LawResources, x2013)
1.3.3 Innominate term;
Innominate term is not like warranty or condition but it is an overall approach which sees the
result of breach that took place. It measures the losses of the innocent party and measures
them ask whether the breach has made large effect on their business. End towards a particular
contract can be concluded under this term. For example contract among Hong Kong Fir
Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26 (LawResources, x2013)
1.3.4 Express; or implied;
Contracting term are classified under innominate, warranty and conditions; express contract
carries negotiation when listed under any contract. Implies term takes place as a condition
towards contract even though they are not mentioned under the contract. Under oral contract,
it becomes difficult to know which statements were trustworthy and which were foul so
negotiating such statement becomes hard (LawResources, y2013). It was implied under the
contract that Gateway should provide quality based goods at reasonable leasing and also after
their selling’s should relate to their clients through telephones. Express term denotes the
reflection or its consideration on the bases of approval and offer. A lot of product sold by the
company did not fulfil the expectations and thus beaches various contract terms like implied,
condition and innominate contract.

2 Task 2 – Specific Terms in a Business Contract (LO2)
2.1 2a) rule on capacity, an important factor towards a valid contract
Under this rule, the ability of the individual is measured. It is the most important and prime
factor to be considered. Like for example if Gateway is contracting with its clients then it
becomes crucial to see that all the graduates are on or above 18 yrs and are legally capable to
enter into any contract.
2.2 2b) legal position on any miss description, quality and after sale services issues
with online clients (distance selling) – implied terms
Implied terms are those terms which are imposed in the agreement by court or act and this is
seen in vary less case were courts implements law. Such terms are implemented on following
listed types.
The Trade Descriptions Act 1968 came into effect on 30 November 1968. It replaced and
expanded the old Merchandise Marks laws dealing with mis-description of goods in general.
It is an Act of parliament in UK which prevents manufacturers, retailers or service
industry providers from misleading consumers as to what they are spending their money on.
A trade description is an indication as to any one of a number of matters listed in the Act.
These include: the quantity, size or gauge of goods; how they were made or processed; what
they are made of; when they were made; their fitness for purpose; strength, performance,
behavior or accuracy and any other physical characteristics which they possess including
information relating to testing or approvals. Trade Descriptions Act is enforced by Trading
Standards officers and they work for local government and have powers to visit stores to
check on prices and descriptions therefore empowers the judiciary to punish companies or
individuals who make false claims about the products or services that they sell. Applying a
false trade description to goods is a strict liability offence: provided it is shown that the
description was applied and was false, the accused has to prove certain defences in order to
escape conviction. Each product sold must be as described, of satisfactory quality, and was
obvious or pointed out at the point of sale. "Fit for purpose" covers not only the obvious
purpose of an item but also any purpose determined at the point of sale as a result of queries
by the customer and assurances given by the trader. False descriptions as to services require
the more normal proof of mens rea (guilty intent). Where there is a contract for the sale of
goods by description, there is an implied term that the goods will correspond with the
2.2.1 Terms implied through custom
Under this term, the court has passed a specific term which is common for all trading
businesses of similar type thus are called as terms implied through custom. : Hutton v
Warren [1836] EWHC Exch J61 (LawResources, y2013)
As per the terms of custom Gateway is expected to supply quality goods to its customers. The
goods must adhere to the standard quality supplied by other sellers in market. It is customary
for any business to supply goods as per the standards prescribed by law. The equipment
supplied did not work as per the description and hence comes under miss description which
might lead to allow clients of Gateway to get compensation from Gateway.
2.2.2 Terms implied in fact
Under this term, the parties’ intentions are assigned with the contract. Like it carries various
efficiency test questions; will such term provide effectiveness to the business? Will the
absence of the term affect the business intelligence? In such case, court will imply those
terms that as per them are required and carries weightage Moorcock (1889) 14 PD 64
(LawResources, y2013). As per this term Gateway is expected to supply goods and services
which will not affect the effectiveness of business. Non supply of effective goods which are
of defective quality and intelligence of business.
2.2.3 Terms implied in law
Under this term, laws are imposed by the court towards weaker section of the society for their
protection like for example in case of supplier/purchaser, property-owner/renter and so
Liverpool City Council v Irwin [1977] AC 239. The term imposed additionally should be
reasonable enough for the contract to be of definite type Wilson v Best Travel [1993] 1 All
ER 353. Sufficiency and positivity should exist under the implied term. (Shell UK v Lostock
Garage Limited [1976] 1 WLR 1187 (LawResources, y2013). As per this Gateway’s term of
excluding express or implied warranty and condition is not reasonable to make contract
between Gateway and its customers definitive and hence can be declined by their clients. The
term affects positivity and sufficiency of terms implied under contract.
2.3 2c) legal effect of Clause “any express or implied condition or warranty is hereby
A specific term can be introduced under the contract for minimizing either parties legal
responsibility (liability) which is called as “small print”. Term can also be unfair in cases if
not carried correctly, as contract can be unacceptable if there are faults or distortion towards
innocent party. In this case, contract can be set to an end. USLC who are the clients of
Gateway manufacturers do not have the right to sue the suppliers for any warranty violation
only when the contract carries the statement “any express or implied condition or warranty is
hereby excluded” and was approved by USLC directors who carries responsibility towards
buying goods and services in aid of USLC. USLC has the right to file a suit against Gateway
if they fail to provide services after sales, as there is different contract for after sales services.

