Innominate Terms

The Hong Kong Fir Shipping Co -v- Kawasaki Kisen Kaisha [1962] was the landmark case in this particular regard at which time Lord Justice Diplock, in the Court of Appeal, stated that these are terms which may be fitted into the category of either ‘conditions’ or ‘warranties’. A breach of one of these more complex terms could in one situation give rise to a fundamental breach, whilst in a different situation give rise to only a minor breach. The answer in such a case was to look at the effect of the breach upon the contract and the loss incurred by the innocent party.

The breach would be a condition if it would “deprive the innocent party of substantially the whole benefit of the contract” but would be a warranty “if the problem is capable of solution by the payment of damages”. In the case of the “Hong Kong Fir”, the problem was a main engine breakdown due, it was contended, to inefficiency by the engine room staff and which needed a considerable time for repairs.

The charterers withdrew from the charter claiming that the ship was unseaworthy; the shipowners contested this. Diplock LJ and his fellow Appeal Court judges, agreed with the court of first instance that the delays caused by the machinery repairs did not prevent the ship from completing her time charter commitment and dismissed the charterer’s appeal.