Classification Flashcards
What is the definition of classification?
There are different types of contract terms: conditions, warranties and innominate terms. Breaching these will have different consequences for the contract/parties.
What is a condition of a contract?
A major term of the contract where it is so important to the contract that failure to fulfil it defeats the purpose of the contract. Conditions go to the ‘root of the contract’.
What is the effect of breaching a condition?
The contract can be repudiated (i.e. set aside). This is a choice by V and they can reject any goods supplied and get a refund or refuse any further performance under the contract. There may also be a claim for damages instead or repudiation or in addition to it.
Which case is an example of a breach of a condition?
Poussard v Spiers and Pond. Actually performing the lead role was the main part of the contract making it a condition. The actress’ failure to show up for the first few performances meant the contract could be repudiated and the role could be given to someone else.
What is a warranty?
A minor term of the contract. Failure to fulfil a warranty does not defeat the purpose of the contract.
What is the effect of a breach of a warranty?
The contract still exists and continues. V has no right to repudiate and if they do, they will be in breach for wrongful repudiation. But damages can be paid to V.
Which case is an example of a warranty?
Bettini v Gye. Attending the rehearsals was not the main part of his contract, the actual performances were, therefore the term regarding rehearsals was only a warranty. His failure to show up for rehearsals meant he had to pay damages to the director but the contract still continued and he still had the part. The director wrongfully repudiated the contract in giving the role to someone else so now the director is also in breach.
What is the main way to determine if a term is a condition or a warranty?
The court uses the test of if the term goes to the root of the contract or not. If it does, it is a condition like in Poussard. If it doesn’t, it is a warranty like in Bettini.
How can a statute help determine if a term is a condition or a warranty?
If a statute specifies the implied term as a condition or a warranty. This is conclusive. For example, the Sale of Goods Act 1979 shows implied terms relating to the quality of goods must be a condition of B2B contracts.
How can the parties themselves help determine if a term is a condition or a warranty?
If the parties have specified what the term is this suggests what their intentions were and can be good evidence for which type of term it is. However this is not conclusive.
Which case proves that the parties specifying what the terms are is not conclusive?
Schuler v Wickman. We look at the parties intentions but the more unreasonable it is for that term to be a condition, the less likely they wanted it to be a condition. It was virtually impossible for Wickman to make all 1400 trips and it seemed unlikely the parties would want the whole contract to end if he missed even one for valid reasons such as being ill. Therefore, it would be unreasonable for this to be a condition, despite it being called that.
What are innominate terms?
Very broad terms where breaching them could defeat the point of the contract, or the breach may not be that serious at all.
What happens if an innominate term is breached?
Breaching innominate terms can repudiate the contract (if the breach is so serious it defeats the purpose), or only lead to damages (if it is not so serious and the purpose of the contract can continue). It is either treated like a condition or a warranty once the consequences of the breach have been assessed.
Which case introduced innominate terms?
Hong Kong Fir Shipping
What is the test to determine whether an innominate term is a serious breach or not?
Comes from Hong Kong Fir Shipping. Does the breach deprive the party of substantially the whole benefit of the contract? (i.e has the breach defeated the main purpose of the contract?)
