Discuss the impact of different types of contract

Higher National Diploma in Business Management
Unit 5: Aspects of Contract and Negligence for Business

Learning and assessment criteria
1 Learning outcome one (L01) – Understand the essential elements of a valid contract in a business context
1.1 explain the importance of the essential elements required for the formation of a valid contract
1.2 discuss the impact of different types of contract
1.3 analyse terms in contracts with reference to their meaning and effect

2 Learning outcome two (L02) – Be able to apply the elements of a contract in business situations
2.1 apply the elements of contract in given business scenarios
2.2 apply the law on terms in different contracts
2.3 evaluate the effect of different terms in given contracts

3 Learning outcome three (L03) – Understand principles of liability in negligence in business activities
3.1 contrast liability in tort with contractual liability
3.2 explain the nature of liability in negligence
3.3 explain how a business can be vicariously liable

4 Learning outcome four (L04) – Be able to apply the principles of liability in negligence in business situations
4.1 apply the elements of the tort of negligence and defences in different business situations
4.2 apply the elements of vicarious liability in given business situations

Task 1
• Time constrained assessment – June 2015
• Learning outcomes – 1.1, 1.2, & 2.1

Task 2
• Individual report – July 2015
• Learning outcomes – 1.3, 2.2, & 2.3

Task 3
• Group seminar and individual report – June 2015
• Learning outcomes – 3.1, 3.2, 3.3, 4.1, & 4.2

Task 2

You are a solicitor working for a firm which provides a series of seminars for clients wanting to set up a business for the first time. Your task is to produce a written report, to be given to each client attending the seminar, setting out in “user friendly” style the principles of law relating to the ‘Terms’ in a contract and ‘Exclusion of Liability’ clauses by answering the following questions:


1. What is the meaning of the following contractual terms? What remedy is available if these terms are broken?
a) Condition
b) Warranty
c) Innominate term

2. What is the meaning of the following contractual terms? What is the result if the terms are put into practice?
a) Force Majeure
b) Price Variation clauses
c) Retention of title clauses
Case Study – Exclusion of Liability Clauses

Peter likes to travel away from home for a weekend fishing with his friends. He arrives at the LeisureLand Hotel, owned by Holiday Professionals Ltd. He has stayed there several times before. His room is not ready so he leaves his bag with the receptionist and is given a ticket of receipt which he puts in his pocket without reading it. The back of the ticket states:
‘All items left at reception at owner’s risk’. [Notice 1]
When Peter returns to the hotel he is informed that his bag has gone missing but that it will be returned to him as soon as it is found.
Peter goes to his bedroom and sees a large notice which states:
‘Holiday Professionals Ltd accepts no responsibility for loss of property or injury to persons, howsoever caused’ [Notice 2]
Peter decides to carry his laptop to dinner in case it is stolen from his room. Unfortunately, on the way, he catches his shoe in a large hole in the stair carpet, and falls down the stairs breaking his arm and damaging his laptop.
Answer the following with respect to Notice 1 and Notice 2 (they are both exclusion clauses), separately:
1. Is the notice a term of the contract?
2. What is the effect on each notice of:
a. The Unfair Contract Terms Act 1977
b. The Unfair Terms in Consumer Contracts Regulations 1999?

Advise Peter whether he can bring a claim in contract against the company for:
a. the loss of his overnight bag, which has not been found, [Notice 1]
b. the damage to his laptop [Notice 2], and
c. the injury to his arm [Notice 2].

Note, to achieve a –
• Pass Grade, you should be able to answer the above.
• Merit Grade, you should, additionally, be able to:
o Show that you have used several sources of information to explain and illustrate the contract terms and their significance
o Explain the effect of the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999 on exemption clauses and give reasons to justify your conclusions
o Demonstrate an effective approach to study and submit the report on the specified date
• Distinction Grade, you should, additionally, be able to:
o Evaluate how well consumers are protected by the law for exemption clauses when dealing with a business
o Solve the contract problem question demonstrating lateral and creative thinking

Task 3

You have been asked to contribute to a seminar about the Law of Tort and the role it plays in business activities. You are part of a team who are identifying and explaining issues about liability based on the law of tort. In each of the four scenarios, below, identify what must be proved to support an action in tort and advise liability in the particular case.

Each member of the team is responsible to present his/her findings and lead the discussion between its members at the seminar about 1 of the 4 scenarios AND each member must contribute to the discussion about all of the scenarios and may be questioned about any of the 4 scenarios. At the end of the seminar you are required to present your findings and hand in a hard copy of the following:
1) Your presentation slides relating to the scenario for which you are leading the discussion at the seminar.
2) Short notes on the content of the other scenarios.
3) Questions for the other members of your team.

