H N D (Business) / Year 1 Semester 2

Unit 5: Aspect of Contract & Negligence for business

Assignment II
Making Commercial Contracts and Corporate Liability

Submitted by:
Ma Wai Myat Noe

Table of Contents
Introduction.............................................................................2
Scenario.................................................................................. 2
Executive Summary.....................................................................4
LO 3: Understand principles of liability in negligence in business activities........5
Task 1 What is Tort Law under English common law?..................................................5
In order to sue successfully under the aspect of negligence, what are the basic facts that the
plaintiff shall prove?........................................................................................... 5
To what extend that the defendant shall liable for any injury caused by his negligent act or
omission in calculation the damages.......................................................................8
Task 2 Analyze the differences between negligence and contractual liability.....................9
Task 3 Describe two factors that contribute in the questions of existence of duty of care for
negligence and exemption of that issue..................................................................10

LO 4: Be able to apply principles of liability in negligence in business situations 12

Task 4 Could Rain Flower car rental service escape their liability for the injury caused to
Alfred?.......................................................................................................... 12
Task 5 Should Silver Mountain Co., Ltd of the accident done by their employee?.............13
Task 6 Do the warning sign create an effective measure to prevent injury to the visitor of
resort? What is the legal status of the boy who swims in the river? Who would responsible for
the boy drowning at the resort?............................................................................14
Task 7 To whom shall the blame be put to financial loss to Alfred and Xavier? What kind of
liability shall Floral and Partners audit firm? Do you think an auditor should take a
responsibility for their negligent preparation of audit report and should every professional
such as a doctor or a lawyer should hold the same liability? Gives reasons for you argument.
................................................................................................................... 15

Conclusion.............................................................................17

Introduction
This report was set up in order to inform the information about negligence in
business. The report mainly focuses in the liability in tort law, what is the characteristic of
tort, its aim and objective. It also contrast the liability in tort and liability in contractual in
order to understand and to distinguish these two common law and avoid it. After that, the
report will delve into two aspects of tort law, which is vicarious liability and negligence.
Through the two claims of Alfred and Xavier, we can know the nature of liability in
negligence and how a business can be vicariously liable. In order to be success in the
claim for negligence, claimant must be prove to the court that the defendant owe them a
duty of care, there is a breach in duty of care by the defendant and the breach of this duty
cause claimant damage. With business, employer and he or she is on the course of
employment. Knowing the way to avoid and claim for compensation can benefit to
employer and individual.

Scenario
Alfred and Xavier, who are from UK, have arrived Myanmar 2 days ago.
Purposes of their visit are to explore Yangon and to establish Hotel and Tourism business.
At first, they rent a private vehicle from Rain Flower car rental service to look around
the environment and visit famous sites nearby region by themselves though they are not
familiar with the road system. Certain terms of the lease agreement between them stated
that the company should not be held responsible for any injuries caused to the Renter by
the negligence of the driver of the car or by any other third party.

(a) Alfred holds international driving license but he hasnt obtained verification from
local authority. On the way back to their hotel, a cargo truck of local construction
company Silver Mountain hit their car. The driver was drunk and claimed that
Alfred was driving wrong direction while the latter asserted that he just trying to
avoid the accident. Both cars were badly damaged. Alfred suffered an internal
bleeding because the airbag didnt open on time when the cars are collided.
(b) Despite this unfortunate event, young entrepreneurs were able to lease a vast land
beside a beautiful riverbank for a long term. Although the site requires extensive
development, they have decided to open the resort under the name of River View
Resort Co., Ltd after completing the basic establishment. They found out that the
current of the river is not safe for visitors to swim so they made a manager of the
hotel to handle this issue and the manager decided to put a warning sign on the
bank but he did not employ any lifeguard. A young guest who is around the age of
12 gone to the river without being noticed by his family or staff or the resort and
get drown. Luckily, a local saved him.
(c) Another major crisis for the investors is that the resort has enjoyed no financial
profit since its opening. It has been 5 years they run their business and Alfred is
now demanding Xavier to liquidate the company. Before they invest in this resort
project on river bank, local host called U ZawZaw owner of Jax Development
Co., Ltd persuaded them by submitting his audit report done by Floral and
Partners audit firm, in order to prove his companys financial creditability and
potential success of the project. The firm negligently inserted a number of private
properties of U ZawZaw under the companys holding without obtaining the title
first. So, Alfred and Xavier have little to recover from their join-partner Jax.

