Jackson v Union Marine Insurance Co 02 Dec 1874 LR 10 CP 125, Ex Ct

A ship was chartered for a specific voyage but was stranded and required extensive repairs, causing a delay of many months. The court held that this delay frustrated the commercial purpose of the venture, thereby releasing the charterers from their obligations.

Facts

The plaintiff, a shipowner, secured an insurance policy with the defendants for loss of freight on his ship, the Spirit of the Dawn. The policy covered perils of the sea. Subsequently, the plaintiff entered into a charterparty on 16 November 1871, for the ship to proceed ‘with all possible dispatch’ from Liverpool to Newport, and there load a cargo of iron rails for San Francisco. On 3 January 1872, whilst on its way from Liverpool to Newport, the ship ran aground in Carnarvon Bay due to a peril of the sea. It was not refloated until 18 February and required extensive repairs, which were not completed until the end of August 1872. On 15 February, the charterers, anticipating the long delay, abandoned the charter and chartered another ship. The plaintiff claimed against the defendants for the loss of freight under the insurance policy, arguing the loss was caused by a peril of the sea.

Issues

The central issues before the court were:

1. Whether the charterers were legally justified in repudiating the charterparty due to the extensive delay for repairs.
2. If the charterers were so justified, was the loss of freight a ‘loss by perils of the sea’ within the meaning of the insurance policy?

This involved determining whether the clause to proceed ‘with all possible dispatch’ was a condition precedent, the breach of which would entitle the charterers to repudiate, or if the delay was so long as to frustrate the entire commercial object of the voyage.

Judgment

The Court of Exchequer Chamber, affirming the decision of the Court of Common Pleas, held in favour of the plaintiff shipowner. The majority judgment, delivered by Baron Bramwell, established that the charterers were released from their obligation to load the cargo, and consequently, the freight was lost due to a peril of the sea.

The Court reasoned that the delay caused by the grounding was so long that it destroyed the commercial purpose of the adventure. It would have made the contract a fundamentally different one from what was originally intended. Baron Bramwell noted that a rigid application of the ‘condition precedent’ doctrine was not always appropriate. Instead, the court should look at the effect of the delay.

Reasoning of the Court

The judgment introduced the principle of an implied condition in the contract that if the commercial venture is frustrated, the contract is discharged. Baron Bramwell explained the principle with an analogy:

Thus, A. has let a music hall to B. for a concert. The hall is burnt down. It is necessarily implied that the happening of such a contingency shall excuse from performance.

Applying this to the case, the Court found that the long delay for repairs, though neither party’s fault, fundamentally altered the nature of the voyage contracted for. A voyage commencing in August was a different commercial undertaking to one commencing in January. The charterers were therefore not bound to load the vessel after such a delay had occurred.

It is a delay “so long as to put an end to the commercial speculation entered into by the shipowner and the charterers.” … The charterers, therefore, were not bound to load the vessel; and consequently the freight was lost, and lost by perils of the sea.

Since the charterers were lawfully excused from loading, the freight was lost. As the event that excused them (the grounding and subsequent delay) was a peril of the sea, the court concluded that the loss of freight was proximately caused by a peril of the sea, bringing it within the scope of the insurance policy held with the defendants.

Implications

This case is a landmark decision in English contract law, being a foundational authority for the modern doctrine of frustration. It established that a contract can be discharged where an unforeseen event occurs, without the fault of either party, that makes performance impossible or renders the commercial purpose of the contract unattainable. It moved English law away from the strict, absolute liability for contractual obligations established in cases like Paradine v Jane (1647). The judgment’s focus on an ‘implied term’ that the venture would remain commercially viable was influential in the development of the doctrine of frustration, which discharges a contract when its performance becomes radically different from that which was contemplated by the parties at the time of contracting.

Verdict: The judgment of the Court of Common Pleas was affirmed; the plaintiff was entitled to recover from the insurers for a loss of freight by perils of the sea.

Source: Jackson v Union Marine Insurance Co 02 Dec 1874 LR 10 CP 125, Ex Ct