Task 1

P1).Understanding the essential elements of a valid contract in a business

context.

Contract Law
The law of contract is a set of rules governing the relationship, content and
validity of an agreement between two or more persons (individuals, companies or
other institution) regarding the sale of goods, provision of services or exchange of
interests or ownership.
Contract law Definition:
i) Contract has been defined as a promise or set of promises which the law
will enforce.
ii) A contract is an agreement giving rise to obligations which are enforced
or recognized by law.
Either definition confirms the involvement of the law by way of enforcement,
suggesting that should there be an infraction of the terms of the agreement then
the aggrieved party may seek recourse via the Courts.
Contract in a business context:
A contract can arise is a plethora of scenarios; from buying a loaf of bread in the
corner shop, to the sale of a house. Certainty is needed the Courts will intervene
to enforce any agreement. The law of contract has confirmed the basic
foundations of any contract, regardless of its complexity and substance; it must
contain to make the agreement enforceable in law.
Contract offer and its acceptance to make an agreement:
There must be an offer and this must be accepted to make an agreement. An
offer can be made orally, in writing or by way of conduct. Regardless as to the
manner of the offer, it is the willingness or intention of the person making the
offer (the offered) If a person says that I want to sell this orange for 1.00 but
then mistakenly advertises it for 1p, and that offer is accepted, then a valid
agreement will be upheld.

Invitation to treat:
Parties may enter into preliminary negotiations or pre-emptive talks before
entering into a contract. A classic example is the produce on display at
Supermarkets and on shelves. The price highlighted amounts to an invitation to
treat only. The offer does not materialize until the goods are taken to the
checkout and the price confirmed. At that point the customer can accept the
goods and pay the total amount, thereby completing the transaction and
formalizing the contract.
Contract law not only governs what happens when the contract breaks down, but
it also establishes what the terms of the contract are, in the event of a dispute.
While the contract may be self explanatory in what the parties intend i.e. you pay
50 and Ill give you this washing machine, there are of course terms as to the
time of payment, delivery , condition of the goods etc that need to be established.
The most important terms are of course the quality of the goods and the method
of payment. Certain pieces of legislation will import terms into the contract
without any acknowledgement or agreement between the parties that they will
be so included.
Example of the sales of goods
An example is the Sale of Goods Act 1979 which ensures that in sales to
consumers by anyone in the course of a business, that the goods are of
satisfactory quality , fit for their purpose and correspond to their description.
Contract law protects the purchaser without his knowledge. The phrase usually
displayed at checkouts regarding sales and offers, This will not affect your
statutory rights.

The requirement of consideration:
The requirement of consideration refers to the exchange of money for goods or
services, or of value traded between the parties. Contract must be valued
consideration as opposed to inadequate consideration.

Valued Consideration:
With the agreement between two or more people confirmed as an agreement,
containing an offer and acceptance, and the exchange amount to money or
something in moneys worth, there must still be the requisite intention to create
legal relations.

Contract in Commercial Transaction:
While in a commercial transaction, the parties to the contract intended to create
legal relations. The Courts may draw an inference from conduct and common
knowledge that shoppers are well aware of the binding nature of any agreement
to purchase goods or services. The Court will apply an objective test to consider
all the facts of each individual case.
A case involving a pupil barrister who accepted an offer from a Barristers
Chambers was held to be a binding contract between the trainee and the whole
chambers.
Informal Agreements: Informal agreements between co-habitants living in a
quasi-marital relationship can lead to dispute, particularly upon the breakup of
that relationship. A contract would form when the stay at home mother would
find herself without recourse via matrimonial legislation.
The contract was said to relate to the offer to be maintained for life by the
husband, was accepted, and the consideration would be foregoing the right to
earn a living and/or providing a home for the family.

