Tort Promise Agreement | Free Tort Law Essay

Contract and Tort Laws: Application

a)

An offer is a proposal or promise by one party (the Offeror) to enter into a contract, on a particular set of terms, with the intention of being bound as soon as the party to whom the promise is made (the Offeree) signifies his acceptance. An offer may be made either to an individual person, or to a particular group of people, or it may be made to the general public. An offer may be written, spoken or implied by conduct; it may be made with varying degrees of complexity. During the bargaining process, there may be a series of communications between the parties as they move towards a final agreement, and it may be difficult to state with confidence whether a particular statement was an offer, or whether it was part of continuing negotiations between the parties. A possible test which can be applied is to ask whether further bargaining was still expected or whether the statement shows a clear willingness to be bound if the other party assents. This test, although valid, is probably simpler to state than it is to apply, and the cases on this subject are not always easy to reconcile.

The nature of Ali's Advertisement is an Offer.

Generally the rule is, any goods or services advertised in a news paper or magazine; are regarded as an ‘Invitation to treat' not an ‘Offer'. For an example, Newspaper Advert, ‘Bramblefinch cocks, bramblefinch hens, 25s each.' – Patridge V Crittenden [1968]. This rule may prevail, even when the word ‘Offer' is used. [Spencer V Harding (1870)].

The reasons are_

  • Further negotiations are normally intended or expected.
  • It is said that, if displays or advertisements were offers, then vendors would be deprived of their freedom not to deal with a particular customer and this contradicts the idea that, a shop is place for bargain, not for compulsory sale.
  • It is said that, if display or advertisements were offers, it might oblige the vendor to supply goods or services to every one, who accepts; even if the vendor runs out of stock.

But there is an exception of Invitation to treat in Ali's advertisement. As in the cases such as Carlill V Carbolic Smoke Ball - where indication of no further negotiations were either expected or intended.

There are number of indications in the Ali's Advertisement that can substantially lead to recognize as it is an offer not an Invitation to treat-

  • The advertisement contains very specific terms.
  • The words “a Bell supreme: £500 cash...This is a serious offer” leave no scope for further negotiation.
  • The advertisement confines the total number of possible acceptances to one.

b)

Bob has actually entered into a binding contract with Ali.

In response to Ali's Advertisement, Bob sent his acceptance of the offer by post in due time before the offer ends.

The ‘Postal Rule' implies that, where use of the ordinary postal system is the normal, anticipated or agreed means of accepting, then the contract is formed at the time the letter of acceptance is posted, not when it is received. [Adams V lindsell (1818)] The rule applies even if the letter is never received. [Household Fire Insurance V Grant (1879)] The offeror cannot revoke his offer after the offeree's acceptance is posted even though he has not yet received it. [Byrne v. Van Tienhoven (1880)]

Therefore, a valid contract has been formed between Bob and Ali.

c)

Cindy has no right to take any action regarding Ali's (offeror) rejection to sell the item, he had advertised for. Because, no contract has been formed.

The reason is, there will be a only a contract, where there is_

An agreement – based on mutuality.

Consideration – meaning both sides are bound to exchange something with each other.

Intention – to be legally bound by the terms of the agreement.

Cindy's offer of £500 check for the item as advertised by Ali, is a counter offer. Because, it is clearly stated in the advert that, the mode of payment is only cash, “a Bell Supreme:500 cash”. Since, a counter offer amounts to a rejection of the original offer. [Hyde v Wrench(1840)].Thus, no valid contract has been made. Ali's rejection of accepting £500 check is well bound with the original offer.

Therefore, the case is unenforceable and Cindy cannot pursue to take any action against Ali.

d)

The offer made by Den in an accord to Ali's advert is a counter offer. Because, Den's pleading to Ali to keep the offer alive till Monday; actually invalids the term of the original offer which states,”…who accepts it on Saturday – valid for one day only”. Thus, the original offer has lost its applicability in this case. [Hyde v Wrench(1840)].

But as Ali has agreed to Den's Offer to keep the offer open till Monday, a new agreement has been evolved, apart from the original one. Also Den paid £50 pound towards the actual price (£500) and promised to pay the rest on Monday. Ali agreed subsequently. A collateral contract has been formed. A promise which is not a term of principle contract could possibly be enforced as a collateral contract.

In Evans V Andrea Merzairo [1976] 1 WLR 1078, Lord Denning MR, stated while explain the use for a collateral contract_

“When a person gives a promise or an assurance to another, intending that he/she should act on it by entering into a contract, and he does the act on it by entering into the contract, we hold that it is binding…”

But on Monday Ali refused to sell the item to Den, thus breaching the contract. Subsequently, Den went to another computer shop and bought the same item paying £800.

