Analysis of Contractual Terms: Breach, Remedies, and Innominate Terms

This report delves into the classification of contractual terms, exploring their impact on the remedies available when a contract is breached. It differentiates between conditions, warranties, and innominate terms, highlighting how the nature of a term influences the consequences of its breach. The report examines how courts determine a breach of contract, considering the terms, timing, and intentions of the parties involved, with reference to case laws such as Couchman v Hill and Schawel v Reade. It further discusses the potential consequences of a breach, including compensatory and punitive damages, as well as professional repercussions, and outlines various remedies, such as money damages, reformation, rescission, and specific performance. Finally, the report considers how courts assess the effect of a breach, taking into account the intentions of the parties at the time of contract formation and relevant statutory provisions.

Contractual terms

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Types of Terms...........................................................................................................................1
Consequences of breach..............................................................................................................2
Potential consequences of breach................................................................................................3
Breach of contract's remedies......................................................................................................3
How will court determine about the breach of contract..............................................................4
How will they determine the effect of the breach.......................................................................4
Innominate terms:........................................................................................................................7
REFERENCES................................................................................................................................8

Project Question: What is the effect of the classification of Contractual terms on the remedies
available for breach of Contract? How are breaches of innominate terms treated?
INTRODUCTION
If two parties are under any agreement or contract then they both come under
contractual obligation and breach of that obligation give rise to litigation. Contractual
obligation are the implied or expressed terms under that contract which both the parties need
to follow. If any of the two parties break the contract or do something against the terms and
conditions implied or expressed in the contract then it is known as breach of contract. The
following report will be covering the types of terms and their effect on the remedies available
for breach of contract. Is will also throw some light on how court of law determine that
breach has been occurred in the contract (Vicary and Jones, 2017). It will further include
some important cases regarding the importance of statements and timing of statements the
case laws like Couchman v Hill and Routledge v McKay.
There are two classification of contractual terms which are as under:
Conditions or warranties
Conditions are the most important part of contract and the breach of any condition
laid down in the contract will lead to termination of the contract. While warranty is less
imperative than conditions and if any breach of warranty will not terminate the contract (Abdi
and Aulakh, P2017). But both the breach of condition or warrant will cause some type of
damages.
Innominate term
This is the term which is neither condition nor warranty and breach of which may or
may not cause damages to contract depending upon their nature.
Types of Terms.
If the two parties want to come under any contract there are some types of statements
which are made by both the parties to encourage the other one to come under the contract.
And then after they come under the contract they both need to follow those terms of the
contract and any breach of them will lead to damage to the party. There are two types of
terms in the contract (Demir, 2017). That is condition and warranty. Condition is the most
important terms of that contract which is specified in contract and both the party need to
follow those conditions. The court will have the look upon those conditions is the case is put
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before the law for further clarification. Without having any condition in contract parties will
not be able to enter in an agreement or contract. While warranty will not be able to breach or
terminate the contract only one who has done wrong will need to pay for the damage in
monetary terms for the loss. There is two basic of the terms which is expressed and implied.
Expressed term is that which is laid down by both the parties who are in contract like the
amount of agreed profit or loss in business (Khorooshi and Maleki, 2017).
Implied term is that term which is implied by court of law and is not expressed in the
contract of those two parties.
As in the case of Couchman v Hill [1947] in which P purchased a heifer at an auction
and the seller claimed that the cow was unserved and he bought it. But after that P found
heifer was pregnant and died because of some complications and P sued the seller. P
purchased the heifer only on the condition that is been unserved so P was not held responsible
for any error and P was misled by the condition of unserved heifer. Court did not accept D's
statement as P would not have entered into the contract without the condition. So condition is
the types of terms under law and the need of importance of the statements in law.
According to the case of Schawel v Reade [1931] in which claimant i.e., Schawel
purchased a horse from Reade and specified the purpose to use the horse for the stud purpose.
Reade implied that the horse was fit and sound to be used for breeding and did not require
any verification and could be bought. He also ensured Schawel that if any issue raised with
horse then he will do the personal visit for veterinarian. But Schawel found that horse was
suffering from hereditary eye disease and it will not be able to used as a stud. Court held that
this statement will be deemed as contractual term and Reade had promised Schawel that he
will rely on his word and Schawel had communicated the purpose for which horse was to be
used. So Reade was claimed as breach of contract and at the starting there was a need for
verification of the statement as well.
Consequences of breach.
Any of the breach of contract will always lead to either pay off the damages to the
claimant party or whole contract would be terminate (Bridge, 2017). The breach of contract is
when a party under contract repudiates or fail to perform the obligation specified in contract.
