Contract and Tort Law

Andy V Bob:

According to Hodge, “A negligently made statement may have far-reaching effects” (2004, pg41).

This is a tort of negligence issue between Andy (the claimant) and Bob (the defendant) where Andy can sue Bob for misrepresentation (misstatement) and may claim for damages under the tort of negligence for the car he bought from hotmotors garage.

Tort and tortious liability can be defined by the definition which is quoted most frequently, which was given by Winfield, as “Tortious liability arises from the breach of a duty primarily fixed by law; such duty is towards persons generally and its breach is redressible by an action for unliquidated damages (Winfield, p.4).

To define what is meant by ‘negligence’, this is a definition for ‘negligence’ which was given by Baron Alderson who said, Negligence is the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do or doing something which a prudent and reasonable man would not do. (Blyth v Birmingham Waterworks Co [1856]).

In order to have a successful claim in any tort of negligence case, three things must be proved. First of all, whether or not a duty of care is owed to a party (the claimant) by the other party (the defendant) which is in this case Andy against Bob as Bob owes a duty of care towards Andy. Secondly, whether or not there is a breach of that duty and in this case, the breach has occurred by the misrepresentation of Bob given negligently by him to Andy. Finally, the court will ask if the claimant did suffer injuries or damages as a result of that breach. Regarding that point, as it shows from the facts, Andy suffers damages as a result of that breach of duty by Bob.

Donoghue v Stevenson (1932), the case of the snail in the bottle of ginger beer, a case which have reached the House of Lords and its judgement is very important because firstly, it was decided that a manufacturer of a defective product owed a duty of care to the ultimate consumer and secondly, it attempted to formulate a basic principle which could be applied in appropriate cases to decide whether or not a duty of care was owed (Hodge. S, 2004).

The development of deciding the existence of a duty of care can be seen in the cases of Donoghue v Stevenson (1932), Anns v Merton (1978) and Caparo Industries plc v Dickman (1990).

In Donoghue v Stevenson (1932), it was first decided that duty of care is owed to those who may foreseeably be injured by failure to take reasonable care. Later on as a development, it was decided in the case of Anns v Merton (1978) that a duty owed if there is a sufficient relationship of proximity between claimant and defendant Unless there is any reason why it should not exist. Finally, in Caparo Industries plc v Dickman (1990) the modern test which is used today in courts was laid down as the court will ask, was damage reasonably foreseeable? In Andy’s case, it could be argued that damages could have been reasonably foreseeable as the defendant did give the claimant wrong information about the car’s condition which resulted in financial loss for Andy. Secondly, was there sufficient proximity between claimant and defendant? As it is going to be defined later, this special relationship is there. Thirdly, is it just and reasonable to impose a duty of care? Andy could argue here that it is just and reasonable to impose a duty of care on Bob as Andy is a customer and Bob is the salesman so he owes a duty of care towards his customer as in the case of Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964), where the claimants were about to incur financial liability on behalf of a client and they asked their own bankers for a reference regarding that client which was provided by the defendants. The reference letter said that this client was respectable and good for its ordinary business engagements and as a result of relying on their statement, the client went into liquidation and as a result costing the claimants financial loss. At the end, if the answer for each of those questions is ‘yes’, duty of care has been established.

“The establishment of a duty of care does Not necessarily mean that compensation will be available for breach; it is merely the first step for a victim seeking a remedy” (Hodge. S, 2004) as in the case of Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964), as it was decided that although a duty of care existed, the defendants were not liable.

Even though there are limitations, a person who relies on a negligent misstatement may find that there is a remedy if as a result of the reliance loss is suffered. According to Hodge, a person owes a duty to be careful in making a statement only if there is a special relationship between that person and the person relying on the statement.

As it was defined by Lord Devlin, the required relationship (special relationship) is “a responsibility that is voluntarily accepted or undertaken, either generally where a general relationship, such as that of solicitor and client or banker and customer, is created, or specifically in relation to a particular transaction”.

