A breach of contract occurs where one party fails to fulfill their obligations under contract.

A breach of contract can take many forms, for example: It would be a breach of contract where an employee leaves without giving two weeks notice (if this is a term of his contract), or where a customer does not receive services which they have already paid for.

Another example would be where performance under the contract as precisely detailed: If you form a contract to deliver 100 white onions, but instead you deliver 100 red onions, that is a breach of contract (though as we will see, there are different levels of breach).

Today we’re going to learn about some of the types of breach in anticipation of next week’s piece on rememdies (and if you’re the type that usually spends all week asking yourself “What will Craig write next week? I’m so excited!” then I’m sorry for ruining the surprise…)

Conditions, Warranties, and Innominate Terms

There are three types of term which will determine the level of the breach of contract – These are conditions, warranties, and innominate terms.

Conditions

Conditions, also known as fundamental terms, were considered by Lord Greene M.R. In the case of Alderslade v Hendon Laundry Ltd as the “hard core of the contract”.

They are major contractual terms which go to the very root of a contract and if such a condition is breached then the innocent party is entitled to repudiate (terminate) the contract and take a claim for damages to the court.

An example of a condiiton is in the case of Poussard v Spiers – In this case, a contract was made with Madame Poussard to perform, as an opera singer, for three months. Prior to the opening night, she became ill and was unable to perform.

In this case, Madame Poussard was in breach of a condition. This was due to the importance of opening night and because the contract was clearly not just for any opera singer, but rather for only Madame Poussard.

Warranties

Warranties are not fundamental terms of the contract, but most certainly cannot be said to be completely irrelevant to the contract as a whole.

Although a breach of a warranty is still a breach of contract, the innocent party in this instance can only seek damages and is not entitled to end the contract.

An example of a warranty can be found in the case of Bettini v Gye – In this case, a contract was made with Bettini (also an opera singer) to perform for a three month period. Bettini, due to illness, missed 6-days of rehersals.

Gye ended the contract and replaced Bettini with another opera singer. However, in this case, Gye was not entitled to end the contract: Rehersals did not go to the root of the contract and, as such, Gye was not entitled to repudiate the contract (but could seek damages!).

Interestingly, this meant Gye actually was the party in breach of contract by terminating Bettini’s contract without a legal reason to do so.

Lesson to be learned: Don’t end contracts on a whim or because you think you’re entitled to; If you end a contract for breach of conditions, YOU are the breaching party.

Innominate Terms

Innominate terms are interesting – they are terms which are classified as neither conditions or warranties, or they are terms that are classified but (on interpretation by the courts) are assigned differently.

It’s hard to explain – but let’s look at an example. In the case of Schuler v Wickman Tools, it was stated as a condition in the contract between the parties that Wickman would send a sales person to named companies once a week to solicit sales.

However, these names companies totalled 1,400. From a practical perspective, this was not possible.

As you’d probably expect, Wickman failed to make some of his visits and Schuler terminated the contract.

However, the court held that despite the fact that the contract stipulated that such visits would be a condition it was interpreted as a warranty. This sacrafices certainty and provides common sense.

Where a term does not speak for itself as to whether it is a condition or warranty, the courts will consider whether the breach substantially deprived the innocent party of the whole benefit of the contract. If the answer is yes, the innocent party will be able to repudiate the contract; if the answer is not, they will only be able to seek damages.

Conclusion (And why is this important!?)

The classification of a breach under a contract is very important because it will determine what subsequent rights you have: Whether to terminate, claim damages, or both.

The important thing to take away is: If you consider something fundamental to the contract, say so!

Points to Take Away

1. A breach of contract occurs where one party fails to fulfill their obligations under contract.

2. Some breaches are more serious than others; There’s breach of conditions or warranties, and then there are innominate terms.

3. A breach of a condition will entitle the innocent party to repudiate the contract and seek damages.

4. A breach of a warranty will entitle the innocent party only to damages

5. A breach of an innominate term will be dependant upon whether breach of that term substantially deprived the innocent party of the whole benefit of the contract.

6. Lessons to learn: First, don’t be trigger happy in terminating contracts – carefully consider your position; two, if you consider something fundamental to the contract, say so; and Three, have a lovely day.

Craig

Craig Ineson is a law graduate of the University of Liverpool, current student of international business law at master’s level, a passionate restaurant reviewer, and experienced content writer.
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