Types Of Contractual Terms

Question 1

CATEGORISING TERMS

Answer 1

To understand difference between conditions, warranties and innominate terms

Question 2

What is a condition?

Answer 2

This is a term that allows a person the right to terminate and claim damages

Question 3

What is a warranty?

Answer 3

A term that gives a person the right to damages but NOT to terminate

Question 4

What is an innominate term?

Answer 4

This classification depends on judging, at the time of the breach, if the consequences of the breach sufficiently serious to merit termination

Question 5

What are a person’s options when a breach occurs (condition)

Answer 5

Affirmation and continuing the contract AND claiming damages for loss

Or Terminate and claim damages

Question 6

What are a person’s options when a breach occurs (warranty)

Answer 6

Claim damages NOT terminate the contract

Question 7

What ways can contractual terms be classified?

Answer 7

Statute

Parties intentions

Judiciary

Question 8

How are they classified by statute?

Answer 8

E.g. Sale of Goods Act 1979 and Consumer Rights Act 2015

The parties: express agreement

Courts: binding precedent or ascertaining implied intention of parties

Question 9

sections of Sale of Goods Act 1979

Answer 9

11 - when condition to be treated as warranty
12- implied terms about the title
13- sale by description
14 - implied terms about quality or fitness

Question 10

Sections of Consumer Rights Act 2015

Answer 10

9 - Goods to be of satisfactory quality
10 - Goods to be fit for purpose
20 - Right to reject
21 - Partial rejection of Goods

Question 13

Parties’ intention

Answer 13

Schuler v Wickman:
W given sole right to sell S’s machine tools in UK for 4 1/2 years
Clause 7: condition of the agreement that sales representatives should visit 6 firms once a week
Clause 11: agreement terminable for material breach of contractual obligations
HELD: HL refused to accept this term as a condition and instead interpret as a warranty

(The more unreasonable a result the more unlikely the parties could have intended it

Question 14

Parties intention (CASES)

Answer 14

Rice v Great Yarmouth Borough Council

• Clause in a long term leisure management agreement

HELD: Clause could not have been intended by the parties to apply to minor breaches

Question 15

When does a term become a condition of a contract?

Answer 15

Poussard v Spiers (1876)

Material Facts: a singer was engaged to take part in an operetta. Owing to illness she was delayed until a week after the start of the operetta. A replacement had been engaged because of her absence.

HELD: (Obligation to perform!!!) amounted to a condition therefore, the failure to appear on time was a breach of contract

Obligation to perform on the opening nights more important to contract this amounted to a condition

Question 16

When will a term be classed as a warranty?

Answer 16

Schuler v Wickman Machine Tools [1974]
Material facts : the defendants were bound to make weekly visits to six firms over the duration of the contract. This was the only term described as a condition of the contract.
HL refused to interpret as a term as a condition as any breach of it would ring it to an end and this seemed unreasonable.

Bettini v Gye (1876)
Material facts: A singer was supposed to attend rehearsals six days before the start of performances. He was absent due to illness but arrived three day later.
HELD: this as a breach of warranty as the (failure to attend rehearsals)did not lead to a breach of contract

Question 17

What is the difference between Bettini v Gye and Poussard v Spiers

Answer 17

Bettini - Failure to attend rehearsals was a warranty

Poussard: obligation to perform on the opening night more important amounted to a condition

Question 18

When will a term be seen as an innominate term?

Answer 18

Consequences of the breach - does the breach deprive innocent party of substantially the whole benefit of the contract

Hong Kong Fir Shipping : 2 year charter, requested to be “fitted in every way for ordinary cargo service” incompetent staff meant the ship need significant repairs, not seaworthy. Claimant lost 18 weeks worth of use from ship so sued for damages

Held: “slightest failure” to comply with the term should not result in termination

Question 19

What are the limitations to innominate terms (CASES)

Answer 19

Limited in The Mihalis Angelos that an ‘expected readiness to load clause’ clause was not an innominate term but a condition.

Bunge Corporation v Tradex Exports SA: Time of performance

The Hansa Nord : Inominate terms is still alive
(Cargo was still able to be used for cattle feed)

Question 20

How does timing affect whether something is a term

Answer 20

Failure to comply with a demand as part of an agreement may amount to a breach of contract

Lombard North Central v Butterworth - time of payment was essence

Punctual payments of the rental sums ‘shall be the essence of this lease’

Held : court of appeal held that the parties intended 2a to be a condition of contract