Performance Required
Cases
Jackson v Union Marine Insurance
(1874) 10 Common Pleas 125
Bramwell B
“ The first question is, whether the plaintiff could have maintained an action against the charterers for not loading; for, if he could, there certainly has not been a loss of the chartered freight by any of the perils insured against.
In considering this question, the finding of the jury that “the time necessary to get the ship off and repairing her so as to be a cargo-carrying ship was so long as to put an end in a commercial sense to the commercial speculation entered into by the shipowner and charterers,” is all important. I do not think the question could have been left in better terms; but it may be paraphrased or amplified. I understand that the jury have found that the voyage the parties contemplated had become impossible; that a voyage undertaken after the ship was sufficiently repaired would have been a different voyage, not, indeed, different as to the ports of loading and discharge, but different as a different adventure,—a voyage for which at the time of the charter the plaintiff had not in intention engaged the ship, nor the charterers the cargo; a voyage as different as though it had been described as intended to be a spring voyage, while the one after the repair would be an autumn voyage.
It is manifest that, if a definite voyage had been contracted for, and became impossible by perils of the seas, that voyage would have been prevented and the freight to be earned thereby would have been lost by the perils of the seas. The power which undoubtedly would exist to perform, say, an autumn voyage in lieu of a spring voyage, if both parties were willing, would be a power to enter into a new agreement, and would no more prevent the loss of the spring voyage and its freight than would the power (which would exist if both parties were willing) to perform a voyage between different ports with a different cargo.
But the defendants say that here the contract was not to perform a definite voyage, but was at some and any future time, however distant, provided it was by no default in the shipowner, and only postponed by perils of the seas, to carry a cargo of rails from Newport to San Francisco; and that, no matter at what distance of time, at what loss to the shipowner, whatever might be the ship’s engagements, however freights might have risen, or seamen’s wages, though the voyage at the time when the ship was ready might be twice as dangerous, and possibly twice as long, from fogs, ice, and other perils, though war might have broken out meanwhile between the country to whose port she was to sail and some other, still she was bound to take and had the right to demand the cargo of the shippers; who in like way had a right to have carried and were bound to find the agreed cargo, or, if that had been sent on already, a cargo of the same description, no matter at what loss to them, and however useless the transport of the goods might be to them. This is so inconvenient, that, though fully impressed with the considerations so forcibly put by Mr. Aspland, and retaining the opinion I expressed in Tarrabochia v Hickie,[1] I think that, unless the rules of law prohibit it, we ought to hold the contrary.
The question turns on the construction and effect of the charter. By it the vessel is to sail to Newport with all possible dispatch, perils of the seas excepted. It is said this constitutes the only agreement as to time, and, provided all possible dispatch is used, it matters not when she arrives at Newport. I am of a different opinion. If this charterparty be read as a charter for a definite voyage or adventure, then it follows that there is necessarily an implied condition that the ship shall arrive at Newport in time for it. Thus, if a ship was chartered to go from Newport to St. Michael’s in terms in time for the fruit season, and take coals out and bring fruit home, it would follow, notwithstanding the opinion expressed in Touteng v Hubbard,[2] on which I will remark afterwards, that, if she did not get to Newport in time to get to St. Michael’s for the fruit season, the charterer would not be bound to load at Newport, though she had used all possible dispatch to get there, and though there was an exception of perils of the seas.
The two stipulations, to use all possible dispatch, and to arrive in time for the voyage, are not repugnant; nor is either superfluous or useless. The shipowner, in the case put, expressly agrees to use all possible dispatch: that is not a condition precedent; the sole remedy for and right consequent on the breach of it is an action. He also impliedly agrees that the ship shall arrive in time for the voyage: that is a condition precedent as well as an agreement; and its non-performance not only gives the charterer a cause of action, but also releases him. Of course, if these stipulations, owing to excepted perils, are not performed, there is no cause of action, but there is the same release of the charterer. The same reasoning would apply if the terms were, to “use all possible dispatch, and further, and as a condition precedent, to be ready at the port of loading on June 1st.” That reasoning also applies to the present case. If the charter be read, as for a voyage or adventure not precisely defined by time or otherwise, but still for a particular voyage, arrival at Newport in time for it is necessarily a condition precedent. It seems to me it must be so read. I should say reason and good sense require it. The difficulty is supposed to be that there is some rule of law to the contrary. This I cannot see; and it seems to me that, in this case, the shipowner undertook to use all possible dispatch to arrive at the port of loading, and also agreed that the ship should arrive there “at such a time that in a commercial sense the commercial speculation entered into by the shipowner and charterers should not be at an end, but in existence.” That latter agreement is also a condition precedent. Not arriving at such a time puts an end to the contract; though, as it arises from an excepted peril, it gives no cause of action.
