“Name: MR JIA Hongxiang Title: Board Chairman”
“…….. "1) We hereby unconditionally and irrevocably guarantee as primary obligor the full and timely performance by the Charterers of each and every obligation of the Charter Party, and in the event of any one or more defaults in performance by the Charterers, we undertake on your first written demand to promptly rectify each and every default and hereby accept the responsibility for any liability, losses or damages that you suffer as a result or arising out of any such default. 2) We hereby waive due diligence, notice by defaults, and other notice or demand of any kind, and consent to any and all extensions of time, indulgence or waiver of rights under the Charter Party and to any modifications, variation or amendment of the said Charter Party. We shall not be released or discharged from our liability hereunder by any of the above or any change in the shareholding relationship between us and the Charterers. 3) This guarantee shall be governed by and construed in accordance with English law… Name: MR JIA Hongxiang [beside which Mr Jia’s signature appeared] Title: Board Chairman For and on behalf of [GCL]”
“I request the owners be more patient until October when financial support will come, in view of the relatively small sum and long-standing cooperative relationship”
“Article 24 The Board of Directors shall be the decision-making organ of the Company as well as the standing organ of powers of the Board of Shareholders. The Board of Directors shall be accountable to the Board of Shareholders. Article 25 The Board of Directors of the Company shall comprise of 5 directors, among whom there shall be one Board Chairman, one Executive Board Chairman and three Vice Board Chairmen. The term of office shall be 3 years. A director may serve consecutive terms upon expiration if re-elected. Article 26 The directors shall be elected by the Board of Shareholders. The Board Chairman, the Executive Board Chairman and the Vice Board Chairmen shall be elected by the Board of Directors. The Board Chairman is the legal representative of the Company. The term of office of the Board Chairman, the Executive Board Chairman and the Vice Board Chairman shall be 3 years and may serve consecutive terms upon expiration if re-elected. Article 30 The Board of Directors shall exercise the following functions and powers: (1) Convene shareholders’ meetings (2) Execute resolutions passed in shareholder’s meetings; (3) Review and determine the Company’s development plans, annual production and operation plans, financial budget and accounting proposals, profit distribution proposals and proposals for making up losses; (4) Put forward proposals for the increase or reduction of the Company’s registered capital, issuance of bonds, and for mergers, divisions, dissolution and liquidation of the Company; (5) Appoint General Manager and, upon the General Manager’s nomination, appoint the senior managerial personnel including the Vice General Manager and financial officers of the Company; (6) Ascertain the operational and managerial system of the Company, including the labour and wages system, personnel management system and financial affairs management system; (7) Examine and approve proposals regarding structural establishment and manning quotas proposed by the General Manager; (8) Examine and approve important operational decisions of the Company; (9) Other functions and powers authorised in the shareholders’ meeting. Article 31 The Board Chairman is the legal representative of the Company and shall exercise the following functions and powers: (1) Convene and preside over meetings of the Board; (2) Monitor the execution of the resolutions passed at the Board meetings; (3) Sign the Capital Contribution Certificates, important contracts and other important documents of the Company; (4) Give guidance and instructions regarding important business activities of the Company in the intercession of the Board of Directors; The Executive Board Chairman and Vice Board Chairmen shall assist the Board Chairman in his or her work. If the Board Chairman is unable to perform his or her duties, he or she can authorise the Executive Board Chairman or the Vice Board Chairmen to carry out part or all of the Board Chairman’s duties.”
"That unqualified statement of a general rule comes from a source to which the greatest possible respect is due. It is fortuitous that my own instinct should have coincided with it. However diffident I might have been in relying on instinct alone, the coincidence encourages me to suggest a reason for the rule. It is that it is desirable that the law, at whatever level it is declared, should generally be certain. If a decision of this court, reached after full consideration of an earlier one which went the other way, is normally to be open to review on a third occasion when the same point arises for decision at the same level, there will be no end of it. Why not in a fourth, fifth or sixth case as well? Mr. Barnes had to face that prospect with equanimity or, perhaps to be fairer to him, with resignation. I decline to join him, especially in times when the cost of litigation and the pressure of work on the courts are so great. There must come a time when a point is normally to be treated as having been settled at first instance. I think that that should be when the earlier decision has been fully considered, but not followed, in a later one. Consistently with the modern approach of the judges of this court to an earlier decision of one of their number (see, e.g., Police Authority for Huddersfield v. Watson [1947] K.B. 842, 848, per Lord Goddard C.J.), I would make an exception only in the case, which must be rare, where the third judge is convinced that the second was wrong in not following the first. An obvious example is where some binding or persuasive authority has not been cited in either of the first two cases. If that is the rule then, unless the party interested seriously intends to submit that it falls within the exception, the hearing at first instance in the third case will, so far as the point in question is concerned, be a formality, with any argument upon it reserved to the Court of Appeal."
