Summary
The main types of terms
Conditions and warranties – Poussard v Spiers and Pond, Bettini v Gye.
The effect of a breach of either of these:
- Breach of a warranty: damages.
- Breach of a condition: repudiation or damages – Vitol SA v Norelf Ltd;
but if affirming, the innocent party must also carry out obligations still
due – Fercometal Sarl v Mediterranean Shipping Co SA.
Approaches taken by the courts in distinguishing between types
of terms
- Traditional approach: examine whether the breach ‘goes to the root of
the matter’ (Blackburn J in Poussard v Spiers and Pond). - The parties may have labelled the terms – Schuler v Wickman Machine
Tool Sales Ltd. - Statute may specify the nature of the term (usually within a consumer
contract). - The court may consider the consequence of the breach, for example, the
ship in The Mihalis Angelos was in the middle of the ocean, so
repudiation was needed. - A ‘course of dealing’ may exist – British Crane Hire Corporation Ltd v
Ipswich Plant Hire Ltd. - The Hong Kong Fir approach may be used, where the court examines the
effect of the breach and treats the term like a condition or a warranty.
Types of terms within a contract 117The parties agreed that the plaintiff would advertise the defendant
company’s products by flying over various towns displaying a trailing
banner which read ‘Eat Batchelors’ Peas’. Before starting each day the
pilot was to telephone for approval of the location. He did not do this
on 11 November 1937, and flew over the main square in Salford during
the two minutes’ silence which was part of the remembrance day
service. Many complaints were received by the defendant company,
including threats to avoid buying their products.
The defendant company claimed that it was no longer bound by the
contract, and the court upheld this claim. The decision was based not
on the original importance of the term, but on the seriousness of the
breach.