The same result is arrived at by what is the same argument differently put. Where no time is named for the doing of anything, the law attaches a reasonable time. Now, let us suppose this charterparty had said nothing about arriving with all possible dispatch. In that case, had the ship not arrived at Newport in a reasonable time, owing to the default of the shipowner, the charterers would have had a right of action against the owner, and would have had a right to withdraw from the contract. It is impossible to hold that, in that case, the owner would have a right to say, “I came a year after the time I might have come, because meanwhile I have been profitably employing my ship: you must load me, and bring your action for damages.” The charterers would be discharged, because the implied condition to arrive in a reasonable time was not performed. Now, let us suppose the charter contains, as here, that the ship shall arrive with all possible dispatch,—I ask again, is that so inconsistent with or repugnant to a further condition that at all events she shall arrive within a reasonable time? or is that so needless a condition that it is not to be implied? I say certainly not. I must repeat the foregoing reasoning. Let us suppose them both expressed, and it will be seen they are not inconsistent nor needless. Thus, I will use all possible dispatch to get the ship to Newport, but at all events she shall arrive in a reasonable time for the adventure contemplated. I hold, therefore, that the implied condition of a reasonable time exists in this charter. Now, what is the effect of the exception of perils of the seas, and of delay being caused thereby? Suppose it was not there, and not implied, the shipowner would be subject to an action for not arriving in a reasonable time, and the charterers would be discharged. Mr. Benjamin says the exception would be implied. How that is, it is not necessary to discuss, as the words are there: but, if it is so, it is remarkable as shewing what must be implied from the necessity of the case.
The words are there. What is their effect? I think this: they excuse the shipowner, but give him no right. The charterer has no cause of action, but is released from the charter. When I say he is, I think both are. The condition precedent has not been performed, but by default of neither. It is as though the charter were conditional on peace being made between countries A. and B., and it was not; or as though the charterer agreed to load a cargo of coals, strike of pitmen excepted. If a strike of probably long duration began, he would be excused from putting the coals on board, and would have no right to call on the shipowner to wait till the strike was over. The shipowner would be excused from keeping his ship waiting, and have no right to call on the charterer to load at a future time. This seems in accordance with general principles. The exception is an excuse for him who is to do the act, and operates to save him from an action and make his non-performance not a breach of contract, but does not operate to take away the right the other party would have had, if the non-performance had been a breach of contract, to retire from the engagement: and, if one party may, so may the other. Thus, A. enters the service of B., and is ill and cannot perform his work. No action will lie against him; but B. may hire a fresh servant, and not wait his recovery, if his illness would put an end, in a business sense, to their business engagement, and would frustrate the object of that engagement: a short illness would not suffice, if consistent with the object they had in view. So, if A. engages B. to make a drawing, say, of some present event, for an illustrated paper, and B. is attacked with blindness which will disable him for six months, it cannot be doubted that, though A. could maintain no action against B., he might procure some one else to make the drawing. So, of an engagement to write a book, and insanity of the intended author. So, of the case I have put, of an exception of a strike of pitmen.
There is, then, a condition precedent that the vessel shall arrive in a reasonable time. On failure of this, the contract is at an end and the charterers discharged, though they have no cause of action, as the failure arose from an excepted peril. The same result follows, then, whether the implied condition is treated as one that the vessel shall arrive in time for that adventure, or one that it shall arrive in a reasonable time, that time being, in time for the adventure contemplated. And in either case, as in the express cases supposed, and in the analogous cases put, non-arrival and incapacity by that time ends the contract; the principle being, that, though non-performance of a condition may be excused, it does not take away the right to rescind from him for whose benefit the condition was introduced.
On these grounds, I think that, in reason, in principle, and for the convenience of both parties, it ought to be held in this case that the charterers were, on the finding of the jury, discharged.
It remains to examine the authorities. The first in date relied on by the defendants is Hadley v Clarke.[3] Now, it may safely be said that there the question was wholly different from the present. There was no question in that case as to the performance of a condition precedent to be ready at a certain or within a reasonable time, or such a time that the voyage in question, the adventure, should be accomplished and not frustrated. That condition had been performed: the ship had loaded and sailed in due time. The plaintiff had had a part of the benefit intended. The defendant had in justice earned part of his freight. Had the plaintiff demanded his goods at Falmouth, he ought to have paid something for their carriage there. He could not, therefore, well have said that he would not go on with the adventure, but undo it. But, if I am right, unless both could, neither could. Further, in that case there was no finding, nor anything equivalent to a finding, that the objects of the parties were frustrated. This case is therefore in every way distinguishable.
Then, there is the case of Touteng v Hubbard.[4] The opinion there expressed was obiter,—of weight, no doubt; but not of the same weight it would have been had it been the ratio decidendi. I cannot think that it would have been so held, had it been necessary to act on it. To hold that a charterer is bound to furnish a cargo of fruit at a time of year when there is no fruit,—at a time of year different to what he and the shipowner must have contemplated, the change to that time being no fault of his, but the misfortune at best of the shipowner,—is so extravagant, when the consequences become apparent, that it could not be. Suppose a charter to fetch a cargo of ice from Norway, entered into at such a time that the vessel would reach its destination, with reasonable dispatch, in February, when there was ice, and bring it back in June, when ice was wanted, and by perils of the seas it could not get to Norway till the ice was melted, nor return till after ice was of no value: can it be that the charterer would be bound to load? that he had agreed in those events to do so?
