PRINCIPLES OF COMMERCIAL LAW

1. PRINCIPLES OF COMMERCIAL LAW MR. SEYRAM KAWOR (KAZOO) UNIVERSITY OF CAPE COAST DEPARTMENT OF ACCOUNTING AND FINANCE SCHOOL OF BUSINESS

2. UNIT 2: NEGLIGENCE UNIT OUTLINE Session 1: Duty of Care Session 2: The neighbour test Session 3: Statutory duties Session 4: Contributory negligence Session 5: Duty of care situations Session 6: Standard of care

3. Session 1: Duty of Care We shall examine the duty of care expected of persons. We will consider why a duty of care is expected at all and what happens if that duty is breached.

4. What is negligence? It is falling short of an objective standard of conduct. It is the breach of any duty to take reasonable care or exercise reasonable skill. Negligence as a tort is a breach of a legal duty to take care which results in damage, undesired by the defendant, to the plaintiff.

5. Ingredients of negligence • One person must owe another a duty of care. • There must be breach of that duty of care. • Damage must have been suffered as a result of that breach. Note that the burden of proof is placed on the plaintiff (the person who sues must prove that the other person has been negligence).

6. Duty of care A person will only be negligence if he/she is under a legal duty to take care. Duty of care is the chief corner stone of tort, in fact there is no other except damage to the plaintiff. Duty of care as a principle was generally pronounced in the case of Donoghue v. Stevenson. This is a case where someone consumes unwholesome ginger beer. In Acheampong v. Overseas Brewery Ltd. the plaintiff claimed that he suffered injury after drinking beer containing kerosene which had been negligently manufactured by the defendants.

7. Duty of care A duty of care is imposed on all persons generally not to cause harm to others. If a person likes it or not he/she has duty to take care not to cause harm to other persons or their property.

8. Session 2: The neighbour test One question to ask is how do we determine the duty of care in a particular case. The law provides that a person will only be liable if s/he is under a legal duty to take care.

9. Development of duty of care Lord Macmillan noted in Donoghue v. Stevenson that the categories of negligence are never closed. This means that the law will not deny a claim in negligence simply because that claim has not been recognized before. The law from then on developed new duty of care situations case by case to determine the situations under which a person would be said to owe a duty of care to another.

10. The neighbour test The law have always taken the view that a careless person should not have to compensate all the people who suffer as a result of his conduct. The courts will have to look at the interest of the victim whilst being fair to the careless person. Two questions that needed to be answered are: • Is there a sufficient relationship of proximity b/n the plaintiff and the defendant? • If so, are there any policy reasons for negating or reducing the class of persons to whom a duty is owed?

11. Proximity Proximity does not mean physical proximity. It is based on reasonable foreseeability and is generally known as the neighbour test. The first case to establish this principle of proximity was the case of Donoghue v. Stevenson. The religious rule that you must love your neighbour becomes in law, you must not ignore your neighbour.

12. Who is my neighbour? These are persons who are closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question. There are two common factors that must exist for the law to say there exist duty of care. These are: • Foreseeability • Proximity

13. Test of foreseeability For a duty of care to exist it must be shown that it was foreseeable that the action of the defendant could have caused harm to the plaintiff. The test is one of reasonable foreseeability. It is an objective test. It is whether a reasonable person would foresee that a damage may result from another person’s actions.

14. Test of proximity This test states that apart from foreseeability, the relationship between the defendant and the plaintiff must be close-proximate, that requires care to be taken. Daene J. Posits in Jaensch v. Coffey that, proximity involves the notion of nearness, such as an overriding relationship of employer and employee or a professional person and the client. Proximity can be shown in Harley v. London Electrical Board (cable@blind)and King v. Phillips (taxi over a boy bicycle).

15. Liability for omission Can a defendant be held liable for not acting, when his or her non-acting leads to the injury of another person? For there to be a breach of duty of care, there must be a standard of care expected that has been breached. The standard of care is the amount of care that must be taken. The standard required is that of a reasonable person. Whether a reasonable person would have foreseen harm by the circumstances and would have taken steps to prevent it. The defendant will be in breach of duty if a reasonable person could have foreseen have and have taken steps to prevent it.

