Force Majeure In The Court Of Appeal Classic Maritime Inc v Limbungan Makmur SDN [2019] EWCA Civ 1102 BHD

Published date07 August 2020
Subject MatterCorporate/Commercial Law, Litigation, Mediation & Arbitration, Transport, Contracts and Commercial Law, Marine/ Shipping, Trials & Appeals & Compensation
Law FirmQuadrant Chambers
AuthorMr Michael Howard

This case concerned two main issues. The first was whether a clause in a contract of affreightment protected suppliers from liability when the material to be supplied was unavailable because of a natural disaster. The second was whether, if it did not, they were in any event liable only for nominal damages because the receivers would have suffered the same loss in any event.

By a contract of affreightment, the Defendants ("Limbungan") agreed to supply cargoes of iron ore pellets to be shipped from ports in Brazil to Malaysia in tonnage to be provided by the Claimants ("Classic") in 2015 and 2016. Halfway through the shipment period, the Fundi dam burst, terminating the mining operation from which the ore was sourced. Limbungan, relying on clause 32 of the COA, disputed liability for five shipments which should have taken place subsequently, on the ground that the dam burst rendered further performance impossible. It was found that Limbungan would never have loaded the disputed two cargoes because of lack of demand in Malaysia. Teare J held that Limbungan were in breach of contract and were not protected by Clause 32. He held however that they were liable only for nominal damages, because there never would have been any ore available for the five shipments scheduled for the period after the dam burst.

The Court of Appeal upheld Teare J on the liability question but reversed him on the damages question.

Liability. In both courts, the question of liability turned on the construction of the construction of clause 32 of the Contract of Affreightment. Limbungan contended that it was a force majeure clause, alternatively a contractual frustration clause; Classic that it was an exceptions clause and inapplicable on the facts. Limbungan argued that the clause possessed the general characteristics of a force majeure clause, but the Courts held that it was an exceptions clause. It was also held that the clause did not resemble the "contractual frustration" clauses seen in the cases arising out of the 1973 US grain embargo of which the leading case is Bremer v Vanden Avenne.

The supplier's undertaking was...

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