Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007]

Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] UKHL 12, commonly known as The Golden Victory, is a notable English contract law and commercial law case that addresses the assessment of damages for breach of contract.

Golden Strait Corp chartered a ship to Nippon Yusen Kubishika Kaisha, with the earliest termination date being 6 December 2005, except in the event of war between specified countries. Despite the war clause, Nippon repudiated the charter on 14 December 2001, citing the outbreak of the Iraq War as the reason. Golden accepted the repudiation three days later and sought damages. The arbitrator, Mr Robert Gaisford, determined that damages would be limited due to the war, with Nippon being liable for no damages after 21 March 2003.

Golden appealed, arguing that damages should be measured at the date of the breach, emphasising finality and certainty in contractual negotiations. The House of Lords, with a majority, upheld the decision of the Court of Appeal. The majority considered that the outbreak of war, occurring before the assessment of damages, could be taken into account for an accurate assessment based on the loss actually incurred.

Lord Bingham dissented, advocating for damages to be assessed on the date of the breach to ensure certainty and predictability in English contract law and commercial law. He emphasised that allowing the consideration of subsequent events could harm these foundational principles.

The majority rejected the argument that allowing damages based on subsequent events would lead to overcompensation, asserting that contracts are made to be performed. The dissenting opinion, however, stressed the importance of certainty and predictability in commercial transactions, expressing concern about potential negative implications for English contract law and commercial law.

The decision sparked controversy and discussion, with critics viewing it as detrimental to the certainty that is a significant advantage of English contract law and commercial law. Concerns were raised about potential delays in settlements and prolonged litigation encouraged by the decision. Despite the controversy, some argued that the decision reinforced the risk allocation function of contracts and provided an incentive for parties to communicate their intention to breach early, creating a more efficient outcome from a game theory perspective.

The Golden Victory principle was later upheld by the United Kingdom Supreme Court in Bunge SA v Nidera BV [2015], applying it not only to instalment contracts but also to one-off contracts.
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