“It seems to me that when an agreement of hiring is terminated by virtue of a power contained in it, and the owner retakes the vehicle, he can recover damages for any breach up to the date of termination but not for any breach thereafter, for the simple reason that there are no breaches thereafter. I see no difference in this respect between the letting of a vehicle on hire and the letting of land on a lease. If a lessor, under a proviso for re-entry, re-enters on the ground of non-payment of rent or of disrepair, he gets the arrears of rent up to the date of re-entry and damages for want of repair at that date, but he does not get damages for loss of rent or for breaches of repair thereafter.”
“Once the hirer repudiated his liability for future rentals, the owners were entitled to treat the repudiation as itself a breach going to the root of the contract: and, on accepting it as such, they were entitled to regard the hiring as at an end and retake the vehicle. The repudiation being itself a breach which took place before the termination, it is within the class of breaches for which the owners can recover damages according to the principle I have already stated. But if there is no repudiation, and simply, as here, a failure to pay one or two instalments (the failure not going to the root of the contract and only giving a right to terminate by virtue of an express stipulation in the contract), the owners can only recover the instalments in arrear, with interest, and nothing else; for there was no other breach in existence at the termination of the hiring.”
“….. in the absence of express provision to the contrary, the non-payment of two instalments would not be an event which relieved the owners from their undertaking to do what they had agreed to do but had not yet done. As I ventured to point out in Hongkong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha Ltd, parties to a contract may incorporate in it provisions which expressly define the events, whether or not they amount to breaches of contract, which are to have this result. But such a provision of itself may do no more than define an event which of itself, or at the option of one or other of the parties, brings the contract to an end and thus relieves both parties from their undertakings further to perform their obligations thereunder. Whether or not it does more than this and confers any other rights or remedies on either party on termination of the contract, depends on the true construction of the relevant provision.”
“Then it was said that the owner, if not entitled to freight under that clause, is entitled to damages to an equal amount for the charterers’ breach of contract, the breach being the failure of the charterers to pay punctually the hire due on January 10, that this breach occurred while the ship was beyond the reach of the owner so that he could not resume effective control of her, and that therefore he is entitled as damages to an amount equal to hire for the period from January 11 to January 23 when he got possession of his ship at Barry. That argument is fallacious. The non-payment of the hire was not the cause of loss, if any, incurred by the owner through not getting possession of his ship till January 23. The real cause was his own act in withdrawing his ship of his own volition on January 11 when he was well able to make an advantageous choice between leaving control to the charterers and assuming it himself. Having done that act, presumably with a just view of his own interest, he cannot rely upon it as giving him a right to damages.”
“On the whole my view is that the damages arise as the natural and probable consequence of the defendant’s breach of contract in failing to pay the two instalments of hire which were due at the time of the withdrawal.”
“Default in payment, that is, on the due date is not in my opinion excused by accident or inadvertence. The duty to pay is unqualified so far as the express terms of the charterparty go. I think this is the true construction of the terms of the contract, and it is confirmed by the cases cited in argument. A dictum or decision of Bigham J. in Nova Scotia Steel Co., Ld. v. Sutherland Steam Shipping Co., Ld. (1899) 5 Com. Cas. 106, has been relied upon as an authority that a certain latitude was permissible so that payment made two days after the due date did not constitute a default in payment. But I cannot agree that so drastic a departure from the specific words of the charter can be supported. In that case the clause provided for regular and punctual payment: these adjectives however add nothing to the stringency of the simple and unqualified language in the charter before this House. I think that so much of Bigham J’s judgment as conceded a latitude as to the date of payment is erroneous in law and should be overruled. The importance of this advance payment to be made by the charterers, is that it is the substance of the consideration given to the shipowner for the use and service of the ship and crew which the shipowner agrees to give. He is entitled to have the periodical payment as stipulated in advance of his performance so long as the charterparty continues. Hence the stringency of his right to cancel.”
“The significance of that passage, as I see it, is that although it does not state in terms that the provision for payment of hire is a condition, Lord Wright’s reasoning is clearly predicated upon it being an essential term of the contract, which, as other cases demonstrate, is synonymous with the provision being a condition.”
