(d) Innominate terms
The possibility of a third type of term was introduced in Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962).
In this situation, the remedy is not prescribed in advance simply by whether the term breached is a condition or a warranty, but depends on the consequence of the breach. If the breach deprives the innocent party of ‘substantially the whole benefit of the contract’, then the right to repudiate will be permitted; even if the term might otherwise appear to be a mere warranty.
If, however, the innocent party does not lose ‘substantially the whole benefit of the contract’, then they will not be permitted to repudiate but must settle for damages, even if the term might otherwise appear to be a condition. The way in which the courts approach such terms may be seen in Cehave v Bremer (The Hansa Nord) (1976). In this case a contract for the sale of a cargo of citrus pulp pellets, to be used as animal feed, provided that they were to be delivered in good condition. On delivery, the buyers rejected the cargo as not complying with that provision, and claimed back the money they had paid to the sellers. Subsequently the same buyers obtained the pellets, when the cargo was sold off, and used them for their original purpose. It was held that since the breach had not been serious, the buyers had not been free to reject the cargo, and the sellers had acted lawfully in retaining the money paid. |
