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Stockznia V. Latvian Shipping Co. Notes

BCL Law Notes > Restitution of Unjust Enrichment BCL Notes

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STOCKZNIA V. LATVIAN SHIPPING CO. FACTS The plaintiff shipyard in 1992 entered into six contracts to build refrigerated vessels for the defendant buyers. Under each contract the price was payable in installments, the second of which, amounting to 20 per cent. of the total, was payable within five days of receipt of notice of keel-laying as defined in the contract. Clause

5.05 provided that the yard were entitled, in the event of default by the buyers, to rescind the contract and to retain installments already paid, and went on to make provision for the calculation of the amounts due. Work was begun on the first two vessels, but the buyers failed to pay the installments due on keel-laying, and the yard rescinded the contracts. The yard sought to trigger the payments due for the remaining vessels by reallocating the keels already laid for the first two vessels and issuing fresh notices. When the payments were not forthcoming they rescinded those contracts in turn. In an action by the yard claiming the instalments due on keel-laying of the first two vessels and damages. Nature of the Contract: Under each of the contracts, the yard undertook (see clause 2.01) to "design, build, complete and deliver" the vessel, property in the vessel not passing to the buyers until delivery.... Provision was made in clause 5.02 for the price to be paid in four installments. Forfeiture clause under the contract: (2) In the event of such rescission by the seller of this contract due to the purchaser's default as provided for in this clause, the seller shall be entitled to retain and apply the instalments already paid by the purchaser to the recovery of the seller's loss and damage. HOLDING LORD GOFF Impact of the forfeiture clause I now turn to the impact of clause 5.05 on the yard's right to recover the keel-laying instalments in respect of vessels 1 and 2, its right having accrued before the date when the yard rescinded contracts 1 and 2 under clause 5.05(1). It was the submission of Mr. Glennie, for the buyers, that clause 5.05 provides an exhaustive code governing the yard's rights and remedies in the event of a rescission under the article for non-payment of an instalment due under clause 5.02(b) (c) or (d); and that the effect was to exclude what would otherwise have been the yard's right at common law to sue for such an unpaid instalment as a debt.

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