3 Task:
3.1 Summary of essential elements of a valid contract in a business context
The prime element towards a contract is its approval and offer. Mutual understanding and
contract should exist towards offer and acceptance. There should not be agreement based on
others influence and pressure, the parties involved should freely accept it. Considerations
should be there among parties i.e. give and take relationship carrying worth. There should be
exchange of things under their contract. Capability of the parties should be verified like their
age criteria should be 18 yrs or more to be legal authorizer under the contract. The aim
behind such criteria is that the minor are not that much able or grown-up to understand legal
legislation. If this criteria is not meet by nay of the parties then guardian involvement is
essential on their behalf so that until the minor has turned major it is the responsibility of the
guardian to carry their decision. All the members involved under the contract should be
physically, mentally and emotionally stable enough to go through legal competencies. If any
person is not under their mental consciousness then he/she is not able to satisfy the contract
and legal agreement. Written contract is the best way to carry agreement among parties so
that clear views are made, specifications are listed, doubts are reduced, and this is helpful
during breach of contract.
In order to enforce the contract, parties involved should agree on various terms and
conditions. Few of the contractual terms should be agreed initially and few could be set for
later period. It is important by the members entering in contracts to follow the agreement.
Contractual agreements are standardized for all. If in future negotiation takes place then these
agreement would help to settle the dispute and make lawful results. Offer could be legally
challenged if the mutual knowledge among the parties changes greatly from their usual offer.
If either constituent have a propensity towards the result in which the terms and contract
listed differentiate extremely then that negotiable component should be set ceased. If that
particular component caries significance towards business trading then any more offer’s
issuance could be considered. Breach of condition denotes the breakdown of giver in
satisfying promissory terms, sign or claim listed towards quality of goods. Laws are imposed
to verify that some warranties are provided towards seller’s goods and services thus
satisfying with their agreement accordance.
3.2 Principles of liability in negligence in business activities
Negligence denotes malfunction, presence or taking care of their belongings. This means that
the person who has taken the responsibility towards taking care of things has not done its
duty properly like either has done something false or have not done right thing. “Negligence
is lapsing few things which need to be carried by particular assigned authority, which
regulates human concern or doing thing that a sensible and logical staff wouldn’t do.
(LawResources, p2013)”
3.2.1 Personal injuries;
Care should be given towards relationship and such are viewed by the law. Duties need to be
accompanished. If such duties are not taken care of then the faulty party is liable to pay for
the damages or loss that might have taken place. It is essential for claiming person to develop
duty of care with the defendant. Duty of case relies on loss type and various tests concerning
to various failures. Personal harm and damages are studied under this section other injuries
like pure economic loss, psychiatric and defective items are studied in other section.
3.2.2 Damage to property;
Occupiers are the one who occupies the duties allotted to them by the landowner. It is the
responsibility of the landowner to take care of their assets. The owners can pass such liability
to others termed as occupiers. The word occupier in its own is false since material occupation
is not crucial for legal responsibility to take place (LawResources, t2013).
3.2.3 Economic loss;
Duty of care is not due if the loss is suffered economically in business. Like monetary loss
does not relates with individual damage or damage toward assets (LawResources, r2013).
3.2.4 Occupier liability
Under occupier liability, diverse negligence is carried which includes breach of duty, duty of
care that causes harm. Distance selling rules applicable towards inhabitant’s liability are
similar in the way negligence claim are applied. Occupier liability could take place for
making omission as their connection comes with the responsibility towards rise in sense of
duty to guarantee protection of visitors (LawResources, s2013).
Under legal claim, negligence is carried forward on various elements that all together provide
trouble analysis and makes an effort to sort them through lawful requirement. While
implementing such element under negligence different views takes place towards base of
oath. In any case of breach, legal and procedural steps are taken to settle the situation.
Legislation UK (1991) Age of legal capacity Acquistion of Domicile accesed from accessed on December 10, 2013
LawResources (a2013) Essential elements of contract offer and acceptance accessed from accessed on December
10, 2013
LawResources (b2013) Essential elements of contract consideration accessed from accessed on December 10, 2013
LawResources (x2013) Conditions Warranties and innominate terms accessed from
accessed on December 10, 2013
LawResources (y2013) Terms implied by common law, accessed from http://www.e- accessed on December 10, 2013
LawResources (p2013) Negligence accessed from http://www.e- accessed on December 10, 2013
LawResources (q2013) Negligence Liability of defective items accessed from http://www.e- accessed on December 10, 2013
LawResources (r2013) Negligence inflicted economic loss, accessed from http://www.e- accessed on December 10, 2013
LawResources (s2013) Negligence occupiers liability accessed from http://www.e- accessed on December 10, 2013
LawResources (t2013) Negligence duty of care accessed from http://www.e- accessed on December 10, 2013

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