Classification of Terms Conditions, Warranty and Innominate Terms

Implied terms are divided into conditions and warranties.

The difference between conditions and warranty depends on the importance of the status of the term.

Condition

It is a major term in a contract.

If a party breaks the condition of a contract then it will result to serious consequences which allows the other party to bring an action against the opposing party and can also terminate the contract

This is shown in Poussard v Spiers and Pond [1876]- An Actress was employed to play a role in a operetta but did not come to the opening so the directors had used a substitute to perform her role. A week after the season had begun she has showed up but the directors had rejected the main actress terminated the contract. She had claimed but it had failed as the opening operetta she had missed was the most important and she had breached the condition as she did not attend. So thus the producers were able to terminate the contract.

• The right to terminate a contract for breach of condition is modified in relation to non-consumer contracts for the sale of goods by the Sale and Supply of Goods Act 1994, S.4 (1) which inserts a new section, s 15 A into the Sale of Goods Act 1979:

• 15A (1)-
a) The buyer would, apart from this subsection, have the right to reject goods by reason of a breach on the part of the seller of a term implied by section 12, 14 or 15
b) The breach is so slight that it would be unreasonable for him to reject them, then, if the buyer does not deal as consumer, the breach is not to be treated as a breach of condition but may be treated as a breach of warranty.

Warranty

It is the minor term of the contract.

‘One which imposes a term that is merely ancillary to the main thrust of the contract.'

Unlike the condition, if there is a breach of warranty it only allows the party to bring an action against the opposing party.

The contract cannot be terminated but can only sue for damages.

Using the Bettini v Gye [1876]- A singer had to attend 6 days before the season had started for rehearsals but had come 3 days instead. The producers terminated the contract as they believed that the singer had breached the condition in the contract. The singer then claimed and was successful as the rehearsals were just ancillary of the contract therefore it was only a warranty the singer had breached. The producers could only take legal action against the singer for damages but were not in the position to terminate the contract

Innominate

It can also be referred as an intermediate term.

Where there is not an expression of a status of a term in an agreement, the courts will consider it as a Innominate terms rather than a condition or warranty

The effects of the breach and innominate depends on the term in the contract and not on the status of the term.

If there is an innominate term found in the contract then a test is applied to see if the party, who thought there was a breach, had not gotten any benefit from the contract.

An example case where a party did not get any benefit from the contract is the Wuhan Ocean Economic and Technical Cooperation Co Ltd v Schiffahrts-Gesellschaft Hansa Murcia mbH Co KG [2012]

The term innominate first came to existance in the case Hong Kong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha [1962]

The Hong Kong Fir(claimant) rented their ship to kawasaki (defendants) for 2 years

It was said that there was a term in the contract stating that the ship was ‘every way fitted for ordinary cargo service.’

However, the ship was seen to be really old thus the engine room was also old and required to be fixed.

The plaintiffs also admitted that the ship was not right to be at sea.

The ship was held and repaired therefore the ship was not in use for 20 weeks.

Kawasaki(defendants) had then terminated the contract as the plaintiff had breached the conditions

The plaintiffs then claimed that the defendants could not terminate the contract as they were entitled to take legal actions for damages only.

The claim was successful

It was stated by Lord Diplock that it ‘depends on the nature of the event to which the breach gives rise and do not follow the classification terms of condition and warranty.’

It is necessary to look at the breach at the time and apply the test to see if the ‘innocent’ party was fully deprived of getting any benefit from the contract.

In this case they were still allowed to have the boat for another 20 months so it was still possible for Hong Kong to get their benefit from the contract and the contract should not have been terminated.

Made with Adobe Slate

Make your words and images move.

Get Slate

Report Abuse

If you feel that this video content violates the Adobe Terms of Use, you may report this content by filling out this quick form.

To report a Copyright Violation, please follow Section 17 in the Terms of Use.