A shipping company and a shipper responsible for the freight disputed the effect of their contract. The ship was duly loaded with its cargo and set out for the voyage from India to Europe. The bills of lading were signed. When the ship called at Colombo it was arrested for debt. The signed bills of lading had not yet been delivered to the shippers. The question for decision was whether the shipping company was entitled to be paid the freight, in spite of the fact that the arrest of the ship brought the voyage to a halt and the shippers were forced to incur the expense of unloading the cargo and shipping it to Europe by another vessel.
Held: The contract term meant that the right to receive the freight accrued upon the signing of the bills of lading, but that the right to receive payment was postponed until 5 days after delivery of the bills of lading to the shippers. An equitable set-off may occur if there is a cross-claim ‘flowing out of and inseparably connected with the dealings and transactions which also give rise’ to the claim. The historical rule of no set-off against voyage-charter freight extended to a counterclaim for damages for repudiation of the charterparty. There was no good reason to distinguish between the case of a counterclaim for mere breach and the case of a counterclaim for repudiatory breach, and the historical rule prevailed.
Lord Brandon of Oakbrook cites the Dennys Lascelles case and said: ‘Applying those principles to the facts of the present case it is necessary to consider whether the owner’s right to the freight had been ‘unconditionally acquired’ by them before the termination of the charterparty. The circumstance that, by reason of the first phrase of clause 16, the (shipper’s) obligation to pay the freight was postponed until after the termination of the charterparty does not, in my view, mean that the owner’s prior acquisition of the right to the freight was conditional only. The postponement of payment was an incident attaching to the right acquired, but it was not a condition of its acquisition. It follows that, in accordance with the principles of law referred to above, the owner’s right to the freight, having been unconditionally acquired before the termination . . was not divested or discharged by such termination.’
Judges:
Lord Brandon of Oakbrook
Citations:
[1989] AC 1056
Jurisdiction:
England and Wales
Citing:
Restated – McDonald v Dennys Lascelles Ltd 1-Mar-1933
(High Court of Australia) ‘When a party to a simple contract, upon breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. . .
Appeal from – Bank of Boston Connecticut v European Grain and Shipping Ltd (‘The Dominique’) CA 1987
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Cited by:
Cited – Astea (UK) Ltd v Time Group Ltd TCC 9-Apr-2003
The question of whether a reasonable time has been exceeded in performance of a contract is ‘a broad consideration, with the benefit of hindsight, and viewed from the time at which one party contends that a reasonable time for performance has been . .
Cited – Celestial Aviation Trading 71 Ltd v Paramount Airways Private Ltd ComC 4-Dec-2009
The claimant sought summary judgment for recovery of three aircraft (valued at US$36m each) leased to the defendant after non-payment of instalments. The defendant said that the default was based on a demand for supplementary rents which had not . .
Cited – Inveresk Plc v Tullis Russell Papermakers Ltd SC 5-May-2010
The parties had undertaken the sale of a business (from I to TR) with part of the consideration to be payable on later calculation of the turnover. The agreement provided for an audit if the parties failed to agree. TR issued a figure. I argued that . .
Cited – Dole Dried Fruit and Nut Co v Trustin Kerwood Ltd CA 1990
The defendant had an exclusive distributorship agency for the plaintiff in England. Under that agreement, the plaintiff sold its prunes and raisins to the defendant under separate contracts of sale. The plaintiff claimed the price of goods sold . .
Lists of cited by and citing cases may be incomplete.
Contract
Updated: 12 September 2022; Ref: scu.223524