Task 2
P2). Apply the elements of a contract in business situation
Where is Contract Law used today?
Contract law permeates our day-to-day lives, and often we are not aware of its
presence. While legally qualified individuals may be aware every time a contract
comes into existence and note phrases such as the customer uses this at their
own risk with a wry smile, the majority of society lives in blissful ignorance of
how deeply indebted to contract law they are.
Public Transport every ticket bought on a bus train or on the underground
forms a contract. This is a contract of services and the majority of terms will be
implied. If one was to state the whole list of terms on the back of a ticket as to the
obligations of the provider of the transport to the customer, it would result in a
piece of paper resembling an instruction sheet from IKEA rather than a ticket.
The form part of the contract must be present at the moment it was entered into.
The terms of importance will usually be on display either around the point where
a ticket is bought, or it will direct the customer to a full list of the conditions
elsewhere.
Employment every employee must have a contract of employment with their
employer. While it is a fact that some employers have not bothered with the
formality of drafting a document setting out the rights and expectations of both
parties, the Employment Rights Act 1996 will infer a number of basic rights for the
employee in any event. The offer and acceptance of taking a new job is a given, as
is the consideration (days work for a days pay).
Any purchase of goods or services the sale of goods or services is the most
basic form of contract. For example
Buying a house most people who have become involved in the conveyancing
process will recall the stress of waiting for the solicitor to confirm that they have
exchanged contracts. While the ownership of a property in England & Wales
can only pass by way of deed, the contract is pivotal. The contract will set out the
terms of sale, including the price, items of furniture and fixtures that are being
left behind and the date of completion. Once the purchase is completed and the
monies paid, any issue that may be taken between the parties will have to be
raised as a breach of contract. While in the majority of cases the axiom Caveat
Emptor (buyers beware) will apply.
Contract Law is everywhere from the purchase of a newspaper in the morning to
the service of gas and other utilities, there exists a contract to govern most
relationships outside the domestic scenario.
Contract on the purchase of goods and services:-
The most influential and commonly used contracts are those relating to the
purchase of goods and services. The Sale of Goods Act 1979 and Supply of Goods
and Services Act 1982 have developed from a background of Caveat Emptor,
where consumers were unprotected from sellers able to peddle goods that were
less than of merchantable quality.
We have contracts for the sale of goods when we do our weekly shopping, buy a
new appliance or finally get that pair of shoes. Similarly contract for the supply of
services exist over the cables service for the TV, the mobile phone company or the
plumber who comes into fix the leak upstairs.
The contracts exist between companies, corporations, charities or even
governments. Most companies will have several contracts for the services it
obtains from other companies i.e. cleaning, catering, accountancy etc.
There will be contracts of employment with every member of staff, as well as
contracts with each shareholder as to the money they have invested and the
dividends received each period. They will in turn have contracts with the
customers who retain their services, or even other companies by way of merger
or shared services within a larger agreement.


