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Elements in a Contract - Cases involving boats and ships
In Bunge Corp v Tradax Export SA (1981) (Conditions) - the contract concerned the sale and purchase of US soya bean meal (normally used as a protein supplement in animal feeds).
According to the terms of the contract the freight of the soya bean meal was to be handled by the buyers but the seller required at least 15 days’ notice for loading as per the contract. The buyer gave only 13 days’ notice. The contract further stated that the soya bean meal must be shipped by the end of the month.
The court held that the requirement that the seller ship the soya bean meal by the end of the month was a condition and therefore the other party was entitled to terminate the contract if the shipment was not made according to the stipulated terms.
In Couturier v Hastie (1856) (Mistake) - a cargo of corn was on board a ship sailing from the Mediterranean to London. During the journey, due to extensive heat, the crew discovered that the cargo was going bad and sold the corn at the nearest port. In the meantime, the seller and buyer who were not aware of the fact that the corn had been sold, entered into a contract under the assumption that the corn was still on board the ship. It was held that the contract was void because the subject of the contract did not exist. In a contract for the sale of goods, if the goods perished without the knowledge of the seller, at the time the contract was entered into, the contract is void.
In Hartley v Ponsonby (1857) (Consideration) - half the crew in a ship deserted while the ship was sailing to Mumbai. The captain of the ship promised the remainder of the crew extra wages should they be willing to carry on. The remainder of the crew agreed and upon reaching Mumbai the captain of the ship refused the crew the additional wages. The plaintiff sued.
It was held that by agreeing to take on the additional duties, the plaintiff had taken on duties that were not in his contract and was thus entitled to the extra wages.
In Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha (1962) (Innominate Terms) - the defendants had chartered a ship from the plaintiffs for 2 years on the understanding that the ship was seaworthy and was able to complete the 2-year period without docking for repairs. However, as it turned out that the ship needed repairs and spent 20 weeks in the docks. The defendants were entitled to claim for damages but instead they chose to terminate the contract.
The court had to decide on the importance of the term and if the breach was so severe that it would lead to the termination of the contract. The court held that it was not a matter of deciding whether the plaintiffs undertaking to provide a seaworthy ship was a warranty or a condition.
The correct approach according to the court was to look at the consequences of the breach and then decide if the charterers had been deprived of the entire benefit that they desired to obtain under the contract.
The term seaworthy has many interpretations and some breaches may be less severe or serious than others and therefore it is best to look at what has happened as a result of the breach and then decide if the term that has been breached is a condition or a warranty.
In J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd (1976) (Parol Evidence) - the defendant assured the plaintiff that goods will be ferried below deck when in actual fact the goods were stored on the deck and were damaged in a storm. The plaintiff sued and was successful. The oral agreement was held to be a collateral contract i.e. a subsidiary contract which induced the party to enter into the main contract.
In The Mihalis Angelos (1970) (Condition) - a ship was hired out to the defendants to ferry goods with the stipulation that the ship would be ready for loading by a specific date. The ship was not ready by the stipulated date and there was an unusually long delay before the ship could be loaded. The defendants cancelled the contract because of the delay and the plaintiff sued.
It was held that the term that the ship must be ready by a specific date was a condition in the contract and as a result the defendants were entitled to terminate the contract.
In Stilk v Myrick (1809) (Consideration) - two sailors abandoned ship during a voyage and the captain of the ship promised the rest of the crew additional wages should the remainder of the crew take on their duties and help the ship complete its journey. Once the journey was completed the captain did not pay the additional wages and the plaintiff brought an action in court.
It was held that the plaintiff was not entitled to the additional wages because he had merely done what he was contracted to do i.e. complete the journey.
© 2017 Kathiresan Ramachanderam and Dyarne Jessica Ward