Day's notes: Remedies for breach of contract: Introduction

There are mainly two remedies for breach of contract:

1.Termination of the contract: the parties are discharged from their contractual obligations
2. Damages: the aim of awarding damages is to restore the injured party to the position they would have been in had the contract not been breached.

Remedies for breach of contract are dependent on the term of the contract, which is determined by the consequences of its breach. Contractual terms are of three kinds:

Conditions
Breach of a condition goes to the root of the contract and entitles the innocent party to terminate the contract and seek for damages as well. Contractual conditions are laid down in the Sale of Goods Act 1979 s.12-15 as implied terms; briefly dealing with the seller’s title, sale by description, implied quality and fitness of goods and sale by sample.

Warranty
Breach of a warranty does not entitle the innocent party to terminate the contract, but only seek for damages.
Whether a term is a warranty or a condition is dependent upon the construction of the contract (S. 11(3). Even though a condition is a warranty, under S. 11(2) the buyer may:
Waive the condition, or may elect to treat the breach of the condition as a breach of warranty, foregoing the right to treat the contract as repudiated. If the buyer
a) waives the condition, he will be prevented (estopped) from pursuing any breach of contract claim against the seller.
b) treats the breach of condition as a breach of warranty (affirms the contract), he can only make a claim for damages

Innominate term (Intermediate stipulation)
This is a creation of case law, see Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26. An innominate term is neither a condition nor a warranty. The consequences of the breach of this term may lead to the right to terminate a contract and damages, or the right to damages only.

If the breach goes to the root of the contract and substantially deprives the innocent party of the whole benefit of the contract, the innocent party is entitled to terminate the contract. If the breach is not sufficient to frustrate the commercial purpose of the contract, then the innocent party will only be entitled to damages.

Tradax Internacional SA v Goldschmidt SA [1977] 2 Lloyd’s Rep 604 dealt with an action of the buyer’s right to reject the goods on the basis of a certificate of quality which indicated a high amount of impurities. The Court held inter alia in the absence of an agreement that the provision as to impurities was a condition, the Court should construe it as an intermediate, only a serious and substantial breach of which entitled rejection. If there has been no provision as to the quality certificate, the breach ...would have entitled the buyer to an allowance. The fact that the certificate showed minor breach did not make a difference.

REFERENCES
1.Michael Bridge, The International Sale of Goods; Law and Practice (2nd Edn, 2007), Ch.8[1]
2. The Sale of Goods Act Ch.54 1979