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Fundamental breach

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replaced by old ones, body parts were missing, and the engine's cylinder head was detached, revealing burnt valves. This was a serious breach, but the dealer sought to rely on a clause in the contract which read "No condition or warranty that the vehicle is roadworthy or as to its age, condition or fitness for any purpose is given by the owner or implied herein."
1087:(2009), Moss J ruled that a court "would expect to see 'clear' language in the sense of 'strong' language" before accepting that a contract exempted one of the parties from the consequences of a repudiatory breach. In that particular case he concluded that the wording did not extend to the deliberate personal repudiatory breach which the defendant had exhibited. 956:
soon became the leading case on "fundamental breach". As a matter of law, under the doctrine of fundamental breach of contract, exclusion clauses were deemed not to be available to a party in fundamental breach of the contract. However, all was not well, as business people felt alarmed that an agreed
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had overstated the law, and that whether or not a fundamental breach extinguishes any protection that the defendant might rely on was a "question of construction" and not a "question of law". Although the demurrage clause was so absurdly low that it amounted to an exemption clause, nevertheless its
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of $ 1,000 per day. The charterers caused huge delays and few round trips were made. Demurrage totalled only $ 150,000, so the owners claimed damages for their full losses, saying they should not be limited to the demurrage terms because the charterer's gross delays amounted to fundamental breach.
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the contract and claim damages. However, since both common law and statute already recognised that while that breach of warranty entitled a claimant only to damages, any breach of condition would entitle a claimant to both repudiation and damages, it seemed that fundamental breach offered nothing
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a buyer inspected a car dealer's used Buick car and agreed to buy it. The car was later delivered at night, and had been towed. When the buyer inspected the car in the morning, it would not work and it was clear it had been involved in an accident, and there were other changes: its tyres had been
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deviated from the agreed route, by heading first to Burriana (near Valencia). This deviation caused delay and deterioration of the perishable cargo. The carrier relied on a 'liberty clause' in the bill of lading which purported to allow the vessel 'liberty to visit any port in any order'. In the
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in 2010. In its place, the court has created a three-step test to evaluate the application of exclusion clauses. The first step is to evaluate the exclusion clause in the factual context of each case to determine if it applies to the material circumstances. The second step is to evaluate if the
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Tindal C.J. stated that a carrier's deviation from the agreed voyage route amounted also to a deviation from the terms of the contract, including its exceptions or limitation clauses provided by such a contract. This view was adopted in the leading cases of
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noted that in that case the repudiatory breach was the personal action of the company's president and "controlling mind", but warned that legal interpretation might differ in a case where the decision to repudiate was the collective decision of a
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limiting the defendant's liability would automatically become void and ineffective. Also, whereas breach of condition gives the plaintiff the option to repudiate, fundamental breach automatically discharges the entire contract.
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still holds, so that not only may deviating carriers be denied the protection of exemption clauses expressly in the contract, they will also be denied the protection of implicit exemptions such as Article IV of the
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Also, there arose some confusion as to what "fundamental breach" actually was. Some alleged it was a breach that went to "the root of the contract", a breach so fundamental it would permit the distressed party to
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exclusion clause was unconscionable at the time of incorporation. The final step is to evaluate whether the exclusion clause should not be enforced on public policy grounds.
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and using its "main purpose" concept, the court held that the dealer was "in breach of a fundamental obligation" and so could not rely on any exclusion clause.
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is a serious breach that "denies the plaintiff the main benefit of the contract", fundamental breach was supposed to be even worse, with the result that any
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3 Historically restricted in common law jurisdictions but generally accepted elsewhere; availability varies between contemporary common law jurisdictions
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More recently, this law was successfully applied in two cases related to carriage of goods by sea and application of limitation clauses under the
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Tercon Contractors Ltd. v. Her Majesty The Queen in Right of the Province of British Columbia, by her Ministry of Transportation and Highways
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in disguise, adding "the main object of this bill of lading is the carriage of oranges from Malaga to Liverpool". He thus established the
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existence plainly showed that the parties had contemplated the possibility of delay, so delays would not amount to fundamental breach.
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and Canada. The relevant concept in English Law, where a fundamental aspect of a contract is breached, is repudiatory breach.
