Lloyd's Maritime and Commercial Law Quarterly
THE HONGKONG FIR DOCKS IN AUSTRALIA
Koompahtoo v. Sanpine
It is truly said that “[f]ew modern decisions have captured the imaginations of contract lawyers as much as Hongkong Fir Shipping Co Ltd v. Kawasaki Kisen Kaisha Ltd”,1 a case on termination for breach of contract decided in 1961.2 The Court of Appeal there accepted that not all terms are necessarily either “conditions” (essential terms any breach of which entitles the innocent party to terminate) or “warranties” (inessential terms no breach of which entitles the innocent party to terminate). Rather, besides conditions or essential terms, there are inessential terms of two types: those no breach of which entitles the innocent party to terminate; and those breach of which entitles the innocent party to terminate if the breach would deprive the innocent party of substantially the whole of the benefit of the contract (but not otherwise). The latter are “intermediate terms”.3
The case still fascinates as a sign of the shift from classical to modern contract law: a shift (it is said) from a static model which favoured binary rules and focused nearly exclusively on events at the moment of formation, to a dynamic model where multifaceted rules are more common and particular pre- and post-formation circumstances are given more importance.4
Despite its age, Hongkong Fir was only recently accepted into Australian law as a necessary part of the High Court’s reasoning, in Koompahtoo Local Aboriginal Land Council v. Sanpine Pty Ltd.5 It is notable if unsurprising, given the growth of modern contract doctrine, that the majority said that Hongkong Fir “has long since passed into the mainstream law of contract as understood and practised in Australia”.6 The modern has since become classical.7
Hongkong Fir’s formal reception in Australia is also notable for
1. J W Carter, G J Tolhurst and E M Peden, “Developing the Intermediate Term Concept” (2006) 22 JCL 268, 268.
2. Hongkong Fir [1962] 2 QB 26; [1961] 2 Lloyd’s Rep 478.
3. Or “innominate terms”. On the origins of this expression, see Carter, Tolhurst and Peden (2006) 22 JCL 268, 271 fn 19 and J C Smith, “Anticipatory Breach of Contract”, in E Z Lomnicka and C G J Morse (eds), Contemporary Issues in Commercial Law (London, 1997), 177 fn 11.
4. M A Eisenberg, “The Emergence of Dynamic Contract Law” (2001) 2 Theoretical Inquiries in Law 1, 6–7, 76–77. For example, events leading up to formation may be part of the commercial context now held to be central to contractual interpretation: see Eisenberg, ibid, 6; G McMeel, The Construction of Contracts: Interpretation, Implication and Rectification (Oxford, 2007), 123–151.
5. [2007] HCA 71; (2007) 82 ALJR 345. Hongkong Fir had been assumed to be correct in Ankar Pty Ltd v. National Westminster Finance (Aust) Ltd (1987) 162 CLR 549, 562.
6. At [50].
7. Bunge Corp, New York v. Tradax Export SA Panama [1981] 1 WLR 711, 715; [1981] 2 Lloyd’s Rep 1, per Lord Wilberforce.
CASE AND COMMENT
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