Scenario One
John decides to hold a party at the office of his business to celebrate a profitable first year. Ameena, who has not been invited, enters via the back door and when she sees John near her, goes through a door, marked ‘Dangerous Steps’. The door opens inwards and Ameena falls down the steps into the cellar and breaks her wrist and damages a valuable gold bracelet.
Bader is four years old, and wanders away from his parents and trips near a low wall with a sharp edge and receives a severe cut to his head.
Nasser trips on a broken tile in the kitchen and falls into a bucket of bleach and burns his hands and clothing.
Advise John as to any possible claims Ameena, Bader and Nasser may have under the Occupiers’ Liability Acts 1957 and 1984 and the Defective Premises Act 1972.
Can Ameena, Bader, and Nasser bring a claim against John?
1. What must be proved under the Occupiers’ Liability Act 1957?
2. What must be proved under the Occupiers’ Liability Act 1984?
3. What must be proved under the Defective Premises Act 1972?
4. Apply these Acts to what has happened to Ameena, Bader and Nasser.
5. What remedy can each of them claim?

Scenario Two
Ahmed buys a new Fresher brand washing machine and gives it to his brother, Abdulla. Abdulla uses it successfully 5 times, but on the 6th occasion the machine bursts into flames. He manages to put out the fire but the machine is destroyed along with his designer clothes which were in it. The laptop he uses for work which was on the shelf above the washing machine is damaged and because of smoke damage the kitchen needs redecorating.
Advise Abdulla whether he can bring an action in contract, and /or in negligence, and/or under the Consumer Protection Act 1987.
1. Can Abdulla bring a claim based on contract?
2. What must Abdulla prove if he brings a claim based on the tort of Negligence?
3. What does the Consumer Protection Act 1987 provide?
4. What must Abdulla prove to be successful in a claim based on the CPA1987?
5. What are the possible remedies?
6. Would the manufacturer have any defences?
Scenario Three
Renovations Ltd supplies and fits kitchens and bathrooms. Part of the business involves manufacturing its own tiles and furniture. Mary is employed by Renovations Ltd as a wood machinist operating a bench mounted circular saw. Today, while operating the circular saw, Mary caught her hand in the saw and severed 4 fingers. At the time this occurred, she had worked a 12 hour shift and for the last 6 hours of her shift, her supervisor, Saif, asked her to lend her push stick (which she had been instructed to use for feeding small pieces of wood into the machine) to a colleague. She was working to complete an urgent job. Mary admitted that she had been distracted and chatting to a colleague when the accident occurred.
Advise Renovations Ltd as to its liability in negligence, including vicarious liability and whether any defences are available to the company.
1. What is vicarious liability?
2. When is an employer vicariously liable for the actions of its employees?
3. What are the 4 common law duties owed by an employer to its employees?
4. What are the 3 points to be proved in any claim based on negligence?
5. Would Mary be successful in a claim against her employer, Renovations Ltd, and why?
6. What is ‘contributory negligence?
7. Would Renovations Ltd be able to use the defence of ‘contributory negligence’ in any claim by Mary?

Scenario Four
Fast and Co, a firm of accountants and auditors, were engaged to prepare the accounts and balance sheet for Prime Products plc, knowing the accounts were to be sent to Mira, a private investor, who was thinking of buying shares in Prime Products plc. The accounts were negligently prepared and showed the company as financially stable, even though the opposite was true and the company had large unpaid debts. Mira showed the accounts to her friend Amer. Mira bought Dh2million worth of shares and Amer bought DH1million worth of shares. Within 6 months, Prime Products plc went into liquidation and both Mira and Amer lost their investments.
Advise Mira, and Amer whether they are likely to be successful in their claims in negligence against Fast and Co and what defences the company may have.
1. What are the 3 points to be proved in any claim based on negligence?
2. What does ‘pure economic loss’ mean and when can a claim be made for it?
3. What must be proved in a claim for ‘negligent misstatement?
4. Would Mira be successful in a claim for ‘negligent misstatement’ against Fast and Co?
5. Would Amer be successful in a claim for ‘negligent misstatement’ against Fast and Co?
6. Would Fast and co have any defences?
Note, to achieve a –
• Pass Grade, you should be able to answer the above.
• Merit Grade, you should be, additionally, able to:
o Utilise a range of methods of communicating your evidence at the presentation and in the written report to be handed in, including presenting and submitting the work at the specified time
• Distinction Grade, you should be able to:
o Participate in the group discussion with the other group members at the presentation in a coordinated and effective way and show independence in the way you have prepared the full report

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