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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Bunge Corporation (New York) v Tradax Export SA (Panama) [1981] UKHL 11 (25 February 1981)
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Cite as: [1981] 2 All ER 513, [1981] UKHL 11, [1981] 1 WLR 711, [1981] WLR 711

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JISCBAILII_CASE_CONTRACT

    Parliamentary Archives,
    HL/PO/JU/18/241

    Die Jovis 7° Maii 1981

    Upon Report from the Appellate Committee to whom
    was referred the Cause Bunge Corporation, New York
    against Tradax Export S.A., Panama, et e contra, That
    the Committee had heard Counsel as well on Monday
    the 23rd as on Tuesday the 24th, Wednesday the 25th
    and Thursday the 26th days of February last upon the
    Petition and Appeal of Bunge Corporation of 1, Chase
    Manhattan Plaza, New York 10005, United States of
    America praying that the matter of the Order set
    forth in the Schedule thereto, namely an Order of
    Her Majesty's Court of Appeal of the 14th day of
    December 1979 so far as therein stated to be appealed
    against might be reviewed before Her Majesty the
    Queen in Her Court of Parliament and that the
    said Order so far as aforesaid might be reversed,
    varied or altered or that the Petitioners might have such
    other relief in the premises as to Her Majesty the Queen
    in Her Court of Parliament might seem meet; as also
    upon the Petition and Cross-Appeal of Tradax Export
    S.A. of P.O. Box CH-1211 Geneva 12, Switzerland
    praying that the matter of the Order set forth in the
    Schedule thereto, namely an Order of Her Majesty's
    Court of Appeal of the 14th day of December 1979 so
    far as therein stated to be appealed against might be
    reviewed before Her Majesty the Queen in Her Court
    of Parliament and that the said Order so far as aforesaid
    might be reversed, varied or altered or that the Petitioners
    might have such other relief in the premises as to Her
    Majesty the Queen in Her Court of Parliament might
    seem meet; as also the Case of Tradax Export S.A. and
    also upon the Case of Bunge Corporation lodged in
    answer to the said Original and Cross Appeals; and due
    consideration had this day of what was offered on either
    side in this Cause:

    It is Ordered and Adjudged, by the Lords Spiritual
    and Temporal in the Court of Parliament of Her Majesty
    the Queen assembled, That the said Order of Her
    Majesty's Court of Appeal (Civil Division) of the 14th
    day of December 1979 in part complained of in the
    said Original and Cross Appeals be, and the same is
    hereby, Affirmed and that the said Petitions and Appeals
    be, and the same are hereby, dismissed this House: And
    it is further Ordered, That the Original Appellants do
    pay or cause to be paid to the said Original Respondents
    the Costs incurred by them in respect of the said Original
    Appeal, and that the Cross Appellants do pay or cause
    to be paid to the said Cross Respondents the Costs
    incurred by them in respect of the said Cross Appeal,
    the amount of such Costs to be certified by the Clerk of
    the Parliaments if not agreed between the parties.

    Bunge Corporation, New York (Original Appellants and Cross- Respondents) v. Tradax Export S.A., Panama (Original Respondents and Cross-Appellants).


    HOUSE OF LORDS

    BUNGE CORPORATION, NEW YORK
    (ORIGINAL APPELLANTS AND CROSS-RESPONDENTS)

    v.

    TRADAX EXPORT S.A., PANAMA
    (ORIGINAL RESPONDENTS AND CROSS-APPELLANTS)

    Lord Wilberforce
    Lord Fraser of Tullybelton
    Lord Scarman
    Lord Lowry
    Lord Roskill

    Lord Wilberforce

    My Lords,

    I have had the advantage of reading in advance the speech to be delivered
    by my noble and learned friend, Lord Roskill. I agree entirely with it
    and desire only to add a few observations on some general aspects of the
    case.

    The appeal depends upon the construction to be placed upon clause 7
    of GAFTA form 119 as completed by the special contract. It is not
    expressed as a " condition " and the question is whether, in its context and
    in the circumstances it should be read as such.

    Apart from arguments on construction which have been fully dealt with
    by my noble and learned friend, the main contention of Mr. Buckley Q.C.
    for the appellant was based on the decision of the Court of Appeal in
    Hong Kong Fir Shipping Co., Ltd. v. Kawasaki Kisen Kaisha Ltd. [1962]
    2 Q.B. 26, as it might be applied to clause 7. Diplock L.J., as he then was,
    in his seminal judgment illuminated the existence in contracts of terms which
    were neither, necessarily, conditions nor warranties, but, in terminology
    which has since been applied to them, intermediate or innominate terms
    capable of operating, according to the gravity of the breach, as either
    conditions or warranties. Relying on this, Mr. Buckley's submission was
    that the buyer's obligation under the clause, to " give at least [15] consecutive
    " days' notice of probable readiness of vessel(s) and of the approximate
    " quantity required to be loaded ", is of this character. A breach of it,
    both generally and in relation to this particular case, might be, to use
    Mr. Buckley's expression, " inconsequential ", i.e. not such as to make
    performance of the seller's obligation impossible. If this were so it would
    be wrong to treat it as a breach of condition: Hong Kong Fir would require
    it to be treated as a warranty.

    This argument, in my opinion, is based upon a dangerous
    misunderstanding, or misapplication, of what was decided and said in Hong
    Kong Fir.
    That case was concerned with an obligation of seaworthiness,
    breaches of which had occurred during the course of the voyage. The
    decision of the Court of Appeal was that this obligation was not a
    condition, a breach of which entitled the charterer to repudiate. It was
    pointed out that, as could be seen in advance the breaches, which might
    occur of it, were various. They might be extremely trivial, the omission
    of a nail; they might be extremely grave, a serious defect in the hull or
    in the machinery; they might be of serious but not fatal gravity,
    incompetence or incapacity of the crew. The decision, and the judgments
    of the Court of Appeal, drew from these facts the inescapable conclusion
    that it was impossible to ascribe to the obligation, in advance, the character
    of a condition.

