Business Law 2 Revision Notes PDF

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Notes on Exam   Section A (40%) – Problem Solving Questions Section B (60%) – Negligent Act problem where we either represent CLM or DEF o Prepare Schedule of loss (20%) o Legal submission on behalf of CLM or DEF General Notes To establish the Tort of Negligence CLM must prove:  DEF owed a duty o...

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Notes on Exam  

Section A (40%) – Problem Solving Questions Section B (60%) – Negligent Act problem where we either represent CLM or DEF o Prepare Schedule of loss (20%) o Legal submission on behalf of CLM or DEF

General Notes

To establish the Tort of Negligence CLM must prove:  DEF owed a duty of care o Neighbour Test  Def Breached that Duty of Care o Reasonable Man Test o Professional Standard  CLM Suffered reasonably foreseeable damages o Factual causation (But For Test) o Legal Causation (Reasonable Foreseeable damages) The Tort of Negligence Tort – Wrongful Act or Infringement or right leading to a legal liability. While Contract law involves voluntary assumption of responsibility, tort liability is Not Voluntary – It is imposed by the law. Extreme forms of unacceptable behaviour can be dealt with by criminal law, but civil liability through Tort Law also provides remedies to parties affected by unacceptable behaviour of others. Types include: -

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Nuisance o Anything an Individual or business can do which infringes with quality of life of surroundings. E.g. Noise Pollution. Defamation o Lying about somebody and affecting the reputation of an individual or business. Health and Safety o Failure to maintain safe premises or systems at work.

Primary concern of Law of Tort is to provide remedy to any person harmed by contact of others. A Tort is a civil wrong which entitles any party who has suffered damage as a result of that wrong to recover compensation. The law determines that in certain circumstances individuals are under a Duty to act in a particular way, and if they fail to do so they are in breach of their duty and may be liable to any person who suffers harm as a result. Overlap between laws Law of Tort, Crime and Contract can overlap – for example: -

Enterprise Ltd hires Toms Taxis to drive their manager Mark to airport.

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Ann who drivers for ABC Taxis turns up late and drives fast to airport to make time. Loses control and crashes into a fence owned by Bert Mark Injured + Fence damaged

This would lead to following consequences : -

Dangerous Driving – Criminal Law – R v Ann (Magistrates/ Low level Offence) Contract Breach – Civil Law – Enterprise Ltd V Toms Taxis. (County Court as low Amount) Employment Contract Breach – Civil Law – Toms Taxis v Ann (Most likely settled outside court) Tort of Negligence – Injuries to Mark – Mark V Ann(and/or Toms Taxis) Bert V Ann – Tort of Negligence - Civil

Negligence is most important of all torts as it covers many areas, for example Road Accidents, Accidents at work and accidents caused by dangerous premises are all covered. In order for CLM to succeed in an action in negligence he must prove Three things: 1. That DEF owed him a Duty of Care 2. That DEF Breached that duty of Care. 3. That the CLM suffered reasonably foreseeable damages as a result. All three elements must be proved, with Burden of Proof lying with CLM. There may be considerable overlap between all 3 , and Judicial reasoning shows that there is little agreement between judges as to the scope of each element, and it has been suggested that they are all a different way of asking the same questions which is: Should there be Liability in this Case? Tort of negligence mainly derived from common law rules developed through precedent. Different rules depending on type of negligence.

Negligent Acts – Def acts negligently and causes harm to CLM 1. Duty of Care When DEF has acted carelessly, legal test for deciding whether he owed a duty of care to the CLM varies according to type of loss suffered by CLM A) - Where CLM suffers Physical Injury or Property Damage. Prior to 1932 duty of care judged by specific circumstances eg road users owe duty of care to all other road users. Doctors to Patients, Teachers to students etc., but in 1932 a general test was established. Donoghue V Stevenson 1932  Mrs Donoghue visited a café, where her friend ordered and paid for drinks  Mrs D ordered a Ginger Beer Soda, which came in a Opaque bottle and glass  When refilling her glass for second time, a small decomposed snail was found at bottom.