Another case is Hurst v Usborne.[5] That is a case of which, if I knew no more than I learn from the books, I should say it did not decide the question we have before us. It is true that the report in the Law Journal,[6] as Mr. Aspland pointed out, says that Mr. Justice Cresswell said he knew of no time the shipowner was bound to, except to use reasonable dispatch. Still, I cannot see from the reports that the point now before us was presented to the judges in that case. My Brother Blackburn, who was counsel in the cause, says it was intended to raise this point by the evidence that was rejected at nisi prius. No doubt, therefore, that was so; but I cannot think it so understood by the Court. I see no adjudication on it. Mr. Butt pointed out that the charter was for barley or other lawful merchandise. Even if for barley only, it does not appear that barley might not have been stored at Limerick, nor that barley from Limerick arriving in England at the time it would, had the defendant loaded, would not have been as valuable as barley arriving earlier. I cannot but think it was a hasty decision: a rule was refused; and certainly one would think, after the argument we have heard, that the matter was worth discussing. At the same time, its tendency is favorable to the defendants. I think it is unsatisfactory, and, if a decision on the question now before us, wrong. Mr. Justice Willes did not seem to be of opinion that the law was as he is supposed to have laid it down in that case: see his judgment in M’Andrew v Chapple,[7] where, indeed, there had been a breach of his contract by the shipowner; but the observations are general. I may also properly refer to the opinions, if not of myself, of my Brothers Blackburn and Brett in Rankin v Potter.[8] They undoubtedly assume the law to be as the plaintiff contends.
There is also Geipel v Smith,[9] nearly if not quite in point. The shipowner there was excused, not merely for refusing to take a cargo to a port which became blockaded after the charter, but also in effect for refusing to do so after the blockade was removed. Restraint of princes not only excused, but discharged him. The same, no doubt, would have been held as to the charterers.
Then, there are the cases which hold that, where the shipowner has not merely broken his contract, but so broken it that the condition precedent is not performed, the charterer is discharged: see Freeman v Taylor.[10] Why? Not merely because the contract is broken. If it is not a condition precedent, what matters it whether it is unperformed with or without excuse? Not arriving with due diligence, or at a day named, is the subject of a cross action only. But, not arriving in time for the voyage contemplated, but at such a time that it is frustrated, is not only a breach of contract, but discharges the charterer. And so it should, though he has such an excuse that no action lies. Taylor v Caldwell[11] is a strong authority in the same direction. I cannot but think, then, that the weight of authority, as might be expected, is on the side of reason and convenience.
On the other question, viz. whether, though the charterers by perils insured against had a right to refuse to load the cargo, there has been a loss of freight by perils of the seas,—I am of opinion there has been.
It was argued that the doctrine of Causa proxima, non remota, spectetur, applies; and that the proximate cause of the loss of the freight here was, the refusal of the charterers to load. But, if I am right, that the voyage, the adventure, was frustrated by perils of the seas, both parties were discharged, and a loading of cargo in August would have been a new adventure, a new agreement. But, even if not, the maxim does not apply. The perils of the seas do not cause something which causes something else. The freight is lost unless the charterers choose to go on. They do not. In the case of goods carried part of the voyage, and the ship lost, but the goods saved, the shipowner may carry them on if he chooses, but is not bound. Suppose he does not, his freight is lost. So, if he does not choose to repair a vessel which remains in specie, but is a constructive total loss.
For these reasons, I think the judgment should be affirmed.
My Brothers Blackburn, Mellor, and Amphlett agree in this judgment; as does my Brother Lush, who, however, heard part only of the argument.”
Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos)
[1970] EWCA Civ 4 [1971] QB 164, [1970] 3 All ER 125, [1970] 2 Lloyd’s Rep 43, [1970] 3 WLR 601, [1971] 1 QB 164,
THE MASTER OF THE ROLLS:
The material facts are these. On 35th May, 1965, the shipowners let the steamer Mihalis Angelos to the charterers for a voyage from Haiphong, in North Vietnam, to Hamburg or other port in Europe. In the charter party the shipowners said that she was “expected ready to load under this charter about 1st July, 1965”. The vessel was to proceed to Haiphong and then load a cargo of apatite and carry it to Europe. There was a cancelling clause in case the vessel was not ready to load by 20th July, 1965.
The owners were quite wrong in saying she was “expected to load on 1st July” at Haiphong. They had no reasonable grounds for any such expectation. On 25th May, 1965, the date of the charter, the Mihalis Angelos was in the Pacific on her way to Hong Kong. She was not expecting to reach Hong Kong until 25th or 26th Jure., She would need fourteen days to discharge, thus taking it to 9th or 10th July. She had to have a special survey of two days. That took it to 11th or 12th July. She would take two days from Hong Kong to Haiphong. So she could not reasonably be expected to arrive at Haiphong until 15th or 14th July. Yet the shipowners, quite wrongly, said she was expected to arrive on 1st July.
