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WJ Alan Ltd v El Nasr Export and Import Co (1972) CA
This case revolves around a contract dispute concerning currency of payment for coffee sales. Understanding the key issues and the judges' reasoning is crucial.
I. The Facts:
III. The Judges' Decisions & Reasoning:
A. Lord Denning MR:
This case revolves around a contract dispute concerning currency of payment for coffee sales. Understanding the key issues and the judges' reasoning is crucial.
I. The Facts:
- Contract: Two contracts for 250 tons of coffee each, priced in Kenyan shillings (KES). Payment stipulated as "confirmed irrevocable letter of credit."
- Actual Payment: The buyer (El Nasr) provided a letter of credit in British pounds sterling (GBP). The seller (WJ Alan) accepted payment in GBP for the first two shipments.
- Devaluation: Before the third shipment's payment, GBP devalued against KES. WJ Alan sued for the difference, arguing they were entitled to payment in KES as per the contract.
III. The Judges' Decisions & Reasoning:
A. Lord Denning MR:
- Waiver: He found that WJ Alan waived their right to payment in KES by accepting GBP for the first two shipments. He referenced the principles of waiver established in Hughes v Metropolitan Railway Company and Central London Property Trust Ltd v High Trees House Ltd. This waiver was irrevocable due to the injustice it would cause El Nasr to reverse it after accepting payments in Sterling.
- Irrevocable Waiver: He emphasized that waivers aren't always temporary suspensions; sometimes, they become binding, especially when the other party has acted on the belief induced by the waiver (in this case, El Nasr provided Sterling payments). This doesn't necessarily require detriment to the promisee.
- Variation: He viewed the shift from KES to GBP as a binding variation of the contract. Both parties provided consideration: WJ Alan accepted a potentially less valuable payment currency, while El Nasr avoided potential losses from fluctuations in exchange rates, had the original KES payment remained in effect.
- Alternative Basis: Even if not a variation, he agreed a waiver had occurred. This waiver, like Denning MR's conclusion, was deemed final and not temporary.
- Variation or Waiver: He concurred with the outcome, finding either a variation supported by consideration or a valid waiver. He noted a detriment to WJ Alan in accepting payment in the devalued currency, thus supporting a waiver argument. He avoided comment on whether detriment is a necessary condition for waiver.
- Waiver: The voluntary relinquishment of a known right. It can be express or implied from conduct. In this case, the acceptance of GBP payments implied waiver. Importantly, in this case, the waiver became irreversible due to the actions of the other party and the resulting injustice of reversing the agreement.
- Consideration: Something of value exchanged between parties to create a legally binding contract. Megaw LJ found consideration in the variation because both parties faced potential gains and losses from the currency change.
- Variation of Contract: A mutual agreement to change the terms of an existing contract. This must have consideration from both sides.
- Irrevocable Waiver: A waiver that cannot be withdrawn without causing injustice to the other party. This highlights the importance of considering the potential consequences of actions when arguing waiver.
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