Classification of Terms

Millions of contracts are signed every day,all around the world. There are certain terms that have to be fulfilled as they are defined by the contract (expressly or impliedly). If the statement has become a term of a contract- what type of term is it? There are three types of terms: conditions, warranties, and innominate terms. It it very important to distinguish these three terms because of their level of importance in the eyes of the law varies.

Traditionally two types of terms were recognised at law: conditions and warranties. A condition is considered as a major term of a contract, one which goes to the root of the contract. If the term is condition, the innocent party may give rise to a right to treat the contract as repudiated, and if necessary, claim damages as well. The case of Poussard v Spiers and Pond illustrates the significance of conditions. Madame Poussard entered a contract to perform as an opera singer for three months. She became ill five days before the opening night and was not able to perform the first four nights. Producers purported to terminate the contract. Madame Poussard sued them for the breach of contract, but she lost. The court held that the opening night was vitally important, and her absence breached the condition of the contract. The producers had a right to terminate the contract.

The next type of a term, warranty, is regarded as a minor term of a contract, one which is merely subsidiary to the actual root of the contract. A term which is classified as a warranty does not entitle the innocent party confronted with its breach to terminate the contract. A breach of warranty may give rise to a claim for damages for the loss suffered.

The case of Bettini v Gye shows the difference between conditions and warranties. Bettini agreed by contract to perform as an opera singer for a three month period. He became ill and missed six days of rehearsals. The employer tried to terminate the contract, but Bettini sued them for breach of contract and was successful. Bettini was in breach of warranty and therefore the employer was not entitled to end the contract. Missing the rehearsals did not go to the root of the contract. The producers were entitled to sue for damages only.

The last type of terms to consider is an innominate term. In English contract law the innominate term is an intermediate term which cannot be defined as either a condition or a warranty. Innominate terms or 'intermediate terms' of a contract refer to terms which can be broken with serious consequences, in which case the term will act as a condition or it can be broken with minor consequences, in which case the term will act as a warranty. The effect of the breach of an innominative term depends on the effect of a breach of the term in the contract.

The terminology of an innominative term originates from the case of Hong Kong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha Ltd. In this case a ship was chartered to the defendants for a 2 year period. In the agreement there was a clause stating that the ship was 'in every way fitted for cargo service.' The problems developed with the engine of the ship and the engine crew were incompetent. Consequently the ship was out of service for the twenty weeks of the charter . 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 Hong Kong Fir Shipping case shows that the right of the innocent party to repudiate the contract and treat it as at an end depends on an independent judicial assessment of the seriousness of the effect of the breach. The court held that a breach of a term would be treated as a breach of condition if it deprived the innocent party of "substantially the whole benefit of the contract". The defendants were entitled to bring an action for damages for breach of contract because of the clause in the agreement.

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.