Executive Summary
The reason of this study is to learn the basic legal principles for which we can use
in the practical aspect of business. Also from the case studies, which are given, is very
helpful for practical day-to-day issues.
This study is focused on non-lawyers therefore we should give a clear picture of the
concepts such as the contracts, negligence torts, breach of conditions etc. this is also
helpful to understand and learn the legal terms used in business contracts.
This study helped me to understand the key elements of a business contract, Tort of
Negligence and also the consequences of breach, and also to apply the rules and laws for
practical scenarios.

LO 3: Understand principles of liability in negligence in

business activities

Task 1 What is Tort Law under English common law?

Tort Law
The law of torts derives from a combination of common-law principles arising
from case law and legislative enactments. It can be distinguished from actions for breach
of contract simply on the basis that tort actions are not dependent on any agreement
between the parties to the lawsuit. While criminal prosecutions are enforced by the police
and brought by the government, private citizens bring tort actions. As a private citizen
brings action, tort feasors will not receive fines or be sentenced to prison through civil
courts, but are likely to be compelled to pay damages to the plaintiff if the court rules in
the plaintiffs favor.

In order to sue successfully under the aspect of negligence, what are the basic facts
that the plaintiff shall prove?
Negligence
Negligence describes a situation when someone accidently does something
wrong, which causes someone else to get hurt. A person can be held liable for any
damages they cause through their careless behavior. It can be as simple as forgetting to
lock your front gate and letting your dog run free and attack someone. Or, it could be
causing be a much more complicated series of events to unfold.

In order to prove that the defendant was negligent and therefore liable for your
injuries, you must prove all of the "elements." For instance, one of the elements is
"damages," meaning the plaintiff must have suffered damages (injuries, loss, etc.) in
order for the defendant to be held liable. So even if you can prove that the defendant
indeed acted negligently, you may not collect damages if you didn't suffer any injuries.
Juries are instructed to compare the facts, testimony, and evidence with the following
elements before reaching a verdict:
These five elements that need to be established for the tort of negligence are explained in
greater detail below.

Duty of Care

Breach duty of Care

Cause in Fact

Proximate Cause

Damages

They must all be proven in order to sue successfully under the aspect of negligence.
Duty of Care
Duty of care refers to the circumstances and relationships, which the law
recognizes as giving rise to a legal duty to take care. If the defendant fails to take such
care to the claimant, the defendant will be liable to pay compensation for claimant
because according to the law, the defendant had breach of duty of care.
Breach duty of Care
To successful in the claim of negligence, claimant must give evidence that there
was a breach of duty of care of defendant that caused the damage to him. The court will
consider whether the defendants act fell below the standard of reasonable care, the
6

personal concerned should do what a reasonable man would do, that could be expected
of a reasonable person in the same circumstances.
Cause in Fact
Under the traditional rules in negligence cases, a plaintiff must prove that the
defendant's actions actually caused the plaintiff's injury. This is often referred to as "butfor" causation. In other words, but for the defendant's actions, the plaintiff's injury would
not have occurred. The child injured by the defendant who tossed a bag of grain onto a
truck could prove this element by showing that but for the defendant's negligent act of
tossing the grain, the child would not have suffered harm.
Proximate Cause
Proximate cause relates to the scope of a defendant's responsibility in a negligence
case. A defendant in a negligence case is only responsible for those harms that the
defendant could have foreseen through his or her actions. If a defendant has caused
damages that are outside of the scope of the risks that the defendant could have foreseen,
then the plaintiff cannot prove that the defendant's actions were the proximate cause of
the plaintiff's damages.
Damages
A plaintiff in a negligence case must prove a legally recognized harm, usually in
the form of physical injury to a person or to property. It is not enough that the defendant
failed to exercise reasonable care. The failure to exercise reasonable care must result in
actual damages to a person to whom the defendant owed a duty of care.

