The Mihalis Angelos [1971]

The Mihalis Angelos [1971] 1 QB 164 addressed the nature of contractual terms, specifically focusing on expected readiness clauses in charterparties, establishing that such clauses are invariably conditions to ensure commercial certainty. The central issue revolved around whether the expected readiness clause was a condition, the breach of which would entitle the innocent party to terminate the contract.

The case involved a charterparty for the Mihalis Angelos to transport mineral ore from Haiphong to Europe. The charterparty contained an expected readiness clause, describing the ship as expected ready to load under this charter about 1st July, 1965. Additionally, a cancelling clause allowed the charterers to cancel the contract if the vessel was not ready to load by July 20, with a 48-hour notice before the vessel reached Haiphong. The ship was still in Hong Kong on July 17, making it impossible to reach Haiphong by the specified date. Consequently, the charterers canceled the contract, leading the shipowners to claim damages for the breach of contract.

The Court of Appeal held that the expected readiness clause was indeed a condition and that its breach entitled the charterers to terminate the contract. As a result, the charterers were not liable for the breach of contract. Megaw LJ, delivering the judgment, emphasised the advantage of categorising commonly used clauses as conditions, as it provided clarity without the need for a case-by-case determination of whether a breach went to the root of the contract. He asserted that there was no injustice in allowing the charterer to terminate, especially when it was firmly established by authority that such a clause constituted a condition.

The case highlighted the concept of anticipatory repudiation or breach of contract, wherein one party declares its intention not to perform its obligations under the contract before the performance is due. The decision underscored the importance of clarity and certainty in commercial agreements, particularly in widely used contractual clauses, and established that expected readiness clauses are to be treated as conditions, ensuring a straightforward determination of the consequences of their breach.
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