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1) FACTS
2) HELD
b) In every contract, be it for the sale of land or any other commodity, there are
some terms that are of fundamental importance and others of less or minor
importance. Where the term that has been flouted is fundamental to the
contract, the innocent party is entitled to treat himself as being discharged
from further obligations under it. But where the obligation that has been
breached is only subsidiary or minor in nature, the innocent party may not
treat himself as being free of his obligations under the contract, although he
may sue and recover damages for the non-performance of the subsidiary
term;
c) A party who terminates a contract or treats it as having come to an end in
reliance upon the breach of a non-fundamental term is himself guilty of a
breach of a contract;
d) Whether a particular term is fundamental to the contract or merely a term of
subsidiary importance depends on the way in which the particular contract is
constructed. Nevertheless, in the absence of any special considerations in a
contract for the sale of land, the obligation to pay the purchase price is a
fundamental term. So too is a term that the vendor has good title to the
property that is the subject matter of the sale. If the parties desire to make
some other obligation fundamental in nature, they must make it dependent
upon one or other of these terms;
e) Another approach is to look at the consequences of the breach of the term in
question. If the breach is of such a nature that it goes to the root of the
contract, then the term broken is fundamental in nature. On the other hand, if
the consequences of the breach are not serious in the sense that they do not
go to the root of the contract, then the term in question is a subsidiary one
entitling the innocent party to recover damages, but not to treat the contract
as being at an end;
f) Applying either of the tests to the facts of the present appeal having regard to
the terms of the first agreement as a whole it was clear that the stipulation as
to the payment of the purchase price was a fundamental term. It was also
clear that the obligation to deliver the executed memorandum of transfer was
merely a subsidiary term, the non-performance of which did not relieve the
appellant from his obligations under the contract. Therefore, the appellants
failure to pay the purchase price was fatal to its case.
BEHN BURNESS ( 1863 ) 3 BTS 751 122 ER 281
1) FACTS
2) HELD
a) By Erle CJ, Pollock CB, Williams and Keating JJ, and Channell B, reversing
the judgment of the Court of Queen’s Bench;
b) i. That the words “now in the port of Amsterdam” amounted to a warranty or
condition precedent to, the contract, that the ship was there at the, time, of
making the memorandum of charterparty.
c) ii. That the question was properly raised by a plea that at the time of making
the charterparty, time and the then situation of the ship were material and
essential parts of the contract: although it should seem the question might
also be raised by pleading the material circumstances on which the defendant
relied as leading to the construction which the plea sought to put on the
instrument.
ASSOCIATED METAL SMELTERS & THAM CHEOW TOH ( 1971 ) 1 MLJ
271
1) FACTS
2) HELD
a) The failure on the part of the defendant to supply a furnace which would
meet the required temperature constituted a breach of the condition of the
contract entitling the plaintiffs to treat such breach as a breach of warranty.
HONG KONG FIR SHIPPING CO LTD V KAWASAKI KISEN KAISHA
( 1962 ) 2 QB 26
1) FACTS
a) Ship owners let the vessel, Hongkong fir, to charterers for a period of 24
months. Clause 1 of the contract obliged the owners to deliver a “seaworthy”
vessel and Clause 3 further obliged them to maintain the vessel’s
seaworthiness and good condition.
b) Upon initial delivery, the vessel’s machinery was described to be in
‘reasonably good condition,’ yet required constant maintenance due to its
age.
c) The vessel owner’s chief engineer was inefficient and incompetent, and the
vessel suffered numerous breakdowns and delays.
d) The charterer’s repudiated the contract, alleging a breach of the obligations to
deliver and maintain a seaworthy vessel.
2) ISSUE
3) HELD
a) Firstly, the Court held that in order to construe whether a contractual clause
constitutes a condition precedent, the breach of which permits repudiation, or
an innominate term, the breach of which permits damages, depends on a
holistic assessment of the contract’s surrounding circumstances in
determining the intention of the parties in their treatment of the clause.
b) On the facts, the Court held that the seaworthiness and maintenance clause
was not viewed as so fundamental so as to amount to a condition of the
contract, but rather constitutes a term allowing damages.
c) Secondly, the Court held that an innocent party cannot treat the contract as
repudiated due to delays, however significant, if the breach falls short of a
frustration of the contract rendering performance impossible.
d) On the facts, the delays, albeit serious and repeated, did not amount to a
frustration of contract that entitled repudiation of the contract, but merely a
breach allowing for damages.
THE MIHALIS ANGELOS ( 1971 ) 1 QB 164
1) FACTS
a) The owners of the ship, The Mihalis Angelos, chartered the ship to the
defendant to use for the carriage of some cargo.
b) A clause in the agreement stated the ship was expected ready to load on 1st
July.
c) In fact the owners had no grounds for believing the ship would be ready to
load on that date as it was in Hong Kong at the time and would not be ready
until at least the 14th of July and in fact it was not ready at that date.
d) The defendant cancelled the contract on 17th of July.
e) The cargo that they expected to be carrying had not arrived due to the
bombing of a railway in Vietnam.
f) The ship owners brought an action against the defendants for anticipatory
breach.
g) The defendants argued that the claimant was in breach of condition of the
contract by not be ready to load on the specified date.
2) HELD
a) The expected ready to load clause was a condition despite the fact it had
caused no loss to the defendant.
b) The classification as a condition was said to be because of the need for
commercial certainty in shipping contracts.
THE HANSA NORD ( 1976 ) QB 44 , REARDON SMITH LINE V
HANSEN-TANGEN ( 1976 ) 3 ALL ER 570
1) FACTS
1) FACTS
2) ISSUE
3) HELD
a) The Court held that, in a written contract, where a stipulated term has to be
performed by one party as a prerequisite to the other party’s ability to
perform their obligations, the term ought to be constructed as a condition.
b) In the case of mercantile contracts, time is essential and clauses related to
time require precise compliance by the Parties.
c) On the facts, Clause 7 prescribed requisite notice by the buyers, absent which
the sellers would not be able to ascertain the loading port to nominate to
fulfil the delivery of the contract goods within the shipment period.
d) The ability of the seller to fulfil his contractual obligation is entirely
dependant on the buyer’s punctual performance of this contractual clause.
e) Thus, and particularly in consideration of the essential role of time within
mercantile contracts, the notification clause is constructed as a contractual
condition that requires strict compliance.
f) Accordingly, the buyers have breached the condition and the sellers had the
right to terminate and claim for damages.