    Diplock L.J. then generalised this particular consequence into the analysis
    which has since become classical. The fundamental fallacy of the appellant's
    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.

    2

    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 Hong Kong Fir 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.
    [1976] 1 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 Hong Kong Fir points the way (Reardon Smith Line Ltd.
    v. 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 Hong Kong Fir 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 Hong Kong 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. [I980] A.C. 827, 849). I therefore reject that
    part of the appellant's 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 appellant 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 (Contract) paragraphs 481-2, 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.

    The relevant clause falls squarely within these principles, and such
    authority as there is supports its status as a condition—see Bremer

    3

    Handelsgesellschaft v. J. H. Rayner & Co. Ltd. [1978] 2 Lloyd's Rep. 73
    and cp. Turnbull & Co. (Pty) Ltd. v. Mundas Trading Co. (Pty) Ltd. [1954]
    2 Lloyd's Rep. 198 (H.C. of A.). 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.

    I would dismiss the appeal, and for the reasons given by my noble and
    learned friend, Lord Roskill, the cross-appeal.

    Lord Fraser of Tullybelton

    My Lords,

    I have had the advantage of reading in draft the speeches of my noble
    and learned friends, Lord Wilberforce and Lord Roskill, and I agree with
    them. For the reasons stated by them I would dismiss the appeal and
    cross-appeal.

    Lord Scarman

    My Lords,

    I have had the advantage of reading in draft the speeches of my noble
    and learned friends, Lord Wilberforce and Lord Roskill. I agree with
    both of them, and would, therefore, dismiss the appeal and the cross-appeal.

    I wish, however, to make a few observations upon the topic of
    " innominate " terms in our contract law. In Hong Kong Fir Shipping Co.
    Ltd.
    v. Kawasaki K.K. Ltd. [1962] 2 QB 26, the Court of Appeal
    rediscovered and reaffirmed that English law recognises contractual terms
    which, upon a true construction of the contract of which they are part, are
    neither conditions nor warranties but are, to quote my noble and learned
    friend Lord Wilberforce's words in Bremer v. Vanden [1978] 2 Lloyd's
    Rep. 109 at p. 113, " intermediate ". A condition is a term, the failure to
    perform which entitles the other party to treat the contract as at an end.
    A warranty is a term, breach of which sounds in damages but does not
    terminate, or entitle the other party to terminate, the contract. An innominate
    or intermediate term is one, the effect of non-performance of which the
    parties expressly or (as is more usual) impliedly agree will depend upon the
    nature and the consequences of breach. In the Hong Kong Fir case the
    term in question provided for the obligation of seaworthiness, breach of
    which it is well known may be trivial (e.g., one defective rivet) or very
    serious (e.g., a hole in the bottom of the ship). It is inconceivable that parties
    when including such a term in their contract could have contemplated or
    intended (unless they expressly say so) that one defective rivet would entitle
    the charterer to end the contract or that a hole in the bottom of the ship
    would not. I read the Hong Kong Fir case as being concerned as much with
    the construction of the contract as with the consequences and effect of breach.
    The first question is always, therefore, whether, upon the true construction
    of a stipulation and the contract of which it is part, it is a condition, an
    innominate term, or only a warranty. If the stipulation is one, which upon
    the true construction of the contract the parties have not made a condition,
    and breach of which may be attended by trivial, minor, or very grave
    consequences, it is innominate, and the court (or an arbitrator) will, in the
    event of dispute, have the task of deciding whether the breach that has arisen
    is such as the parties would have said, had they been asked at the time they
    made their contract:__ " it goes without saying that, if that happens, the
    " contract is at an end."

    Where, therefore, as commonly happens, the parties do not identify a
    stipulation as a condition, innominate term, or warranty, the court will
    approach the problem of construction in the way outlined by Upjohn L.J.,
    at pp.63 and 64 of the report. As the Lord Justice put it,


    4

    " Where, however, upon the true construction of the contract, the
    " parties have not made a particular stipulation a condition, it would in
    " my judgment be unsound and misleading to conclude that, being a
    " warranty, damages is necessarily a sufficient remedy."

    Unless the contract makes it clear, either by express provision or by necessary
    implication arising from its nature, purpose, and circumstances (" the factual
    "matrix " as spelt out, for example, by Lord Wilberforce in his speech in the
    Reardon Smith case [1976] 1 W.L.R. 989, at pp.995E-997D), that a
    particular stipulation is a condition or only a warranty, it is an innominate
    term, the remedy for a breach of which depends upon the nature,
    consequences, and effect of the breach.

    When the Court of Appeal had taken the logical step of declaring that the
    Hong Kong Fir analysis applied to contracts generally (the Hansa Nord case
    [1976] 1 Q.B. 44), the law was back where it had been left by Lord Mansfield
    in Boone v. Eyre (1777) 1 Hy. Bl. 273 and the judgment of Bramwell B. in
    Jackson v. Union Marine Insurance Co. Ltd. L.R. 10 C.P. 125.
    Section 11(1) (b) of the Sale of Goods Act 1893 can now be seen to be no
    more than a statutory guide to the use of the terms " condition" and
    " warranty " in that Act. It is not to be treated as an indication that the
    law knows no terms other than conditions and warranties. This fallacy was
    exposed in the Hong Kong Fir case. To read the subsection as a guide
    to a comprehensive classification of contractual terms is to convert it into
    a will-o'-the-wisp leading the unwary away from the true path of the law.

    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 L.J. (Hong Kong Fir p.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
    bargain, I would hold it to be not an innominate term but a condition.

    Lord Lowry

    My Lords,

    I have had the advantage of reading in draft the speeches of my noble
    and learned friends Lord Wilberforce and Lord Scarman, as well as the
    comprehensive review of the facts and the relevant law contained in the
    speech about to be delivered by my noble and learned friend Lord Roskill.
    I respectfully agree with their opinions, which taken together leave little
    of value to be said.

