D. Refinement of the Hong Kong Fir Analysis

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 629-633

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Two refinements of the Hong Kong Fir analysis have emerged in the subsequent cases. First, the extent of the adjustment, if any, to existing

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doctrine effected by the Hong Kong Fir definition of the nature of conditional terms has been examined. Second, the applicability of the Hong Kong Fir analysis to sale of goods cases has been considered.

The stringent test proposed by Diplock L.J. in Hong Kong Fir for the recognition of "true" conditions - a term of such a nature and importance that every conceivable breach would deprive the other party of substantially the whole benefit of the contract might, if literally or vigorously applied, radically restrict the types of terms that would be considered to be conditions at common law. Indeed, such an approach might be thought to require reconsideration of bodies of common law doctrine developed over the years with respect to the recognition at common law of conditions in familiar transactional types or patterns. It may be asked, then, whether so substantial an overhauling of prior doctrine was contemplated by the Court of Appeal in Hong Kong Fir and, if so, whether so extensive a program of reform of the common law is desirable.

These issues surfaced for consideration in Bunge Corp., New York v. Tradax Export S.A., Panama.²⁶This case concerned a buyer’s failure to comply with a contractual requirement to provide the seller with "at least 15 consecutive days’ notice" of the probable readiness of a vessel on which the goods would be shipped. The sellers claimed that the late notice was a repudiatory breach, disaffirmed the agreement and sued for expectancy damages. As the agreement did not expressly stipulate that the notice requirement was a condition, the buyer invoked the in-nominate term analysis of Hong Kong Fir, arguing that minor lateness did not deprive the seller of the advantage of the contract. The appeal of the argument is obvious. A timeliness obligation can be breached gravely with a major effect on the party not at fault or trivially with no harmful consequence. Under the Hong Kong Fir analysis, only the former breaches should be considered repudiatory. The House of Lords rejected this argument, however, and in so doing may be taken to have indicated a note of caution with respect to the comprehensiveness of the reform achieved by Hong Kong Fir. Lord Wilberforce suggested that it was an error to attempt to apply Diplock L.J.’s "seminal judgment"²⁷ to a time clause in a mercantile agreement where the parties have an interest in being able to determine with a degree of certainty whether the terms of the agreement have been met. While he commended the "greater flexibility in the law of contracts to which Hong Kong Fir points the way,"²⁸he nonetheless did not doubt that "in suitable cases, the

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