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ASPECTS OF CONTRACT

AND NEGLIGENCE FORBUSINESS

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TABLE OF CONTENTS

INTRODUCTION .......................................................................................................................... 1TASK 1 ........................................................................................................................................... 1

a) Explain the importance of the essential elements required for the formation of a valid

contract. ....................................................................................................................................... 1b) Discuss the impact of different types of contract ................................................................... 2c) Apply the elements of contract to Amys situation................................................................ 3

TASK 2 ........................................................................................................................................... 3a) Explain the concept of someone having the legal capacity to enter into a binding contract

and comment upon the law around capacity ............................................................................... 3TASK 3. EXPLAIN THE RULES REGARDING THE EXCLUSION CLAUSE ........................ 4TASK 4 ........................................................................................................................................... 5

a) Briefly explain what a standard form contract is to Amy and give her at least two examples

of standard form contract ............................................................................................................ 5b) Explain and evaluate the meaning and legal effect of the following terms used in contracts..

..................................................................................................................................................... 5CONCLUSION ............................................................................................................................... 6REFERENCES ............................................................................................................................... 7

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INTRODUCTION

Negligence refers to the failure to exercise the care that a person would exercise in .like

situations. Negligence involves the harm that is caused by carelessness. This project explains the

essential elements required for the formation of a valid contract. Also the impacts of different

types of contracts have been discussed. Standard form contract has also been explained in the

project. This project also explains the legal effect of the express terms, implied terms,

innominate terms, conditions and warranties in contracts.

TASK1

In the contract, the consideration and the certainty elements of a valid contract have been

ignored. Amy did not get the value worth the consideration she paid. There was slight variation

in the colors of the sofa that she bought and the ones she chose before. Also the sofas were notcomfortable.

The store clearly states some of the terms and conditions that are applicable on all the

products that are sold by them during sale. These terms and conditions were ignored by Amy.

Hence she is legally not strong enough to claim for the damage.

Amy can strengthen her position if she succeeds to collect enough evidences in support of

her claim that she was not given the consideration that was decided upon by both the parties at

the time of contract.

a) Explain the importance of the essential elements required for the formation of a valid contract.

A contract has six important elements without which the contract will be an invalid contract.

These elements are:

Offer- This is the first element of a valid contract. An offer is essential for the contractbecause without an offer there will be no contract (Warren, 2012). According to the

Contracts Act, 1950, offer is the first element in a contract to make it legally valid. Offer

is important for the formation of a contract because there must be a definite, clearly stated

offer to do something.

Acceptance- For the contract to be formed there should be an acceptance from the otherparty (Gillies, 2004). The offer must be accepted without conditions exactly as offered.

Hence for a contract, there must be acceptance of what has been offered.

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Consideration- It is an important element in the contract because consideration meansthat one party promises to do something in return for a promise from the other party in

order to provide a benefit of value (Padhi, 2012). For a contract to be binding, it is very

important that it must be supported by valuable consideration.

Intention to create legal relations- It is an essential requirement for the contract that theparties entering into the contract must intend to create legal relations. They must

understand that the agreement can be enforced by law.

Certainty- This is important because the terms and regulations being made in the contractshould be stated clearly and understood by the parties of the contract.

Capacity- This means that the parties must have the legal capacity to enter into contract(Lawson, 2011). The parties must meet the minimum age requirements of 18 years or

above in order to legally enter into contract.

Face to face contracts- Generally a contract is formed when the acceptance iscommunicated to the offeree. In face-to-face negotiations, few problems were provided

by this rule.

The new technology where products could be bought online has impacts on the law of

contract. The development of methods of communicating over distances has posed some

problems. When the offeree has dispatched the acceptance, it is either not received by the offeror

or arrives after the expiry of the offer.

b) Discuss the impact of different types of contract

There are different types of contracts depending upon various legal transactions. These are:

Adhesion contracts- The impact of this contract is that the party who does not have thebargaining advantage has only two alternatives either to accept the contract or to reject it

(Kelly and et.al., 2013).