 Mrs D fell ill from drinking some of contents + Shock from experience.  She wished to recover compensation  decided to bring claim in Tort of Negligence against Manufacturer of Ginger Beer Drink. Held (House of Lords Decision)  Manufacture owed a duty of care to the ultimate consumer of his product.  Manufacturer was in breach of that duty by allowing a snail to get into bottle.  Mrs D who suffered harm as a result was entitled to damages. This case established a general test to determine whether or not a duty of care is owed to CLM. Lord Atkin introduced the Neighbour test which is still used today:  Must take reasonable care to avoid Acts or Omissions which you can reasonably forsee would likely to injure your neighbour.  Your neighbour is those closely affected by your act  And those who you should reasonably contemplate to being affected when deciding to direct the acts or omissions in question. (Manufacturer manufactures for consumer)  Sometimes Neighbour is equated to Proximity  Proximity – Legal proximity (not necessarily physical proximity)

Widening the Duty of Care concept. Initially neighbour test was applied very strictly but gradually in 70s/80s courts began to develop and expand the concept and the current approach (introduced by Obiter Dicta in Caparo Industries v Dickman 1990) is that the court will consider Three questions when deciding whether to impose a duty of care: 1. Was the harm or loss suffered reasonably foreseeable? a. What a reasonable person ought to have foreseen (not what DEF actually did Forsee) b. Is CLMs loss a type, which would be expected by a reasonable person if DEF acts negligently? 2. Was there a relationship of proximity between the parties? a. Whether the relationionship between CLM and DEF is such that imposes a duty on DEF to take care to avoid causing harm to the CLM b. Would the DEF have expected to harm this particular CLM in this way if he acted negligently? 3. Is it fair, Just and Reasonable in all the circumstance that the law should impose a duty of care? a. Allows courts to take public policy issues into account b. Taking everything into account, would it be fair to the parties in dispute and to society as a whole if a Duty of Care was imposed upon the DEF?

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Judges often refer to Policy as a terminant of the duty of care. Policy can mean any Extra Legal factors which influence a judgment such as social, economic, moral and political values. Examples: Loss Allocation o Who can afford to bear loss o Which parties have insurance / Is one subject to compulsory insurance.

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Floodgates o Will imposing liability lead to high volume of new claims o Will courts cope with volume of cases o What effect would this have on insurance cost / Availability? Practical effect of imposing a duty of care o Will the imposition of duty of care act as a deterrent or raise standards? o Will imposing a duty have adverse effect on decision making?

Hill V Chief Constable of West Yorkshire 1988  CLM – Mother of last victim of “Yorkshire Ripper”, who claimed damages on basis:  Police negligently failed to apprehend murdered before her daughter was killed.  Police investigation was poor – He had been interviewed 9 times Held (House of Lords):  Even though harm to someone was reasonably foreseeable  Insufficient proximity between police and the victim o Police had no knowledge of victim, can’t be responsible for every women in society.  For Public policy reasons it was not fair, just and reasonable to impose a duty of care as this could constrain police activities generally. B) Where the CLM suffers pure economic loss Pure Economic Loss – Not Recoverable (Policy reasons) Consequential economic loss – Financial loss due to damage to Property of Person – Recoverable. Weller & Co v Foot & Mouth Disease Research Institute 1966  F&MDRI was carrying out research and allowed virus to escape, Killing most cattle in vincity  Successful claims in negligence were bought by farmers who lost cows to disease  Local cattle auctioneer also suffered financial loss due to no cattle to auction also sued. Held:  CLM suffered no physical injury or property loss, then as a matter of Public Policy:  His CLM must fail.  Allowing such an action to succeed would open door to other CLMs such as Transporters, Dairies, Milkmen, Retailed etc. (Flood Gates Policy Argument)  Courts reluctant to extend liability to cover claims for all types of economic loss.

Spartan Steel & Alloys LTD v Martin&Co 1973  Def negligently cut electric cable powering CLMs factory, resulting in 14.5 hours cut out.  Metal processing in furnace at time was damaged and CLM unable to continue production  Claim bought for: (Held) o Damage to Metal in furnace - £368 (Recoverable as property loss) o Loss of profit on sale of that melt - £400 ( Recoverable as Consequential E. Loss) o Loss of profit on production of 4 further melts which CLM was unable to process £1767. (Unrecoverable due to policy reasons, Pure Economic Loss)

Muirhead V Industrial Tank Specialities 1986.      