Task 3:
P3). Understanding Principles of liability in negligence in business
activities:
Contract Law Cases - Examples
Carlill v . Carbolic Smoke Ball Co (1893) 1 QB 256 (CA)
This case involved the defendant company who produced and advertised smoke
balls as a preventative measure against influenza and the common cold. The
advertisement stated that they would give 100 to anyone who used the product
for three times a day for two weeks but still contracted one of these illnesses. The
defendant also stated that they had placed 1,000 in a bank account to
demonstrate their sincerity. Suffice to say that the claimant took up the challenge
and after roughly 8 weeks of continuous use she contracted the flu. Mrs. Carlill
claimed the 100 but the defendant refused to pay; they claimed that there was
no contract in place for her to enforce the claim.
This matter progressed to the Court of Appeal. The defendants maintained that
there was no intention to create legal relations and the advert amounted to
nothing more than an invitation to treat. The Court of Appeal confirmed that
there was in fact a contract in effect between the parties. This situation
amounted to a unilateral contract whereby one party offers money in exchange
for the performance of a stipulated act. Whereas normally an advert would
amount to nothing more than an invitation to treat, the request for the
performance of an act made it an offer. There was no requirement for Mrs. Carlill
to inform the defendant that she had accepted it, the undertaking of the
challenge was tantamount to acceptance.
The Court adopted a literal meaning to the advert, which simply state that
providing the claimant took the smoke balls continuously and then contracted any
of those illnesses she would receive 100. The deposit of 1,000 into an account
was a demonstration of the defendants meaning and willingness to rely upon
their product in light of this challenge. The Court find that there was a contract
under which the claimant was due 100.
A contract can arise even when the intention was to make an informal offer, but
in the absence of a specific statement to that effect, the conduct of the offer or
may infer the requisite legal intention.
Coward v. Motor Insurers Bureau (1963) 1 QB 259 (CA)
In this matter Mr. Coward and Mr. Cole were work colleagues who had an
arrangement regarding shared lifts to work. Cole would drive his motorbike and
Coward would ride pillion in return for a weekly sum of money.
Unfortunately both were killed in a road traffic accident and the wife of Mr.
Coward made a claim for damages against the estate of Mr. Cole. However Coles
insurance policy did not cover pillion passengers and as his estate had no assets
or money to satisfy the judgment, Mrs. Coward pursued the Motor Insurance
Bureau (MIB).
The MIB have an agreement whereby accidents and consequential claims would
be satisfied by the Government in circumstances where the driver has no relevant
policy of insurance. However the rules covering this situation require Mr. Coward
was carried for hire or reward. Consequently Mrs. Coward needed to prove that
there was a contract in place between Coward and Cole for the lifts to work.
There was clearly an offer of transport and this was accepted. In addition the
consideration exchanged by the parties was the service of transport and the
money paid by Mr. Coward.
This matter progressed to the Court of Appeal and it was decided that
notwithstanding the regular payment of money in return for the lift, it was not so
formal as to create a contract. There were no terms as to how long this was to
last, what would happen in default of payment or the availability of transport, or
anything written down so as to at least make their intention clear .

Olley v . Marlborough Court Ltd (1949) 1 K.B. 532
Mr . Olley visited the hotel belonging to the defendant. He had not made an in
advance booking and upon arrival requested a room for the night. He signed the
register and there was no mention at that stage of any other terms or conditions
that might impact upon his stay at the hotel. During the course of his stay Mr .
Olley discovered that someone had broken into his room and stolen certain
property including a fur coat. It subsequently became known that the defendant
was negligent in relation to the security within the hotel. Nevertheless, the
defendant sought to rely upon an exclusion clause that was placed in the
bedroom the claimant stayed in. This stated that the hotel would not accept
liability for lost or stolen items belonging to customers.
The question was whether the exclusion clause that was displayed in the
bedroom constituted a valid term of the contract. It was not disputed that there
were all the required components to for the agreement i.e. offer , acceptance,
consideration and intention, but that was not to say that all the terms the hotel
sought to rely upon could actually be enforced against Mr . Olley .
The Court decided that the contract was entered into the moment Mr . Olley
arrived at reception and signed the register. That was the point when the room
was offered to him and he accepted. Intention was not an issue and in
consideration of the agreement, he would receive a room to stay for which the
hotel would receive payment. The fact that payment would usually come after the
stay was irrelevant. Consequently Mr.Olley was not given notice of this exclusion
clause until he had already entered into the contract and therefore it was
unenforceable against him.




Issue of notice and timing of the terms of any contract:-
Similar examples of this issue of notice and timing of the terms of any contract
can be seen where clothes are purchased and notices attempting to exclude
liability are put on the receipt. If there is a course of dealing or repeated business,
and in a previous transaction a term was brought to the attention of the
customer, then they could be held to have been made aware of it and it becomes
a term of the contract. If Mr. Olley had stayed at the hotel on a number of
previous occasions; it would have been difficult for him to argue that he had no
knowledge of the exclusion term. In such circumstances it is arguable that he
would have been deemed to have had knowledge and the hotel could have relied
upon the term within the contract.
Adams v . Lindsell (1818) 1 B. & Ald. 681
This case concerns the acceptance of an offer and the importance of how that
acceptance is communicated to the offeror . Here the defendant offered to sell
the claimant fleeces of wool for a certain price. They requested that the response
be made by post. This letter was misdirected by the defendant so that it was not
received for 3 days after it was sent. The claimant decided to accept the offer and
responded on the same day. This was posted on the 5th September but not
received until the 9th September. However the defendant decided on the 8th
September that as they had not received a response decided to sell the wool to
someone else. The claimant argued that a contract had been created as he had
accepted their offer.
The Court confirmed that the delays were entirely the fault of the offeror. Had the
letter been posted correctly then this scenario would in all likelihood not have
arisen. Furthermore the contract was created on the 5
th
September when the
acceptance was posted, not when it was received. While the agreement was not
communicated to the offeror, it could not prevent the contract being created.


