The following is an interesting case which came well before Hong Kong Fir
but which used a similar approach, showing that the idea behind examining
the consequences was not as ‘new’ as perhaps thought, but merely waiting
to be formally introduced via case law.
116 Contract law
Awilko v Fulvia SpA di Navigazione (1981) (The Chikuma)
A vessel was hired out under a charterparty and a dispute arose over the
regularity of payments. The owners claimed that because of this they
were entitled to withdraw the ship. The House of Lords held that they
were entitled to do so. Although this was harsh, it was felt that in such
commercial agreements ‘conditions’ should be strictly interpreted so
that parties know where they stand. In this way, long and expensive
litigation would be avoided. So this was really a matter of erring on the
side of certainty because of the nature of the transaction.Bunge Corporation v Tradax (1981)
In a shipping contract, a term requiring notice of readiness to load was
breached by a few days. This was held by the House of Lords to be a
condition, even though the extent of the breach was small, as a
stipulation over time in a shipping contract is of great importance and
the outcome needs to be certain.Lombard North Central v Butterworth (1987)
This case is a recent example of a party stressing the importance of a
term being of a specific type. The plaintiff leased a computer to the
defendant, with a clause making punctual payment of hire instalments
‘of the essence’ of the agreement. The defendant was late paying the
third, fourth and fifth instalments. When the sixth payment was six
weeks overdue the plaintiff terminated the agreement and sought
damages for breach. It was held by Court of Appeal that they were
entitled to do so, having made their intentions concerning the term
quite clear at the outset.Aerial Advertising Co v Batchelors Peas (1938)Where should
I fly today?Eat Batchelors’ PeasCondition or
warranty?Figure 7.1