DISCHARGE FOR BREACH AND EXCEPTION CLAUSES SINCE HARBUTT'S “PLASTICINE”
| DOI | http://doi.org/10.1111/j.1468-2230.1977.tb01486.x |
| Date | 01 January 1977 |
| Published date | 01 January 1977 |
DISCHARGE FOR BREACH AND
EXCEPTION CLAUSES SINCE
HARBU’TT’S
‘‘
PLASTICINE
”
IT
is, of course, well known
that
in
Harbutt’s “Plasticine
”
Ltd.
v.
Wayne Tank and Pump Ltd.’
the Court
of
Appeal (Lord Denning
M.R.,
Widgery and Cross
L.JJ.)
held that an exception clause which,
on
its proper construction, covered the events which had occurred
nevertheless failed to protect the profexens. What may be less widely
appreciated
is
the full potential application
of
that decision. The
reasoning is simple enough, but it was not completely articulated
in
Harbutt’s
‘‘
Plasticine
”
itself. There are three steps
:
The effect
of
a discharge for breach is the termination,
in
futuro,
of the contract: unless the injured party elects to
Termination prevents the exception clauses taking
effect
be-
cause, by the stage when they become relevant
(ie.
at the point
of adjudication) they, with the rest of
the
contract, have ceased
to exist.”
Whether
a
breach
is
a discharging one or not is to
be
deter-
mined without reference to the exception clauses. This can
be
explained partly because, on termination, the exception clauses
cease to exist; partly because the function
of
exception clauses
is
to act as mere defences
so
that they have no effect to qualify
the obligations
of
the parties; and partly because (and most
explicitly) in dealing
with
exception clauses
“
the thing to do
is
to look at the contract apart from the exempting clauses to
see
what are the obligations imposed on the party.
.
. .”
It
follows from these premises that
unless
the injured party elects
to
af€irm,
no exception clause can have any effect on
a
term or brexh
which (ignoring the exception clause) would give a right to discharge
for breach.
A
fortiori,
discharge for frustration would cause the same
1.
2.
3.
1
[1970]
1
Q.B.
447.
2
Harbutt’s
“
Plasticine
”
Ltd.
v.
Wayne Tank and Pump Co. Ltd. (supra)
3
Ibid.
464465, 475;
Farnworth Finance Facilities
v.
Attryde
[
19701 2
All
E.R.
4
Harbutt’s
“
Plasticine
”
(supra),
465, 466, 470;
Suisse Atlantique SociCtC
d’Armement Maritime S.A.
v.
N.V.
Rotterdamsche Kolen Cenrrale
[1967] 1
A.C.
361, 425,
per Lord Upjohn. It is because the exception clauses are regarded as
being relevant
only
after breach that they can be treated as having ceased to apply,
in spite of the fact that the rest
of
the contract remains relevant
to
the assessment
of
damages,
5 Karsales (Harrow) Ltd.
v.
Wallis
[1956] 1
W.L.R.
936, 940,
per Denning L.J.;
Farnworth Finance Facilities
v.
Attryde (supra)
777,
per Lord Denning M.R.; Cf.
Arrow Transfer
v.
Royal Bank of Canada
(1971) 19
D.L.R.
(3d)
420, 432
(affd.
(1972) 27
D.L.R. (3d)
81).
Because the clause in Harbutt’s “Plasticine
”
merely
limited the quantum of damages, this particular question could not arise in that case.
31
465, 466, 470, 475.
774, 778.
32
THE MODERN LAW REVIEW
[Vol.
40
result.6 On
a
termination, the wrongdoer would lose the whole benefit
of his exception clauses, even
to
the
extent that they might
be
directed to terms
or
breaches less than ccfundamental.” It follows,
further, that
as
well
as
fundamental terms and fundamental breaches,
in the pre-Suisse Atlantique‘ sense, conditions and breaches
of
condition would
also
be unexcludable, apart from the election of the
injured party to
firm.*
Together, then, the three propositions achieve
not just
a
substantial reinstatement of the pre-Suisse Atlantique
fundamental breach theory but, in
effect,
a
significant extension
of
it.
The purpose
of
the present article
is
not to rehearse the criticisms
made at the time
of
the
reasoning
in
Harbutt’s ‘‘ Plasticine.” Instead
it
is
proposed to look at what has happened since that decision to
the premises stated above, to try
to
evaluate two attempts which
have been made to limit or distinguish the decision, to deal briefly
with
a
recent attempt to explain and justify it and, finally, to look
at
two recent cases
in
which the Harbutt’s “Plasticine
”
approach
has been followed. For these purposes it
is
important to realise that
the full Harbutt’s ‘‘ Plasticine
”
effect depends on the interrelation of
all three premises.
If
discharge for breach does not extinguish the
contract, exception clauses (with the rest of the contract) will continue
to be applicable at least to matters occurring before the discharge.
If
exception clauses come into operation not at adjudication, but
when the contract
is
formed, no subsequent termination can deprive
them of the effect they have already had. And,
if
exception clauses
are not mere defences, but qualify obligation, they may potentially
be
relevant to the question whether the events which have occurred
can give rise to
a
discharge.
TERMINATION
OF
THE
CONTRACT
Since Harbutt’s
‘‘
Plasticine
”
was decided,
the
terminating ettect of
a
discharge for breach has been discussed in two well-known cases.
The first was The Mihalis Angelos
lo
in
which the Court
of
Appeal
6
Harbutt’s
“
Plasticine
”
(supra)
465,
per
Lord Denning
M.R.;
Weir
[
19701
C.L.J.
189.
7
Suisse Atlantique SociBtB d‘Armement Maritime
S.A.
v.
K.V.
Rotterdamsche
Kolen Cenfrale
[1967]
1
A.C. 361.
8
Cj.
Treitel $!966) 29 M.L.R; 546, 548-:49. The
use
of the expression “fund-
amental breach in
Harbutt’s PIasticine (supra)
tends to obscure this result.
That a
“
fundamental breach,” in the 195346 sense of a breach which no exception
clause could exclude, was more fundamental than a merely discharging breach is
obvious when it is remembered that before 1953 there was ample authority that
conditions of the contract could be excluded, as Devlin J. himself fully recogniscd
in
Smeaton Hanscomb
v.
Sassoon
I.
Serry
[1953]
1
W.L.R. 1468, 1470. That the
distinction has
not
been fully understood is illustrated, it
is
submitted, by the
treatment accorded
S. 13
of the Sale of
Goods
Act 1893 by the House of Lords in
Ashington Piggeries
Ltd.
V.
Christopher Hill Ltd.
[1972] A.C. 441; Coote (1976)
50
A.L.J. 17.
9
Cootc [1970] C.L.J. 221; Legh-Jones and Pickering (1970) 86 L.Q.R. 513;
(1971) 87 L.Q.R. 515; Weir [1970] C.L.J. 189; Baker (1970)
33
M.L.R. 441;
Benidmin’s Sale
of
Goods
(1974),
pp.
440-444
(F.
M.
B.
Reynolds);
Godde.
Hire
Purchase
Law
and Practice
(2nd
ed.,
1970), pp. 199-200;
Sutton
and
Shannon
on
Contracts
(7th
ed.,
1970), pp. 117-118.
10
[1971]
1
Q.B. 164. Noted (1971) 34 M.L.R. 190; [I9711 C.L.J. 11.
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