The Hansa Nord - 1976

The Hansa Nord [1976] QB 44

Construction of contractual terms as ‘conditions’ and the right to terminate a contract.

Facts

Pursuant to a contract of sale, a German company agreed to sell a Dutch company 12,000 tons of citrus pulp pellets for use in cattle feed. A clause in the contract stipulated that the shipment is “to be made in good condition.” The buyer sought to reject the goods on the ground that “not all of the goods” were shipped in good condition. However, all of the goods were usable for the same intended purpose.

Issue

The question arose as to whether the buyer was entitled to reject the goods on the grounds that (1) the term “good condition” is construed as a contractual condition’; or, (2) the breach was substantial.

Held

As a general rule, whether a contractual breach entitles the other party to repudiate the contract depends on whether the breached stipulation, on the contract’s construction, constitutes a ‘condition.’ In the case law following the Sales of Good Act 1893, the right to repudiate is the breach of a condition or if it is so substantial as to go to the root of the contract. On the facts, firstly, in assessing the term “shipped in good condition,” the Court viewed that the buyer should not have a right to reject an entire cargo shipment due to ‘some’ goods being in bad condition. Thus, the term must be construed as an intermediate stipulation and not a condition, the breach of which does not give the buyer the right to reject the goods but solely a right to claim for damages. Secondly, as all of the goods are usable for the same intended purposes, there is no substantial breach of the term that goes to the root of the contract. Accordingly, the buyer did not have the right to reject the goods but solely to claim for damages for the breach of an intermediate term.

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