Fishmonger planned to buy cheap lobsters in summer and resell at mark up over XMAS Entered contract with 1st DEFs to build tank to store Lobsters Tanks circulated seawater using pumps manufactured by 2nd DEF Pumps failed, killing lobsters, and CLM successfully sued 1st DEF for breach of Contract Unable to recover losses as 1 st DEF went into Liquidation CLM bought tort claim in negligence agsint second DEF claiming for: o Loss of Lobsters (Property Loss) o Loss of profit on sale of lobsters (Consequential Economic Loss) o Expenditure incurred trying to correct fault in pumps (Pure economic Loss) o Cost of the pumps (Pure Economic Loss)

Since fishmonger didn’t have contract with Second Def he had to use TORT Claim, In 2005, he could have used contract rights of 3 rd parties act. Privity Of Contract. Murphy V Brentwood Borough Conuncil 1990

      

Leading Case on economic loss Established principles to apply to economic loss caused by negligent acts and by defenctive products.

CLM bought house from builder which was built on inadequate foundations. Walls cracked and CLM forced to sell house for £35k less that market value. Builder in liquidation so unable to bring breach of contract Claim So CLM sued council in negligence as building inspectors had negligently approved work. CLM argued council owed him duty of care and he relied on these checks when purchasing.

House of Lords Held:  CLM Action failed  Although House was defective, no personal injury had been caused the CLM and none of his property had been damaged.  Losses were purely economic therefore not recoverable. Whilst they would be responsible in tort for Latent (Hidden) defect which suddenly materialised and caused personal or property damage, no duty of care exists in respect of Apparent (discovered) defects where it simply costs homeowner money to repair the damage.

Special Cases of Pure Economic Loss There are some exceptions where courts have decided duty of care is owed even though they only suffer Pure Economic Loss and no damage to property or person. Such situations arise when there is close proximity between the CLM and DEF, so that the defendant would expect to cause economic hard to the CLM if he acted negligently (eg solicitor and a beneficiary under a will, negligence will result in ‘ beneficiary’s pure economic loss, which would be recoverable). Ross V Caunters 1980  Solicitor drafted a will and permitted the spouse of beneficiary to witness it  Didn’t warn that the spouse cannot witness without beneficiary losing his gift.

 When the person died, beneficiary wasn’t entitled to inherit his gift due to this error  He sued solicitor in tort of negligence Held:    

Solicitor owed duty of care to CLM (Beneficiary) Because he KNEW CLM would lose inheritance if incorrectly drafted. Also knew his expertise is being relied upon DEF was in breach of that duty of care, by acting carlessly so was liable even though loss is purely economic.

White V Jones 1995  Elederly man fell out with 2 daughters and cut them out of will  Few months later they reconciled and father instructed solicitor to draft new will giving daughters £9k each.  Due to unnecessary delays from solicitor, testator died before will drafted  Daughters failed to inherit and sued solicitor in negligence. Held (House of Lords):   

By agreeing to draft will , DEF accepted responsiibilty for creation of Valid will. HE owed daughters duty of care because he knew they would suffer financial loss if he did not do so. HE breached his duty of care by failing to draft will, and was liable for their pure economic loss.

These two cases are Exceptional Circumstances where court decided due to close Proximity between the parties, where it would be appropriate to hold the DEF liable even though CLM only suffered pure conomic loss. In normal circumstances Pure Economic Loss is NOT recoverable. In Summary, If the CLM can show they are owed a Duty of Care, then this satisfied the 1st of three requirements in an action in negligence. The CLM must then go on to show DEF has Breached that duty of Care and the CLM has suffered Foreseeable Damages as a result.

2. Breach of the Duty of Care A DEF will be in breach of the duty of care if they fail to reach the standard of care set by Law. The legal standard of care in most situations is that of the Ordinary reasonable man ie the standard that an ordinary man would take in all the circumstances of the case. What is reasonable will obviously vary from case to case and will often depend upon the degree of risk involved. Factors to consider when assessing breach – IE when deciding whether the defendant has acted like an ordinary reasonable man or not:  The magnitude of the risk (liklehood of CLM suffering harm) o How likely is it that injury or damage will occur? o I.e Speeding on public road = likely injury to someone, but on Track its fine  The seriousness of any likely injury o Brain surgeon drunk while operating – High o Hair dresser drunk while working – Low

 The Cost of avoiding the risk o How muc money/Time/effort is required to eliminate the risk? o Is this practical?  The usefulness of defendants actions o Speeding in order to deliver emergency blood to hospital The first two factors are weighed against the second two. If first two are greater than second two then it is likely the duty of care is breached, but if they are smaller than the court is more likely to decide there is no breach and therefore no liability.

