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Law Notes Shipping and International Trade Notes

Discharge By Breach Notes

Updated Discharge By Breach Notes

Shipping and International Trade Notes

Shipping and International Trade

Approximately 359 pages

Shipping and International Trade Law notes fully updated for recent exams at Oxford. These notes cover all the major LLB aspects and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Canada, Hong Kong or Malaysia (University of London). These notes were formed directly from a reading of the cases and main texts and are vigorous, concise and very well written. Everything is conveniently split up by topic as you can se...

The following is a more accessible plain text extract of the PDF sample above, taken from our Shipping and International Trade Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

DISCHARGE BY BREACH

SUMMARY

Conditions, Innominate Terms, Warranties

Definitions

  • This distinction only matters if performance of the contract is not yet complete

    • If performance is complete, you can only ever get damages

  • Innominate term

    • There must be deprivation of substantially the whole benefit to warrant termination (Hongkong Fir)

Examples

Contracts of sale

  • Implied term that goods will match description

    • i.e. thickness of wood in Arcos v Renaasen

    • HL held that there was a right to reject

    • But HL also held that this is subject to a de minimis exception

  • Buyer’s duty to give notice of readiness to load

    • Condition (Bunge v Tradax)

    • There was emphasis on the interdependency between the buyer’s and seller’s obligations

    • It was only after buyer gave notice of readiness, that seller could discharge their own obligation to nominate a port

    • Bunge v Tradax is the counterweight to Hongkong Fir -> emphasised the importance of certainty in the international sale context

Contract of carriage

  • Seaworthiness clause

    • Innominate term (Hongkong Fir)

    • CA thought that this was subject to frequent and trivial breaches

    • Innominate term analysis particularly suited to terms that can be breached in very trivial and very serious ways

  • Duty to care for cargo and duty to provide cargo with reasonable dispatch

    • Both innominate terms

  • Expected ready to load clause

    • Condition (Mihalis Angelos)

  • Voyage charterer’s obligation to load within laytime

    • Innominate term

    • NOTE: Universal Cargo Carriers v Citati called it a warranty, but that was before acceptance of the innominate term category

  • Time charterer’s obligation to pay hire

    • Innominate term (Spar Shipping)

    • Despite time clauses being subject to a general presumption of being a condition, this does not apply to payment clauses

    • Breaches of this term can range from trivial to grave -> very indicative that an innominate term analysis is warranted

    • The CA made clear that parties are free to stipulate that punctual payment is a condition

    • They also made clear that the presence of a withdrawal clause alone does not mean that the term is a condition

  • Cargoworthiness

    • Case dealing with this is Stanton v Richardson

      • Pumps worked for normal cargo, but didn’t work for wet sugar

      • In those circumstances, cargo-owner could refuse to load

      • But that’s a case of cargo-worthiness

      • In that situation, it is right for the cargo-owner to refuse to load

    • But if it’s a general problem with the ship, we wouldn’t normally expect the cargo-owner to be able to refuse to load

      • They have to load the goods and hope for the best – if things go wrong they can sue for damages

    • If shipowner just refuses to solve the problem ->repudiatory breach, can terminate

      • If it’s clear that shipowner cannot solve the problem in a reasonable time

Contracts involved in the operation of a banker’s commercial credit

  • Buyer’s duty to ensure opening of credit

    • It’s a condition (Trans Trust)

    • It’s also a condition precedent to the seller’s obligation to deliver goods (so faced with this obligation, the seller has no obligation to deliver goods, can call contract off and sue for damages) (Trans Trust)

    • It’s also possible that this a condition precedent to the contract coming into existence at all (buyer tried to argue this in Trans Trust), but unlikely to work

  • Buyer’s duty to open a credit that conforms with the sale contract

    • Also a condition (Glencore Grain)

  • If the seller presents documents to the bank that are not in strict conformity with the terms of the LoC, is the seller entitled to payment?

    • No -> Rayner v Hambros Bank

    • LoC required documents for “Coromandel groundnuts” but the B/L was for “machine-shelled groundnut kernels”

    • Bank can’t be expected to know whether there’s any difference or not – especially an overseas branch

    • Bank is also exposed to a lot of risk here – so they’re entitled to be picky

  • Obviously not a breach of contract here by the seller – it just means he’s not entitled to get money from the bank

  • If seller does not tender conforming documents, bank does not pay, can the seller sue the buyer?

    • General rule is yes -> LoC is only conditional payment

    • It’s just like writing a cheque that’s bounced

    • Very unfortunate result is that sometimes the buyer has to pay twice: once to the bank and once more to the seller (ED & F Man)

  • What are the exceptions?

    • 1) Where the seller expressly or impliedly agrees that he will look to the bank for payment to the exclusion of the buyer

      • The mere fact of agreement to a LoC is not sufficient (ED & F Man), but if the seller has gone out of the way to stipulate this, then he cannot later sue the buyer

  • Is the buyer in breach if the bank doesn’t pay?

    • It seems the analysis is that they are -> they have promised to pay in a certain way, through the LoC mechanism, and that mechanism has failed

  • But if they end up paying anyway, there might not be any damages flowing from that breach

Refusal to Perform/Rejection

  • A party who gives a wrong reason for refusal does not deprive himself of a justification which in fact existed (Glencore Grain)

    • QUAL 1: if the point not taken is one which could have been put right, the general rule will not apply

    • QUAL 2: waiver and estoppel

    • QUAL 3: acceptance

Promissory estoppel, election, acceptance

  • What is the difference between termination for breach and rejection?

    • Rejection of goods does not necessarily bring sale contract to an end – it does not end the seller’s obligations to deliver conforming goods - the seller could later tender conforming goods

    • Rejection is a form of repudiation (Kwei Tek Chao?)

  • Promissory estoppel

    • Promise/representation not to enforce legal rights (e.g. to terminate)

    • When is required for that estoppel to take effect?

      • Reliance by the party in breach, that would make it inequitable for the innocent party to go back on his promise

      • In the context of a sale contract, this occurs most commonly in not trying to retender conforming goods

      • ...

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