The main principle of negligent misstatement was set out in Hedley Byrne v Heller & Partner Ltd(1964), which stated that where there is a special relationship established between the parties, a party making a negligent misstatement and thereby causes loss to a party relying on that statement, the party who suffers loss as a result can establish that a duty of care was owed and therefore could recover consequential loss.

Furthermore, as an outcome of the case of Hedley Byrne v Heller & Partner Ltd(1964), it has appeared that three things must be established by the victims in order to prove that a duty of care was owed in a statement. These three things are as follow:

Firstly, that the victim has relied on the other party’s skill and judgement or ability to make careful enquiry. In this case, Andy seems to have relied on the salesman skill and judgement and his ability to make careful enquiry as a result of his experience as a salesman for hotmotors.

Secondly, that the party giving the statement knew, or ought reasonably to have known, that the victim was relying on the statement. It could be argued here that Bob knew or ought reasonably to have known that Andy was relying on his statement.

Thirdly, that it was reasonable for the victim in the circumstances to have such reliance on the other party giving the statement. Andy could argue that it was reasonable for him to rely on Bob’s statement as he should be representing HOTMOTORS and therefore, have the right information about the car as a salesman and he was giving information related to the car in order to let Andy buy it.

Furthermore, the case of Caparo Industries plc v Dickman (1990), came to develop these three points adding one more point to them which needs to be established which is that the party giving the statement knew, or ought to have known, the purpose for which the defendant required the advice or information. Andy could argue here that it was reasonable that Bob knew the purpose for the required information.

Nevertheless, it was decided in Henderson v Merrett Syndicates Ltd (1994), regardless of whether or not there was a contractual relationship between the parties, provided the victim could also show reliance on the advice, that there could be legal responsibility for negligent misstatement.

Andy V Hotmotors:

There are number of possible civil actions that Andy can take against hotmotors garage under both contact and tort law.

First Of All, Suing Under Contract Law:

Andy may sue HOTMOTORS for breach of the Sale of Goods Act.

According to Elliot & Quinn, a contract is any legally binding agreement whether it is written or unwritten (2007, pg1).

Contract law was made to enforce the rights and obligations of the contracting parties and to uphold the rights of individuals.

In order for a contract to be legally binding, there are some basic requirements that need to be satisfied. First of all, there must be an agreement between the parties entering the contract which is usually can be made known by the fact that one party has made an offer and the other party has accepted it. Secondly, there must be an intention to create legal relations, in other words, to be legally bound by that agreement. The third requirement is certainty as to the terms of the agreement. Fourthly, capacity to contract and finally, consideration given by each of the parties which means that there must be some kind of exchange (something given in return for that promise) between the parties or if not, the contract cannot be enforced in law.

A contract can be either a unilateral contract where only one party in the contract supposes an obligation under that contract or, it could be a bilateral contract, as most contracts are, where each party takes on an obligation. This is done usually by promising the other something.

In this case, Andy’s contract with hotmotors is a bilateral contract as it involves more than one party taking obligation.

Since the nineteenth century, courts started to imply terms into contracts to make sure that the buyer has got a fair deal by requiring some conditions such as that the goods must fit for their purpose. In the year of 1893, the first Sale of Goods Act was passed and then after that and since the 1960’s, a series of Acts has passed by the Parliament designed to protect the interest of consumers including the Sale of Goods Act 1979 which was amended by the Sale of Goods (Amendment) Act 1995.

Under section 2(1) of the Sale of Goods Act 1979 , a sale of goods contract was defined as one ‘by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price’. The Act applies only for goods sold for money and not for other kinds of transaction such as exchanging of goods.

Under section 14(2) goods sold in the course of a business, which is the case of HOTMOTORS selling the car to Andy, should be of satisfactory quality. According to Elliot & Quinn , we can say that goods are of a satisfactory quality if they meet the standard that a reasonable person would consider as satisfactory, taking account of any description of the goods, the price ( if relevant) and all the other relevant circumstances and where the buyer deals as a consumer, these relevant circumstances include any public statements on the specific characteristics of the goods made about them by the seller, the producer, or his representative, particularly in advertising or in labeling (2007, pg 362).