To what extend that the defendant shall liable for any injury caused by his negligent
act or omission in calculation the damages.
Negligence is the lack of application of reasoning and ordinary prudence on the
part of the defendant for, that he can be held liable for any damages results from such
damages. In every business practice or in other words, contract it is the duty of both the
parties to act and behave in a reasonable and wise manner and perform his obligation
diligently. Thus as an independent tort negligence means the infliction of damage by
breach of a legal duty to take care which the defendant owed to the plaintiff. This if there
occurs any breach or any party suffers loss for any injury caused by the negligent act and
omission of the other, it will entitle the plaintiff seek relief and damages for such
negligent behave.

Task 2 Analyze the differences between negligence and contractual liability

Contract and tort law are common law for a long time. Contract and tort are two
different aspects in common law; they have a certain amount in common.

They are both civil law

The claimant will sue the defendant in order to ask for compensation, not for

punishment.
The claimant will bring an action against the defendant and must prove that the
claimants loss is not too remote a consequence of the defendants breach

Contract and tort law also have some difference in these areas
Relationship between parties: In contractual liability, the relationship" between parties is
created and governs by the contract. In tort liability, the relationship is non-contractual
and is imposed by the law.
Consent: The contract only form and legal if parties entering the contract consent about
every term in the contract. They cannot be force the other party to enter the contract
without their agreement. On the other hand, the liability in tort does not base on consent.
As the definition above, torts involve an intrusion by one party into the safety, health and
profit of other party.
Purpose of award damage: In contact claim, when there is a breach of contract term of
one party, the other party will sue to restoring their position in the contract because the
contract set up base on the balance in position and profit of parties. Furthermore, the
compensation in case breach of contract usually clearly state in the contract and the party
which breach the contract only compensate base on it. In liability in tort, the claim for
compensation usually for the claimants loss and the level of compensation base on the
extent of damage of the victim.

Task 3 Describe two factors that contribute in the questions of existence of duty of
care for negligence and exemption of that issue.
In some situations, the question of whether someone is legally liable for injuries
may turn on whether there is a duty of care to protect against injuries for someone who
is not expected to be in the place where the accident happens.
Example: Sameer wanted to ask a question of the produce manager at his local supermarket. He knocked on the door of the produce back room, but no one answered.
Although the door was marked Employees Only, Sameer went in. While he was
looking around for someone, he leaned against a stack of crates. The crates collapsed
onto Sameer, injuring him. Sameer would not have a good liability claim because the
store had no duty to protect customers who ignore Employees Only signs and wander
around where they are not supposed to be.
The exemption clauses that seek to limit or exclude liability for death or personal
injury caused by negligence are always void and unenforceable. The supplier shall not be
liable for any injury caused to any person. This would have been automatically void. A
person who is liable for any breach of contract cannot be held liable rather the person on
behalf of whom he enters into contract will be liable. Thus when there occurs any wrong
or breach of any contract or any part thereof by an agent acting on behalf of and within
the authority of the principal, then the principal and the agent will be held liable. The
same rule applies in the case of partnership business and for the wrong of a partner the
fellow partners become liable subject to certain conditions and exceptions. Thus in the
case of various contracts and business dealings there arises vicarious liability.

