For 20 years now the problem of construction of terms justifying recission has been dominated by the decision of the Court of Appeal in 1962 in the Hongkong Fir case.1 In slow stages the “flexible” approach to terms, allowing the court to look at the effect of the breach in question has gained ground, to a point where it seemed set to take over the greater part of the law of Contract.

Lately, however, a new mood seems discernible, particularly in the House of Lords, which sees “certainty” as a clearer, and perhaps more desirable, objective and this has led to a return to a stricter approach, especially in relation to time clauses.

This article comes in two sections. First, a reconsideration of the construction of terms over the past few years, looking in particular at two House of Lords’ decisions, Bunge Corp. v. Tradax Export S.A.2 and The Chikuma.3 Secondly, it deals with the question of time clauses in contracts and whether they are or should be dealt with differently than other terms. Within this context we discuss the current state of the law in this area, how this reflects judicial attitudes to commercial contracts and whether, in the authors’ opinions, these attitudes are the correct ones.

Conditions and Warranties

Two decades have elapsed since Lord Justice Diplock “pointed out” that the traditional dichotomy of conditions and warranties did not produce exclusive categories.4 So-called innominate terms were discovered. In a sense they had always been there. The two-fold division of terms had been enshrined in the Sale of Goods Act. Sir Mackenzie Chalmers, the draftsman of that statute, which was intended to codify the common law of sale, expressly divided terms into two categories, conditions and warranties.5 The question of whether a breach of contract would justify recission was to be determined by the nature of the term broken.