According to Elliot & Quinn, the quality of the goods takes into account their state and condition, fitness for all the purposes for which goods of that kind are commonly supplied, appearance and finish, freedom from minor defects, safety and durability (2007, pg 362) which also means that the more expensive the goods are, the higher the standard that may be required to satisfy the Sale of Goods Act as in the case of Clegg v Andersson (2003) where the claimant had bought an expensive yacht for over 200,000 pounds. The yacht was heavier than expected so the claimant rejected it and sought for his money on the basis that the boat was not of satisfactory quality. Although the boat was fit for its purpose as it could still sail, The Court of Appeal allowed his claim because it was not sufficient that it could still sail as it was not of a satisfactory quality given the price that had been paid as in the case of Andy against HOTMOTORS where the car is not of a satisfactory quality. Shall the defect or other matter is specifically drawn to the buyer’s attention before the contract is made, the requirement of satisfactory quality will not apply.

Suing before 2002, Andy could sue for rejection and damages as a result of the breach of Sale of Goods Act as these two remedies still exists, except that the new reversal of the burden of proof in relation to the non-conformity of the goods to the contract does not apply to them. On the other hand, Andy may still claim under the Act for repair of his car or a replacement as a result of their possible breach of the Act but he must do this within a reasonable time, usually within six months from the date of delivery. Although he can claim for it, he might not be entitled to repair or replacement if it is impossible to do so or disproportionate, or if the defendant fails to repair or give a replacement for the car, Andy may be able to claim for a price reduction or for a full refund of the price (known as rescission). If he was successful in granting the full price paid, the amount may be reduced taking into account any use of the car.

Secondly, Suing Under Tort Law (Tort Of Negligence):

Andy may be able to sue HOTMOTORS garage under the tort of negligence for breach of duty of care and vicarious liability.

Vicarious liability can be defined as ‘a situation where a person who is in fact may be blameless is held liable for the wrongful acts of another’.

There are many reasons why employers may be liable for their employee’s torts whilst committed in the course of business such as the fact that the employers are in control and the employee may not have any choice but to work under inadequate conditions which cause the accident. The employers are more likely to be insured. Employers should be encouraged to choose suitable staff, training and discipline staff for safety, and to maintain equipment. Employers make the profits so they should be prepared to cover the losses however caused. Furthermore, is that they may be able to recover the damages they have to pay from the negligent employee – also they can dismiss them. By making the employers liable for their employee’s torts, they will act as role models for other businesses.

In order to sue for vicarious liability, the court must know who the employer is and who the employee is. In order to do that, there are several ways that have been developed through out years and cases to identify who is an employee.

First, there is the ‘control test’ which is a straightforward test to ask whether the alleged employee is under the control of the employer. Does the employer have the right to dictate not only what must be done but how it is to be done? This test was probably reasonable in the old days but as the way employment is done now has changed, employers have been required to employ those who are specialist in a field where the employer has no competence or skill and therefore cannot tell the employee how to do the job even though they technically have the right to do so.

Later on as the ‘control test’ became apparently insufficient, courts had to develop another test and here came the ‘organisation’ or ‘integration test’ which have been explained by Lord Denning in Stevenson Jordan & Harrison Ltd v Macdonald & Evans (1952) when he held,

“It is often easy to recognise a contract of service when you see it, but difficult to say wherein the difference lies [between a contract of service and a contract for service]. A ship’s master, a chauffeur, and a reporter on the staff of a newspaper are all employed under a contract of service; but a ship’s pilot, a taxi-man and a newspaper contributor are employed under a contract for service. One feature which seems to run through the instances is that, under a contract of service, a man is employed as a part of the business, and his work is done as an integral part of the business; whereas, under a contract for service, his work, although done for the business, is not integrated into it but is only accessory to it” (Hodge, S. 2004 pg 172).

In fact, this test has never been widely used.

After that, came the ‘multiple’ test which is most commonly used over recent years which acknowledges that there is no simple answer to the question of ‘who is an employee’.

