Aspects of Contract and Negligence for Business Assignment 2

Unit OutcomesInternal Verification First attempt Re-work Understand principles of liability in negligence in business activities LO3 Contrast liability in tort with contractual liabil

BTEC HND IN BUSINESS (Accounting)

ASSIGNMENT COVER SHEET

UNIT TITLE Aspects of Contract and Negligence for Business

ASSIGNMENT NO 2 of 2 (individual report)

SUBMISSION DEADLINE 26 Dec 2013

I, Nguyen Thi Kieu Anh hereby confirm that this assignment is my own work and not copied

or plagiarized from any source I have referenced the sources from which information is obtained by

me for this assignment.

_26 Dec 2013

Signature Date

-FOR OFFICIAL USE (Course Administrator)

Unit Outcomes

Internal Verification

First attempt

Re-work

Understand

principles of

liability in

negligence in

business

activities

LO3

Contrast liability in tort with contractual liability

3.1

Explain the nature of liability in negligence 3.2

Explain how a business can be vicariously liable

3.3

Be able to

apply

principles of

liability in

negligence in

business

situations

LO4

Apply the elements of the tort of negligence and defences in different business situations

4.1

Apply the elements of vicarious liability in given business situations.

4.2

Outcome Evidence for the

Internal Verification

First attempt

Re-work

Assignment

( ) Well-structured; Reference is done properly / should be done (if any)

Overall, you’ve

Areas for improvement:

ASSESSOR SIGNATURE DATE / /

NAME:

(Oral feedback was also provided)

STUDENT SIGNATURE DATE / /

NAME :

FOR INTERNAL USE ONLY

VERIFIED YES NO

DATE :

VERIFIED BY :

NAME :

NEGLIGENCE

Prepared for:

Lecturer, Mr John Andre Aspects of Contract and Negligence for Business

Banking Academy, Hanoi BTEC HND in Business (Finance)

Prepared by:

Nguyễn Thị Kiều Anh - Snow - F05A Registration No: F05-014

No of words: 2563 Submission date: 26 December, 2013

TABLE OF CONTENTS

CONTENTS 7

Task 1: Contrast liability in tort with contractual liability (3.1) 7

Task 2: Explain the nature of liability in negligence (3.2) and apply the elements of the tort of negligence and defences (4.1) 8

1 Duty of care 9

2 Strict liability 10

3 Contributory negligence 11

Task 3: Explain how a business can be vicariously liable (3.3) and apply the elements of vicarious liability (4.2) 11

CONCLUSION 13

REFERENCES 14

INTRODUCTION

In this report, I play role as business consulting firm for Mug-n-Sas, LTD - an electronics retailer in London My responsibility is giving some advices for Honky Uh Now, the CEO of Mug-n-Sas on several legal issues Through analyzing issues related to business law in specific company, readers can understand deeply about liability in tort, contractual liability, tort of negligence and defences as well as principles of vicarious liability and its important roles This report is divided into 3 tasks as follows:

 Task 1: Contrast liability in tort with contractual liability.

 Task 2: Explain the nature of liability in negligence and apply the elements of the tort

of negligence and defences

 Task 3: Explain how a business can be vicariously liable and apply the elements of

vicarious liability

I write this report based on information in the Business Law course book and some reference books, many sources from internet Moreover, many slides which were continuously updated every week by lecturer John also help me collect information, theory, and case study in order

to support applying for situations of Mug-n-Sas Company

CONTENTS Task 1: Contrast liability in tort with contractual liability (3.1)

Before finding out about elements of tort of negligence and defences in business situation, it

is necessary to understand the differences between tortious liability and contractual liability as follows:

Characteristic

s

Tortious liability Contractual liability

Definition

Legal obligation of wrongdoer to a victim as a result of civil wrong, anyone has suffered damages has right claim for compensation which related to personal injury, property damage or economic loss [ CITATION ansnd \l 1033 ]

Legal obligation only exist when two parties bound in the contract,

a party just has right to claim the other for the loss, damage when they has somehow breached the contract [ CITATION ansnd \l 1033 ]

Relationship

between

defendant and

claimant

The defendant may not have any previous transaction or relationship with

the claimant  The third party can

sued or be sued which related directly to the negligence [ CITATION bte09 \l 1033 ]

