Classification of Terms Done BY ZAHRAH AMIN

Warranty

Minor term of contract which if breached can be compensated with payment of damages and is not likely to be fatal to main part of the contract.

Breach of this results in the injured party being enabled to only sue for damages due to the fact it is considered only as a minor term of the contract (or as a warning).

Bettini v Gye (1876): obligation to attend rehearsals for six days. Failed to attend the first three. The rehearsal obligation did not go to the root of the contract. It was only a warranty giving rise to a claim in damages but not to the ability to terminate the contract.

Condition

This can be considered as the opposite of a warranty whereby it is an important term and regarded as major term of contract which goes to the root of the contract.

Breach of condition – repudiatory breach so that there is always the option to terminate (repudiate) the contract or affirm. The plaintiff can sue for damages if they want too.

Poussard v Spiers (1876): obligation of lead singer to perform at first performance went to the root of the contract and its breach amounted to a breach of condition.

Innominate term

This can be explained as a term where no specific status has been placed upon it (not knowing whether it is a warranty or condition), the court’s have classified it as ‘innominate term.’ Some of the effects of these terms have serious consequences and some only minor.

As it is depending on the consequences it may or may not be repudiatory depending on how serious the consequences of breach is. The breach will be repudiatory if it derives the innocent party of the benefit which it was supposed to get from the contract.

Hong Kong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha Ltd (1962): plaintiffs charted ship from plaintiffs for two years and contained term which required plaintiff to provide ship which was seaworthiness but plaintiffs openly admitted it was unseaworthy. After 20 weeks use of ship was lost and defendant claimed to treat contract as terminated for breach of contract. Plaintiff claimed breach only entitled defendants to sue for damages. Plaintiffs succeeded in defendant’s wrongful termination.

Case Commentary:

Hong Kong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha Ltd (1962):

Facts: This case is about a ship which was chartered to the defendants for a 2 years period by the plaintiffs. The agreement formed had a term that the ship would be seaworthy, however problems occurred with the engine and ship had become out of service for 5 weeks and then a further 15 week’s period. When this had happened, the defendants had decided to terminate the contract due to breach. But the plaintiffs in response claimed breach for wrongful repudiation by stating that seaworthiness was not a condition of the contract.

Held: the defendants were liable for repudiation resulting in the successful of plaintiff for wrongful termination of contract. The court had use the innominate term within this case because they did not classify whether the term was a condition or warranty but rather the effects of its breach and whether it deprived or caused major damages to the innocent party. By applying this to the case, the court clarified that 20 weeks out of a 2 years contract period did not deprive the defendant’s and therefore, should have not been entitled to repudiate the contract.

Lord Diplock had made a comment within this case whereby he had said that in complex situation we cannot determine whether it is a warranty or condition but rather look at the deprived party which believed they would gain the whole benefit from the contract. Also, the legal consequence of the breach unless expressly stated in the contract is that of which takes place when the breach occurs.

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