Aleatory contractsthe impact of aleatory contract is that both the parties assume risks. Bilateral and unilateral contracts- the impact of unilateral contract is that the offeree

cannot be sued for refraining and abandoning or failing to execute his act. This is because

he does not promise anything.

Executed contracts- the impact of this contract is that there is an obligation to beperformed at some point of time in future according to the contractual terms.

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Express contracts- The impact of this contract is that t the time of forming the terms andconditions are stated either orally or in writing (Mote, 2013). Hence when the offeree

accepts that written or oral proposal, he accepts it in a way that explicitly defines legal

consent to the terms of the contract.

Implied contracts- The impact of this contract is that it cannot be labeled as implied inlaw (Middlemiss, 2011). This is because it lacks the requirements of a true contract.

Unconscionable contracts- The impact of these contracts is that they are unfair are one-way favors of the party who stands at the superior end of the bargaining power.

c) Apply the elements of contract to Amys situation

In the first situation, an offer was made by Amy to her friend Baljit. According to it, Amy

offered to pay a certain amount for buying Baljits furniture. Both the parties were legally

competent. The terms and regulations were clearly stated. Hence this situation had Offer,

consideration, legally competent parties, intention to create legal relations and certainty elements

of a contract. It lacked the element of acceptance. This contract became void when Baljit made a

counter offer to Amy.

In the second situation, a counter offer was given by Baljit to Amy where he offered to

sell his furniture to Amy for a certain amount. This situation had offer, consideration, legally

competent parties and certainty elements of a contract. The contract in this situation became void

when Amy informed Baljit that she had bought the furniture from a local store.

In the third situation, Amy bought furniture from a local store at a bargained price but

later found that she did not get the value worth the consideration she paid. Hence in this contract

the consideration element had been denied.

TASK2

a) Explain the concept of someone having the legal capacity to enter into a binding contract and

comment upon the law around capacity

A valid contract cannot be entered upon by all people. The contracts following groups of people

are dealt separately:

People who have mental impairment- A person with mental impairment may have thecapacity to understand some contracts but not other complicate contracts (Miller, 2012).

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Anyone suffering from a mental disorder is considered incapable of entering into a

binding contract.

Young people (Minors) - The term young person refers to anyone under the age of 18years. In the situation of one of the parties not meeting this requirement, the party must

have a legal guardian enter on his or her behalf (Nysten-Haarala, Lee and Lehto, 2010).

The agreement then becomes the guardians responsibility until the minor meets the

minimum age requirement.

Binding contracts and young people- the young person contracting in thissituation will be bound to pay a reasonable price for necessaries actually sold and

delivered.

Non- binding contracts for young people- The contracts which are not fornecessaries and the contracts for the repayment of money lent or to be lent are not

binding on a young person (Elements of a contract, 2013).

In the given scenario, if Amy is supposed to be a minor, then the contract will become

void as the element of legal capacity of parties has not been fulfilled, which is an essential

element of a valid contract. In this case, the person who takes up as the guardian of Amy will be

responsible for making all the payments to the store. Both the store as well as Amy will be under

legal consideration.

TASK

3

EXPLAIN THE RULES REGARDING THE EXCLUSION CLAUSE AND

DISSCUSS THE EFFECTS OF EXCLUSION CLAUSES IN ATTEMPTING

TO EXCLUDE CONTRACTUAL LIABILITY.

The rules regarding the Exclusion Clause are:

It must be shown by the party seeking to rely on an exclusion clause that it wasincorporated as a term of contract. Here, reasonable steps are to be taken to bring it to the

attention of the other party.

An exclusion clause will be construed strictly against the party by whom it wasintroduced and who seeks to rely on it (Exclusion Clauses, 2013). Hence the party should

be careful about this.