    If I venture to add a few words of my own (which gives me an
    opportunity to acknowledge the excellent arguments on both sides), it is
    because I wish to refer to two points of general interest and then to state
    shortly why I would hold the term breached by the buyers to have been a
    condition.

    As your Lordships have observed, the appellants based themselves on
    Hong Kong Fir Shipping Co. Ltd. v. Kawasaki Kisen Kaisha Shipping
    Ltd.
    [1962] 2 QB 26, but they sought from that case a degree of support
    which it could not give them by citing it for the proposition that a term
    of a contract is not a condition unless a breach of it is seen to have deprived

    5

    the party not in default of substantially the whole benefit which he was
    intended to obtain from the contract. By this argument the appellants were
    saying that in Hong Kong Fir Diplock L.J., as he then was, had adopted a
    new criterion for deciding by means of hindsight whether a term was a
    condition or not.

    This was wrong. In the first place, the term in question in Hong Kong Fir
    was one relating to seaworthiness, and the entire court agreed that it was
    not a condition but a term the remedy for a breach of which might be
    rescission (with or without damages) or merely damages for the breach.
    Secondly, at p.70 Diplock L.J. introduces the discussion by saying that there
    are many contractual undertakings of a more complex character which
    cannot be categorised as being conditions or warranties. And the description
    which has since been applied to this kind of term provides a conclusive
    answer to the appellants' contention. It is " intermediate " because it lies
    in the middle between a condition and a warranty (just as the remedy for
    its breach lies somewhere between the remedies for breach of a condition
    and breach of a warranty), and it is " innominate " because it is not called
    a condition or a warranty but assumes the character of each in turn.

    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). The latter process is not an aid to construing the contract, but
    indicates whether rescission or merely damages is the proper remedy for a
    breach for which the innocent party might be recompensed in one way or
    the other according to its gravity. The approach of Diplock L.J. at
    pp.69-70 of Hong Kong Fir is absolutely consistent with the classic
    statement of Bowen L.J. in Bentsen v. Taylor [1893] 2 Q.B. 274, 281 which
    Sellers L.J. cited at p.60.

    The " wait and see " method, or, as my noble and learned friend Lord
    Wilberforce has put it, the " gravity of the breach " approach, is not the
    way to identify a condition in a contract. This is done by construing the
    contract in the light of the surrounding circumstances. By his illuminating
    analysis Diplock L.J. shed a new light on old and accepted principles: he
    did not purport to establish new ones.

    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., as he then was, in
    the Hansa Nord case [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 at p.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

    6

    " 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."

    This passage has stood the test of time and I commend it to all lawyers who
    undertake to advise their clients on mercantile affairs.

    In order to identify an implied term (concerning which both parties to the
    contract, being men of business, would say, " of course; it goes without
    " saying ") one must construe the contract in the light of the surrounding
    circumstances and, to understand how that is done, we cannot do better than
    read the passage from Lord Wilberforce's speech in the Reardon Smith
    case [1976] 1 W.L.R. 989 at pp 995E-997C to which my noble and learned
    friend, Lord Scarman, has already referred your Lordships.

    The law having been established, why should we regard the term here in
    question as a condition. I start by expressing my full agreement with the
    reasons given in your Lordships' speeches. Among the points which have
    weighed with me are the following: —

    1. There are enormous practical advantages in certainty, not least in
      regard to string contracts where today's buyer may be tomorrow's seller.

    2. Most members of the string will have many ongoing contracts
      simultaneously and they must be able to do business with confidence in the
      legal results of their actions.

    3. Decisions would be too difficult if the term were innominate, litigation
      would be rife and years might elapse before the results were known.

    4. The difficulty of assessing damages is an indication in favour of
      condition: McDougall v. Aeromarine of Emsworth Ltd. [1958] 1 W.L.R.
      1126, 1133.

    5. One can at least say that recent litigation has provided indications that
      the term is a condition. Parties to similar contracts should (failing a strong
      centra-indication) be able to rely on this: The Mihalis Angelos [1971]
      1 Q.B. 164, 199F per Edmund-Davies L.J.

    6. To make " total loss " the only test of a condition is contrary to
      authority and experience, when one recalls that terms as to the date of
      sailing, deviation from a voyage and the date of delivery are regarded as
      conditions, but that failure to comply with them does not always have serious
      consequences.

    7. Nor need an implied condition pass the total loss test: see 6 above.

    8. If the consequences of breach of condition turn out to be slight, the
      innocent party may treat the condition as an innominate term or a warranty.

    9. While the sellers could have made time of the essence, if it were not
      so already, this would require reasonable notice, which might well not be
      practical either in a string contract or at all.

    10. In Tarrabochia v. Hickie 1 H. & N. 183; 156 E.R. 1168, upon which
    the appellants strongly relied, Bramwell B. said:

    " No doubt it is competent for the parties, if they think fit, to
    " declare in express terms that any matter shall be a condition precedent,
    " but when they have not so expressed themselves, it is necessary for
    " those who construe the instrument to see whether they intend to do it.
    " Since, however, they could have done it, those who construe the

    7

    " instrument should be chary in doing for them that which they might,
    " but have not done for themselves."

    But in that very case both Pollock C. B. and Bramwell B., without the benefit of
    any express term, said that, where the agreement was that a ship should sail
    on a particular day, that was a condition precedent.

    1. To accept the argument that conditions ought not to be implied
      " because the parties themselves know how to describe a term " would logically
      condemn the entire doctrine of implied terms.

    2. Arbitrators and courts might, if the term were innominate, give
      different answers concerning the effect of a breach in very similar transactions,
      and parties could never learn by experience what was likely to happen in a
      given situation. So-called string contracts are not made, or adjudicated on, in
      strings.

