LAW220 Contract Law Assignment

This document presents solved assignments for a Contract Law course (LAW220), likely from CSU. It addresses two main problems. The first involves a contract between Qantas and Airbus, analyzing whether specific terms are conditions or warranties and the validity of a post-contractual limitation of liability clause. The solution applies relevant case law (e.g., Associated Newspapers Ltd v Bancks, Bettini v Gye) to determine the consequences of breach. The second problem concerns agency law, examining the validity of contracts made by agents (Gemma and Bob) with third parties (Frances and Angela), respectively. The analysis focuses on the types of authority (express, implied, ostensible) held by the agents and the legal implications for the principal (Frank). The solutions reference key cases like Watteau v Fenwick and Freeman & Lockyer v Buckhurst Park Properties to support the legal arguments. A bibliography lists relevant modules, cases, and potentially other resources.

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Cover Sheet
Name of the student
Student ID
Word Count

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Contents
Solution 1.........................................................................................................................................3
Issues............................................................................................................................................3
Relevant Law...............................................................................................................................3
Application of law........................................................................................................................4
Conclusion...................................................................................................................................5
Solution 2.........................................................................................................................................5
Issues............................................................................................................................................5
Relevant Law...............................................................................................................................5
Application of law........................................................................................................................6
Conclusion...................................................................................................................................7
Bibliography....................................................................................................................................8

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Solution 1
Issues
a. Whether the term 455 is a condition or a warranty? Can Qantas Airlines terminate the
contract on the basis that the terms are violated by Airbus Corporation Ltd?
b. Whether the new term ‘‘Limitation of Liability’ is valid upon Qantas Airlines as the same
was incorporated by Airbus Corporation Ltd after signing of the contract?
Relevant Law
Whenever any two parties desire to establish a contractual relationship then they must form the
contract as per the legal requirements which include formation of an agreement (offer and
acceptance) along with legal intention, party’s capacity and consideration. (CSU LAW220
Modules, 2015, Topic 5, p 41)
These parties (offeror and offeree) when are making a valid contract incorporates the rights and
liabilities that are required to be furnished by them. These rights and liabilities that originate
through a valid contract are called contract terms. The contract terms are normally essentials and
supplementary. On the basis of importance that the terms hold in any given contract, the contract
terms can be classified as: (CSU LAW220 Modules, 2015, Topic 7, p 62)
i. Conditions- Those terms without which a contract cannot be performed are called
condition. These are the terms which are the main reason for which parties have
agreed to form a contract amid them. These are the core terms in any given contract.
If these terms are not part of the contract then there is no reason as to why the parties
have established the contract in the first place. In the leading case of ( Associated
Newspapers Ltd v Bancks, 1951) the concept of a condition was rightly explained.
Now, if any party to the contract is not able to comply with these conditions, then, the
reason for which the contract is made cease to exist. Thus, it results in terminating the
very essence of the contract. So, the party who is not at fault has every right to cancel
the contract and claim damages from the defaulting party. The contract can be
terminate and damages can be asked for if a condition is violated.
ii. Warranties – The nature of these terms are supplementary or additional to the main
contract terms. These are not the terms because of which the contract was established

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amid the parties. These are the terms which are required by the parties so that the
contract can be carried forward without any problems. These are not core to the
contract. In (Bettini v Gye, 1876) the concept of warranty was explained.
Now, while complying with the contract terms, any of the party violates these
warranties, then the contract does not come to an end because the main core of the
contract is not hampered. So, the party who is not at fault can only claim damages
from the defaulting party without cancellation of the contract and the parties are
obligatory to continue to comply with the terms of the contract. In (Wallis v Pratt,
1911) it was held that the contract cannot be terminate and damages can only be
asked for if a warranty is violated.
Now, when at mutual consent, the liability of one party is excluded on the happening of a pre
decided event then such terms which limit or exclude the liabilities of the defaulting party are
called exclusion clauses and is rightly held in Olley v. Marlborough Court Ltd [1949]. These
clauses are normally made part of the contract and are binding upon the parties upon signing of
the contract. But, if the clause is made part of the contract after the signing of the contract, then,
it is necessary in law that the party who is incorporating the clause must made all reasonable
attempts so that the clause can be brought in the notion of the other party, otherwise the clause is
invalid and non-binding in nature and is held in Thornton v. Shoe Lane Parking Ltd [1971].
(CSU LAW220 Modules, 2015, Topic 7, p 64-65)
Application of law
Issue A
As per the facts, Qantas and Airbus formulated a contract for the building upon of a new
aircraft. There are two important terms in the contract.
Term 56 submits that the airplane should travel 10,000KM @ 800KM Per hour. Considering this
term, it is a very important term in a contract of a supply of an airplane. Without this term there
is no reason as to why the contract is entered amid the parties. This is a CONDITION in the
contract as it is the core term in the contract ( Associated Newspapers Ltd v Bancks, 1951). This
term is complied with by Airbus.
Term 455 submits that the plane must have an in-flight video system capable of showing 36
channels of entertainment to passengers. But when the plane was supplied it has 34 channels.

