Common law right to terminate and failure to pay


Whilst this case featured a shipping contract between a ship owner and some traders for the hire of some ships, some interesting points were made in relation to the rights of termination that apply to commercial contracts generally in the context of repeated late payment.

The Court of Appeal (“CA”) referred to the distinction between different types of contractual terms.

Classification of contractual terms

A contract term can be classified as a condition, a warranty or what is called an intermediate or innominate term and the classification affects the innocent party’s right to terminate. Generally, how a term will be classified depends on the intention of the parties and the interpretation of the contract:



Payment term not a condition

The CA interpreted the payment obligation as an intermediate term not a condition in line with the HC’s decision. It considered that:

Was there a repudiatory breach?

Points to note:

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