Seminar 6 Classification of Terms

Condition

"...'condition' is that of an essential stipulation of the contract which one party guarantees is true or promise will be fulfilled."

B.A.Garner, "Blacks's Law Dictionary ; 10th ed" , 365

Remedies available

"Any breach of such a stipulation entitles the innocent party if he so chooses, to treat himself as discharged from further performance of the contract and notwithstanding that he has suffered no prejudice by the breach. He can also claim damages for any loss suffered."

H.Beale, " Chitty on Contract: vol 1 , General Principles" , 917

Warranty

"...warranty in this sense is reserved for the less important terms of a contract or those which are collateral to the main purpose of the contract,..."

"Sales of Goods Act 1893" ; s 61 (1).

Remedies available

"...warranty, the breach of which may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated, depends in each case on the construction of the contract."

"Sale of Goods Act 1893" ; s 11 (b)

Intermediate terms

" Terms which are more flexible to the consequences of breach and tending to encourage, rather than discourage performance of the contract."

Cehave N.V. v Bremer Handelsgesellschaft mb Hb [1976] Q.B. 44, 70

Remedies available

" Breach of such a term entitles the party not in default to treat the contract as repudiated only if the other party has thereby renounced his obligations under the contract or rendered them impossible of performance in some essential respect or if the consequences of the breach are so serious as to deprive the innocent party of substantially the whole benefit which it was intended that he should obtain from the contract."

H.Beale, " Chitty on Contract: vol 1 , General Principles" ,920

Case comment

In a case of Hong Kong Fir Shipping v Kawasaki Kisen Kaisha Ltd [1962] 1 All ER 474 CA it was shown that traditional division of terms into warranties and conditions does not face completely the nowadays problems and therefore there are also innominate or intermediate terms.

In this particular case the shipowner hired a ship to the charterer for the time of 24 months. On a way to deliver coal to Osaka the ship spent five weeks being repaired. The engines of this vessel were in bad condition and had to be maintained by efficient staff. However staff of the vessel was insignificant in numbers and inefficient. When the ship arrived to Osaka the staff was replaced and further 15 week time repair work was required for ship to continue the voyage. The charterer claimed his ability to terminate the contract for the failure to deliver a seaworthy ship ( bad condition of engines and incompetence of the staff)

The shipowner in its turn sued the charterer for wrongful termination of the contract. The court of appeal held that despite the owner had been in breach for failing to provide seaworthiness , it was not enough to terminate the contract. The charterer was in breach of wrongfully terminating the contract. The owner was entitled for damages due the financial problems caused by the delay of the voyage.

The main importance of the particular case lies in the treatment of by Diplock L.J. He made it clear that whether termination was possible, for the breach of term of seaworthiness, did not depend upon the classification of the term but on the circumstances of the breach, inter alia, termination is possible if only consequences of breach are serious enough.

Diplock L.J stated :

"There are, however, many contractual undertakings of a more complex character which cannot be categorized as being " conditions " or " warranties, "…Of such undertakings all that can be predicated 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 consequences of a breach of such an undertaking,… depend upon 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. "."

Therefore court decided that the " sea worthiness " was not a condition and therefore termination could not be exercised . It was a term , legal circumstances of breach which depended upon its actual consequences. thus term can be considered as innominate.

Web site created by Daniil Jevdokimovs ( Yakesh Tanna Seminar group IL 2 on Friday 1 PM GE 436)

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Daniil Jevdokimovs
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( Yakesh Tanna Seminar group IL 2 on Friday 1 PM GE 436)

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