The defendant and claimant must

be the parties to the contract 

Only parties in the contract can

sue and be sued [ CITATION bte09 \

l 1033 ]

Duty

- Are usually owned to people in

general

- Is fixed by the law [ CITATION Ell09 \l

1033 ]

- Are usually only owed to the

other contracting party

- Based on term in contract

[ CITATION Ell09 \l 1033 ]

Limitations of

actions

Limitation Act 1980

- Claims for negligence: the later of 6

years from the date the damage is suffered

- Claims for personal injury: 3 years

from the date of injury is suffered

[ CITATION Bea13 \l 1033 ]

Limitation Act 1980 claims for

breach of contract

- For a simple contract: 6 years

from the date of the breach

- For a deed: 12 years from the

date of the breach [ CITATION Bea13 \l 1033 ]

 Tortious liability

The case Donoghue v Stevenson [1932] below is an example of liability in tort

The facts: A purchased a dark, opaque bottle of ginger-beer from a retailer and gave it to

B - friend of A B drank some before her friend discovered a decomposed snail in the bottle She sued C, the manufacturer for psychological harm (shock) and gastroenteritis (stomach flu) The manufactures argued that as there was no contract between himself and B, he owned her no duty of care and so was not liable for her

Decision: C was liable to B In supplying polluted ginger-beer in an opaque bottle, the manufacturer must be held to contemplate that the person who drank the contents of the bottle would be affected by the consequences of the manufacturer’s failure to take care to supply his product in a clean bottle

 Manufactures of defective products owed duty of care with end consumer of that product although consumers do not have the contract directly with manufacturer They must to have liability for victim by the law (consumer protection) [ CITATION BPP10 \l 1033 ]

 Contractual liability

The case Carlill v Carbolic Smoke Ball Co [1893] below is an example for contractual

liability

The facts: The defendant, a medicine manufacturer, publishing an advertisments: a reward

£100 to any person stills influenza after using the smoke ball according to printed direction Moreover, £1,000 had been deposited at a bank to show company’s sincerity in this matter The claimant purchased and used the smoke ball as directed but still flu She claimed for £100

Decision: The advertisment of the Carbolic company to the public was an offer and the purchasing and using ‘smoke ball’ of Carlill was acceptance, which formed contract Carbolic Company has to pay £100 for Carill as the contract’s terms

 There is the existence of a contract between customer and company When binding to the contract, customer has right to sue company for not follow what they stated in the contract and company was liable for contract’s terms by compensating £100 for customer

Task 2: Explain the nature of liability in negligence (3.2) and apply the elements of the tort of negligence and defences (4.1)

Negligence is a civil wrong whereby a person or party is in breach of a legal duty of care to

another which results in loss or injury to the claimant [ CITATION dic13 \l 1033 ] There are many elements of negligence such as duty of care, strict liability, contributory negligence….With each element, it has the different nature of liability

To succeed in an action for negligence the claimant must prove 3 things:

- The defendant must owe the claimant a duty of care: the courts will decide whether

defendant owed a duty of care or not by applying some tests such as reasonably foreseeable, proximity, fair, just and reasonable…

- The defendant must breach that duty of care: The claimant must prove the defendant

breach the duty of care

- The failure must cause damage to the claimant: The claimant also has to prove for

the damages they suffered such as personal injury, damage to property, economic loss…[ CITATION Ell09 \l 1033 ]

1 Duty of care

Duty of care is the responsibility or the legal obligation of a person or organization to

avoid acts or omissions (which can be reasonably foreseen) to be likely to cause harm to others [ CITATION bus132 \l 1033 ]

Liability for economic loss

Damages for economic loss are personal injury and damage to property, in which both physical damages to property and economic loss happens by damages to property

[ CITATION Ell09 \l 1033 ]

Figure 1: Negligence and economic loss[ CITATION Ell09 \l 1033 ]

The case Spartan Steel v Martin [1972] illustrated clearly liability for economic loss The

defendants had negligently cut an electric cable, causing a power cut that lasted for 14 hours The claimant sued for:

- Damage to the metal that was in the furnace at the time of the power cut (physical damage to property);

- Loss of the profit that would have been made on the sale of that metal (economic loss arising from damage to property);

- Loss of profit on metal which would have been processed during the time the factory was closed due to the power cut (pure economic loss)

The court held that the first two claims were recoverable but the third was not The defendants owed the claimants a duty to pay for any loss directly arising from such damage but they did not owe them any duty with regard to loss of profit

