CONDITIONS VS WARRANTIES
There is sometimes confusion surrounding the differences between conditions and warranties. Rather than attempting to describe the differences, I turn to Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) in which Jordan CJ described the differences quite precisely:
“If it is a condition that is broken, ie, an essential promise, the innocent party, when he becomes aware of the breach, has ordinarily the right at his option either to treat himself as discharged from the contract and to recover damages for loss of the contract or else to keep the contract on foot and recover damages for the particular breach.
If it is a warranty that is broken, ie, a non-essential promise, only the latter alternative is available to the innocent party: in that case, he cannot, of course, obtain damages for loss of the contract.”
It is essential to describe both warranties and conditions clearly in contracts. Once defined, it will usually provide the parties with certainty of when they can terminate and under what circumstances. Such clarity can also warn the parties of consequences following a breach of contract.
Intermediate Terms
As the term suggests, intermediate terms are those that are somewhere between essential terms and warranties. According to the High Court of Australia in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61, intermediate terms give rise to a right of termination where the breach was sufficiently serious enough to make it equitable to do so.
