Types of Terms

1. What is a condition?

A condition is a term that is fundamental to the contract - without that term, the contract would be pointless.

2. What happens when a condition is breached?

When a condition is breached, such as in Poussard v Spiers, the victim may repudiate (end) the contract if desired and/or sue for damages.

3. What is a warranty?

A warranty is a minor term of the contract.

4. What happens when a warranty is broken?

When a warranty is broken, the victim may sue only for compensation and the contract will continue, as shown in the case of Bettini v Gye.

5. What are innominate terms?

Not every term is so clear cut and often the courts will have to examine the contract as a whole to determine whether it is a condition or a warranty; these terms are known as innominate terms.

6. How will the courts decide if a term is a condition or a warranty?

Here the court will look at the consequences of the breach and then decide.

7. What is an example of where a term is likely to be classed as a condition?「」

For example, if the breach has a serious result, then it is likely to be classed a condition so the victim may repudiate the contract and/or sue for damages (Hong Kong Fir Shipping Co Ltd).