Contract
A business is governed by various laws, based on its type of work, the locality and numerous other factors. However, there are a few laws, which are common to each and every kind of business, and one of such laws is the Contract Law. Contract law dictates the manner in which a contract is formed, along with the various other aspects of it. The following parts contain a detail of these very aspects of the contract law. Negligence is another law applicable on business and so, the discussion would also touch the tort law. Along with this, an elucidation of the tests, which are used to determine the employment status of an individual, has also been done.
When a promise is made between two or more than two parties, to do or to refrain from carrying on certain activities, for a consideration, a contract is formed. A contract can be of two forms, verbal or written. In the former, the contracting terms are mutually discussed in a verbal manner. However, in the latter, these terms are discussed and put on a document, which is later on signed by the parties to such a contract (Elliot, 2011).
To form a contract, there are three vital ingredients, and these include the agreement, covering the offer and acceptance part, the consideration and the intention to form legal relationship (Andrews, 2015). To begin any contract, there has to be an offer. The offer has to be differentiated from the invitation to treat. The offer shows the intention to enter into legal relations and the willingness to enter into the contract. Alternatively, the invitation to treat represents the willingness to begin the negotiations on a particular deal (Abbott, Pendlebury and Wardman, 2007). The advertisements which are given in newspapers or in the magazines are generally considered as an invitation to treat. And in such cases, the advertising party is not required to go through with the sale, as was seen in the case of Partridge v Crittenden [1968] 1 WLR 1204 (Swarb, 2016).
However, there are cases where the advertisements can be taken as an offer and a prime example of this is the case of Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256. This is because in this case, a unilateral offer was made, which could be accepted by anyone from the general public. In this case, the consideration was the award of £100 payable to Mrs. Carlill, as she contracted flu even when she used the smoked ball which was claimed to be the cure for influenza. This consideration would be deemed to be an executed one, as for an executed consideration, the act is carried out at the time of contract and the performance is necessary for forming the contract. Here, by smoking the ball, Mrs. Carlill performed her part of the contract, which affirms the consideration being an executed one (British and Irish Legal Information Institute, 2017a).
The next essential element relates to the acceptance being attained on the offer that was made (Paterson, Robertson and Duke, 2012). The offer has to be accepted as it was made, and if there is any change or modification in the terms of offer, it is not deemed as an acceptance, and instead is treated as a counter offer. The prime case in this regard is the case of Hyde v. Wrench (1840) 3 Beav 334 (Marson and Ferris, 2015).
Neighbor Principle
The next element relates to the consideration. Without a consideration, a contract is invalid. Moreover, the consideration has to be adequate and sufficient. A past consideration is not sufficient (Treitel and Peel, 2015). Consideration can be any value or thing which has certain economic value. In the case of Chappell and Co Ltd v Nestle Co Ltd [1960] AC 87, the judges considered that the three wrappers were valid consideration (E-Law Resources, 2017a). The parties should also have the intention of entering into legal relationships. The intention of the parties cannot be assumed, unless there is clear evidence which can prove the contrary, as was held in Balfour v Balfour [1919] 2 KB 571 (E-Law Resources, 2017b).
Apart from these three essentials, there are certain other elements which have to be present in a contract, for it to be legal. The parties to the contract should have the contractual capacity to enter into legal relations. In other words, they should be of sound mind and legal age. The terms of the contract should also be clear to the parties (Mulcahy, 2008). Lastly, the parties should freely consent to the contract. Only when all these elements are present in a contract, can a legally binding contract be formed. Upon formation of a contract, legal relations are established. In case one of the parties fails to perform the contract, the aggrieved party can claim for a breach of contract (Latimer, 2012).
Negligence is a part of tort law. When a duty of care, which one person owes towards another person, is breached by the person, who owed this duty, and the result of such breach is harm, loss or injury to the other person, it is the case of negligence (Emanuel and Emanuel, 2008). To establish a case of negligence, it has to be shown that there was a duty of care present, this duty was breached, and the result was loss or harm. There also has to be foreseeability and causation in the negligence, and the loss cannot be remote. In case negligence is established, the injured party can claim for damages from the party who breached their duty of care (Greene, 2013).
A momentous case with regard to negligence, which is quoted every time negligence is quoted, is the case of Donoghue v Stevenson [1932] UKHL 100, otherwise known as the Snail in the bottle case. In the quoted case, Donoghue consumed the ginger beer from the bottle manufactured by Stevenson, while she was sitting at a café in the Snail in the bottle case. A dead snail was found in the bottle, which made her sick and as a result of this, she sued the manufacturer of the ginger bottle beer, i.e., Stevenson for negligence. It was held by the Court that Stevenson owed a duty of care towards its consumers and the snail was a sheer breach of this duty. The claim by Donoghue was held to be a successful one and this case became significant for the neighbor test it put forward (British and Irish Legal Information Institute, 2017b).
Tests to Determine the Employment Status
This case presented the neighbor principle. The judge held that the individuals had to take reasonable care in avoiding the acts which are reasonably foreseeable and which could injure the neighbor. The question was asked, regarding who is a person’s neighbor. The answer to this question was any such individual, who is close and who is directly affected by the acts of some other person, which the other person should have contemplated, would be a neighbor. This principle helped in various cases, to establish if the duty or care was owed in case of negligence, towards a particular person.
