Maredelanto Cia Naviera SA v Bergbau-Handel GmbH

An owner’s contractual assurance that a vessel is expected ready to load on or about a stated date is a condition. It warrants that the owner honestly held that expectation on reasonable grounds. Its breach entitles the charterer to terminate without proving that the breach caused serious consequences.

Where an anticipatory repudiation is accepted, damages compensate the value of the contractual rights actually lost. They must reflect contingencies which, if the contract had continued, were certain to reduce or eliminate that value. A claimant therefore recovers no substantial damages where the other party would certainly and lawfully have cancelled the contract at the later stage.

The owners chartered the Mihalis Angelos to the charterers for a voyage from Haiphong to Northern Europe. The charterparty stated that the vessel was expected ready to load about 1 July 1965 and gave the charterers an option to cancel if she was not ready by 20 July.

The charterers purported to cancel on 17 July on grounds of force majeure. The owners treated that notice as a repudiation. Arbitrators held that the purported cancellation was wrongful but that the owners had suffered no more than nominal loss, because the charterers would certainly have exercised their later cancellation option. Mr Justice Mocatta awarded the owners £4,000 damages. The charterers appealed.

The central questions were whether the expected-readiness term entitled the charterers to terminate and, if not, how damages for their anticipatory repudiation should be assessed.

Appeal allowed unanimously. Lord Denning MR, Edmund Davies LJ and Megaw LJ held that the charterers had been entitled to terminate the charterparty.

1. The expected-readiness term was a condition. The statement that the vessel was expected ready to load about 1 July was a contractual assurance of the owner’s honest expectation, founded on reasonable grounds. The arbitrators’ finding that the owners lacked reasonable grounds established its breach. The court treated the commercial need for certainty, and the established treatment of comparable clauses, as justifying classification as a condition. The charterers could therefore terminate even though their notice relied on the mistaken ground of force majeure. The principle in British & Beningtons v Cachar (1923) AC 48 permitted reliance on the right ground subsequently.
2. The cancelling clause. This issue was unnecessary to the result. Edmund Davies LJ and Megaw LJ considered that clause 11 did not permit cancellation before 20 July merely because it had become certain that the vessel would miss that date. Lord Denning MR took the contrary view. The majority’s discussion was therefore obiter.
3. Damages in the alternative. Each judge also concluded that, if the charterers’ notice had been a wrongful anticipatory repudiation, the owners would have recovered no more than nominal damages. The actionable breach was the accepted repudiation, not an assumed future failure to load. Damages had to reflect the value of the contract had it continued, including the certain future exercise of the charterers’ contractual cancellation option. That event would have made the charter worthless to the owners.

The court answered the relevant questions in the award in the charterers’ favour and, absent agreement, remitted the matter to the arbitrators to bring it to finality. The charterers were awarded costs in the Court of Appeal and below.

• Court of Appeal — allowed the charterers’ appeal in [1971] 1 QB 164, holding that the expected-readiness term was a condition and that the owners had, in any event, suffered no substantial loss.
• High Court (QBD, Commercial List) — Mr Justice Mocatta upheld the conclusion that the charterers had repudiated the charterparty and awarded the owners £4,000 damages. No report citation is stated in the judgment.
• Arbitration — the arbitrators held that the charterers’ purported cancellation was wrongful but that the owners were entitled only to nominal damages, as the charterers would certainly have cancelled later under the cancelling clause.