Solution Issues in Kalpana-Rafia Contract

So, the pre contractual statement is: (Gibson and Fraser, 2013) When they become part of the contract – When pre contractual statements are negotiated amid the parties and the parties intend the statements to be promissory in nature then such statements become contractual terms. When any collateral contract is established amid the parties then there are two contracts that exists, that is, the main contract (written contract) long with collateral contract (oral contract). Any kind of pre contractual negotiations can be determined to be part of

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Contents
Solution....................................................................................................................................2
Issues....................................................................................................................................2
Relevant Law........................................................................................................................2
Application of law.................................................................................................................5
Reference List.........................................................................................................................10
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Solution
Issues
i. Is the oral assurance, given by Kalpana to Rafia, a term of the contract or
not?
ii. If the oral assurance can be regarded as a term, is a court likely to regard it
a condition or warranty?
iii. What remedies are open to USC given the facts?
Relevant Law
When any contract is made amid the parties then the obligations that are imposed
upon the contractual parties must comply with the contractual terms. The terms that
are incorporated in the contract are normally classified into two broad heads, that is,
express terms and implied terms. (McKendrick and Liu, 2015)
The terms which are articulated by the contractual parties in the contract either
verbally or in oral form are express terms. These terms are incorporated in the
contract and are obligatory in nature. But, the terms which are undertaken by the
parties not because they agreed expressly to the same but under the implication of
usage, trade, custom, law. The basic difference amid the express and implied terms
are analysed in B.P. Refinery (Westernport) Proprietary Limited v Shire of
Hastings (Victoria) [1977]. (McKendrick and Liu, 2015)
Both the terms whether express or implied is bound upon the parties and must be
comply with in order to avoid any kind of breach.
Now, when the parties try to incorporate terms by themselves either in written form or
verbally then such terms are express in nature and the terms are pre decided by the
parties, that is, before the formation of the contract. Thus these are express pre
contractual statements that are negotiated among the parties and which are made part
of the contract and others which are just mere negotiations and are not made part of
the contract. So, the pre contractual statement is: (Gibson and Fraser, 2013)
I. When they become part of the contract – When pre contractual
statements are negotiated amid the parties and the parties intend the
statements to be promissory in nature then such statements become
contractual terms. It is the parties intention that determine whether a
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statement made is considered to be part of the contract or not and is
analysed in Ellul and Ellul v Oakes (1972).
II. When they become part of the collateral contract – A collateral
contract basically means an oral contract. When any collateral contract
is established amid the parties then there are two contracts that exists,
that is, the main contract (written contract) long with collateral contract
(oral contract).
Any kind of pre contractual negotiations can be determined to be part
of the collateral contract and is binding upon the parties provided:
a. The pre contractual statements that are exchanged amid the
parties have promissory effect, that is, the parties intend to
abide by the statements;
b. The parties have not intended to make the statements as part of
the written contract. If the parties intend that the term must be
made part of the written contract then the parole evidence rule
will not allow the oral term to be enforced upon the parties;
c. That the oral terms that are made amid the parties coincide with
the formal contract as held in Hoyt's Pty Ltd v Spencer (1919)
d. There must be some supporting consideration for the statements
that are made by the parties as held in JJ Savage v Blakney
(1970) and Shepperd v The Council of the Municipality of
Ryde (1952).
III. When they are mere representations - When pre contractual
negotiations take place amid the parties but the parties does not want
the same to be promissory in nature then the same are non-binding and
are mere representation and is validly held in Ellul and Ellul v Oakes.
The representations have no relevance and are not made part of the
contract
IV. Statements construed as sales puff are not the terms of the contract in
either sense and thus are not binding in nature.
Thus, from the above analysis it is clear that a pre contractual statements can become
part of the written contract if such terms are either already made part of the written
contract or are considered as collateral contract.
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Now,
When the terms are made part of the contract then it is required to evaluate the nature
of the terms. The nature of the term decides whether the term is of so much
importance to the contract that if not complied with results in contract termination or
mere damages. So, based on the nature and importance of the term, the terms are
divided into conditions and warranties. (Davies, 2018)
Conditions
The concept of condition was for the first involved in the leading case of Poussard
v Spiers and Pond (1876) where the courts of United Kingdom has submitted the term
as of such a relevance that no contract can be considered to be formulated or
completed in absence of the conditions.
