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Chapter 7:Types of terms within a contract

Question 1

The question invites you to consider whether it is an advantage to have the

certainty of knowing whether a term is a condition or warranty, or whether

the courts will be more likely to be flexible using the innominate term

approach found in Hong Kong Fir. Make sure that you show that you know

the different approaches taken by the courts in the past and use cases to

illustrate this.

To most parties, the reason for examining the type of term is to find out

what remedy is available – damages for breach of warranty or a choice of

damages or repudiation for breach of condition. Explain this clearly.

• Discuss the need for certainty in some contracts, e.g. The Chikuma,
  Bunge Corporation v Tradax (1981), Lombard North Central v
  Butterworth– again, showing that you understand the question.


• Explain the two main types of terms and the traditional approach to
  differentiating between them: Poussard v Spiers and Pond, Bettini v Gye.


• Examine alternative approaches: when the parties label the terms:
  Schuler v Wickman Machine Tool Sales Ltd; statute may specify the
  nature of the term; a ‘course of dealing’ may exist: British Crane Hire
  Corporation Ltd v Ispwich Plant Hire Ltd.


• Examine the Hong Kong Firapproach, where the court examines the
  effect of the breach and treats the term likea condition or a warranty.
  Support this with cases like The Hansa Nordand Reardon Smith Line
  v Hansen Tangen.


• Conclude, referring to the wording of the question, on whether it is
  really important now to ‘label’ terms.

Question 2

This question raises similar issues to those in Question 1 (above), but the

style of the question is different. The emphasis is on the use of the

innominate term approach rather than the need for certainty, so you should

respond to this in your answer.

• Explain the difference between the two main types of terms – Poussard
  v Spiers and Pond, Bettini v Gye.


• Discuss the approach to identifying terms taken in Hong Kong Fir, where
  the court examines the effect of the breach and treats the term like a
  condition or a warranty. Support this with cases like The Hansa Nord and
  Reardon Smith Line v Hansen Tangen. Consider whether this brings
  about the justice desired and whether it raises the level of uncertainty.


• Examine alternative approaches: whether the breach ‘goes to the root
  of the matter’ (Blackburn J in Poussard v Spiers and Pond); labelling

Answers guide 303

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