Law of Contract Terms Conditions & Warranties

Law of ContractTermsConditions & Warranties

Conditions & Warranties The Terms of Contract have been traditionally been divided into two types : 1) Conditions 2) Warranties

Conditions & Warranties Not all terms are of equal importance : A condition is an essential term of the contract which goes to the root or the heart of the contract

Conditions & Warranties Its important to distinguish between a Condition and a warranty, because a breach of them would lead to different results : a)a condition is an important termwhich goes to the root of the contract. A breach of a condition entitles the injured party to repudiate, terminate the contract and or claim damages b) a warranty is a less important term, which entitles the injured party to claim damages only.

Conditions & Warranties A term may be held to be a condition by three methods : 1) Statutory Classification S12-15 Sale of Goods Act 1979 2) Judicial Classification ( Judges classification ) 3) Classification by the parties

Statutory classification Sale of Goods Act 1979 (originally SGA 1893) S 12 : an implied condition is included in the contract that the seller has a right to sell the goods…ie. he has a good title to sell. S 13 : Where there is a sale of goods by description there is an implied condition that the goods correspond with the description. S 14 (3) : In a sale of goods in the course of business there is an implied term that the goods are reasonably fit for the purpose expressly or impliedly made known by the buyer. S14 (2) : ..there is an implied condition that they be of “satisfactory quality” SGA 1994 S15 : ..there is an implied condition that the bulk of the goods correspond with the sample of quality

Statutory classification Re Moore & Co and Landauer Co (1921) Facts : A sale was agreed of a quantity of tinned fruits described as packed in cases of 30 tins. The correct overall quality was delivered, but in cases of 24 tins. The whole consignment was rejected by the buyer, but without any reason being given other then the quantities packed. Held : The goods did not correspond with their description contrary to term implied in S 13 SGA 1979. The buyer was entitled to repudiate the contract.

Judicial classification The courts distinguish between the two terms, i.e whether, they are conditions or warranties using the following tests: 1)What were the intentions of the parties 2) What were the consequences of the breach

Conditions /root of contract Where courts find that it goes to the Root of the contract : Poussard v Spiers and Pond (1876) Facts : An actress contracted to appear in a play commencing on a particular date. She fell ill and became available to appear only some days after the play’s run had started. In her absence, a substitute had been engaged and the producers therefore refused her services when she returned. Held : The producers were entitled to repudiate the contract, because her late arrival was a breach of a condition,..going to the root of the contract.

Conditions /root of contract Couchman v Hill (1947) Facts : A heifer was put up for sale, but no warranty was given as to its state. The claimant asked whether it was in calf and stated that he was not interested in buying if it was Held : The claimant is entitled to repudiate the contract as the state of the calf was a condition, going to the root of the contract

Warranty Bettini v Gye (1876) Facts : A singer was contracted to perform from 30 Mar to 13 Jul, and to attend to six days before for rehearsals. Because of her illness the singer did not arrive until 28 Mar and was told that his services were not required. Held : It was held on the facts that missing a few days of rehearsals did not amount to a breach of condition. Thus repudiation of contract was not possible and only damages could be recovered.

Intention of parties Bannerman v White (1861) Facts : A buyer of hops asked whether sulphur had been used in the cultivation of the hops, and he said that if they were, he would not even bother to ask the price. Held : There was clear intention that it would be a condition of the contract.

Intention of parties The mere use of the word “condition” in a contract does not make it a condition. Schuler AG v Wickman Machine Tools (1974) Facts : A term of an agreement said that it was a “condition” that a distributor should visit six named customers per week for each week of the duration of the contract, which was for four years. Held : a failure to make one visit would not be a breach of a condition.

Intention of parties Courts may look at the commercial importance of a term, in relation to the industry, trade or profession, to find the intention of parties, and thus to determine whether, a condition or warranty, has been breached. Behn v Burness (1863) Facts : Where in the contract for a charter of a ship, it was stated as a condition that the ship has to be in the port of Amsterdam by a certain date, and the ship arrived 4 days later. Held : It was a breach of condition as time is crucial in chartering ships.

Consequences of breach At times it might be difficult to conclude whether a term is a condition or warranty based on the nature of the term and the intentions of parties. So Courts will look at the consequences of the breach : The more serious the consequences the more likely it is that the breach will entitle the innocent affected party to repudiate the contract.

Consequences of breach HongKong Fir Shipping v Kawasaki Kisen Kasiha Ltd (1962) Facts :The claimants owned a ship which they chartered to the defendants for a period of 24 months. A term in the contract required the ship to be ‘in every way fitted for ordinary cargo service’. On a voyage to Osaka, the ship was delayed for almost 20 weeks. It was seaworthy only in Sept. Meanwhile, the defendants had repudiated the contract in June.

Consequences of breach HongKong Fir Shipping v Kawasaki Kisen Kasiha Ltd (1962) Held : The court held that the consequence of the breach was not “serious enough” for a repudiation of the contract by the defendants. The defendants should have sued for breach of but not repudiate. Notes : the court surprisingly did not use the terms condition or warranty to come to this conclusion

Consequences of breach Cehave NV v Bremer Hendelsgesellschaft (The Hansa Nord) 1975 Facts : Citrus pulp pellets to the value of £100,000 were sold. An express term in the contract stipulated that the ‘shipment to be made in good condition’. Some of the pellets overheated during shipment and were thus not in good condition. The buyer rejected the whole quantity. The goods were sold to a 3rd party, and were later bought by the original buyer for £ 30,000 and used for the original intended purpose. Held : The seller obtained compensation for breach as the buyer was not entitled to repudiate the contract.

Consequences of breach Reardon Smith Line v Hansen Tangen(1976) Facts : A charter contract was made of a tanker which was still to be built. It was described in the contract as ‘No. 354 at Osaka”, Osaka being the shipbuilding yard. In fact the ship was not built at Osaka but at Oshima as No. 004. The plans and specifications to which it was built were however identical. The charterer refused to take delivery of the ship, claiming a breach of condition. (the real refusal was the collapse of the oil tanker market) Held : The was no breach of condition. The consequence of breach was not serious.

Consequences of breach Re Moore & Co and Landauer Co (1921) Held : The goods did not correspond with their description contrary to term implied in S 13 SGA 1893. The buyer was entitled to repudiate the contract. The fruit was merchantable and satisfactory and the consequences were minimal but yet, the court chose to apply S13. SGA 1893

Consequences of breach Arcos Ltd v Ronaasen (1933) Facts : Timber to be used for making barrels to store cement was described as being half inch thick. The timber actually delivered was slightly thinner and was therefore rejected by the buyer. In fact the difference in thickness made no difference to the use of the wood for making the barrels. Held : The buyer was entitled to reject the barrels as they did not correspond with their description,. Contrary to the implied terms provision in S13 SGA 1893

Law of Contract Terms Conditions & Warranties