High Court finds instalments recoverable under shipbuilding contract as reliance-based damages (Havila v Abarca)

Article summary

Commercial analysis: This case concerned the recovery of instalments paid by the buyer under two-ship building contracts. The buyer was found to have validly terminated the contract, both by accepting the yard’s renunciation and in reliance on specific contractual termination provisions. The buyer had an express right to recover the instalments under those termination provisions. However, the court held that the buyer could also recover the instalments as damages for the yard’s repudiatory breach on the reliance measure. Allowing such recovery at common law enables the court, in principle, to avoid the injustice of otherwise undercompensating a buyer and leaving the yard with a windfall, where a claim for return of the instalments on the basis of a total failure of consideration is unavailable. The case more generally touches on a number of important issues in the context of shipbuilding contracts and related contracts of guarantee but most importantly clarifies the scope of available common law remedies for...