LAW504 Consideration according to the legal laws

LO 1. Understand the essential elements of a valid contract in a business context:

1.1              The importance of the essential elements required for the formation of a valid contract:

There is some essential part needed for the formation of a valid contract in the business context. The essential elements are following.

·         Suggestion and approval

·         Consideration by legal laws

·         The capacity of the party to the contract

·         Contract should not be negated

·         Registration and written document

·         Create a Relationship of legitimate prospect.


§  Suggestion and approval:

In the business, all the settlement is explained as suggestion and approval. There should be presence at least two parties. One member of the business suggested to another member, and another member requires approving the suggestion and arranging a new agreement (Friedman, 2011). According to the suggestion, a suggestion is to define as an agreement to do or not something.

§  Consideration according to the legal laws:

Consideration is considered as the movement through fulfilling the suggestion. Every agreement needs consideration, but the consideration must be lawful. Consideration can also explain as an agreement about the price which is paid to the other business partner. Consideration is also defined as the interest or benefit of agreement and the responsibility of the accepted by the other partner. (Hurst, 2004) The person who agreements the suggestion must be supplied in return, e.g. money.

§  The necessity of Contracts:

Many peoples are sensible about the necessity of contracts. The most essential and the best way of making the contract is the mutual understanding of both business partners. It is essential to prove the presence of the contract and define the condition of the agreement.

§  Intention:

The intention is to form for the bound in the contracts of two partners. If one party had been bound in the contract, later the party will avoid the responsibilities. As a result, it shows no legally bound in an indentation.


1.2. The impact of different types of contract:

Contracts are defined as the settlement between the two or more business partners. According to the law, the condition of the agreement is must be a component of legal arrangement (Anon., 1999). It is also known as the exchange of promise. There are different types of contracts, those are following-

§  Bilateral Contracts:

The bilateral contract is a settlement between at least two parties or two groups of the business partners. In this category, most of the personal contracts and business contract fall in this section. Bilateral contracts effects in every life. For example, order a meal at a restaurant, buy from favourite shops or get service from the doctor, in each of these three situations one party promise to pay another party a fixed amount.

§  Unilateral Contracts:

In the unilateral contracts, one business partner requires an action from another business partner in exchange for few promises. The unilateral contract defines one party to make an agreement. In this contract, another person should not engage in the agreement or promise of the contract (Anon., 1999). The example of this contract can be given as follows. Party A is the assurance to pay a reward to B-party by the exchange of lost things of party A. In this circumstance party A is the assurance to pay a reward to party B but party B is not engaged in this contract. Party B is not given any penalty if he or she fails to find it but if party b is found the hidden things party, A have to give a reward to the party B.

Few measures requireimposing a unilateral or bilateral contract in court. It is required to establish in every circumstance:

•           The contract was fragmented.

•           The contract presence.

•           Distress from a loss

The contract which works best:

In the court, both bilateral and unilateral contracts are enforced here. When someone decided to fulfil the promise by the promisor, then a unilateral contract is enforceable. The bilateral contract is enforceable from the both partners is assured the promise.


1.3.      Analyse of the terms in contracts concerning their meaning and effect:

A contract is a written agreement between two business partners to give a service or a product. One partner will make several assurances to encourage to another partner before entering into a contract (Mann & Roberts, 2012). Later, a conflict may arise for a part of the agreement. There may be a time period when assurance by one partner should not in the contract which is assured by another partner. When one party enters into a settlement, they optimise particular terms. The contractual terms may be implicit or expressed. In agreement, all these terms can play a vital role. These all matters are essential in the agreement.The terms of the contracts decide according to the consideration, settlement and various materials details.

LO 2: able to apply the element of a contract in a business situation:

2.1. Apply the elements of the contract in given business scenario:

The knowledge of norms is required to understanding and gathered knowledge about the principle, usages and rules of the contracts are essential for the operation and dealing (McMains & Mullins, 2014). Now at a time we must have a clear understanding assumed and concept of contract law, in the business context which falls under the preview of contract.