Then this breach of the conditions of contract will lead to claim for damages to the innocent
party or discharge from all liabilities. As in the case of Bentley production v Harold Smith
motors [1965] under which both the parties came under a contract in which Dick Bentley
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wanted to purchase a well vetted Bentley. And they came across Harold Smith the car dealer
and found one Bentley which as per the car dealer was run only 20000 miles after its
replacement engine. After it was known to Bentley that the car was run for 100000 mile and
both engine and gear box had already been replaced. Dick Bentley sued Harold Smith for
breach of warranty and they was successful before the trail judge. This was the case of breach
of the contract under the warranty and this did not give rise to any damage to Bentley but
they should know about the truth of statement.
Potential consequences of breach.
There are 3 potential consequences of breach of the contract which are stated as
under:
 Compensatory damages- this is compensation which is received by victim for loss
which is caused to them as a result of breach of contract (Yip and Goh, 2017). But for
this the victims need to prove that they have been caused damage by the other party
and are likely to receive compensation from the other one.
 Punitive damages- this go beyond compensated damages and are designed to punish
that party who has violated fiduciary duty or any law.
 Professional consequences- in this type of consequences professionals who are found
guilty in court of law are then resulted in serious loss of their professional damages.
Like if any doctor or accountant is found guilty of any breach of their professional
duty then their license as doctor or accountant is withdrawn by court and they will not
be able to practice further.
Breach of contract's remedies.
If there is any breach of the contract by any of the two parties then they are entitled to
pay off the damages to victim who has been proved by court and the penalty is also decided
by the court only (Tufan, De Witte and Wendt, 2017). There are some basic remedies for
breach of contract which include money damages, restitution, reformation, rescission and
specific performance.
 Money damages- this is the basic form of remedy of any breach of contract which
include giving sum of money in form of compensation inlue of financial loss done. In
this case plaintiff will be recovering the sum of money equal to the cost of hiring.
 Reformation- in this type of remedy the court of law if finding that any of substance
in contract is not correct or carry inequality then this allow court to change contract
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(Clarke, 2017). But court are not allowed to do so in all the cases to change any part
of contract between any two parties and the mistake if any in the contract can be
rectified by pre contract investigation only. Like in the of Little still water Holding
corp. V Cold Book sand & Gravel corp. [1991]
 Specific performance- this is done when the money damages are not sufficient to
compensate the plaintiff for the breach which has occurred. Heirloom and antiques are
the best example of such case in which specific performance was the remedy.
How will court determine about the breach of contract.
It is the duty of the court to determine among the parties who is wrong and who is
right and then penalizes the one who is guilty. To figure out the guilty among the two is done
by looking all the available evidence and full examination of the contract for declared it as
breach.
Examination of the contract- this will include top review all the required material elements
of the contract terms, conditions and warranties are need to be studied. This will also include
the timing of completion of contract, amount of money to be paid, items which are to be
provided and particular manner in which service is need to be performed (VanBuskirk, 2017).
It is also required by the court to identify all sort of damages which are caused by breach of
the contract. The damages can be in the form of either monetary terms, lose of some
opportunity or suffering the other identified harm to the other party.
Further, defining and requesting payment of damages- taking the compensatory of all the
damages made which are to put the victim party in the state where they were before the actual
happing. The compensation or monetary remedy is not always enough in all types of breach
of contract but some time it will also lead to punitive damages if the breach of contract is
very server. This is the strict contractual matters and need to be there only be there in some
special cases only.
How will they determine the effect of the breach.
Determining about the breach of contract is comparatively easy as per determining the
effect of the breach. The failure or breach to perform any obligation under the law can be
expressed or implied (Vicary and Jones, 2017). Then is important to see that whether the
breach of contract is material or not. And this is taken out on the bases of the type of breach
of contract their effect is determined. And there are two condition on which the breach is
been determined:
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Intention of parties at time of contract is made.
This is identified that at the time of contract what was the intention of both the parties and did
this affect the breach of that contract. Like in the case of Couchman v Hill [1947] P
purchased the cow only with the intention that it was not unserved and later found that heifer
was pregnant and died because of completions. And in the case of Schawel v Reade [1931]
Schawel wanted to purchase a horse just for the purpose of breeding it and later found that
horse was suffering from some eye disease. So the intention in both these above cases was
clearly stated at the time of contract. So this was wrong that after they found their contract
was breached.
Statutory provisions in force at time contract is made.
