LA1040 Contract Law

Table of Contents


How does the classification of contractual terms affect the remedies available in case of breach?

How is the treatment of breaches of innominate terms?



A contract is an agreement between two parties that is legally binding in court.

The terms of a contract are governed by several laws.

A contract is made up of several provisions, also known as contractual terms.

Each term is weighted differently, so one term might have a greater consequence than the other for breach.

Common law divides the terms of a contract into three types: conditions, warranties, and innominate terms (Hunter 2017,).

Contracts are binding for all parties.

The aggrieved party can claim damages and other remedies for breach of contract if the parties fail to fulfill their obligations.

Not all terms of a contract have the same effect if they are broken.

Different remedies are available to the aggrieved party if a contract is breached.

Common law and statutes both state that a party is liable for damages if he or she violates a contract promise.

The aggrieved party can not only receive compensation if he or she breaches a contract condition, but can also repudiate, cancel or be released from contractual obligations (Poole 2016,).

The aggrieved party can only get compensation if the term is not a warranty to the contract.

The paper discusses how breaches of innominate terms will be treated.

Conditions in a Contract

Conditions are the most crucial terms in a contract.

These terms are the core of the contract.

Contract parties can terminate the contract if a condition is violated.

This concept was discussed in Poussard and Spiers (1876), 1 QBD 410.

The parties entered into a contract in which the plaintiff Poussard was to sing opera for three months.

The plaintiff fell ill five days before the opening night and was unable to perform the act the first four nights.

The plaintiff was replaced by another singer by the defendant.

The plaintiff brought a lawsuit against the defendant for breach of contract.

The plaintiff claimed that she had only broken a minor contract term, and not a major one. Therefore she was entitled to damages from defendant.

After reviewing the facts, the court determined that the defendant had the right to terminate the contract because she had violated a condition of it.

It was a major clause in the contract that plaintiff was not able to fulfill and the court ruled that defendant would suffer significant losses.

The plaintiff’s performance from the opening night was also a fundamental promise under the contract, and it is therefore to be considered a condition.

Baldry v Marshall [1925] 1KB 260. The plaintiff spoke to a dealer about buying a car for touring.

A Bugati Bugati car was suggested by the defendant care dealer.

The plaintiff believed in the defendant and purchased the car.

The car was not suitable for touring.

Plaintiff brought suit against the defendant for breach of contract.

The court found that the defendant had violated the conditions of the contract, which concern the car’s suitability for touring.

Because the plaintiff purchased the car for the purpose of touring, this is why the court found that the defendant has violated the condition of the contract.

The court ordered that the plaintiff be allowed to repudiate the contract and claim damages he suffered during the tour.

If a court finds that a contract condition is not being met, the court will notify the parties and allow them to cancel the contract and claim compensation.

Contract Warranties

Warranty terms are minor terms in a contract that do not constitute a core part of the contract’s existence.

The aggrieved party is not entitled to repudiate the contract or terminate it if the warranties are breached.

In the case of Bettini V Gye 1876 QBD183, this concept was discussed.

The plaintiff entered into a contract for three months in which he was to sing opera.

After falling ill, he was unable to attend rehearsals for six days.

During this period, his employer fired him and hired a substitute.

The plaintiff claimed that he had only broken the warranty of the contract, and therefore the defendant isn’t liable for the breach.

The court found that the plaintiff had broken a warranty because the six-day training period was not the fundamental of the contract, which was to perform as an opera singer.

The court found that the defendant had violated the contract by substituting the plaintiff for another singer.

The defendant sold the plaintiff a four-berth motorboat in Wills v Amber [1954]1 Lloyd’s Rep 253, claiming that all parts were good.

Later, it was discovered that one of the parts had become rotten.

The court deemed the representation to be a warranty, citing that it was not the root of the contract.

In such cases, the aggrieved party may only sue for damages and not to void the contract if the warranty term is found to be not fundamental or root of the contract.

Classification of Conditions and Warranties

This condition is an essential term in a contract, which means its inclusion is crucial to the terms of any contract.

On the other hand, warranties that are collateral mean that the nature and content of the terms is what makes them a warranty.

While a breach is considered a breach, a breach or condition cannot be considered a breach.

The court in Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC235 held that parties cannot identify a term in a contract as either a condition or warranty.

Because the term condition is not conclusive, this is why it was not ruled that the parties could designate a term of a contract as a condition or warranty.

The contract’s context indicated that the parties didn’t intend to use the term condition in its technical meaning.

It is not clear whether a term is a warranty or condition.

Courts’ Treatment of Innominate Term or Intermediate Term Breach

An intermediate term is a term that isn’t easily defined.

To determine whether the term constitutes a warranty or condition, the consequence of the breach must be considered.

In the case of Hong Kong Fir Shipping [1962] 2QB 26, the concept of innomiate conditions was established.