In this section, we will be discussed about the essential component that is needed for the build a valid contracts. If any agreement or dealing is going to set, then it is essential to agreement between the parties is set by the enforceable law of business (Mann & Roberts, 2012). It is also an important component that all contracts are being the agreement, but all agreement is not being a contract. For example, operating with the purchasing of a drug is not comes under the grasp law, and also it does not come under the contract. But the purchasing of any other goods such as laptops, books, etc. are included in the law and also it is included in contracts.

The agreement of a contract between parties has followed some conditions. The conditions are described below-

•           The agreement must be in written in a form, and it is included in the contracts by the website and electronic methods.

•           The act helps to understand behave and conductor inference.

•           Using all, verbally or any of the previous mentions processes.

An essential component of a valid contract:

The following conditions can fulfil the agreement becomes contracts-

•           The capacity of the parties.

•           The aim of the agreement must be according to the lawful.

•           Agreement of the parties is free.

•           The consideration is presence according to the lawful in the contract.

•           Offer and acceptance.

•           If in the contract not declare according to the law, might that agreement is considered as invalid.

From the above section, the law may need the following points for the contracts-

•           In written

•           Certainty of the contract

•           Performance possibility.

In the particular subject the first principle, terms and conditions, are enforceable towards the contracts and both parties are agreed with this. Few examples are like the employment contract, immovable property, the sales of moveable property, etc.

Moreover, it can be categories in an essential component of a valid business contract by four important categories-

•           Consideration: Engagement and the validity of a valid contract are depending on the review (Owen, 2014). The transaction in the form of service is must happen, and it must be remembered that the particular subject matter which can vary by the different contracts case.

•           Agreement: In the every contract it is essential to have two parties in the agreement, where one party recommended a strong proposal and another party should accept the proposal.

•           The intention of Creating Legal Relationship: In a contract when everything is related to legitimate objectives and legal between two parties then it is considered as a valid contract.

•           The capability of the engaged parties: A capacity of engaged parties is leading to any contract. The creation of legal prevention is according to mentally disorder persons and infants.

The most important and the fundamental component of a valid contract take some issues into consideration in a contract-

•           Written: In a written contract the enforcement of a contract is easier than any other components.

•           Certainty: In a valid contract the particular subject matter, precise and certain is considered.

•           Free consent of the parties: The free agreement of the parties is an essential component for the validity of a contract.

The fundamental duty of a seller is to distribute the goods according to the contract term. According to the Sale of the good act, 1979 it is said that if a seller does not deliver as the manner that according to the requirement of contract then he will be considered under the rupture of the contract (Ng, et al., 2013).

In this section, the particular business scenario, Todor already sell the HND law book to the Carl. But he is forgotten to remove from the display, and it was the last copy of this book. Ivan insists that he want to buy this book. In this situation, if Todor interrupts the contract and resells the book to Ivan then Todor suffer from a serious outcome. In this situation, the remedies are available in the Act. According to the Act, the consequences are it either the contract is being a premature end or compensation for the contract.

Moreover, further rights for the customer protection are included in the Sale and Supply of Goods to Consumer Regulations 2002.

2.2. Apply the law on terms in different contracts:

There are many laws that can appear in a business such as business to customer, business to business. The term of contract defines the portion of the contract in any settlement. Every term provides a contractual responsibility. The contract can be different types of terms such as written, oral. Essential terms in contracts are the condition, warranties and innominate term (Ng, et al., 2013). Terms of contracts can be categorised as either warranties or conditions. The innominate term helps to understand which term are warranties and which term are conditions.  The condition is the more important than warranties in the contracts.

•           A condition:

A condition is an essential part of the contract which defines the depth of the contracts. If a situation is penetrated, the authorised party is labelled to dismiss the contract and allegation for the damages. Without any condition, one or another party cannot enter into the contract. 

•           Warranties:

Warranties are less important than the condition in the contracts. It is not a fundamental to the presence of the contracts. If a warranty is ruptured, the authorised party may elect damages but cannot claim at the end of the contract.

