Sometimes it is hard to determine the status of terms, thus an intermediate category for such terms is developed- innominate terms. Whether termination is available depends on the ‘waiting and seeing’ at time of the breach and whether it is so fundamental to strike the fundamental purpose of the contract. If the breach is serious, it will be classified as a condition and able to be rescinded. and if it is not, it will be classified as a warranty- where rescission is not available.
The parties may describe the terms as condition themselves. An examination of innominate terms, the courts will not take this as decisive but judge on the facts of the case. They are thus giventoo much discretion and this may potentially be unjust to parties who has really mean the terms to be construed as condtions.zl
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In the case of Hong Kong Fir Shipping vKawasaki, Here the claimants have chartered a ship for 2 years. Due to faulty engines and inadequate staff, 20 weeks of the charter has been lost to carry out repairs. The ship was contracted to be ‘in every way fitted for ordinary cargo service’ Hence the defendants have obviously able to claim damages but instead they chose to rescind the contract. The claimants sued for wrongful repudiation- claiming that their breach did not entitle them to sue for damages,
Conventionally, the courts will determine the status of terms at the time of the contract. The importance of the term then dictated the consequences of the breach. However, in HK Fir, the courts find themselves ready to find a term innominate, even if parties described it as conditions.
This is confirmed In the case of Schuler v Wickman, where there was a clause stating as conditions for there to be a weekly visit to certain manufacturers. Clearly there could be a breach of the visits were rarely undertaken or where only one visit was missed.
The creation of the innominate terms approach the effect of a breach in a way that is opposed to the traditional way. The courts would look at the effect of the breach to determine the term rather than the importance of the term in the course of negotiations. This strategy is clearly logical when a term such as ‘seaworthiness’ could be breach with high consequences or trivial consequences. However, it would create much uncertainty- especially in commercial contracts where parties would want to know the status of terms before proceeding.(Reardon Smith v Hansen Tangen)
Innominate terms are very important when the status of terms cannot only be based on just facts.The courts would look at the result of the breach. Even with many benefits, innominate terms create uncertainty and thus may cause inconvenience in business where parties often need to know what obligations they are assuming in order to plan their affairs. Consequently, the courts have decided not to give the doctrine too broad a scope as in to Mihalis Angelos case. T is a necessary evil that do more good than harm, producing fairer outcomes.