273:"It is undesirable because it puts owners too much at the mercy of their charterers, who can happily drain the last drop and more of profit at a time of raised market rates, taking the risk of late redelivery, knowing that they will never have to pay their owners more than the current market rate for the overrun period, a rate which will never in truth properly reflect the value to the charterers of being able to fit in another spot voyage at the last moment. It is uncommercial because, if it is demanded that the charterers need to know more than they already do in the ordinary course of events, when they already know that a new fixture, in all probability fixed at or around the time of redelivery, will follow on their own charter, then the demand is for something that cannot be provided. All that an owner will be able to tell his charterer in most cases is that he plans to fix his vessel anew at the time of redelivery. To which the charterer might reply: 'well I know that already! But donât expect that your telling me that is enough to put me on notice for the purpose of claiming loss of fixture damages, if I deliver the vessel late and you turn out to lose your fixture!' Such an answer, however, reflects the uncommerciality and error of the charterersâ submission."
302:"The case therefore raises a fundamental point of principle in the law of contractual damages: is the rule that a party may recover losses which were foreseeable ("not unlikely") an external rule of law, imposed upon the parties to every contract in default of express provision to the contrary, or is it a prima facie assumption about what the parties may be taken to have intended, no doubt applicable in the great majority of cases but capable of rebuttal in cases in which the context, surrounding circumstances or general understanding in the relevant market shows that a party would not reasonably have been regarded as assuming responsibility for such losses?"
407:"it is important not to lose sight of the basic point that, in the absence of special knowledge, a party entering into a contract can only be supposed to contemplate the losses which are likely to result from the breach in question - in other words, those losses which will generally happen in the ordinary course of things if the breach occurs. Those are the losses for which the party in breach is held responsible - the stated rationale being that, other losses not having been in contemplation, the parties had no opportunity to provide for them."
322:âThe test appears to be: have the facts in question come to the defendantâs knowledge in such circumstances that a reasonable person in the shoes of the defendant would, if he had considered the matter at the time of making the contract, have contemplated that, in the event of a breach by him, such facts were to be taken into account when considering his responsibility for loss suffered by the plaintiff as a result of such breach.â
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363:"I agree that cases of departure from the ordinary foreseeability rule based on individual circumstances will be unusual, but limitations on the extent of liability in particular types of contract arising out of general expectations in certain markets, such as banking and shipping, are likely to be more common. There is, I think, an analogy with the distinction which
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s conclusion - that a defaulting party would not be liable for reasonably foreseeable costs if the parties did not intend the party in breach to have assumed liability for those costs when the contract was formed - had led to some confusion. Hamblen J commented that there were two distinct approaches
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The question was how much
Transfield should pay to Mercator for returning the ship late. Transfield argued they should only pay an amount reflecting the difference between the first contract rate and the market rate for daily hire during the delay, at the market rate prevailing then. This would make
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The dissenting arbitrator, however, concluded that a reasonable person in
Transfield's position would not have understood he was assuming liability for the risk of the type of loss that occurred. The shipping market's general understanding was that liability was restricted to the difference between
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AC 239, 257-258 between terms implied into all contracts of a certain type and the implication of a term into a particular contract... It seems to me logical to found liability for damages upon the intention of the parties (objectively ascertained) because all contractual liability is voluntarily
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as arising "naturally, i.e. according to the usual course of things, from such breach of contract itself". It fell within that rule because it was damage "of a kind which the , when he made the contract, ought to have realised was not unlikely to result from a breach of contract ".
265:"damages for late redelivery should be limited to the overrun period measure unless the owners can show that, at the time of the contract, they had given their charterers special information of their follow-up fixture, is both undesirable and uncommercial."
350:
to think that
Transfield was going to be liable for any loss, however enormous, when it had no knowledge or control over what contract Mercator might be making next. To work out what is "in the parties' contemplation" and what is not, Lord Hoffmann said,
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undertaken. It must be in principle wrong to hold someone liable for risks for which the people entering into such a contract in their particular market, would not reasonably be considered to have undertaken."
