Conditions + Warranties

Question 1

Ways of classifying a term in a contract: 3 ways

Answer 1

• conditions
• warranties
• innominate terms.

Question 2

General principle if party breaches a condition?

Answer 2

innocent party = right to treat contract as repudiated + sue for damages immediately

Question 3

Does the innocent party have to repudiate the contract if the other party breaches a condition?

Answer 3

No - can affirm it ie contract remains in full force.

Question 4

Remedy if party breaches warranty?

Answer 4

sue for damages ony

Question 5

what is the distinction between a condition and a warranty?

Answer 5

condition = important term ‘going to the root of the contract’

warranty = less important term not going to the root of the contract.

Question 6

If the parties clearly intended at the time of contracting that any breach of the relevant term could result in the innocent party terminating, what type of term is this?

Answer 6

a condition (from the outset)

Question 7

Terms at the outset which are neither conditions nor warranties are …?

Answer 7

Innominate/ intermediate nature

Question 8

What Question do you ask when an innominate term has been breached?

Answer 8

Does breach deprive non-defaulting party of substantially the whole benefit that he should obtain from the contract?

Question 9

If a party has committed a repudiatory breach, what classification of term have they breached?

Answer 9

a condition

Question 10

What happens if there has been a breach of an innominate term?

Answer 10

the term will be treated as a condition

innocent party entitled to treat the contract as repudiated + claim damages.

Question 11

What happens if the consequences of the breach are minor (of innominate term)

Answer 11

Will be considered as a warranty = innocent party entitled to claim damages only.

Question 12

when considering classification of terms, what is the court’s starting position in considering whether the term in question has been classified as a condition or a warranty by…

Answer 12

i) statute;
ii) the parties or
iii) previous judicial decision(s)

Question 13

If neither statute, the parties, or previous judicial decisions provide an answer, what will the courts do next?

Answer 13

look at:
- the contract
- the subject matter
- the surrounding facts

= to determine whether the parties intended for any breach of the term to entitle the innocent party to terminate the contract

Question 14

If the court cannot determine the parties’ intention or determines their intention was that not every breach would lead to the right to terminate, what will they decide on the term?

Answer 14

term = innominate, and apply test from Hong Kong Fir (Do the consequences of the breach deprive the party not in default of substantially the whole benefit from the contract)

Question 15

Where a requirement as to timing is essential to the contract, what will lateness amount to?

Answer 15

A repudiatory breach