The FOB contract for the sale of goods required the buyers to give notice of the probable readiness of the ships on which the goods were to be carried. The notice was given four days too late. The sellers declared the buyers in default and claimed damages for default on the basis that the term as to notice was a condition. The damages claimed were the difference between the contract price and the market price. The sellers did not contend that, if the term was not a condition, the delay of four days amounted to a repudiation. The breach complained of consisted not of giving less than the requisite number of days’ notice under the contract, but of giving notice after the last date on which it could legitimately be given because the required 15 days notice would have ended after the last possible date for shipment. The House considered the construction of clause 7 of GAFTA 119, and in particular whether it was a condition or warranty, and whether time was of the essence.
Held: Whether a time limit is of the essence of a contractual provision is a question of interpretation.
Lord Wilberforce said: ‘As to such a clause there is only one kind of breach possible, namely to be late, and the questions to be asked are: first what importance have the parties expressly ascribed to this consequence? And, second, in the absence of expressed agreement, what consequence ought to be attached to it having regard to the contract as a whole?’ and ‘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 Holdings case), 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.’
Lord Lowry said: ‘It is by construing a contract (which can be done as soon as the contract is made) that one decides whether a term is, either expressly or by necessary implication, a condition, and not by considering the gravity of the breach of that term (which cannot be done until the breach is imminent or has occurred).’
Judges:
Lord Wilberforce, Lord Fraser of Tullybelton, Lord Scarman, Lord Lowry, Lord Roskill
Citations:
[1981] UKHL 11, [1981] 2 All ER 513, [1981] 1 WLR 711, [1981] 2 Lloyds Rep 1
Links:
Jurisdiction:
England and Wales
Citing:
Appeal from – Bunge Corporation v Tradax CA 1980
. .
Cited by:
Cited – Lombard North Central v Butterworth CA 31-Jul-1986
The defendant entered into a hire-purchase contract for a computer, time being stipulated to be ‘of the essence’ in relation to the payment obligations. He defendant defaulted, and the plaintiff took possession of the goods, and and sought payment . .
Cited – Lombard North Central v Butterworth CA 31-Jul-1986
The defendant entered into a hire-purchase contract for a computer, time being stipulated to be ‘of the essence’ in relation to the payment obligations. He defendant defaulted, and the plaintiff took possession of the goods, and and sought payment . .
Lists of cited by and citing cases may be incomplete.
Contract, Damages
Updated: 09 July 2022; Ref: scu.248649