COMMERCIAL LAW1 Question 1 Issue The key issue is whether the oral assurance which Kalpana gave to Rafia is considered as a term of the contract or not? Law A contract creates a binding relationship between two or more parties, and they are required to comply with its terms. It is necessary that the contracting parties must comply with the terms of the contract or else they can be found guilty of breach of the contract, and the aggrieved party can claim for damages. A contract can be written or oral, and it creates a contractual relationship as long as the parties fulfil its essential elements. The first element is an offer which must be given by a party of the contract, offeror, to another party for creating a legal relationship and the party, offeree, must accept such offer without any changes in its terms (McKendrick, 2014). A valid offer requires that the offeror must be bound by its terms which mean after its acceptance, the offeror cannot change the terms of the contract. In a leading case, the plaintiff sends a telegram to the defendant to know the lowest price of Bumper Hall Pen. The defendant replied that lowest price is£900. The plaintiff provided that he agreed to purchase the pen for£900. The Privy Council provided a judgement that no contract is created between the parties because the defendant just supplied the information about the pen to the plaintiff in their first interaction (Blount and Martin, 2017). The request for knowing the price of a product cannot be constituted as an offer, therefore, the telegram sent by the defendant cannot be considered as an acceptance and no contractual relationship existed between the parties (Harvey v Facey). The second essential element is the acceptance of the offeree without any changes in terms of the contract. A party offered to sell his land for£1000, however, the party reply by an offer of £950. The first party rejected the counteroffer, after that the offeree decided to accept the original offer of the offeror.The court held that a counteroffer resulted in cancelling the original offer and the offeree cannot accept the original offer unless it is revived by the offeror (Hyde v Wrench). While entering intoacontractualrelationship,partiestoacontractmusthavetheintentiontobind themselves by the legal terms of the contract (Monaghan and Monaghan, 2013). The intention of contracting parties is an essential element for forming a contract based on which domestic and social agreements are not considered as a commercial contract. In a leading
COMMERCIAL LAW2 case, Esso made a promise for giving away a ‘world cup coin’ with the condition that the coin will be given to customers who purchase 4 gallons of fuel. HMC&E argued that such coins are taxable and Esso owed£200,000 in tax Esso provided that such coins are free gifts which did not have a legal effect. The House of Lords provided that an intention to create a legal relationship is present because coins were given with a commercial context (Esso Petroleum v Customs & Excise). However, coins are not exchanged for consideration hence they are not for resale. Consideration of a contract is another key element which mandatory to create a valid contractual relationship (Turner, 2014). A consideration is referred to the exchange of promises in which each party receives a benefit and suffers a detriment. It is necessary that the consideration must have a value in the eyes of the law. In a leading case, a husband transfers his house to his wife in return for paying £1 per year ground rent. The executors refused the agreement by stating that the consideration is not enough. It was held that consideration needs to be present, and it must have some value in the eyes of the law, but it need not be sufficient (Thomas v Thomas). Furthermore, the essential element of the contract includes the capability of parties to create a legal contract. It means that the parties to a contract must not be minor, insolvent, and unsound. The parties to a contract must have a mutual obligation which means the obligations of the contract must bind them. Application Rafia clearly asked Kalpana whether she does traditional classical Indian dance, and she replied positively. She guarantees to Rafia that she performs most beautiful Indian dance. Both the parties were entered into a legal contract because they fulfilled the terms of the contract. An offer was given by Rafia which was accepted by Kalpana without any changes in its terms and Rafia is authorised to act on behalf of USC. Other essential elements such as a valid consideration, competency of parties, mutual obligation and intention of parties were fulfilled as well. As discussed above, a contract can be written or oral if the parties fulfil the essential elements, therefore, the oral assurance given by Kalpana is considered as valid terms of the contract, and she is bound by her assurance. Although information regarding the type of dance or written assurance from Kalpana that it will be a traditional dance, however, she is bound by her oral assurance which she gave to Rafia.
COMMERCIAL LAW3 Conclusion Thus, Kalpana is bound by her oral assurance which she gave to Rafia, and it is considered as a term of the contract.
