Termination and Step-In Rights

Notes

1 Such agreements are often described as carry over agreements and are discussed in more detail in ch 17.

2 [2001] CLC 1552.

3 [1998] 1 Lloyd’s Rep 609, [1998] 1 A11 ER 883.

4 Misrepresentation Act 1967 s 2(2).

5 See Johnson v Agnew [1980] AC 367, where Lord Wilberforce highlighted the difference between ‘rescission’ and the concept of a rescission ab initio, approving the observation of Lord Porter in Heyman v Darwins Ltd [1942] AC 356, 399 (HL), that where one party exercises his right to treat himself as discharged from a contract, to say that the contract is rescinded may not be sufficient, ‘but the fuller expression that the injured party is thereby absolved from future performance of his obligations under the contract is a more exact description of the position. Strictly speaking, to say that on acceptance of the renunciation of a contract the contract is rescinded is incorrect’.

6 See Article X of the Shipbuilders’ Association of Japan pro forma shipbuilding contract.

7 Berkeley Community Villages Ltd v Pullen [2007] EWHC 1330 (Ch) at [79]; Universal Cargo Carriers Corp v Citati (No 1) [1957] 2 QB 401.

8 H G Beale, Chitty on Contracts (32nd edn, Sweet & Maxwell 2015).

9 Universal Cargo Carriers Corp v Citati (No 1) (n 7).

10 See Baird Textile Holdings Ltd v Marks & Spencer plc [2001] EWCA Civ 274 at [59]–[61], where it was stated that where there is ‘an agreement on essentials with sufficient clarity’ then ‘an intention to create legal relations is normally presumed’.

11 [1979] AC 757.

12 Universal Cargo Carriers Corp v Citati (No 1) (n 7) at 437.

13 Afovos Shipping Co SA v R Pagnan & Fratelli (The Afovos) [1983] 1 WLR 195, 203 (HL, Lord Diplock); Andrew Tettenborn, Neil Andrews and Malcolm Clarke, Contractual Duties: Performance, Breach, Termination and Remedies (1st edn, Sweet & Maxwell 2012) 129.

14 [2009] EWHC 2974 (Comm).

15 Alfred Toepfer International GmbH v Itex Itagrani Export SA [1993] 1 Lloyd’s Rep 360 (Saville J).

16 SK Shipping (S) PTE Ltd v Petroexport Ltd (The Pro Victor) [2009] EWHC 2974 at [84] (Flaux J).

17 Universal Cargo Carriers Corp v Citati (No 1) (n 7) at 446–47, which cites British and Beningtons Ltd v North West Cachar Tea Co Ltd [1923] AC 48, 72 (HL).

18 See Metropolitan Water Board v Dick, Kerr & Co Ltd [1918] AC 119 as a good illustration of this.

19 Trade and Transport Inc v Iino Kaiun Kaisha Ltd (The Angelia) [1973] 1 WLR 210, 219.

20 This is described as ‘frustrating delay’.

21 Afovos Shipping Co SA v R Pagnan & Fratelli (The Afovos) (n 13).

22 [2009] EWCA Civ 75.

23 Afovos Shipping Co SA v R Pagnan & Fratelli (The Afovos) (n 13).

24 See Stocznia Gdynia SA v Gearbulk Holdings Ltd (n 22) para 20.

25 Woodar and Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277. In this case it was held that the serving of a termination notice in circumstances in which the party serving it undertook to perform the contract if the court ruled that it was not entitled to terminate does not necessarily evince an intention not to be bound.

26 Stocznia Gdynia SA v Gearbulk Holdings Ltd (n 22).

27 Robinson v Harman (1848) 1 Exch 850, 855.

28 The question is what is inadequate. Where there is no damage it is not sufficient to extend the rights in general damages.

29 White & Carter v McGregor [1962] AC 413 (HL).

30 Hain SS Co Ltd v Tate & Lyle Ltd (1936) 41 Com Cas 350, 355.

31 Segal Securities Ltd v Thoseby [1963] 1 QB 887; Yuhong Linc Ltd of Korea v Rendsberg Investments Corp of Liberia [1996] 2 Lloyd’s Rep 604, 607.

32 Stocznia Gdanska SA v Latvian Shipping Co [2002] EWCA Civ 889, [2002] 2 Lloyd’s Rep 436.

33 Peyman v Lanjani (1985) Ch 457.

34 For further discussion on this issue, see Chitty on Contracts (n 8) para 24–005.

35 The particular circumstances in which a waiver may occur and the effectiveness of a non-waiver provision is considered in ch 6 at paras 6.86 to 6.87.

