Classification Flashcards
What are terms?
The details of what has been agreed between two parties.
What are the 4 types of terms?
- Condition
- Warranties
- Innominate terms
What are conditions?
Major terms in a contract - so important that failure to fulfil them deafest the purpose of the contract.
What is the effect of breaching a condition?
Breaching a condition means the contract can be repudiated (set aside). This means the parties do not have to actually go through with the contract, but there may be damages.
The V will decide if: they repudiate, get damages or both.
What is the case for conditions?
Poussard v Spiers & Pond
Decision: Performing in the lead role was the main part of the contract, therefore it was a condition. Due to it being a condition, her failure to show up meant the contract had been repudiated and the part could be given away.
What are warranties?
Minor terms of a contract - failure to fulfil them does not defeat the purpose of the contract.
What the is the effect of breaching a warranty?
Breaching a warranty means the contract still exists and continues, but damages can be paid to the V.
What is the case for warranties?
Bettini v Gye
Decision: Attending the rehearsals is not the main part of the contract, therefore was only a warranty. Due to it being a warranty, his failure to dhow up to rehearsals meant he had to pay damages to the director, but the contract still continued and he still had the part.
What are the 3 ways the courts determine if a term is a condition or a warranty?
- The court may use the test ‘does the term go to the root of the contract’.
- A statute may specify the term as a condition or warranty. e.g. the Sale of Good Act 1979 shows terms relating to the quality of goods must be a condition.
- The parties themselves specify what the term is. However, the courts can still ignore this stipulation.
e. g. Schuler v Wickman Machine Tools - We look at the parties’ intentions - calling it a condition is good evidence that they wanted it to be a condition, but the more unreasonable it is for the term to be a condition, the less likely they wanted it to be a condition. Here, it was virtually impossible for W to make all 1400 trips, so it was very unreasonable to be a condition.
What are innominate terms?
Very broad/ambiguous terms.
What happens if an innominate term is breached?
Breaching innominate terms can repudiate the contract (if the breach defeats the purpose of the contract), or only lead to damages (if the breach is not so serious). This is decided by the courts.
What is the case for innominate terms?
Hong Kong Fir Shipping - The party had not been so deprived because they only lost a few weeks out of 2 years - so the breach was treated as a breach of a warranty and damages were awarded, but the contract continued.
How does the court decide if an innominate term is serious or not?
Does the breach deprive the party of substantially the whole benefit of the contract.
I.e. Has the breach taken away from/defeated the main purpose of the contract.
What happened in Bunge Co?
The case involved terms that were common in many commercial contracts - ‘readiness to load’ clauses.
The court held that such terms should be conditions (not innominate terms) to keep the law on such contract certain.
Eval - Certainty vs Flexibility
What happened in Cehave v Bremer?
Case involved a third party.
- The term ‘delivered in good condition’ is very broad and so is an innominate term.
- The buyers wanted the contract to be set aside as the market value had dropped.
- However, the initial buyers ended up buying the exact same feed from a third party later on (proof the breach did not defeat the purpose of the contract).
-Therefore, the term was a treated like a warranty.
Eval - Party Exploitation - Bargaining Power