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COMMERCIAL LAW4 Question 2 Issue The issue is if the oral assurance is regarded as a term, then whether the court is likely to consider it as a condition or warranty? Law The terms of a contract can be classified into two main categories which include a condition and a warranty. A term is referred to the pre-condition which is provided before the formation of a contract or a pre-condition for performance. Terms bind the parties to a contract, and in case of breach of such terms, parties have to face legal consequences. The contractual terms of a contract include conditions, warranties or innominate terms. While entering into a contract, it is necessary that the contracting parties clearly differentiate between the terms which are conditions and which are warranties. Clear identification of these terms assists parties in case of a breach of contract because it is important to determine which type of terms has been breached by the parties to establish the remedy available (Ayres and Schwartz, 2014). A condition is referred to a major contractual term which is based on the root of the contract. In case the condition of a contract is breached by the contracting parties, then the aggrieved party has the right to repudiate or end the contract and claim for damages. In a leading case, Madame Poussard created a contractual relationship to perform as an opera singer for a period of three months. Before five days of the opening night, Madame Poussard becomes ill, and she was not able to perform for the first four nights. After five days, Spiers replaced Madame Poussard with another opera singer. The court held that Madame Poussard had breached the condition of the contract based on which Spiers has the right to repudiate their contract (Utobo, 2017). Due to her illness, she missed the opening night which was considered as one of the most significant performance as all critics were present and publicity would be based on the opening night (Poussard v Spiers). Warranty is referred to a promise or guarantee which is made by a party to another in order to give assurance that specific conditions are correct, or they may occur in the future. It serves as the confirmation that specific event will run during the same timeline and the conditions specified will be complete. Warranties in a contract are referred to minor terms which are not central to the existence or creation of the contract. In case of a breach of
COMMERCIAL LAW5 warranties, the innocent party has the right to claim damages, but the contact cannot be repudiated or end. The court described it in a leading case in which Bettini contracted to sing for a promoter over a period of 15 months at various events. One of the contractual term provided that Bettini has to arrive six days before to attend rehearsals. Due to her illness, she was late for four days for rehearsals. Based on this breach of contract, the promoter attempted to repudiate the future performance of the contract. However, the court provided that attending the rehearsals six days before the first engagement was a warranty and it was not a condition based on which the contract was created (Anson et al., 2010). Therefore, the promoter is not entitled to terminate the contract, he can only claim for damages (Bettini v Gye). The innominate term is a relatively new concept which was established inHong Kong Fir Shipping v Kawasaki Kisen Kaishacase. It provides that rather than classifying terms into conditions or warranties, the innominate term evaluate whether the aggrieved party is deprived of a substantial benefit due to a breach of the contract. Application While meeting with Kalpana, Rafia clearly explained to her how important the success of the event is for her and how its success might result in creating a contract between USC and the Indian University. Rafia further explained that if they entered into an agreement then she will advertise the event of Indian traditional dancers as the central event for the show in order to sell tickets and to impress the visitors from India. Rafia clearly explained to Kalpana the importance of the event and why the event is important. The fact that success of the event might result in creating a contractual relationship between the USC and the Indian University is the basic root of the case. Furthermore, the decisions for selling tickets by advertising the Indian traditional dancers’ shows as the central event is another key factor based on which Rafia contracted with Kalpana. Therefore, it can be stated that both of these factors are the roots of the contract based on which it was formed; hence, the oral assurance given by Kalpana to Rafia is considered as a condition by the court (Poussard v Spiers). If more information was given, then the provision of the innominate term would have been more suitable to apply in this situation.
COMMERCIAL LAW6 Conclusion To conclude, Rafia entered into a contract with Kalpana to impress the visitors from the Indian University and to sell tickets, therefore, the court is likely to regard the oral assurance of Kalpana as a condition.
