J Lauritzen AS v Wijsmuller BV (Re The Super Servant Two) [1990] 1 Lloyd’s Rep 1

KEY POINTS

• The defendant could not terminate the contract if the vessel's loss resulted from the defendant's (or his employees’ and/or representatives’) negligence before the performance deadline.

• If a party, trying to claim that a contract has been frustrated, causes the event that leads to frustration itself, even if they acted reasonably in deciding not to fulfill their part of the contract, the contract is not considered frustrated.

FACTS

• Lauritzen, owners of a drilling rig named Dan King, had a contract with Wijsmuller to transport the rig from Japan to the North Sea. The contract specified the use of "Super Servant One or Super Servant Two" for transportation. The delivery date was to be between June and August 1981, with payment split in half at the beginning and end of the voyage.

• The contract was governed by English law, and one important clause, Clause 15, required Wijsmuller to exercise care in reaching the port of discharge safely and on time. Clause 16 stated that the transportation to and from loading, stowage, and unloading locations was at the principal's risk unless Wijsmuller was grossly negligent.

• Clause 17 allowed Wijsmuller to cancel the contract due to various extraordinary events that could impede, prevent, or delay performance. If canceled, Wijsmuller had to tender redelivery of the cargo at a convenient port, and payments were to be adjusted accordingly. Clause 4 allowed Wijsmuller to terminate the contract at a port of refuge if the cargo's condition required it.

• Before the scheduled carriage, Super Servant Two, the intended vessel, was lost. The parties entered negotiations, and the rig was eventually transported by barge and tug, causing both parties to incur losses.

• Wijsmuller claimed that Super Servant One had prior commitments and the Dan King contract would have been its seventh voyage. They argued that the contracts performed by Super Servant One during the period in question could only be safely performed by a Super Servant vessel.

• Lauritzen sued for damages for breach of the Dan King carriage contract, while Wijsmuller claimed that the contract had been frustrated.

JUDGEMENT

• Appeal dismissed.

COMMENTARY

• The case is particularly relevant to maritime and shipping contracts, where unforeseen events, such as political unrest or weather conditions, can impact the performance of the contract.

• It underscores the need for parties in these industries to clearly specify how such risks will be allocated in their agreements.

ORIGINAL ANALYSIS

• Wijsmuller (W) agreed to transport J Lauritzen's (L) rig and had two boats at its disposal. It allocated boat 2 for this job (NB internally i.e. it wasn’t stated in the contract which boat would be used) and boat 1 for other contracts.

• Boat 2 sank before performance and boat 2 was unavailable since it was engaged n other contracts.

• CA held that frustration was not applicable since it was W’s own election not to use the remaining boat and, even if this choice was not a real one, due to the other contracts, it should still be imputed to W as a choice since W controls how many contracts it will enter into.

• It is therefore fair to allow the risk to go with W (i.e. if W has over-exposed himself, he should bear the consequences of this position).

Bingham LJ

• Also said that CA here was restricted by Maritime National Fish to find frustration where there was any election.

• CW: this is harsh and can be criticised.

  • Firstly it is not a real option open to W to perform since ship 1 was unavailable.

  • Secondly, the claim that W is still to be blamed regardless of this because he controls how many contracts he enters into is de facto returning to the absolute liability principle of Paradine. This is because if we require parties to perform in all circumstances or pay damages, even where this is impossible, then there are no cases where frustration will apply. It would be like saying that if a contract fails to provide for a situation then performance must continue, as in Paradine.

  • Thirdly, this case could have been distinguished from Maritime National Fish. In that case there was a genuine choice for M as to whether or not M would use O’s boat and allow performance. Here W had no genuine choice, since its movements were restricted by other contracts. 

RELATED CASES

• Krell v Henry

• Maritime National Fish v Ocean Trawlers