Four questions are going to be asked regarding the ‘multiple’ test starting with, are wages paid net of tax and national insurance contributions? Who provides the tools for the job? Does the employee have to obey orders? And finally, how the payment is calculated i.e. on a weekly or monthly basis or a lump sum for the total job?

After all, an employer is liable for torts of employment if employee is doing authorised job even if in unauthorised way.

Hotmotors can also get the compensation back from the employee, if they were liable and have to pay compensation for Andy, under the Civil Liability (Contribution) Act 1978 , as it stated that ‘a person held liable to pay compensation has the right to seek a contribution towards the sum paid from any other person who is also liable’. An employer can recover cost from employee if the employee grossly or wilfully negligent.

Andy may also be able to sue HOTMOTORS for breach of duty of care. As the rules of establishing a duty of care are mentioned above, HOTMOTORS owed Andy a duty of care and by applying the rules, they are in breach of that duty and therefore, Andy may claim for damages.

Andy V Sam:

This is a tort law issue and Andy therefore could be able to sue Sam for misrepresentation (misstatement).

As it was explained above in more details, three things must be established by Andy in order to prove that a duty of care was owed to him by Sam in the statement.

Firstly, that Andy has relied on Sam’s skill and judgement or ability to make careful enquiry. Secondly, that Sam knew, or ought reasonably to have known, that the Andy was relying on the statement. Thirdly, that it was reasonable for Andy in the circumstances to have such reliance on Sam’s statement. Did Sam knew, or ought to have known, the purpose for which Andy required the advice or information and if the answer for all the questions was yes, there could be legal responsibility for negligent misstatement.

However, if there is an obvious negligence Andy could use the RES IPSA LOQUITUR, which means that the defendant (Sam) must prove, on a balance of probabilities, that they were not negligent such as in the case of Ward v Tesco Stores Ltd (1976), which is the case of the lady who slipped on yoghurt and broke her hip and Tesco stores could not prove that they were not negligent and they were therefore held liable.

Nonetheless, there are some particular rules in order to use the RES IPSA LOQUITUR , Starting with the first rule which states that what happened and caused the harm should not be something that would happen without negligent. An additional rule is that Sam should be in a position which is in control of the thing causing harm and Andy should not know about what happened and caused the harm.

If these three conditions apply, then Andy can reverse the burden of proof, which means that Sam will have to prove that he was not negligent, such as in the case of Ward v Tesco Stores Ltd (1976).

It is unlikely to be a successful claim unless Sam is an expert or if he cannot disprove that he was negligent.

Jane:

This is a tort of negligence issue and Jane may be able to sue Andy under the tort of negligence for breach of duty of care for the damage occurred to her car by Andy’s negligent driving.

As it was explained above in more details, the court will ask, was damage reasonably foreseeable? Was there sufficient proximity between claimant and defendant? Is it just and reasonable to impose a duty of care? If the answer for all the questions is yes, which is in this case, then duty of care has been established and Andy is in a breach of that duty and therefore Jane should be entitled to damages.

Bob V Andy:

This is a tort of negligence problem and Bob can Sue Andy for nervous shock.

In nervous shock cases, there are two types of victims. There is the primary victim who is the one in immediate fear on his own life and the secondary victim who is the one who saw or heard the incident for themselves, with their unaided senses.

In this case Bob is a primary victim and may sue Andy for nervous shock as this experience left him nervous with strangers which resulted in losing his job, case example, Page v Smith (1995), and therefore he might also sue Andy for pure economic loss, case example, Spartan Steel v Martin & Co (1973).

Sam:

This is a tort of negligence issue and here Sam can sue Andy under the tort of negligence for breach of duty of care and may be able to claim damages.

Dave:

Dave could sue Andy for breach of contract. However, Andy could argue that the contact was for fixing the car which did not happen.

Mel:

Mel may be able to sue Andy for nervous shock but it is unlikely to be a successful claim as there is a break in the chain of causation.

Bibliography

Elliot, C. Quinn, F. (2007) Contract Law, Dorchester: Pearson Education Limited.

Hodge, S. (2004) Tort LAW, Devon: Willan Publishing.