Since there was agreement backed by consideration (Payment) to keep the offer open until Monday, Ali is in the breach of this collateral contract. Taken this into account, Den can sue Ali for damages for the breach of collateral contract.

Moreover, Den (the claimant) can seek compensation for the ‘Incidental Loss'- that he incurred by buying the same item at higher price (£800) from another shop because of the breach of contract by Ali.

e)

Eva offered Ali £600 for the computer on Saturday to be paid on Monday, Ali agreed to the offer. Thus a contract had been formed. But on Monday, Eva phoned Ali saying, she did not want to buy the computer as she promised earlier. There was an actual breach of the contract by Eva.

Damages for breach of contract- sometimes losses will be viewed as too remote to be recoverable, sometimes there will not be a sufficiently strong casual connection between the breach and the loss, the claimant may have failed to mitigate his loss  or he may have suffered loss partly as a result of his own fault. Remoteness, causation, mitigation and contributory negligence are methods by which damages may be limited.

The general rule is stated by Parke B (at 855) in Robinson v. Harman (1848): ‘the rule of the common law is, that where a party sustains loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed' (emphasis added). Thus, the relevant ‘loss' is of the claimant's expectation of gain generated by the contract and lost by the breach.

Ali can sue Eva for ‘Nominal Damage' occurred for the breach of contract. Nominal damage implies, if the claimant has suffered no recognized loss from the breach, he will not receive substantial damages; he will only be awarded nominal damages.

Answer to the Question 2:

The basis of liability in tort is quite difficult to grasp, but as people live together in society, the behaviour of one person is quite likely to cause harm or loss, or threaten to cause harm or loss to the interests of another.

The rules of the law of tort determine when one person can be compensated for the behaviour of another, or when he can prevent that behaviour from occurring.

The law of tort is limited in its scope, in that for every wrong that is done, there is not necessarily a remedy. New torts do evolve from time to time, but to succeed in an action, a claimant must be able to prove that the defendant's behaviour falls into a category specifically covered by the law of tort.

These specified situations are then given identifying names as separate torts. So, there is a tort of negligence, a tort of nuisance, a tort of trespass, a tort of defamation, and so on.

Rules designed to compensate claimants under the law of tort have a long established history. The earliest torts usually gave protection in respect of injury to the person or to property, under the law of trespass, where the acts complained of were direct. As the law of tort developed, it began to give protection against less direct forms of harm, and rules evolved about negligence and the protection of economic interests.

Negligence as a tort can be defined as breach of a duty owed to the claimant to take reasonable care, which results in damage of the right, which is not too remote. It is usual to break down this definition into the concepts of duty, breach and damage, and consider them separately. In one sense, this is artificial, as they tend to overlap with each other. So, for example, in some cases, it may be difficult to say whether an action fails because no duty was owed, or because the damage caused was too remote. The argument can seem to become circular.

For an action for negligence to succeed, the claimant must provide that –

  • A duty of care was owed to him by the defendant.
  • There was a breach of that due to negligence; and
  • The resulting damage was principally caused by negligence.

Law deals with the first criteria. The latter ones are matter of fact.

The claimant must have to show that the defendant has been negligent, when it comes to Breach of duty. Some criteria must be taken into account when establishing proof on Breach of duty_

  • The defendant is a reasonable man.
  • There is no negligence if reasonable precautions have been taken. (Bolton V Stone)
  • The courts do take surrounding circumstances into the account (Paris V Stepney Council)
  • It is not necessary to show negligence of res ipsa loquitur (it speaks for itself) applies. (Byrne V Boadle)

In the first case, Mary's loosing the chance of employment in Comfort House due to the wrong referral by her former employee Barnet Hospital, is a breach of duty of care as negligence. Due to this, Mary could not get the job.

In Hedley Byrne v Heller [1963], the House of Lords held that in the appropriate circumstances there could be a duty to take reasonable care in giving information. There appeared to be three requirements: (a) the claimant relied on the defendant's skill and judgment or his ability to make careful enquiry; (b) the defendant knew, or ought reasonably to have known, that the claimant was relying on him; and (c) it was reasonable in the circumstances for the claimant to rely on the defendant. Relevant cases include: Smith v Eric Bush [1989] and Caparo Industries v Dickman [1990].

In some circumstances a negligent statement made by A to B and acted upon by, causing financial loss to C. The classic example is a reference given by A to B about C, normally for employment purposes. Spring v Guardian Assurance [1994].

