RTI Ltd v MUR Shipping BV [2024] UKSC 18 (15 May 2024)
Citation:RTI Ltd v MUR Shipping BV [2024] UKSC 18 (15 May 2024)
Rule of thumb: If you cannot pay a contract in the currency agreed, but offer to pay the equivalent amount in another currency, are you in material breach of contract? Yes, not paying in the required currency is a breach of contract, even if it is caused by a force majeure (war) with a similar currency offered.
Background facts: This case invoked the subjects of contract law & shipping law.
The basic facts of this case were that RTI was a company based in Eastern Europe. It bought rock/stone from Guinea. RTI agreed a contract with Mur, a shipping company, to transport this from Guinea to Eastern Europe for them. When the Ukraine-Russia war started, RTI’s parent company, was subject to American economic sanctions, stating that no one was allowed to accept payment of American dollars from the holding company or RTI. RTI were no longer allowed to pay Mur for doing the shipping in Dollars. RTI explained this to Mur & offered to pay the fees owed for the shipping in Dollars. Mur refused this offer & sought to end the contract. The matter ended up at the UK Supreme Court.
Court held: The UKSC upheld the arguments of Mur. They stated that the ‘force majeure’ clause was invoked by this. The UKSC further upheld that not paying the contract in the agreed currency was a material breach of contract, & that offering to pay in a similarly valued currency was not such an event as to keep the contract going. The UKSC affirmed that even when the failure to comply is caused by a force majeure, changing the currency the contract has to be paid in is still a material breach. The UKSC declared that RTI were in material breach & that Mur were under no obligation to perform the shipping services.
Ratio-decidendi:
Following the majority decision of the Court of Appeal in this case, Foxton J reasoned that it did not matter that this would involve the owners accepting a non-contractual performance. As the payment had been validly made, the charterers were entitled to specific performance of the obligation to deliver the vessels. There are at least two points of significant distinction between Gravelor and the present case. First, the sanctions clause in question, clause 8.10, was much more specific and targeted than the general force majeure clause with which we are concerned. Not only was it confined to dealing with sanctions, it was also directed to the payment obligation. Secondly, in contrast to the "reasonable endeavours" clause relating to the affected party in our case, the sanctions clause was directed to both parties having to "cooperate" and to take "all necessary steps" in order for payments to be resumed. In our view, therefore, Gravelor is distinguishable from this case. In any event, Foxton J was bound, as a matter of precedent, to apply what the majority of the Court of Appeal had laid down in MUR so that his judgment should not be read as providing independent support for the majority's approach in this case’.
Lord Hamblen
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.