The plaintiff shipbuilders entered into a series of contracts with the defendants for the construction and delivery of six vessels. Property in the vessels was to pass to the defendants on delivery. Payment was to be in four instalments which would become due at specific stages during construction. The defendants defaulted on the second instalment for the vessels then under construction and the plaintiff rescinded the contract as it was entitled to do by clause 5.05 thereof. The plaintiff then brought proceedings to obtain the second instalment on each vessel as well as damages. The issues that arose for consideration were whether the plaintiffs were entitled to claim the second instalment in spite of the rescission of the contract, and whether part payment could anyway be claimed given that the property in the vessels remained with the plaintiffs and the defendants had not therefore received any benefit under the contract. In relation to the first issue, the House of Lords concluded that clear words were needed to rebut the presumption that a contracting party did not intend to abandon any remedies for breach of contract arising by operation of law. The plaintiffs had not clearly indicated that by exercising their right of rescission under the contract they would abandon their right at common law to recover as a debt unpaid instalments of the price which had already accrued due. They were therefore entitled to found a claim on that common law right. As to the second issue, their Lordships took the view that a shipbuilding contract was not like a contract of sale, in which the transfer of property in the goods was the central element, but had more in common with a contract for services in which a party is entitled to be paid for work undertaken up until the date of termination of the contract. The plaintiff was therefore entitled to remuneration for the design and construction work undertaken prior to rescission, and there had not been a total failure of consideration in relation to instalments of the contract price paid or due.
European Review of Private Law