“It is important to remember that in relation to the payment of hire under a time charterparty, time is of the essence of the contract only in the sense that there is a breach of contract if payment is a moment late. It is not of the essence of the contract in the sense that late payment goes to the root of the contract and is a repudiating breach giving rise to a common law right in the owners to treat the contract as at an end. The right to withdraw the vessel and thus bring the charterparty to an end is contractual and the situations in which this right is exercisable depend upon the true construction of the contract. In the present case the words are ‘In default of payment’. Does this mean ‘If there has been default in payment’ or does it mean ‘Whilst there is default in payment’? If it means the former, a shipowner can take his time considering whether or not to withdraw the vessel and there is no action which the charterer can take to retrieve the position, although a stage will eventually be reached when, in the absence of a withdrawal of the vessel, it can be said that the owner has waived his rights. If it means the latter, the owner can still withdraw the vessel if he acts promptly, but the charterer can retrieve the situation if he pays or tenders the hire before the owner acts. “Both the wording of the clause and the drastic nature of the right conferred on the owners lead me to the conclusion that the right of withdrawal is intended as a spur to timeous payment, which subsists only so long as there is an absence of payment rather than a punishment for late payment. Once payment has been made, whether late or in time, there is no further need for such encouragement. The words are ‘In default of’ which I construe as ‘in the absence of’.”
“The effect of a stipulation as to time always depends on the true construction of the contract. A default in payment does not automatically give the other a right to determine it. Usually it does not do so. It only does so if there is an express provision giving the right to determine, or if the non-payment is such as to amount to a repudiation of the contract. That is shown by Martindale v. Smith, (1841) 1 Q.B. 389; and by the well-known judgment of Lord Blackburn in Mersey Steel and Iron Company (Ltd.) v. Naylor, Benzon & Co., (1884) 9 App. Cas. 434, at p. 444. In the present case the non-payment was clearly not such as to amount to repudiation. It was obviously a mistake. The charterers thought that as the banks were closed on Saturday and Sunday, Monday would do. They were wrong in so thinking. But they were not repudiating the contract. Then does the clause itself give the shipowners the right to withdraw? I think it does, as the Tankexpress case shows, provided always that they exercise the right before payment is made or tendered. I think in this clause the words “in default of payment” mean “in default of payment and so long as default continues”
“It was argued by Mr Evans that there were two features of clause 5 of the charterparty in this case, not present in clause 6 of the charterparty in [The Georgios C. ie the Baltime form] which showed that the parties intended the obligation to pay hire by a certain date to be of the essence of the contract. These were, first, the use in relation to the word ‘payment’ of the epithets ‘punctual’ and ‘regular’, and, secondly, the presence of the words ‘or any breach of this charterparty’. As regards the epithets ‘punctual’ and ‘regular’ he said that these emphasised the importance of the obligation, and he relied, in support of this proposition, on Maclaine v Gatty[1921] 1 AC 376 and particularly on the observations of Viscount Finlay, at p 389. As regards the words ‘or any breach of this charterparty’ he said that it was necessary to imply the words ‘in the event of’ between the words ‘or’ and ‘any’, and that what was then meant was that, in the event of a breach of any essential term of the charterparty, other than failure to pay hire punctually, the owners should have the right to withdraw the ship. It followed that failure to pay hire punctually was being treated as being in the same category as breach of any other essential term. Against that Mr Goff contended that the use of the epithets ‘punctual’ and ‘regular’ added nothing or little to the word ‘payment’ standing alone; and that reservation of an express right of withdrawal for failure to pay hire tended to show that the obligation was not otherwise of such a character as to be an essential term. I have considered these arguments carefully and I have reached the conclusion that there is nothing in clause 5 which shows clearly that the parties intended the obligation to pay hire punctually to be an essential term of the contract, as distinct from being a term for breach of which an express right to withdraw was given. It follows that I decide the first point of construction in favour of the charterers.”
“6. Repudiation It remains to deal with the owners’ cross-notice. This relates to Brandon J.’s rejection of the plea contained in paragraph 13 of the defence that the charterers’ failure to pay the April hire punctually, following as it did on persistent late payments and notwithstanding the owners’ protests in January and February 1970,. . . “constituted a breach of condition and/or a repudiation and/or fundamental breach of the charterparty . . .” which entitled the owners to rescind by withdrawing the ship. Mr. Anthony Evans evinced no enthusiasm in supporting this plea, and that, I think, was wholly understandable. Brandon J. said [1973] 1 W.L.R. 386, 409: “In order to justify a decision that the charterers’ conduct was repudiatory it would be necessary to find that they evinced clearly by it an intention not to be bound by the terms of the contract.”
“The repudiation question The owners contend that the history of belated hire payments by the charterers is such that the owners were entitled to treat the charterparty contract as at an end, apart altogether from the “failing punctual payment” clause. Once again, because of the assignment, there might be difficulties for the owners in relying on late payments, the right to receive which they had transferred to another person. In any event, however, with all respect, the argument on behalf of the owners wholly failed to convince me that there was any possible basis for disagreeing with the view held and expressed by Brandon J, who rejected this submission on his review of the relevant facts.”
“Although when Lord Tenterden first wrote his famous text-book on Shipping it was not the practice to provide for hire to be paid in advance and for time charterers to grant an express right of withdrawal on non-payment of such advance payments, these provisions have been common form in time charters in this country and the United States for generations. I think there is much weight in Mr. Pollock’s argument that if the word “withdrawal” bore the construction sought to be placed upon it by Mr. Hallgarten so as to include temporary withdrawal or suspension, this would inevitably have come up for decision in the Courts before now. The Courts seem to have treated the word “withdrawal” as equivalent to “cancellation", an interpretation which, if I may say so with respect, seems to me the natural one.”
