Classifications Of Contractual Terms PDF

CLASSIFICATIONS OF TERMS INTRODUCTION Once a statement is a term of a contract, must determine its classification Traditional classifications: Condition Warranty ‘New’ – innominate term © IZURA M ZAKRI (UM) 2 ...

CLASSIFICATIONS OF TERMS INTRODUCTION Once a statement is a term of a contract, must determine its classification Traditional classifications: Condition Warranty ‘New’ – innominate term © IZURA M ZAKRI (UM) 2  CONDITION V WARRANTY Condition: Important or essential term Breach - terminate contract Warranty: Subsidiary to the contract/not so important Breach - damages © IZURA M ZAKRI (UM) 3  BETTINI V GYE 1 QBD 183 Contract between Bettini and Gye is that Bettini is to sing at the Royal Station Opera House in London for 3 months. She is also to attend 6 days of rehearsal prior to the performance. Attended only 2 days. Held … taking the entire contract into account, the rehearsal clause is not the foundation of the contract. It is not a condition, but a warranty. © IZURA M ZAKRI (UM) 4 WHEN A ‘CONDITION’ CAN BE A ‘WARRANTY’ Even though it may be categorised as a condition, it can be treated as a warranty (ie claim for damages only) when: 1. S.13 Sales of Goods Act – a choice 2. Receiving faulty goods and not refusing it within a reasonable time 3. Innocent party affirmed the contract even though breach of condition has occurred © IZURA M ZAKRI (UM) 5 3. INNOMINATE TERM Traditional classification of ‘condition’ and ‘warranty’ sometimes inaccurate Third category created When what had happened cannot be easily categorised into the traditional classifications © IZURA M ZAKRI (UM) 6 There are, however many contractual undertakings of a more complex character which cannot be categorised as being ‘conditions’ or ‘warranties’. … Of such undertakings all that can be predicated is that some breaches will and others will not give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract; 7 © IZURA M ZAKRI (UM) and the legal consequences of a breach if such an undertaking, unless provided for expressly in the contract, depend upon the nature of the event to which the breach gives rise and do not follow automatically from a prior classification of the undertaking as a ‘condition’ or a ‘warranty’ 8 © IZURA M ZAKRI (UM) Key question: Has the innocent party been substantially deprived of the benefits which it should have received under the contract? If yes: terminate contract If no: damages only © IZURA M ZAKRI (UM) 9 HONG KONG FIR SHIPPING CO LTD V KAWASAKI KISHEN KAISHA LTD 1 ALL ER 474 P rented ship (time charterparty) to D for 24 months. Sent to Liverpool, engine room staff insufficient and inefficient. P admits breaching a contractual term ie providing a ship that is seaworthy. On the way to Osaka, Japan, ship suffered engine failure and was delayed for 5 weeks. In Osaka, 15 more weeks were lost due to inefficiency of crew members. Seaworthy only in September. In June, D sought to end the contract as there had been breach of conditions. 10 © IZURA M ZAKRI (UM) (A) SEAWORTHY Literally, seaworthiness is a fundamental aspect of the contract. However, it can be breached in a number of ways, be it minor or serious. Here, ship was not seaworthy due to the inefficiency of the crew members. This is easily fixed by replacing them. Terminating a contract based on this would not be fair. © IZURA M ZAKRI (UM) 11 (B) TIME DELAY Question is not whether there has been delay, but rather, “has the delay caused a person to be substantially deprived of the benefits under the contract?” Here, it is a contract for 2 years (24 months) while the delay is for 20 weeks. Thus, there are still 19 months left under the contract. The party had not been substantially deprived of the benefits under the contract. 12 © IZURA M ZAKRI (UM)  CONDITION WARRANTY INNOMINATE Very important term Not so important term Can be either Breach: consequences dire Breach: consequences not Breach: were you dire substantially deprived? Can terminate contract Can claim damages Cannot terminate contract May terminate contract Can claim damages Can claim damages 13 © IZURA M ZAKRI (UM)  Is the Term Important? Yes No Are the consequences of the breach serious / were you Yes substantially deprived? No No Yes Condition Innominate Warranty © IZURA M ZAKRI (UM) 14 END