classification of terms Oreoluwa Ayo-lawal Seminar:Tuesday 9 A.M

Conditions are major and essential terms which goes to root of the contract

If a term is seen as a condition by the court, the parties have rights to claim damages and terminate the contract, although party may decide to affirm.

Warranties are minor terms. It majorly describes contractual term that if breached wont lead to serious consequences.

In an insurance contract, if a term is label as a warranty, it is actually a major term. The classification of the terms creates certainty for the party and the court.

The third classification, Innominate terms, was introduced by the courts because of ‘the odd terms’. It can be often described as the court remedial flexibility. Innominate terms operate on a wait and see approach and it adds a degree of flexibility to the classification, which upsets the traditional classification.

The remedy depends on the effect of the term and not the status of the term.

HONG KONG FIR SHIPPING V KAWASAKI KISEN KAISHA LTD [1962] 1 ALL ER 474 CA: CASE COMMENTARY

This case introduced the classification of innominate terms. The issue of the case was determining the test to be used if a breach or contract lead to revocation. The court of appeal refused to describe the ship owner obligation to deliver a ‘sea-worthy’ vessel. The court held that test does not always depend on whether the breach is a condition or warranty, because the circumstances are complex. Lord Diplock stated that it was the events which occurred as a result of the breach that mattered and to decide if the events deprived substantially the whole benefit that was intended for entering the contract.

This illustrates that the effect of the term determines the remedy because it was held that the breakdown and problem faced, did not frustrated the commercial purpose. This means that the party still derived the benefits despite the problems faced. The consequences of the breach determine if it will be acting as a condition or warranty. If the breach is serious, it will be treated as a a condition and if it is minor, it will be treated a s a warranty.

However, it can be argued that there only two classifications, which are conditions and innominate, while some may argue that only the traditional classification (condition and warranty), while some may argue on the three classification

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