It would otherwise require (in this scenario) the claimant to wait until the
defendant had received the offer and then written to him saying that the terms
were agreed and so on. This system of acceptance was thereafter referred to as
the postal rule.
Task 4
P4) Apply the principles of liability in negligence in business
situations:
we live in a capitalist society with freedom of choice, the need to ensure quality
often negates the need for a consumer to enforce their rights as to quality and
fitness under a contract of sale. Standards are maintained by Government bodies
and independent organizations i.e. BSI. The consumer rarely has the need to
enforce breaches of contract, and even if they do, retailers are so aware of the
rights of consumers that they will allow an exchange of goods without question.
Default of the agreement:
i) It is not in the current financial climate that the terms as to payment are
enforced by suppliers and sellers in default of the agreement more
frequently.
ii) Issues of credit are widespread at the moment and the contracts that
regulate the borrowing of money against property (hire purchase) or
simply under a general agreement (credit card) are being breached every
day.
iii) There are terms and conditions for both parties. The essence of a legal
contract, the exchange of consideration without which there is nothing
more than an unenforceable promise.
iv) The law of contract needs to change with the developments in economics,
technology and social attitudes. It is usually a matter for Parliament to
intervene and legislate for new situations and introduce law that will
govern particular relationships and the contract that arise between them.

The introduction of a system that will create a standard form of agreement based
upon the nature and relationship of the parties to it e.g. companies or businesses
in the same market dealing between themselves but there will always be the
isolated agreement, or informal shake of hands that ultimately creates a contract
and the enforceable terms it grants to those party to it.
Contract Law Essay Examples:-
Example 1: In order for the customer and XYZ to be bound by standard terms and
conditions there should be a set of criterion filled. These conditions should be
treated as exclusion clauses as they are the extreme conditions to be enforced.
A valid contract must have the following elements; offer; acceptance;
consideration; capacity; and intention. These are present in this contract when
XYZ offers his work and the customer accepts verbally or in writing. There is also
intention because there is an understanding that XYZ will turn up to work on a
certain day and the customer will pay a certain fee, which is evidence of
consideration as the customer is at a disadvantage. The customer has never
worked with XYZ and at the verbal contract point does not indicate what his usual
terms and conditions are.
Example 2: In order to establish what the nature of the ultimate contract is,
between the hotel and A, it is first necessary to find the offer and acceptance;
the constituent parts of any contract. An offer has been held to be a statement
which objectively (I.e. to a reasonable observer) indicates that the person making
the offer is prepared to contract on the terms specified in that offer (Gibson v
Manchester City Council).
It would at first sight, appear that the hotels website and advert for the
accommodation at the specified price was an offer. This, however , is not the
case, as it has been held by the courts that advertisements are usually invitations
to treat rather than offers, as the advert usually lacks the other essential
ingredient of a contract; an intention to be legally bound (Partridge v Crittenden).
This principle is in place in order to protect the advertiser from incurring
liability in contract to everyone who is willing to purchase the goods (in this case,
the holiday), at the advertised price. An invitation to treat is an invitation to the
other party to negotiate the terms of a potential contract. A responds to this
invitation by making his initial email enquiry, which can similarly be classed as an
invitation to treat, or perhaps simply an enquiry.
Example 3: - Customer B may be able to rely on undue influence, the main case
being National Westminster Bank v Morgan where it was held the claimant must
not suffer from manifest disadvantage. Undue influence simply means unfair
pressure on a party when forming a contract. The shop may argue there was no
special relationship between the parties, in which case it is for customer B to
prove this (Williams v Bayley). Following the decision in Lloyds Bank v Bundy, the
question may be whether there was inequality of bargaining strength the shop
acted as an agency for the HP financers