    The only arguments against treating the term as a condition appear to me
    to be based on generalities, whereas the considerations which are peculiar to
    this contract and similar contracts tell in favour of its being a condition.

    For these reasons, and for the reasons given by my noble and learned
    friends, I would concur in dismissing both the appeal and the cross-appeal.

    Lord Roskill

    My Lords,

    The appellants (Bunge Corporation, New York) were the buyers and the
    respondents (Tradax Export S.A., Panama) the sellers under a contract
    concluded on 30th January 1974 through their respective brokers in Antwerp
    and Rotterdam for the sale and purchase of 15,000 long tons, 5% more or
    less in vessel's option, of United States soyabean meal, shipment of 5,000 long
    tons in each of May, June and July 1975 at a price of U.S. dollars 199-50 per
    metric ton, F.O.B. one United States Gulf port at sellers' option. The
    respondents through their associated German company issued a contract note
    bearing that date for 5,000 long tons, 5% more or less for May 1975 ship-
    ment and the present appeal arises out of that May 1975 shipment. The
    appellants' brokers in Antwerp issued a single contract note for the entire
    quantity of 15,000 tons already referred to. The two contract notes were not
    in identical terms but nothing now depends upon the differences.

    The contract incorporated the terms and conditions of GAFTA form 119.
    The relevant extracts from the two contract notes are as follows.

    The respondents' Contract Note.

    " Quantity 5,000 (five thousand) tons of 2,240 lbs, 5% more or less
    " in vessel's option at contract price, to be declared latest when
    " nominating the vessel.

    " Shipment May, 1975—buyers to give sellers 15 days loading
    "notice F.o.b. one Gulf port at seller's option, stowed/trimmed."

    The appellants' Contract Note.

    " Quantity 15,000 L.T. of 1.016 kilos, 5% more or less at vessel's
    " option at contract price, quantity to be declared latest when
    " nominating vessel. . . .

    " Other Conditions. . . . Buyers to give 15 days preadvice of
    " readiness of steamer."

    The most relevant clauses in form 119 are as follows:

    " 7. Period of Delivery. During.....................................at Buyers' call.

    " Buyers shall give at least....................................consecutive days' notice of

    " probable readiness of vessel(s), and of the approximate quantity
    " required to be loaded. Buyers shall keep Sellers informed of any
    " changes in the date of probable readiness of vessel(s).


    8

    " 8. Extension of Delivery. The contract period of delivery shall,
    " if desired by Buyers, be extended by an additional period of one
    " calendar month, provided that Buyers give notice in accordance with
    " the Notices Clause not later than the next business day following
    " the last day of the delivery period. In this event Sellers shall carry
    " the goods at Buyers account and all charges for storage, interest,
    " insurance and other such normal carrying expenses shall be for
    " Buyers' account. Should Buyers not have taken delivery by the
    " end of this extension period, Sellers shall have the option of declaring
    " the Buyers to be in default or shall be entitled to demand payment
    " at contract price plus such charges as stated above, less current f.o.b.
    " charges against warehouse warrants and such tender of warehouse
    " receipts shall be considered complete performance of the contract
    " on the part of the Sellers." . . .

    " 20. Notices. Any Notices received after 1600 hours on a business
    " day shall be deemed to have been received on the business
    " day following. A Notice to the Broker or Agent shall be deemed
    " a Notice under this contract. All Notices given under this contract
    " shall be given by letter or by telegram or by telex or by other method
    " of rapid written communication. In case of resales all Notices shall
    " be passed on without delay by Buyers to their respective Sellers or
    " vice versa." . . .

    " 22. Default. In default of fulfilment of contract by either party,
    " the other, at his discretion shall, after giving notice by letter, telegram
    " or telex, have the right to sell or purchase, as the case may be,
    " against the defaulter and the defaulter shall make good the loss, if
    " any, on such purchase or sale on demand. If the party liable to
    " pay be dissatisfied with the price of such sale or purchase or if the
    " above right is not exercised and damages cannot be mutually agreed,
    " any damages, payable by the party in default, shall be settled by
    " arbitration. In the event of default by Sellers entitling Buyers to
    " damages, such damages shall be based upon the actual or estimated
    " value of the goods on date of default, to be fixed by arbitration
    " unless mutually agreed, and nothing contained in or implied under
    " this contract shall entitle Buyers to recover any damages in respect
    " of loss of profit upon any sub-contracts made by themselves or
    " others unless the Arbitrators or Board of Appeal, having regard to
    " any special circumstances, shall in their sole and absolute discretion
    " award such damages. In the event of default in shipment or
    " delivery, damages, if any, shall be computed upon the mean contract
    " quantity."

    My Lords, since it was agreed that there was no material difference
    between the two important clauses regarding the giving of the 15 days'
    notice to which those clauses refer, it is clear that the two blanks in
    clause 7 of form 119 have to be treated as completed with the words
    " during May 1975 " in the first blank and the figures " 15 " in the second
    blank, so that clause 7 thus completed reads:

    " Period of delivery—during May 1975 at Buyers' call. Buyers
    " shall give at least 15 consecutive days' notice of probable readiness
    " of vessel(s) and of the approximate quantity required to be loaded.
    " Buyers shall keep Sellers informed of any changes in the date of
    " probable readiness of the vessel(s)."