The terms which go to the source of the contract are called conditions. In the leading
case of Federal Commerce & Navigation Co Ltd v Molena Alpha Inc. (The Nanfri)
[1979] the concept and importance of conditions was analysed. In Koompahtoo Local
Aboriginal Land Council v Sanpine Pty Ltd [2007], Lord Justice Lewison submitted
that those terms which are so essential to the contract that without which no contract
can be performed are called conditions. (Davies, 2018)
In Rice (t/a Garden Guardian) v Great Yarmouth Borough Council [2000] it was
submitted by Hale LJ that the before analysing any term as condition or warranty, it is
important to understand whether the nature of the term is so serious that if not comply
with will gave an opportunity to the innocent party to cancel the contract, then, the
term is a condition otherwise the same must be considered as a warranty. (Davies,
2018)
Warranties
The terms which does not go to the source/root of the contract are called conditions.
In the leading case of Bettini v Gye 1876 the concept and importance of conditions
was analysed. These are nothing but minor contractual terms that are not central to the
contract and thus are not to be considered as its soul and heart. These are the terms
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which are made part of the contract along with the conditions so that the contract can
be complied with effectively. They are the supporting elements to the essential
contractual terms. (Davies, 2018)
The terms which are not much of the significance to the contract and are normally
required to support the conditions are considered as warranties.
Many times, it becomes very difficult to make a distinction amid a condition and a
warranty, such terms are in nominate term. The in nominate term are treated as a
condition or a warranty depending upon how much importance such terms acquires in
any given contract and is held in Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen
Kaisha Ltd [1961] and Lombard North Central v Butterworth [1986].
Now, after understand the difference amid the nature of a condition and a warranty it
is important to understand the consequences that each of the term will bring if
violated:
i. If condition is violated – In the leading case of Poussard v Spiers, it was
held that when any condition is violated then the law gave right to the
aggrieved party to consider the contract as terminated and also allow him
to bring an action for damages. When an condition is violated then the
essence of the contract is shattered and the contract become redundant.
Thus, the law has given a rightful remedy in favour of the aggrieved
wherein he has the power to terminate the contract and also sue for
damages
ii. If warranty is violated – If the warranty are violated by either of the party
to the contract, then, the aggrieved party is not deprived of the gain of
whole of the contract. Rather, when a warranty is violated then the non
essential, term of the contract is violated which does not goes to the root of
the contract. Thus the aggrieved party is only entitled to damages and does
not have the right to terminate the contract.
Application of law
Issue 1
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The oral assurance given by Kalpana to Rafia must be construed as term of the
contract and is thus binding upon the parties.
The facts reveal that, Rafia was properly authorized to act for University of the
Sunshine Coast (USC), thus the law of agency is not applied.
In USC, Raffia was appointed as an event manager. Rafia was organizing a
multicultural dance program at USC Campus. PSC intends that an agreement must be
made with Indian Students to attend USC on an exchange program.
Rafia is impressed with the photograph of Indian classical dance/performance sited on
Shastriya Nritya and meet the principal Kalpana. Raffia intends that Kaplan must
provide the main act on the evening of the event.
Now, there are various negotiations and statements that are exchanged amid Rafia and
Kalpana:
i. Rafia made it clear to Kalpana that the event is very important considering
the fact that there is a contract amid the USC and the Indian University.
ii. Rafia made it clear that she wants to put on a genuine, culturally
appropriate show for the Indian visitors.
iii. Rafia wants that Kalpana must advertise the Indian traditional dancers as
the central event to help sell tickets and to impress the visitors from India
at USC event.
iv. Kalpan made an oral statement that they perform beautiful Indian dance
and it’s a guarantee.
v. Kalpana further confirmed that she is an Indian by birth and had training in
India. They entered into a deal.
But, these are the oral statements that are made amid the parties. The oral terms have
no relevance when there is a written contract that exist amid the parties as held in
Gordon v Macgregor (1909).
Thus, a written contract is made amid Rafia and Kalpana wherein Kaplan dancers are
to perform at the USC multicultural event for a fee. However, there was no mention
of the kind of dance that the dancers should not perform nor the agreement contains
the oral assurance that is given by Kalpana that is the dance was ‘traditional, classical
Indian dance’.
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Thus, by applying Gordon v Macgregor (1909) the oral assurances that are made by
Kalpana to Rafia before the formation of the contract must not be enforced amid the
parties as they are not part of the written contract. Thus, the oral assurances must not
be construed as term of the contract.