10

Does the manufacturer of certain product and retailer of such product own similar
responsibility with regard to the product they supply to the consumer
If the business supplies products to consumers, it needs to make sure the products
are safe. The duty to guard against negligence and supply a safe product applies to
everyone in the chain of distribution, including a manufacturer who carelessly makes a
defective product, the company that uses the product to assemble something else without
discovering an obvious defect, and the retailers who should exercise greater care in
offering products for sale. These individuals owe a duty of care to anyone who is likely to
be injured by such a product if it is defective, including the initial buyer, that person's
family members, any bystanders, and persons who lease the item or hold it for the
purchaser.
The heaviest responsibility falls on manufacturer of a product. But retailers also
have legal responsibilities. A manufacturer can be held liable for negligence if lack of
reasonable care in the production, design, or assembly of the manufacturer's product
caused harm. Failing to meet the responsibilities can have serious consequences. It could
face legal action with possible fines or even imprisonment. It could also be sued by
anyone who has been injured or has suffered damage to personal property as a result of
using your product.
A defendant's duty of reasonable care arose only from the contract, and only a
party to that contract could sue for its breach. This meant that a negligent manufacturer
who sold a product to a retailer, who in turn sold it to the plaintiff, was effectively
insulated from liability. The plaintiff was usually without a remedy in tort because it was
the manufacturer and not the retailer whose negligence caused the harm. It needs to take
an active approach to preventing safety problems, otherwise it risk being sued, fined or
imprisoned.
Retailers are not normally liable for harm to consumers or their property caused
by an unsafe product, as long as they identify the producer. But retailers do have some
responsibility for safety and can face enforcement action.

11

LO 4: Be able to apply principles of liability in negligence in

business situations
Task 4 Could Rain Flower car rental service escape their liability for the injury
caused to Alfred?
In the scenario, the problem that needs to be considered is that Is Rain Flower
car rental service escapes their liability for the injury caused to Alfred? Rain Flower
Company rent a car to Alfred and a cargo truck of third party hit the car when Alfred was
driving. But, the airbag didnt open on time when the cars are collided and Alfred
suffered an internal bleeding. The car airbag didnt open on time, not intention of Rain
Flower Company. However, the company still owes Alfred a duty of care because every
person owes a general duty of care to person so closely and directly affected by my act
that I ought reasonably to have them in contemplation as being so affected. In this case,
Rain Flower Company must be held to duty of care to Alfred because Alfred would be
affected by the consequences of the companys failure to take care and carefully check
the car before renting it to customer. Rain Flower had breach that duty of care when rent
the dodgy car to Alfred and caused him an internal bleeding.
But, induction of the situation, innocence is happened when they made an
agreement between them that the company shall not be held responsible for any injuries
caused to the Renter by the negligence of the driver of the car or by other third party.
Alfred got the injury caused by the accident. In fact, Rain Flower Company and Alfred
were already made an agreement between them stated that the company shall not be held
responsible for any injuries caused to the Renter by the negligence of the driver of the car
or by any other third party before the accident. And the accident occurs because of Alfred
and the third party (Silver Mountain companys driver) has been negligent. If the accident
not occurs, the process of the car not opening the airbag cannot happen. Thats why Rain
Flower car rental service can escape their liability for the injury caused to Alfred.

12

Task 5 Should Silver Mountain Co., Ltd of the accident done by their employee?
The case have clearly state that the employee from Silver Mountain Company hit
the car, which is driving by Alfred. When the accident occurred, the employee was drunk
and claimed that Alfred was driving wrong direction while the latter asserted that he just
trying to avoid the accident. According to the principle of vicarious liability, Silver
Mountain Company and the driver are in a relationship between employer and employee
but when the accident occurred, the driver was even on the course of employment, he was
drunk. Therefore, Silver Mountain Co., Ltd isnt held liability to the suffered an internal
bleeding of Alfred and the driver from the company is the one who have to pay
compensation for damages.

