76 Chapter 3The terms of the contract
It might be thought that the right to terminate a contract is of little importance if damages
are always available. However, the right to terminate can be very important when one of
the parties has made what has turned out to be an ongoing bad bargain.Innominate terms
In the Hong Kong Fir Case (1962)the Court of Appeal invented a new category of term, the
innominate or intermediate term. In deciding whether or not breach of such a term gives the
injured party the right to terminate the contract, the court does not consider how important
the term seemed when the contract was made. Instead, the court asks whether or not the
breach deprived the injured party of substantially the whole benefit of the contract. If the
breach did do this, the injured party can treat the contract as terminated and claim damages.
If the breach did not do this, the injured party can claim damages but cannot treat the con-
tract as terminated. Innominate terms have not replaced conditions and warranties. Some
terms can now be classed as conditions or warranties, others are innominate terms.
There may be some uncertainty as to whether a court will classify a particular term as
either a condition, a warranty or an innominate term. Generally, the position is as follows.
(i) A statute, such as the Sale of Goods Act 1979, or a rule of law might establish that a term
is a condition or a warranty.
(ii) The parties themselves might agree that certain terms will or will not give the right
to terminate if they are breached. The court will give effect to such an agreement.
However, the mere labelling of a term as a condition or a warranty will not of itself be
enough to indicate such an agreement.
(iii) If no term of the contract or rule of law stipulates that a particular term will or will not
allow termination, the courts will regard the term as an innominate term. Breach of such
a term will allow the injured party to terminate the contract only if the breach deprived
the injured party of substantially the whole benefit of the contract.
It should also be remembered that damages will always be available for any breach of con-
tract, whether the injured party has the right to terminate the contract or not. The subject of
damages is considered in Chapter 5.Terms implied by statute
Terms are implied into contracts by three statutes: the Sale of Goods Act 1979; the Supply
of Goods (Implied Terms) Act 1973; and the Supply of Goods and Services Act 1982. The
terms which these statutes imply are inserted into certain types of contracts without the
parties needing to agree to them. Indeed, as we shall see, in consumer contracts the terms
can be implied even if the parties expressly agree that they should not be.The Sale of Goods Act 1979
The Sale of Goods Act 1893 was the first statute to imply terms into contracts. The 1893 Act
has been replaced by the Sale of Goods Act 1979 (SGA 1979). The implied terms contained
in the SGA 1979 are virtually identical to those contained in the original 1893 Act. The terms
implied by the other two statutes, the Supply of Goods (Implied Terms) Act 1973 (SGITA
1973) and the Supply of Goods and Services Act 1982 (SGSA 1982), are also very closely
modelled on the terms implied by the Sale of Goods Acts 1893 and 1979. Almost all of the