But, at times pre contractual terms are binding upon the parties even if not made part
of the contact. By applying the law in Hoyt's Pty Ltd v Spencer, the oral terms that are
exchanged amid Rafia and Kalpana are made part of the collateral contract and thus
the oral negotiations must be considered as terms of the contract mainly because:
i. When the oral statements are made amid Rafia and Kalpana then they
intend to be promissory in nature. They want to abide by the same and the
statements were the basis for which the contract was made amid them;
ii. Both Kalpana and Rafia never intend that oral statements should be part of
the contract;
iii. The oral negotiations made amid them are in compliance with the formal
contract that is made amid them and is not contradictory to the same;
iv. The written contract that is made amid them is the supporting
consideration.
Thus, the oral negotiations that took place amid them are considered as part of the
contract by considering the same as collateral contract.
So, the oral negations are terms of the contract.
Issue 2
It is now important to analyze whether the terms, that, oral negotiations that took
place amid Rafia and Kalpana must be construed as conditions or warranties.
There are several oral negotiations that took place amid Rafia and Kalpana that were
not made part of the written agreement however the same are treated as terms of the
contract.
It is submitted that Rafia made it clear to Kalpana that the event is very important
considering the fact that there is a contract amid the USC and the Indian University. It
was also clarified by Rafia that she wants to put on a genuine, culturally appropriate
show for the Indian visitors.
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Thus, the main aim of Rafia to enter into contract with Kalpana is that she wants a
purely genuine and culturally show and which is the basis for her Indian University
contract. so the requirements are the basis because of which Rafia was entering into
contract with Kalpana. To authenticate the jejunity of the event, Rafia wants that
Kalpana must advertise the Indian traditional dancers as the central event to help sell
tickets and to impress the visitors from India at USC event. Thus, Rafia has given
paramount importance to the oral terms that are made part of the contract.
The terms are nothing but the basis for which the contract is established amid the
parties.
Further, Kalpana made an oral statement that they perform beautiful Indian dance and
it’s a guarantee. She further submitted that she is an Indian by birth and had training
in India. They entered into a deal. Thus, the statements that are made by Kalpana are
of serious nature and are made so that raffia enters into a contract with her.
Considering the seriousness of the nature of the terms and the importance that are
given by both Rafia and Kaplan before entering into the contract makes the terms as
CONDIION (Poussard v Spiers and Pond).
The terms are considered to be the root of the contact and the reason why the contract
is established amid the parties. The terms goes to the very essence of the contract and
thus it is very important that booth the parties to the contract must comply with the
same.
Issue 3
It is submitted that based on the oral assurance that is made by Kalpana, Rafia
advertised that the USC event contains traditional, classical Indian dance along with
pictures. However, on the event day, Rafia did not like the performance as it is more
like Hollywood rather than a traditional Indian dancing. Visitors did not like the dance
and some patrons demanded refund. The contract with Indian University also failed.
It is submitted that the oral submissions that are made by Rafia and Kalpana must be
treated as conditions and the same must be comply with by them at every cost.
However, Kalpana does not comply with the terms. Tis resulted in loss to Rafia.
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Thus, Rafia has the power to terminate the contract on the basis that a condition are
violated by Kalpana and thus she can also sue for the loss that are sustained by her
and the compensation if any that can be claimed by her for the losses that are sustain
by her.
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Reference List
Books/Articles/Journals
Gibson, A and Fraser, D. (2013) Business Law 2014. Pearson Higher Education AU.
McKendrick, E and Liu, Q. (2015) Contract Law: Australian Edition. Macmillan
International Higher Education.
Case law
B.P. Refinery (Westernport) Proprietary Limited v Shire of Hastings (Victoria) [1977]
UKPC 13.
Bettini v Gye 1876 QBD 183.
Ellul and Ellul v Oakes (1972) 3 SASR 377;
Federal Commerce & Navigation Co Ltd v Molena Alpha Inc. (The Nanfri)[1979] AC
757;
Gordon v Macgregor (1909) 8 CLR 316, H
Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133.
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1961] EWCA Civ 7
(20 December 1961)
JJ Savage v Blakney (1970) 119 CLR 435;
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61
(2007) 82 AJLR 345 at [54], Rice (t/a Garden Guardian) v Great Yarmouth Borough
Council [2000] APP.L.R. 06/30 .
Lombard North Central v Butterworth [1986] EWCA Civ 5 (31 July 1986).
Poussard v Spiers and Pond (1876) 1 QBD 410.
Shepperd v The Council of the Municipality of Ryde (1952) 85 CLR 1;
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Online Material
Davies (2018) The Good, the Bad and the Ugly? Conditions, Warranties and
Innominate Terms (Online). Available at:
http://www.daviesanddavies.net/construction-industry-news/the-good-the-bad-and-
the-ugly-conditions-warranties-and-innominate-terms. Accessed on 11th May 2018.
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