13

Task 6 Do the warning sign create an effective measure to prevent injury to the
visitor of resort? What is the legal status of the boy who swims in the river? Who
would responsible for the boy drowning at the resort?
In this case, Alfred and Xavier were able to lease a vast land beside a beautiful
riverbank and opened the resort under the name of River View Resort Co., Ltd. And
they found out that the current of the river is not safe for visitors to swim, so they made a
manager of the hotel to handle this issue. And a young guest who is around the age of 12
get drown. The company was occupier for the purposes of the Occupiers Liability Act
1957 and therefore they owed the common duty of care. Therefore, the River View
Resort Company is held liability to the young guest.
However, the cause mainly stem from the manager because when Alfred and
Xavier give a liability to manager to handle the case of the river is not safe for visitors to
swim, and he just only put a warning sign on the bank. He should know that the warning
sign does not enough to prevent injury to the visitor of resort. And he also did not employ
any lifeguard. So, he breaches his duty of care. And also the boy has been negligent for
beware of the warning sign. And when he went to the river, his family or staff or the
resort has not been noticed. If the young guest beware of the warning sign before
swimming or if the manager employ a lifeguard, the cause cannot be happen.
So, this accident occurs both parties have been negligent, and this raises the
doctrine of contributory negligence. In conclusion, the manager has responsible for the
boy drowning at the resort, not the company.

14

Task 7 To whom shall the blame be put to financial loss to Alfred and Xavier?
What kind of liability shall Floral and Partners audit firm? Do you think an
auditor should take a responsibility for their negligent preparation of audit report
and should every professional such as a doctor or a lawyer should hold the same
liability? Gives reasons for you argument.
In this case of Floral and Partners audit firm, an auditor will liable with Alfred
and Xavier because he is breach duty of care. This is extended to monetary loss caused by
careless misstatement. This has produced a special area of negligence, which is referred
to as professional negligence. And the auditor should the blame be put to financial loss to
them. In my opinion, to succeed Alfred and Xavier had to invest in the resort project on
the riverbank, as a matter of law, that an auditor owed them a duty of care. And not only
to their clients, but also to all those whom they know will rely on his audit reports in the
transactions for which those audit reports are prepared. There is a great difference
between the doctor and the auditor. The doctor is never called on to express his personal
belief in the truth of his patients diseases, whereas the auditor, who certifies the accounts
of his client is always called on to express his personal opinion whether the accounts
exhibit a true and correct view of his clients affairs and he is required to do this not so
much for the satisfaction of his own client, but more for the guidance of shareholders,
investors and others who may have to rely on the accounts in serious matters of business.
Thats why Floral and Partners audit firm should take a responsibility for their
negligent preparation of audit report and a doctor or a lawyer should not hold the same
liability as the last sentence of the above extract has clearly reveals.

15

The Council said that if the matter were free from authority, I should have said
that the auditor clearly did owe a duty of care to Alfred and Xavier. He is a professional
accountant who prepared and put before them these accounts, knowing that he was going
to be guided by them in making an investment in the company. On the faith of those audit
reports they did make the investment, whereas if the audit report had been carefully
prepared, they would not have made the investment at all. The result is that they have lost
their money. In the circumstances, they have not every right to rely on the audit report
being prepared with proper care; and they are not entitled to redress from the auditor on
whom he relied. I say that he is liability for the financial loss to Alfred and Xavier.

16

Conclusion
Alfred and Xavier are young entrepreneurs from UK. Because of the carelessness
of Alfred and third party, he caught up in some trouble with the Rain Flower car rental
service company and the law. And also he suffered an internal bleeding.
The second problem they met is the responsible of them as an employer with their
managers tort. By analyzing the relationship between them and their manager and the
course of employment, reporter finds out that they were not held vicarious liability and
did not have to pay any compensation for the case of young guest drowning.
And the last problem is about financial loss to them. In this case, the auditor has
been negligent in preparing the audit report. So, the reporter also analyzes the law of
negligence carefully however the auditor should take a responsibility for the financial
loss of Alfred and Xavier.

17