“Apart from these authorities and the remarkable absence of any authority the other way, I thought there was force and relevance in Mr. Pollock’s submission that payment of hire is not a condition precedent in the contract to immediate further performance by the shipowner. Thus in The Brimnes both Mr. Justice Brandon, [1972] 2 Lloyd’s Rep. 465 and 483, and the Court of Appeal [1974] 2 Lloyd’s Rep. 241 at pp. 252, 256 and 262, held that late payment of hire was not of itself repudiatory entitling the owners, in the absence of a withdrawal provision, to terminate the charter. In this connection his citation of Leslie Shipping Co. v. Welstead, (1921) 7 Ll.L.Rep. 251; [1921] 3 K.B. 420, was interesting. There Mr. Justice Greer (as he then was) said at pp. 253 and 426 that the withdrawal clause was inserted in the charter for the benefit of the shipowners giving them an express right to withdraw the vessel and making it impossible that there should be any discussion about the matter. If timely payment of hire was a condition precedent, there would have been no relevance in this comment. . If hire still remains payable should the services of the ship be withdrawn for a period without this amounting to a repudiation which is accepted, then I do not think there is that close concurrent mutuality for which Mr. Hallgarten argued.”
“As has often been pointed out the description of a time charter as a hire or demise of a ship is very misleading: all that the owner does, in fact, is to agree to provide services, those of the master and the crew (whose wages the owner has - punctually - to pay) in sailing the ship for the charterers’ purposes, and all that the withdrawal clause does is to entitle the owner to cease providing these services (for example see Lord Porter in the Tankexpress [1949] A.C. 76, 90). It must be obvious that this is a very different type of creature from a lease of land. I would certainly go so far as to agree that the owner has to show that the conditions necessary to entitle him to withdraw have been strictly complied with: but equally I would not overlook the fact that there are very good reasons why the charterer should punctiliously comply with the provisions as to the payment of hire in which the owner has an interest very different from that of a landlord whose essential interest is to receive the rent.”
“A time charter is a contract for the provision of services. Much of its language has historical origins and is not appropriate to modern times: see Sea and Land Securities Ltd. v. William Dickinson and Co. Ltd. [1942] 2 K.B. 65, 69. During the provision of the services the shipowner bears the cost of running the vessel from day to day. For this he is to get the hire in advance because the owner puts the profit earning capacity of the ship at the disposal of the charterer. The freights are collected by the charterer; the shipowner never sees these profits. The shipowner is not obliged to perform the services on credit; he does so only against advance payment. He stipulates for and is entitled to advance payment monthly or fortnightly. He is not obliged to provide the services here for a given fortnight until he has had payment in full in respect of it: see Tankexpress A/S v. Compagnie Financière Belge des Petroles S.A. (The Petrofina)[1949] A.C. 76, 81, 89-90, 91, 93, 94, 97, 99-100, 102, 105. The withdrawal clause allows the shipowner to put an end to the contract.”
“My Lords, it would seem that there are some members of the Court of Appeal who do not approve of the Baltime form of charter and other forms of charter such as the New York Produce Exchange and the Shelltime forms which closely resemble it. These forms of charter are undoubtedly very strict in relation to the due payment of hire: their meaning, however, is perfectly clear and it is not permissible to put a construction upon them which would depart from that meaning. Unless the full amount of hire is paid by its due date the owners have the undoubted right to withdraw their vessel providing they do so within a reasonable time of the charterers’ default. The only exception is when the parties by their course of conduct (a) have as in the present case accepted that disbursements made by the charterers in respect of the owners’ liabilities may be deducted from the hire subject to vouchers being produced, or e.g., (b) have accepted as in Tankexpress A/S v. Compagnie Financière Belge des Petroles S.A.[1949] A.C. 76 that the amount of hire posted two days before it falls due shall be deemed to have been paid in time. Otherwise, unless the full hire is paid by the time it falls due the charterers are in default and the vessel may be withdrawn. On the appeal to your Lordships’ House in The Laconia [1977] A.C. 850 I ventured to point out that the law relating to the owners’ rights under a Baltime form of charter to withdraw their vessel should the charterers fail to pay the hire in time had been clearly stated by your Lordships’ House in the Tankexpresscase; but that a great deal of doubt on the subject had since been generated by the Court of Appeal in The Georgios C [1971] 1 Q.B. 488 and had troubled the waters ever since. I expressed the hope that those doubts might finally be dispelled by your Lordships’ reversal of the Court of Appeal’s decision in The Laconia and overruling its decision in The Georgios C. These doubts were, however, temporarily revivified by the decision of the Court of Appeal in the present case but will now, I think, permanently be laid to rest by your Lordships’ decision allowing this appeal; Certainty of meaning is of primary importance in all commercial transactions. Commercial contracts all over the world, having nothing to do with the United Kingdom, have for generations provided that any dispute arising under the contract shall be decided in the English commercial court or by arbitration in London according to English law. This is because of the confidence which exists throughout the commercial world in the administration of English justice. I fear that this confidence will hardly be strengthened should there be any further decisions in the Court of Appeal similar to those in The Georgios C, The Laconia and the instant case.”