355:"the only rational basis for the distinction is that it reflects what would have been reasonable and have been regarded by the contracting party as significant for the purposes of the risk he was undertaking."
212:$ 158,301.17. Mercator argued Transfield should pay the amount they had lost on the new chartering contract because of the late return, which adding up the cost over the months would be $ 1,364,584.37.
340:"sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within contemplation".
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gave a concurring judgment) noted that it had always been assumed that damages for late delivery were the difference between market and charter rate. As to the core issue in this case, he said this.
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International SA) on 8 May 2004 at $ 39,500 a day for four to six months. But
Transfield did not return the ship until 11 May. With two weeks to go they were appointed to carry coals from
310:. The question was not simply, what was a probable loss, but what the parties had in mind, or what was in their contemplation, regarding the nature of the business transaction. He noted
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saying if the damage were exceptional and unnatural it would be harsh to make a party liable for it, because had he known he would have pushed for more time in the first place.
180:. Transfield was meant to have the ship for five to seven months, and return it no later than midnight on 2 May 2004. Mercator contracted to let the ship to another charterer (
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490:
445:, would apply in most cases, but in exceptional situations the "broader" approach based on whether there was also "an assumption of responsibility" should also be applied.
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of the case, by a majority, decided in favour of
Mercator. They held that the loss from getting a lower price on the next chartering contract was within the first rule in
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Lord
Hoffmann noted, "If this voyage could not reasonably have been expected to allow redelivery by 2 May 2004, the owners could probably have refused to perform it": see
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Lord
Hoffmann said one should look at "the background of market expectations". Liability for the next contract would be "completely unquantifiable". And according to
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He stated that the majority of arbitrators had applied too crude a test of what the type of foreseeable loss was. The industry's common understanding was crucial to
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244:"any departure from this rule likely to give rise to a real risk of serious commercial uncertainty which the industry as a whole would regard as undesirable".
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208:. Since it was returned late, the new charterer, Cargill, agreed to take the ship, but only at $ 31,500 a day, since the freight market had fallen sharply.
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Tettenborn, 'Hadley v Baxendale Foreseeability: a Principle Beyond its Sell-by Date' (2007) 23 Journal of Contract Law 120
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Agreement-Centred Approach to Remoteness and Contract Damages' in Cohen and McKendrick (ed),
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Lloydâs Rep 175, 183, asking what a reasonable person would have thought his responsibility was.
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Robertson, 'The basis of the remoteness rule in contract' (2008) 28 Legal Studies 172
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Satef-Huttenes Albertus SpA v Paloma Tercera Shipping Co SA (The Pegase)
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Hyundai Merchant Marine Co Ltd v Gesuri Chartering Co Ltd (The Peonia)
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the market rate and the charter rate for the period of lateness and
81:, 3 WLR 345, 4 All ER 159, 2 All ER (Comm) 753, 2 Lloyd's Rep 275
666:, In-House Lawyer, June 2010 Legal Briefing, accessed 22 March 2022
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Arta Shipping Co Ltd v Thai Europe Tapioca Service Ltd (The Johnny)
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In this case it was not. It was contrary to the principle in
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upheld the arbitrators' ruling. In concluding his opinion,
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Torvald Klaveness A/S v Arni Maritime Corpn (The Gregos)
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Alma Shipping Corpn of Monrovia v Mantovani (The Dione)
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Transfield Shipping was a charterer. It hired use of
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Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd
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Sylvia Shipping Co Ltd v Progress Bulk Carriers Ltd.
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469:Victoria Laundry (Windsor) v Newman Industries
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579:EWCA Civ 901, 1 All E.R. (Comm) 685
464:(1854) 9 Exch 341; 156 ER 145 Ex Ct
644:2 KB 528; affirmed in The Heron II
603:2 Lloydâs Rep 1, 2; Bingham LJ in
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370:Liverpool City Council v Irwin
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