D chartered a boat off P with a contractual term that D had to finish loading at each port within a specified time limit. When D failed to unload in several ports within the time limits, P considered that the contract was breached and that they could terminate. In the contract was a demurrage clause which agreed on a set figure to be paid by D when they delayed in leaving the port. However P realised that in fact the cost to them from the late departure (fines, freight charges etc) would be greater than this set figure and tried, rather than accept the set figure, to terminate the contract and claim for actual damages suffered. HL held that the contract could not be terminated due to the delays but P could merely sue for damages on the set, contractually agreed sum.
Lord Wilberforce: How is the demurrage (set figure damages) clause to be interpreted? Not penalty clause since it isn’t disproportionate. Not a limitation clause either since often the set sum will be payable even though no actual loss to the owners has occurred i.e. they are doing well out of the term. On a true construction the clause is one of liquidated damages i.e. it applies to this case as the agreed level of damages and the contract is not terminated. The fact that Ps allowed Ds o continue with voyages after several delays in loading at ports shows that this term was not so fundamental as to qualify for termination grounds. His reasoning was based on “the more unreasonable the result, the less likely the parties are to have intended it” (CW) unlike the “fundamental breach” approach of Denning in earlier cases.