12/4/2023 0 Comments Breach castMSC's claim for liquidated damages was effectively capped on the date of the repudiatory breach. This is a rare outcome as in most circumstances parties are not obliged to accept termination by repudiatory breach by the other side. As MSC had no 'legitimate interest' in keeping the contract alive after that date, the Judge held that MSC should be forced to accept the repudiatory breach and bring the contract to an end. The Judge held that a repudiatory breach had been committed when Cottonex informed MSC that it would be unable to return the containers. The JudgmentĪlthough MSC was suffering no financial loss, they were entitled under the terms of the contract to charge liquidated damages until the containers were returned empty.Ĭottonex was powerless to force the buyer to collect the goods and bring the situation to an end, leaving them with a potentially open-ended liability for liquidated damages. This meant that the seller, Cottonex, could not unpack the containers and consequently could not return them to the shipper, MSC. MSC began to charge Cottonex the daily rate of liquidated damages agreed under the terms of the contract. The cargo was delivered to Bangladesh as agreed, but was never collected by the buyer despite ownership having transferred to the buyer. The FactsĪ contract contained a liquidated damages clause which provided for a daily rate to be paid for each day that a carrier's shipping containers were not returned following delivery. The case has also extended the idea that contracting parties must act in good faith towards one another. The recent decision in MSC Mediterranean Shipping Co SA v Cottonex Anstalt (2015) has cast doubt on the ongoing recoverability of liquidated damages following a repudiatory breach of contract.
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