Contract Interpretation – Conditions vs Innominate Terms

The recent case of Ark Shipping Co LLC v Silverburn Shipping (IoM) Ltd (M/V 'ARCTIC') [2019] EWCA Civ 1161 caused the court to consider when a contractual term is a condition and when it is an innominate term, that is, neither a condition nor a warranty. The principles covered in the judgment will be relevant to all those involved in the drafting and interpretation of contracts.

The dispute centred on the interpretation of a particular term in a bareboat charterparty (lease) of a vessel (M/V 'ARCTIC') on a standard form of contract by Ark Shipping Company LLC, and whether the vessel's owner, Silverburn Shipping (IOM) Ltd, was able to terminate immediately and seek damages as a result of an alleged breach of that particular clause. If the clause was a condition then as the innocent party Silverburn would be able to terminate the contract immediately for breach and seek damages, regardless of the consequences of that breach.

The charterparty provided that Ark:

'shall maintain [the Arctic] [...] in a good state of repair, [...] in accordance with good commercial maintenance practice and...