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Re The Mihalis Angelos

[1971] 1 QB 164

Case summary last updated at 04/01/2020 11:22 by the Oxbridge Notes in-house law team.

Judgement for the case Re The Mihalis Angelos

P contracted D to transport materials to a port but inserted a clause that allowed them to cancel the order 48 hours before due arrival of goods if it became impossible for D to transport them i.e where the “expected readiness” couldn’t be achieved. Due to war in the place where the goods were supposed to be collected, the order was cancelled early on the wrong grounds of force majeure. D took this to be a repudiation of the contract and sued for damages. CA held that the “expected readiness” term was a condition and that P was entitled to terminate the contract on these grounds and would inevitably have done so, even though it gave the incorrect reason of force majeure as the reason for cancelling the contract. Once the grounds for termination exist and termination occurs, it is irrelevant that the wrong grounds are stated. Also, although the cancellation occurred before performance (i.e. it was an anticipatory repudiation), damages can only be awarded for the true value of the contract lost. Since, here, the value of the contract was nil (P could have legitimately used the expected delivery clause when performance was due and terminated the contract) no damages would be awarded. Megaw LJ says that damages are only for compensating the actual lost value when a contract is wrongly terminated. Denning MR said that analogous cases had found “expected delivery” to constitute a condition. 
 
Megaw LJ: The expected delivery clause should be classified as a condition for 4 reasons: (1) it gives certainty to the parties; (2) It is just: the clause could be invoked where there was no reasonable grounds for the boat owner to believe that he would arrive on time and thus it would be very rare to produce injustice (it is not unfair that a person who knows he cannot arrive by the specified term should release the other from the contract); (3) this type of clause has been classified as a condition by precedent; (4) 

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