This is also done by identifying the materiality of the fact of breach of the contract and the
statutory provisions in force at time of contract was made (Demir, 2017). Statutory provision
are the legal obligations which arise because of two parties coming into contract and this will
determine the effect of breach of contract. And in force is the entry of that particular statutory
provision or commencement of that in to action.
As in the case of Routledge v McKay [1954] claimant purchased a Douglas BSA
motorcycle and sidecar in the exchange of another motorcycle in £30. As per the registration
document of the motorcycle it was the model of 1942 but the fact was that actually it was of
1936 model and was modified and then again registered by previous owner. When the
claimant found this he sued the owner from whom he had purchased the motorcycle but
found out that there were also some other third and fourth parties who were involved in this
process of motorcycle sale and purchase (Yip and Goh, 2017). So the court analysed that the
party who has sold the motorcycle to claimant was not knowing about the actual year of the
motorcycle model and was also not an expert in it. The date of actual purchase of the
motorcycle was also not stated in the written agreement. And this is the example of timing of
statements.
The term of contract if either fully written, fully oral or partly written and partly oral.
And these terms in contract are different from statements which are generally made prior to
contract. These statements are of two types representation about the scene and promise that
something will occur in the future. As the expressed statements in term of contract are the pre
decided part of agreement which is to be laid down by parties themselves. And they are
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mainly the oral statements which can cause further confusions and breach of contract become
easy.
Oral statements- the main problem with the oral statements is that in the prior concluding the
contract they can become either contract or will remain representation or promise (Abdi and
Aulakh, 2017). There are many factors which court will have a look before giving their
judgements:
 Importance of statements- if statements is very much important then that need to be
viewed by court while giving its judgement. This importance is looked before that
party would or would not enter into contract like in case of Couchman v Hill.
 Timing of statements- this is generally not important between time of statements and
conclusion of contract. But if the statements is held to be term of contract then timing
will be important like in case of Routledge and McKay [1954]
 Strength of statements- in this the statement which is having more effect on the
contract is likely to be viewed by the court at the time of judgement like in the case of
Schawel v Reade [1931].
 Written form- any statements which is in written form in the contract is regarded as
term or condition of that particular contract. This is an assumption that is any of the
statement is not written in contract and is mere oral then that statement is not viewed
as important. As in the case of Duffy v Newcastle United Football [2000].
The Parol evidence rule or written terms- if the whole of the contract is in written form then
there are less chance of both the parties submitting any wrong evidence to court (Morgan,
2017). The exception to the above said rule include the error in written contract due to
mistake or fraud.
 Partially written agreement- as was, seen in the case of Couchman v Hill that there
was P purchased the heifer on the bases that it was unserved and was after found
pregnant and later died because of completions. So if the written agreement which is
not intended to set all terms which are agreed between the parties and extrinsic
evidence of other term is admissible.
 Operating status of contract- here it is to be shown that the written and under what
all situation the contract was commenced or ceased as in the case of Pym v Campbell
[1856].
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 Rectification- if the written document are intended to record the oral agreement and
is not dean up to mark then evidence of oral agreement is admissible.
 Implied terms- this is the Parol evidence that is supported by any term which is
implied by law and not written or orally said at the time of contract between two
parties. Like in the section 12-15 of the Sale of Goods act [1979] there are some of the
implied terms are the seller of goods at the time of sale will be having the right to sale
his all goods at his per decided price. All the goods are implied to be free till that time
when the property is to be passed to some other party.
 Evidence about capacity of the parties- this evidence also show that what are the
capacity of both parties under which they are entering into contract if they are acting
as principal or an agent.
 Proving custom- this is important to show that how the terms of contract will be
constructed to prove a custom or trade usage and evidence will be admitted as shown
in Hutton v Warren [1836].
 Collateral contract- this is the basic contract on whose bases main contract is to be
entered into and the breach of which will be resulted to suing by the injured party. If
the party signed the contract then they will assure to constructed the agreement in
certain way (Pustilnik, 2017). As in the case of City and Westminster properties v
Mudd [1959]. The case is the clear example of collateral contract where the written
document is no always deemed to as exhaustive of the intentions of both parties.
