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  1. BUSINESS ETHICS Prof. MahajanSamant

  2. TORT • Derived from the Latin term TORTUM • TORTUM – to twist, and implies conduct which is twisted or tortious • A TORT is a wrong independent of contract, giving rise to a civil remedy for which compensation is recoverable. It is an act or omission which prejudicially affects a person in some private legal right (………..WRONGFUL ACT………..)

  3. ACT….. • The word ACT is used in a wide sense to include both positive and negative acts i.e. Acts and omissions • Omission…………is failure to do an act as a whole • Voluntary Act…A self – willed act => Liability! • Involuntary Act….May not involve the Liability?

  4. ACT • Mental Elements…..Even a voluntary act, except in those cases where the liability is strict, is not enough to fasten liability and it has to be fastened with requisite MENTAL ELEMENTS • A. MALICE • B. INTENTION, NEGLIGENCE & RECKLESSNESS • C. MOTIVE

  5. MALICE…. • In popular sense => spite or ill – will • (a.) Express Malice or Malice in Fact or Actual Malice means ill – will against a person • (b.) Malice in Law or Implied Malice means wrongful act done intentionally without just cause or excuse

  6. MALICE • Moghul Steamship Co. V/s McGregor (1892) A, B, C & D…..all shipowners drive out rival F! • Bromage V/s Prosser……………. Blow to stranger – death? Or poison a fishery! • Allen V/s Flood………………… Both employees, 1 in Union, 2 Not! Plea & dismissed 1!

  7. TORTS AFFECTING CONTRACTUAL & BUSINESS RELATIONS • I. Procuring A Breach Of Contract…..TORT! ….is an actionable wrong to induce a person to commit a breach of contract which he has entered into with another person. 1. Lumley V/s Gye Manager of theatre 1 V/s theatre 2, inducing MISS to break! 2. Quinn V/s Le Athem To do good, A induced B’s workmen to discontinue work! 3. Allen V/s Flood Day to Day basis work, 1 not in Trade Union, but the Trade Union objected, so company dismissed 1.

  8. TORTS AFFECTING CONTRACTUAL & BUSINESS RELATIONS • II. Conspiracy.........Both a Tort & a Crime!! 1.Mogul Steamship Co. V/s. Mc Gregor, Gow & Co. For Tea Trade Monopoly in China, ABCDEF drove out M! 2. Allen V/s. Flood 3. Quinn V/s. Lee Anthem…… For 1 of best customers to stop taking suppliers 4. Sorrell V/s. Smith D…a Union of Newspaper owners P…a Retailer, Retail Agents Association A…a Wholesaler D…If A supplier to P, D threatened to cut – off the supply of papers to A, BECAUSE P…Transferred his custom from B to A

  9. TORTS AFFECTING CONTRACTUAL & BUSINESS RELATIONS 5. Craft Hand Woven Haris Tweed Co. Ltd. V/s. Veitch • Originally yarn was hand – spun from wool by the crafter of Lewis and wholly produced in the Aisle of Lewis • By 1980….Hand Spinning became commercially impracticable so many weavers imported, but 5 mills continued • Interest of all to get a minimum price fixed! • 90% of workers were in the Union!! • Plea to increase wage but N.A. since imports! • Therefore Embargo, No work on imported material • 7 Small Producers / Importers sued Union for Conspiracy

  10. SILENCE 1. A sells by auction to B, a horse which A knows to be unsound. A says nothing to B about the horses unsoundedness. 2. B is A’s daughter, here relation, hence A’s duty! 3. B says to A – “ If you do not deny it, I shall assume that the horse is sound.” A says nothing. Here, A’s silence is equivalent to speech 4. A & B, being traders, enter upon a contract. A has private information of a change in prices which would affect B’s willingness to proceed with the contract. A is not bound to inform B.

  11. SILENCE WHEN AMOUNTS TO FRAUD • Turner V/s. Green…. Negotiation for settlement between X & Y. Solicitor of X learnt that suit was decided against X. Y unaware and agreed to settlement. • Mere silence, without any duty to speak, does not, by itself, amount to fraud • Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless – a.) The circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or b.) Silence is, in itself, equivalent to speech

  12. FRAUD • Means & includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into contract 1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true. 2. The active concealment of a fact by one having knowledge or belief of the fact. 3. A promise made without any intention of performing it. 4. Any other act fitted to deceive. 5. Any such act or omission as the law specially declares to be fraudulent.

