Contract Law condition, warranty or innominate term?

"I have read and I accept the terms and conditions..."

How many times are we ticking that box without even thinking about it? What consequences could it possibly have? What are we even agreeing for?

By ticking that so well-known box we create a contract with a company which is legally binding for both- us and the company- to fulfill certain requirements

To fully understand the topic of terms and the distinctions between them it is crucial to understand what is the contract itself. The most popular definition of it comes from "The Law of Contract" by Edwin Peel, G. H Treitel and it states, that it is

"an agreement giving rise to obligations which are enforced or RECOGNISED by law."

Those "obligations" mentioned by Treitel are indeed the terms of a contract. Within those we can make a distinction to three main categories: Conditions, warranties and innominate terms.

Let' s have a closer look on all three of them.

Conditions

A condition in a contract is a vital stipulation

That is how the Longman Dictionary of Law defines a condition. It is basically a major term, which goes to the heart of a contract.

For better understanding of that term and how is it perceived by courts it is worth looking at a relevant case law.

Poussard v Spiers [1876] 1 QBD 410

In that case an actress has been employed for a leading role in opera. However, 5 days before the opening night she becomes ill and is not able to perform not only on a premiere but on 4 first nights. Taking into consideration the importance of the opening night for the reputation of the whole opera the producers decide to replace her. She then starts to feel better and tries to come back. Since producers made an attempted to terminate the contact, actress brings a cause of action against them.

The court however decided that the performance on the opening night as of such importance that failing to perform was a breach of a condition and doesn't reward her any damages.

Shuler v Wickman [1974] AC 235

The relevant factor that needs to be taken into consideration when distinguishing if a term is a condition or not is a fact that, even if the something is called "condition" in the contract itself, the court may decide otherwise.

That was clearly shown in the case of Shuler v Wickman [1974] where Court of Appeal decided that even though the word "condition" was used it was only an indication and haven't made that action a condition staright away.

REMEDIES?

Now that we have defined what a condition is there is a question of what possible remedies are available in the case of a breach of the condition?

Since t is the major term of the contract and very often is a key point and foundation of t there is a wide range of possible remedies, starting at awarding the party who suffered a loss damages till even termination of the whole contract

Warranties

Warranties are simply minor, subsidary terms of a contract

Since they are not as significant as conditions there are fewer remedies available for the breach of warranty. Parties are not able to bring a cause of action for termination of a contract. In the best case they can be awarded damages.

Bettini v Gye (1876) 1QBD 183

That is an example of the case where court decided that performing certain action was not a condition, but merely a warranty.

The case is about a singer who sign a contract for number of performances in variety of different places. In the contract itself there was a clause that he is obliged to appear 6 days before the performance to take part in rehearsals. However ho absent until 3 days before the show. On those grounds the producers wanted to terminate the contract, but since courts decided that it was a minor term they could only be awarded damages.

Innominate terms

This is the third and the last category of terms. Those are mostly treated with a 'wait and see' approach, which simply means that the remedies available for the breach of a certain term are dependant on the effect of that breach- innominate term can act as a conditions or as warranties.

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

That case is the most significant when it comes to innominate terms, since this concept has been first risen.

Facts

  1. A ship was chartered by the defendants with the requirement of the ship being suitable for 'ordinary cargo service' and being 'seaworthy'
  2. Ship had been delivered and sold to USA, from where it was supposed to began its journey to Japan
  3. The crew turned out to be not experience and not having enough knowledge to repair complicated machinery, which effected in the loss of 20 weeks' use of the ship and the contract being treated by defendants as terminated (because of the breach of condition)
  4. Plaintiffs admitted that the the ship was, in fact, unseaworthy, but claimed that it only entitled defendants to sue for damages and not to terminate the whole contract.
  5. The Court of Appeal held that the defendants were indeed not entitled to terminate the contract as the unseaworthiness or the delay itself were not "so great as to frustrate the commercial purpose of the contract".

The case showed how much hard and ambiguous process is the distinction between the condition and the warranty. In most of the cases it can be argued both ways and it is just for the court to decide if such a term acts as a condition or as a warranty and which remedy should be applied.

That was clearly confirmed by Lord Diplock in the case itself, where he stated, that:

"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 consequences of a 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"."

Credits:

Created with images by TeroVesalainen - "handshake hand give" • PDPics - "signature sign writing" • succo - "hammer horizontal court" • succo - "hammer horizontal court" • PDPics - "signature sign writing" • succo - "hammer horizontal court" • PDPics - "signature sign writing" • succo - "hammer horizontal court"

Made with Adobe Slate

Make your words and images move.

Get Slate

Report Abuse

If you feel that this video content violates the Adobe Terms of Use, you may report this content by filling out this quick form.

To report a Copyright Violation, please follow Section 17 in the Terms of Use.