- The courts may look at the overall picture presented by the contract and
make a decision based on the consequence of the breach. - There may be a ‘course of dealing’ between the parties.
- The approach in Hong Kong Fir may be used (see p. 113).
Terms specified by the parties
When any dispute arises over a contract the courts do place importance on
the original intention of the parties, if this is clear. This is seen in the recent
case of Parham v F Parham Ltd (2006) where the wording of an
employment contract was given its ‘ordinary and natural meaning’
specified by the parties, even though this involved an increase in salary for
an employee from £10,000 to £410,005.88. It could be argued that a
similar approach should be taken towards the parties’ statements
concerning when the terms of a contract are conditions or warranties. This
sometimes is the case, and is to be expected, as the contracts will then
reflect the original intention of the parties. However, occasionally
difficulties may arise over a situation which is apparently straightforward.
The following case shows that even if a term is stated to be either a
condition or warranty the use of these expressions is not conclusive and
does not prevent the court considering the relative importance of the terms.
Types of terms within a contract 111Schuler v Wickman Machine Tool Sales Ltd (1973)
The plaintiff agreed to give the defendant sole selling rights of certain
machinery, provided that the defendant visited the six largest car
manufacturers in the United Kingdom at least once every week to
solicit orders. Only this clause, out of twenty, was described as a
condition of the agreement. The defendant committed significant
breaches of this clause during the first eight months. The plaintiff knew
of this, and at first overlooked it, but later sought to terminate the
contract claiming breach of condition. It was held that the plaintiff was
not entitled to repudiate. The use of the word ‘condition’ was not
conclusive, as it was not certain that the parties understood the
significance of the expression at the outset, especially since no action
had been taken when breaches first arose. If the labelling of a term as
a condition was intended to be interpreted strictly, the parties should
make that intention clear.Do you think that the average person realises the distinction between
a condition and a warranty when forming a contract?