  13. FRAUD - EXPLANATION • Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech

  14. INTENTION, NEGLIGENCE & RECKLESSNESS & MOTIVE • Intention….is an internal fact, something which passes in the mind & direct evidence of which is not available • An act is intentional as to its consequences if the person concerned has the knowledge that they would result & also desire that they should result • Negligence….It is a case of negligence when the consequences are not adverted to though a reasonable person would have foreseen them

  15. INTENTION, NEGLIGENCE & RECKLESSNESS & MOTIVE • Recklessness……It is ‘recklessness’ when the consequences are adverted to though not desired & there is indifference towards them or willingness to run the risk. Recklessness is sometimes called ‘Gross Negligence’ but very often & more properly it is assimilated with intention • Motive……is the ulterior object or purpose of doing an act. It differs from intention in 2 ways. First, intention relates to the immediate objective of an act, whereas, motive refers to the ulterior objective. Secondly, motive refers to some personal benefit or satisfaction which the actor desires whereas intention need not be so related to the actor. • E.g. A poisons B, hence, • Intention is to kill B • Motive maybe to inherit B’s property

  16. INTENTION, NEGLIGENCE & RECKLESSNESS & MOTIVE • Malfeasance …. Applies to the commission of an unlawful act. E.g. tresspass & it does not require proof od intention or motive • Misfeasance …. Is applicable to improper performance of some lawful act. E.g. there is negligence • Non – feasance …. Applies to the omission to perform some act when there is an obligation to perform it

  17. FAULT • Liability for TORT generally depends upon something done by a man which can be regarded as a fault for the reason that it violates another man’s right. But liability may also arise without fault. Such liability is also known as Absolute or Strict Liability. • E.g. Rylands V/s. Fletcher also M.C. Mehta V/s. Union of India

  18. FAULT • Mayor of Bradford V/s. Pickles (1985)…. D sunk a well, cutoff underground water of P & P’s well was dried up. 2. Quinn V/s. Leathem (1901)….. Without just cause or excuse, induced B’s workmen to discontinue work. Good Motive! 3. Tithes’ ( A tenth of the Harvest ) Imperilled…. P – A village peasant, carelessness, tithe left in field, finding corn being eaten by horse, D with benevolent purpose put the corn in P’s barn ( Grain Storage Place).

  19. FAULT 4. Guille V/s. Swan …. (1822)…. D, A balloonist, descended in P’s garden, crowd broke & damage to vegetables & flowers. 5. Wilkinson V/s. Downtown (1892)…Grey Hair Case! D jokes, P’s husband met with an accident & both legs broken, P seriously ill, hair turned white, danger to life for sometime.

  20. IGNORANTIA FACTI EXCUSAT – IGNORANTIA JURIS NON EXCUSAT • Ignorance of fact excuses – • Ignorance of the law does not excuse 1. Higgs V/s. Scot……. A is B’s Tenant, B’s property MORTGAGE with C, C sends notice to A to pay rent to C because B has not paid interest, IN ARREARS, so pay to C. Notwithstanding notice, A pay B, again compelled, pays C

  21. IGNORANTIA FACTI EXCUSAT – IGNORANTIA JURIS NON EXCUSAT 2. Tolson (1889)…. Mrs. Tolson, deserted by her husband, remarries (believing death of her husband) within seven years. 3. Bell V/s. Lever Brothers (1932) Compensation was paid to the Appellants under an agreement of termination of service contracts having several years to run. Appellant was guilty of breaches of duty hence SUMMARY DISMISSAL would have been justified. But unknown to Respondent.

  22. IGNORANTIA FACTI EXCUSAT – IGNORANTIA JURIS NON EXCUSAT 4. Prince’s Case (1875) Girl asks the accused to take her away from parents. Started her age more than 18, but she lied. She appeared more than 18, Person takes away. 5. Consolidated Co. V/s. Curtis & Son (1982) Owner assigned (By bill of sale) furniture to P. Subsequently, he employed D = Firm of Auctioneer to sell it by auction. D had no notice of the Bill of Sale, sold & delivered to the purchaser. D pleaded – had no notice of true ownership.

  23. VOLENTI NON FIT INJURIA • Damage suffered by consent is not a cause of action • Auto Racing Club Racing car shot over the railing & killed two spectators. No Negligence! 2. Scalon V/s. Wedgor D conducted Fire Work Display, explosion, P injured, D had exercised reasonable care. 3. Dann V/s. Hamilton P knew, Car - Driver under influence of drink, she chose to travel, accident, injury, driver killed, action against the personal representative of driver.

