CHAR_A01.PDF, page 1-18 @ Normalize ( CHAR_A01.QXD )

It was held by the House of Lords that this small technical breach should not
allow the buyers to repudiate. A rigid application of rules should not be allowed
to lead to injustice. This is an important comment on the Hong Kong Fir
approach, since it really does aim to bring about justice in the individual case.
The problem is that in doing so, it increases uncertainty, as the parties are not
sure of the view that will be taken by the court, and do not know of the
consequences of any possible breach until after it has occurred.

The debate continues

The commercial standing of the parties and their equality of bargaining
power should be taken into account in considering whether the new, less
rigid approach should be taken, and the following factors may affect the
decision of the court.

• If the term is one which is covered by statute then there it is not open to
  the courts to discuss its status.


• If a breach of term would ‘go to the root’ of the contract, then the
  traditional approach to differentiating between types of terms may be
  satisfactory.


• If there is a ‘course of dealing’ it may be clear what type of term has been
  breached.


• If the parties clearly stated their intentions regarding the status of the
  terms in the agreement, and understood the significance of their
  statements, then this may be decisive (but see Schuler v Wickman,
  p. 111).


• If the parties are of equal commercial standing, it may well be justified,
  in the interests of certainty and consistency, to interpret terms more
  strictly, to ensure certainty between the parties. This principle will apply
  particularly in the case of charterparties. The following cases are
  relevant here.

Types of terms within a contract 115

Reardon Smith Line v Hansen Tangen (1976)

Here the breach was technical and was being used as an excuse to

escape from a subsequently unwanted contract. A tanker being built to

order was labelled Osaka 354. A subcontractor did some work on it and

relabelled it Oskima 004. The buyers tried to reject the vessel, claiming

that it did not conform to its original description, a term which could

have been breached in a major or minor way. In fact, they really wanted

to avoid the contract because the market had slumped.