Classification of Terms Qu 1: What do you understand by a "condition", "warranty" and "innominate term"? What are the remedies available for breach of these different types of terms? Qu 2: Provide a case commentary on Hong Kong Fir Shipping v Kawasaki Kisen Kaisha Ltd [1962] 1 All ER 474 CA.

Qu 1. Condition: It is a major term ; more specifically, conditions are essential terms which goes to the root / heart of the contract. Calling a term a "condition" does not necessary render it. Parties have the right to claim damages and terminate a contract, although the party may decide to affirm.

Warranty: Warranties are subsidiary terms / minor terms of a contract, which are not central to the terms of the contract. It describes a contractual term, which if breached, does not amount to serious consequences. The innocent party cannot end the contract, since the contract will still run, but he/she may nevertheless claim damages. An example of a warranty could be a scratch on a laptop.

Innominate term: These are intermediate terms. The importance attached to such terms depends on the nature and effects of the breach. Innominate terms would appear if it is not possible to state at the outset with absolute certainty of the consequences of the particular breach of that term. The consequences would therefore be very serious. If the effects of the breach are serious, the courts will view it as acting like a condition (in that particular situation). If the effects of the breach are minor, it acts like a warranty (qualitative term: e.g: roadworthiness- the vagueness of that term would have to be looked at). The court created this third category (innominate term) which has the greatest remedial flexibility and can focus on the consequences of the breach. The court would also question the fact if it should be considered a warranty or condition. The remedy does not depend on the status of the term, but on the effects of the breach.

Qu 2. Case commentary on Hong Kong Fir Shipping v Kawasaki Kisen Kaisha Ltd [1962] 1 All ER 474 CA.

This case introduces the concept of innominate terms. The Court of Appeal refused to describe the shipowner's obligation to deliver a seaworthy vessel due to the character of the condition. The defendant charged the ship (renting for two years). The ship is delivered on February 1927 and picked up cargo in the USA(from the USA to Japan). Since the ship was quite old and due to that, the machinery needed to be maintained by experienced, competent and careful staffs. There was an insufficient number of staff and the chief engineer was constantly drunk. As a consequence, there were many breakdowns in machinery. Twenty weeks were wasted because of repairing the breakdowns. The agreement contained a clause about seaworthiness of the vessel. According to the defendants, if deemed to be a condition, then only they could breach the contract. According to the case it was not a condition: since delays, breakdowns, repairs were not exceptional. This did not frustrate the commercial purpose anyhow, if the party had been deprived. The Court held that the entire cargo was used as animal feed and breach did not go to the contract. They were entitled to reject the goods. The introduction of this intermediate term helps prevent the strategic term where buyers try to get out of a bad bargain. The intermediate/innominate term was that the shipman was in a good condition.

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