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declared that a "car" was a "vehicle capable of self-propulsion", and accordingly this Buick was not a proper car. Following
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was conclusive, and that the deviation was actionable, preventing the carrier from invoking the protection of the "
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Although the concept caused some excitement in the 1950s and 1960s, the concept was regarded as flawed by the
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Although the 19th century cases were maritime cases, the idea of the "main purpose" caught on in the general
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Internet Broadcasting Corporation Ltd. (T/a Nettv) & Anor v Mar LLC (T/a Marhedge) EWHC 844 (Ch)
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case has taken the sting out of the fundamental breach idea, in deviation itself little has changed.
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Exemption clauses need strong words to survive deliberate, fundamental breaches, says High Court
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case substantially curtailed the doctrine, which has now been effectively "laid to rest" in
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Suisse Atlantique Societe d'Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale
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In other words, fundamental breach was not some kind of "super breach of condition".
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contract term could be set aside by a court; there seemed to be no "certainty".
875: 860: 707: 598: 529: 514: 262: 109: 1568: 1407: 1173: 1116: 852: 498: 246: 219: 149: 241: 988: 925:(1945), labelled the fundamental term as ‘the hard core of the contract'. 822: 702: 697: 684: 475: 129: 35: 1534:, 2010 SCC 4, para. 81, published 12 February 2010, accessed 26 April 2021 1143:
Tercon Contractors Ltd. v. British Columbia (Transportation and Highways)
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Maxine Footwear Company Ltd. v. Canadian Government Merchant Marine Ltd
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Internet Broadcasting Corporation Ltd. t/a NETTV v MAR LLC t/a Marhedge
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House of Lords, Lord Herschell LC declared the liberty clause to be an
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The matter came to a head in 1966 in the House of Lords decision in
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The doctrine of fundamental breach has been “laid to rest” by the
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patently ignored the House of Lords' findings. One such case was
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case they emphatically reaffirmed their decision in the
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both in Québec and in the country's common law provinces
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Harbutt's "Plasticine" Ltd v Wayne Tank and Pump Co Ltd
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Daewoo Heavy Industries Ltd. v. Klipriver Shipping Ltd.
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Harbutt's "Plasticine" Ltd v Wayne Tank and Pump Co Ltd
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from 1962 to 1982, but it did not find favour with the
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was a further deviation case following this approach.
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effectively overturned the "rule of law" doctrine of
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Although the clause was clear and well drafted, the
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7 Specific to civil law jurisdictions, the American