Innominate terms:
These can either be conditions or warranties as according to agreement or contract
this is the intermediate term between both of them. The breach of innominate term can lead to
serious trial depending on the particular fact or situation. Innominate term is further defined
under the Hong Kong fir Shipping v Kawasaki [1961] and then can be distinguish between
conditions and warranties. Under this case Hong Kong fir shipping hired a ship with the
agreement of Kawasaki and was sailing to collect a cargo from Liverpool to Newport news
Virginia. The main term of the contract was that the ship is seaworthy and at the time of
hiring Hong Kong fir shipping did not examine the ship's seaworthiness. The crew was
incompetent in maintaining the ship after hiring, were insufficient and the chief engineer was
drunken as well. Because of all these reasons the ship faced many problems during and after
the cargo as there were several breakdowns of the ship. After the voyage also it needed a 15
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weeks repairing work to make it better and seaworthy again. Hong Kong fir shipping also not
exercised a good due diligence and did not examine the ship before its departure or purchase.
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REFERENCES
Books and Journals:
Abdi, M. and Aulakh, P.S., 2017. Locus of uncertainty and the relationship between
contractual and relational governance in cross-border interfirm relationships. Journal
of Management. 43(3). pp.771-803.
Bridge, M., 2017. The UK Supreme Court decision in The Res Cogitans and the cardinal
role of property in sales law. Sing. J. Legal Stud., p.345.
Clarke, P.H., 2017. Curbing the Abuse of a Dominant Position Through Unfair Contract
Terms Legislation: Australian and UK Comparison. In The Constitutional
Dimension of Contract Law(pp. 185-216). Springer International Publishing.
Demir, I., 2017. Oil, Gas Contracts And Islamic Principles. Advances in Social Sciences
Research Journal. 4(10).
Khorooshi, A., and Maleki, J., 2017. Basis of Contract Clause in the UK and the
Necessity for Reforming Insurance Law in Iran. J. Pol. & L.. 10. p.156.
Morgan, J., 2017. CONTRACTING FOR SELF-DENIAL: ON ENFORCING “NO
ORAL MODIFICATION” CLAUSES. The Cambridge Law Journal. 76(3). pp.589-
615.
Pustilnik, A.C., 2017. Legal evidence of subjective states: a brain-based model of
chronic pain increases accuracy and fairness in law. Harvard review of
psychiatry. 25(6). pp.279-288.
Tufan, P., De Witte, K. and Wendt, H.J., 2017. Diversity-related psychological contract
breach and employee work behavior: insights from intergroup emotions theory. The
International Journal of Human Resource Management. pp.1-25.
VanBuskirk, K., 2017. Aftermath of the SCC's Potter Decision: The Interaction between
Constructive Dismissal and Mitigation of Damages Still Requires
Attention. Canadian Lab. & Emp. LJ. 20. p.43.
Vicary, A. and Jones, K., 2017. The Implications of Contractual Terms of Employment
for Women and Leadership: An Autoethnographic Study in UK Higher
Education. Administrative Sciences. 7(2). p.20.
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Yip, M. and Goh, Y., 2017. Convergence between Australian common law and English
common law: The rule against penalties in the age of freedom of contract. Common
Law World Review. 46(1). pp.61-68.
Online:
Bentley production V Harold Smith Motors, 1956 [Online] Accessed through:
<http://www.unistudyguides.com/wiki/Dick_Bentley_Production_v_Harold_Smith
_%28Motors%29_Ltd>
City and Westminster properties v Mudd, 1959 [Online] Accessed
through:<http://casebrief.me/casebriefs/city-of-westminster-properties-v-mudd/>
Couchman v Hill, 1947 [Online] Accessed through:
<https://www.coursehero.com/file/p5ijjepu/Couchman-Couchman-v-Hill-1947-KB-
554-P-sold-a-heifer-at-aucon-Auconeer-and/>
Duffy V Newcastle United Football, 2000 [Online] Accessed
through: <http://lexisweb.co.uk/cases/2000/june/duffy-and-others-v-newcastle-
united-football-club-ltd>
Hong Kong Fir Shipping V Kawasaki, 1961 [Online] Accessed through: <http://www.e-
lawresources.co.uk/Hong-Kong-Fir-Shipping-v-Kawasaki-Kisen-Kaisha.php>
Huttom v Warren, 1836 [Online] Accessed through:
<https://www.lawteacher.net/cases/hutton-v-warren.php>
Pym v Campbell, 1856 [Online] Accessed through:
<https://www.quimbee.com/cases/pym-v-campbell>
Routledge v McKay, 1954 [Online] Accessed through:<http://www.e-
lawresources.co.uk/Routledge-v-Mackay.php>
Sales of Goods Act, 1979 [Online] Accessed
through:<https://www.legislation.gov.uk/ukpga/1979/54/section/12>
Schavel v Reade, 1931 [Online] Accessed through:
<https://www.lawteacher.net/cases/schawel-v-reade.php>
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