BUSINESS ETHICSBUSINESS ETHICSProf. Mahajan Samant

TORTTORTDerived from the Latin term TORTUMTORTUM – to twist, and implies conduct

which is twisted or tortiousA 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………..)

ACT…..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?

ACTACTMental 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

MALICE….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

MALICEMALICEMoghul 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!

TORTS AFFECTING TORTS AFFECTING CONTRACTUAL & BUSINESS CONTRACTUAL & BUSINESS RELATIONSRELATIONS 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 GyeManager of theatre 1 V/s theatre 2, inducing MISS to break!

2. Quinn V/s Le AthemTo do good, A induced B’s workmen to discontinue work!

3. Allen V/s FloodDay to Day basis work, 1 not in Trade Union, but the Trade Union objected, so company dismissed 1.

TORTS AFFECTING TORTS AFFECTING CONTRACTUAL & BUSINESS CONTRACTUAL & BUSINESS RELATIONSRELATIONS 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. SmithD…a Union of Newspaper ownersP…a Retailer, Retail Agents AssociationA…a WholesalerD…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

TORTS AFFECTING TORTS AFFECTING CONTRACTUAL & BUSINESS CONTRACTUAL & BUSINESS RELATIONSRELATIONS5. 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

SILENCESILENCE1. 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.

SILENCE WHEN AMOUNTS TO SILENCE WHEN AMOUNTS TO FRAUDFRAUD1. 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

FRAUD 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.

FRAUD - EXPLANATIONFRAUD - EXPLANATIONMere 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

INTENTION, NEGLIGENCE & INTENTION, NEGLIGENCE & RECKLESSNESS & MOTIVERECKLESSNESS & 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

INTENTION, NEGLIGENCE & INTENTION, NEGLIGENCE & RECKLESSNESS & MOTIVERECKLESSNESS & 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

INTENTION, NEGLIGENCE & INTENTION, NEGLIGENCE & RECKLESSNESS & MOTIVERECKLESSNESS & MOTIVEMalfeasance …. 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

FAULTFAULTLiability 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

FAULTFAULT1. 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).

FAULTFAULT4. 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.

IGNORANTIA FACTI EXCUSAT – IGNORANTIA FACTI EXCUSAT – IGNORANTIA JURIS NON 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

IGNORANTIA FACTI EXCUSAT – IGNORANTIA FACTI EXCUSAT – IGNORANTIA JURIS NON 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.

IGNORANTIA FACTI EXCUSAT – IGNORANTIA FACTI EXCUSAT – IGNORANTIA JURIS NON 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.

VOLENTI NON FIT INJURIAVOLENTI NON FIT INJURIA Damage suffered by consent is not a cause of action

1. Auto Racing ClubRacing 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.

VOLENTI NON FIT INJURIAVOLENTI NON FIT INJURIA4. 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 CaseNegligent practice prevailed in the Quarry, swinging stones by means of the crane, Injury! Workman had full knowledge & was in service.

RES ISPA LOQUITURRES ISPA LOQUITUR……..The Thing Speaks For itself

1.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?

RES ISPA LOQUITURRES ISPA LOQUITUR3. 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. StevensonP 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!

RES ISPA LOQUITURRES ISPA LOQUITUR5. 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!

EX TURPI CAUSA NON EX TURPI CAUSA NON ORITUR ACTIOORITUR 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!

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITYA. Liability by Ratification

QUI FACIT PER ALIUM FACITY PER SEi.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]

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITY1. 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

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITY3. 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

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITYB. LIABILITY arousing out of SPECIAL

RELATIONSHIP1.Master & Servant(1. ) Hewitt V/s. Bonvin (1940)Son drives Father’s car to drive two girl - friends to their home. Accident, Friendkilled, 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!

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITYTWO BASIC PRINCIPLES

1. QUI FACIT PER ALIUM FACIT PER SEHe who does a thing through another

DOES IT HIMSELF2. RESPONDENT SUPERIOR

Let the superior be responsible

THUS : FOUR KINDS OF LIABILITIESL1 : Liability of the Master to Third PersonsL2 : Liability of the Servant to Third PersonsL3: Liability of the Master to ServantL4 : Liability of the Servant to Master

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITYL1 : Liability of the Master to Third PersonsIN 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.

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITY3. 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?

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITYA master becomes liable in

following six ways:

W1: Execution of masters specific orders

Gregory V/s. PiperDispute of Right of way, D orders his servant to place rubbish carefully,

Touches!

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITYW2 : Servants want of care or

negligence1.Bayley V/s. Manchester Railway (1873)

Porter’s duty to prevent getting in wrong train, P was in right train but error by Porter!

2.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

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITY3. Williams V/s. Jones (1865) D employed his servant, a Carpenter, to make signboard in P’s shed, Pipe Smoking!

4. Nalini Sengupta 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?

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITYW3 : Excess or Mistaken Execution

of Lawful Authority

1.Bayley V/s. Manchester Railway Porter pulls passengers!

2.Polant V/s. J.P. & Sons (1927)A carter in employment of X & Co. , following behind wagon with sugar, Boy, Stealing? Blow?

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITYW 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?

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITYW 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!

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy 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!

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy 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!

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITYRefer :

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!

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITYL4 : Servant’s Liability To Master

If servant is Non – Feasance or Wrongful Ommissions!Master can recover Damages!

II Owner & Independent ContractorIII Principal & AgentIV Company & Its DirectorsV Firm & Its PartnersVI Guardian & Ward { Also Trust

Management}

Liability For Wrongs Committed Liability For Wrongs Committed By Others - VICARIOUS LIABILITYBy Others - VICARIOUS LIABILITY1. Ellis V/s. Sheffield Gas…. Lay down

pipes in street (illegal).2. Burges V/s. Grey…. Drain

construction, Heap of Gravel, Injury!

3. Penny V/s. Wimbeldon…. Highway work, Heap of Stones, No Light!

C. LIABILITY BY ABETMENT = As Much As!!!