BTEC HIGHER NATIONAL(BUSINESS)

Unit 5: Aspect of Contract and Negligence for Business

Centre Name: East End Computing & Business College

Learner's Name: Nayemul Haque Khan
Assessor's Name: Mr Joseph
Date of Submission:13/08/2012

Section: A
Q2:
a) In relation to the law of contract , define an offer:
An offer is a conditional promise made by the offeror to the offeree. The offeror is the
party who makes the offer ; the offeree is the person to whom an offer is made . The offer
is conditional because the offeror will not be bound by the promises unless the offeree
responds to the offer. The Second Re-statement of Contracts defines an offer as " the
manifestation of willingness to enter into a bargain , so made as to justify another person
in understanding that his assent to that bargain is invited " (Wong,2010).
An offer usually includes the following essential terms:
a) The parties involved ;
b) The subject matter ;
c)The time and place for the subject matter to be performed ;
d)The price to be paid .
For example, College A offers to play at college B in football on July 30,2012 at 3.00 p.m.
for the sum of 1000 plus complimentary tickets . College B accepts the offer and signs a
written contract with college A. In this example, an exchange of promises has been made
and the essential terms of parties, time, place, performance

and price

have been

incorporated (Wong,2010) .
Most offers contain a pair of promises- a conditional promise made by one party that is
premised on the second party's promising to do some act in return . This exchange of
promises is categorized as a bilateral contract. When an offer is made by one party to a
proposed contract to the second party to the contract, it creates a power of acceptance
,because if the second party accepts the offer, a contract formed (Wong,2010) .

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b)
1)Explain the specific meaning and effect of a Counter offer .
An offer made in response to an original offer which some changes in the offer thereby
terminating the original offer unless it is mentioned in the counter offer that the original
offer will not be terminated (Richards,2009) .
In the following case we can identify the offer, the counter offer and the acceptance.
Hyde and Wrench(1840):
On 6 June Wrench offered to sell his firm to Hyde for 1,000.Hyde offered to give
Wrench 950 for the purchase of the firm , but Wrench wish to have a few days to
consider . On 27 June Wrench wrote to Hyde starting he was sorry he could not feel
disposal to accept his offer

at present. On the 29 June Hyde

wrote to Wrench:

(Richards,2009) .
I beg to acknowledge the receipt of your letter of the 27 th instant, informing me that you
are not disposed to accept the sum of 950 for your farm at Luddenham. This being the
case I at once agree to the terms on which you offered the farm .viz.1000...by your letter
of the 6th instant. I shall be obliged by your instructing your solicitor to communicate with
me without delay.... (Richards,2009) .
The issue before the court was whether there was a concluded contract between Hyde and
Wrench. The court first had to consider whether Hyde's offer to give Wrench 950 for the
purchase of the farm it amounted to an invitation to treat or a request for information or a
counter offer. The court held that Hyde's ''offer'' was, in fact, a counter offer
(Richards,2009) .
We have seen that a counter offer is a form of conditional acceptance because it contains
different terms from those in the original offer .The effect of this is that a counter offer
destroys the original offer. Therefore, when Hyde offered to buy the farm for 950.he:
1)Rejected the original offer
2)Destroyed the original offer and
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3)Made a new offer