78: 1521:, delivered 24 April 2009, accessed 28 October 2023 907:Adoption of fundamental breach within contract law 576:Contract A and Contract B in Canadian contract law 952:This decision was clearly fair to the buyer, and 811:may be traced to early cases on the doctrine of 1566: 1304:, published 6 May 2009, accessed 28 October 2023 1017:decision, there was a series of cases where the 731:2 Specific to civil and mixed law jurisdictions 34:. The doctrine was, in particular, nurtured by 1285:Photo Production Ltd v Securicor Transport Ltd 1252:Hong Kong Fir Shipping v Kawasaki Kisen Kaisha 788: 768:contractual and pre-contractual negotiation 1296: 1294: 1292: 991:dependent on tonnage of cargo carried. If 987:to export coal, the shipowners to be paid 795: 781: 1103:. However, given the general move in the 16:Concept within the common law of contract 1386:Tate & Lyle v Hain Steamship Company 900:Tate & Lyle v Hain Steamship Company 839:, a vessel bound from Fiume (modern day 26:, is a controversial concept within the 1289: 807:The origins of the idea of fundamental 1567: 859:meant that the route described in the 564:Duty of honest contractual performance 752:of International Commercial Contracts 1003:The House of Lords boldly held that 1543:S.C.R. 801: Canadian Supreme Court 741:and other civil codes based on the 13: 14: 1591: 1047:and instead maintained a strict " 922:Alderslade v. Hendon Laundry Ltd. 79:Background – the law of deviation 566:(or doctrine of abuse of rights) 381:Enforcement of foreign judgments 345:Hague Choice of Court Convention 93: 1548: 1537: 1524: 1511: 1488: 1466: 1457: 1444: 1435: 1426: 1414: 1400: 1391: 1378: 1361:"Glynn v Margetson case report" 1353: 1341: 1210: 1201: 1192: 983:. The case involved a two-year 1580:Legal doctrines and principles 1330: 1318: 1307: 1278: 1269: 1258: 1244: 1232: 1064:Unfair Contract Terms Act 1977 374:Singapore Mediation Convention 1: 1226: 1180:Terms in English contract law 748:5 Explicitly rejected by the 515:Quasi-contractual obligations 1314:Davis v. Garrett case report 851:, sinking in a storm in the 7: 1150: 10: 1596: 1422:The Sale of Goods Act 1893 386:Hague Judgments Convention 1530:Supreme Court of Canada, 1505:McFadden v Blue Star Line 1452:The Kapitan Petko Voivoda 1176:or basic principle of law 1131: 737:4 Specific to the German 1337:Leduc v Ward case report 1218:Consumer Rights Act 2015 1185: 442:Anticipatory repudiation 192:unequal bargaining power 65:, whose decision in the 1138:Supreme Court of Canada 847:headed instead towards 764:Uniform Commercial Code 739:BĂŒrgerliches Gesetzbuch 424:Third-party beneficiary 396:Rights of third parties 274:Accord and satisfaction 495:Liquidated, stipulated 340:Forum selection clause 225:Frustration of purpose 1502:(1885) 10 PD 103 and 1238:Sometimes known as a 1216:Since amended by the 1054:These two cases (the 1044:Karsales Ltd v Wallis 1006:Karsales Ltd v Wallis 757:Canadian contract law 125:Abstraction principle 1483:Donoghue v Stevenson 1049:rule of construction 874:, a vessel carrying 586:Related areas of law 485:Specific performance 335:Choice of law clause 300:Contract of adhesion 214:Culpa in contrahendo 120:Meeting of the minds 115:Offer and acceptance 1463:2 Lloyd's Rep. 357. 1169:Pacta sunt servanda 893:"main purpose rule" 857:parol evidence rule 750:UNIDROIT Principles 524:Promissory estoppel 404:Privity of contract 357:New York Convention 317:UNIDROIT Principles 160:Collateral contract 155:Implication-in-fact 140:Invitation to treat 40:Master of the Rolls 1432:1 Lloyd's Rep. 529 1275:1 Lloyd's Rep. 529 1240:repudiatory breach 1163:Breach of contract 1126:board of directors 1111:to a standard of " 931:Karsales v Wallis 915:after Lord Greene 570:Duty of good faith 467:Fundamental breach 433:Breach of contract 362:UNCITRAL Model Law 326:Dispute resolution 311:Contra proferentem 305:Integration clause 279:Exculpatory clause 49:Whereas breach of 20:Fundamental breach 1397:KB, 189 at p. 193 1348:Glynn v Margetson 1327:(1888) 20 QBD 475 1207:i.e not automatic 1101:Hague-Visby Rules 1096:Glynn v Margetson 1092:Suisse Atlantique 1071:Hague-Visby Rules 1060:Photo Productions 1056:Suisse Atlantique 1035:Suisse Atlantique 1030:Photo Productions 1015:Suisse Atlantique 972:Suisse Atlantique 970:Resolution – the 954:Karsales v Wallis 947:Glynn v Margetson 872:Glynn v Margetson 865:perils of the sea 829:Glynn v Margetson 805: 804: 648:England and Wales 556:Duties