The classification of terms (conditions, warranties and innominate terms)-FS Flashcards
(17 cards)
What is a “repudiatory breach”?
A repudiatory breach is a serious breach of contract that entitles the innocent party to terminate the contract and sue for damages.
What are the two options available to the innocent party after a condition is breached?
- Terminate the contract and sue for damages.
- Affirm the contract (continue it) and still sue for damages.
What is the legal consequence of breaching a warranty?
The innocent party may sue for damages but cannot terminate the contract.
What is the traditional test for identifying a “condition” in a contract?
A condition is a term that goes to the root of the contract.
What is a “warranty” in contract law?
A warranty is a less important term that does not go to the root of the contract. Breach does not allow termination, only damages.
Can parties themselves classify contract terms as “conditions” or “warranties”?
Yes, but their classification is not decisive. Courts will still assess the parties’ intent and the term’s actual importance.
What legal test applies to “innominate terms”?
If a breach of an innominate term substantially deprives the innocent party of the whole benefit of the contract, it can be treated as a condition. If not, it is treated as a warranty.
What factors does a court consider when classifying a contract term?
- Party classification (if any)
- Statutory classification
- Prior judicial decisions
- Surrounding circumstances and intention of parties
- Consequences of breach
What is meant by “time is of the essence”?
It means that timing is a condition of the contract. A delay will constitute a repudiatory breach, allowing termination.
How can a party make time of the essence if it wasn’t originally?
By giving the other party reasonable notice with a new deadline, after which delay will be treated as a repudiatory breach.
When will a court not uphold a term labelled a “condition” by the parties?
If a court finds the breach is trivial and the parties likely didn’t intend for such breach to justify termination, it may treat the term as a warranty or innominate.
What principle did the court establish regarding trivial breaches in long-term contracts?
A trivial breach in a long-term contract will likely not entitle the innocent party to terminate, even if the term was labelled a condition.
What is the “Hong Kong Fir test”?
Ask: Did the breach substantially deprive the innocent party of the whole benefit of the contract? If yes → treat as a condition; if no → treat as a warranty.
What remedy is available if an innominate term is breached and it is minor?
The innocent party can claim damages only, not terminate the contract.
What remedy is available if an innominate term is breached and it is serious?
The innocent party may treat the contract as repudiated and claim damages.
Can a term about timing be a condition without the phrase “time is of the essence”?
Not automatically. Courts consider intention of the parties, but this phrase provides strong evidence of intent.
What happens when time is not originally of the essence but becomes important later?
A party may issue a notice making time of the essence, turning a timing term into a condition.