The court then had to decide was whether Hyde's letter to Wrench saying that since 'you
are not disposed to accept the sum of 950 for your farm at Luddenham.....I at once agree
to the terms on which you offered the farm,viz,1000...his letter amounted to an acceptance
or an offer .The court held that Hyde's letter was an offer (Young,2010) .
We saw that Hyde's original letter amounted to a counter offer which destroyed Wrench's
original offer. Since Wrench's original offer no longer exists-it has been destroyed-there is
nothing for Hyde to accept! Therefore, Hyde's second letter is an offer to buy Wrench's
land for1,000.Wrench is then free to accept or reject that new offer (Young,2010) .
2. Explain the specific meaning and effect of a unilateral contract:
A unilateral contract is one in which only one of the parties has a promise outstanding at
the time that the contract is formed. It is distinct from a bilateral contract , in which there
are promises due by both parties at the instant of formation. There can be no such thing as
a ' unilateral ' contract as they word may be understood in a lay sense-a person cannot
contract with himself, and a one-sided promise to another contract law 'unilateral contract
'is a term of art , used to describe a situation in which an offer prescribes that the only way
it may be accepted is by the offeree rendering the very performance that will constitute the
offeree's consideration under the contract. In this way , the act of signifying acceptance is
at the same time the act of performance. The effect of this is that at the instance of
acceptance, the offeree has completed the performance of his side of the transaction, and
the only thing remaining is the offeror's promise of return performance (Reilly,2000) .
For example, an offeror offers to sell her car to the offeree for $5,000 and specifies that the
offer may be accepted only by the offeree handing $5,000 in cash to the offeror . The
payment is both the act of acceptance and the offeree's performance under the contract , so
upon acceptance, the offeree has fully performed and the only thing remaining to be done
under the contract is the performance of the offeror's promise to deliver the car
(Reilly,2000) .
Unilateral contracts are sometimes called 'if 'contracts, in that rather than both parties
committing themselves, one party makes an offer in the form 'if ' you do this ,then i

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promises to do that '. A famous example of a unilateral contracts is called Carlill v

Carbolic Smoke Ball Co(1893), where the company, by its advertisement for its 'smoke
ball' ,was deemed to have made an offer in the form 'if' you use our smoke ball as directed
,and still catch influence ,we will pay you 100'. So, in the problem , Michael is saying 'if
you get your letter of confirmation to me by 11am on Tuesday. I will sell you my car for
20,000.The contract is unilateral in that, although Michael is committing himself to the
sale if Laura does what he has requested, Laura has no obligation . She can supply the
written confirmation if

she wishes, but she is perfectly free to change her mind and do

nothing .In which case Michael will have no claim against her (Stone,2005) .
As it happen, Laura decides to go ahead with the contract and writes and posts the letter of
acceptance is sent in reply to an offer made by letter is that the acceptance takes effect on
posting [Adams v Lindsell (1818)]. This postal rule has no application here, however ,
since the case of Holwell Securities v Hughes (1974) makes it clear that the rule can be
avoided by a specific request for written notice . Moreover , in the context of the unilateral
contract ,the actual delivery of the letter to Michael is of crucial importance (Stone,2005) .
As regards the alternative situation, Laura is in an even stronger position. Revocations of
offers must be communicated to be effective [ (Byrne v Van Tienhoven (1890)] , and so
Michael's letter clearly arrives too late to prevent the contract coming into existence .Once
again, Laura can insist on buying the car at 20,000 (Stone,2005) .

Section-B

Q3:Advise for Amy as to whether she can insist on Ben and Che paying the full amounts
of their initial promises.

The question is concerned with the law of contract , more specifically it is concerned with the
formation of contract. Common law requires that for an agreement to take place amount to a
contract there must be an offer and acceptance consideration and an intention to create legal
relation (Richards,2009) .

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The first issue that needs to be established is whether Amy's offer is a bilateral or a unilateral
offer. A unilateral offer is made when one party promises to pay a sum of money for the act
of the other party and the acceptance of that other offer takes place when the party performs
the act in question( Carlil v Carlrolic Smoke Ball Co[1893]). A bilateral offer however is a
promise in return for a promise and both the parties are immediately bound upon acceptance,
provided there is a consideration and intention to create legal relation. In relation to this
scenario, Amy's offer is a bilateral offer (Klass,2010) .

The next issue to establish is whether the offer has been accepted . According to Treitel, an
acceptance is 'a final qualified expression of assert to all the terms of an offer'. Acceptance
must be mirror image of the offer, if it doesn't match the offer and introduces new terms in
the offer then it is not valid. The general rule is that an acceptance must be communicated to
the offeror but in circumstances such as in this case ,it may take place through conduct.
( Carlil v Carbolic Smoke Ball[1893]). The act of acceptance must be completely performed
for it to be valid.(Daulia v Four Millbank Nominees Ltd[1978]) (Klass,2010) .

