Bunge Corporation v Tradax Export SA [1981] UKHL 11; [1981] 1 WLR 711
Contractual conditions, late notice and the assessment of damages.
Facts
Bunge bought 15,000 long tons of US soya bean meal from Tradax, with a tolerance of 5% more or less at the buyer’s option. The goods were to be shipped in three monthly instalments of 5,000 long tons. The dispute concerned the first instalment, originally due in May 1975, for which the delivery period had been extended to June.
The contract incorporated GAFTA form 119. Clause 7 required Bunge to give at least 15 consecutive days’ notice of the vessel’s probable readiness and the approximate quantity to be loaded. Tradax would then nominate a US Gulf port where the goods could be loaded.
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Bunge’s notice reached Tradax’s brokers on 17 June, leaving less than the required notice before the extended delivery period ended. Tradax declared Bunge in default on 20 June and claimed damages. The market price had fallen substantially.
The arbitrator and GAFTA appeal board found for Tradax. Parker J reversed that decision, but the Court of Appeal restored liability while reducing the quantity used to assess damages. Bunge appealed to the House of Lords on liability; Tradax cross-appealed on damages.
Issues
Was the notice requirement a condition, so that breach entitled Tradax to terminate and claim damages, or an innominate term whose breach justified termination only if its consequences were sufficiently serious?
The cross-appeal concerned whether damages should be calculated on the mean instalment quantity of 5,000 long tons or the minimum 4,750 long tons that Bunge was obliged to take.
Decision
The House of Lords unanimously dismissed both appeals. The notice requirement was a condition, and Tradax was entitled to terminate for its breach. The reduced damages assessment, based on 4,750 long tons, also stood.
Why the notice requirement was a condition
The classification of the term depended on the contract’s meaning and commercial setting. It did not depend simply on how serious this particular delay proved to be. Nor was the express label “condition” necessary: the parties’ intention could be apparent from the contract read as a whole.
Timely notice enabled Tradax to choose the loading port and arrange for the goods to be ready within the delivery period. The buyer’s performance was therefore a prerequisite to the seller’s performance of an essential obligation. Certainty mattered because commercial parties needed to know their rights as events occurred, including where goods were traded through a chain of contracts.
Bunge relied on Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd, arguing that termination required deprivation of substantially the whole contractual benefit. The House explained that this approach addressed the consequences of breaching an innominate term. It did not mean that a term already classified as a condition could be treated differently merely because the particular breach caused limited harm.
The judges nevertheless cautioned against classifying terms as conditions too readily. The decision rested on the wording, purpose and commercial context of this notice obligation; it did not make every provision in a commercial contract a condition.
The damages cross-appeal
Tradax relied on the final sentence of clause 22, which used the mean contract quantity when assessing damages for default in shipment or delivery. The House held that this wording concerned a seller’s breach of its shipment or delivery obligations. It did not govern the buyer’s default here.
Ordinary damages principles therefore applied. Because Bunge could have performed by taking 5% less than the stated instalment quantity, damages had to reflect the minimum 4,750 long tons rather than 5,000.
