In Section 12(2) Sales of Goods Act 1975 (SOGA) defines that a condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated (Tulsian 2007). A condition is a term in the contract that the parties consider very important that it must be performed. The innocent party can usually be able to repudiate the future performance of the contract if the contract has not been fully performed. Besides, when a condition is breached, the innocent party also can pursue other remedies like injunctions or any further performance and sue for damages. Thus, it may be stated that a condition is a requirement fundamental to the major objective of the contract.
In Section 12(3) SOGA provides that a warranty is a stipulation collateral to the main purpose of the contract, the breach of which give rise to a claim for damages but not the right to reject the goods and treat the contract as repudiated (Tulsian 2007). A warranty is a less significant term of the contract compare with condition which is usually written as a promise or assurance. Furthermore, a warranty is not essential to the main purpose of the contract. Thus, the efficacy of the whole contract will not be affect if the contract breached. If the warranty is breached, the aggrieved party are only able to claim for damages but will not entitle them to repudiate the contract.
In case Tan Chong & Sons Motors Co Sdn Bhd V Alan McKnight, the court held that the effect of breach of condition is the aggrieved party has the right to terminate the contract and claim damages whereas the breach of warranty is the innocent party cannot repudiate the contract but they only can claim for damages (Business Law, p8). Besides, in case Tham Cheow Toh V Associated Metal Smelters Ltd, the defendant agreed to sell a metal melting furnace to the plaintiff. The defendant promised that the furnace would have a temperature of not lower than 2,600 ? F. This specification was not fulfilled. The court held that the plaintiff were allowed to treat the breach of conditions as a breach of warranty as sue for damages in Section 13(1). (Business Law, p8). Section13 (1) SOGA states that ‘Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of condition as a breach of warranty and not as a ground for treating the contract as repudiated.’ (Business Law, p8).
Innominate terms also known as intermediate terms which is neither a condition nor a warranty. The term are classified as a warranty or a condition depends on the nature of the breach. If the effects of the breach are serious, the term will act as a condition, whereas if they are minor, it acts as a warranty. The court would held that the plaintiff would be entitled to repudiate the contract or claim the damage if the breach are seriousness, whereas the innocent party would only to claim for damage not to terminate the contract when there is no substantial loss, as in the case Hong Kong Fir Shipping Co. Ltd V Kawasaki Kisen Kaisha Ltd. In this case, plaintiff rented out the ship and the crew to the defendant. However, there were problems with ship and cause the ship delay for 5 weeks besides the staff was not competent. The defendants terminated the contract on the grounds that the plaintiff had breached a condition of the contract. The plaintiff sued defendant for breach of contract there was still about 20 months left. The court held that the defendant can only be claim for damage but not to terminate the contract because it does not deprive the defendant substantially of the whole benefit under the contract.