  24. VOLENTI NON FIT INJURIA 4. Haynes V/s. Harwood (1935) D’s horses negligently left unattended, boy threw a stone, P is a constable, ran out to stop the horses, severely injured. 5. Smith V/s. Baker (1891) : Stone Quarry Case Negligent practice prevailed in the Quarry, swinging stones by means of the crane, Injury! Workman had full knowledge & was in service.

  25. RES ISPA LOQUITUR • ……..The Thing Speaks For itself • Byrne V/s. Boadle (1863) Fall of a barrel of flour rolled out of a window on second floor of D’s shop fell on P passing along the street, injury. 2. Crisp V/s. Thomas (1891) Classroom blackboard slipped down & fell, one student injured, Teachers Negligence?

  26. RES ISPA LOQUITUR 3. State of Punjab V/s. Kalia (1969) SP on official tour, accident, injury when official jeep under control of the driver, But road unworthy condition, Worn Out Tyres! 4. Donoghue V/s. Stevenson P with friend goes to café for refreshment, Two slices of Ice – Cream & a bottle of Ginger – Beer, Dark opaque glass bottle, had decomposed snail in the remaining half, sight plus consumption, Injury!

  27. RES ISPA LOQUITUR • Austin V/s. Great Western Railway (1867) Mother with three year old son, Took her ticket, Injury to son on account of railway’s negligence. 6. Manchester Corp.V/s. Markland (1936) P’s service water – pipe burst, pool of water, three days, froze into ice, Motor – Car skidded, knocked down & killed a man, Widow sued BOTH!

  28. EX TURPI CAUSA NON ORITUR ACTIO • If the damage is in any manner tainted with IMMORALITY, no cause of action can be maintained 1. Hegarty V/s. Shine (1878) P is infected by D, her paramour, with a V.D., existence of V.D. concealed by D. Therefore D’s right! 2. Dry Day (Six Winfield) X stole a bottle of whisky from Y, and if Y had purchased it on a DRY DAY! 3. MAKANJUOLA V/s. Commissioner of Police (1989) Nigerian student took Part – Time work & contravened her visitor’s permit, policeman called at her house, DEPORT, but if sex then no report! She granted sexual favors to avoid deportation, SUIT!

  29. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY • Liability by Ratification QUI FACIT PER ALIUM FACITY PER SE i.e. He who does an act through another, does it himself, in such a case, the person authorizing is liable, not only for the tort authorized but its direct consequences. [Hence Partnership Act]

  30. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY 1. Marsh V/s. Keating Partner in a firm of bankers caused a Customers Stock in the Firms Custody to be sold under a Forged Power of Attorney, Proceeds paid with agents, drawn out by Partner, Other Partners ignorant, Claim of Customer? 2. Debenham V/s. Mellon Wife pledges Husband’s credit when (a.) Living Together (b.) Separated, H’s Fault, W’s Fault

  31. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY 3. Miles V/s. Bough Act for building a bridge required that any notice to be given by trustees appointed, & by signature of three trustees, deputy clerk signature. Principle :- DELEGATA POPTESTAS NON POTEST DELEGARI i.e. Delegated Authority cannot be Re - Delegated

  32. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY B. LIABILITY arousing out of SPECIAL RELATIONSHIP • Master & Servant (1. ) Hewitt V/s. Bonvin (1940) Son drives Father’s car to drive two girl - friends to their home. Accident, Friend killed, Owner = Father Sued! (2.)Devinder Singh V/s. Mangal Singh (1981) Owner leaves car at workshop for repairs, car was test driven, accident, Owner Sued!

  33. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY TWO BASIC PRINCIPLES 1. QUI FACIT PER ALIUM FACIT PER SE He who does a thing through another DOES IT HIMSELF 2. RESPONDENT SUPERIOR Let the superior be responsible THUS : FOUR KINDS OF LIABILITIES L1 : Liability of the Master to Third Persons L2 : Liability of the Servant to Third Persons L3: Liability of the Master to Servant L4 : Liability of the Servant to Master

  34. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY L1 : Liability of the Master to Third Persons IN SERVANTS COURSE OF EMPLOYMENT 1. Birmingham Electric Co. V/s. Hawkins (USA Case) D’s Bus – Driver angered, HONKING but no over-taking, Stopped P’s Bus, Assaulted D. 2. Roberts V/s. Shanks D ordered CHAUFFER to take car to Garage. C went home, meals, while towards garage : Accident.

