What are Warranties, Conditions and Innominate Terms?

“Conditions”, “innominate terms”, and “warranties” are three categories used to classify terms in a contract. Their level of importance in the eyes of the law varies, with “warranties” being the least important, and “conditions” being the most important.

Conditions

“Conditions” are terms that the parties consider so important that they must be performed. If a party fails to perform a condition, the other party is entitled to treat the contract as being at an end. Once the breach of a condition has been established, the innocent party may choose to either:

1. Terminate the contract and sue for damages, or
2. Affirm the contract (i.e. the innocent party continues to perform its contractual obligations), sue for damages and pursue other remedies like injunctions or specific performance.

For instance, in a contract for the repair of a computer, a condition could be expressly stipulated by the parties such that the repairer has to use safe parts to replace the faulty ones. If the repairer utilises subpar replacement parts, the customer may choose to regard this as a breach of an essential condition and sue the seller for damages. The customer may even choose to terminate the contract and look for another repairer.

Warranties

“Warranties”, on the other hand, do not refer to warranties that come together with the purchase of certain items like mobile phones or electronic goods. In legal terminology, the word “warranty” is used to identify a less important term of the contract.

If a warranty is breached, the innocent party may sue for damages for the loss suffered, but he is not allowed to terminate the contract. If he does so, he may instead find himself being sued in turn for unjustified contract termination.

Innominate Terms

“Innominate terms” refer to contractual terms that lie in limbo. If the innominate term is an important one (i.e. a breach of the term would be so serious as to deprive the innocent party of substantially the whole benefit it was to obtain from the contract), the innocent party may terminate the contract and obtain other remedies.

However, if the term is read to be a minor term (i.e. a breach of the term would not be so serious as to deprive the innocent party of substantially the whole benefit it was to obtain from the contract), the innocent party may not terminate. It may only sue for damages and other remedies such as specific performance.

The general rule to differentiate between a “condition” and a “warranty” is to determine whether the term deals with the primary obligation of the contract. The intention of the parties towards that particular term is also an important consideration. In the event of a breach, whether an innocent party can terminate the contract depends on the following factors:

1. Singapore statutes may expressly stipulate whether certain terms are conditions or warranties. For instance, the Sale of Goods Act provides that certain typical sale and purchase terms are to be implied conditions, while others are to be merely implied warranties
2. The intention of the parties, i.e. whether they regarded a term to be important enough as to be a condition of the contract
3. Industry practice, for instance, timely deliveries is an important obligation in a contract for the transport of perishable goods
4. Other relevant factors such as background circumstances