Conditions are terms that the parties consider so important that they must be performed.

If a party fails
to perform a condition, the other party is entitled to treat the contract as being at an end.

Warranties, on the other hand, do not refer to warranties that come together with the purchase of
certain items like mobile phones or electronic goods. In legal terminology, the word “warranty” is used
to identify a less important term of the contract.

If a warranty is breached, the innocent party may sue for damages for the loss suffered, but he is not
allowed to terminate the contract. If he does so, he may instead find himself being sued in turn for
unjustified contract termination.

Innominate terms refer to contractual terms that lie in limbo. If the innominate term is an important
one (i.e. a breach of the term would be so serious as to deprive the innocent party of substantially the
whole benefit it was to obtain from the contract), the innocent party may terminate the contract and
obtain other remedies.

If a breach of condition occurs, the party that is innocent can make a choice between two actions:

1. End the contract and sue for damages

In the case of Poussard v Spiers [9] shows clearly what is the breach of condition is. Madame Poussard
was an opera singer who had a contract obligating her to give a number of performances over a three
months period of time. Unfortunately she became ill, which was the reason why she was not able to
perform first four concerts. Her employers wanted to repudiate the contract, as it was impossible to find
a replacement for the rest period of time. The court held that the Madame Poussard did breach the
contract and Spiers had the right to terminate the contract.

There are also certain types of terms leading to a condition such as expected readiness. This was seen in
the case of The Mihalis Angelos  where The owners of the ship, The Mihalis Angelos, chartered the ship
to the defendant to use for the carriage of some cargo. A clause in the agreement stated the ship was
expected ready to load on 1st July. In fact the owners had no grounds for believing the ship would be
ready to load on that date as it was in Hong Kong at the time and would not be ready until at least the
14th of July and in fact it was not ready at that date. The defendant cancelled the contract on 17th of
July. The cargo that they expected to be carrying had not arrived due to the bombing of a railway in
Vietnam. The ship owners brought an action against the defendants for anticipatory breach. The
defendants argued that the claimant was in breach of condition of the contract by not be ready to load
on the specified date.
It was held that the expected ready to load clause was a condition despite the fact it had caused no loss
to the defendant. The classification as a condition was said to be because of the need for commercial
certainty in shipping contracts.

However, in the case of warranties, Bettini v Gye is the case very similar to the previous one, but has
different circumstances which lead to the opposite decision of the court. Unlike Poussard Bettini missed
half of the six days rehearsal schedule, as a result of his illness. His employees considered it as a breach
of a contract, as the contract had terms regarding the attendance of rehearsal sessions. Bettini claimed
that the term was a warranty, thus Gye did not have a right to sack him. The court held that Bettini was
right, and as the result Gye had to pay damages to the opera singer.

The innominate term was introduced by Lord Diplock in 1962. The case Hong Kong Fir Shipping Co Ltd v
Kawasaki Kisen Kaisha Ltd showed that the existing classification of contractual terms into either
conditions or warranties is not sufficient enough.

In this case, A ship was chartered to the defendants for a 2 year period. The agreement included a term
that the ship would be seaworthy throughout the period of hire. The problems developed with the
engine of the ship and the engine crew were incompetent. Consequently the ship was out of service for
a 5 week period and then a further 15 week period. The defendants treated this as a breach of condition
and ended the contract. The claimants brought an action for wrongful repudiation arguing the term
relating to seaworthiness was not a condition of the contract.

Held:

The defendants were liable for wrongful repudiation. The court introduced the innominate term
approach. Rather than seeking to classify the term itself as a condition or warranty, the court should
look to the effect of the breach and ask if the breach has substantially deprived the innocent party of the
whole benefit of the contract. Only where this is answered affirmatively is it to be a breach of condition.
20 weeks out of a 2 year contract period did not substantially deprive the defendants of whole benefit
and therefore they were not entitled to repudiate the contract.

Some of the facts influenced the decision of judges; these facts can be called circumstances. The main
concern of the court is to divine objectively the intention of the parties from the words they have agreed
in their contract. [14] The first concern was about the current freight market. At the time when
charterers terminated the contract the market has fallen from 47s per ton (the freight rate the ship was
hired for) to 13s 6d per ton. Thus the court identified the intention of charterers unfaithful, as the
defendant’s motive was to escape the non-profitable bargain. The term regarding the seaworthiness of
the ship covered every minor breaches, including even the absence of a rivet. At the same time the
same the term was covering such a big thing as a sinking of the ship. Thus if the term was called a
condition, the charterers would have a right to repudiate the contract in case of finding a missing rivet.
However, it could not be classified as a warranty neither, as the contract could not be repudiated even
in the case of ship sinking. As the result now the contract terms can be classified either as a conditions,
warranties or innominate terms.

Schuler v Wickman Tools [1974] AC 235 House of Lords

Schuler were manufacturers of certain tools and Wickman were a sales company granted the sole right
to sell certain tools manufactured by Schuler. A term of the contract between the parties was described
in the contract as being a condition and provided that Wickman would send a sales person to each
named company once a week to solicit sales. This imposed an obligation to make 1,400 visits in total.
Wickman failed to make some of the visits and Schuler terminated the contract for breach of condition.

Held:

Despite the fact the contract had expressly stated the term was a condition, the House of Lords held
that it was only a warranty.

In The Hansa Nord case, the buyer was searching for a way out of a bad bargain. According to buyers the
shipment of citrus pulp was not made in “good condition”, that is why they have rejected the cargo
totalling in £100,000. The sellers had to resell the cargo, and the buyers managed to buy it through the
agent for £30,000. It should be mentioned that the condition of the product was the same as for its
original purpose. The Court of Appeal has held that the term which had been broken was neither the
warranty nor the condition, and applying Hong Kong Fir, held that the term was an innominate term, as
the consequences of the breach were not sufficiently serious to give grounds for termination of the
contract.

As the result of this case the buyers were only able to claim damages for the loss in value of the cargo
caused by its defective state.