Innominate term

Terms of a contract that are also referred to as intermediate terms.

The parties to a contract may label the terms of the contract as either conditions or warranties and those labels will usually be respected by the courts provided that the result is reasonable.

In English contract law an innominate term is an intermediate term which cannot be defined as either a condition or a warranty. An innominate term is more flexible than a condition and, generally speaking, may be more favoured.

Innominate terms  or 'intermediate terms' of a contract refer to terms which can be broken with serious consequences, in which case the term will act as a condition or it can be broken with minor consequences, in which case the term will act as a warranty.

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962),  created the concept of an innominate term.  In this case the defendants chartered a ship for two years from the plaintiffs.  In the agreement there was a clause stating that the ship was 'in every way fitted for cargo service.' Over the course of the two years, twenty weeks of the charter were lost due to problems with the engine and incompetent staff. The defendants were entitled to bring an action for damages for breach of contract because of the clause in the agreement but instead of doing this they ended the contract.

This resulted in the plaintiffs bringing an action for wrongful repudiation.  They claimed that the defendants were not entitled to end the contract because of their breach of the contract, only to claim damages.

The Court of Appeal agreed, asking whether the breach had resulted in the defendants being deprived of the whole of the benefit they were entitled to under the contract.  This was not the case and the breach did not justify termination.

The remedy for breach of an innominate term depends on the nature of the breach. If the claimant has lost the whole of the benefit of the contract he will be entitled to treat the contract as repudiated and claim damages. If not, he will be entitled to damages only.

 

 

 

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