of parties 547:Negotiorum gestio 536:Unjust enrichment 257:Statute of frauds 206:Unconscionability 178:Misrepresentation 135:Mirror image rule 68:Suisse Atlantique 1587: 1560: 1552: 1546: 1541: 1535: 1528: 1522: 1515: 1509: 1492: 1486: 1470: 1464: 1461: 1455: 1454:2 Lloyd's Rep. 1 1448: 1442: 1439: 1433: 1430: 1424: 1418: 1412: 1404: 1398: 1395: 1389: 1382: 1376: 1375: 1373: 1372: 1363:. Archived from 1357: 1351: 1350:AC 351 1 KB 660 1345: 1339: 1334: 1328: 1322: 1316: 1311: 1305: 1300:Pinsent Masons, 1298: 1287: 1282: 1276: 1273: 1267: 1262: 1256: 1248: 1242: 1236: 1220: 1214: 1208: 1205: 1199: 1196: 1109:strict liability 1081:The Happy Ranger 1039:Lord Wilberforce 889:exemption clause 817:Davis v. Garrett 797: 790: 783: 625:China (mainland) 594:Conflict of laws 457:Efficient breach 452:Exclusion clause 252:Illusory promise 235:Impracticability 97: 83: 82: 55:exclusion clause 1595: 1594: 1590: 1589: 1588: 1586: 1585: 1584: 1565: 1564: 1563: 1553: 1549: 1542: 1538: 1529: 1525: 1516: 1512: 1493: 1489: 1471: 1467: 1462: 1458: 1449: 1445: 1440: 1436: 1431: 1427: 1419: 1415: 1405: 1401: 1396: 1392: 1383: 1379: 1370: 1368: 1359: 1358: 1354: 1346: 1342: 1335: 1331: 1323: 1319: 1312: 1308: 1299: 1290: 1283: 1279: 1274: 1270: 1263: 1259: 1249: 1245: 1237: 1233: 1229: 1224: 1223: 1215: 1211: 1206: 1202: 1197: 1193: 1188: 1153: 1134: 1113:reasonable care 1019:Court of Appeal 975: 943:Court of Appeal 913:law of contract 909: 876:Seville oranges 801: 772: 644:United Kingdom 607:By jurisdiction 81: 17: 12: 11: 5: 1593: 1583: 1582: 1577: 1562: 1561: 1547: 1536: 1523: 1510: 1487: 1465: 1456: 1443: 1434: 1425: 1413: 1399: 1390: 1377: 1352: 1340: 1329: 1317: 1306: 1288: 1277: 1268: 1257: 1243: 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Retrieved 1365:the original 1355: 1347: 1343: 1332: 1325:Leduc v Ward 1324: 1320: 1309: 1280: 1271: 1260: 1250: 1246: 1239: 1234: 1212: 1203: 1194: 1167: 1156: 1141: 1135: 1120: 1095: 1091: 1089: 1084: 1080: 1074: 1068: 1059: 1055: 1053: 1042: 1034: 1028: 1022: 1014: 1012: 1004: 1002: 985:time charter 978: 976: 971: 959: 953: 951: 946: 940: 929: 927: 920: 910: 898: 897: 892: 871: 869: 837:Leduc v Ward 836: 834: 827: 826:(1888) and 823:Leduc v Ward 821: 816: 806: 703:Criminal law 685:Property law 640:Saudi Arabia 545: 528: 466: 309: 261: 212: 130:Posting rule 87:Contract law 66: 60: 48: 36:Lord Denning 19: 18: 541:Restitution 352:Arbitration 1569:Categories 1554:A.C. 589: 1517:Moss, G., 1477:Re Polemis 1371:2018-04-06 1227:References 1107:away from 1105:common law 1013:After the 935:EWCA Civ 4 743:pandectist 726:common law 506:Rescission 414:Delegation 409:Assignment 197:Illegality 145:Firm offer 28:common law 997:demurrage 963:repudiate 884:Liverpool 813:deviation 745:tradition 615:Australia 462:Deviation 369:Mediation 102:Formation 63:Law Lords 51:condition 1508:1 KB 697 1441:1 QB 447 1151:See also 1121:Marhedge 832:(1893). 708:Evidence 680:Tort law 653:Scotland 476:Remedies 419:Novation 242:Hardship 169:Defences 110:Capacity 32:contract 24:contract 1174:brocard 1115:" (or " 993:laytime 989:freight 849:Glasgow 845:Dunkirk 698:estates 630:Ireland 247:Set-off 188:Threats 183:Mistake 73:England 1450:Also, 1411:(1876) 1384:iLaw, 1254:, 1961 1159:(1957) 1132:Canada 880:Malaga 841:Rijeka 809:breach 696:, and 694:trusts 668:Other 620:Canada 1420:e.g. 1186:Notes 1083:. In 966:new. 919:, in 878:from 843:) to 815:. In 716:Notes 690:Wills 672:areas 635:India 497:, or 447:Cover 1480:and 1172:, a 1079:and 1058:and 199:and 190:and 1495:viz 1473:viz 1140:in 928:In 882:to 835:In 670:law 30:of 22:of 1571:: 1291:^ 1128:. 1073:: 1066:. 1037:. 917:MR 692:, 46:. 38:, 1374:. 796:e 789:t 782:v

Index

contract
common law
contract
Lord Denning
Master of the Rolls
House of Lords
condition
exclusion clause
Law Lords
Suisse Atlantique
England
Contract law

Capacity
Offer and acceptance
Meeting of the minds
Abstraction principle
Posting rule
Mirror image rule
Invitation to treat
Firm offer
Consideration
Implication-in-fact
Collateral contract
Defences
Misrepresentation
Mistake
Threats
unequal bargaining power
Illegality

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