Terms of Contract

3 Classification of terms

Terms may be further classified into three categories.

  1. Condition
  2. Warranty
  3. Innominate terms

It is important to distinguish between condition and warranty because the remedies available under law are different if breached.

Effect of the breach is also different in both cases.

  1. Breach of condition: high losses
  2. Breach of warranty: low losses

3.1 Condition

Some of the terms in a contract are major and have vital importance, called condition.

We can also say that the basic or the fundamental term of the contract is condition.

The effects of the breach of condition are harsh.

After the beach of condition the injured party may have right to terminate the contract at all.

Case law: Poussard v Spiers 1876

3.1.2 Expressed and implied condition

Conditions are express when they are willingly inserted in the contract by the parties and implied when the law presumes their existence in the contract automatically.

3.2 Warranty

Warranty is the term of a contract which is minor as compared to condition and subsidiary to the main purpose of the contract.

The effect for the breach of the warranty is also not vital.

After the breach of warranty, the injured party must continue performance and  may have right to claim only for damages.

Case law: Bettini v Gye 1876

3.3 Innominate terms

An implied term of a contract which is neither classed as a condition or a warranty but somewhere in between calledan intermediary or innominate term.

Case law: Hong Kong Fir Shipping Co Ltd v Kawasaki Kisa Kaisha Ltd 1962