Classification

Question 1

What are terms?

Answer 1

The details of what has been agreed between the two parties.

Question 2

What are the 3 types of term?

Answer 2

1. Conditions
2. Warranties
3. Innominate terms

Question 3

Discuss conditions

Answer 3

A condition is a major term in a contract and are so important that failure to fulfil them defeats the purpose of the contract.
Breaching a condition means the contract can be repudiated (set aside). There can also be damages, with the V of the breach deciding what to claim.
Poussard v Spiers & Pond shows that if breaching a term would defeat the purpose of the contract, this will be a condition.

Question 4

Discuss warranties

Answer 4

A warranty is a minor term of the contract, failure to fulfil them does not defect the purpose of the contract.
Breaching a warranty mean the contract continues, but damages can be paid.
Betting v Gye shows that if breaching the term will not defeat the purpose of the contract, this will only be a warranty.

Question 5

How do the courts determine if a term is a condition or a warrant?

Answer 5

1. The court may use the test of ‘does the term go to the root of the contract’?
2. A statute may specify the term as a condition or warranty
3. The parties themselves may have specified what the term is. This occurred in Schuler v Wickman Machine Tools where the term was specified as a condition. However, the court said it was not a condition as it was unreasonable to do so, showing how the parties specifying what the term is will not always work.

Question 6

Discuss innominate terms

Answer 6

Innominate terms are very broad and ambiguous terms.
Breaching such terms can repudiate the contract, if the breach is so serious it defeats the point of the contract, or only lead to damages, if the breach is less serious. Hong Kong Fir Shipping shows that a breach is serious if it deprives the party of substantially the whole benefit of the contract.
Bunge Co shows courts may be reluctant to classify a term as an innominate term in order to maintain certainty in the law.
Cehave v Bremer shows that the courts can find an innominate term and declare it a warranty if one party is trying to exploit a condition.