In point of fact, she made up time across the Pacific, and arrived at Hong Kong on 23rd June: but the discharge at Hong Kong was unexpectedly prolonged. She did not complete it until 23rd July. Meanwhile, however, the charterers had their own troubles. They discovered there was no apatite ore available at Haiphong. They thought it was due to the War in North Vietnam. It was said that the Americans had bombed the railway line to the port. On 17th July, 1965, the charterers cancelled the contract as a case of force majeure. The ship-owners accepted this information as a repudiation of the contract. They did not charter the vessel to anyone else. Instead they sold her on 29th July as she lay in Hong Kong.
The Arbitrators found that if the ship, after discharge at Hong Kong, had proceeded to Haiphong, the charterers would, beyond doubt, have cancelled the charter on the ground that the ship had missed her cancelling date. So the owners, in fact, lost nothing. But they claimed damages on the footing that they lost the charter on 17th July and were entitled to £4,000 damages. The Arbitrators rejected the claim, but the Judge allowed it.
The first point arises on the clause by which the charterers said that the vessel was “expected to arrive ready to load about 1st July, 1965”. The charterers said that this was a condition of the contract: and that it was broken because the owners had no reasonable grounds for any such expectation. The Arbitrators found that “on 25th May, 1965, the owners could not reasonably have estimated that the Mihalis Angelos could or would arrive at Haiphong about 1st July, 1965”.
The charterers did not take this point on 17th July, 1965, when they cancelled the charter. They put it on the ground of force majeure. But the owners admit that, if this point is a good one, the charterers can rely on it. The fact that a contracting party gives a bad reason for determining it does not prevent him from afterwards relying on a good one when he discovers it: see British & Beningtons v. Cachar (1923 A.C.,48 at 71-2) by Lord Sumner.
The contest resolved itself simply into this. Was the “expected ready to load” clause a condition, such that for breach of it the charterers could throw up the charter? Or was it a mere warranty such as to give rise to damages if it was broken, but not to a right to cancel, seeing that cancellation was expressly dealt with in the cancelling clause?
Sir Frederick Pollock divided the terms of a contract into two categories; Conditions and Warranties. The difference between them was this: If the promisor broke a condition in any respect, however slight, it gave the other party a right to be quit of his future obligations and to sue for damages: unless he by his conduct waived the condition, in which case he was bound to perform his future obligations but could sue for the damage he suffered. If the promisor broke a warranty in any respect, however serious, the other party was not quit of his future obligations. He had to perform them. His only remedy was to sue for damages.
This division was adopted by Sir Mackenzie Chalmers when he drafted the Sale of Goods Act, and by Parliament when it passed it. It was stated by Lord Justice Fletcher Moulton, in his celebrated dissenting judgment in Wallis v. Pratt (1910, 2 K.B., 1003, at 1012), which was adopted in its entirety by the House of Lords in 1911 A.C., 394.
It would be a mistake, however, to look upon that division as exhaustive. There are many terms of many contracts which cannot be fitted into either category. In such cases the Courts, for nigh on 200 years, have not asked themselves: Was the term a condition or warranty? But rather: Was the breach such as to go to the root of the contract? If it was, then the other party is entitled, at his election, to treat himself as discharged from any further performance. That is made clear by the judgment of Lord Mansfield in Boone -v- Eyre (1777, 1 H.B1., 273); and by the speech of Lord Blackburn in Mersey v. Naylor (1834, 9 A.C., 434, at 443-4); and the notes to Cutter v. Powell (2 Smith’s Leading Cases, at 16-18). The case of Hongkong Fir Shipping Co. v. Kawasaki Kisen Kaisha (1962, 2 Q.B., 26) is a useful reminder of this large category.
Although this large category exists, there is still remaining a considerable body of law by which certain stipulations have been classified as “conditions” so that any failure to perform, however slight, entitles the other to treat himself as discharged. Thus a statement in a charter-party on 19th October, 1860, that the ship is “now in the port of Amsterdam” was held to be a “condition”. On that date she was just outside Amsterdam and could not get in owing to strong gales. But she got in a day or two later when the gales abated. The Court of Exchequer Chamber held that the charterer was entitled to call off the charter: see Behn v. Burness (1863, 3 B. & S., 751), overruling the Court of Exchequer (1862, 1 B. & S., 877).