    It was found by the Board of Appeal of GAFTA, in paragraph 6 of
    the special case, that extensions were claimed under clause 8 of form 119
    so that the relevant delivery period became June 1975. The Board of
    Appeal also found in paragraph 11 of the special case, that the appellants'
    nomination of the vessel concerned to load what had thus become a June
    shipment was given to the respondents at 0846 on 17th June 1975 when
    it was received by the respondents' brokers in Rotterdam, less than 15
    consecutive days before the end of the extended shipment period. It is
    not necessary to detail the passing on of this notice until it reached the

    9

    respondents on 18th June 1975. On 20th June 1975 the respondents
    claimed default because of the alleged lateness of the appellants' notice.
    The relevant details will be found in paragraphs 12, 13, and 14 of the
    special case. As is found in paragraph 19 of the special case, the market
    price had by then fallen by over U.S. $60 per metric ton. The respondents
    claimed damages from the appellants. The dispute was referred to
    arbitration in accordance with clause 26 of form 119. The umpire awarded
    the respondents U.S. $317.500 as damages, this figure being based on the
    mean contract quantity of 5,000 long tons together with certain other sums
    not now immediately relevant. The appellants appealed to the Board of
    Appeal of GAFTA and that Board consisting of five members dismissed
    their appeal in all respects but stated a special case for the decision of the
    court. Upon the hearing of that special case by Parker J., that learned
    judge reversed the decision of the Board of Appeal and upheld their
    alternative award. The respondents thereupon appealed to the Court of
    Appeal (Megaw, Browne and Brightman L.JJ.) who restored the award of
    the Board of Appeal on liability but varied the quantum of damages
    holding that these should be measured by the minimum quantity the
    appellants would have been obliged to take. Leave to appeal to your
    Lordships' House was granted by the Court of Appeal.

    My Lords, your Lordships' House is the fifth tribunal before whom this
    dispute has been heard. I understand all your Lordships are agreed that
    the appeal and also the cross-appeal on quantum fail in substance for the
    reasons given by Megaw L.J. in, if I may respectfully say so, a powerful
    and closely reasoned judgment in the Court of Appeal. It follows that the
    same view upon the main issue involved in this dispute has been formed
    by six members of GAFTA, three learned Lords Justices and five members
    of your Lordships' House, a total of fourteen with only the learned judge
    taking the opposite view on that main issue. My Lords, I intend no
    disrespect to the learned judge in pointing this out. I do so merely for
    the purpose of expressing regret that, notwithstanding repeated adverse
    comments in your Lordships' House, in a simple case of this kind there
    should be a succession of no less than four appeals from the decision of
    an umpire well versed in disputes of this kind and that this is still possible.
    I derive some comfort however, from the fact that with the passing of the
    Arbitration Act 1979 this multiplicity of appeals should soon be a thing
    of the past.

    My Lords, the central question in this appeal is whether the appellants'
    obligation under clause 7 completed as I have completed it, are of such a
    character that a breach of them by the appellants such as, in my view,
    undoubtedly took place, entitled the respondents forthwith to rescind and
    claim damages. Put into lawyers' language—is the appellants' obligation to
    give the required 15 days' notice a condition or not? If it is, this appeal
    fails. If it is not, this appeal must succeed. As already stated, at all stages of
    these proceedings, save one, this obligation has been held to be a condition.
    The learned judge not only held that it was not a condition but also held that
    there was no breach by the appellants of clause 7. The Court of Appeal
    disagreed and this latter submission which found favour with the learned
    judge was not—rightly in my view—pursued in argument before your
    Lordships' House.

    My Lords, the relevant phrase " give at least 15 consecutive days' notice "
    consists only of six words and two digits. But the able arguments of which
    your Lordships have had the benefit have extended over 3 full days. The
    appellants' arguments may be summarised thus. They submitted that this
    term was not a condition but was what has come to be described since the
    Hong Kong Fir case [1962] 2 QB 26, as an " innominate " obligation—
    neither a condition nor a warranty, and that when a term is an innominate
    obligation the question whether or not a breach gives the innocent party the
    right to rescind depends upon whether the innocent party was thereby deprived
    " of substantially the whole benefit which it was intended he should obtain
    " from the contract ". This last quotation is from the judgment of

    10

    Diplock L.J. (as he then was) in the Hong Kong Fir case at page 70 of the
    report. It was further argued that since the respondents accepted that they
    could not show the now admitted breach by the appellants in giving a late
    notice had deprived them of substantially the whole benefit which it was
    intended they should obtain from the contract, the respondent had no right to
    rescind on account of that late notice. Much reliance was also placed by
    Mr. Roger Buckley, Q.C. for the appellants upon the ensuing passage in the
    learned Lord Justice's judgment, also at page 70 of the report: " and the legal
    " consequences of a breach of such an undertaking, unless provided for
    " expressly in the contract [my emphasis], depend upon the nature of the event
    " to which the breach gives rise ". There was, Mr. Buckley argued, no such
    " express " provision in this contract. Mr. Buckley also placed reliance upon
    the application of the principle enunciated in the Hong Kong Fir case, which
    was a case of a time charterparty relating to an unseaworthy ship, to contracts
    for the sale of goods, such as the present, by the Court of Appeal in the
    Hansa Nord case, [1976] Q.B. 44, a decision approved in your Lordships'
    House in the Reardon Smith case, [1976] 1 W.L.R. 989. The principles
    enunciated in the first two cases mentioned were, he said, of general
    application and pointed the way to a new and now correct approach to the
    question how a term in a contract alleged on the one hand to be a condition
    and on the other hand to be an " innominate term " should be approached.

    My Lords, it is beyond question that there are many cases in the books
    where terms, the breach of which do not deprive the innocent party of
    substantially the whole of the benefit which he was intended to receive from
    the contract, were nonetheless held to be conditions any breach of which
    entitled the innocent party to rescind. Perhaps the most famous is Bowes
    v. Shand (1877) 2 App. Cas. 455. Reuter v. Sala (1879) 4 C.P.D. 239, is
    another such case. Both these cases were decided before the Sale of Goods
    Act 1893 was enacted. But that Act only codified the relevant common law.
    I think Mr. Buckley was entitled to say that these two, and other similar
    cases, largely turned upon the fact that the breach complained of was part
    of the description of the goods in question and that would therefore today
    be a statutory condition under section 13 of the Sale of Goods Act. But
    there are many other cases, modern and less modern, where terms in
    contracts for the sale of goods have been held to be conditions any breach of
    which will give rise to a right to rescind. Though section 10 (1) of the
    Sale of Goods Act provides that, unless a different intention appears, terms
    as to the time of payment are not deemed to be of the essence of a contract
    of sale, there are many cases, notably those in connection with the opening
    of bankers credits and the payment against documents, where the relevant
    obligations have been held to be a condition a breach of which will entitle
    the innocent party to rescind. No useful purpose will be served by listing all
    those cases cited in argument on either side. Many are usefully collected in
    the judgment of Diplock J. (as he then was) in Ian Stach Limited v. Baker
    Bosley Ltd.
    [1958] 2 Q.B. 130 at pages 139-144, and I would emphasize in
    this connection the need for certainty in this type of transaction to which
    that learned judge referred at pages 143 and 144 of his judgment. 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.

