Fercometal SARL v Mediterranean Shipping Co SA (The Simona) [1989] AC 788
The effect of a wrongful repudiation of contract.
Facts
Charterers entered into an agreement with ship owners for a cargo in the vessel ‘Simona.’ A clause of the agreement allowed the charterers the option of termination if the vessel was not ready to load by 9 July 1982. The charterers gave notice to cancel the contract prematurely, thus repudiating the contract. The owners did not accept the repudiation and proceeded with the voyage, tendering a notice of readiness on 8 July. However, the vessel was still loading other cargo and was not ready to load the charterers’ steel. The charterers sent a further cancellation notice on 12 July. The owners claimed dead freight.
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Issues
The question arose as to (1) the effect of the wrongful repudiation on the obligations of the innocent party and (2) whether the charterers lost their right to terminate the contract by their prior repudiation.
Decision/Outcome
Firstly, the Court held that one party’s wrongful repudiation and failure to perform a contract does not have the legal effect of terminating the contract. In the case of wrongful repudiation by one party, the non-repudiating party has the option of either accepting the repudiation or affirming the contract by continuing to fulfil their obligations. If the innocent party affirms the contract, he must continue to tender performance thereof. On the facts, after the charterers’ wrongful repudiation, the vessel owners affirmed the continuance of the contract. The charterers’ independent cancellation option therefore remained available. Clause 10 did not itself impose an obligation on the owners to begin loading by 9 July; it gave the charterers an option to cancel if the vessel was not ready by then. Secondly, an unaccepted wrongful repudiation does not cancel a contractual right of termination. Thus, the charterers’ unaccepted repudiation does not affect their right of termination if the vessel is not ready by 9 July. The charterers could exercise that option once its conditions were satisfied. Their premature repudiation did not, without acceptance, deprive them of it. The House of Lords dismissed the owners’ appeal, leaving the setting aside of the dead-freight award in place.
Judgment transcript. Parallel citations: [1988] 3 WLR 200; [1988] 2 All ER 742; [1988] 2 Lloyd’s Rep 199.