The question in this case is whether the statement by the owner: “expected ready to load under this charter about 1st July, 1965” is likewise a “condition”. The meaning of such a clause is settled by a decision of this Court. It is an assurance by the owner that he honestly expects that the vessel will be ready to load on that date and that his expectation is based on reasonable grounds* see Sanday v. Keighley, Maxted & Co. (1922, 27 Commercial Cases, 296). The clause with that meaning has been held in this Court to be a “condition” which, if not fulfilled, entitled the other party to treat himself as discharged; see Finnish Government v. Ford (1921, 6 Lloyds List Reports, 188). Those were Sale of Goods cases. But I think the clause should receive the same interpretation in charter party cases. It seems to me that, if the owner of a ship or his agent states in a charter that she is “expected ready to load about 1st July, 1965” he is making a representation as to his own state of mind; that is, of what he himself expects: and, what is more, he puts it in the contract as a term of it, binding himself to its truth. If he or his agent breaks that term by making the statement without any honest belief in its truth or without any reasonable grounds for it, he must take the consequences. It is at lowest a misrepresentation which entitles the other party to rescind- and at highest a breach of contract which goes to the root of the matter, The charterer, who is misled by the statement is entitled, on discovering its falsity, to throw up the charter. It may, therefore, properly be described as a “condition”.
I am confirmed in this view by the illustration given by Lord Justice Scrutton himself in all the editions of his work on charter parties: “A ship was chartered ‘expected to be at X about the 15th December… shall with all convenient speed sail to X’. The ship was in fact then on such a voyage that she could not complete it and be at X by 15th December. Submitted that the charterer was entitled to throw up the charter”.
I do not regard the case of Associated Portland Cement Manufacturers v. Houlder Bros. (1917, 22 Comm.Cas., 279) as any authority to the contrary. The facts are too shortly reported for any guidance to be got from it.
I hold, therefore, that on 17th July, 1965, the charterers were entitled to cancel the contract on the ground that the owners had broken the ”expected ready to load” clause. In case I am wrong, however, I go on to consider the charterers’ second point. They say that they were entitled to cancel on that day under the cancelling clause, which reads:
“(11) Should the vessel not be ready to load (whether in berth or not)on or before 20 July ’65 Charterers have the option of cancelling this contract, such option to be declared, if demanded, at least 48 hours before vessel’s expected arrival at port of loading”.
The charterers said that on 17th July, 1965, it was plain that the vessel would not be ready to load on or before 20th July, 1965: and on that account they were entitled to cancel the charter. But the shipowners said that the charterers could not exercise the option until 20th July, 1965, after office hours on that day.
We were referred to the antecedents of this clause. The part “…such option to be declared”, etc. was inserted to modify the decision of this Court in Moel Tryvan v. Andrew Weir (1910, 2 K.B., 844). We were also referred to The “Helvetia -S” (1960, 1 LlL.R., 540 at 551), and to The “Madeleine” (1967, 2 LlL.R., 224), where the Judges said, of a somewhat similar clause, that a charterer cannot exercise the option to cancel before the cancelling date. That is simply not true of this present clause. Suppose that the vessel was delayed so that she was not expected to arrive at the port of loading until 21st July: and that on 15th July they told the charterer: “She will not be able to arrive until 21st July. Please declare your option”. The charterer would be bound, under this clause, to declare his option at least by 19th July. So on those facts the charterer would not only be entitled, but would be bound, to exercise it before the cancelling date. Seeing that result, it seems to me that the clause is a concise way of expressing this meaning:
“Should the vessel not be ready to load (whether in berth or not), or be in such a position that she will not be ready to load on or before 20th July, 1965, Charterers have the option of cancelling this contract, such option to be declared, if demanded, at least 48 hours before vessel’s expected arrival at port of loading”.
So expanded, the clause means that the charterers have the option of cancelling the contract as soon as it becomes plain that the vessel cannot possibly be ready to load on or before 20th July, 1965. This is a sensible interpretation: because, as a matter of commercial convenience, it is better for both sides that, when it is obvious that the vessel will not arrive in time, the charterer should be able to cancel. The charterer can then engage another vessel: and the ship-owner can use his ship elsewhere.
I limit myself, of course, to saying that the charterer is entitled to exercise his option before the cancelling date: not that he is bound_ to exercise it before that date, save in the circumstances described in the second part of the sentence. The Moel Tryvan case still holds good to show that the charterer is not bound to exercise it.
Mr Goff submitted that in any case the charterers cannot rely on the clause, for this reason; They did not exercise the option given to them by the clause. They did not cancel on the ground that the vessel would not be ready to load on or before 20th July, 1965. They cancelled on the ground of force majeure, i.e., that they themselves could not load the vessel. But I think that the principle stated by Lord Sumner in British & Beningtons applies here also. If they had a right to cancel on 17th July, they can rely on it, even though they gave a wrong reason for it. I would hold, therefore, that the charterers on 17th July were entitled to cancel under the cancelling clause.
In case I am wrong on this second point, I come to the third point, It proceeds on the footing that the charterers were wrong in cancelling or. 17th July, 1965, If so, their cancellation was a renunciation of their contract to load the vessel when she arrived at Haiphong. The shipowners accepted this renunciation and called off the charter. They are entitled to damages, But what are the damages? The Arbitrators found that, if the vessel had sailed to Haiphong, the charterers would beyond_ doubt have cancelled the charter, and would be within their rights then in so doing. So the shipowner suffered no loss.