    My Lords, I find nothing in the judgment of Diplock L.J. in the Hong
    Kong Fir
    case which suggests any departure from the basic and long
    standing rules for determining whether a particular term in a contract is
    or is not a condition and there is much in the judgment of Sellers LJ.
    with which Upjohn L.J. (as he then was) expressly agreed, to show that

    11

    those rules are still good law and should be maintained. They are
    enshrined in the oft quoted judgment of Bowen L.J. (as he then was) in
    Bentsen v. Taylor [1893] 2 Q.B. 274 at 281. " There is no way of deciding
    " that question except by looking at the contract in the light of the
    " surrounding circumstances, and then making up one's mind whether the
    " intention of the parties, as gathered from the instrument itself, will best
    " be carried out by treating the promise as a warranty sounding only in
    " damages, or as a condition precedent by the failure to perform which
    " the other party is relieved of his liability." That well-known passage will
    be found quoted by Sellers LJ. at page 60 of the report in the Hong
    Kong Fir
    case. I would add a reference in this connection to the judgment
    of Scrutton L.J. in Comptoir Commercial Anversois v. Power [1920] 1 K.B.
    868 at 899, where that learned Lord Justice added to the statements of the
    same principle in the Exchequer Chamber in Behn v. Burness (1863)
    3 B. & S. 751 and in Oppenheim v. Fraser (1876) 34 L.T. 524, his own
    great authority.

    My Lords, the judgment of Diplock L.J. in the Hong Kong Fir case is,
    if I may respectfully say so, a landmark in the development of one part
    of our law of contract in the latter part of this century. The learned Lord
    Justice showed by reference to detailed historical analysis, contrary to what
    had often been thought previously, that there was no complete dichotomy
    between conditions and warranties and that there was a third class of
    term, the innominate term. But I do not believe the learned Lord Justice
    ever intended his judgment to afford an easy escape route from the normal
    consequences of rescission to a contract breaker who had broken what
    was, upon its true construction, clearly a condition of the contract by
    claiming that he had only broken an innominate term. Of course when
    considering whether a particular term is or is not a condition it is relevant
    to consider to what other class or category that term, if not a condition,
    might belong. But to say that is not to accept that the question whether
    or not a term is a condition has to be determined solely by reference to
    what has to be proved before rescission can be claimed for breach of a
    term which has already been shown not to be a condition but an
    innominate term. Once it is appreciated that the whole of the passages
    on pages 69 and 70 of the learned Lord Justice's judgment are directed
    to the consequences of a term which is not a condition but an innominate
    term and not to the question of whether or not a particular term is a
    condition, the difficulties mentioned by Megaw L.J. in his judgment if
    the passages in question are read too literally, and as the appellants invite
    your Lordships to read them, disappear. The only criticism I would
    respectfully venture of these passages is the use of the adverb " expressly "
    in the passage I have already quoted from the middle of the full paragraph
    on page 70. Surely the same result must follow whether the legal
    consequences of the breach are also " impliedly " provided for in the
    contract upon that contract's true construction? In venturing this amend-
    ment to what the learned Lord Justice said, I derive comfort from the
    fact that my noble and learned friend, Lord Diplock himself in Photo
    Production Ltd.
    v. Securicor Transport Ltd. [1980] AC 827 at page 849,
    speaks of the case where the contracting parties have agreed " whether by
    " express words or by implication of law"
    (my emphasis) that " any "
    (Lord Diplock's emphasis) " failure by one party to perform a particular
    " primary obligation (' condition ' in the nomenclature of the Sale of Goods
    " Act 1893), irrespective of the gravity of the event that has in fact resulted
    " from the breach, shall entitle the other party to elect to put an end to
    " all primary obligations of both parties remaining unperformed ". Thus
    I think it legitimate to suggest an amendment to the passage in [1962]
    2 Q.B. at page 70 either by deleting the word " expressly " or by adding
    the words " or by necessary implication ".

    My Lords, your Lordships' House had to consider a similar problem in
    relation to a different clause (clause 21) in a different GAFTA contract
    in Bremer v. Vanden [1978] 2 Lloyd's Rep. 109. In passing I would
    observe the text of that clause is inaccurately quoted in the headnote of

    12

    the report but will be found correctly quoted in the speech of Viscount
    Dilhorne at page 121. My noble and learned friend Lord Wilberforce
    said at page 113:

    " Automatic and invariable treatment of a clause such as this runs
    " counter to the approach, which modern authorities recognise, of
    " treating such a provision as having the force of a condition (giving
    " rise to rescission or invalidity), or of a contractual term (giving rise
    " to damages only) according to the nature and gravity of the breach.
    " The clause is then categorised as an innominate term. This doctrine
    " emerged very clearly in the Hong Kong Fir case in relation to the
    " obligation of seaworthiness, and was as applied to a contract for
    " sale of goods made on GAFTA form 100 in the Hansa Nord, a
    " decision itself approved by this House in the Reardon Smith case.
    " In my opinion, the clause may vary appropriately and should be
    " regarded as such an intermediate term: to do so would recognise
    " that while in many, possibly most, instances, breach of it can
    " adequately be sanctioned by damages, cases may exist in which, in
    " fairness to the buyer, it would be proper to treat the cancellation
    " as not having effect. On the other hand, always so to treat it may
    " be often be unfair to the seller, and unnecessarily rigid."

