Lecture 11-Classification Flashcards
Classification
Conditions
Warranties
Innominate terms
Conditions
Conditions are essential, important or major terms of a contract – they go to the root of or core of the contract
If a condition is breached, the injured party can sue for damages AND can terminate the contract
Terms can be classified as a condition by:
the parties themselves,
by statute, or
by the courts
By courts
There are two grounds on which the courts may decide that a term is a condition:
Where performance of the term goes to the root of the contract (reflects intention of the parties)
Couchman v Hill [1947]
Where binding authority requires the court to hold that the term is a condition (standard term of charter parties)
The Mihalis Angelos [1971]
Breach gives rise to
Damages and Repudiation
Warranties
Warranties are minor or subsidiary terms – they are not essential terms of the contract
Collateral to the main purpose of the contract.
Warranty breach gives rise to
Only damages
Innominate terms (breach-based)
Hongkong Fir Shipping v Kawasaki [1962]
Certainty can be achieved most effectively by deciding whether or not a term is a condition according to the nature of the term broken, not by requiring the parties to wait and examine the consequences of the breach before deciding whether or not they are sufficiently serious to justify the classification of the term as a condition.
Key question
Does the breach deprive the innocent party of substantially the whole of the benefit he expected to gain from the contract?
Clarification
The Hansa Nord [1976]
The breach must be serious and substantial/ goes to the root of the contract
No breach
Valilas v Januzaj [2014]
No breach where the party is not deprived of the whole benefit of the contract
Statutory Implied Terms
Sometimes statutory implied terms are stated also to be conditions or warranties
Stipulation by parties
Schuler AG v Wickman Ltd [1974]
Where a term is described as a condition, there is a presumption that (a ‘strong indication’ that) it will be treated as such BUT this presumption can be rebutted
Rebuttal
When to interpret the term as a condition would lead to an unreasonable result
High Threshold
Heritage Oil and Gas Ltd. v Tullow Uganda Ltd [2014]
Not keen on going against stipulation (high-threshold)
Dangerous presumption as many contracting parties are careful over deciding the terms in the contract.
Binding Authority
The Mihalis Angelos [1970] ‘Expected readiness to load’ clauses in shipping contracts should be classed as conditions for the purposes of certainty, a ‘most indispensable quality of mercantile contracts.’
Reaffirmed
Bunge v Tradax [1981]
Term will be treated as a condition:
if an applicable statute treats it as a condition;
if there are precedents which have categorised a term of that type as a condition (although older precedents should be approached with caution);
if the contract designates the term as a condition;
if the nature of the contract, the subject-matter, or the circumstances of the case lead to the conclusion that the parties must have intended that the innocent party would be discharged from further performance of his obligations if the term was not fully and precisely complied with
Time Clauses
Valilas v Januzaj [2014] “[t]ime of payment is not generally of the essence of a commercial contract unless the parties have agreed (either expressly or by necessary implication) that it should be.” (per Lord Justice Underhill)
Classification of innominate outside of shipping contracts.
Approach to classification
Overall, the “modern approach is that a term is innominate unless a contrary intention is made clear.” (per Hamblen LJ in Grand China Logistics Holding (Group) Co Ltd v Spar Shipping AS [2016])
