Regarded as a major term of contract. If a party to a contract breaks a condition the consequence is serious since entitles the other party not only to sue for damages but also to terminate the contract. The injured party would not have the option of affirming the contract and simply claiming damages if they wish so.
This is regarded as a minor term of contract. e.g one which imposes a term that is merely ancillary to the main thrust off the contract. Normally a breach of warranty merely gives the injured party the right to sue for damages only. (Poussard v Spiers and Pond 1876).
Often parties made expressly agreed to designate a term as a condition or warranty as an indication of the emphasis they wish to place on the importance the turn within the contract. The law can also indicate the importance of a term by a statute, for example the sales of goods act 1979. However, in recent times when there is no expressed term in the agreement, the courts have classified in this term as an innominate term. The effect of breaching this does not depend on the status of the term in the contract when entered what are the effects of a breach of the term in the contract. This principle arose from the case of Hong Kong Fir Shipping Co.Ltd v Kawasaki Kisen Kaisha Ltd 1962. The Facts of the case are summarised below.
Hong Kong Fir Shipping Co.Ltd v Kawasaki Kisen Kaisha Ltd 1962, summarised.
- The defendants chartered a ship from the plaintiffs for two years.
- The charter-party make a specific term which required the plaintiff to provide a ship which should be seaworthy throughout the two years of hiring.
- However, problem developed when the engine broke down and the engine crew were incompetent and that the ship was in a very bad state and so could not be fixed Therefore the ship was unseaworthy.
- Consequently, the ship was out of use for 20 weeks.
- The defendant treated this as a breach of term and so terminated the contract.
- Held: The plaintiffs were successful in their claim of bringing an action against the defendants for wrongful termination. Rather than seeking to classify the term itself as a condition or warranty, the court should look to the effect of the breach and ask if the breach has substantially deprived the innocent party of the whole benefit of the contract. Only where this is answered affirmatively is it to be a breach of condition.
- Lord Diplock stated "the legal consequence off the breach of such an undertaking, unless provided for expressly in the contract, depend on the nature of the event to which the breach gives rise and do not follow automatically from a prior classification of the undertaking as a "condition" or a "warranty".