The next issue is consideration .In general a promise is not finding unless it is either made in
a dead or supported by some consideration .In a unilateral contract , an agreement by which
one party makes a promise in exchange for the other's performance is consideration or a
promise, while the promise is consideration for the performance (Dunlop v Selfridge[1915])
(Richards,2009) .

It can be concluded that, there were offer, acceptance and agreement among Amy ,Ben and
Che. Amy have fill up requirements of the contract law, so she will get money from Ben and
Che.

Section-C
Q6: In relation to tort of negligence, explain the meaning of 'duty of care'.
The concept of the duty of care defines those persons to another may be liable for his
negligent acts. The traditional approach to defining the situation that give rise to a duty of
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care was based upon a process of piecemeal extension by analogy with existing cases,
rather than on the basis of a general principle. The first notable attempt to elicit a more
principled approach occurred in the landmark case of Donoghue v Stevenson [1932 ] AC
562.There, the plaintiff ,who was given a bottle of ginger beer by friend ,alleged that she
had become ill after drinking it because of the presence of a decomposed snail in the bottle
.As the plaintiff had no contractual relationship with the seller ,since it was her friend who
had purchased it from the shop. She attempted to sue the manufacturer of the beer bottle in
tort (Speaight,2010) .
The House of Lords held that a manufacture of bottled ginger beer did owe the ultimate
purchaser or consumer a legal duty to take responsible care to ensure that it was free from
a defect likely to cause injury to health. Therefore in principle the plaintiff had a cause of
action against the ginger beer's manufacturer. However, the main significance of the case
is contained in Lord Atkin's description of the general concept of the duty of care:
(Speaight,2010) .
'The rule that you are to love your neighbour becomes in law, you must not injure your
neighbour and the lawyer's questions, who is my neighbour? receives a restricted repay.
You must take reasonable care to avoid acts which you can reasonably foresee would be
likely to injure your neighbour. Who, then, in law is my neighbour ? The answer seems to
be-persons who are so closely affected by my act that I ought reasonably to have them in
contemplation as being so affected when I am directing my mind to the acts or omissions
which are called in question' (Speaight,2010) .
The duty of care during negotiations recognises that even in the absence of a concluded
contractual relation , the parties may enter a relation of dependence during negotiations
where the actions of one party may foresee ably cause economic harm to another unless
care is taken . Promises , statements , and conduct may induce the dependent party to act to
his detriment, and where this action was one of reasonable reliance upon the promises,
statement or other conduct, then the law is likely to impose a duty to compensate for the
losses incurred. This duty of care during negotiations fits into the broader scheme of the
law of tort where obligations are owed to prevent harm to the interests of others, but it
receives a specialized articulation in the context of negotiations towards a contract
(Collins,2003) .

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Under the Occupiers' Liability Act 1957, occupiers of premises owe to all lawful visitors to
those premises the common duty of care, in respect of risks relating to the state of the
premises and things done or omitted to be done on them. Premises covers land and
buildings; and are extended to fixed and movable structures, including vessels, vehicles
and aircraft. The common duty of care is a duty to take reasonable care to see that the
visitor will be reasonably safe in using the premises for the purpose for which he is invited
or permitted to be there (Youngs, 1998) .

Section-D
Q7:Advise for Sarah, Ruben and Thomas of claims that they make against the Uffal
Restaurant in Occupiers Liability.

The modern law of negligence was established in Donoghue v Stevenson [1932] AC 562. In
order to be successful in a negligence claim, Sarah, Ruben and Thomas must prove:

1. the defendant owed them a duty of care;

2. the defendant was in breach of that duty;

3. the breach of duty caused damage and;

4. the damage was not too remote.

Duty of care refers to the circumstances and relationships which the law recognises as
giving rise to a legal duty to take care. A failure to take such care can result in the defendant
being liable to pay damages to a party who is injured or suffers loss as a result of their breach
of duty of care. Therefore it is necessary for the claimant to establish that the defendant
owed them a duty of care. The existence of a duty of care depends on the type of loss and
different legal tests apply to different losses. The existence of a duty of care for personal
injury and property damage was originally decided by Lord Aitken's neighbour test from
Donoghue v Stevenson (Andrews, 2011) .