The Arbitrators on this account awarded the shipowners only nominal damages. But the Judge, with regret, found they were entitled to damages of £4,000.
The reason, as I understand it, was as follows:-
The shipowners are entitled to damages for “anticipated breach” of contract. The Court must, therefore, accept that there would inevitably have been a breach by the charterers if the contract had run its full course. The Court cannot listen to any argument which says that the charterers would have committed no breach, not even in reduction of damages.
This reasoning was supported by the statement of Chief Justice Cockburn in Frost v. Knight (1872, L.R., 7 Ex.Cas., at 114):
“The eventual non-performance may, therefore, by anticipation, be treated as a cause of action…”;
and of Mr Justice Devlin in Universal Cargo Carriers v.Citati (1957, 2 Q.B.,401, at 438):
“The injured party is allowed to anticipate an inevitable breach”.
I think that the argument is rooted in fallacy. The words “anticipatory breach” are misleading. The cause of action is not the future breach. It is the renunciation itself. I venture to quote the notes to Cutter v. Powell (2 Smith’s Leading Cases, at 30):
“It is of the essence of every contract that each party thereto should have the right to consider it as of binding force from the moment it is made and should have the right to base his conduct on the expectation of its being fulfilled by the other party. If, therefore, the other side by an unqualified refusal to perform his side of the contract, destroys that expectation, he destroys that which is the basis of the contract: and his conduct may be treated as a breach going to the whole of the consideration”.
Seeing that the renunciation itself is the breach, the damages must be measured by compensating the injured party for the loss he has suffered by reason of the renunciation. You must take into account all contingencies which might have reduced or extinguished the loss. That is made clear by the very first case in which that doctrine of anticipatory breach was established, in Hochster v. De la Tour itself (1853, 2 E. & B. at 686-7). It follows that if the defendant has under the contract an option which would reduce or extinguish the loss, it will be assumed that he would exercise it. Again, if it is reasonable for him to take steps to mitigate his loss, he must do it. And so forth. In short, the Plaintiff must be compensated for such loss as he would have suffered if there had been no renunciation: but not if he would have lost nothing.
Seeing that the charterers would, beyond doubt, have cancelled, I am clearly of opinion that the shipowners suffered no loss; and would be entitled at most to nominal damages. On this point the two experienced Arbitrators (one on each side) were quite agreed. I agree with them. I would allow the appeal and restore the Award, which adjudged that the claim of the owners failed.
LORD JUSTICE EDMUND DAVIES:
The two broad questions raised by this appeal may be thus stated;
(1) On 17th July, 1965, did the charterers of the vessel Mihalis Angelos commit an anticipatory breach of their contract with the shipowners?
(2) If they did, are the owners entitled to recover more than nominal damages?
By their admirably clear and helpful Award, the Arbitrators answered the first question in the affirmative. But they considered that the second question called for a negative answer and, as the charterers had tendered £5 at a sufficiently early date, they held that the owners’ action failed. The learned Judge upheld their finding in relation to the first question but held that the second question must be answered in the affirmative and awarded the owners £4,000 damages.
While these two questions summarise the basic matters raised by this appeal, they have been considered before us under three heads, and it seems right that I should indicate my conclusions regarding each of them.
Issue A. Clause 1 of the Charter party of 25th May, 1965, stated that the Mihalis Angelos was “expected ready to load under this Charter about the 1st July, 1965”. These words mean that, in the light of the facts known to the owner at the time of making the contract, he honestly expected that the vessel would be ready as stated and, further, that such expectation was based on reasonable grounds; Sanday v. Keighley. Maxted & Co. (1922, 27 Com.Cas., 296).
It is undisputed that in the present case the owner had no reasonable grounds to expect that his ship would be ready to load “about 1st July, 1965”. That Clause 1 was a contractual term is not in issue, and is, in any event, established by Corkling v. Massey (1873 L.R., 8 C.P., 39 5). But what is in dispute is its legal nature. In other words, was it a condition of the contract, a breach of which entitled the charterers to repudiate? Or was it a term which, if broken, restricted the charterers to claiming damages? The owners urge the latter, and rely on Associated Portland Cement Manufacturers v. Houlder Bros. (1917, 22 Com. Cas.,279, at 281), where Mr Justice Atkin said:
“The obligation of the defendants to be ready to load on May 25th by reason of the definite alongside date having been given to the plaintiffs is not in my opinion one which it was of the essence of the contract for them to perform. I think the plaintiffs are merely entitled to recover such carnages as in fact they suffered by reason of the defendants’ delay…”
But as to this Mr Mustill makes two cogent observations:
(a) It does not appear to have been a term of the contract itself that the ship should be ready to load on 25th May, and
(b) the quoted observation of Mr Justice Atkin was obiter, inasmuch as the only question there arising was as to damages for one day’s delay, and whether the term was a condition or not made no difference, as the plaintiffs never sought to treat the term as a condition entitling them to cancel. This last-mentioned case may be contrasted with C. Mathisens v. Smith (1922, 13 LlL.R., 212), where the charter party contained the following clause as to the vessel’s position:
“Now leaving today Birkenhead for Flushing for orders, and expecting to load June 28th-29th”.
