7- Types of terms PDF

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Types of terms in contract law...

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CONTRACT LAW 1209 THE CONTENTS OF A CONTRACT (2) ___________________________________________________

CONDITIONS WARRANTIES AND INNOMINATE TERMS The relative significance of each term in a contract is important, as it will determine the remedies available if a term is broken. CONDITIONS: these are usually terms that contain the fundamental obligation under the contract. They are terms that go to the root of the contract. When is a term a condition? Terms may be conditions if established by: i) Statute eg. s. 12-15 SOGA 1979 - prevents non-consumer from rejecting goods where breach of s13 is so slight that it would be unreasonable for him to do so. ii) Precedent eg. Mihalis Angelos (1971) 3 All ER 125 - term re time for performance in a mercantile contract amounts to a condition. In this case an 'expected readiness clause' of a vessel = a condition. iii) Intention of the parties, eg.Lombard North Central v Butterworth (1987) 1 All ER 267 - where time for the payment of instalments was 'of the essence of the contract'. But the mere use of the word "condition" is not conclusive. Schuler AG v Wickman Machine Tool Sales (1974) AC 235; (1973) 2 All ER 39 (sale of machine tools) iv) the court - Considers whether or not the term goes to the root of the contract. see Poussard v Spiers (1876) & Bettini v Gye (1876) below.

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Breach of a condition entitles the aggrieved (wronged) party to: i)

Sue for damages and

ii)

Repudiate any further liability (terminate the contract)

Poussard v Spiers (1876) 1 QBD 401 A singer, hired to perform during the entire run of an operetta, did not arrive until after one week of the run, when a substitute had been taken on. Held: there had been breach of a condition of the singer’s contract because it was essential that she was available in particular on the opening night of the performance and thereafter. Consequently, the managers were entitled to terminate her contract and take on a substitute instead.

WARRANTIES are terms that are subordinate to the main purpose of the contract, the breach of which only entitles the aggrieved party to sue for damages. Bettini v Gye (1876) 1 QBD 183, (1874-80) All ER Rep 242 A singer, hired to perform during an entire season, had agreed to arrive six days in advance for rehearsals, but was three days late and was dismissed in favour of a replacement. Held: was not breach of condition but breach of a warranty. Managers could only sue for damages IF they could prove someone had suffered loss from him not coming to rehearsals. Managers not entitled to terminate his contract as there was no breach of condition; there was merely breach of a warranty. Consequently, he was entitled to sue for wrongful repudiation of his contract and was entitled to damages accordingly.

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INNOMINATE TERMS (term with no name): sometimes it is not clear whether a condition or a warranty has been broken. To get around this problem the courts may adopt a different approach to the rights of a wronged party in the event of breach. Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen & Kaisha Ltd (1962) 2 QB 26, (1962) 1 All ER 474 The legal consequences depend upon the actual consequences of the breach. D chartered a ship from C for 2 years. The engines were in poor shape and the crew inefficient, which resulted in 20 weeks of the charter lost due to breakdown and repairs. One of the contract terms stated that the ship should be ‘in every way fitted for ordinary cargo service’. Both sides agreed that this term was broken. D argued it was a condition and repudiated the contract, whereupon C sued for wrongful repudiation on the basis that the term was only a warranty. CA held: The seriousness of the consequences of the breach were not enough to entitle the Ds to repudiate the contract. Consequently, it was treated more as a kin to a breach of a warranty rather than condition. Breach of an innominate term.

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