Uncertainty, Opportunism and the Intermediate Term: The Hong Kong Fir Principle in English and Irish Contract Law

• Date: 01 January 2015
• Author: James C. Fisher

96

Uncertainty, Opportunism and the

Intermediate Term: The Hong Kong Fir

Principle in English and Irish Contract Law

JAMES C. FISHER

Introduction and Argument

In addition to his many other inuential contributions to the common law

of England, Diplock LJ (as he then was) has been credited with having

“illuminated the existence”1 of what have subsequently become known as

intermediate, or innominate, contractual terms in his seminal judgment in

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd2 [hereinafter

Hong Kong Fir]. So-called intermediate terms are those terms of a contract

whose breach will sometimes, but not always, give the promisee a right to

terminate the contract in addition to a common law action for damages

which automatically arises on breach of contract by the promisor.

The inuence of the decision in Hong Kong Fir has spread far beyond its

native jurisdiction. Since the decision in Irish Telephone Rentals Ltd v Irish

Civil Service Building Society Ltd3 [hereinafter Irish Telephone Rentals], the

intermediate term has formed part of Irish contract law in addition to the

law of England and Wales. More recently still the Hong Kong Fir principle

has been formally welcomed into Australian jurisprudence, the High Court

of Australia having held in the case of Koompahtoo Local Aboriginal Land

Council v Sanpine4 [hereinafter Koompahtoo] that the intermediate term

forms part of the common law of Australia.

The recognition of intermediate terms has been widely applauded

for reducing the ability of promisees opportunistically to exploit trivial

breaches of the promisor’s contractual obligations in order to terminate

their contracts for reasons in fact unrelated to the consequences of the

breach. This is most tempting when, for whatever reason, it has become

more protable to walk away from the contract than to claim damages for

the breach and maintain the contractual relationship.

In opposition to the widespread support enjoyed by Diplock LJ’s

judgment and the development of the intermediate term, it will be argued

1 Bunge Corporation v Tradax Export SA [1981] 1 W.L.R. 711 at 714, per Lord

Wilberforce [hereinafter Bunge v Tradax]

2 Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 Q.B. 26

3 Irish Telephone Rentals Ltd v Irish Civil Service Building Society Ltd [1991] I.L.R.M.

880

4 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61

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