Business Law

The law of tort seeks to govern the interaction by determining and controlling how business entities behave towards the elements in their social environment with whom they interact. Torts law is an aspect of the law, which seeks to create an obligation where a contract has not necessarily been entered into by the parties. It follows on the principle of fair dealings where a party may act in a manner that wrongs another. In the succeeding sections, this essay seeks to develop an understanding of the nature and applicability of Torts law in business dealings. In the first section, the elements that evidence the tort of negligence are discussed. The second section discusses the criteria for establishing a claim of negligent misstatement. In section three, the difference between primary and secondary victim under psychiatric injury is discussed. Later, an explanation of the fiduciary duties of an agent towards a principal is offered in section four.  In the last section, the paper analyzes a case study to apply the principles of torts law discussed in the preceding sections.

Claim for the Tort of Negligence

The tort of negligence occurs where an individual, who owes another the duty of care, acts in a manner that causes the other harm. However, where damage or injury occurs, a person may claim compensation from the alleged negligent party. In order to make a successful claim for negligence, the claimant must prove that there was an existing duty of care that the tortfeasor owed them; the tortfeasor breached the duty, and damages were incurred by the claimant. The duty of care can only exist where a fiduciary relationship existed between the two parties. In the absence of the relationship, the existence of the duty cannot be claimed. Additionally, there should be reasonably foreseeable circumstances for the occurrence of damages or loss, which the tortfeasor should have detected and prevented. Lastly, the establishment of the duty must be just and reasonable, such that the burden of care and the obligations of the relationships should be fair on all parties.

The claim of breach of duty is usually challenging to prove, as the claimant is required to prove that the tortfeasor could have foreseen the damage or loss and prevent it. The actions of the tortfeasor should have directly resulted in the damage or injury through not acting with reasonable care, ignoring the possibility of risks of injury, or exposed the claimant to the risks of injury. In proving that the duty of care established under the relationship that existed between the claimant and tortfeasor was breached, the claimant can claim negligence. Lastly, the issue of injury is crucial in the determination of the award of compensation to the claimant. The claimant is required to provide evidence that the actions of the tortfeasor are directly related to the injury. The injury or damage is definable under the law, or as evidenced by the physical injury or loss to the claimant. Where all the three conditions are met, a claimant is entitled to compensation for a value that would reinstate them to the original position they were in before the tort occurred.

Claiming Negligent Misstatement

A negligent misstatement is a concept, which primarily affects businesses that offer professional services and advice. This is in cases where a person, based on a business relationship seeks expert advice from a professional in the field. For instance, where expert advice is required to make an economic decision, a person who relies on the information and subsequently suffers an economic loss, while relying on the expert advice, may sue under negligent misstatement. There are four conditions, which must be met for the claim to be viable under negligent misstatement. The first is knowledge of the purpose of advice. The claimant must prove that the tortfeasor was aware that they intended to use their advice for a specified purpose. Secondly, the tortfeasor must be aware, at any point, that the advice would be communicated to the claimant who would use it for the specified purpose. Third, the claimant should prove that the tortfeasor was aware that upon receiving the advice, the claimant would make their decisions based on it. Lastly, it must be proved that the claimant in actuality relied only on the given advice in making their decisions. With the four conditions met, the claimant can claim damages against the professional for negligent misstatement.

Primary and Secondary Victims in Psychiatric Injury

The principle of psychiatric injury stems from the assumption that health encompasses both the physiological and psychological aspects of an individual. As such, psychiatric injury, even in the absence of physical injury is actionable under tort. This occurs where the actions of one individual are psychologically distressful to an individual. In business entities, this is most common in employer/employee relationships where the employer is legal, both under common and legislative law, obligated to protect the well-being of the employee. The obligation results in the creation of primary and secondary victims. The primary victim is one who is close to the event to suffer from psychological distress because they feared actual personal harm arising from the event. In the case of primary victims, the task of the court is to determine whether the defendant reasonably feared for their personal safety. On the other hand, secondary victims are determined by the proximity to the injured person. The issue at law is the determination of whether the psychologically injured party was emotionally or psychologically linked to the injured, such that, actual physical injury on the claimant would cause psychological distress.

The nature of the difference between the two victims is based on the proximity of the psychologically injured individual. In the primary victim instance, the proximity of the injured should be to an event that makes them fearful for their lives. The claim is based on the fact that, due to the event, the claimant was reasonably distressed with the assumption that the event would have occurred to them and caused them actual physical injury. On the other hand, the proximity tested in secondary victim scenario is that of the relationship between the victim and the injured person. In this case, there are two parties to the claim; the actual claimant, who suffered a physical injury; and the secondary victim, who suffered a psychological injury due to witnessing the claimant’s injury. The relationship between the two should be such that the secondary victim would suffer emotionally from witnessing actual physical harm befalling the claimant, such as a spouse, sibling or other close relationship.

Types of Fiduciary Duty A fiduciary duty exists where a relationship is formed out of a legal or ethical obligation between two individuals. It is used in law where trust is a significant component in the relationship and interactions between two or more individuals. In businesses, the trust offered by the customer is that the products, services, and other elements of the transaction with the business organizations are trustworthy. This means that information and commodities demanded by the customer are or the required quality from the seller. Four main fiduciary duties are established under an agent/principal relationship.