16. Liability for omission In Blyth v. Birmingham Waterworks Co. the courts held that negligence is the omission to do something which a reasonable person 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. Is there a general duty to act positively for the benefit of others?

17. Session 3: Statutory duties We shall examine what statutory duty is and situations in which these duties are imposed on person or group of persons. Further we shall look at the elements of the breach of a statutory duty and find out whether third parties can be liable for the actions of other persons. Finally we shall examine whether a person who has a contractual duty with another can also sue in tort.

18. What is a statutory duty? It is a duty provided by an Act of Parliament, or a statute. It is a duty that is obligatory or mandatory on a person to perform. Where statutory duty is imposed upon a person or body of persons, and the duty is broken there is of course liability to whatever penalty the statutes provides. Persons who seek to enforce claims founded on a statute must generally show that the statute on its proper construction confers a civil right of action upon him or her. Where a duty is imposed by statute but no sanction of any kind is provided, there is a presumption that a person injured by its breach has a right of action.

19. Elements of the tort of the breach of a statutory duty • The duty must be owed to the plaintiff: Asafo v. Catholic Hospital of Apam and where so expressed as to limit classes of persons for whose benefit they exist: Harley v. Mayoh & Co. • The injury must be of the kind which the statute is intended to prevent: Gorris v. Scott • The defendant must be guilty of a breach of a statutory obligation: Chipchase v. British Titan Products Co. • The breach must have caused the damage: Boyle v. Kodak Ltd.

20. Liability for the actions of third parties Apart from vicarious liability, a person does not owe any duty to another to take certain actions or measure to prevent somebody else from injuring this other person. The following conditions are the only situations where a person can be held responsible: • There must be a special relationship b/n either the defendant and the plaintiff, or b/n the defendant and the third party, which places a duty on the third party from causing harm to the plaintiff • The injury caused by the third party must be due to failure to perform the duty of care on the part of the defendant.

21. Duties in contract and in tort A person who has contractual relationship with another can also sue in tort. This can happen when during the performance of the contractual obligations, the person has destroyed property belonging to the other party.

22. Contributory negligence Sometime ago the rule was that if the defendant were to prove that the plaintiff had also been negligent, the defendant would completely escape liability even if he or she had also been negligent. Since 1945, this rule has changed and others can also be held liable for the injury they sustain. We shall discuss the principle of contributory negligence how damages is awarded in contributory negligence.

23. What is contributory negligence It occurs when a party can be held partly to blame for the loss sustained as a result of a failure to take reasonable care against a foreseeable risk of injury. The defendant must prove that the plaintiff put him or herself in a situation in which the accident affected him or her (Jones v. Livox Quarries Ltd.)

24. The test for contributory negligence A person is guilty of contributory negligence if he ought reasonably to have foreseen that, if he or she did not act as a reasonable, prudent man, he might be hurting him or herself, and he or she must take into account the possibility of others being careless. Ekem v. Wiseway Cleaners Ltd.

25. Children There is no age below which, as a matter of law, it can be said that a child cannot be guilty of contributory negligence. But the age of a child in a circumstance which must be considered in deciding whether it has been guilty of contributory negligence. Yachuk v. Oliver Blais Co.

26. Apportionment of damages The result of a successful plea of contributory negligence is that there will be an apportionment (reduction) of damages. The plaintiffs’ damages will be reduced to the extent of their contributory negligence. A person can be guilty of contributory negligence if his conduct, while in no way contributing to the accident itself, contributed to the nature and extent of his injuries. O’Connell v. Jackson, Froom v. Butcher and Owens v. Brimmel.

27. Session 5: Duty of care situations Remember the first ingredient of negligence? The legal duty to take care. In this session we will study situations where duty of care arises

28. Types of Damage • Physical damage to a person’s property or to a person’s body • Economic loss • Pure economic loss

29. The law of physical damage Any person who causes damage to another person’s property is generally liable.

30. Economic Loss Although it is not impossible to claim for economic loss, it is difficult to do so. The liability for such loss is still probably not extensive as a physical damage. The plaintiff in Donogue v Stephenson could have recovered loss of earnings as well as medical expenses. In Ross v Caunters where the solicitors of the plaintiff were negligent in in arranging withnessing of will, the plaintiff suceeded