Mr Justice Greer said:
“There can be no question that the words ‘leaving Birkenhead for Flushing for orders’ are not mere terms or an independent term of contract, but they are a condition of the contract which gives the charterer every right to say he can cancel… They were untrue, that is to say inaccurate, at the time of the signing of the Charter party, and on that ground the charterers were entitled to cancel, as they did, after they had ascertained the facts”.
It was strenuously argued by Mr Goff, for the owners, that, in the light of Hongkong Fir Shipping Co. v. Kawasaki Risen Kaisha (1962, 2 Q.B., 26), the long-standing dichotomy between conditions and warranties should no longer persist and that, as Lord Justice Diplock put it (at page 70):
“There are, however, many contractual undertakings…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’ For instance, to take Baron Bramwell’s example in Jackson v. Union Marine Insurance Co.Ltd. (L.R. 10 C.P., 125 at 142) itself, breach of an undertaking by a shipowner to sail with all possible dispatch to a named port does not necessarily relieve the charterer of further performance of his obligation under the charter party, but if the breach is so prolonged that the contemplated voyage is frustrated, it does have this effect”.
In that case the Court of Appeal held that, although the owners were in breach of the clause in the charter party relating to seaworthiness, the vessel being unseaworthy on delivery by reason of an incompetent engine room staff, seaworthiness was not a condition of the charter party a breach of which entitled the charterer at once to repudiate. Lord Justice Upjohn said, at page 63:
“It is open to the parties to a contract to make it clear either expressly or by necessary implication that a particular stipulation is to be regarded as a condition which goes to the root of the contract, so that it is clear that the parties contemplate that any breach of it entitles the other party at once to treat the contract as at an end. That matter has to be determined as a question of the proper interpretation of the contract”.
He then went on to recall Baron Bramwell’s warning in Tarrabochia v. Hickie (1 H. & N., 183) against the dangers of too readily implying such a condition, but continued:
“Where, however, upon the true construction of the contract, the parties have not made a particular stipulation a condition, it would in my judgment be unsound and misleading to conclude that, being a warranty, damages is necessarily a sufficient remedy”.
In other words, breach of a stipulation which is not a condition strictly so called may nevertheless be such as, in certain circumstances, to entitle the innocent party to treat the contract as at an end. In that case the Court of Appeal held that the initial unseaworthiness did not go so much to the root of the contract that the charterers were then and there entitled to treat the charter party as at an end, for, being due to the insufficiency and incompetence of the crew, the parties must have contemplated that in such an event the crew could be changed and augmented.
An undertaking as to seaworthiness being of obvious importance and yet, in the circumstances of the Hongkong Fir case, being found not to amount to a “condition” the breach of which entitled the charterers at once to repudiate, Mr Goff has urged how much less does clause 1 of the present charter-party import such a condition. With respect, I do not find such an approach convincing, for as Mr Justice Williams said in Behn v. Burness (1865, 3 B. & S., 751, at 759):
“For most charterers, considering winds, markets and dependent contracts, the time of a ship’s arrival to load is an essential fact, for the interest of the charterer… Then if the statement of the place of the ship is a substantial part of the contract, it seems to us that we ought to hold it to be a condition, unless we can find in the contract itself or the surrounding circumstances reason for thinking that the parties did not so intend”.
How ought this matter to be resolved? Notwithstanding the observations in the Hongkong case, if the fact is that a provision in a charter party such as that contained in clause 1 in the present case has generally been regarded as a condition, giving the charterer the option to cancel on proof that the representation was made either untruthfully or without reasonable grounds, it would be regrettable at this stage to disturb an established interpretation. The standard textbooks unequivocally state that such a clause as we are here concerned with is to be regarded as a condition: see, among others, Chitty on Contracts (23rd Edition, “General Principles” Volume, para.598) and Carver (Vol.3, para.355). Even more impressive is the fact that certainly from the 10th Edition and onwards of Scrutton on Charter parties the learned author and his successive editors have “submitted” that such a clause as we are presently concerned with is one the breach of which entitled the charterer to throw up the charter. In sale of goods cases the Courts have for many years held that an analogous provision imported a condition – see, for example, Finnish Government v. H_._Ford Ltd. (1921, 6 L1L.R., 188) and Macpherson, Train & Co. Ltd. v. Howard Ross Ltd. (1955, 1 W.L.R., 641) – and it is difficult to see on what ground a distinction should be drawn in the case of charter-parties.
