Terms of a Contract IITerms of a Contract II

Classification of Classification of TermsTerms

11

Types of termsTypes of terms

ConditionsConditions

WarrantiesWarranties

Innominate TermsInnominate Terms

22

Breach of condition : Breach of condition : EffectEffect

Innocent party has right of Innocent party has right of electionelection

Either: Either: To affirm & continue the To affirm & continue the contract AND claim damages for contract AND claim damages for loss occasioned by breachloss occasioned by breach

ORORTo terminate and claim damages To terminate and claim damages immediatelyimmediately 33

Breach of warranty : Breach of warranty : EffectEffect

Breach of a warranty only Breach of a warranty only allows the innocent party to allows the innocent party to claim damages, not to terminateclaim damages, not to terminate

44

Distinguishing condition & Distinguishing condition & warrantywarranty

Conditions - Conditions - Poussard v SpiersPoussard v Spiers (1876)(1876)

Warranties - Warranties - Bettini v GyeBettini v Gye (1876) (1876)

55

Types of ‘condition’Types of ‘condition’Promissory conditionsPromissory conditions

Contingent conditions Contingent conditions

– Condition precedentCondition precedent– Condition subsequentCondition subsequent

66

How is a condition How is a condition classified?classified?

StatuteStatute

Parties intentionsParties intentions

JudiciaryJudiciary

77

Statutory classificationStatutory classificationSale of Goods Act 1979Sale of Goods Act 1979– S.12S.12 Title – s.12(5A)Title – s.12(5A)– S.13S.13 Description - s.13(1A)Description - s.13(1A)– S.14S.14 Fitness for purpose - Fitness for purpose - s.14(6)s.14(6)

– S.15S.15 Sample s.15(3)Sample s.15(3)

All conditions UNLESS S.15(A) All conditions UNLESS S.15(A) appliesapplies

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S 15A SGA ‘79S 15A SGA ‘79Arcos v Ronaasen 1933Arcos v Ronaasen 1933

Where BUSINESS TO BUSINESS (B2B) Where BUSINESS TO BUSINESS (B2B) contractcontract

Such Such SLIGHTSLIGHT breaches of s 13, 14 or 15 breaches of s 13, 14 or 15 so thatso that

REJECTIONREJECTION of goods of goods UNREASONABLEUNREASONABLE

Breach Breach MAYMAY be treated as breach of be treated as breach of WARRANTYWARRANTY

Sale and Supply of Goods to Consumers Sale and Supply of Goods to Consumers 20022002

99

Sale and Supply of Goods Regs Sale and Supply of Goods Regs 2002 Amendments to SGSA 19792002 Amendments to SGSA 1979S. 48(A),(B),(C) (D) SGA 1979If goods do not conform consumer

may request that:the goods are repaired or replaced within a reasonable period of time,without causing significant inconvenience to the consumer,with the seller bearing any necessary cost of repairing or replacing the goods.

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Classification by the Classification by the partiesparties

Courts usually give effect to Courts usually give effect to parties intentionparties intention

Lombard North Central v Butterworths Lombard North Central v Butterworths 19871987

But not always…But not always…

Schuler v Wickman [1974]Schuler v Wickman [1974]1111

Where the Judiciary Where the Judiciary steps in…steps in…

‘‘Use of the word ‘condition’ is an Use of the word ‘condition’ is an indication – even a strong indication – even a strong indication – of [the parties’ indication – of [the parties’ intention but it is by no means intention but it is by no means conclusive.conclusive.The fact that a particular The fact that a particular construction leads to a very construction leads to a very unreasonable result must be a unreasonable result must be a relevant consideration. The more relevant consideration. The more unreasonable the result the more unreasonable the result the more unlikely it is that the parties can unlikely it is that the parties can have intended it…’ have intended it…’

Schuler v Wickman Schuler v Wickman [1974] per Lord Reid[1974] per Lord Reid 1212

Generally: JudiciaryGenerally: JudiciaryDefinition of ‘condition’ – Definition of ‘condition’ – guidelines guidelines

Hong Kong Fir v Kawasaki Kisen Kaishi [1962]Hong Kong Fir v Kawasaki Kisen Kaishi [1962]

‘‘goes to the root’ of the contract goes to the root’ of the contract Per Upjohn LJPer Upjohn LJ

a term ‘breach of which deprives a term ‘breach of which deprives the innocent party of substantially the innocent party of substantially the whole benefit of the contract’the whole benefit of the contract’Per Diplock LJPer Diplock LJ 1313

Specific terms: Specific terms: JudiciaryJudiciary

Precedents which have Precedents which have established certain terms as established certain terms as conditionsconditions

1. Expected ready to load1. Expected ready to loadThe Mihalis Angelos [1971]The Mihalis Angelos [1971]

2. 2. Time of performanceTime of performanceBunge v Tradax [1981]Bunge v Tradax [1981] 1414

2020thth Century - The Century - The innominate terminnominate term

Court looks to ‘Court looks to ‘consequences of the consequences of the breach’breach’‘…‘…many [terms] cannot be categorised many [terms] cannot be categorised as being conditions or warranties… as being conditions or warranties… all that can be predicted is that all that can be predicted is that some breaches will and others will some breaches will and others will not … deprive the [innocent] party not … deprive the [innocent] party of substantially the whole benefit’ of substantially the whole benefit’ per Diplock LJper Diplock LJ

Hong Kong Fir v Kawasaki [1962 ]Hong Kong Fir v Kawasaki [1962 ]

Aerial Advertising Co v Batchelor Peas Aerial Advertising Co v Batchelor Peas [1938] [1938]

NOTE: s.13 SGSA 1982 “reasonable care NOTE: s.13 SGSA 1982 “reasonable care & skill”& skill”

1515

Breach of innominate Breach of innominate termterm

innocent party’s rights may be innocent party’s rights may be uncertainuncertain

Possibility of wrongful Possibility of wrongful repudiation repudiation

Hong Kong Fir [1962]Hong Kong Fir [1962]

1616

Recap : Breach of Recap : Breach of conditions & warrantiesconditions & warrantiesBreach of condition: Right of Breach of condition: Right of electionelection

–affirm & continue + claim affirm & continue + claim damages ORdamages OR

–terminate + claim damagesterminate + claim damages

Breach of a warranty Breach of a warranty – claimant can only claim damages, claimant can only claim damages, not terminatenot terminate 1717

Conclusions - Conclusions - IncorporationIncorporation

Is the statement Is the statement incorporatedincorporated into the contract?into the contract?Pre-contractual statements Pre-contractual statements

– Express – oral & writtenExpress – oral & written

– Implied terms – common law & Implied terms – common law & statutestatute

1818

Conclusions - Conclusions - classificationclassification

If incorporated, then how If incorporated, then how classified?classified?

1. In advance1. In advance, at the time of , at the time of contracting:contracting:

By Statute ORBy Statute OR

By the parties (subject to By the parties (subject to judicial meddling)judicial meddling)

1919

ConclusionsConclusionsIf incorporated, then how If incorporated, then how classified?classified?

2. After contracting:2. After contracting:

by the courts by the courts using the using the innominate term approachinnominate term approach

This allows flexibility at the This allows flexibility at the expense of certaintyexpense of certainty 2020

Pervasive Topic Pervasive Topic BreachBreach

Exclusion/limitation clausesExclusion/limitation clauses

MisrepresentationMisrepresentation

RemediesRemedies

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