“The Baltime form of charter and others which closely resemble it may be hard on charterers, especially when the market for hiring vessels rises sharply during the span of the charter. Certainly there are other forms of charter which are not so strict. It must, however, be remembered that charterers and shipowners are usually hard-headed and experienced businessmen who freely agree upon which form of charter they will adopt.”
“Nevertheless the doctrine of anticipatory breach by conduct which disables a party to a contract from performing one of his primary obligations under the contract has in my view no application to a breach of such a clause. The relevant portions of cl. 5 have been set out by the Lord Chancellor. The first part of the clause imposes upon the respondents as charterers a primary obligation to pay the “said hire” (which by cl. 4 had been fixed at a monthly rate and pro-rata for any part of a month) punctually and regularly in advance by semi-monthly instalments in the manner specified, which would involve the payment of a minimum of 42 and a maximum of 54 instalments, during the period of the charter. Failure to comply with this primary obligation by delay in payment of one instalment is incapable in law of amounting to a “fundamental breach” of contract by the charterers in the sense to which I suggested in Photo Production Ltd. v. Securicor Transport Ltd., [1980] 1 Lloyd’s Rep. 545; [1980] A.C. 827 at pp. 553 and 849, this expression, if used as a term of legal art, ought to be confined. The reason is that such delay in payment of one half-monthly instalment would not have the effect of depriving the owners of substantially the whole benefit which it was the intention of the parties that the owners should obtain from the unexpired period of the time charter extending over a period of between 21 and 27 months. The second part of cl. 5, however, starting with the word “otherwise” goes on to provide expressly what the rights of the owners are to be in the event of any such breach by the charterers of their primary obligation to make punctual payment of an instalment. The owners are to be at liberty to withdraw the vessel from the service of the charterers; in other words they are entitled to treat the breach when it occurs as a breach of condition and so giving them the right to elect to treat it as putting an end to all their own primary obligations under the charter-party then remaining unperformed. But although failure by the charterers in punctual payment of any instalment, however brief the delay involved may be, is made a breach of condition it is not also thereby converted into a fundamental breach; and it is to fundamental breaches alone that the doctrine of anticipatory breach is applicable.”
“We always return to the point that the owners’ construction is wholly unreasonable, totally uncommercial and in total contradiction to the whole purpose of the N.Y.P.E. time charter form. The owners relied on what they said was 'the literal meaning of the words in the clause'. We would say that if necessary, in a situation such as this, a purposive construction should be given to the clause so as not to defeat the commercial purpose of the contract.”” “We always return to the point that the owners’ construction is wholly unreasonable, totally uncommercial and in total contradiction to the whole purpose of the N.Y.P.E. time charter form. The owners relied on what they said was 'the literal meaning of the words in the clause'. We would say that if necessary, in a situation such as this, a purposive construction should be given to the clause so as not to defeat the commercial purpose of the contract.””
“52. The general contractual context in my view also supports a conclusion that the express indemnity clause is inapt to apply to the present situation. Clause 8 of the charterparty gives owners a simple contractual option. It is accepted that the mere late payment of one instalment did not constitute a repudiatory breach (or a breach of a condition in a sense like that used in theSale of Goods Act 1979 ) which could entitle the owners to damages for loss of the charter. That loss flowed from the owners’ exercise of their option to withdraw. The phrase in clause 8 “without prejudice to any claim owners may otherwise have on charterers under this charter” does not create a right of action, and looks on its face only to pre-existing claims. So there is no way in which the time spent discharging in Angra dos Reis can be claimed as damages.”
“No doubt there are many simple contractual undertakings, sometimes express but more often because of their very simplicity (“It goes without saying”) to be implied, of which it can be predicated that every breach of such an undertaking must give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract. And such a stipulation, unless the parties have agreed that breach of it shall not entitle the non-defaulting party to treat the contract as repudiated, is a “condition.”