On these grounds, and particularly having regard to the importance to the charterer of the ability to be able to rely upon the shipowner giving no assurance as to expected readiness save on grounds both honest and reasonable, I would be for holding that clause 1 in the present case imported a condition. That the owners were in breach of it is common ground. It is equally undisputed that, if, as I think, the circumstances entitled the charterers to repudiate on 17th July, the fact that they did so by reliance on an untenable plea of force majeure does not invalidate their act of cancellation. In the result, I would be for reversing the finding of the Arbitrators and of the learned Judge on the first question and for holding that on 17th July, 1965, the charterers were entitled to cancel the charter party, as they in fact purported to do.
If I am right in so holding, that is an end of this case. But, out of respect for the able arguments of learned Counsel, I feel I ought to express the views I have formed regarding the two other questions canvassed before us.
……
I am bound to say that this conclusion has throughout seemed to me both reasonable and ineluctable. Indeed, I confess that I would have regarded the contrary view as unarguable had we not had presented to us by Mr Goff an argument so skilful that he actually succeeded in persuading Mr Justice Mocatta that his clients should recover £4,000 damages, a conclusion at which the learned Judge nevertheless arrived with confessed reluctance. The stages in Mr Goff’s argument are these: In Frost v. Knight (1872 L.R., 7 Ex. Cas., 111), where the defendant had promised to marry the plaintiff as soon as the defendant’s father died but nevertheless married another during his father’s lifetime, it was held that the plaintiff was entitled to recover damages while the father was still alive, Chief Justice Cockburn observing, at page 114, that:
“The contract having been thus broken by the promisor, and treated as broken by the promisee, performance at the appointed time becomes excluded, and the breach by reason of the future non-performance becomes virtually involved in the action as one of the consequences of the repudiation of the contract; and the eventual non-performance may therefore, by anticipation, be treated as a cause of action, and damages be assessed and recovered in respect of it, though the time for performance may yet be remote”.
Mr Goff next relies upon the observations of Mr Justice Devlin in Universal Cargo v. Citati (1957, 8 Q.B., 401), founding himself largely on Hochster v. De la Tour (1853, 2 E. & B., 678), that a renunciation, when acted upon, becomes final and that it is essential to the concept of anticipatory breach that “the injured party is allowed to anticipate an inevitable breach… So anticipatory breach means simply that a party is in breach from the moment that his actual breach becomes inevitable. Since the reason for the rule is that a party is allowed to anticipate the inevitable breach and is not obliged to wait till it happens, it must follow that the breach which he anticipates is of just the same character as the breach which would actually have occurred if he had waited”.
Upon this basis Mr Goff skilfully constructed an elaborate submission that, since one is proceeding here on the basis that on 17th July, 1965, the charterers committed an anticipatory breach of the charter party, it was no longer open to them to assert that, on the very belated arrival of the vessel at Haiphong, they could invoke the right to cancel conferred by clause 11. In other words, one is driven to assume an actual breach of the charter party being committed by the charterers, and the submission made was that this involved assuming that the charterers, being obliged to load a cargo of apatite, wrongfully refused to load any cargo at all. Influenced by Mr Goff’s persuasive argument, Mr Justice Mocatta said, at page 19-A:
“Once there is a renunciation and an acceptance of it, there is in the eyes of the law a breach and the contract is at an end, but the assumed (and, in law, inevitable) failure to perform is one at a date in the future when performance would have been required had there been no anticipatory breach. It is in relation to that assumed future breach of contract, which by law is anticipated, that damages will have to be assessed. Here, on the facts, the assumed breach can only be a failure to load; omission to exercise an option to cancel can never be a breach of contract”,
I am afraid it has to be said, though with the greatest respect, that this approach leads to a result so manifestly unrealistic that there must surely be something wrong with it. And so there is, in my judgment. As Mr Mistill clearly brought out, the underlying fallacy is in assuming that the anticipatory breach was one which presupposes that the right to cancel will not be exercised – in other words, that you must always anticipate not only a breach, but the worst breach. But the true test in a case of anticipatory breach is: “What would the position of the parties have been if the defendant had not wrongly announced his refusal to fulfil his part of the contract when the time for performance arrived?” One must look at the contract as a whole, and if it is clear that the innocent party has lost nothing, he should recover no more than nominal damages for the loss of his right to have the whole contract completed. The assumption has to be made that, had there been no anticipatory breach, the defendant would have performed his legal obligation and no more. “A defendant is not liable in damages for not doing that which he is not bound to do” (per Lord Justice Scrutton in Abrahams v. Reiach (1922, 1 K.B. , 477, at 482), cited with approval by Lord Justice Diplock in Laverack v. Woods & Co. (1967, 1 Q.B., 278, at 293). In the light of the Arbitrators’ finding, it is beyond dispute that, on the belated arrival of the Mihalis Angelos at Haiphong, the charterers not only could have elected to cancel the charter party, but would actually have done so. The rights lost to the owners by reason of the assumed anticipatory breach were thus certain to be rendered valueless. It follows from this that, in my judgment, the Arbitrators were right in holding that, in the circumstances, the claim of the owners for damages should be dismissed.
As to the appeal as a whole, for the reasons given in relation to Issue A, I concur in holding that it should be allowed and judgment entered for the charterers.