Tenax Steamship Co v Owners of the Motor Vessel Brimnes (The Brimnes)
Court of Appeal
Citations:  AC 154;  2 WLR 865;  1 All ER 1015;  1 Lloyd’s Rep 534; (1974) 118 SJ 387;  CLY 3532.
Tenax entered into a contract to charter a ship by the name of The Brimnes. The contract specified that Tenax had to pay the owners ‘in New York in cash’ monthly. The owners of the Brimnes had the right to withdraw the vessel failing ‘punctual payment’. The owners later assigned the charter contract to their bank.
At 17:45pm on the 2nd of April, the owners sent Tenax a notice. The notice stated that since Tenax failed to make the payment due the day before, the owners were withdrawing the vessel. The same day, early in the morning, Tenax instructed their bankers to make the overdue payment. Tenax’s bankers then sent an instruction to the owner’s bankers to assign the payment. The owner’s bankers credited the account some time after 17:45pm. All these communications were made by Telex.
Tenax alleged that the owners had wrongfully withdrawn the vessel. They claimed to have paid the owners before the notice was sent. This, they argued, made the notice invalid because the breach was remedied. Alternatively, that the owners accepted the payment meant that they had waived their right to object to its lateness. Accordingly, Tenax sued for breach of contract.
- Was the owner’s right to withdraw the vessel affected by the assignment of the charter to the bank?
- When was the payment to the owners made?
- If the payment arrived before the notice was sent, would this preclude the owners relying on their right to withdraw the vessel?
- Had the owners waived their right to object to the late payment?
The Court of Appeal held in favour of the owners. The owner’s right to withdraw the vessel was not affected by the assignment to the bank. The particular circumstances of the case indicated that the parties intended that the owner’s right to payment and withdrawal to be unaffected by the assignment.
In this context, ‘payment in cash’ meant payment in legal tender or the receipt of credit which the creditor can immediately withdraw as cash. Crediting the owner’s bank account therefore met the requirement of ‘payment in cash’. However, merely instructing the owner’s bankers to credit the bank account did not meet this requirement. This was because the instruction was revocable and gave the owner’s no firm right to the money.
Tenax’s payment was therefore made when the owner’s bank credited their account. This occurred after Tenax had received the owner’s withdrawal notice. The owners therefore communicated the notice before they received the payment. Neither had the owners waived their right to object to the late payment. This was because they were unaware that the payment was being made until it was too late to stop it.
If the notice had arrived after the payment, the owner would still have been entitled to withdraw the vessel. The contract required payment to be made on time. The right to withdraw therefore arose once payment was late, even if Tenax ultimately paid it.
This Case is Authority For…
Communications made by instantaneous methods of communication such as Telex are treated as being immediately communicated (so long as they are sent within business hours) for the purposes of contract law. As long as the communication arrives on the relevant machine (and so the recipient is capable in principle of accessing it), it is treated as received. This is true even if the recipient is unaware they have received it.
Waiver of contractual rights may only be effected by clear and unequivocal words or conduct.
In this case, accepting the payment was not clear and unequivocal conduct, because a) the owner was not aware that it had happened; and b) it objectively happened for reasons other than a desire to waive the breach. Edmund Davies LJ noted that the owner’s decision to retain the money and not refund it might have been a waiver. However, the court had not been asked to decide this, so no ruling was made on the matter.