Classification of TermsCondition, Warranty and Innominate term.
What is condition?
A condition is a major term which is vital to the main purpose of the contract. A breach of condition will entitle the injured party to repudiate the contract and claim damages. The injured party may also choose to go on with the contract, despite the breach, and recover damages instead. Case Example: Poussard V Spiers .
What is Warranty ?
A warranty is a less important term: it does not go to the root of the contract. A breach of warranty will only give the injured party the right to claim damages; he cannot repudiate the contract. Case Example: Bettini V Gye .
What is innominate term?
The innominate term approach was established in the case of Hong Kong Fir Shipping. Rather than classifying the terms themselves as conditions or warranties, the innominate term approach looks to the effect of the breach and questions whether the innocent party to the breach was deprived of substantially the whole benefit of the contract. Only where the innocent party was substantially deprived of the whole benefit
the case of Hong Kong.
This approach has been criticized for sacrificing certainty. Also the innocent party may well be liable for wrongful repudiation if they treat the contract as at an end where it is found that the breach did not deprive them of substantially the whole benefit of the contract.
Even where the parties have themselves classified the term as a condition the courts can hold that it was in fact only a minor term and therefore a breach of that term would not give rise to the right to repudiate the contract.