Lauritzen A/A v Wijsmuller BV

Factual and Procedural Background

The case arises from a contract dated 7th July 1980 between Plaintiff, owners of a large drilling rig named Dan King, and Defendant, specialised sea carriers. Defendant agreed to transport the rig from Japan to the Rotterdam area using one of two designated vessels ("Super Servant One" or "Super Servant Two"). The contract specified delivery dates and payment terms. Clause 15 imposed a duty on Defendant to act as a good carrier, while clause 16 allocated risks and liabilities related to the cargo. Clause 17 provided Defendant with a broad right to cancel the contract under various force majeure and related circumstances.

On 29th January 1981, prior to performance, Super Servant Two was lost in an accident. Defendant notified Plaintiff in February 1981 that they would not perform the contract using either vessel. The parties negotiated a substitute arrangement for transportation by barge and tug, resulting in losses and increased expenses claimed by both sides. Plaintiff sued for damages for breach of contract; Defendant pleaded frustration and relied on clause 17 as a right to cancel, also counterclaiming.

The court below answered four preliminary questions, ruling in favour of Defendant on one (uncontested on appeal) and in favour of Plaintiff on three others, which Defendant now appeals.

Legal Issues Presented

1. Whether Defendant was entitled to cancel the contract under clause 17 if the loss of Super Servant Two was caused by Defendant's negligence.
2. Whether the contract was frustrated by the loss of Super Servant Two:
   1. If the loss occurred without Defendant's negligence.
   2. If the loss was caused by Defendant's negligence.

Arguments of the Parties

Defendant's Arguments

• Clause 17 includes "perils or danger and accidents of the sea," which legally covers fortuitous casualties even if caused by negligence.
• There was no duty of care owed before performance began under clause 15, so negligence in the loss of Super Servant Two did not preclude reliance on clause 17.
• The right to cancel under clause 17 should apply even if the event was caused by Defendant's negligence, both before and after carriage began.
• Regarding frustration, the loss of Super Servant Two was a supervening event making performance impossible; Defendant acted reasonably in electing not to perform the contract.
• Negligence must be deliberate or a breach of actionable duty to preclude reliance on frustration.

Plaintiff's Arguments

• Clause 17 does not apply to events caused by Defendant's negligence; the clause should be construed to exclude cancellation rights in such circumstances.
• Clause 15 imposes a duty of reasonable care on Defendant, which applies before performance begins.
• A term requiring Defendant to take reasonable care to preserve the vessels before loading should be implied.
• The doctrine of frustration requires the supervening event to be outside the control of the party relying on it; negligence precludes reliance on frustration.
• Defendant's election not to perform using Super Servant One breaks the chain of causation necessary for frustration.

Table of Precedents Cited

Court's Reasoning and Analysis

The court engaged in detailed contractual construction and application of established legal principles. It held that clause 17, though broadly worded, must be construed as excluding events caused by Defendant's negligence from the right to cancel the contract. This interpretation aligns with the principle that a party should not benefit from its own wrong and reflects commercial common sense, given the draconian financial consequences of cancellation.

Clause 15, imposing a duty of care, was found not to apply before performance began, limiting Defendant's obligations prior to the vessel's arrival for loading. The court rejected the implication of a term imposing pre-performance care obligations on Defendant, emphasizing the detailed nature of the contract and lack of necessity to imply such a term.

Regarding frustration, the court reiterated the strict and narrow application of the doctrine, requiring an outside event making performance radically different without fault of the party relying on it. The loss of Super Servant Two did not frustrate the contract because performance was still possible using the alternative vessel, and Defendant's election not to perform using that vessel broke the chain of causation. The doctrine of frustration cannot be invoked where a party's own election or default causes non-performance.

The court also clarified that fault for frustration is not limited to deliberate breach or actionable duty but includes responsibility in a broader sense, rejecting Defendant's narrower test. The principle that a party cannot rely on self-induced frustration was applied to preclude Defendant's claim if negligence caused the loss.

In sum, the court affirmed the lower court's conclusions, emphasizing the importance of construing contractual clauses in context, applying established principles on exceptions and frustration, and maintaining commercial reasonableness.

Holding and Implications

The court DISMISSED THE APPEAL, affirming the lower court's rulings that:

• Defendant is not entitled to cancel the contract under clause 17 if the loss of the vessel was caused by Defendant's negligence.
• The contract was not frustrated by the loss of the vessel, whether or not caused by Defendant's negligence.

The decision directly affects the parties by denying Defendant the right to cancel or claim frustration under the circumstances. No new precedent was established beyond the application and clarification of existing legal principles regarding contractual construction, exceptions clauses, and frustration doctrine.