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COMMERCIAL LAW7 Question 3 Issue What remedies are available for USC against Kalpana? Law In case of a breach of contract, there are five remedies available for the aggrieved parties whichincludedamages,rescission,specificperformance,injunctionsandrepudiation. Damages are referred to a legal remedy which the aggrieved party can claim against the breach of a contract. It is referred to an award of money which is issued by the court in order to compensate the aggrieved party. Its primary objective is to place the aggrieved party into the position where they have been in case the terms of the contract weren’t breached by the parties (Addis v Gramophone). Damages are awarded by the court based on the application of the rule of remoteness, causation and a duty to mitigate loss (Brodie, 2009). Repudiation is another remedy which is available for the aggrieved party in case of breach of a contract. It means termination or brings an end to the contract. This remedy is only available to the aggrieved party in case of a breach of the condition rather than a breach of warranty (Bettini v Gye). The aggrieved parties can also demand rescission as an equitable remedy which is available at the discretion of the judge. This remedy focuses on placing the parties back to their pre-contractual position by unravelling the contract, and this remedy is available in case the contract is voidable based on factors such as undue influence, duress or misrepresentation (Car & Universal Credit v Caldwell). Specific performance is another remedy available for the aggrieved parties to a contract which can be issued based on the discretion of the judge. In this remedy, the court orders the parties to perform their contractual obligation. A contract is created between parties to perform their contractual obligations, and the court can issue an order to the parties of contact toperformaspecificaction.However,thecourtisoftenreluctanttoissuespecific performance, and this remedy is only available in limited circumstances (Mahoney, 2011). The court can issue the remedy of specific performance if the damages are not adequate to compensate the aggrieved party in a contract (Nutbrown v Thornton). The final remedy in case of a breach of the contract is injunctions; it is also issued at the discretion of the judge. There are three types of injunctions which include interlocutory, prohibitory and mandatory. In interlocutory injunction, the court issues a temporary injunction until the hearing. In
COMMERCIAL LAW8 Prohibitory injunction, the court orders a party not to perform a specific act. In mandatory injunction, the court orders a party to perform a specific action. The courts have recognised that there is an overlap between specific performance and mandatory injunctions and the court did not grant an injunction in case it would have an effect of specific performance (Page One Records v Britton). Application As discussed above, the oral assurance given by Kalpana is considered as a condition. Rafia entered into a contract with Kalpana in order to improve their visitors from the Indian University. She planned to impress the visitors that might increase the chances of a potential relationship between USC and the Indian University. Furthermore, her goal was to sell tickets collect money from the event. Kalpana gave her assurance that she will perform a traditional classical Indian dance however she did a Bollywood style dance which resulted in upsetting the visitors from the Indian University. The event offended the visitors and Rafia discovered that the contract did not go ahead between USC and the Indian University. Moreover, USC faced significant financial loss due to advertisements and refunding of the ticket amount. The roots of the contract were to impress the visitors and make a profit by selling tickets, both of which did not meet because Kalpana breached the conditions of the contact. Since it was a breach of the condition, Rafia has right to repudiate the contract with Kalpana (Bettini v Gye). She also has the right to demand damages from Kalpana because of the loss suffered by USE due to advertisement and refund of event tickets. Conclusion In conclusion, USC has the option to repudiate the contract and claim for damages faced by the company due to the breach of the terms of the contract.
COMMERCIAL LAW9 References Addis v Gramophone[1909] AC 488 Anson, W.R., Beatson, J., Burrows, A.S. and Cartwright, J. (2010)Anson's law of contract. Oxford University Press. Ayres, I. and Schwartz, A. (2014) The no-reading problem in consumer contract law.Stan. L. Rev.,66, p.545. Bettini v Gye[1876] 1 QBD 183 Blount, S. and Martin, C. (2017) Property: eConveyancing: Principles, platforms and procedures.LSJ: Law Society of NSW Journal, (38), p.82. Brodie, D. (2009) The Beginning of the End for Addis v The Gramophone Company? Honda Canada Inc. v Keays [2008] 294 DLR (4th) 577 (Supreme Court of Canada).Industrial Law Journal,38(2), pp.228-232. Car & Universal Credit v Caldwell[1964] 2 WLR 600 Esso Petroleum v Customs & Excise[1976] 1 WLR 1 Harvey v Facey[1893] AC 552 Hong Kong Fir Shipping v Kawasaki Kisen Kaisha[1962] 2 QB 26 Hyde v Wrench[1840] 49 ER 132 Mahoney, P.G. (2011) Contract remedies: general.Contract Law and Economics,6, p.155. McKendrick, E. (2014)Contract law: text, cases, and materials. Oxford University Press (UK). Monaghan, C. and Monaghan, N. (2013)Beginning Contract Law. Routledge. Nutbrown v Thornton[1805] 10 Ves 159 Page One Records v Britton[1968] 1 WLR 157 Poussard v Spiers[1876] 1 QBD 410
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COMMERCIAL LAW10 Thomas v Thomas[1842] 2 QB 851 Turner, C. (2014)Key Cases: Contract Law. Routledge. Utobo, J.O. (2017) Employees Contract of Employment and Wrongful Dismissal from Service.African Journal of Politics and Adminstrative Studies,7(1).