Terms of a Contract IITerms of a Contract II

Classification of TermsClassification of Terms

11

Types of termsTypes of terms

ConditionsConditions

WarrantiesWarranties

Innominate TermsInnominate Terms

22

Breach of condition : EffectBreach of condition : Effect

Innocent party has right of electionInnocent party has right of election

Either: Either:

To affirm & continue the contract AND To affirm & continue the contract AND claim damages for loss occasioned by claim damages for loss occasioned by breachbreach

OROR

To terminate and claim damages To terminate and claim damages immediatelyimmediately

33

Breach of warranty : EffectBreach of warranty : Effect

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

44

Distinguishing condition & warrantyDistinguishing condition & warranty

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 classified?How is a condition classified?

StatuteStatute

Parties intentionsParties intentions

JudiciaryJudiciary

77

Statutory classificationStatutory classification

Sale 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 - s.14(6)Fitness for purpose - s.14(6)

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

All conditions UNLESS S.15(A) appliesAll conditions UNLESS S.15(A) applies

88

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

Where BUSINESS TO BUSINESS (B2B) contractWhere BUSINESS TO BUSINESS (B2B) contract

Such Such SLIGHTSLIGHT breaches of s 13, 14 or 15 so that breaches of s 13, 14 or 15 so 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 2002Sale and Supply of Goods to Consumers 200299

Sale and Supply of Goods Regs 2002 Sale and Supply of Goods Regs 2002 Amendments to SGSA 1979Amendments to SGSA 1979

S. 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. 1010

Classification by the partiesClassification by the parties

Courts usually give effect to parties Courts usually give effect to parties intentionintention

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

Definition of ‘condition’ – guidelines Definition of ‘condition’ – 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 the innocent a term ‘breach of which deprives the innocent party of substantially the whole benefit of the party of substantially the whole benefit of the contract’contract’Per Diplock LJPer Diplock LJ

1313

Specific terms: JudiciarySpecific terms: Judiciary

Precedents which have established Precedents which have established certain terms as conditionscertain terms as conditions

1. Expected ready to load1. Expected ready to load

The 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 innominate term Century - The innominate term

Court looks to ‘Court looks to ‘consequences of the breach’consequences of the breach’

‘…‘…many [terms] cannot be categorised as being many [terms] cannot be categorised as being conditions or warranties… all that can be conditions or warranties… all that can be predicted is that some breaches will and others predicted is that some breaches will and others will not … deprive the [innocent] party of will not … deprive the [innocent] party of substantially the whole benefit’ per Diplock LJsubstantially the whole benefit’ per 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 & skill”NOTE: s.13 SGSA 1982 “reasonable care & skill”

1515

Breach of innominate termBreach of innominate term

innocent party’s rights may be uncertaininnocent party’s rights may be uncertain

Possibility of wrongful repudiation Possibility of wrongful repudiation

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

1616

Recap : Breach of conditions & Recap : Breach of conditions & warrantieswarranties

Breach of condition: Right of electionBreach of condition: Right of election

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

– terminate + claim damagesterminate + claim damages

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

terminateterminate

1717

Conclusions - IncorporationConclusions - Incorporation

Is the statement Is the statement incorporatedincorporated into the into the contract?contract?

Pre-contractual statements Pre-contractual statements

– Express – oral & writtenExpress – oral & written

– Implied terms – common law & statuteImplied terms – common law & statute

1818

Conclusions - classificationConclusions - classification

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

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

By Statute ORBy Statute OR

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

1919

ConclusionsConclusions

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

2. After contracting:2. After contracting:

by the courts by the courts using the innominate term using the innominate term approachapproach

This allows flexibility at the expense of This allows flexibility at the expense of certaintycertainty

2020

Pervasive Topic Pervasive Topic

BreachBreach

Exclusion/limitation clausesExclusion/limitation clauses

MisrepresentationMisrepresentation

RemediesRemedies

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