However, Remoteness of the Damage in negligence can become very confusing, particularly at this point, where the word "remoteness" can be used in a number of different ways. Sometimes, an action could not succeed as the harm was too remote, in that it consisted only of pure economic loss. This effectively means that no duty was owed.

Here remoteness is concerned with the meaning that the harm caused, occurred in an unusual way, or is not of the type which could be anticipated in the circumstances, or is far more excessive than could reasonably be anticipated.

The rules of remoteness establish the "cut off" point, to determine for which harm the defendant must compensate the claimant.

A court could take the view that the defendant should be liable for all the direct consequences of his negligent actions, however extraordinary they may be. Or the court could say that a negligent defendant will only be liable for such consequences of his actions as could be reasonably foreseen.

Here in Mary's case, the negligence of her former employer as providing wrong referral to the prospective employer by mistaking surname of the other employee is totally unprecedented. It is too remote for the damage; Mary suffered, to be established as the direct consequence of deliberate negligence.

In the light of above discussion, it is advised to Mary that, she can't take any legal action against her former employee.

In the Second case, Mary brought shares of a primary school following the advice of her friend Joe, an investment advisor. But the share price fell dramatically after an allegation against the directors of the school.

Hedley Byrne V Heller & Partners [1963] established that a professional person owes a duty of care to any person he knew or reasonably ought to have known would rely on his professional statement.

Damage can be caused by negligent acts and negligent statements. So long as the damage is physical harm to the person or property, the claimant will be able to sue.

For the damage principally caused by the professional person's negligence must be a financial loss.

If the statement was made negligently, and did not induce a contract between the claimant and the defendant, the claimant may be able to sue under common law principles developed in tort following Hedley Byrne v Heller & Partners Ltd [1963]

Before a claimant can succeed under these principles, he must be able to show that there is a special relationship with the defendant. This is now likely to be described as a sufficiently proximate relationship with the defendant.

This means that the defendant:

  • Knew or ought to have known that the claimant was trusting him;
  • And was going to rely on what he said;
  • And it was reasonable in the circumstances for him to do so.

Because it is a feature of establishing the duty that it must be clear that it was reasonable for the claimant to rely on the statement, it follows that the court is not likely to allow a claimant to succeed if he asks for professional advice in an informal way at a social gathering. In the case Mary sought the advice from Joe in a much informal occasion and place, probably in a bar or pub.

Moreover, the loss of Mary is not the direct consequence of the negligence. The accident, fall of share price, due to the allegations against the directors for fraud and bribery, when it was revealed.

The incident was too remote to foresee at the time of negligence, as when Joe advised Mary to buy the shares.

In the light of above discussions, it is assumed that Mary cannot take any legal action against Joe.

In the Third case, Mary bought share of MGS.com following the recommendation on investment in an internet article, written by Thomas, an investment specialist and well known in TV and as a successful investor. But the after six months Mary found the investment worthless.

The Caparo case shows that it is crucial for the defendant to know the purpose for which the information is required. Caparo bought a company on the basis of audited accounts which were misleading and inaccurate. He received the audited accounts as an ordinary shareholder of the company. When the company failed, he attempted to sue the auditors, on the basis that they owed a duty to him when making statements. His action failed on the grounds that the accounts were prepared and circulated to shareholders to allow better management of the company, not to permit shareholders to make investment decisions.Caparo Industries plc V Dickman [1990].

Unlike the Caparo Case, here the information on investment was directly made to the prospective investors like Mary as recommended by a proclaimed investor and specialist, Thosmas, in an article.

The financial loss of Mary is a direct consequence by following the recommendation, which lacks of mentioning the volatile nature of investment in online companies. In that sense, the damage is foreseeable and not too remote.

Mary can take legal action against Thomas in the above perspective due to breach of duty of care by a professional, thus leading to negligence.

References and Bibliography:

  • Adams, J and Brownsword, R. (2007).”Understanding Contract Law”, 5Rev Ed edition, Sweet & Maxwell
  • Cooke, J(2007), “Law of Tort”,8th edition, Longman
  • Elliot, C. and Quinn F. (2005), “Tort Law”, 5th edition, Longman
  • http://www.lawteacher.net/contract.htm - accessed on 30, November, 2007
  • http://www.lawteacher.net/tort.htm - accessed on 02, December, 2007
  • Law of Contract, Lecture Handout: Session 2
  • Tort of Negligence, Lecture Handout.
  • Turner, C(2003), “Contract Law”, Hodder & Stoughton


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