Contractual Conditions, Warranties And Innominate Terms: Differentiating The Notions

When signing a contract, both parties agree to honour the terms of the contractual obligation. These obligations can be breached by defective, delayed or failed performances and entitles the injured party to a course of action, as they did not receive the benefits of deal that was legally agreed upon. The action an injured party is entitled to will be determined by the type of term that was broken. In this answer, the three types of contractual terms – conditions, warranties and innominate terms will be described and differentiated against each other.

Contractual conditions go ‘to the root of the contract’ and breaching these conditions can lead to claims of damages as well as the entitling the injured party the right to repudiate the contract.

A contractual warranty is not as strong a term as a contractual condition as it generally doesn’t go ‘to the root of the contract.’ Breach of a warranty only entitles the injured party to damages without the right to repudiate. The differences between the two can be observed in cases involving opera singers in Bettany vs Gye (1876) where Bettany was contracted to perform as an opera singer over a period of three months. The contract demanded he attend six days of rehearsals but was only able to attend three days due to illness. The employer terminated the contract and arranged a replacement singer, arguing that attenting rehearsals was a condition, whilst Bettany maintained that it was a warranty. The court ruled in Bettany’s favour, as performances over the three-month contract went ‘to the root of the contract’ so was conditional. However, rehearsals were just a warranty that Bettany had breached. Whislt he would have been liable to pay damages to the employer, the unjustified termination of the contract meant the employer was obliged to pay damages to Bettany.

The case of Poussard vs Spiers (1876), Poussard fell ill and was unable to attend the first four performances. Poussard was unable to attend the opening night, which was a breach of the conditions in her contract. The employer had to find a replacement for the opening night but the new singer required a three month contract. The employer was justified in terminating Poussard’s contract .

An innominate term is one that can’t be categorized as either a condition or warranty but lies in the ‘no-mans-land’ between the two. It can be observed in Hong Kong Fir Shipping v Kawasaki Kisen Kaisha (1962), where a ship was leased to the defendants for 2 years. The agreement stipulated that the ship must be seaworthy throughout the 2 years, but this breached when the defendant realised that the ship had engine damage that rendedred in unusable for 5 months. The contract was repudiated by the defendents, but the claimants brought an action forward arguinf that seaworthiness was not a condition of the contract. This was held by the courts through the innominate approach. Rather than investigating if seaworthiness was a condition or warranty, he court looked at the effect of the breach and considered if the the breach substantially deprived the innocent party of the whole benefit of the contract. The court decided that 5 months of inactivity in a 24 month contract period was not a substantial deprivation and the defendants were not entitled to repudiate the contract.

Differences between the three terms

When making a decision on if breach of an innominate term, the court looks at the effect of the breach. If there is a substantial deficit in the benefit of the contract, the injured party can claim both damages and repudiation. However, if the benefits of the contract have been substantially delivered, damages can be claimed but not repudiation.

However, under contracts and warranties, the courts do not wait to see the effects of the breach. Instead, the courty will look at the circumstances at the time the contract was drawn up and a decision will be made on how important the terms would have been at the time. If the term went to the root of the contract it will be classified as a condition, and if not then it will be deemed a warranty.

The statutory terms (terms imposed by the law) which are implied into non- consumer contracts are classified by the statutes themselves as either conditions or warranties. The more important statutory implied terms are conditions, and breach of these terms allows the injured party to reject the goods and treat the contract as terminated.

However, s.15A of the Sale of Goods Act 1979, s.11A of the Supply of Goods Implied Terms Act 1973, and ss.5A and 10A of the Supply of Goods and Services Act 1982 provide that a non-consumer buyer will have to treat a breach of condition as a breach of warranty if the breach is so slight that it would be unreasonable to reject. (See Chapter 8 at 8.3.4.) The terms implied into consumer contracts by the Consumer Rights Act 2015 are not classified as conditions or warranties. The remedies, available if such terms are breached (the short-term right to reject, repair, replacement, price reduction and the final right to reject), have no equivalent in the other statutes which imply terms.

Terms other than the statutory implied terms will be treated as innominate terms unless the parties have expressly or impliedly agreed that breach of the term will or will not entitle the injured party to treat the contract as repudiated. If such an intention has been shown then the courts will give it effect and the term will be either a condition or a warranty. (Calling the term a condition or a warranty is not conclusive of such an intention, although it is an indication of it.)

Alternatively, a rule of law might indicate that a particular term is to be treated as a condition or a warranty. Where none of the previously mentioned matters classify a term as either a condition or a warranty, the term will be an innominate term. If an innominate term is breached then the injured party can treat the contract as repudiated only if he has been deprived of substantially the whole benefit of the contract