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opinion, several answers to this. The first is that contracts are made to be performed, not broken. It may prove disadvantageous to break a contract instead of performing it. The second is that if, on their repudiation being accepted, the charterers had promptly honoured their secondary obligation to pay damages, the transaction would have been settled well before the Second Gulf War became a reality. The third is that the owners were, as the arbitrator held (see para 7 above), entitled to be compensated for the value of what they had lost on the date it was lost, and it could not be doubted that what the owners lost at that date was a charterparty with slightly less than four years to run. This was a clear and, in my opinion, crucial finding, but it was not mentioned in either of the judgments below, nor is it mentioned by any of my noble and learned friends in the majority. On the arbitrator's finding, it was marketable on that basis. I can readily accept that the value of a contract in the market may be reduced if terminable on an event which the market judges to be likely but not certain, but that was not what the arbitrator found to be the fact in this case. There is, with respect to those who think otherwise, nothing artificial in this approach. If a party is compensated for the value of what he has lost at the time when he loses it, and its value is at that time for any reason depressed, he is fairly compensated. That does not cease to be so because adventitious later events reveal that the market at that time was depressed by the apprehension of risks that did not eventuate. A party is not, after all, obliged to accept a repudiation: he can, if he chooses, keep the contract alive, for better or worse. By describing the prospect of war in
December 2001 as "merely a possibility", the expression twice used by the arbitrator in paragraph 59 of his reasons, the arbitrator can only have meant that it was seen as an outside chance, not affecting the marketable value of the charter at that time.
259:
the state of play so far as the likelihood of some interruption to the contract is concerned"), settlement ("otherwise the position will remain fluid"), consistency ("the idea that a party's accrued rights can be changed by subsequent events is objectionable in principle") and coherence ("the date of repudiation is the date on which rights and damages are assessed"). The judge was not greatly impressed by the charterers' argument along these lines, observing (paras 13, 35) that although certainty is a real and beneficial target, it is not easily achieved, and the charterparty contained within it the commercial uncertainty of the war clause. Lord Mance similarly said (para 24):
263:"Certainty, finality and ease of settlement are all of course important general considerations. But the element of uncertainty, resulting from the war clause, meant that the owners were never entitled to absolute confidence that the charter would run for its full seven-year period. They never had an asset which they could bank or sell on that basis. There is no reason why the transmutation of their claims to performance of the charter into claims for damages for non-performance of the charter should improve their position in this respect."
325:
certainty which is one of the major advantages of
English commercial law, and it encourages the breaching party to delay settlement or prolong litigation. However, it has also been pointed out that the majority decision also reinforces the risk allocation function of contract, and the rule stated in it is both socially desirable and it provides an incentive to inform the other party as early as possible of their intention to breach, thus creating a more efficient outcome from a
28:
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The majority held that because the outbreak of war occurred before the damages fell to be assessed, they could be taken into account. The most important thing was an accurate assessment of damages based on the loss actually incurred, which goes to the root of the compensatory principles that a victim
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23 There is, however, a further answer which I, in common with the arbitrator, consider to be of great importance. He acknowledged the force of arguments advanced by the owners based on certainty ("generally important in commercial affairs"), finality ("the alternative being a running assessment of
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22 The thrust of the charterers' argument was that the owners would be unfairly over-compensated if they were to recover as damages sums which, with the benefit of hindsight, it is now known that they would not have received had there been no accepted repudiation by the charterers. There are, in my
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Golden argued that where there was an available market, the loss should be measured at the date of acceptance of breach. It said that this created finality in contractual negotiations, and certainty because events subsequent to the date of acceptance of a contractual breach would become irrelevant.
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The arbitrator, Mr Robert
Gaisford, reluctantly decided that the outbreak of war had created a limit on the payable damages. NYK Line was liable for no damages after 21 March 2003. Golden appealed, the question being, in what circumstances could a party in breach rely on subsequent events to show
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declaring that it was "‘the worst decision on any aspect of
English commercial law, and certainly shipping law, that has come out of the House of Lords in my entire career in the legal profession..." Academics have raised several concerns about the majority decision, stating that it damages the
250:, dissenting, would have held that damages should be assessed on the date of the breach. That should have meant Golden got damages for four years left on the charterparty. He emphasised the importance of certainty and predictability in English commercial law and said this decision would hurt it.
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of breach of contract will be compensated for the loss of his bargain. The victim should be placed in the position as if the contract were performed. The court should not ignore facts that were available. Golden was trying to argue for compensation exceeding the value of what it had lost.
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217:) for cancellation was if war broke out between Iraq, the United States, the United Kingdom and a number of others. NYK Line, nevertheless repudiated the charter on 14 December 2001, redelivering the ship to Golden. Golden accepted this three days after.
