Law of Contract - Terms in a Contract (Part 2)

Terms implied by statute

Because of the doctrine of supremacy, Parliament can enact any statute it desires. It can therefore imply terms into any contract.

The implied terms you are most likely to encounter are those contained in S12-15 Sale of Goods Act 1979.

S 12 implies a term into all sales of goods that the seller is legally entitled to sell the goods. (In other words – that he has good title to the goods.)

S.13 implies a term that where there is a sale by description, the goods will match the description.

S.14 (2) implies a term that goods will be of a satisfactory quality.

S.14 (3) implies a term that if goods are sold for a particular purpose they will be fit for that purpose.

In practice these terms are extremely important. It will usually be much easier to rely on these terms than any express terms that may also be in the contract.
Conditions and warranties
Historically it was believed that all terms (implied or express) were either warranties or conditions. This classification is vitally important as it defines the extent of the available remedies in the event of a breach of contract.


Conditions are terms that go to the heart of the contract. Because of the importance of this type of term, the consequence of a breach of condition is that the innocent party will be able to terminate the contract and/or claim damages.


Warranties are terms of lesser importance. In the sale of goods act they are defined as terms “collateral to the main purpose of the contract.”

Because warranties are not so important, the consequence of a breach of warranty is that the innocent party is only entitled to claim damages.

Innominate Terms

In 1962, the Court of Appeal decided that there was a further group of terms that could not be classified as either warranties or conditions. Innominate terms are those terms which if breached could have serious or minor consequences.

In Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd,( [1962] QB 26) Lord Justice Diplock considered the contractual obligation that a ship should be seaworthy. Lord Diplock decided that the term itself when put into the contract was an intermediate or innominate term - it could only be assessed whether it was a warranty or condition once a breach had occurred.

This makes sense when you try to define “seaworthy”. Seaworthy could mean that the ship must be tidy and well presented. It could also mean that it can put out to sea without sinking! 
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