  35. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY 3. Century Insurance Co. Ltd. V/s. North Ireland R. Tr. Board B’s driver A of a Petrol Lorry, whilst transferring petrol to an underground tank, Lit Cigarette, FIRE! 4. Heasmans V/s. Clarity Cleaning Co. (1987) Cleaning contractor employed cleaning lady to clean office after office hours, £ 1500 Telephone Calls Bill?

  36. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY • A master becomes liable in following six ways: W1: Execution of masters specific orders Gregory V/s. Piper Dispute of Right of way, D orders his servant to place rubbish carefully, Touches!

  37. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY • W2 : Servants want of care or negligence • Bayley V/s. Manchester Railway (1873) Porter’s duty to prevent getting in wrong train, P was in right train but error by Porter! • Milner V/s. Great Northern Railway (1884) Cloak – Room – Clerk taking parcel to train, Running, Dashed Porter – TC Collided with P’s wife, Death! P sued the Railway

  38. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY 3. Williams V/s. Jones (1865) D employed his servant, a Carpenter, to make signboard in P’s shed, Pipe Smoking! 4. NaliniSengupta V/s. Calcutta Corporation C employed A = Driver, B = Cleaner, Repair, Workshop, Road Closed, A leaves, B drives? 5. Beard V/s. London General Omnibus End of tiresome journey, Conductor, relieved driver, drove, accident?

  39. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY • W3 : Excess or Mistaken Execution of Lawful Authority • Bayley V/s. Manchester Railway Porter pulls passengers! • Polant V/s. J.P. & Sons (1927) A carter in employment of X & Co. , following behind wagon with sugar, Boy, Stealing? Blow?

  40. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY • W 4 : Wilful Wrong on Masters Behalf + Intention • Jafferson V/s. Derbyshire Farmers Ltd. (1921) D using P’s premise as garage, Their servant poured out motor spirit from a drum, lit cigarette?

  41. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY • W 5 : Servants Fraudulent Act • Lloyd V/s. Grace Smith & Co. (1912) P, widow, Owns Cottage, Mortgage of £ 1000, Advice of Solicitors, Manager says SELL, Embezzles!

  42. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY • W 6 : Servants Criminal Act • UXBRIDGE Building Society V/s. Pickard (1939) P = Solicitor, practice in London with a branch office at S managed by C. C Frauds, Forgeries, Property & Money! { Defrauded persons were not P’s Client } Also, Ricketes V/s. Thos Thilling (1915) OMNIBUS Driving! D’s driver allows conductor to drive! ( Master’s liability where Servant Delegates Duty) But Master Not Liable (a.) M temporarily lent servant to another person (b.) M obliged by law to employ particular person e.g. PILOT! (c.) Head of Govt. Dept. & Employee of that Department Postmaster General & Telegraph Cable Repairer’s Act!

  43. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY • L2 : Liability of Servant to Third Person Whoever commits an illegal act! Remedy against both! • L3 : Master’s Liability to Servant (a.) If Volenti Non Fit Injuria. Therefore N.A.! Smith V/s. Baker….Stone Quarry Crane! Paris V/s. S.B.Council (1951) GOGGLES Case! Workman with only one good eye, metal chip, injured good eye, Goggle not supplied!

  44. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY • Refer : Workmen’s Compensation Act, 1923 (India) Workmen’s Compensation Act, 1925 (UK) And, Personal Injuries Act, 1963 (India) • REDCLIFFE V/s. RIBBLE (1939) : A & B Motor Drivers, Liverpool to N Journey, B told to return to D’s garage, B stopped at Liverpool, A knocked B, B filed suit against D, No Common Employment!

  45. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY • L4 : Servant’s Liability To Master If servant is Non – Feasance or Wrongful Ommissions! Master can recover Damages! • II Owner & Independent Contractor • III Principal & Agent • IV Company & Its Directors • V Firm & Its Partners • VI Guardian & Ward { Also Trust Management}

  46. Liability For Wrongs Committed By Others - VICARIOUS LIABILITY • Ellis V/s. Sheffield Gas…. Lay down pipes in street (illegal). • Burges V/s. Grey…. Drain construction, Heap of Gravel, Injury! • Penny V/s. Wimbeldon…. Highway work, Heap of Stones, No Light! • C. LIABILITY BY ABETMENT = As Much As!!!