In English contract law, an innominate term is an intermediate term which cannot be defined as either a "condition" or a "warranty".
In Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962 2 QB 26) the Court of Appeal of England and Wales first conceived the notion of an "innominate term". This was followed in the case of The Mihalis Angelos (1971 1 QB 174).
Importance
The classification of terms is fundamental in contract law as it affects the legal rights of a party in the event of a breach of contract. Innominate terms of contracts are one of the three categories of terms of contract, the others being warranties and conditions.
The creation of this innominate category of terms (also known as "intermediate") is associated with the analysis of Diplock LJ in the case Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962), and is credited with the introduction of innominate terms in Hong Kong Fir.
The judge does not however refer to this type of term as "innominate" or "intermediate" anywhere in the judgment. The word "innominate" was coined in Stephenson LJ in Wickman Machine Tool Sales Ltd v L Schuler A.G. [1972] 1 WLR 840.
It is the legal principle and reasoning in Hong Kong Fir which gives the case its fundamental importance in contract law, rather than facts of the case. The background of the facts is of little relative importance. The case is that it establishes the legal test applied to decide whether a party to a contract is in repudiatory breach of contract, or not. That significance of that test is that when a party is in repudiatory breach of a contract, the innocent party is entitled to terminate the contract.
Origins
In Bremer Handelsgesellschaft Schaft m.b.h. v Vanden Avenne Izegem p.v.b.a. [1978] 2 Lloyd's Rep 109 at p. 113 Lord Wilberforce spoke of the consequences of a breach of an "innominate term" hinged on the "nature and gravity" of the breach.
Since Bunge v Tradax in the House of Lords, the description "innominate term" has been in regular use. Lord Scarman's speech in that case concisely describes the differences between conditions, warranties and innominate terms.
The treatment of innominate terms in the modern law of contract was set out by Diplock LJ in Hong Kong Fir Shipping Co. Ltd. v Kawasaki Kisen Kaisha Ltd. [1962] 2 QB 26 in the following passage at pages 69–70:
69. No doubt there are many simple contractual undertakings, sometimes express but more often because of their very simplicity ('It goes without saying') to be implied, of which it can be predicated that every breach of such an undertaking must give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contact. And such a stipulation, unless the parties have agreed that breach of it shall not entitle the non-defaulting party to treat the contract as repudiated, is a 'condition'. So too there may be other simple contractual undertakings of which it can be predicated that no breach can give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract; and such a stipulation, unless the parties have agreed that breach of it shall entitle the non-defaulting party to treat the contract as repudiated, is a 'warranty'. 70 There are, however, many contractual undertakings of a more complex character which cannot be categorised as being 'conditions' or 'warranties'….. Of such undertakings all that can be predicated is that some breaches will and others will not give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract; and the legal consequences of a breach of such an undertaking, unless provided for expressly in the contract, depend upon the nature of the event to which the breach gives rise and do not follow automatically from a prior classification of the undertaking as a 'condition' or a 'warranty'…
Twenty years later, the then leading contract law judge in England, Lord Wilberforce said in the third paragraph of his judgment in Bunge v Tradax: "In Hong Kong Fir Diplock LJ […] in his seminal judgment illuminated the existence in contracts of terms which were neither, necessarily, conditions nor warranties, but, in terminology which has since been applied to them, intermediate or innominate terms capable of operating, according to the gravity of the breach, as either conditions or warranties." The test pronounced by Diplock LJ in Hong Kong Fir remains the law in England and Wales.