Contract Terms: Conditions, Warranties, and Innominate Terms

Once a contract is formed, its terms define the rights and obligations of the parties. Not all terms are of equal importance. English law classifies contract terms into conditions, warranties, and innominate terms, and the classification determines the remedies available if a term is breached. This lesson also covers the distinction between express and implied terms, and the key statutory implied terms under the Sale of Goods Act 1979 and the Consumer Rights Act 2015.

---

Express and Implied Terms

Express Terms

Express terms are terms that the parties have specifically agreed upon, either orally or in writing. They represent the explicit content of the agreement.

In determining what the parties agreed, the courts apply the parol evidence rule: where a contract has been reduced to writing, extrinsic evidence (such as prior oral statements) is generally not admissible to add to, vary, or contradict the written terms. However, this rule has many exceptions and has been significantly weakened in practice.

Implied Terms

Implied terms are terms that are not expressly stated but are read into the contract by the courts or by statute. Terms may be implied:

Source	Basis	Example
By the court (in fact)	The "officious bystander" test — the term is so obvious it goes without saying	The Moorcock (1889)
By the court (in law)	The court implies a term as a matter of policy for a particular type of contract	Liverpool City Council v Irwin [1977]
By statute	Parliament requires certain terms to be included in contracts	Sale of Goods Act 1979; Consumer Rights Act 2015
By custom	A term is implied by the recognised customs of a particular trade or locality	Hutton v Warren (1836)

The test for implying a term in fact was clarified by the Supreme Court in Marks & Spencer plc v BNP Paribas Securities Services Trust Co [2015], which confirmed that a term will only be implied if it is necessary to give the contract business efficacy or is so obvious that it goes without saying.

---

Classification of Terms

Conditions

A condition is a term that is fundamental to the contract — it goes to the root of the agreement. Breach of a condition entitles the innocent party to:

1. Terminate (repudiate) the contract, AND
2. Claim damages

In Poussard v Spiers and Pond (1876), an opera singer was engaged to perform in an opera for a season. She was ill and missed the first four performances (including the important opening night). The producers hired a substitute and refused to have her back when she recovered. The court held that her obligation to perform from the start of the season was a condition — her failure went to the root of the contract, so the producers were entitled to terminate.

Warranties

A warranty is a term that is subsidiary or less important. Breach of a warranty entitles the innocent party to:

1. Claim damages only
2. The innocent party must continue with the contract — they cannot terminate

In Bettini v Gye (1876), a singer was engaged for a concert season and was required to attend six days of rehearsals beforehand. He arrived three days late for rehearsals but was ready for the performances. The court held that the rehearsal term was a warranty, not a condition — missing some rehearsals did not go to the root of the contract. The concert organiser could claim damages but could not terminate.

Classification	Importance	Remedy for Breach
Condition	Fundamental — goes to the root	Terminate + damages
Warranty	Subsidiary — less important	Damages only

Exam Tip: The contrast between Poussard v Spiers (condition — missed opening performances) and Bettini v Gye (warranty — missed some rehearsals) is the classic comparison. Learn both cases and be ready to apply the reasoning to new scenarios.

Innominate (Intermediate) Terms

An innominate term (also called an intermediate term) is one that cannot be classified in advance as either a condition or a warranty. Its classification depends on the consequences of the breach.

The concept was established in Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962]. The claimants chartered a ship to the defendants for 24 months. The ship was unseaworthy due to an incompetent engine room crew. The ship was out of action for 20 weeks for repairs. The defendants terminated the contract. The Court of Appeal held that the term requiring the ship to be seaworthy was an innominate term. The test was:

Does the breach deprive the innocent party of substantially the whole benefit they were intended to receive under the contract?

Here, there were still about 17 months left on the charter — the breach, though serious, did not deprive the defendants of substantially the whole benefit. They were not entitled to terminate.

graph TD
    A["Term of the Contract<br/>is Breached"] --> B{"What type of<br/>term is it?"}
    B -->|"CONDITION<br/>(Fundamental)"| C["Innocent party CAN<br/>terminate + claim damages<br/>(Poussard v Spiers [1876])"]
    B -->|"WARRANTY<br/>(Subsidiary)"| D["Innocent party can<br/>claim damages ONLY<br/>(Bettini v Gye [1876])"]
    B -->|"INNOMINATE TERM<br/>(Cannot pre-classify)"| E{"Does the breach deprive<br/>the innocent party of<br/>SUBSTANTIALLY THE WHOLE<br/>BENEFIT?"}
    E -->|"Yes — serious breach"| F["Treated as a condition:<br/>Terminate + damages"]
    E -->|"No — minor breach"| G["Treated as a warranty:<br/>Damages only"]

    style C fill:#e74c3c,color:#fff
    style D fill:#f39c12,color:#fff
    style F fill:#e74c3c,color:#fff
    style G fill:#f39c12,color:#fff

Advantages and Disadvantages of the Innominate Term Approach