Hong Kong Fir Shipping v Kawasaki [1962] 2 QB 26

Court of Appeal

Basic Facts: H (Hong Kong Fir) chartered a ship to K (Kawasaki) for 24 months. After 12 months, K repudiated the contract due to a breach concerning the ship’s seaworthiness and the competence of the crew. H kept a competent crew and sued for breach.

Issue for the Court: When can a contract be terminated due to breach, and what constitutes a fundamental breach?

Held : The breach was not fundamental enough to terminate the contract.

• Sellers LJ: The breach related to seaworthiness was a warranty rather than a condition. The performance was not fundamentally altered by the breach. A breach must go to the root of the contract to justify termination; otherwise, damages are the appropriate remedy.

• Upjohn LJ: The seaworthiness clause, while important, did not constitute a condition precedent in the sense that trivial breaches did not justify immediate termination. Breach of a warranty allows for damages but not necessarily termination of the contract.

• Diplock LJ: Terms may be classified as conditions or warranties based on their impact on the contract’s overall purpose. If a breach deprives the innocent party of substantially the whole benefit of the contract, it can be treated as a condition allowing for termination; otherwise, it is a warranty.