Business law case assessment Assignment Example | Topics and Well Written Essays - 2250 words

Business law case assessment - Assignment Example They can succeed if it is established that Mercury & Partners owed a duty of care to them and that duty has been breached. On the other hand, Mercury & Partners might look to contend that they had no relation with Elvis and Dionne. There is no privy as there is not contract between them. A contractual liability is different from being liable for negligence. Negligence liability does not require the parties involved to be in a contract. The tort of negligence emanates from the landmark case of Donoghue v Stevenson (1932)1 in which the defendant drank from a bottle of ginger beer which had a snail. It was held that the manufacturer of the bottle had a duty of care to keep the ginger beer free from snails as his bottles were opaque and any unsuspecting user could have drank it. The tort of negligence has five elements: i. Duty of care; ii. Breach of duty; iii. Factual causation; iv. Legal causation or remoteness; v. Harm; Firstly, in order to establish a duty of care, courts apply a â⠂¬Å"threefold test† that was introduced in Caparo v Dickman (1990)2. The three conditions are: i. The harm must be foreseeable; ii. There must be a relation of proximity between the parties involved; iii. It must be fair, just and reasonable to impose liability. In Caparo v Dickman (1990)3, Lord Oliver made it clear that once it is maintained that the harm was foreseeable, the relationship of proximity is automatically established. The courts have to examine whether it is just and reasonable to impose liability. Sometimes, the harm that is done is so remote that it fails the criterion of reasonableness. Most importantly, the individual circumstances of a particular case play a huge role in the establishment of duty of care. The aforementioned criteria are not necessarily the benchmark on which duty of care is to be established in each and every case. For tort of negligence, when duty of care is established, there must a breach of duty and harm must be caused which is the direc t result of the breach of duty. Factual causation is very important as a plaintiff cannot look to hold the defendant liable for a loss or harm that is not a direct result of the defendant’s act of negligence. It is unfair, unjust and unreasonable to hold the defendant liable for an unforeseeable harm. However, a physical harm poses a different question. In the given case, Mercury & Partners are the auditors and they have a duty to prepare their audit reports with reasonable care. There is a wide variety of users that uses audit reports to make important economic decisions. Reliability is a principle that sits at the very base of preparing audit reports. Elvis and Dionne made investments in Holly plc because of the information that they received from the audit report prepared by Mercury and Partners. Their loss was reasonably foreseeable which means that there was a relation of proximity too. There has been a breach of duty which has directly resulted in Elvis and Dionne losin g $100,000 each. All the elements of tort of negligence are there. However, the recovery of the loss might not be possible. In Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964)4, Lord Reid explained that when a negligently made article is broadcast so that a variety of ultimate consumers act on the advice, it is unfair to hold the advisor liable to each and every one of them. Therefore, Elvis and Dionne might just be one of the many ultimate consumers