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If there is a contract between two parties containing an exclusion clause, the third partyX will be allowed to rely on the clause only if there is a clear evidence that X is a party

to the contract and that the clause was intended to protect X.

Sometimes a party to a contract includes exclusion clause to exclude or limit his liability.

The exclusion clause does not give inequality of bargain (Gray, 2010). This can be a problem if

one party is a big company and the other party is an ordinary customer.

The exclusion clause only protects the defendants. This proves to be unfair sometimes

because the defendant companies rely completely on exclusion clauses to limit its liabilities if

something goes wrong (Milner, 2011).

Advice- Amy should not take any legal action regarding this.

TASK 4

a) Briefly explain what a standard form contract is to Amy and give her at least two examples of

standard form contract

Standard Form Contracts are agreements that employ standardized, non-negotiated

provisions. These are usually in reprinted forms (Lawson, 2011). These are also called as Take

it or leave it contracts. The party with superior bargaining power drafts the terms.

For Example, in case of insurance policies, the insurer decides what it will and will not

insure and also the language of the contract.

For example, when a standard form contract is entered into between an ordinary customer

and a multinational corporation, the customer cannot negotiate the standard terms; also the

companys representative often does not have the authority to alter the terms.

b) Explain and evaluate the meaning and legal effect of the following terms used in contracts.

Use decided cases, statutes and examples to support the answer: Express terms, implied terms,

innominate terms, conditions and warranties.

As per as the term express terms is concern, it is those rules that are explained very

clearly in the contract (DiMatteo, 2012). At the current situation, the terms that are explained

regarding the policy of the no refund is clearly mentioned during the sale period at the store.

These can be called as the express terms.

The implied terms are those terms of the contract that are not disclose and explained as

compared to express terms but are still considered as the terms that are applicable in the contract

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REFERENCES

Journals

Bowyer, M. L., 2000. Insurance contract law and regulation and competition in the UK insurance

industry: The missing link. Journal of Financial Regulation and Compliance. 8(2).

pp.140150.

DiMatteo, A. L., 2012. False dichotomies in commercial contract interpretation. Journal of

International Trade Law and Policy. 11(1). pp.27-43.

Gray, J., 2010. Legal commentary. Journal of Financial Regulation and Compliance. 18(3).

pp.293-300.

Lee, R., 2001. Negligence. Property management. 19(5).

Middlemiss, S., 2011. The psychological contract and implied contractual terms: Synchronous or

asynchronous models?.International Journal of Law and Management. 53(1). pp.32-50.

Milner, A., 2011. Contract interpretation: potential for relaxing the exclusionary rule.

International Journal of Law in the Built Environment.3(3). pp.205221.

Nysten-Haarala, S., Lee, N. and Lehto, J., 2010. Flexibility in contract terms and contracting

processes. International Journal of Managing Projects in Business. 3(3). pp.462478.

Warren, J. M. C., 2012. Law and the Built Environment. Property Management. 30(2). pp.209-

210.

Books

Andrews, N., 2011. Contract Law. Cambridge University Press.

Chen-Wishart, M., 2012. Contract Law. Oxford University Press.

Gillies, P., 2004.Business Law.Federation Press.

Kelly, D. and et.al., 2013.Business Law. Taylor & Francis.

Lawson, R., 2011.Exclusion Clauses and Unfair Contract Terms. Sweet and Maxwell.

Miller, R. L. R., 2012.Business Law Today: The Essentials. 10th

ed. Cengage Learning.

Padhi, K. P., 2012. Legal Aspects of Business. PHI Learning Pvt. Ltd.

Online

Elements of a contract. 2013. [Online]. Available Through:

. [Accessed on 26 August

2013].

Exclusion Clauses. 2013. [Online]. Available Through:

. [Accessed on 22 August 2013].

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Mote, A., 2013. Types of Contracts. [Online]. Available Through:

. [Accessed on 24 August

2013].