    The passage I have just quoted was directed to clause 21 of the contract
    there in question. All members of your Lordships' House were of the
    opinion that that clause was not a condition because it was insufficiently
    definitive or precise—see the speeches of my noble and learned friends,
    Lord Salmon at page 128, and Lord Russell of Killowen at page 130.
    But it is important to observe that your Lordships' House had also to
    consider clause 22 of that contract. All members of your Lordships'
    House held that clause 22 was a condition—see the speeches of my noble
    and learned friends, Lord Wilberforce at page 116, and Lord Salmon at
    page 128. I venture to emphasise the statement in the former passage
    that accurate compliance with the stipulation in question was essential
    to avoid commercial confusion in view of the possibility of long string
    contracts being involved, a point of especial importance in the present case.

    In short, while recognising the modern approach and not being over-
    ready to construe terms of 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
    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 Hong Kong
    Fir
    case 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 at [1980] 1 Lloyd's Rep. 294 at pages 307,
    308. The explanation of the passage which he quotes is that which I
    have just given.

    My Lords, Mr. Buckley founded much of this part of his argument
    upon the decision of your Lordships' House in United Scientific Holdings
    v. Burnley Borough Council [1978] A.C. 904 when your Lordships' House,
    unanimously reversing two separate decisions of the Court of Appeal, held
    that the time table specified in rent review clauses for the completion of
    the various steps for determining the rent payable in respect of the period
    following the review was not of the essence. Naturally, Mr. Buckley
    relied upon a passage in the speech of my noble and learned friend. Lord
    Diplock, at page 928. I quote the passage in full.

    " My Lords, I will not take up time repeating here what I myself
    " said in the Hong Kong Fir case, except to point out that by 1873:

    " (1) Stipulations as to the time at which a party was to perform
    " a promise on his part were among the contractual stipulations which

    13

    " were not regarded as 'conditions precedent' if his failure to perform
    " that promise punctually did not deprive the other party of
    " substantially the whole benefit which it was intended that he should
    " obtain from the contract;

    " (2) When the delay by one party in performing a particular
    " promise punctually had become so prolonged as to deprive the
    " other party of substantially the whole benefit which it was intended
    " that he should obtain from the contract it did discharge that other
    " party from the obligation to continue to perform any of his own
    " promises which as yet were unperformed;

    " (3) Similar principles were applicable to determine whether the
    " parties' duties to one another to continue to perform their mutual
    " obligations were discharged by frustration of the adventure that was
    " the object of the contract. A party's ability to perform his promise
    " might depend upon the prior occurrence of an event which neither
    " he nor the other party had promised would occur. The question
    " whether a stipulation as to the time at which the event should occur
    " was of the essence of the contract depended upon whether even a
    " brief postponement of it would deprive one or other of the parties
    " of substantially the whole benefit that it was intended that he should
    " obtain from the contract."

    Read literally, the passage might be thought to be of universal
    application and to suggest that by 1873 terms in contract as to time,
    whatever their character, were not to be construed as conditions any
    breach of which would give rise to a right to rescind unless the several
    prerequisites specified in this passage were fulfilled. My Lords, I do not
    think that my noble and learned friend can possibly have intended this
    passage to be so read. In the immediately preceding pages he had been
    dealing with the manner in which the courts of Chancery had been
    developing the equitable principles which he describes and explaining how
    contemporaneously the courts of common law were reaching the same
    result though by a different route. But to read the passage I have just
    quoted as of universal application and in particular as of application to
    to stipulations as to time in mercantile contracts would be to misread it,
    for it would be quite inconsistent with many earlier authorities such as
    Behn v. Burness as well as later authorities such as Bowes v. Shand,
    Reuter
    v. Sala and Bentsen v. Taylor to which I have already referred.
    That this is so is strongly reinforced by the fact that Mr. Hugh Francis
    Q.C., whose argument for the appellants was unanimously accepted by
    your Lordships' House, expressly conceded that the doctrine that my
    noble and learned friend, Lord Diplock, ultimately so clearly expounded
    at pages 926 to 928 did not apply in three classes of case of which the
    second was " where the courts may infer from the nature of the contract
    " or the surrounding circumstances that the parties regard time stipulations
    " as of the essence of their bargains; mercantile contracts . . ."—see page
    908 of the report, a concession which I think was clearly rightly made.

    In reply to this part of Mr. Buckley's argument Mr. Staughton drew
    your Lordships' attention to Halsbury's Laws of England (4th Edition,
    1974) Volume 9, paragraphs 481 and 482. He was able to show that the
    penultimate full paragraph in paragraph 481 had been expressly approved
    by no less than three of your Lordships in the United Scientific Holdings
    case, by Viscount Dilhorne at page 937, Lord Simon of Glaisdale at pages
    941 and 944, and by Lord Fraser of Tullybelton at page 958, while Lord
    Salmon at page 950 stated the law in virtually identical terms though
    without an express reference to this particular passage in Halsbury. The
    passage in question reads thus:

    " 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

    14

    " 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."

    The relevant passage in paragraph 482 reads thus:

    " 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."

    A footnote, No. 3, refers among other cases to Reuter v. Sala and to Bowes
    v. Shand. My Lords, I agree with Mr. Staughton that the express approval
    of the passage in paragraph 481 cannot be taken as involving implied
    disapproval of the passage I have just quoted from paragraph 482.

    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 v. Vanden, 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.

