Hirji Mulji v Cheong Yue Steamship Co Ltd

Law Case Summary

Hirji Mulji v Cheong Yue Steamship Co Ltd [1926] AC 497; 95 LJPC 121; 17 Asp MLC 8; 31 Com Cas 199; [1926] All ER Rep 51; 134 LT 737; 42 TLR 359

CONTRACT, CHARTERPARTY, FRUSTRATION, LEGAL EFFECT OF FRUSTRATION, REQUISITION OF VESSEL, JURISDICTION OF ARBITRATORS, ARBITRATION

Facts

By a charterparty, made in November 1916, the respondents chartered their steamship to the appellants. The charter was to commence on 1 March 1917 at the port of Singapore. The appellants agreed to employ the vessel on specified terms for ten months from the date she was delivered to them. There was a term in the charterparty, stipulating that all disputes arising out of it are to be submitted to arbitration in Hong Kong. Before the commencement of the period covered by the charterparty, the steamship was requisitioned by the government and was not released until February 1919. The appellants then refused to take delivery of the steamship. The arbitrator awarded the respondents damages for breach of contract and they brought an action upon this award.

Issues

(1) Was there a frustration of the contract by the requisition of the steamship?

(2) Did the arbitrator have jurisdiction to rule on the case?

Decision / Outcome

The decision was in favour of the appellants.

(1) The requisition of the steamship by the government before the term of the charterparty commenced was a frustration of the charterparty.

(2) The legal effect of the frustration of a contract does not depend on the intention, opinions or knowledge of the parties as to the event which has caused the frustration, but on its occurrence in such circumstances as to show it to be inconsistent with the further prosecution of the adventure.

(3) The frustration of the charterparty brought an end to the whole contract, including the requirement to submit disputes arising under to contract to arbitration in Hong Kong. Therefore, the arbitrator had no jurisdiction to rule on the case.