Bunge Corporation v Tradax SA [1981] 1 WLR 711

Key point

  • Time clauses are invariably conditions in commercial contracts even when breach does not deprive the innocent party substantially the whole of the benefit of the contract

Facts

  • Late notice was given by the buyer (D) of soya bean meal to the seller (C) as to the time of shipment
  • C sued the D for damages for wrongful repudiation of contract on the ground that the term fixing the notice period (the ‘time clause’) was a condition
  • D argued that the time clause was an innominate term

Held (House of Lords)

  • C was entitled to treat the contract as repudiated and were awarded damages
  • The time clause was a condition and not an innominate term

Lord Wilbeforce

Time clauses not innominate terms

  • The analysis by Diplock LJ in Hong Kong Fir cannot be applied to a time clause which can only breached in one way, by being late, as compared to a seaworthiness clause which can be breached in different ways with differing severity
  • It will lead to uncertainty in commercial contracts as to exactly how long a duration of a delay amounts to a repudiatory breach

Conditions

  • It is open to the parties to agree that, as regards a particular obligation, any breach shall entitle the party not in default to treat the contract as repudiated
  • The court should recognise the term as a condition if the intention of the parties so indicate, the ‘gravity of breach’ approach in Hong Kong Fir is unsuitable
  • The actual use of the word ‘condition’ is not required

Current case

  • Broadly speaking time is of the essence in mercantile contracts
  • In this present context it is clearly essential that both buyer and seller should know precisely what their obligations are, most especially because the ability of the seller to fulfil his obligation may well be totally dependent on punctual performance by the buyer

Commentary

  • In Bremer Handels GmbH v Vanden-Avenne Izegem PVBA [1978] 2 Lloyd’s Rep. 109 , a time clause in another soya bean contract required the seller to advise the buyer ‘without delay’ of any impossibility of shipment because of prohibition of export, but there was no time limit; hence the time clause was held to be an innominate term