Classification of Terms By Jasmin Jacques

Introduction

A term is a statement which has been incorporated as a term within a contract. Terms are classified, into three types according to their importance.The there classifications are: Condition, Warranties and Innominate Terms. Occasionally legislation specifies classification of some terms for example The Sale of Good Act 1979.

Condition Terms

Condition terms are regarded as the most important form of term, as they are at the heart of the contract. If the conditions of a contract are breached the remedies available to the suffering parties can be anything from damages or to repudiation of the contract. It is not always necessary to terminate a contract as it my be more effective to continue it. It is imperative to note that if a contract states specifically that the term is a condition, it dose not always make it so. This is highlighted in the case of Schuler v Wickman [1974] AC 235.

Warranties

A warranty is, significantly minor compared to a conditional term. They are an ancillary to the main contract. If there has been a breach in a warranty, the remedies available can only be damages, not a termination of the contract. A case which show the remedy available for a breach in a warranty term is, Bettini v Gye [1876] 1 QBD 183.

Innomate Terms

This is a modern classification of terms, which began after the Hong Kong Fir Shipping v Kawasaki Kisen Kaisha Ltd [1962] 1 All ER 474 CA case which will be detailed below .It is not possible to state with absolute certainty of the consequence of the breach, as it could be serious or trivial. If the effects of the breach is serious then the term will be acting like a condition, and thus the remedies will be similar to a conditional breach. If the effects of the breach are minor then it acts like a warranty.Overall an innomate terms remedy does not depend on the term but instead the effects of the breach.The term can causes problems with the conviction as it does create uncertainty within the Law. Innomate Terms adds a degree in flexibility to the law, however it does upset the traditional approach to classifying terms.

Hong Kong Fir Shipping v Kawasaki Kisen Kaisha Ltd [1962] 1 All ER 474 CA

The defendants had charted a ship from the claimant for two years. The charterparty contained a term which required the claimant to provide a ship which was "in every way fitted for ordinary cargo service". It became apparent that the engine room crew were incompetent and that the ship was in a poor state of repair. In fact the claimant openly admitted that the ship was unseaworthy. As a result of these factors, 20 weeks' use of the ship was lost and the defendants claimed to treat the contract as terminated for breach of a condition. The claimant claimed the breach only entitled the defendants to sue for damages. The claimant succeeded in their action against the defendants for wrongful termination.

Lord Diplock's Judgment

The problem with this case is, in my view, neither solved nor soluble by debating whether the ship owners express or implied taking to tender a seaworthy ship is a "condition" or a "warranty"... There are many contractual undertakings all that can predicted is that some breaches will, and others will not, give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract: and the legal consequence of 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 prior classification of the undertaking as a "condition" or a "warranty".

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