Lecturer: Miljen Matijašević G10, room 6, Tue 11:30-12:30 Session 4

1. Revision of the last session 2. Contract 3. Case studies

Negligence

1. How do we define negligence? 2. What elements need to be established if the defendant is to be found liable for negligence? 3. What standards of care do you know? 4. What is the ‘but for’ test? 5. What problems can arise in proving causation?

6. How is liability determined if the damage could also have been caused in a non- tortious way? 7. How can the chain of causation be broken? 8. What is foreseeability of damage? 9. What is remoteness? 10. What is statutory negligence?

Unit 30

Think about the following questions:  What is a contract?  How does it differ from a regular agreement?  What are its essential elements?  In what situations do we enter into contracts?

A contract can be defined as: a legally binding agreement between two or more parties which the courts will enforce  In order for an agreement to be considered a contract it must meet certain essential requirements.

The four essential elements of contract are: 1. Offer 2. Acceptance 3. Consideration 4. Legal Capacity and Intention In addition to these, certain other requirements need to be met as well.

 one party must have made a binding offer to another, containing the basic terms of the agreement  if the other party accepts the offer with all the basic terms, a contract is formed (unqualified acceptance)

 If the other party tries to negotiate by suggesting different terms, this is referred to as a qualified acceptance  Qualified acceptance does not result in a contract, but constitutes a counter-offer  If, in turn, the other party gives unqualified acceptance to the counter-offer, a contract is formed

 Possible issues that may arise: ◦ Was there unqualified acceptance? ◦ Was the acceptance communicated?  In some cases, acceptance does not even have to be communicated by words – it is implied from conduct (e.g. the everyday situation of buying a product in a retail store)

 Refers to the promise between the contracting parties to give each other something of value  e.g. goods, price paid for the goods, service, etc.  In addition, the object of the contract must not be disapproved by the law

 The contracting parties must have legal capacity to contract (poslovna sposobnost)  Also, intention to create legal relations must be present (this can be disputed if there is evidence to the contrary)

made orally  Contracts can be made orally, although some contracts are only effective if made in writing: ◦ contracts for the sale of land, ◦ contracts for transfer of shares, ◦ hire-purchase contracts ◦ lease contracts, etc.  Contracts must be enforceable – if either party fails to perform the contract, the courts must be able to enforce it

 Contracts which do not meet the requirements can be: ◦ void ◦ voidable ◦ unenforceable

 A void contract is one lacking one of the essential elements, i.e. a contract is not formed at all  Examples: ◦ one or both parties do not have legal capacity ◦ the object of the contract is illegal

 A voidable contract is a contract which has a defect in its formation and can be rescinded (avoided) by one of the parties if they choose  Examples: ◦ terms agreed under duress ◦ there was fraud or misrepresentation

 An unenforceable contract is valid but will not be enforced by the court  Examples: ◦ promise to pay a gambling debt ◦ the limitation period for bringing action against the breaching party has expired (six years after the breach) ◦ evidence of a contract is lacking

 Remedies available in an action for breach of contract are: ◦ compensation ◦ injunction ◦ specific performance ◦ rescission (in some jurisdictions)  Specific performance is relatable to an injunction. However the court order the breaching party to perform the contract, i.e. It does not order them to stop an activity but rather to complete the contract.

binding offer acceptance unqualified agreement qualified agreement consideration legal capacity terms of contract counter-offer void contract voidable contract unenforceable contract specific performance rescission

1. Parties are considered to have entered into contract if there has been _________ acceptance of the binding offer made by one party. If this criterion has not been met, the contract is considered as _________. 2. If found liable for a tort, the tortfeasor may be made to pay _________, or the court may issue a(n) _________ ordering them to discontinue the tortious activity. 3. The defendant may be ordered to pay _________ for the injury or loss _________ by the _________. 4. A tort is a civil _________, less serious than a crime, committed by one person against another, other than _________ of contract.

 Facts: P. had an idea for a new food product. P. wrote a letter to D. offering to reveal such idea, and D. responded with a letter stating that they would consider her idea, "but only with the understanding that the use to be made of it by [D.], and the compensation, if any, to be paid therefor, are matters resting solely in our discretion." P. revealed her idea, which D. used, and paid P. no compensation. P. sued.  Nature of the Risk: When a seller discloses an idea after allowing the buyer the unlimited right to determine the price after use of the idea, he assumes the risk that the compensation may be less than he hoped.

 Issue: Was there an implied promise to pay a reasonable value for the P.'s recipe?  Holding: Where the buyer retains an unlimited right to determine the price of goods, and the seller acts relying upon the good faith and sense of fairness of the buyer to provide reasonable value for the goods, the courts cannot enforce a payment by the buyer.  Reasoning: The court reasoned that the wording of the letter was too vague to consider a contract, and that the P. acted voluntarily at the mercy of the D..

 Facts: P. owned a rough and uncut stone she did not know the identity of, although she thought it might be a topaz. P. sold said stone to D., who also did not recognize the identity or value of the stone, for $1. Upon finding out that the stone was actually a very valuable diamond, P. offered the D. $1.10, and demanded return of the stone. D. refused, and so P. brought suit.  Nature of the Risk(s): In the absence of explicit contractual statements otherwise, the seller assumes the risk that he under-charged for an item, and the buyer assumes the risk that he over-paid for an item.

 Issue(s): Is the P. entitled to rescind the sale because she was ignorant as to the "hypothetical fair market value" of the stone she sold D.?  Holding(s): "In the absence of fraud, the [hypothetical] value of the property sold, as compared with the price paid, is no ground for recission of the sale."  Reasoning: Neither the P. nor the D. had any knowledge that the stone was a diamond, so there was no fraud. Therefore, the risk was equally borne by both the buyer and the seller, and the seller could not rescind the sale.

 Facts: The Defendant received and read a newspaper over the course of several years. He had at one time subscribed for a two- year period, but claims that after the expiration of those two years, he requested that service be stopped. The Claimant is the newspaper owner, who claims he never received notice of stoppage.  Nature of the Risk: In the absence of a contract, the Claimant assumed the risk that the Defendant would not pay for his newspaper.

 Issue: Was there a contract implied by the conduct of the Defendant in reading the newspaper?  Holding: One who accepts an unsolicited newspaper, and reads it, is liable for the cost of the newspaper subscription if it is understood that the newspaper is not free.

 Reasoning: The court stated that although one cannot be forced into a contract unilaterally by the newspaper company, the Defendant's actions of reading the newspaper, which he knew was not free, implied that he had to pay for it. The court constructed a quasi-contract due to the Defendant's deriving benefit, and held the Defendant liable for the subscription price.