What are intermediate terms?
Intermediate terms are a type of term that sits between a warranty and a condition. The High Court case of Koompahtoo confirmed the term’s existence in 2007. Before we define what intermediate terms are and their effects it is important to consider the other two types of terms to paint a clearer picture.
Types of terms
It is important to note that a term is not based on what it is classified as in the contract. Whether a term is a warranty, condition, or intermediate term, depends on the intention of the parties when they made the contract.
- Warranties are non-essential terms that do not allow for termination of the contract if breached because they do not go to the core of the objectives of the contract.
- Conditions are essential terms that if they were not there, the parties would not have even entered the contract. If breached, the party that didn’t breach can terminate the contract.
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How intermediate terms work
Now that we have defined the other two terms, we can now better understand intermediate terms. For explanation purposes lets assume that you are a non-breaching party seeking legal action. Think of intermediate terms as falling between warranties and conditions. Intermediate terms are both essential and non-essential. Lets say the other party has breached an intermediate term. If the court deems the breach serious enough you can terminate the contract. In deciding this, the court will look at whether the breach deprives you of the whole benefit that you were intending to receive by performance. The court will determine if it is a substantial deprivation by looking at the seriousness of the events that come because of the breach.
You will not be able to terminate if the breach is not serious enough. It would be viewed as a warranty and therefore not essential.
Interested in contract law? Check out our guide on consideration and whether it is necessary for a valid contract.
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Factors to consider when terminating
When choosing to terminate a contract either because of a breach of a condition or an intermediate term, it is always necessary to turn your mind to several considerations. You should weigh up the cost of creating a new contract with a different party and how that compares to keeping your current one. If the risk of the contract not being fulfilled is high it may be wise to terminate the original contract despite some extra cost. Additionally, you should make sure by consulting a lawyer that the breach of an intermediate term is serious enough before going to court. By estimating the cost of litigation and the chance of success you will be better informed on the correct decision to take.
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Conclusion
Intermediate terms if breached can allow you to terminate a contract because under the right circumstances they can be viewed as conditions. In order for you to be successful in terminating the contract the breach must be serious enough. That is, that the breach must deprive you of the whole benefit of the contract. Sometimes it may not be in your best interest to terminate because you may end up paying more in legal fees and replacing the other party. You should always seek legal advice on the best course of action when it comes to terminating contracts. If you are facing issues with a contract it is best to get in touch with a lawyer.
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