“Diplock L.J. then generalised this particular consequence into the analysis which has since become classical. The fundamental fallacy of the appellants’ argument lies in attempting to apply this analysis to a time clause such as the present in a mercantile contract which is totally different in character. As to such a clause there is only one kind of breach possible, namely, to be late, and the questions which have to be asked are, first, what importance have the parties expressly ascribed to this consequence and secondly, in the absence of expressed agreement, what consequence ought to be attached to it having regard to the contract as a whole. The test suggested by the appellants was a different one. One must consider, they said, the breach actually committed and then decide whether that default would deprive the party not in default of substantially the whole benefit of the contract. They invoked even certain passages in the judgment of Diplock L.J. in the Hongkong Fircase [1962] 2 Q.B. 26 to support it. One may observe in the first place that the introduction of a test of this kind would be commercially most undesirable. It would expose the parties, after a breach of one, two, three, seven and other numbers of days to an argument whether this delay would have left time for the seller to provide the goods. It would make it, at the time, at least difficult, and sometimes impossible, for the supplier to know whether he could do so. It would fatally remove from a vital provision in the contract that certainty which is the most indispensable quality of mercantile contracts and lead to a large increase in arbitrations. It would confine the seller—perhaps after arbitration and reference through the courts—to a remedy in damages which might be extremely difficult to quantify. These are all serious objections in practice. But I am clear that the submission is unacceptable in law. The judgment of Diplock L.J. does not give any support and ought not to give any encouragement to any such proposition; for beyond doubt it recognises that it is open to the parties to agree that, as regards a particular obligation, any breach shall entitle the party not in default to treat the contract as repudiated. Indeed, if he were not doing so he would, in a passage which does not profess to be more than clarificatory, be discrediting a long and uniform series of cases—at least from Bowes v. Shand (1877) 2 App. Cas. 455 onwards which have been referred to by my noble and learned friend, Lord Roskill. It remains true, as Lord Roskill has pointed out in Cehave N.V. v. Bremer Handelsgesellschaft m.b.H. (The Hansa Nord) [1976] Q.B. 44, that the courts should not be too ready to interpret contractual clauses as conditions. And I have myself commended, and continue to commend, the greater flexibility in the law of contracts to which Hongkong Fir points the way (Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen (trading as H. E. Hansen-Tangen) [1976] 1 W.L.R. 989, 998). But I do not doubt that, in suitable cases, the courts should not be reluctant, if the intentions of the parties as shown by the contract so indicate, to hold that an obligation has the force of a condition, and that indeed they should usually do so in the case of time clauses in mercantile contracts. To such cases the “gravity of the breach” approach of the Hongkong Fircase [1962] 2 Q.B. 26 would be unsuitable. I need only add on this point that the word “expressly” used by Diplock L.J. at p. 70 of his judgment in Hongkong Fir should not be read as requiring the actual use of the word “condition”: any term or terms of the contract, which, fairly read, have the effect indicated, are sufficient. Lord Diplock himself has given recognition to this in this House: Photo Production Ltd. v. Securicor Transport Ltd [1980] AC. 827, 849. I therefore reject that part of the appellants’ argument which was based upon it, and I must disagree with the judgment of the learned trial judge in so far as he accepted it. I respectfully endorse, on the other hand, the full and learned treatment of this issue in the judgment of Megaw L.J. in the Court of Appeal. I would add that the argument above applies equally to the use which the appellants endeavoured to make of certain observations in United Scientific Holdings Ltd. v. Burnley Borough Council[1978] A.C, 904 , a case on which I do not need to comment on this occasion. In conclusion, the statement of the law in Halsbury’s Laws of England, 4th ed., vol. 9 (1974), paras. 481—482, including the footnotes to paragraph 482 (generally approved in the House in the United Scientific Holdingscase), appears to me to be correct, in particular in asserting (1) that the court will require precise compliance with stipulations as to time wherever the circumstances of the case indicate that this would fulfil the intention of the parties, and (2) that broadly speaking time will be considered of the essence in “mercantile” contracts—with footnote reference to authorities which I have mentioned. The relevant clause falls squarely within these principles, and such authority as there is supports its status as a condition: see Bremer Handelsgesellschaft m.b.H. v. J. H. Rayner & Co. Ltd. [1978] 2 Lloyd’s Rep. 73 and see Turnbull (Peter) & Co. Pty. Ltd. v. Mundas Trading Co. (Australasia) Pty. Ltd [1954] 2 Lloyd’s Rep. 198. In this present context it is clearly essential that both buyer and seller (who may change roles in the next series of contracts, or even in the same chain of contracts) should know precisely what their obligations are, most especially because the ability of the seller to fulfil his obligation may well be totally dependent on punctual performance by the buyer.”
“Parties to commercial transactions should be entitled to know their rights at once and should not, when possible, be required to wait upon events before those rights can be determined. Of course, in many cases of alleged frustration or of alleged repudiatory delay it may be necessary to await events upon the happening or non-happening of which rights may well crystallise. But your Lordships’ House has recently reiterated in a series of cases arising from the withdrawal of ships on time charter for non-payment of hire the need for certainty where punctual payment of hire is required and has held that the right to rescind automatically follows a breach of any such condition.”
