Blue is guilty of breach of contract because the barge was only actually ready-to-load on the 3rd of January 2006 in violation of the owner's promise (Clause 8) that the barge will be ready-to-load from the start of the charter, i.e. the 1st of January. Moreover, Blue is guilty of breach of contract because the barge had to be towed sometime January 2008 (when the contract is still effective) from Oslo to Liverpool due to serious engine failure in violation of Clause 4. Having failed to perform its obligations under the contract, Blue is therefore in breach of contract.
In regard to the issue of whether Red may exercise the right both to terminate the contract and to claim compensation for past and future losses, the answer depends on whether the terms of the contract violated by Blue is a condition or a warranty. This is because not all contract terms are of equal significance. Some are more important than others. A condition is an essential term of the contract which goes to the root or the heart of the contract while a warranty, on the other hand, is a lesser, subsidiary term of the contract. The distinction between a condition and a warranty is vital in the event of a breach of contract. A breach of a condition enables the party who is not in breach of contract ("the innocent party") either to terminate the performance of the contract and obtain damages for any loss suffered as a result the breach or to affirm the contract and recover damages for the breach. A breach of a warranty, on the other hand, only enables the innocent party to claim damages, such that the innocent party cannot terminate the performance of the contract and must therefore continue to perform his obligations under the contract. Simply stated, if a party violated a warranty, the innocent party is confined to a remedy in damages. Thus, it is necessary to know how to determine whether a term is a condition or warranty.
A term is declared a condition in one of three ways: by statutory classification, by judicial classification or by the classification of the parties. Firstly, a term may be classified as a condition by statute such as for example sections 12-15 of the Sale of Goods Act 1979 implying certain terms into contracts for the sale of goods. These sections classify these implied terms: satisfactory quality, fitness for purpose and compliance with description and sample are declared as conditions. By analogy, it can be argued that Clause 4 is akin to the implied terms of satisfactory quality and fitness for purpose.
Secondly, a term may be classified as a condition by the courts. There are two grounds, apart from the stipulation of the parties, on which courts may decide that a term is a condition. The first is where performance of the term goes into the root of the contract so that, by necessary implication, the parties must intended that the term should be treated as a condition, breach of which would entitle the other party to treat himself as discharged. (Couchman v. Hill  KB 544) To ascertain the significance of the