Commercial Law

Running head: COMMERCIAL LAW
Commercial Law
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1COMMERCIAL LAW
Question 1:
Issue:
The issue in this case is that, whether the oral assurance given by Kalpana to Rafia forms
a part of the contract.
Rule:
The essentials of a valid contract are intention, consideration, capacity and consent (Kong
et al. 2016). Therefore, in order to make the contract legally binding upon the contracting parties,
there must be an existence of an agreement, an intention to form an agreement, consideration,
capacity of the contracting parties and legal consent. In this regard, it is noteworthy to mention
here that a contract can be made verbally or in a written form (Munoz 2017). The existence of an
oral assurance in a contract was first established with the help of Parole Evidence Rule. The
Parole Evidence Role was first observed in the landmark cases of Sydney V Taylor (1891) 12 LR
(NSW) 252 (at 262) [2] and Goss V Lord Nugent (1833) 5 B & Ad 58 (at 64-65) ; 110 ER 713
(at 716). In these landmark cases, the terms of contract in relation to oral and verbal contract
were determined. The Courts in such cases generally assume that the terms and requirement
contained in the contract are specifically planned by the parties however; lacked the confidence
to perform the requirements of the contract. The Parole Evidence Rule focuses on the existence
of unreliable evidence for instance, an oral agreement and in some cases a written agreement that
has not been included in the contract (Epstein, Archer and Davis 2014). Therefore, it is worth
noting that in order to provide appropriate support to the intention of the parties to contract, the
Parole Evidence Rule has been applied by the Courts. Applying the Parole Evidence Rule, the
Court is at the authority to reach at a final decision in relation to the duties and rights of the
parties to contract for the purpose of preventing imitation and deceptive claims (Veasey and
Simon 2017). According to this rule, the consequences faced as a result of oral contract cannot
be claimed or modified for the purpose of discharging the written contract. Various exceptions
are there under the Parole Evidence Rule, that are-
1. Partly written and partly oral contracts.
2. Invalidity.
3. Suspension of operation.

2COMMERCIAL LAW
4. Rectification.
5. Uncertainty
The nature of the written agreement in the contract may be such that may not form the
part of the whole contract as intended by the parties; there may be the presence of an oral
agreement (Arnold‐Dwyer 2017). Therefore, the condition of oral contract can only allowed by
the Court on the ground that the written agreement in the contract was not intended to form the
part of the whole agreement (Zeng 2015). However in such cases, one of the parties to the
contract may take unfair disadvantage of the other party which was held in Van den Esschert v
Chappell [1960] WAR 114. In Van den Esschert v Chappell [1960] WAR 114 it was observed
that before signing the contract for sale agreement the seller guaranteed the purchaser by way of
oral assurance that there were no existence of white ants in the house. Afterwards the purchaser
observed that as a result of the presence of white ants in the house it destroyed all the timber. The
seller was sued and the purchaser received compensation for the damages. It was held by the
Court that, the oral assurance given by the seller regarding the presence of white ants formed an
essential part of the contract, although it was not mentioned in the written contract. Similarly in
Nemeth v Bayswater Road Pty Ltd [1988] 2 Qd R 406, it was observed that the defendant was
sued by the plaintiff as the defendant assured that there were no additional charges in the
contract. Later on identifying the additional charges from the written document the plaintiff sued
the defendant.
Application:
In the present case study it can be observed that there was a oral assurance on the part of
Kalpana when she mention that the form of the dance will be traditional, classical Indian dance.
A contract was signed between her and Rafia where the form of dance was not mentioned neither
Kalpana’s oral assurance. Therefore, the exception of party written and party oral contract can be
applied here. It can be stated that the nature of contract which existed between Kalpana and
Rafia was partly written and partly oral. Therefore, it can be stated that the verbal assurance on
the part of Kalpana is a term of contract. The case study Van den Esschert v Chappell [1960]
WAR 114. In Van den Esschert v Chappell [1960] WAR 114 can be referred in this regard
where it was observed that the seller (defendant) has to compensate for the damages for not
acting in terms of the verbal assurance given by him although there was a presence of a written