Lauritzen A/A v Wijsmuller B.V. [1989] EWCA Civ 6 (12 October 1989)

A contract for transporting an oil rig contained a force majeure clause. The transporter, whose designated vessel sank, cancelled the contract despite having an alternative vessel available which was allocated to other work. The court held the cancellation was a breach of contract.

Facts

The plaintiffs (Lauritzen) contracted with the defendants (Wijsmuller) for the transportation of an oil rig named the ‘Dan King’ during a specified period in 1984. The defendants owned two specialised, self-propelled barges capable of this transport: ‘Super Servant One’ and ‘Super Servant Two’. The contract provided that the defendants could use either vessel. Clause 17 of the contract, a force majeure clause, entitled the defendants to cancel if performance was hindered or prevented by specified perils, including ‘perils or dangers and accidents of the sea’. In January 1984, before the performance period, ‘Super Servant Two’ sank. The defendants had already committed ‘Super Servant One’ to other contracts during the period designated for the Lauritzen transport. Consequently, the defendants informed the plaintiffs they could not perform the contract and cancelled it, invoking Clause 17. The plaintiffs sued for damages for breach of contract. The judge at first instance found for the plaintiffs, and the defendants appealed.

Issues

The primary legal issue before the Court of Appeal was whether the defendants were entitled to rely on the force majeure clause (Clause 17) to cancel the contract without liability. This question turned on whether the ‘hindrance’ to performance was the sinking of ‘Super Servant Two’ (a specified peril), or the defendants’ own choice to allocate their one remaining suitable vessel, ‘Super Servant One’, to other contractual obligations. The court also considered whether the doctrine of frustration could apply.

Judgment

The Court of Appeal unanimously dismissed the appeal, upholding the High Court’s decision in favour of the plaintiffs. Lord Justice Bingham delivered the leading judgment.

Force Majeure and Self-Induced Frustration

Bingham LJ analysed the core principle that a party cannot rely on a force majeure clause or the doctrine of frustration if the state of affairs causing non-performance is ‘self-induced’. He determined that the cause of the defendants’ inability to perform the contract with Lauritzen was not solely the sinking of ‘Super Servant Two’. Rather, it was the combination of that event and the defendants’ own choice to commit their other available vessel to different jobs. Since the defendants had a choice of which contract to fulfil and which to breach, they could not claim the non-performance was beyond their control. Bingham LJ approved the reasoning of the trial judge, Hobhouse J:

The real question to my mind is whether the defendants can bring themselves within clause 17 at all having regard to the existence of Super Servant One and their ability to use that vessel for the performance of their contract with the plaintiffs… The defendants are seeking to be excused from a contract which ex hypothesi they could have performed.

Bingham LJ concluded that the defence under Clause 17 failed because the true cause of the non-performance was the defendants’ own decision:

The cause of the non-performance of the contract was the choice of the defendants to allocate Super Servant One to the performance of other contracts. A choice, it may be said, which the defendants were obliged to make. But that is no answer. The defendants were not, on the facts of this case, entitled to cancel.

Similarly, the doctrine of frustration was held not to apply. Citing the authority of Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524, Bingham LJ affirmed that where a supervening event does not make performance impossible, but merely requires a party with multiple commitments to choose which to honour, the resulting failure to perform is self-induced and frustration cannot be a defence.

Implications

The judgment in ‘The Super Servant Two’ is a cornerstone authority on the limits of force majeure clauses and the doctrine of frustration. It establishes that a party cannot rely on these mechanisms to escape liability where they have, through their own actions or choices, created the impossibility of performance. The case clarifies that an event does not frustrate a contract if it merely makes performance more onerous or impacts one of a party’s several means of performance, leaving them with a choice of which contractual obligations to breach. This decision highlights the risk a party assumes when entering multiple contracts that rely on a limited pool of resources and underscores the principle that contractual relief is for events truly beyond a party’s control.

Verdict: The Court of Appeal dismissed the defendants’ appeal, upholding the High Court’s judgment that the defendants were liable for breach of contract.

Source: Lauritzen A/A v Wijsmuller B.V. [1989] EWCA Civ 6 (12 October 1989)