“In short, while recognising the modern approach and not being over-ready to construe terms as conditions unless the contract clearly requires the court so to do, none the less the basic principles of construction for determining whether or not a particular term is a condition remain as before, always bearing in mind on the one hand the need for certainty and on the other the desirability of not, when legitimate, allowing rescission where the breach complained of is highly technical and where damages would clearly be an adequate remedy. It is therefore in my opinion wrong to use the language employed by Diplock L.J. in the Hongkong Fircase[1962] 2 Q.B. 26 as directed to the determination of the question which terms of a particular contract are conditions and which are only innominate terms. I respectfully agree with what Megaw L.J. said in the passage in his judgment in the instant case.”
“The modern law, in the case of contracts of all types, may be summarised as follows. Time will not be considered to be of the essence unless: (1) the parties expressly stipulate that conditions as to time must be strictly complied with; or (2) the nature of the subject matter of the contract or the surrounding circumstances show that time should be considered to be of the essence; or (3) a party who has been subjected to unreasonable delay gives notice to the party in default making time of the essence.”
“Apart from express agreement or notice making time of the essence, the court will require precise compliance with stipulations as to time wherever the circumstances of the case indicate that this would fulfil the intention of the parties. Broadly speaking, time will be considered of the essence in ‘mercantile’ contracts and in other cases where the nature of the contract or of the subject matter or the circumstances of the case require precise compliance.”
“My Lords, I venture to doubt whether much help is necessarily to be derived in determining whether a particular term is to be construed as a condition or as an innominate term by attaching a particular label to the contract. Plainly there are terms in a mercantile contract, as your Lordships’ House pointed out in Bremer Handelsgesellschaft m.b.H. v. Vanden Avenne-Izegem P.V.B.A. [1978] 2 Lloyd’s Rep. 109, which are not to be considered as conditions. But the need for certainty in mercantile contracts is often of great importance and sometimes may well be a determining factor in deciding the true construction of a particular term in such a contract. To my mind the most important single factor in favour of Mr. Staughton’s submission is that until the requirement of the 15-day consecutive notice was fulfilled, the respondents could not nominate the “one Gulf port” as the loading port, which under the instant contract it was their sole right to do. I agree with Mr. Staughton that in a mercantile contract when a term has to be performed by one party as a condition precedent to the ability of the other party to perform another term, especially an essential term such as the nomination of a single loading port, the term as to time for the performance of the former obligation will in general fall to be treated as a condition. Until the 15 consecutive days’ notice had been given, the respondents could not know for certain which loading port they should nominate so as to ensure that the contract goods would be available for loading on the ship’s arrival at that port before the end of the shipment period.”
“The difficulty in the present case is, as Mr Buckley’s excellent argument for the appellants revealed, to determine what is the true construction of the completed clause 7 of GAFTA form 119, which the parties incorporated in their contract. After some hesitation, I have concluded that the clause was intended as a term, the buyer’s performance of which was the necessary condition to performance by the seller of his obligations. The contract, when made, was, to use the idiom of Diplock LJ. [1962] 2 Q.B. 26, 65 and Demosthenes (Oratt. Attici, Reiske 867.11), “synallagmatic,” i.e. a contract of mutual engagements to be performed in the future, or, in the more familiar English/Latin idiom, an “executory” contract. The seller needed sufficient notice to enable him to choose the loading port: the parties were agreed that the notice to be given him was 15 days: this was a mercantile contract in which the parties required to know where they stood not merely later with hindsight but at once as events occurred. Because it makes commercial sense to treat the clause in the context and circumstances of this contract as a condition to be performed before the seller takes his steps to comply with the bargain, I would hold it to be not an innominate term but a condition.”
“The second general point which I desire to mention concerns stipulations as to time in mercantile contracts, in regard to which it has been said that, broadly speaking, time will be considered to be of the essence. To treat time limits thus means treating them as conditions, and he who would do so must pay respect to the principle enunciated by Roskill L.J. in Cehave N.V. v. Bremer Handelsgesellschaft m.b.H. [1976] Q.B. 44, 71A, that contracts are made to be performed and not to be avoided. The treatment of time limits as conditions in mercantile contracts does not appear to me to be justifiable by any presumption of fact or rule of law, but rather to be a practical expedient founded on and dictated by the experience of businessmen, just the kind of thing which Bowen L.J. could have had in mind when framing his classic observations on the implied term in The Moorcock (1889) 14 P.D. 64, 68: “Now, an implied warranty, or, as it is called, a covenant in law, as distinguished from an express contract or express warranty, really is in all cases founded on the presumed intention of the parties, and upon reason. The implication which the law draws from what must obviously have been the intention of the parties, the law draws with the object of giving efficacy to the transaction and preventing such a failure of consideration as cannot have been within the contemplation of either side: and I believe if one were to take all the cases, and they are many, of implied warranties of covenants in law, it will be found that in all of them the law is raising an implication from the presumed intention of the parties with the object of giving to the transaction such efficacy as both parties must have intended that at all events it should have. In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men; not to impose on one side all the perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party promise in law as much, at all events, as it must have been in the contemplation of both parties that he should be responsible for in respect of those perils or chances. Now what did each party in a case like this know? For if we are examining into their presumed intention we must examine into their minds as to what the transaction was.”