The court in this case, rather than classifying terms of the contract as warranties or conditions, created an intermediate approach that considers the effects of breaching the terms on the parties.

The court decided whether the breach had deprived the aggrieved of substantially all the benefits of the contract.

The party can only repudiate or terminate the contract if it is determined that the aggrieved person was substantially deprived of all benefits.

This approach was criticized for not giving priority to certainty.

Innocent parties can be held liable for wrongful repudiation if they treat the contract so that it is not determined that the breach has substantially taken away their contract’s entire benefit (McKendrick 2014).

Even in cases where terms are classified by the parties to a contract, the court can hold that the term is a minor term so the aggrieved party would not have the right to reject the contract (Knapp and al.

Schuler v Wickman Tools [1974] AC 235, the plaintiff was the manufacturer of a specific tool, while the defendant was the sale organization that was granted the exclusive right to sell the tools made by the plaintiff.

The parties in this case described one condition of the contract as a condition.

The defendant was required to send a sales representative to every sales company each week.

The defendant was required to make 1400 visits.

The plaintiff ended the contract after the defendant failed to make a few visits.

Based on innominate terms, the court found that even though the parties considered the term a condition, it was actually a warranty.

Butterworth leased a computer to the plaintiff in the case Lombard North Central [1987] QB527.

According to the contract, the defendant had to pay PS584 20 times a month.

The contract contained a clause that if the installment was not paid on time, the defendant would be responsible for terminating or dissolving the contract.

The defendant made arrears in relation to the installments. Thus, the plaintiff obtained the computer from the defendant and sold it to him for PS175.

The plaintiff also sued the defendant, claiming future payments and arrears totaling PS6,869.

The court held that prompt payment was a condition of the contract in this case.

Because Nicholls LJ stated the term was essential, and the consequences of breaching it was laid out in the contract.

The judge also stated that the plaintiff could repudiate the contract even if one payment was not made.

In The Mihalis Angelos [1970] WLR 601, Mihalis Angelos, the owner of the vessel chartered the ship to defendant for cargo carriage.

The defendant required that the ship be available by the deadline set by the owner.

Although the ship was not ready to use by that date, the defendant revoked the contract because the cargo that was to be shipped was delayed by bombing on the railway line in Vietnam.

The plaintiff filed a claim regarding the anticipatory violation of contract. However, the defendant argued that the plaintiff failed to get the ship ready in the time required for loading the cargo and thus breached the contract.

The court ruled that the expect ready to load clause, although it didn’t cause any damage to the defendant, was still a condition of contract.

This was because the commercial contract needed certainty in order to work properly.

Bunge Corporation v Tradax (1981) 1 WLR 711 required the buyer to give the seller a notice of fifteen days for loading readiness in relation to the sale or soya beans.

This term was included in the contract as a condition.

The buyer had requested a shorter time period and the seller renounced the contract and filed a claim for damages.

The soya price had dropped by $60 per ton.

Arbitration was used to determine if the buyer had violated the conditions. The seller was allowed to cancel the contract. In addition, 317,500 was given to the seller because the soya value had declined.

Through the use of the innominate terms approach, the high court reversed decision of arbitrator.

The high court’s decision was praised by the court of appellation. Therefore, the buyer appealed the decision to the House of Lords.

The HOL ruled that the condition must be included in the contract.

Commercial contracts need certainty. The HOL held that the innominate term approach had led to many litigations. Therefore, it should only be used when it is impossible to classify terms in terms and warranted by the terms themselves.


It is confusing to use innominate terms to determine the remedies that will be offered to the aggrieved party.

It is not clear how it will be applied.

The judicial system must maintain certainty in order to ensure similar cases are ruled in the same way.

The court will decide the extent to which the aggrieved party has suffered when they apply the innominate term approach.

In this case, the innocent party is liable for wrongful repudiation if they treat the contract so that it is not clear that the breach has substantially taken away their entire benefit from the contract.

Even if the terms of the contract have been classified by the parties, the court can hold that the term was minor and thus the party would not be able to repudiate it.

To provide certainty in commercial contracts, the court does not use the innominate term approach. Instead, it uses the condition and warranties approach.

This approach allows the court to determine which type of term has been broken by the party, whether it is conditions or warranties.

If a condition that is essential to the contract is broken, the party can repudiate the contract and claim damages.

The breach of warranties, on the other hand, would not entitle the aggrieved side to damages but to repudiate the contract.

This method is more reliable than the innominate terms approach to determining remedies in contracts.

Refer to

Baldry v Marshall [1925] 1 KB 260

Modern Law of Contracts.

Knapp C.L. Crystal N.M. Prince H.G. (2016)

Cases and materials for Problems in Contract Law.

Wolters Kluwer Law & Business.

Lombard North Central against Butterworth [1987] QB527

Contract law: Text, cases, and materials.

Oxford University Press (UK).

Textbook on contract law.

Oxford University Press.

Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC235

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