Lloyd's Maritime and Commercial Law Quarterly
THE DATE FOR ASSESSING DAMAGES FOR LOSS OF PROSPECTIVE PERFORMANCE UNDER A CONTRACT
The Golden Victory
Where a party to a contract which remains wholly or partially executory on its part commits a breach, which breach entitles the other party to terminate the contract, and the other party does terminate the contract, in relation to the defaulting party’s prospective performance which has now been discharged, should the innocent party’s damages be assessed by reference to the date of the breach, the date of the termination, or the date for the performance? In particular, is the court entitled, in assessing the damages, to take into account any event that occurs or may occur after the date of the termination but before the date for the performance, on the ground that the event may affect the value of the innocent party’s contractual right to that performance? These are the legal questions raised and answered, in the present author’s view, correctly by a majority of the House of Lords, in Golden Strait Corp
v. Nippon Yusen Kubishka Kaisha (The Golden Victory)
.1
However, the facts that strong dissenting opinions were present in the case, and that there had been notable academic reservations over the decision of the Court of Appeal,2
which decision was affirmed by the majority of the House, make it necessary to explore more fully the principles of law involved in answering the above questions.
The facts of the case have been stated in my previous Comment on the decision of the Court of Appeal.3
A brief recapitulation suffices. The owners under a time charter terminated the contract, at a time when the charter still had about four years to run, as the charterers, in breach of the contract, redelivered the vessel to the owners. The owners claimed damages, presumably for loss of profit resulting from non-payment of future hire, on the ground of the charterers’ breach and calculated the amount of damages by reference to the whole remaining four years. The main defence put up by counsel for the charterers was that, since a second Gulf War broke out some 14 months after the termination, which would have given both parties a right to terminate pursuant to cl 33 of the charter had it not been brought to an end earlier, and the charterers would have exercised that right then,
1. [2007] UKHL 12; [2007] 2 WLR 691.
2. GH Treitel, “Assessment of Damages for Wrongful Repudiation” (2007) 123 LQR 9, commenting on Golden Strait Corp
v. Nippon Yusen Kubishika Kaisha (The Golden Victory)
[2005] EWCA Civ 1190; [2005] 2 Lloyd’s Rep 747.
3. Q Liu, “Accepted Anticipatory Breach: Duty of Mitigation and Damages Assessment” [2006] LMCLQ 17, 18.
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