The Alaskan Trader [1984] 1 All ER 129

Court: High Court

Facts: Midway through a time charter, the charterers (D) sought to prematurely return the ship to the owners (C) in a repudiatory breach of contract. However, C went ahead with expensive repairs and maintained a crew ready to sail. C sought an arbitral award for the contract price under the charter; the arbitrator held that C had no legitimate interest in affirming the contract. C appealed the arbitral decision, challenging the validity of the legitimate interest test, arguing that it was strictly obiter when laid down by Lord Reid in White and Carter as no argument was presented on it.

Issue: Was the legitimate interest test valid for determining whether an innocent party can affirm a repudiated contract, and did the arbitrator err in applying this test?

Held: Claim denied; the arbitrator had not made an error of law in his decision.

Key Judicial Statements: Lloyd J stated that there is a constraint on the innocent party's right to not accept a repudiation in extreme cases if there is no legitimate interest in performing the contract rather than claiming damages. For there to be no legitimate interest, the conduct of the innocent party in affirming the contract must be wholly unreasonable, not merely unreasonable. Lloyd J also clarified that in cases where affirmation is fettered, it is more accurate to say that the court, on equitable grounds, refuses to allow the innocent party to enforce full contractual rights. This restriction pertains to the range of remedies available rather than the right to elect to affirm or terminate.

💡 Leveluplaw: Demonstrates that affirmation of a repudiated contract is contingent on the presence of a legitimate interest and is denied only in extreme cases. The principle was later affirmed in Isabella Shipowner SA v Shagang Shipping Co Ltd [2012].