Bolton V Stone 1951  CLM walking along pavement when he was struck by cricket ball which was hit out during match  Court had to decide whether the club had acted Reasonably in the way which they organised game to minimise the risk of harm. Held:  Cricket club owed a duty of care to all persons in the vincity BUT  Hadn’t breched that duty because it’d done everything youd expect a reasonable club to do.  They had 5m high fence surrounding pitch, 78m away from batsman, and only 6 balls had left the ground in 28 years, none causing injury.  Club was NOT Liable in negligence, as Raising fence was a high expense, and there was a limited chance of it actually happening. Hilder V Associated Portland Cement 1961  DEF allowed children to play football on wasteland in front of his factory  CLM was riding past on motorbike when hit by ball, which children had kicked onto road.  He fell from motorcycle and was killed, so his Widow sued the DEF in negligence. Under tort law, rights to sue pass onto next of kin

Held:  Liklehood of injury to both passer by and children was Very high since ball regularly ran into road.  The Def owed a duty of care to children and all road users.  He was in breach of that duty for failing to take the precautions that a Reasonable man would take to prevent these risks  So he was liable to CLM in negligence for the damage caused.

The usefulness of DEF actions tends to be an important factor in cases where defendant acted in an emergency, as you can drop the standard of care in emergency. Watt v Hertfordshire County Council 1954  CLM was firefighter called to accident where women was trapped under lorry  Heavy lifting jack was needed to lift the lorry, but vehicle needed to transport was not available, so normal fire truck was used. Jack slipped in transit crushing CLMs leg.  HE sued county council claiming they were responsible for negligence of fire service. Held  Under normal circumstances the fire officers’ actions would have been unreasonable  BUT these were not normal circumstances as it was a matter of life and death for the trapped women.  It was reasonable to take greater risks in such an emergency  So, the DEF were not in breach of their duty of care and so were not liable in negligence. Denning LJ said : “If accident happened in commercial enterprise without emergency, there would be no doubt CLM would succeed. But making profit is different to saving life and limb which justified the taking of considerable risk”.

Latimer v AEC 1953.    

Rainfall flooded DEF factory leaving floor slippery DEF closed factory in order to sawdust floor but didn’t cover all of the slippery areas. When factory reopened CLM was injured when he slipped on an untreated are CLM sued DEF in negligence, alleging that they had not taken sufficient precautions and should have closed the factory. 1. Chances of injury low as majority of area covered 2. Seriousness of injury medium, as your unlikely to kill yourself. 3. Only way to avoid is continue to close business, so cost of avoiding is high due to loss of profit.

Held:  They did owe a duty of care to CLM  But they had done everything that Reasonable employers could be expected to do for safety of workers  The only way to eliminate risk would be to entirely close factory  Given the wet areas were small and clearly visible this would have been a precaution out of all proportion to the risk in question  So their conduct was reasonable and there was no breach of contract.

Policy considerations play an increasingly important role in determining whether or not duty of care has been breached. Who can afford loss (Insurance)

Flood gates Practical Effects of imposing Duty of Care

The Compensation Act 2006 Compensation Culture – Desire for injured parties to sue for every incident which causes any harm. This reduced the quality of modern life as any activity which carried any risk, would be avoided to avoid possibility of legal liability should anything go wrong. In response to concerns from businesses, schools, social clubs etc, the Government introduced the Compensation Act 2006. Section 1 of this act attempted to reduce the compensation culture by providing that when a court is assessing whether a DEF has taken the steps necessary to meet the standard of care required (Reasonable conduct) It should firstly consider: -

Whether their decision would prevent a desirable activity fro taking place at all, or limit the way it was done or discourage people in general from doing things which are socially desirable?

The purpose of this section is to provide legal authority for the view that some risks are justified. Cole V Davis Gilbert and the Royal British Legion 2007  First DEF Gilbert owned a Village green  Second DEF Britihs Legion who erected a maypole on village green where May Day fete was held  Removal of maypole left hole which DEF filled with stones and capped off.  Two years later hold become exposed and CLM walking across green, broke her leg due to placing foot in hole, and still suffered pain and disability 6 years later.  She sued both DEFs,  1st DEF the occupiers of village green who she cl...