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Caparo Industries Plc v Dickman [1990] 2 AC 605 Lord Bridge's three stage test for
imposing a duty of care, known as the Caparo test:

Under the Caparo test the claimant must establish:

1. That harm was reasonably foreseeable

2. That there was a relationship of proximity

3. That it is fair, just and reasonable to impose a duty of care

Breach of duty may be found to exist where the defendant fails to meet the standard required
by law. Once it has been established that the defendant owed the claimant a duty of care, the
claimant must also demonstrate that the defendant was in breach of duty. The test of breach
of duty is generally objective, however, there may be slight variations to this. Breach of
duty is decided by the objective test ie the defendant is expected to meet the standard of a
reasonable person: Vaughan v Menlove (1837) 3 Bing. N.C. 467 (Andrews, 2011) .

In deciding whether the defendant has acted reasonably or is in breach of duty, the courts
weigh up four factors:

1. Likelihood of harm:
The defendant is not expected to guard against events which cannot be foreseen: Roe v
Minister of Health [1954] 2 WLR 915
2. Seriousness of harm: Paris v Stepney [1951] AC 367
3. Cost of prevention: Latimer v AEC [1953] AC 643

4. Utility of the defendant's conduct: Watt v Hertfordshire [1954] 1 WLR 835

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Remoteness of damage relates to the requirement that the damage must be of a foreseeable
type. In negligence claims, once the claimant has established that the defendant owes them a
duty of care and is in breach of that duty which has caused damage, they must also
demonstrate that the damage was not too remote. Remoteness of damage must also be
applied to claims under the Occupiers Liability Acts and also to nuisance claims.
Remoteness of damage is often viewed as an additional mechanism of controlling tortuous
liability. Not every loss will be recoverable in tort law. Originally a defendant was liable for
all losses which were a direct consequence of the defendant's breach of duty: Re Polemis &
Furness Withy & Company ltd. [1921]3 KB 5 ( www.e-lawresources.co.uk Accessed on
05August 2012)

This was largely considered unfair as a defendant could be liable for damage which was not
foreseeable and therefore could not take steps to prevent it. The direct consequence test was
overruled in the Wagon Mound no 1 [1961] AC 388

and replaced with a new test for

deciding if damages are too remote. Following the Wagon Mound no 1 the test for remoteness
of damage is that damage must be of a kind which was foreseeable. Once damage is of a
kind that is foreseeable the defendant is liable for the full extent of the damage no matter
whether the extent of the damage is foreseeable ( www.e-lawresources.co.uk Accessed on
05August 2012)

There has been some confusion as to whether for remoteness of damage, in addition to being
damage of a type which is foreseeable, the damage must occur in a foreseeable manner. A
final aspect of remoteness of damage is the egg shell (or thin) skull rule. This means a
defendant must take their victim as they find them. I.e. if the victim is particularly vulnerable
or has a pre-existing condition resulting in them suffering greater injury than would be
expected in an ordinary person, the defendant remains responsible for the full extent of the
injury: Smith v Leech Brain [1962] 2 QB 405 ( www.e-lawresources.co.uk Accessed on
05August 2012)

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References:
Andrews, N. (2011) Contract Law (7th edn). Cambridge University Press, London .
Collins, H. (2003) The Law of Contract (4th edn). Cambridge University Press, London .
Klass, G. (2010) Contract Law in the USA (4th edn). Kluwer Law International , USA .
Richards, P. (2009) Law of Contract (9th edn). Pearson Education Limited, England.
Reilly, J. W. (2000) The Language of Real Estate (5th edn). Real Estate Education
Company, Chicago.
Speaight , A. (2010) Architect's Legal Handbook: The Law of Architects (Ninth edn).
USA: Elsevier Ltd.
Stone, R. (2005) Contract Law Q&A (6th edn). Cavendish Publishing Limited , Great Britain.
Wong, G.M (2010) Essentials of Sports Law (4th edn). California: ABC-Clio, LLC.
Youngs, R, (1998) English French & German Comparative Law (2nd edn). Cavendish
Publication Limited, London.
Young, M.(2010) Understanding Contract Law (1st edn). New York: Taylor &Francis
Group.
http://www.e-lawresources.co.uk/

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