The duty of care is applied in the case of Paul v Mug-n-Sas, Mug-n-Sas breached the duty

of care when they provided a defective phone for their customers, which caused fatal shock

of Suzi Moreover, Mug-n-Sas can foresee the damage of defective products to the

customers Therefore, Mug-n-Sas owed the duty of care to customers and must have liability for their negligence

Mug-n-Sas must pay £25,000 for funeral because of providing defective phone which

caused death of Suzi The fact is that Mug-n-Sas did not regularly audit the products to catch the manufacturing problem, which lead to defective phone This serious problem will

continue occurring if they still continue ignoring audit Therefore, Mug-n-Sas have to pay

£1 million in exemplary damage for deterring Mug-n-Sas and other company from similar mistakes in the future Paul, husband of Suzi will not win for £1 million which he estimated that his wife would have made over the lifetime plus because Paul does not

suffer the damage, moreover the amount of money Suzi can earn if she alive, it is Suzi’s money, not Paul’s money Therefore, Paul does not have right to claim for that

2 Strict liability

Strict liability is a tort law concept that imposes liability for harm suffered without

requiring proof of negligence Strictly by owning a dangerous animal, an owner may be found liable if that animal ever escapes and causes damage or harm It does not matter if the owner has taken all the typical precautions [ CITATION defnd \l 1033 ]

A defendant who negligently creates or allows the creation of risk of danger may be liable even though a third party’s actions cause that danger to injure the claimant [ CITATION Ell09

\l 1033 ] The case of Haynes v Harwood [1935] is example for strict liability The

defendant left a horse-drawn van unattended in a crowed street The horses bolted when a boy threw a stone at them A police officer tried to stop the horses to save a woman and children who were in the path of the bolting horses The police officer was injured It was held that the defendant owned a duty of care as he had created a source of danger by leaving his horses unattended in a busy street

In the case scenario Apple v Mug-n-Sas, Apple owed a duty of care as they create risk of

danger by carrying nitro-glycerin - an explosive material Therefore, they must be strictly liable for damages that explosive materials caused although damages also derived from

negligence of Mug-n-Sas employee Apple will get nothing from Mug-n-Sas and have to pay £100,000 worth of damage.

3 Contributory negligence

If both the claimant and defendant are found to be negligent, any damages or blame will be divided between them Courts use actual percentages to determine responsibility in contributory negligence cases [ CITATION Ano136 \l 1033 ]

The courts may reject a claim for contributory negligence if the claimant suffered damage whilst engaged in illegally activity [ CITATION BPP10 \l 1033 ] An example of this

case is Ashton v Turner [1981], where both claimant and defendant had taken part in a

burglary The defendant had the job of driving the getaway car, but did it so badly that the claimant was injured The claimant attemped to sue his co-burglar for the injury, but the court held that the defence of illegally could apply to prevent the claim

In the case scenario Tom v Mug-n-Sas, Tom’s claim for contributory negligence because

of the exposed wire is rejected because Tom suffered damages when he do illegal act

(broke into Mug-n-Sas stores in order to steal new Iphone 6) He can foresee risk of danger when he entered through the roof by cutting a hole and climbed down by the rope Tom

will get nothing and must pay £4,000 to replace the TV’s he destroyed and another

£3,000 to repair the roof for Mug-n-Sas

Task 3: Explain how a business can be vicariously liable (3.3) and apply the elements of vicarious liability (4.2)

In order to understand deeply how a business can be vicarious liable, we should find out

differences between employer liability and vicarious liability because there are some

confuses about these two things:

 Employer liability: Employers may be held liable for the health and safety of their

employees while they are at work [ CITATION busnd \l 1033 ] For example, employer will

be liable for employee when they do not provide a safe workplace which cause personal injury to employee while working

 Vicarious liability: imposes responsibility upon employer for the failure or omissions

of employee, provided it can be shown that they took place in the course of their employment [ CITATION acand \l 1033 ] For instance, the employer will be liable for employee’s actions when they injures customer within the course of employment

In order for vicarious liability to apply, the courts must ask two questions:

 Was the person who committed the tort an employee of the defendant?

 Was the tort committed in the course of that person’s employment?

Employers are only liable if the answer to both questions is yes [ CITATION Ell09 \l 1033 ]