TERMS & CONDITIONS ( LAW :- Q & A)

TERMS AND CONDITIONS

Although the Contracts Act does not draw any distinction between the relative importance of the terms of a contract, the Malaysian Courts have followed the common law and have drawn a similar distinction between conditions and warranties.

In Tan Chong & Sons Motor Company (Sdn) Berhad v Alan McKnight [1983]1 MLJ 220 Salleh Abbas FJ, in dealing with the word warranty, made the following observation on the difference between a condition and a warranty:

"In so far as the word is used to denote a term of the contract, its employment is purely for the purpose of distinguishing the most important terms (known as conditions) from the less important ones (known as warranties), the breaches of which lead to different results and give different remedies to the innocent party.If the term breached is a condition, the innocent party has a right to repudiate the contract and consider himself discharged therefrom and claim damaged for the breach. If on the other hand,the term broken is only a warranty, the innocent party cannot repudiate the contract and his remedy is confined to the claim for damages only."

In Abdul Razak bin Datuk Abu Samah v Shah Alam Properties Sdn. Bhd & Anor Appeal [1999] 2 MLJ 500 CA, Gopal Sri Ram JCA observed :

"The traditional method of classifying the terms of a contract is according to the degree of their importance. Stipulations that are essential are called 'conditions' while those of a secondary nature are referred to as' warranties'

Conditions- major term to the contract- if breached- can repudiate (cancel) the contract.
Case: Poussard v Spiers - fell sick- breached a condition.

Warranty - minor term to the contract- can only claim for damages. Sect 12(3) SOGA 1957. Case Bettini v Gye - late for rehearsal- only a warranty.

Intermediate terms-

look at the seriousness of the breach- Hong Kong Fir Shipping Co. v Kawasaki Kishen Kaisha Ltd.

Q&A

Explain briefly the meaning and effect of the following terms in the context of the law of contract, using examples and cases, if any, to illustrate your answer.

(1) conditions (2) warranties (3) intermediate terms

A condition is a major term of the contract, which if breached, entitles one party to repudiate the contract Sect 12(2) SOGA 1957). In short, conditions form the fundamentals to a contract, which if not kept, the contract itself collapses.

However the party affected by the breach, may choose to continue with the contract and claim for damages. Sect 13(1) SOGA 1957.

Poussard v Spiers-
fell sick- contract terminated = breach of a condition.

Cheow Toh v Associated Metal Smelters Ltd. –
furnance must not have temperature less than 2,600.= breach of condition= But Mr. Cheow continued with contract= Ct awarded damages.

(2)

A warranty is a minor term of the contract, which if breached, does not entitle the affected party to terminate the contract, but can only sue for damages. In this situation, the breach does not go to the root of the contract, it does not affect the whole contract. It isnot essential to the main purpose of the contract. Sect 12(3) SOGA 1957 “ a warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not a right to reject the goods.”

Bettini v Gye == sick- late for rehearsals- only a breach of warranty

(3)
Intermediate terms – These are terms which cannot be classified as terms or warranties. When a breach occurs, one has to look at the seriousness of the breach. If it is very serious going to the root of the contract, it will be treated as a condition. If it is minor, then it will be treated as a warranty.

HONG KONG FIR SHIPPING CO V KAWASAKI KISHEN KAISHA
subject matter concerned a ship- “ in every way fitted for ordinary cargo service.” Later sent for repair for 7 months- only a warranty. Sue and claim for damages.