Editing Contracts/Fundamental breach
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==Resolution – the ''Suisse Atlantique''== | ==Resolution – the ''Suisse Atlantique''== | ||
The matter came to a head in 1966 in the House of Lords decision ''[[Suisse Atlantique Societe d'Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale|Suisse Atlantique]]''<ref>[1966] 1 Lloyd's Rep. 529</ref>. The case involved a two-year [[time charter]] to export coal, the shipowners to be paid [[freight rate|freight]] | The matter came to a head in 1966 in the House of Lords decision ''[[Suisse Atlantique Societe d'Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale|Suisse Atlantique]]''<ref>[1966] 1 Lloyd's Rep. 529</ref>. The case involved a two-year [[time charter]] to export coal, the shipowners to be paid [[freight rate|freight]] dependant on tonnage of cargo carried. If [[laytime]]{{efn|"Laytime" is the allowable period for the charterer to arrange loading and unloading}} were exceeded, the charterers were to pay [[demurrage]] of $1,000 per day. The charterers caused huge delays and few round trips were made. Demurrage totalled only $150,000, so the owners claimed damages for their full losses, saying they should not be limited to the demurrage terms because the charterer's gross delays amounted to fundamental breach. | ||
The House of Lords boldly held that ''Karsales v Wallis'' had overstated the law, and that whether or not a fundamental breach extinguishes any protection that the defendant might rely on was a "question of construction" and not a "question of law".{{efn|i.e not automatic}} Although the demurrage clause was so absurdly low that it amounted to an exemption clause, nevertheless its existence plainly showed that the parties had contemplated the possibility of delay, so delays would not amount to fundamental breach. | The House of Lords boldly held that ''Karsales v Wallis'' had overstated the law, and that whether or not a fundamental breach extinguishes any protection that the defendant might rely on was a "question of construction" and not a "question of law".{{efn|i.e not automatic}} Although the demurrage clause was so absurdly low that it amounted to an exemption clause, nevertheless its existence plainly showed that the parties had contemplated the possibility of delay, so delays would not amount to fundamental breach. |