Hong Kong Fir Shipping v Kawasaki [1962] 2 QB 26

KEY POINTS

• Seaworthiness cannot be established as an absolute condition in contracts because even minor issues could result in a breach. It is unlikely that the parties intended for the contract to be terminated over such commonplace and insignificant occurrences.

• This case introduced the concept of "innominate terms," which are contractual terms that do not fall strictly into the categories of conditions or warranties at the outset. Instead, their classification as either a condition or a warranty is determined based on the severity of the breach that occurs.

FACTS

• The plaintiffs purchased a vessel and chartered it for a voyage from Liverpool to Osaka, Japan. Delays occurred during the journey due to the shipowners' contractual breaches, prompting the charterers to cancel the charter-party, citing the vessel's alleged unseaworthiness. The shipowners contested the cancellation, considering it a wrongful repudiation by the charterers.

• Despite offering the vessel for hire after repairs, the charterers refused to continue with the charter, leading to its termination. The court found the charterers' refusal to be wrongful and awarded damages to the plaintiffs.

• The judge determined that the vessel's machinery was not initially inefficient or defective but required proper maintenance by an experienced engine-room staff due to its age. However, the vessel was considered unseaworthy upon delivery due to an insufficient and incompetent engine-room staff.

JUDGEMENT

• Appeal dismissed.

COMMENTARY

• The judgment underscores the shipowners' duty of due diligence in ensuring the vessel's seaworthiness and efficiency. It acknowledges the challenges in finding skilled crew members but holds that shipowners must make reasonable efforts to meet these requirements.

ORIGINAL ANALYSIS

• Defendant chartered his ship to Plaintiff and was contracted to ensure that the vessel seaworthy and “in every way fitted for ordinary cargo service”. Defendant failed to provide competent personnel to maintain the ship so that it was only at sea for 8 ½ weeks of the first seven months charter of the charter. 

• CA held that the contract would not be terminated since, given the time remaining on the charter and Defendant’s efforts to repair the ship, Plaintiff had “not been substantially deprived of the whole benefit” of the contract. 

• The term of “maintenance” was held to be neither a condition nor a warranty and was an “innominate” term that would only terminate the contract if its breach had such consequences serious enough to amount to the frustration of the commercial purpose of the venture.

Upjohn LJ

• The parties can specify in a contract which terms are conditions and which stipulations. 

• He says seaworthiness cannot be a condition because the slightest thing can lead to its breach (e.g. failing to hammer in a nail) and it cannot have been intended that the contract should be terminated if any of these common/trivial things should happen. 

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