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Contract | Formation

Terms: Classification

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Terms: Classification

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Traditional approach: conditions & warranties

  • objective test: reasonable person think parties intended term to be condition or warranty?
  • condition: major term / terminate / & damages / even if minor breach
  • warranty: minor term / only damages / seriousness breach irrelevant
  • rebuttable presumption word condition used in a legal sense (Schuler v Wickman Machine Tool Sales Ltd [1974])
  • certainty: condition breached terminate / warranty breached not
  • inflexible & unfair not consider breach effect: minor breach condition: terminate / except: S15A SGA 1979 or S5A SGSA 1982 / major breach warranty cannot
  • The Mihalis Angelos [1971] backed traditional: certainty / uniformity / predictability / important commercial context / Megaw LJ: .. Where justice does not require greater flexibility, there is everything to be said for, and nothing against, a degree of rigidity in legal principle...

Recent development: innominate terms

Hong Kong Fir Shipping Case [1962]

  • D chartered ship P / 2 yrs / seaworthiness clause / engine failed / 15 wks out of service / D terminated for breach of condition / P argued wrongful repudiation / not a condition
  • held: D not entitled terminate / test: whether the breach deprived innocent party of substantially the whole benefit of contract? / time lost insufficient / effect of breach determines remedy
  • Diplock LJ: not used in all cases / parties can expressly agree remedies or statute impose / when breach of certain term always deprive innocent party of substantially whole benefit of contract (condition) / if breach never have this effect (warranty)
  • less certain: whether effect of breach sufficiency serious to justify termination / more flexible & fairer results
bits of law

Terms: Classification

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Limitations on court deciding classification


  • SGA 1979 implies conditions goods: correspond to description (S13) / satisfactory quality (S14(2)) / fit for purpose (S14(3)) / SGSA 1982 S3 & S4 implies similar conditions
  • SGSA 1982 implies innominate terms: S13 - 15 / service provided / remedy dependent on effect of breach

Trade usage & commercial expectation

  • certainty: beneficial / previous dealings / trade usage considered / traditional preferred (The Mihalis Angelos [1971])

Express provision by parties

  • parties may expressly create conditions & warranties / courts must be satisfied in terminology used in strict legal sense (Schuler v Wickman Machine Tool Sales Ltd [1974])
bits of law
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