31. Economic loss cont’d For a person to claim for pure economic loss, he has to establish that there is a special relationship between the defendant and him, which proves that the defendant took responsibility to protect for the economic loss he has suffered

32. The law of Pure economic loss-Negligent statements It is generally acknowledged that a person who advises another must not be negligent in his advice. The rules of liability apply when negligent statements results in physical injury. Clay v Crump an architect's misstatement made him liable Where the misstatement results in financial loss, a different rule of liability applies. The differerence concerns who the duty of care is owed The neighbours rule is replaced with special relationship rule in Hedley Byrne & co Ltd v Heller

33. The law of Pure economic loss-Negligent statements In Hedley Byrne & co v Heller Partners ltd, the plaintiff relied on the advice of the defendant, a bank to grant credit to the defendants client, Easipower. The defendant on two occasions confirms that the client easipower was financially sound. The plaintiff relied on this assertion, granted credit to Easipower and this resulted in a loss of E17000. But for the disclaimer of liability, the plaintiff would have succeded

34. The law of Pure economic loss-Negligent statements cont’d To prove special relationship, the plaintiff must prove that • He relied on the special skill and judgement of the defendant • The defendant knew or ought to have known of this reliance and thus accepted responsibility for making the statement carefully

35. The law of economic loss due to physical Damage The courts will generally impose liability for economic loss that is the direct consequence of physical damage to property. Where the negligent conduct causes financial loss that is not consequential upon physical injury to persons or property, the courts have been generally unwilling to hold that the duty of care exist, and unlikely to impose for pure economic loss. In Spartan and Alloys v Maritime Lord Denning said there are several reasons why liability should not be imposed on the defendant for pure loss arising from the negligent cutting of electricity to the plaintiff’s factory

36. Session 6: Standard of care/proving negligence In this final session we will discuss how a person discharges his duty of care, the standard to determine the discharge and the situations where the plaintiff need not prove a breach of duty of care

37. Objectivity and standard of care A person discharges his duty of care if he takes reasonable care What then determines a reasonable care? There must be a standard. The standard is objective and depends on the different situation. In tort the standard is not laid down, the standard of care is that of a hypothetical reasonable person. In applying the standard the court asks what would a reasonable man foresee?

38. Objectivity and standard of care cont’d The next question is whether the relationship between the plaintiff and the defendant are such that the defendant owes a duty of care to the plaintiff If he has, has the breach of that duty resulted in a loss? A mere possibility of a loss does not make the defendant liable. The loss must occur. In law of tort a person is not liable for every carelessness that results in an injury For the plaintiff to succeed, there must be a foresight of the event occurring.

39. Objectivity and standard of care cont’d See Roe v Ministry of Health (the doctors case) Bolton vStone (cricket player’s case)

40. Objectivity and standard of care cont’d The care that a reasonable man will take varies in each circumstance. This include • The magnitude of the foreseeable risk Latimer v AEC (slippery floor case) • The known characteristic of the party exposed to the risk .Paris v Stepny Borough Council

41. Standard care of Professionals • the standard is what a reasonable competent professional will do under the circumstance. See Fodwo v Law Chambers (the Swedru careless Lawyers case)

42. How will one avoid liability Insurance: whether it is possible to take insurance against that risk Two- tier system

43. Res ipsa loquitur • There are circumstances where the plaintiff need not prove that the defendant has breached a duty of care. • The plaintiff can rely on the maxim of res ipsa loquitur, the thing speak for itself. • For a successful plea of res ipsa loquitur, there must be some conditions.

44. Res ipsa loquitur cont’d • That the “thing” is under the control of the defendant Gee v Metropolitan Railway, the railway company was held to be liable because the thing (the door) was under their control Contrast with Easson v London East Railway, it was established that the door was not sufficiently under the control of the defendant

45. Res ipsa Loquitur • That the accident must be such as would not in the ordinary course of things have happened without negligence • That the defendant has an information about the thing which the plaintiff is not privy to. A reasonable plaintiff may not be in the position to explain the events (absence of explanation of the accident) In Klutse and another v Nelson the plaintiff was unsuccessful in the plea because he was able to say what led to the accident

46. Res ipsa loquitur • In Dumgya v Sports Council of Ghana, the plea of res ipsa loquitur was successful as all the three conditions are present.

47. THANK YOU