Understanding Australian Macmillan International Education: Contractual Terms And Their Importance

Express and Implied Terms

Discuss About The Australian Macmillan International Education.

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)

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)

1. 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 statement made is considered to be part of the contract or not and is analysed in Ellul and Ellul v Oakes (1972).
2. 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).

1. The pre contractual statements that are exchanged amid the parties have promissory effect, that is, the parties intend to abide by the statements;
2. 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;
3. 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)
4. 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).

• 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
• 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.

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)

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)

Conditions

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)

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 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)

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:

1. 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
2. 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.  

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.

1. 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.
2. Rafia made it clear that she wants to put on a genuine, culturally appropriate show for the Indian visitors.

• 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.

1. Kalpan made an oral statement that they perform beautiful Indian dance and it’s a guarantee.
2. 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).

Warranties

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’.

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:

1. 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;
2. Both Kalpana and Rafia never intend that oral statements should be part of the contract;

• 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;

1. 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.

 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.

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.

Application of Law

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.

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.

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.

Reference List

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.

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;

Online Material

Davies (2018) The Good, the Bad and the Ugly? Conditions, Warranties and Innominate Terms (Online). Available at:

https://www.daviesanddavies.net/construction-industry-news/the-good-the-bad-and-the-ugly-conditions-warranties-and-innominate-terms. Accessed on 11th May 2018.