Classification of terms +/-

Question 1

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Answer 1

1. Provides clarity and structure
   Helps courts and parties understand consequences of breach. E.g. conditions allow termination, warranties do not.
2. Supports commercial certainty
   In business, it’s vital to know which breaches allow contract termination — parties can plan accordingly.
3. Innominate terms allow flexibility
   E.g. in Hong Kong Fir v Kawasaki, courts assessed seriousness of breach rather than rigid labels.
4. Encourages careful drafting
   Forces parties to clearly define key terms in contracts to avoid disputes.

Question 2

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Answer 2

1. Rigid distinction can be unfair
   ➡️ A minor breach of a condition still gives right to terminate — harsh result (Arcos v Ronaasen).
2. Uncertainty in innominate terms
   ➡️ While flexible, they create unpredictability — parties won’t know in advance if a breach is serious enough (The Hansa Nord).
3. Legal labels can be misused
   ➡️ Businesses may label all terms as “conditions” to gain unfair advantage — can lead to disproportionate remedies.
4. Inconsistent judicial interpretation
   ➡️ Different judges may classify the same term differently — lacks consistent standards.