•           Innominate terms:

The innominate term is used to indicate the term is either condition or warranties. It is explained that the impact of a question and gap whether the legitimate party to ensure the overall advantages of disadvantaged of substantially at the end of the contracts.


2.3. Evaluate the effects of different terms in given contracts:

This section is an agreement of contractual that specifying the limitation of the party or prohibiting of them from the liability. The misuse of the liability can cause the disadvantage of the party (Anon., 1996). Moreover, an important change can create not only a fairer law but also limitation of the use of sections.

Kinds of Exemption clauses:

There are two types of exemption clauses-

•           Exclusion clause: In this clause, there are no needs to take any liability for the party.

•           Limitation Clause: In this clause, there is one party can apply the limitation of the liability.

The exemption clause does not depend on the court, and it is enforceable. Before deciding the enforcement of clause, the court will consider few stages.

In the contract, the inclusion clause is described by the term ‘incorporation'. In the situation, for the decision of exempted clause consideration is the only factor where the exemption exists within the contract or not.

In this respect, we describing three situations with reference-

•           Second party must be well known about the terms of exemption clause- Thornton v Shoe-lane parking case. (1971)

•           The exemption clause is encompassed by too late terms- Olley v Marlborough Court case (1949)

•           For take the liability, the defendants must be comprised of themselves- Hollier v Rambler Motors (1972)

Interpretation: Interpretation is used for the assess liability by the court. The legal description of exemption clause is same as well as the “construction”.

Fairness in Contracts: For the considering of liability the court has analysed the balance for the review of the contract. The general review of the court is that exclusion clauses are unfair and as a result of that they have a limitation in the application ( Miller & Cross, 2012). The court interprets the clause against the party when the party is trying to depend on it. Simultaneously, the court is tried to understand it hardly.

The parties will bind by the exclusion clause when the parties signed the contractual document. Though, in the case of an unsigned document, the court will indicate the person who is behind this and on whom the exclusion clause of a document depends. From this situation, another party must be informed about the exclusion clause.

LO 3: Principles of liability in negligence in business activities

3.1. Contracts liability in tort with contractual liability:

The tort law is used in such circumstances where another party damages one party. Tort law covers the contravention where the party abuse another party intentionally.  One party who deals a contract with another party is responsible for the contractual liability (Anon., 1996). If a contract for business settled, it is essential to maintain the contract according to law. If the parties eliminate the provision, it would be conflicting to the unfair contractual term. If one party confronts contractual liability, they must be established a contractual relation between the sort of contractual term or contractual promise. The tort liability can arise if one party or customer harm for another party's negligent. This precedent creates a situation where there was no contractual relationship with the third party, and they can investigate the allegation in tort against the person. In tort, some dispute may be generated to the allegation. The contract liability prevents the contract when a damage arises for which the party assume to express or implied liability in a written agreement.

3.2. The nature of Liability in Negligence:

In the law of business, the negligence defined as the breach of duty which results the loss or damage to the party (Johnson, 2005). Negligence consist of a reasonable, ordinary and prudent party might not do or don't accomplishment by considering the situation, circumstances and the judgement of the parties are included. In the tort liability, the parties designate to allegation for the damage in the court. For the successful order of negligence allegation, the parties have to prove the following things-

•           A duty of care has to be owned by the suspect.

•           Damage can be arising from the cause of the breach of duty.

•           In the breach of duty, the suspect is there.

•           Not too much unapproachable the damage.

The duty of care:

According to the types of loss, the legal test for the claim of duty of care can be varied. The types of loss are following-

•           The Caparo test can be applied for the personal harm and property.

•           The Alcock test can be used for the psychiatric.

•           The policy is considered in this section.

•           The duty of care can be varied for the pure economic loss.

Breach of duty:

If the suspect is in breach of duty the aim of the objective test is applied to specify.


‘But for' test is applied for the taking the decision of causation.

Damage remoteness:

The test is providing the matter which is for the suspect is an only response for the loss or damage which is calculable. If the damage was a calculable type, the suspect is responsible for the full expansion of the damage or loss even if the damage or loss was more than the expected. Then the damage remoteness will be further explained.

