Classification of Terms Hirakshi Shajpal - Seminar Group Thur 11am

Question 1:

Condition = A condition is a major term of a contract which is essential to the root of the contract. if a condition is breached there are a wide range of remedies available from a claim for damages to termination of a contract. Poussard v Spiers [1876] 1 QBD 410 = The case concluded with the actress suing for breach and loses due to the importance placed on opening night at the theatre; however producers claim the actress' absence amounts to a breach of conditions resulting in a termination of the contract. Schuler v Wickman [1974] AC 235 = The House of Lords concluded that just because the word 'condition' has been used it does not necessarily make it one

Warranty = A warranty is a subsidiary/minor term of a contract, breach of this does not lead to serious consequences, and in the event of a breach the only remedy available is the right to sue for damages. Bettini v Gye (1876) 1 QBD 183 = the singer contracted to arrive 6 days prior to the performance, it was then found that rehearsal days before the performance itself are only minor terms meaning the producers cannot terminate contract but only sue for damages.

Innominate term = A third classification of terms will appear if it is not possible to state from the outset with absolute certainty what the consequences of a particular term will be (wait and see approach). If these terms are breached then the remedy depends on the status of the breach, there is no automatic entitlement as the courts have greater flexibility so that they can focus on the consequences of the particular breach. See the cases of The Mihalis Angelos [1970] 3 WLR 601 and, Bunge Corporation v Tradax [1981] 1 WLR 711

Question 2:

The concept of innominate terms was introduced in the case of: Hong Kong Fir Shipping v Kawasaki Kisen Kaisha Ltd [1962] 1 All ER 474 CA = The Court of Appeal refused to describe shipowners obligation to deliver a 'sea worthy vessel as a character of condition. The facts of the case are as follows:

  • Defendants chartered the ship from the claimants for 2 years (renting), the ship was delivered in February 1957 to pick up cargo from the US to Japan
  • The ship was old and machinery needed to be maintained by competent and careful engineer staff, however, there was a insufficient number of staff and the chief of the engineers was an alcoholic
  • Due to many serious breakdowns the defendants lost 20 weeks of the lease
  • The agreement made by the two parties claimed a clause stating that the vessel must be 'sea worthy'
  • The Court of Appeal concluded that seaworthiness was not a condition and that none of the breakdowns had been so bad as to stop its commercial purpose.
  • It was established that termination of the contract was only valid if the breach deprived the defendants of the whole benefit to which they are entitled by the contract

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