Bunge Corporation v Tradax Export SA

Ratio Decidendi

Facts

Under a contract for the sale of soya bean meal, the buyers were obliged to give the sellers at least fifteen consecutive days' notice of the probable readiness of the vessel that was to load the goods, so that the sellers could nominate the loading port in time. The buyers gave their notice of readiness several days late. The sellers treated the late notice as a breach of condition entitling them to terminate the contract and claim damages; the buyers argued the term was not a condition and that the breach, not being serious, gave rise only to damages.

Judgment Summary

The House of Lords held that the buyers' obligation to give timely notice of readiness was a condition of the contract, so the sellers were entitled to terminate on the buyers' late performance regardless of how serious the consequences of the delay actually were. Although many terms are 'innominate' (as in Hong Kong Fir Shipping), whether a term is a condition depends on the intention of the parties and the nature of the contract; and in mercantile contracts — especially those forming part of a string of contracts, where performance by each party depends on timely performance by the next — certainty is of paramount importance. Time stipulations of this kind are therefore generally to be treated as conditions ('of the essence'), so that the parties can know at once whether a breach entitles termination without having to wait and assess the gravity of its consequences. Lord Wilberforce and Lord Roskill emphasised the commercial need for certainty and predictability. The case is the leading authority on the treatment of time clauses as conditions in commercial contracts and on how courts classify contractual terms.

Key Quotes

Subsequent Treatment