S bought a ship, aware that a charter had been agreed to by the previous owner and he accepted it when buying a ship. However, after purchase, he tried to deny the charter-party’s contract to use the ship. HL said that since there had been full disclosure of the agreement, S was really a constructive trustee for the charter-party with obligations that “a court of equity will not allow him to violate”. This was on the basis of Knight LJ in an earlier case: “Reason and justice seem to prescribe that, at least as a general rule, where a man, by gift or purchase, acquires property from another, with knowledge of a previous contract, lawfully and for valuable consideration made by him with a third person, to use and employ the property for a particular purpose in a specified manner, the acquirer shall not, to the material damage of the third person, in opposition to the contract and inconsistently with it, use and employ the property in a manner not allowable to the giver or seller.”
