Quick answer: Contract terms are classified by importance. Breach of a condition (a term going to the root of the contract) lets the innocent party terminate and claim damages. Breach of a warranty (a minor term) only allows damages. For an innominate term, the remedy depends on how serious the consequences of the breach are (Hongkong Fir Shipping v Kawasaki (1962)).
This topic falls under contents of a contract in Paper 3 (Law of Contract) of the Cambridge 9084 syllabus: express terms (3.2.1) and the status of terms (3.2.3). It links directly to remedies, so it is a favourite for both problem questions and essays.
Step 1: Is the Statement a Term or a Representation?
Before classifying a term, decide whether the statement is part of the contract at all. A term is a promise within the contract; a representation is a statement that induced the contract but is not part of it. The courts look at the parties’ intentions using several factors:
- Importance of the statement – if the claimant made clear it was vital, it is likely a term (Bannerman v White (1861), sulphur in hops; Couchman v Hill (1947)).
- Special knowledge – statements by an expert are more likely to be terms (Dick Bentley v Harold Smith Motors (1965)), while statements by a non-expert may be representations (Oscar Chess v Williams (1957)).
- Timing – the longer the gap between the statement and the contract, the less likely it is a term (Routledge v McKay (1954)).
- Invitation to verify – if the maker tells the other party to check, it is less likely to be a term (Ecay v Godfrey (1947), where the seller advised the buyer to have a boat surveyed; compare Schawel v Reade (1913), where the buyer was told not to bother checking a horse).
- Written contract – if the statement is left out of a later written contract, it is less likely to be a term.
Step 2: Classify the Term
| Type | Meaning | Remedy for breach |
|---|---|---|
| Condition | An essential term going to the root of the contract | Terminate (repudiate) and/or claim damages |
| Warranty | A minor or ancillary term | Damages only |
| Innominate term | A term that could be broken in major or minor ways | Depends on the seriousness of the consequences of the breach |
Conditions
In Poussard v Spiers and Pond (1876), a singer missed the opening performances of an opera. Her presence at the start was vital, so the term was a condition and the producers could terminate. Terms can be conditions because:
- a statute says so (for example, implied terms in business contracts under the Sale of Goods Act 1979);
- the parties clearly intended it (but labelling alone is not decisive – in Schuler v Wickman Machine Tool Sales (1974), calling a term a “condition” did not make every minor breach a ground for termination);
- previous case law has classified it (in commercial contracts, time clauses are often conditions: Bunge Corporation v Tradax Export (1981));
- strict compliance is required with descriptions in commercial sales (Arcos v Ronaasen (1933), staves slightly too thick).
Warranties
In Bettini v Gye (1876), a singer missed only some rehearsals. This was a breach of a minor term, a warranty, so the producers could claim damages but not terminate.
Innominate (intermediate) terms
In Hongkong Fir Shipping v Kawasaki Kisen Kaisha (1962), a ship was chartered for two years and described as “fitted in every way for ordinary cargo service”. The engine crew was inefficient and the ship was out of action for about 20 weeks. The Court of Appeal held the seaworthiness term was innominate: because the charterers still had most of the charter period left, the breach did not deprive them of substantially the whole benefit, so they could only claim damages. In The Hansa Nord (1976), a term about shipment in good condition was also treated as innominate.
Evaluation: Certainty vs Fairness
- The traditional condition/warranty split gives certainty – the parties know in advance what happens after a breach – but can be unfair when a party uses a trivial breach of a “condition” to escape a bad bargain (Arcos v Ronaasen).
- The innominate approach is fairer and more flexible because it looks at the actual consequences, but it creates uncertainty until a court decides.
- Courts often prefer certainty in commercial contracts, as in Bunge v Tradax, where time clauses were treated as conditions.
Exam Technique
- Is the statement a term or a representation? Apply the factors.
- If it is a term, is it a condition, warranty or innominate term?
- For innominate terms, did the breach deprive the innocent party of substantially the whole benefit of the contract?
- State the remedy – termination and/or damages – and link to damages for breach of contract.
Revise the rest of Paper 3 with the free Paper 3 contract notes and our guides to exclusion clauses and Consumer Rights Act 2015 implied terms.
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Frequently Asked Questions
What is the difference between a condition and a warranty?
A condition is an essential term; breach allows the innocent party to terminate the contract and claim damages. A warranty is a minor term; breach only allows damages.
What is an innominate term?
An innominate term is one that can be broken in trivial or serious ways. Following Hongkong Fir, the innocent party can terminate only if the breach deprives them of substantially the whole benefit of the contract.
Which case created innominate terms?
Hongkong Fir Shipping v Kawasaki Kisen Kaisha (1962) in the Court of Appeal.
How do courts decide if a statement is a term or a representation?
They consider the importance of the statement, any special knowledge of the maker, the timing, whether the other party was invited to verify it, and whether it was included in a written contract.
Final Thought
Classifying terms is really about remedies. Learn Poussard and Bettini as your pair for conditions and warranties, Hongkong Fir for innominate terms, and one or two cases for terms versus representations, and you have the core of this topic.