Contract Law ARJAN DHINDSA

Define a condition

a term or requirement stated in a contract, which must be met for the other party to have the duty to fulfill his/her obligations.

A condition is a major term of the contract which goes to the root of the contract. If a condition is breached the innocent party is entitled to repudiate (end) the contract and claim damages: Poussard v Spiers (1876) 1 QBD 410

Define warranty

a written statement of good quality of merchandise, clear title to real estate, or that a fact stated in a contract is true. An "express warranty" is a definite written statement and "implied warranty" is based on the circumstances surrounding the sale or the creation of the contract.

Warranties are minor terms of a contract which are not central to the existence of the contract. If a warranty is breached the innocent party may claim damages but can not end the contract: Bettini v Gye 1876 QBD 183

define the term 'innominate term'.

The innominate term approach was established in the case of Hong Kong Fir Shipping. Rather than classifying the terms themselves as conditions or warranties, the innominate term approach looks to the effect of the breach and questions whether the innocent party to the breach was deprived of substantially the whole benefit of the contract. Only where the innocent party was substantially deprived of the whole benefit, will they be able to treat the contract as at an end: Hong Kong Fir Shipping v Kawasaki Kisen Kaisha.

A summary of the Hong Kong Fir Shipping v Kawasaki Kisen Kaisha case:

A ship was chartered to the defendants for a 2 year period. The agreement included a term that the ship would be seaworthy throughout the period of hire. The problems developed with the engine of the ship and the engine crew were incompetent. Consequently the ship was out of service for a 5 week period and then a further 15 week period. The defendants treated this as a breach of condition and ended the contract. The claimants brought an action for wrongful repudiation arguing the term relating to seaworthiness was not a condition of the contract.

The defendants were liable for wrongful repudiation. The court introduced the innominate term approach. 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. 20 weeks out of a 2 year contract period did not substantially deprive the defendants of whole benefit and therefore they were not entitled to repudiate the contract.

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