Status of terms

Need to know

What you need to know

• **By Statute:** Parliament may specify that a term is a condition. For example, under the Sale of Goods Act 1979, s.12 (seller's right to sell) is a condition. However, statute can also moderate this; s.15A of the same Act states that for non-consumer contracts, if a breach of an implied condition (e.g., quality or fitness) is so slight that rejection would be unreasonable, it is treated as a breach of warranty.
• **By the Courts (Judicial Precedent):** The courts may have already decided in previous cases that a particular type of term is a condition or warranty. For instance, obligations as to the time of performance in a commercial contract are often held to be conditions ('time is of the essence').
• **By the Parties:** The parties may label a term as a 'condition'. This indicates their intention and is a strong factor, as seen in *Lombard North Central plc v Butterworth*, where timely payment was expressly made a condition. However, the courts are not bound by the label if it leads to an unreasonable result, as demonstrated in *Schuler AG v Wickman Machine Tool Sales Ltd*, where the House of Lords treated a 'condition' as a warranty to avoid allowing termination for a trivial breach.

Explanation

Status of terms

1. **By Statute:** Parliament may specify that a term is a condition. For example, under the Sale of Goods Act 1979, s.12 (seller's right to sell) is a condition. However, statute can also moderate this; s.15A of the same Act states that for non-consumer contracts, if a breach of an implied condition (e.g., quality or fitness) is so slight that rejection would be unreasonable, it is treated as a breach of warranty.
2. **By the Courts (Judicial Precedent):** The courts may have already decided in previous cases that a particular type of term is a condition or warranty. For instance, obligations as to the time of performance in a commercial contract are often held to be conditions ('time is of the essence').
3. **By the Parties:** The parties may label a term as a 'condition'. This indicates their intention and is a strong factor, as seen in *Lombard North Central plc v Butterworth*, where timely payment was expressly made a condition. However, the courts are not bound by the label if it leads to an unreasonable result, as demonstrated in *Schuler AG v Wickman Machine Tool Sales Ltd*, where the House of Lords treated a 'condition' as a warranty to avoid allowing termination for a trivial breach.