Business Law -Tort Law

Lucy Jones, Introduction to Business Law (Oxford University Press, 2011). Chapter 11 on The Tort of Negligence (Refer to pages 340 – 374). Please note that we ARE NOT going through every single areas in relation to negligence. For instance, the area on nervous shock.

Aims and Objectives: - To enable students to appreciate the general law of tort, especially the concept of negligence; To understand how this area applies in business context and its wider importance; The relationship between Law of Contract and Law of Tort (Both are civil in nature)

Further Reading: -

Keenan and Riches Business Law – Part 3: Business Transactions, Chapter 11

Mortimer, T; Business Law – Lecture 10 (All Inclusive)


The concept of business law primarily involves contractual matters. The concept of offer and acceptance, together with other positive criteria are vital in order to commence a legal relationship between the parties. These involves relationship between seller and buyer, employer and employee, manufacturer and distributor or even owner and visitor to the land!

Therefore, the relationship between the parties does potentially cover other aspects of law as well. For instance, a person could commence an action under tort if he suffers injury or losses as a result of the company’s negligence.

What is Tort?

1.The word “tort” is derived from the Latin word “tortus” meaning “twisted”. It came to mean, “wrong”, and it is still so used. In English the word “tort” has a purely technical legal meaning: - a legal wrong for which the law provides a remedy.

2.It is now generally accepted that the purpose of tort is to protect a person’s right and its aim is to provide compensation to those whose right has been affected. Basis for tortuous liability

Tort has traditionally been based on principle of fault. As a general rule, the defendant will not be liable to compensate the P unless he is at fault i.e. the “fault principle.” It is the P who bears the legal burden of proving that the D was at fault. This is based on the concept of justice and fairness.


1.The first and the most important element which must be proven by the P is that the D owed a duty of care to the P, otherwise, there will be no point in considering whether a particular act or omission which has resulted in harm was negligent.

[Donoghue v Stevenson (1932)] (Action by consumer against manufacturer in respect of personal injury)

FACTS: A manufacturer of ginger beer sold to a retailer the ginger beer, which contained in an opaque glass. Hence its contents were not visible. The retailer resold it to Mrs.Donoghue/M’Alister (P)’s friend, who treated P with its contents. She drank some of the contents and when her friend refilled her glass from the bottle, there floated out the decomposed remains of a snail. She suffered from shock and severe gastric as a result. She sued the manufacturer for negligence.

HELD: The doctrine of privity of contract prevented her bringing a claim founded upon breach of warranty in a contract of sale, as she was not a party to the contract. But majority of HOL came to conclusion that the manufacturer owed her (as consumer) a duty of care that the bottle did not contain noxious matter and that he would be liable in tort if that duty was broken.

-Where Claimant might not have sufficient action contract might nonetheless have valid claim under tort. In order to show whether the person owes a duty of care, there MUST be PROXIMITY, FORESEEABILITY OF DAMAGE and FAIR, JUST AND REASONABLE TO IMPOSE THE DUTY ON THE PERSON. [Caparo v. Dickman Industries]

Gorham v British Telecommunications plc (2000) – CA

FACTS: A man G was advised to change from the BT pension scheme to a Standard Life personal pension, and did so, but it subsequently became clear that he (like many other people) had been negligently advised. When G died shortly afterwards, his wife and children did not receive the same benefits they would have received had he remained in the company scheme.

HELD: A duty of care was owed by the Standard Life (as employers of the adviser) to not just G but also to his dependants, especially since he had made it clear that his main concern was to ensure adequate provision for them.

2.Once the P has shown that the D owed him a duty of care, it is necessary for him to prove that the D was in breach of that duty.

[Nettleship v Weston (1971)]

FACTS: The P gave the D driving lessons. The D had been careful but on her 3rd lesson, the car struck a lamp- post and the P was injured. P sued the D. The question before the court was “What was the standard of care required of a learner driver?”

HELD: Lord Denning – The standard of care required of a learner driver is the same standard of care expected of an experienced driver. “

How about professionals?

3.The 3rd element that the P must establish is that the breach of duty had caused damage to the P and the damage was not too remote as regarded in law.


1.The employer will only be liable for those torts, which have been committed within the course of employment. If the tort is committed outside the course of work, the employee will be personally liable.

Century Insurance v Northern Ireland RTB (1942)

FACTS: Driver of a petrol lorry was employed by the D to transport petrol to stations and transfer the petrol to underground tanks. The driver was under strict guidelines not to smoke. While transferring petrol in the P’s station, the D struck a match to light a cigarette and threw it on the floor. There was an explosion and the station was destroyed.

HELD: The D was vicariously liable for the negligence of the driver as unloading the petrol was what he was hired to do. Where the employee carries out his work in a negligent manner, the employer shall be liable.

2.As a general rule, there is no vicarious liability on the part of the employer for the torts of his independent contractor.

3.However, there are exceptions to this general rule where a person can be liable: - If there is a failure to ensure the independent contractor is reasonably competent and carried out reasonable supervision.


1.Employers’ liabilities concern the question as to whether an employer should be liable for the injuries suffered by his own employee during the working hours.

2.This area in tort is different from vicarious liability in the sense that the latter concerns the question as to whether an employer shall be liable for the tort committed by his employee.

Employers are under a duty to ensure that the staff whom they employ are competent to undertake the task which they are required to perform and must train them to use any equipment in the correct manner.

There is a duty at common law imposed upon all employers to ensure that any equipment provided for the use of employees is of a safe standard. This will also include a duty to ensure that the equipment is properly maintained. Employers are required at common law to take reasonable steps to ensure that places of work are safe. Hatton v Sutherland (2002) – CA

HELD: The claims for psychiatric injury arising from stress at work were to be considered in accordance with the ordinary principles of employer’s liability. The test was the same whatever the employment: there were no occupations, which should be regarded, as intrinsically dangerous to mental health. APPENDIX




1. Tort liability arises from a duty imposed by the law independent of the consent of the parties. 1. Contractual liability arises from the agreement between the parties.

2. Since law fixes the duties or liabilities in tort, the parties to an action usually have no contact before the tort is committed. 2.

Since the contractual duties/liabilities are fixed by the agreement between parties, the parties will have had some contact and be fully aware of their legal duties before any breach of contract occurs.

3. The main aim of tort is said to be compensation for harm suffered as a result of the breach of a duty fixed by law. 3. The main aim of contract is to support and enforce contractual promises, and to deter breaches of contract.

4. The aim of the award of damages in tort is to restore the P, in so far as money can do so, to his/her pre-accident. 4.

The aim of the award of damages in contract is to place the P in the position he/ she would have been in if the contract had been performed.

5. Tort compensates both tangible losses and for factors which are enormously difficult to quantify e.g. loss of amenity, pain & suffering, nervous shock, as well as intangible losses.

5. Contract is less willing to contemplate awarding damages for such nebulous factors as injury or feelings.

6. Tort damages = ”unliquidated” i.e. P is not claiming a fixed amount of compensation. 6. Contract damages = “liquidated” i.e. P has assessed exactly how much the breach of contract has cost & claimed that fixed amount.