In this English contract law case Suisse Atlantique Société d’Armement SA v. NV Rotterdamsche Kolen Centrale [1967] 1 AC 361, the House of Lords addressed the concepts of fundamental breach of contract and unequal bargaining power.
FACTS OF THE CASE :
A two-year time charter to export coal from Europe to the USA was at issue in this case. The owners were to receive a certain freight rate based on the volume of cargo carried, and the ship was to make as many journeys as feasible. The charterers were required to pay $1000 in demurrage per day if the laytime was exceeded. Because the charterers struggled to efficiently load and unload the ship as well as deliver the cargo to the port, there were significant delays. But the shipowner kept the agreement in place and permitted the charter to run its course for the remaining two years. Only eight round flights were made in all, despite the owners’ claims that they could have done another six journeys with no delays.
But the shipowner kept the agreement in place and permitted the charter to run its course for the remaining two years. Only eight round flights were made in all, despite the owners’ claims that they could have done another six journeys with no delays. Only $150,000 in demurrage was owed in total. The charterer’s egregious delays amounted to a fundamental breach of the contract, according to the owners, who filed a lawsuit for damages. They argued that their claim should not be limited to the amount of demurrage.
JUDGMENT:
The owners asserted that the delays constituted a fundamental violation of the charterparty because they were so significant. In addition, they claimed that the Karsales Ltd. v. Wallis case meant that in the event of a fundamental breach, the law automatically denied such protection of any exclusion clauses because the $1000 per day demurrage was so pitiful that the term amounted to an exclusion clause depriving the shipowner of appropriate compensation.
JUDGEMENT REVIEW BY SREYA MARY.