3.3. How a business can be vicariously liable:

Vicarious liability defines the situation when one party is liable for the action of lawful of a third party. The third party carries the liability of own share. Vicious liability leads to the situation of taking responsibility of a third party (Griffith, 2005). It can arise when the third party is responsible and carry the negligent. It controls the exercise and responsibility. It can be known as the imputed liability. It is a legal approach that authorised liability to the party who is not responsible for the damage but the party who is responsible for the damage, has the legal relationship with the third party. Vicariously liability is maintained by the tort law. It is the concern with allegation between the individual party and another party and it is controlled in a civil court. There is some situation in which another person vicariously liable for the tort (Rousseau, 1995).

•           A principle-agent relationship is a presence in the business. If the agent of A is B, the both party might be liable for the torturous act for the party A.

•           An existing business has both two sides – employees and the employers. These two poles in any business organisation develop an employee-employer relationship. Therefore, the liability of any organisation is distributed among all the individuals associated with the business.  Though the responsibilities are distributed, the employees have to bear relatively lesser responsibility.

•           If both party A and B is the partner of the business, then the liability of tort is directly responsible for the promises in the process of business.

LO 4: Able to apply principles of liability in negligence in a business situation:

4.1. Apply the elements of the tort of negligence and defences in a different business situation:

The conditions of the liability are satisfied when a person or a party might be liable for any kinds of tort. In the various business cases, the important component of negligence is considered as a defence and a part can be used in the appropriate places.

Negligence as components:

In the imposing business practices, it is the responsibility of the both accumulating to act, and it continues very carefully and suitably. In this way, the party can be detained the risk of any harm when the types of standard judgement on litigant exists (Mann & Roberts, 2011). In this method, for any authentic disagreement of obligation or any types of disaster depreciate by the accumulating over the unconcerned demonstration. The elimination of the other the offended party has the capability to search for the help and harms for such quick act seriously.

Contributory negligence:

For the negligence act, this section is a superior defence. Contributory negligence is defined as if due to any negligence of defendant can happen any breach, accident or damage and also for the requirement of normal care by the complainant.

In our particular case study, David was driving 35 MPH in 25 MPH zone. There were children are playing. Kevin, a nine years old child who is chasing the soccer ball in the street and there also had a telephone pole. David wants to save Kevin and hits the telephone pole. He was extremely and permanently injured. For the hit of the David, the telephone pole break into two pieces and Kevin also hurt by this. In this situation, we can say that David is the responsible for this accident and also he is liable for his negligent behaviour. 

4.2. Apply the elements of vicarious liability in given business situation:

When such a situation occurs that someone is detained liable for the wrong responsibility or any blunders of another party, then it is a very typical case. Though, on the ground of business, the business organisation is responsible for the performances of its employees at the time of occupancy of engagement with the particular organisation. (Vaughan, 1982)The business organisation is also responsible for the illegal activities of another party in the vicariously liable.

In this case study, Colin is the head Chef of the Regent Hotel, and Roger works in this hotel as a dishwasher. Colin is unhappy for Roger's attitude and anger. One day Colin unconsciously knocks Roger with a flying pan and Roger is injured by this, and he was rejectedto go to a hospital. Under this circumstance, there is an illegal activity against Colin that he has injured Roger. Colin is not intentionally hurt Roger. He did this activity by his negligence and lack of usual care. It is a case of contributory negligence. 

You may also like Format Of Law Case Study Analysis


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McMains, M. J. & Mullins, W. C., 2014. Crisis Negotiations: Managing Critical Incidents and Hostage Situations in Law Enforcement and Corrections. reprint, revised ed. Abingdon-on-Thames: Routledge.

Ng, I. C., Ding, D. X. & Yip, N., 2013. Industrial Marketing Management. Outcome-based contracts as new business model: The role of partnership and value-driven relational assets, 42(5), pp. 730-743.

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Rousseau, D., 1995. Psychological Contracts in Organizations. california: SAGE Publications.

Vaughan, D., 1982. Toward Understanding Unlawful Organizational Behavior. jstor, 80(7), pp. 1377-1402.


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