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Contract Law: Terms 2?Previously, looked at how a term gets into a contract: express or implied. Could be inserted automatically by statute. A discussion prior to a contract might end up with terms becoming part of contract etc. Having identified a term, need to classify it. Types of terms: o Conditions: if breached, gives all possible remedies. o Warranties: less remedies if breached. o Innominate Terms: a term which has not yet been defined. Note one way to identify the type of term is to say it in the contract. Eg 'this is a condition'; or eg 'the company warrants that' etc.
Why does it matter what time of term---Effect of breach
??? ?When we say 'breach of contract', we actually mean breach of a term of the contract.
? ?? ? Breach of condition: o Innocent party has right of election. o EITHER; to affirm & continue the contract AND claim damages for loss occasioned by breach. o OR terminate contract AND claim damages immediately. o [why would you affirm and continue: note that affirmation does not mean you force the contract-breaker to carry on with the contract, you can't do that. But it might be possible for you to carry on with your side of the contract---you might want to do that, so you can fully perform your end of the contract, and then you can invoice the contract-breaker. Damages are decided by the court, but courts will not interfere with an invoice. So if you've got to the end of the contract, fulfilled your obligations, and send the other side a bill, you will definitely get the full contract price. Although if completing the contract relies on compliance by contract-breaker, probably won't be able to do it.]
? ?? ? Breach of Warranty---only right to damages o Only allows the innocent party to claim damages, not to terminate. Distinguishing condition and warranty
? Conditions---Poussard v Spiers (1876) o A condition 'goes to the root of the contract'. o Poussard a well-known opera singer. Was contracted to go to rehearsals, opening night, and sing in the operate until the end of the run. o Poussard was will---didn't turn up to rehearsals or opening night, only turned up a week into the run of the show. Her agent, Spiers, repudiated the contract, said we don't want you anymore, we have a replacement. 1
o HELD: The obligation to perform from the first night was a condition--breach of condition---failure to show for rehearsals, opening night and first week---went to 'root of the contract', had breached condition, and Spiers had right to terminate the contract. o Was a breach because: actress unavailable for opening night and after because she was ill. When it became clear she would not be available, the producers had no alternative but to employ a substitute. When actress recovered, and wanted to take her place, was she entitled to insist on this (compelling the substitute to stand down) or where the producers released from this obligation? HELD: producers were released from obligation, not because the actress was in breach of condition, but because her illness operate to discharge the parties from their contractual obligations (= the contract was frustrated). CF Warranties---Bettini v Gye (1876). o Bettini also an opera-singer. Was also contracted to go to 6 days of rehearsals, and sing in series of concerts. o Bettini was ill, arrived 3 days late for rehearsals. o He was sacked, because he didn't show up for rehearsals. o HELD, cf with Poussard: Bettini had only breached a warranty, not a condition---didn't go to 'root of contract', had only missed a few days of rehearsal. The undertaking to take part in rehearsals for 6 days was a warranty, not a condition. You could try and get damages for missing 3 days of rehearsal, but can't terminate (repudiate) the contract. o Mr Justice Blackburn: "whether the particular stipulation goes to the root of the matter, so that a failure to perform it would render the performance of the rest of the contract by the plaintiff a thing different in substance from what the defendant has stipulated for [i.e. condition]; or whether it merely partially affects it and may be compensated for in damages [i.e. warranty]."
Types of 'condition'
? Promissory conditions (what we're talking about today)
? CF contingent conditions (does not mean the same as the type of conditions we are talking about today) o This is a condition upon which the contract hangs. If you don't want a contract to go ahead unless a particular situation is in place, you can put that in the contract. o Condition precedent. a stipulation of a state of affairs that must be achieved before any contractual liability will be incurred / contract not binding until some specified event occurs
2 o Condition subsequent (eg a break clause). a stipulation of a state of affairs which will cause existing contractual obligations to terminate / contract will be terminated if some specified event occurs
?????Head v Tattersall. Man buying a horse. Goes to seller's stables. Buyer says he's not interested in the horse 'unless you can tell me he has hunted with the Bicester hounds'. Seller said yes it has. Buyer found out it hasn't. Buyer buys it anyway. Was part of contract that buyer could return the horse before Wednesday if there was anything wrong with it. o So contract had (1) condition precedent (that it had hunted with Bicester hound); (2) horse could be returned by Wednesday. o Horse died on way home, buyer took the dead horse back to seller's stables. Buyer said he's returning the horse, he's dead, there's something wrong with him. And he's never hunted with the Bicester horse. HELD: yes there was o (1) breach of condition precedent (horse had never hunted with Bicester hounds; o and (2) breach of condition subsequent (there was something wrong with it when returned before Wednesday, it was dead, doesn't matter whose fault it was). How is a condition classified?
?????(1) Statute: o Sales of Goods Act, the terms we met in last lecture---they come in a consumer's contract as conditions, the Act says so.
?????(2) Classification by the parties: will have decided themselves, at beginning. Eg 'this is a condition/warranty'.
?????(3) judiciary: might intervene, said the parties called it wrong, in fact they meant it to be something else. And judiciary using innominate terms approach. (1) Statutory classification
? Traditional division of terms into conditions & warranties in Sale of Goods Act 1893: o Condition, s11: 'the breach of which' gives rise to right to 'repudiate'. o Warranty: 'the breach of which may give rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated'. o S62: a warranty was 'collateral to the main purpose of the contract'. o These definitions included in SGA 1979, and remain unaffected by Sale & Supply of Goods Act 1994.
? Sale of Goods Act 1979 o Ss12-15 (but not s12(2)) are classified as conditions. 3
S12: title - s12(5A) says it's condition. S13, description - S 13(1A) says it's a condition. S14, fitness for purpose - s14(6) S15, Sample - s15(3) Are all conditions UNLESS s15(A) applies [re ss13-15], where it's two businesses. o S15(A) SGA 1979, amendment introduced by s4 Sale &
Supply of Goods Act 1994: if breach (of s13, 14, 15) is so 'SLIGHT' as to make REJECTION of goods UNREASONABLE ? breach may be treated as breach of warranty, buyer only entitled to damages. o An answer to Arcos v Ronaasen (1933). Arcos makes wooden staves. Agreed to sell a load of wooden staves to Ronaasen. Contract agreed, staves are being shipped to R. Whilst transportation going on, R has found a much cheaper supplier. So desperate to get out of the contract with A. When the staves arrive, they were not the half-inch thick specified in the contract. Was a tiny, fractional difference in width. But, under s13 (description), he was allowed, regrettably said the court, to use s13 to reject the goods. o So then s15(A) was introduced . . . o So allows court discretion to treat a 'slight' breach as a breach of warranty instead of condition---so only remedy available is damages. o Only applies If B2B contract (for consumers it's always a condition). o [[s15A gives effect to view that damages will normally suffice for non-consumers; and that right to terminate for slightest breach could be unfair to seller, whose lose from rejection of goods might far exceed the cost of remedying the defect.]]
Sales & Supply of Goods Regs 2002, Amendments to SGA 1979 o S48(A), (B), (C), (D), SGA 1979: o If goods do not conform consumer may request that:
? The goods are repaired or replaced within a reasonable period of time;
? Without causing significant inconvenience to the consumer;
? With the seller bearing any necessary cost of repairing or replacing the goods. o o o o o(2) Classification by the parties
? Courts usually give effect to parties' intentions---parties to a contract at free to classify the relative importance of the terms of contract as they see fit.
? Lombard North Central v Butterworths (1987):
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