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I cannot, with respect, accept this reasoning. The importance of certainty and predictability in commercial transactions has been a constant theme of
English commercial law at any rate since the judgment of
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QC read the Court of Appeal's judgment as appearing to impair this quality of certainty ("Assessment of
Damages for Wrongful Repudiation", (2007) 123 LQR 9-18) and I respectfully share his concern.
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in a unanimous decision in 2015, holding that it applied to one-off contracts, in addition to the instalment contracts that were at issue in the earlier ruling.
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or "NYK Line" from 10 July 1998. The earliest contractual date for termination was 6 December 2005. The only exception (in clause 33 of the
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Damages should represent the value of the contractual benefits of which the claimant had been deprived by the breach of contract.
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They took the case to an arbitrator to consider how much NYK Line should pay in damages. By that time, America had started the
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Three members of the House of Lords upheld the decision of the Court of Appeal, while Lord
Bingham and Lord Walker dissented.
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549:, 2 Lloyd's Rep 592 (17 January 2003) (another case between the parties in the High Court, decided by Morison J)
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224:, in March 2003. This was just the event that would have allowed NYK Line to cancel the charter, if stayed with it.
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The decision attracted considerable discussion among jurists and academics, with one former judge of the
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278:(1774) 1 Cowp 143, 153, and has been strongly asserted in recent years in cases such as
512:"Landmark UK Supreme Court ruling on default clauses and damages: Bunge SA v Nidera BV"
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Payiataki, Vassia; Evagora, Kyri; Gandhi, Sejal; Archer, Rebecca (1 July 2015).
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Golden Strait
Corporation v Nippon Yusen Kubishika Kaisha "The Golden Victory"
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Jindal Iron and Steel Co Ltd v
Islamic Solidarity Shipping Co Jordan Inc
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case, concerning the measure of damages for breach of contract.
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Scandinavian
Trading Tanker Co AB v Flota Petrolera Ecuatoriana
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543:
Nippon Yusen Kubishiki Kaisha v Golden Strait Corporation
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Golden Strait Corporation v Nippon Yusen Kubishika Kaisha
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Maredelanto Compania Naviera SA v Bergbau-Handel GmbH
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Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha
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that the contractual rights lost were not valuable?
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in 2003 cancelled the contract between the parties.
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380:L Schuler AG v Wickman Machine Tool Sales Ltd
304:) UKHL 49, 1 WLR 1363, 1370. Professor Sir
291:Homburg Houtimport BV v Agrosin Private Ltd
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312:Lord Walker dissented with Lord Bingham.
288:) QB 529, 540-541, 2 AC 694, 703-704;
209:Golden Strait Corp chartered a ship to
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83: (18 October 2005)), affirming
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89:[2005] EWHC 161 (Comm)
77:Golden Strait Corporation v Kaisha
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547:[2003] EWHC 16 (Comm)
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128:Lord Brown of Eaton-under-Heywood
578:2007 in United Kingdom case law
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1:
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419:"Damages for repudiation: an
372:Bunge Corporation v Tradax SA
211:Nippon Yusen Kubishika Kaisha
568:English termination case law
334:United Kingdom Supreme Court
118:Lord Walker of Gestingthorpe
81:[2005] EWCA Civ 1190
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176:damages; breach of contract
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294:UKHL 12, 1 AC 715, 738;
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336:upheld the principle of
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166:Lords Bingham and Walker
158:Lords Carswell and Brown
108:Lord Bingham of Cornhill
563:English remedy case law
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528:[2015] UKSC 43
316:Impact and controversy
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189:[2007] UKHL 12
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113:Lord Scott of Foscote
573:House of Lords cases
523:Bunge SA v Nidera BV
388:Bunge SA v Nidera BV
199:English contract law
423:perspective on the
530: (1 July 2015)
403:Baker v Willoughby
338:The Golden Victory
194:The Golden Victory
21:The Golden Victory
432:Sydney Law Review
417:Zhou, Qi (2010).
275:Vallejo v Wheeler
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439:(4): 579–593.
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375:2 All ER 513
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68:Case history
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349:In contract
327:game theory
155:Concurrence
147:Decision by
557:Categories
450:References
150:Lord Scott
498:Zhou 2010
486:Zhou 2010
474:Zhou 2010
58:Citations
367:1 QB 164
344:See also
236:Judgment
222:Iraq War
197:, is an
171:Keywords
63:2 AC 353
34:Iraq War
421:ex ante
396:In tort
391:UKSC 43
359:2 QB 26
163:Dissent
61:UKHL 12
50:Decided
383:AC 235
272:CJ in
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445:Notes
205:Facts
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42:Court
332:The
32:The
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