Classification of Terms by Maryam Ghanti (7049240, Seminar Group 4)

A term is an obligation stated within a contract. There are three classifications of terms; conditions, warranties, and innominate terms. Each of these terms also has their own remedy if they are breached in a contract.

Below is an explanation of each type of term followed by their suitable remedies if breached.

A condition is classified as a major term in the contract. It begins and is part of the sole root of the contract. Therefore, if breached, the claimants have a right to claim for damages and/or be provided remedies. They also have the ability to terminate the contract if one of these conditions are breached. However, simply stating that a term is a condition in a contract, does not make it so. You have to assess how serious a breach of the term would be in order to establish whether it is a condition.

An example of a condition in a contract is the case of Poussard v Spiers [1876] 1 QBD 410. The claimant was employed to play a leading role in an opera however a few days before the opening act, she became ill and was therefore unable to act her contractual duties. The opera company then employed another singer and terminated the claimants contract who then sued stating this was a breach. This was denied as it was held that the fact that the claimant needed to be there on the opening night was a major term in the contract. This is because the opening night of any opera is the most important night due to the publicity and crowds that it gathers. It was stated that the claimant herself breached her own contract as she was not able to make the most important night, therefore her producers were in their right to hire a new singer. She was thus unable to sue for breach of contract.

A warranty in a contract is classified as a minor term and is ancillary to the main purpose and conditions of the contract. As it is a minor term, parties can only claim for damages and cannot terminate the contract like in breaches of a major term. It is important to note however, that if there is a warranty in an insurance contract, it is classified as a major term due to the nature of that particular type of contract.

An example of a term classified as a warranty in a contract is the case of Bettini v Gye [1876] 1 QBD 183. Similarly to the case of Poussard, a singer was contracted to perform at a variety of theatres. A part of the contract stated that the singer needed to appear six days before the start of the shows for rehearsal however, the singer turned up three days beforehand. The producers then argued that this was a breach of contract and tried to terminate the contract with the singer who then sued for wrongful termination. The courts held that the rehearsals and turning up six days before the show was a minor term in the contract as not much would happen if he did not turn up for all six days. Thus, this term was classed as a warranty in the contract which allowed the producers to sue for damages but they were not able to terminate the contract as this can only be done if there is a breach of a major term.

An innominate term is not technically categorised as either a minor or major term, but is a type of third classification. It adopts a 'wait and see' approach wherein the courts will assess the case and then determine what type of term was involved. Due to this, it is not possible on the outset to state what exactly the consequences are for a breach of an innominate term. Innominate terms were introduced as it was not always clear to see what type of term it was in a contract. Therefore, the courts will adopt the approach on a basis where if the breach of the contract is serious, then the term will be classified as a condition, if the breach is minor then the term will be classified as a warranty. Thus, it is important in cases to consider the effects of the breach which will then assess what type of term it is, resulting in different remedies.

A case which introduced the concept of innominate terms was Hong Kong Fir Shipping v Kawasaki Kisen Kaisha Ltd [1962] 1 All ER 474 CA. This case involved the hire of a ship to transport goods from the USA to Japan. The ship was given to the charterers for this purpose and it was stated in the contract that , 'she being in every way fitted for ordinary cargo service'. However, it was then found that the machinery on the ship was very old and it took a lot of crew members to maintain it of which the charterers did not have enough of. Due to this, the charterers lost a lot of time of their voyage as their ship had to constantly be repaired. As there was an agreement within the contract claiming that the ship was seaworthiness, the claimants tried to terminate the contract as it they found it not seaworthiness. However, it was held that this agreement was not a condition thus not allowing them to repudiate the contract.

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