Classification of terms Seminar 6, contract law

Condition - "A provision which makes the existence of a right dependent on the happening of an event; the right is then conditional, as opposed to an absolute right." ~Osborn's Concise law dictionary, 12th Ed.
"Conditions are important terms that are said 'to go to the root of the contract'; if they are broken, the breach is generally regarded as repudiatory, so that the non-breaching party will have the option of terminating the contract for the future or affirming it, in addition to the remedy of damages." ~Jill Poole, Textbook on Contract law, 13th Ed.
Warranty - "a non-essential or subsidiary term" ~Mindy Chen Wishart, Contract Law, 5th Ed.

Contrary to the conditions, the consequences of breaching the terms which are seen as a warranty, are not that serious. When the warranty is breached, the claimant is entitled for damages, however, the contract will not be terminated. It may be illustrated by the case Bettini v Gye where the Court made a decision that,missing few rehearsals by the opera singer was not vital to the agreement. It was rather a warranty than a condition, therefore the contract cannot be terminated on that basis.

Innominate term - "A contractual term, which is neither a condition nor a warranty" ~Osborn’s Concise Law Dictionary, 12th Ed.

The termination of innominate terms depends on 'waiting and seeing' whether the term should be classified as condition or as warranty. The innominate terms can be broken with either important or trivial consequences, depending on the nature of the breach. If the effects of the breach are serious, then the term is classified as a condition, if no, then the term is seen as warranty. This may be illustrated by the

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd

The facts of the case are:

  • The contract concerned the charter of a ship for a period of 2 years.
  • The vessel was chartered in "reasonably good condition" and it should be returned in the same condition.
  • However, due to the incompetent staff, there was a serious breakdown of a vessel which resulted in delays and the need to repair the vessel.
  • The defendant, in June 1957, decided to terminate contract on the ground that the vessel would not be made seaworthy before September 1957.
  • As the vessel was made seaworthy in the middle of September 1957, the claimants brought an action of the wrongful repudiation.
  • The issue in this case was whether the defendants were entitled to terminate contract or whether they had been entitled only to claim damages.

Lord Diplock:

"The problem in this case, in my view, neither solved nor soluble by debating whether the shipowner's express or implied undertaking to tender a seaworthy ship is a 'condition' or 'warranty'. The correct approach was to look at what had happened as a result of the breach and then decide if the charterers had been deprived of substantially the whole benefit which it was the intention of the parties they should obtained."

In my opinion, this case have got an unusual importance in relation to the classification of the terms. The legal principle is that some terms cannot be defined before breach as a conditions or warranties and so it happened in this case. As it was stated that the breach did not go to the root of the contract, the charterers had not been entitled to terminate the contract. This decision shows that law applies individually to each case and each facts should be considered in detailed. The case, for the first time ever, made a point about innominate terms which are now used in contract law, for example in the Bunge Corp v Tradax SA case.

To sum up the areas I have covered, I upload the video which may be used as a conclusion.

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