“I shall have to examine rather more closely what are the legal consequences of “time being of the essence” and time not being of the essence; but I do not think that the question of principle involved in these appeals can be solved by classifying the contract of tenancy as being of a commercial character. In some stipulations in commercial contracts as to the time when something must be done by one of the parties or some event must occur, time is of the essence; in others it is not. In commercial contracts for the sale of goods prima facie a stipulated time of delivery is of the essence, but prima facie a stipulated time of payment is not (Sale of Goods Act 1893, section 10 (1) ); in a charterparty a stipulated time of payment of hire is of the essence. Moreover a contract of tenancy of business premises would not appear to be more of a commercial character than a contract for sale of those premises. Nevertheless, the latter provides a classic example of a contract in which stipulations as to the time when the various steps to complete the purchase are to be taken are not regarded as of the essence of the contract.”
“131. In Re Olympia & York Canary Wharf Ltd (No 2)[1993] BCC 159 Morritt J, as he then was, considered the authorities relating to the making of time of the essence. From that analysis and other authority I derive the following propositions: (a) Equity, before the Judicature Acts, insisted that prima facie time for payment was not essential. But equity’s patience was exhaustible. It would allow the contract to be treated as repudiated if the party in default had been given the opportunity to mend his ways by the giving of a notice to comply within a reasonable time. Whilst this is described as making time of the essence in reality the notice is the means of bringing to an end equity’s interference with the contract: Behzadi v Shaftesbury Hotels Ltd[1992] Ch 1 ; (b) Such a notice, which may be given in respect of any species of term, may not be served until the time for performance has expired; but it may be served as soon as that time arrives; (c) Such a notice must state clearly what the other party is required to do and the consequence if he fails ie that the contract may he terminated: Afovos Shipping Co SA v R Pagnan and Flli (The Afovos)[1982] 1 Lloyd’s Rep 562 , 565 col 2;[1982] 1 WLR 848 , 854C; (d) If the defaulting party fails to perform after service of such a notice, the failure is not automatically a repudiation of the contract, giving rise to a right to terminate. The breach must go to the root of the contract; (e) The notice operates as evidence of the date by which the promisee considers it reasonable to require the contract to be performed, failure to perform by which is evidence of an intention not to perform: see Lord Simon of Glaisdale in United Scientific Holdings Ltd v Burnley Borough Council[1978] AC 904 , 946E—947A; Astea (UK) Ltd v Time Group Ltd[2003] EWHC 725 (TCC) para 147.” (a) Equity, before the Judicature Acts, insisted that prima facie time for payment was not essential. But equity’s patience was exhaustible. It would allow the contract to be treated as repudiated if the party in default had been given the opportunity to mend his ways by the giving of a notice to comply within a reasonable time. Whilst this is described as making time of the essence in reality the notice is the means of bringing to an end equity’s interference with the contract: Behzadi v Shaftesbury Hotels Ltd[1992] Ch 1 ; (b) Such a notice, which may be given in respect of any species of term, may not be served until the time for performance has expired; but it may be served as soon as that time arrives; (c) Such a notice must state clearly what the other party is required to do and the consequence if he fails ie that the contract may he terminated: Afovos Shipping Co SA v R Pagnan and Flli (The Afovos)[1982] 1 Lloyd’s Rep 562 , 565 col 2;[1982] 1 WLR 848 , 854C; (d) If the defaulting party fails to perform after service of such a notice, the failure is not automatically a repudiation of the contract, giving rise to a right to terminate. The breach must go to the root of the contract; (e) The notice operates as evidence of the date by which the promisee considers it reasonable to require the contract to be performed, failure to perform by which is evidence of an intention not to perform: see Lord Simon of Glaisdale in United Scientific Holdings Ltd v Burnley Borough Council[1978] AC 904 , 946E—947A; Astea (UK) Ltd v Time Group Ltd[2003] EWHC 725 (TCC) para 147.”
“I would like to but I cannot” negatives intent just as much as “I will not.”
“We hereby unconditionally and irrevocably guarantee as primary obligor the full and timely performance by the Charterers of each and every obligation of the Charter Party, and in the event of any one or more defaults in performance by the Charterers, we undertake, on your first written demand to promptly rectify each and every default and hereby accept the responsibility for any liability, losses or damages that you suffer as a result or arising out of such default.”