    It follows that in my opinion the umpire, the Board of Appeal and the
    Court of Appeal all reached the correct conclusion and for the reasons I
    have given I would dismiss the appellants' appeal. It will have been
    observed that I have reached this conclusion as a matter of the construction
    of the relevant clause. I have thus far paid no regard to the finding in
    paragraph 5 of the special case that " This term in an FOB contract is
    " regarded in the trade as of such great and fundamental importance that
    " any breach thereof goes to the root of the contract." Naturally, though
    the crucial question of construction is a matter of law for the court, the
    court will give much weight to the view of the trade tribunal concerned.
    Though I question whether on the argument of a special case it is permissible
    to look outside the findings of fact in that special case to findings of fact
    in other special cases, Mr. Buckley was able to point to a contrary finding
    of fact by a different Board of Appeal of the same association in Bremer
    v. Rayner [1978] 2 Lloyd's Rep. 73 at page 81 " Failure of an fob buyer to
    " indicate to his seller the demurrage/despatch rate with the nomination of
    " a vessel or at any time is not [my emphasis] customarily treated by the
    " trade as being a term of great or fundamental importance to the contract
    " such as to give a seller the right to reject the nomination or to refuse to
    " ship the goods."

    The relevant clause 7 in that case will be found at page 85 of the report in
    the judgment of Mocatta J.

    15

    " 7. Nomination of Vessel. Buyer to give nomination of vessel to
    " seller, in writing, in time for seller to receive with minimum 15 days'
    " notice of earliest readiness of tonnage at first or sole port of loading."

    The learned judge held at page 89 of his judgment that the finding which
    I have just quoted did not preclude his reaching the conclusion that that
    clause was a matter of construction a condition, a breach of which entitled
    the innocent party to rescind. The learned judge's decision was reversed
    on appeal on a different point—see [1979] 2 Lloyd's Rep. 216. But
    Bridge L.J. (as he then was) at page 234 was at pains to say that as then
    advised he was not persuaded that on this question the learned judge had
    reached the wrong conclusion. See also the judgment of Megaw L.J. at
    page 229. With respect, I think that Mocatta J. was plainly correct in his
    conclusion on this question.

    Mr. Staughton also relied upon a number of cases where the argument
    presently urged by Mr. Buckley might have been but was not advanced.
    They included Turnbull v. Mundas [1954] 2 Lloyd's Rep. 198, (a decision of
    the High Court of Australia which included Sir Owen Dixon C.J.) and
    Carapanayoti v. Andre [1972] 1 Lloyd's Rep. 139—a decision of the Court
    of Appeal). With respect I doubt whether past omissions, whether for good
    or bad reasons, greatly advance the solution of the present problem.

    My Lords, I would only add in conclusion that it seems clear from the
    argument and indeed from the judgment of Parker J. in the present case
    that certain passages in the judgment of Diplock L.J. in the Hong Kong
    Fir
    case and in the speech of my noble and learned friend Lord Diplock
    in United Scientific Holdings v. Burnley Borough Council have been read
    out of context and thus misunderstood. An excellent illustration of this
    misunderstanding is shown by the argument advanced and unanimously
    rejected in Toepfer v. Lenersan [1978] 2 Lloyd's Rep. 555 (Donaldson J.
    as he then was) and [1980] 1 Lloyd's Rep. 143 (Court of Appeal). There
    the sellers attempted on the strength of the decision in the Hong Kong
    Fir
    case to argue that the sellers' obligations regarding time for presenta-
    tion of the documents against which the buyers had to pay not later than
    20 days after the bill of lading date was not a condition a breach of
    which entitled the buyers to rescind but was only an innominate term.
    I find myself in complete agreement with the observations of Donaldson J.
    pointing out how the Hong Kong Fir case had been misunderstood. I
    would, therefore, dismiss this appeal with costs.

    My Lords, I turn to deal briefly with the respondents' cross-appeal.
    Both the umpire and the Board of Appeal awarded the respondents
    damages on the basis of the mean contract quantity of 5,000 long tons.
    They clearly reached this conclusion on the strength of the last sentence
    of clause 22 of GAFTA form 119. The Court of Appeal reduced the
    damages payable to the respondents by assessing them by reference not
    to 5,000 long tons but to 4,750 long tons being 5% less than the mean
    contract quantity, this being the minimum quantity the appellants would
    have been obliged to take. As a result of the Court of Appeal decision,
    the Board of Appeal subsequently made a supplementary award in the
    respondents' favour for a lesser amount based upon the figure of 4,750
    long tons.

    It was common ground that the reference in the contract " at vessel's
    " option " meant " at buyers' option ". My Lords it was also common
    ground that the Court of Appeal was bound to reach this conclusion by
    reason of an earlier decision of that court, Toprak v. Finagrain [1979]
    2 Lloyd's Rep. 98 to which I was a party. In that case the court held
    that the relevant sentence in the contract applied only to default of
    shipment by the seller or default of delivery by the seller and not to
    default by the buyer. In the latter case damages fell to be assessed on
    ordinary principles.

    My Lords the respondents urged that in this context " default" bore
    its primary dictionary meaning of " failure " or " want " or " absence "
    and that since there had been a " failure " or " want " or " absence " of


    16

    shipment by the sellers that was sufficient to enable the last sentence of
    clause 22 to be invoked so as to require the respondents' damages to be
    assessed on the mean contract quantity.

    My Lords, no doubt in some contexts the word " default" may bear
    this particular dictionary meaning. But in determining the meaning of
    the word in any case, the context in which the word in used is of crucial
    importance. One has only to see the number of times that the word
    " default" or " defaulter" is used in clause 22 to see that the context
    is one of a breach of contract sounding in damages and not of non-
    performance without breach. My Lords, I am clearly of the view that
    " default" in the last sentence of clause 22 means default by the sellers
    in breach of their contractual obligations. That sentence has no application
    to the present case. Accordingly with all respect to the umpire and the
    Board of Appeal in the present case I think that Toprak v. Finagrain
    was correctly decided. If the trade wishes to have the same result where
    the relevant default is by the buyer and not by the seller the terms of
    GAFTA form 119 and other similar terms will require to be altered.
    For these reasons I would dismiss the cross-appeal with costs.

    313270 Dd 8208150 C2 4/81


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