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Now, this term is not so important for the functioning of the contract. It is not root to the
contract. So it is a WARRANTY (Bettini v Gye, 1876).
So, Term 455 is a warranty which is violated. So, Qantas cannot terminate the contract but can
only ask for compensation.
Issue B
As per the facts, when the contract is signed by the parties, a new term which limits the liability
of Air bus to $ 300 000 is incorporated by adding new documents to the contract.
This is an exclusion term and this term is valid provided it is mutually made part of the contract.
but, since Airbus is relying on the term individually, thus, it is obligatory upon him to bring the
same in the notion of Qantas with reasonable means. But the same is not done by Airbus.
So, the new term ‘‘Limitation of Liability’ is not valid upon Qantas Airlines as the same was
incorporated by Airbus Corporation Ltd after signing of the contract and no attempts are made to
bring the same in the notion of Qantas.
Conclusion
A warranty is violated by Airbus when term 455 is violated as it is not core to the contract. So,
Qantas can sue Airbus for damages. Also, the limitation clause is not valid as it is not within the
notion of Qantas when incorporated nor any attempts are made by Airbus. So, the cap is not
limited to $ 300 000.
Solution 2
Issues
a. Is the contract amid Frances and Gemma valid in nature or Frank can terminate the
contract on the basis of lack of authority?
b. Is the contract amid Angela and Bob valid in nature or Frank can terminate the
contract on the basis of lack of authority?
Relevant Law
The law of agency is based on a mutual relationship that is shared by the principal and his agent.
There are two parties that are involved in the relationship of agency, that is, a principal and an
agent. A principal is the person who appoints an agent to carry out his tasks. The agent is
obligated to carry out the tasks of the principal as per his directions and must carry out the tasks

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with utmost care and diligence and with honesty. ((CSU LAW220 Modules, 2015, Topic 12, p
90)
However, a principal can only seek the help of the agent to carry out his tasks provided the agent
is authorized to do such tasks. The delegation of principals authority does not takes place on its
own, rather, there are three different manners in which the principal can hand over his
1responsibilities to his agents. The same are: (CSU LAW220 Modules, 2015, Topic 12, p 64-65)
i. Express authority – When the principal either in written form (by entering into a
formal agreement with the agent) or in oral form has handed over his authority to his
agent then such kind of delegation is called express authority which is attained by the
agent by his principal. The acts which are carried on by the agent within this kind of
authority is binding upon the principal and is held in Watteau v Fenwick [1893].
ii. Implied authority – Those acts and duties which are incidental to the main duties of
an agent and which can be carried on by the agent without seeking prior approval
from the principal is a kind of implied authority and any such act which is carried out
within the implied authority will make the principal bound and he is obligated to
honor such contracts and is held in Freeman & Lockyer v Buckhurst Park Properties
[1964].
iii. Ostensible authority – When the agent does not actually assigned with any kind of
authority but some kind of action or omission is undertaken by the principal which
depicts to an outsider that the agent have an authority to act on behalf of the principal,
then, any contract by the outsider with the agent will bind the principal, provided, the
principal is acting in good faith and has no previous knowledge that the agent does
not possess any kind of knowledge and is held in the leading case of Freeman &
Lockyer v Buckhurst Park Properties [1964].
Application of law
Issue A
As per the facts of the case, Frank is the principal and Gemma is his agent. Frank sells
ovens/fridges/freezers and appoints Gemma for the sale of one of his dishwasher for $ 350.
Thus, Gemma is authored by Frank for the sale of dishwasher. Tom, one of the visitors, intends
to buy the washer for $ 350. Gemma is more interested to sell the washer to Frances (niece) so
she told Frances that she can make the washer available to her for $ 300. In order to do so he

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misguided Frank that no visitor is interested in buying the washer for $ 350 as the price is too
high and thus the price must be reduced. On relying on the advice of Gemma, Frank again
authorizes him to sell the washer for $ 300.
So, Gemma again gains authority to buy the washer at the reduced price of $ 300 to Frances as
per Watteau v Fenwick [1893].
So, the contract amid Frances and Gemma is valid as the same is carried out as per the valid
authority.
But, since Gemma acted without care and diligence thus, Frank can also sue Gemma for the loss
of his profit and can recover the same from Gemma (Robb v Green [1895].
Issue B
As per the facts of the case, Bob is appointed by Frank for the sale of washing machines.
However, Frank terminated the services of Bob as he was irregular and was drunk on duty. Prior
to termination of the services, Bob was dealing with Angela who has no notion of the
termination of the services of Bob.
Post termination, Bob contacted Angela and sold machines to her worth $ 10,000 and an
electronic transaction is made by Angela who is enchased by Bob and he flew away.
It is submitted that when the Bob was removed from his position by Frank then there is no notice
or any kind of information that was communicated by him to Angela knowing the fact that Bob
is negotiation with her for the sale of machines. Thus, though Bob is not the agent of Frank but
not communicating the termination of Bob, Frank has overtly handed over an ostensible
authority to him Freeman & Lockyer v Buckhurst Park Properties [1964]. Angela is under no
impression that Bob is now not the agent of Frank. Thus, the contract that is made by Bob with
Angela is within his apparent authority and the contract is binding upon Frank.
Conclusion
The sale of washer to Frances by Gemma is valid as the same is carried out as per the express
authority provided by Frank to Gemma but Frank can sue Gemma as the authority was delegated
to Gemma under fraud and so he can recover the losses from Gemma personally.
The contract that is made by Bob with Angela is a valid contract as the same is carried out within
his ostensible authority. Thus, Frank must conclude the contract with Angela which is made by
Bob on his behalf.

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Bibliography
Books/Articles/Journals
CSU LAW220 Modules, 2015
Case Laws
Associated Newspapers Ltd v Bancks (1951).
Bettini v Gye (1876).
Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993).
Freeman & Lockyer v Buckhurst Park Properties [1964].
Olley v. Marlborough Court Ltd [1949].
Robb v Green [1895].
Thornton v. Shoe Lane Parking Ltd [1971].
Watteau v Fenwick [1893].