Solution Issues in Kalpana-Rafia Contract

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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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