The essential feature of a term is that it is a subsidiary, non-essential term, breach ofwhich only gives rise to an action for damages by the innocent party. In insurance law, ‘warranty’sometimes means an essential term. Breach of warranty entitles the innocent party to damagesonly (Hong Kong Fir Shipping Co Ltd v Kawasaki Kaisha Ltd).Intermediate (innominate) Terms7
Contract Law: Contractual TermsWhere there was a breach, the strict classification of conditionsand warrantieswould allow anon-defaulting party to treat the contract as being at an end, even where the party had not suf-fered any significant losses, this was perceived as an abuse of the classification. The court therefore developed a more flexible approach to the classification of terms, en-couraging performance7by limiting the circumstances in which a non-defaulting party can treatthe contract as at an end. Unless specifically agreed by the parties or determined by legislation, breach of an inter-mediate term entitles the innocent party to treat the contract as being at an end only ifthebreach has caused the innocent party to be substantially deprived of the whole benefit intendedfor him under the contract. Principles in applying the classification of termsSale of Goods legislation defines certain implied terms as either conditions or warranties.8Theparties may also designate a term as a condition (or a condition precedent), warranty or interme-diate term. Where they do so, this designation will generally be respected by the court. For ex-ample, in the case of a breach of a condition, that breach, however small, will give rise to a rightto repudiate, unless such a construction produces a result so unreasonable that the parties couldnot have intended it, and if there is some other possible and reasonable construction. Exemption and Limitation ClausesAn exemption or exclusion clause is an express contractual term which seeks to exclude or limitcontractual or tortuous liability of one of the parties under the contract. The exclusion of or limi-tation on liability can relate to exclusion of terms implied by the court, by statute or by customorto statements made during negotiationor before entry into the agreement. The common law rules governing exemptions clauses are stated below.Standard form AgreementsExemption clauses are often found in standard form contracts, such as contracts made subject tothe printed terms drawn up by one of the parties. Examples include the “conditions of carriage”in airline tickets, or “terms and conditions” in mobile phone contracts. Standard form contractsare increasingly common, and the average person may enter into these contracts without everhaving negotiated these terms. 7 Cehave NV v Bremer QB 44 8 S 11 8
Contract Law: Contractual TermsFrom a consumer’s perspective in particular, he is rarely in a position to negotiate, ques-tion or vary these terms.