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The Treatment of Breach of Contract by Lord Devlin

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					The Cambridge Law Journal 1966

The Treatment of Breach of Contract by Lord Devlin

'The Treatment of Breach of Contract' by Lord Devlin
I WANT to start from the basic position in which I was brought up (I expect you were all brought up in it too) that the terms of a contract consist of conditions and warranties, the distinction between them being that the condition is something that is essential to the contract, while the other terms that are collateral or ancillary are merely warranties. If a condition is broken the aggrieved party is discharged from his obligations and can rescind the contract. If it is a warranty that is broken, the breach sounds only in damages.
The Hongkong case—a new approach to breach The traditional thinking on this point has recently been rather mystified by references to something which is called the fundamental term and which has not yet, so far as I know, been judicially denned. Then there have been some suggestions that what matters is not the fundamental term but the fundamental breach. And finally there is the very important judgment of Diplock L.J. in the Hongkong case1 in which he opens up new vistas, suggesting that the traditional classification of terms into conditions and warranties has been outmoded and ought to be scrapped in favour of a new approach altogether based on the event. It must be accepted that whatever sort of approach is made to this topic, whether a new or a traditional one, there must be some way of defining the situation in which the aggrieved party is entitled to rescind. He cannot be allowed to do so for every breach of every term. So there is a need for a division. It could be based, as traditionally it has been, on the nature of the term; or on the nature of the breach; or, as Diplock L.J. suggests, on the nature of the event which results from the breach. These seem to be the three possibilities.

The Hongkong case has two significant features. First, it contains, especially in the judgment of Diplock L.J., a lot of new thinking about conditions and warranties and the distinction between them. Secondly, it illustrates the circumstances in which an act which is apparently only a breach of warranty can give rise to a right to rescind and suggests that these circumstances are such as, if they had been brought about without fault, would cause the dissolution of the contract by frustration. I want to look at the case from both these aspects and shall begin by summarising the facts. A ship was chartered for twenty-four months—a time charter. This is just the same as the hire of a car for a period. Time charter-parties and voyage charterparties use language which may at first be unfamiliar, but the basic thing is exactly the same, a contract of hiring. There was the usual (warranty—I was going to say—of seaworthiness, but perhaps I had better use a neutral term at this stage) clause about seaworthiness, utz., that the vessel was to be in every way fitted for ordinary cargo service. Again this is the same thing as if it was said about a car that it had to be roadworthy; seaworthiness and roadworthiness are the same thing for the purposes of the law. Now this clause was broken because the ship was provided with an insufficient and incompetent engine-room staff. Again it is the same thing; if a chauffeur-driven car is hired, the obligation is to provide a competent chauffeur; so the obligation in the eharterparty is to provide a competent crew. The result of it was that, although (as the trial judge, Salmon J. found) the machinery was rather old, it would have been all right if it had been looked after by a competent crew; but because it was not there were breakdowns. During the first five months of the twenty-four months the ship spent five weeks under repair. Then it was found that she needed further repairs which would take (it was then estimated and the estimate seems to have been about right) another three-and-a-half months to make her seaworthy. The charterparty contained the usual off-hire clause, that is to say the charterer had not got to pay the hire while she was being repaired. But of course he had chartered the ship for twenty-four months* service and made his arrangements accordingly. He thought it was not good enough; he did not wait for the further three-and-a-half months of repair; he sought to rescind. It was held that he was not entitled to do so because the delay involved was not so long as to frustrate the object of the charterparty.
If you approach these facts in the traditional way, … see full text on www.lawandsea.net -

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Hongkong Fir Shipping Co. Ltd. v. Kawasaki Kisen Kaisha Ltd. [1962] 2Q.B. 26.

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The Cambridge Law Journal 1966

The Treatment of Breach of Contract by Lord Devlin

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Description: Article published in The Cambridge Law Journal 1966, by Lord Devlin - The Treatment of Breach of Contract