The neighbor principle opened the channel gates for the claims of negligence for the injured parties, as it identified the people who might owe a duty of care to some other party, under particular circumstances. These people include the ones, who are close enough and can be directly impacted due to the negligent acts of the other person. This is one of the cases which led to the elements of foreseeability and causation for establishing the negligence in any case.
For determining the status of an individual as employed or self-employed, the common law presents certain tests. According to the tradition test, also known as the control test, presented in the case of Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73, the right of exercising control, instead of the manner in which the control is exercised over the individual, determines the employment status. So, if an individual has the right to exercise control over the individual, the latter individual would be an employee (Australasian Legal Information Institute, 2017).
Another test in this regard is the integration test. Under this test, the degree to which the individual is integrated in the business of some other individual determines if the person is employed or self-employed. Wearing the uniform provided by the company makes the individual an employee of the company. Also, the display or signs on the vehicle would show the presence of the relationship of an employer and an employee. Even though these two tests are not opted on standalone basis, they are still quite vital (Marshall, 2006).
The last and the most conclusive test to determine the employment status of an individual is the multiple indicia test, which was initially formulated in the case of Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1, and was later on confirmed in Hollis v Vabu Pty Limited (2001) 207 CLR 21. The rationale behind giving this test by the High Court was that the control test could not be regarded solely as the factor relevant to determine the status of an individual and so, there was a need to see the relationship in entirety (Find Law, 2017).
The multiple indicia test dictates that all the situations and circumstances which encompass the employment of an individual had to be evaluated to categorize the type of the working relationship between two individuals. A sole factor could not show the type of relationship, and any attempt to list out the things which are relevant would not only be incomplete, but also misleading (Turner, 2013). Though, there were certain things which could be considered in this regard, and an example of this is the provision and maintenance of the equipments, as well as, tools. If the same are provided by the individual himself, he would be a self-employed person and if they are provided by some other person, then the individual would be an employee.
References
Abbott, K., Pendlebury, N., and Wardman, K. (2007) Business law. 8th ed. London: Thompson Learning.
Andrews, N. (2015) Contract Law. 2nd ed. UK: Cambridge University Press
Australasian Legal Information Institute. (2017) Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73; (1955) 93 CLR 561 (15 December 1955). [Online] Australasian Legal Information Institute. Available from: https://www.austlii.edu.au/au/cases/cth/high_ct/93clr561.html [Accessed on: 16/03/17]
British and Irish Legal Information Institute. (2017a) Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1 (07 December 1892). [Online] British and Irish Legal Information Institute. Available from: https://www.bailii.org/ew/cases/EWCA/Civ/1892/1.html [Accessed on: 16/03/17]
British and Irish Legal Information Institute. (2017b) Donoghue v Stevenson [1932] UKHL 100 (26 May 1932). [Online] British and Irish Legal Information Institute. Available from: https://www.bailii.org/uk/cases/UKHL/1932/100.html [Accessed on: 16/03/17]
E-Law Resources. (2017a). Chappel v Nestle [1960] AC 87 House of Lords. [Online] E-Law Resources. Available from: https://www.e-lawresources.co.uk/Chappel-v-Nestle.php [Accessed on: 16/03/17]
E-Law Resources. (2017b). Balfour v Balfour [1919] 2 KB 571. [Online] E-Law Resources. Available from: https://e-lawresources.co.uk/Balfour-v-Balfour.php [Accessed on: 16/03/17]
Elliot, C. (2011) Contract Law. 8th ed. London: Pearson.
Emanuel, S., and Emanuel, L. (2008) Torts. New York: Aspen Publishers.
Find Law. (2017) What is an independent contractor and how does an independent contractor differ from an employee?. [Online] Find Law. Available from: https://www.findlaw.com.au/articles/4515/what-is-an-independent-contractor-and-how-does-an-.aspx [Accessed on: 16/03/17]
Gibson, A., and Fraser, D. (2014) Business Law 2014. 8th ed. Melbourne, Pearson Education Australia.
Greene, B. (2013) Course Notes: Tort Law. Oxon: Routledge.
Latimer, P. (2012) Australian Business Law 2012. 31st ed. Sydney, NSW: CCH Australia Limited.
Marshall, B. (2006) Working it out- Employee or independent contractor?. The National Legal Eagle, 12(2).
Marson, J., and Ferris, K. (2015) Business Law. 4th ed. Oxford: Oxford University Press.
Mulcahy, L. (2008) Contract Law in Perspective. 5th ed. Oxon: Routledge.
Paterson, J.M., Robertson, A., and Duke, A. (2012) Principles of Contract Law. 4th ed. Rozelle, NSW: Thomson Reuters (Professional) Australia.
Swarb. (2016) Partridge v Crittenden: QBD 1968. [Online] Swarb. Available from: https://swarb.co.uk/partridge-v-crittenden-qbd-1968/ [Accessed on: 16/03/17]
Treitel, G H., and Peel, E. (2015) The Law of Contract. 14th ed. London: Sweet and Maxwell.
Turner, C. (2013) Key Facts: Employment Law. 3rd ed. New York: Routledge.
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