Promissory Conditions and Warranties: More Unhelpful English Terminology

This week Mark Anderson reminded us of this 2012 IPDraughts post. I’m pleased he did so, because it caused me to consider some unhelpful English terminology.

I’ll let you read Mark’s post for the background. The gist of it was that in a dispute over an allegedly defective airplane, Bombardier sought to avoid application of sections 13 and 14 of the English Sale of Goods Act 1979 by invoking the contract provision that waived “ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.” But perhaps because the contract used in the deal was based on a U.S. contract (the all capitals are something of a giveaway), the wording left something to be desired for purposes of English law.

Here’s Mark’s description of what happened:

Unfortunately for Bombardier, there is a long line of English case authority, discussed at length in Cooke J’s judgment, stating that in order to exclude section 14, it is necessary to state explicitly that one is excluding the “conditions” of merchantability (now satisfactory quality) and fitness for purpose. It is not enough to state that one is excluding “warranties”. This is because the Sale of Goods Act makes a clear distinction between promissory conditions (breach of which entitle the party suffering from a breach to terminate the contract) and warranties (breach of which only entitle that party to claim damages).

Let’s look at the distinction between conditions and warranties. The first thing to note about this meaning of condition is that it has nothing to do with the broader meaning of condition, which Black’s Law Dictionary states as follows: “A future and uncertain event on which the existence or extent of an obligation or liability depends; an uncertain act or event that triggers or negates a duty to render a promised performance.”

Instead, here’s how Practical Law Company defines condition:

A condition is a term of the contract that, if breached, gives the non-defaulting party the right to either:

  • Treat the breach as a repudiation and terminate the contract (technically, to treat the contract as discharged, so that future contractual obligations come to an end); or
  • Affirm the contract.

And here’s how it defines warranty:

A warranty is a contract term the breach of which does not give the non-defaulting party the right to treat the contract as repudiated. A breach of warranty will only entitle the non-defaulting party to claim damages for any loss suffered.

Not clear enough? Then let’s try Chitty on Contracts. 2-158 says, “[The word condition] may refer to the performance by one party of his undertaking. Where, for example, A agrees to work for B at a weekly wage payable at the end of the week, the contract is immediately binding on both parties, but B is not liable to pay until A has performed his promise to work. Such performance is a condition of B’s liability, and, as A has promised to render it, the condition may be described as promissory.”

At 13-031, it says, “In its most technical sense, however, [the word warranty] is to be understood as meaning a term of the contract, the breach of which may give rise to a claim for damages but not to a right to treat the contract as repudiated.”

I’m afraid that still seems obscure. That’s perhaps why Wikipedia is able to offer the following gem: “Conditions are terms which go to the very root of a contract. Breach of these terms repudiate the contract,allowing the other party to discharge the contract. A warranty is not so imperative so the contract will subsist after a breach. Breach of either will give rise to damages.”

It goes on to say, “By way of illustration, an actress’ obligation to perform the opening night of a theatrical production is a condition, whereas a singers obligation to perform during the first three days of rehearsal is a warranty.”

You’re welcome to join me in scratching your head at that one.

I’m not offering Wikipedia as an authority on English law. But if that’s the best that Wikipedia can offer, it suggests we’re dealing with an obscure distinction. So I wasn’t surprised to have Mark say this:

There is a strong commercial argument that this technical distinction between conditions and warranties has outlived its usefulness, does not reflect modern commercial practice, and should no longer form part of English law. In one of the cited cases, Rix LJ (a very senior, current English judge specialising in commercial law) made comments to this effect, but felt bound by House of Lords (now Supreme Court) authority.

I can’t say I feel particularly sorry for Bombardier: their lawyers should have known what the law is. But this awkward distinction was built into a statute, so that anyone who wants to take advantage of provisions under the statute has to invoke that distinction, and in a magic-words way. That’s unfortunate.

And it adds to the evidence suggesting that the English legal establishment is predisposed to legalistic hairsplitting.

(If you want a sensible taxonomy, I offer my “categories of contract language” framework, a summary of which is available here.)

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.