36 The lex situs, as to which, see below at para 13.78.

37 Whilst certain arbitral regimes (such as the International Chamber of Commerce and the London Court of International Arbitration) have introduced provisions for ‘emergency arbitration’, there is no such provision under the terms of the London Maritime Arbitrators Association (LMAA). However, the LMAA will adopt measures to expedite the conclusion of disputes if this is needed. Arbitration is considered further in ch 20.

38 The lex situs or lex loci rei situs is the law of the place where the relevant property is situated. Title is likely to be the premise for the Company’s right to possession. It may be the case that the Company and the Contractor intended under their contract that title should pass to the Company as materials were incorporated into the work. However, it may be that, in the country where the work is located (the lex situs), title does not pass until some further step is taken, such as registration or completion, which is likely to require the cooperation of the Contractor.

39 Behnke v Bede Shipping Co Ltd (1927) 27 Ll L Rep 24.

40 See, for example, C N Marine Inc v Stena Line A/B (The Stena Nautica) [1982] 2 Lloyd’s Rep 336.

41 See the comments of Hirst J in Gyllenhammar v Split [1989] 2 Lloyd’s Rep 403 at 422. He noted that the ‘voluminous specification’ showed that the relevant contract was ‘a very complex contract requiring extensive co-operation between the parties on a number of matters, in particular modifications, optional variations, and perhaps most important of all, matters of detail (some by no means unimportant) left undefined in the specification. In my judgment these factors, coupled with the consideration that the work would take place in a foreign yard outside the Court’s jurisdiction, would tell strongly against an order for specific performance being appropriate in the present case’.

42 Torts (Interference with Goods) Act 1977 s 3.

43 See further Michael Jones, Anthony Dugdale and Mark Simpson (eds), Clerk and Lindsell on Torts (21st edn, including 1st Supplement, Sweet & Maxwell 2014 para 17–89.

44 Torts (Interference with Goods) Act 1977 s 4; see also Clerk and Lindsell on Torts (n 43) para 17–92 and CPR 25.1.1(c) and (e). An example of such an order is Howard E Perry & Co Ltd v BritishRailways Board [1980] 1 WLR 1375 (HL). In that case, the Court exercised its discretion to grant relief on the basis that the claimants had a strong case for a final order for delivery up and damages would not compensate the claimant. Interestingly, the Court held that jurisdiction to grant interim relief was not limited to cases where there was a danger that the goods would be disposed of, lost or destroyed.

45 See also Merchants’ Trading Company v Banner (1871) LR 12 Eq 18.

46 [1975] AC 396.

47 Arbitration Act 1996 s 48(5).

48 ibid s 39(4). The LMAA terms, for example, do not grant any power to grant interim injunctions: see Starlight Shipping Co v Tai Ping Insurance Co Ltd [2008] 1 Lloyd’s Rep 230 at 234. The right in section 39(1) is ‘opt in’: see Kastner v Jason [2005] 1 Lloyd’s Rep 397 at 401.

49 See further discussion in ch 20.

50 This could be under the Court’s general powers in s 37 of the Senior Courts Act 1981 or on an interim basis in support of arbitration under s 44(2) of the Arbitration Act 1996. If the application is not urgent, the Company cannot apply to the court unless the tribunal consents or the other parties agree: see Arbitration Act 1996 s 44(4).

51 S 44 (5) of the Arbitration Act 1996.

52 For the difficulties of calculating the costs of what might or might not have been when a specification changes, see Petromec Inc v Petroleo Brasileiro SA [2007] EWCA Civ 1371, affirming [2007] EWHC 1589 (Comm).

53 A cautionary tale for contractors is given in the Solitaire arbitration and litigation. See, for example, Sembawang Corp Ltd v Pacific Ocean Shipping Corp (No 3) [2004] EWHC 2743 (Comm).

54 [2000] All ER (D) 1873. At para 22 of the judgment, Tomlinson J stated that: ‘It would be to my mind at any rate unusual if a shipbuilding contract provided that, notwithstanding the Builder’s default relied upon to effect a termination of the Builder’s entitlement to complete the contract works, the Builder remained entitled to payment of such part of the contract price as remained unpaid at the time of exercise of the Owner’s right so to terminate the Builder’s entitlement. It is of course a question of construction whether that result has in this contract been achieved. But if it was intended to be achieved I would have expected that the parties would have spelled out in some detail the entitlement of the Owner to recover the cost of completion from the Builder…. [i]f contractual instalments of the Contract Price are intended to be payable notwithstanding service of a valid notice [of the right to take possession], I would have expected this to be expressed in clear terms rather than left as a conclusion to be spelled out of the arguable survival of contractual obligations.’

55 [2001] EWCA Civ 862.

56 The authors did not draft the contract!