therefore, the exercise of contractual discretion, whether it is based on reasonableness or rationality comes into play in terms of the application of the shipowner’s
contractual security provisions in the charterparty. In light of what Lord Sumption
had to say in the two cases referred to above, the essence of the alternative
approaches taken by the courts in specific instances is much the same. Needless to
say, the shipowner will have discretion obligations when exercising his lien on cargo
meaning he will have to exercise the lien with honesty, good faith and reasonableness. But that is subject to whether the lien clause gives to the shipowner an
“absolute contractual right” as distinguished from a contractual discretion. If it is
the former, then decidedly no discretion obligations arise with respect to the shipowner exercising his cargo lien, and no commensurate duty to act in a reasonable
manner.
Lord Jackson described the notion of “absolute contractual right” in Mid Essex
Hospital Services NHS Trust v. Compass Group UK and Ireland Ltd. (trading as
Medirest) as “[A] right arising under a contract which is not subject to either
fiduciary or discretion obligations.”
83 It seems that there is no clear test for identifying the differences between contractual discretion and absolute contractual right.
One consideration is, “[W]here one party’s choice arises as a result of the other’s
breach, this is indicative of an absolute right.”
84 If the lien clause is held to give to
the shipowner an absolute contractual right, arguably, the legal position regarding
contractual discretion as set out in the line of authorities referred to above, would
become irrelevant and the shipowner would be under no implied duty to act in good
faith and in a reasonable manner. At any rate, it is unlikely that the lien clause enjoys
the legal status of an absolute contractual right given the paucity of case law
specifically and pointedly dealing with lien clauses in charterparties. Whether
there will be a change in the legal landscape in this field, remains to be seen.
6 The Chinese Law
6.1 Implied Obligation to Act in Reasonable Manner
in Chinese Law
Unlike English law, in Chinese law there is no distinction between express and
implied terms. The Chinese courts generally do not recognise an implied term. If the
contract does not provide a term expressly, the court tends to look at the statute law
or other legislation including, judicial interpretations and regulations. In the event
that there is no relevant law to be found, the court can consider whether a principle in
the legislation can be applied. Thus, the expression “implied duty” used in the
present discussion refers to a statutory duty or a duty provided by the principle.
83 [2013] EWCA Civ 200 para. 83, 91, 92.
84 Foxton (2018) para. 9. d.
330
S. Jia and H. Yu
contractual security provisions in the charterparty. In light of what Lord Sumption
had to say in the two cases referred to above, the essence of the alternative
approaches taken by the courts in specific instances is much the same. Needless to
say, the shipowner will have discretion obligations when exercising his lien on cargo
meaning he will have to exercise the lien with honesty, good faith and reasonableness. But that is subject to whether the lien clause gives to the shipowner an
“absolute contractual right” as distinguished from a contractual discretion. If it is
the former, then decidedly no discretion obligations arise with respect to the shipowner exercising his cargo lien, and no commensurate duty to act in a reasonable
manner.
Lord Jackson described the notion of “absolute contractual right” in Mid Essex
Hospital Services NHS Trust v. Compass Group UK and Ireland Ltd. (trading as
Medirest) as “[A] right arising under a contract which is not subject to either
fiduciary or discretion obligations.”
83 It seems that there is no clear test for identifying the differences between contractual discretion and absolute contractual right.
One consideration is, “[W]here one party’s choice arises as a result of the other’s
breach, this is indicative of an absolute right.”
84 If the lien clause is held to give to
the shipowner an absolute contractual right, arguably, the legal position regarding
contractual discretion as set out in the line of authorities referred to above, would
become irrelevant and the shipowner would be under no implied duty to act in good
faith and in a reasonable manner. At any rate, it is unlikely that the lien clause enjoys
the legal status of an absolute contractual right given the paucity of case law
specifically and pointedly dealing with lien clauses in charterparties. Whether
there will be a change in the legal landscape in this field, remains to be seen.
6 The Chinese Law
6.1 Implied Obligation to Act in Reasonable Manner
in Chinese Law
Unlike English law, in Chinese law there is no distinction between express and
implied terms. The Chinese courts generally do not recognise an implied term. If the
contract does not provide a term expressly, the court tends to look at the statute law
or other legislation including, judicial interpretations and regulations. In the event
that there is no relevant law to be found, the court can consider whether a principle in
the legislation can be applied. Thus, the expression “implied duty” used in the
present discussion refers to a statutory duty or a duty provided by the principle.
83 [2013] EWCA Civ 200 para. 83, 91, 92.
84 Foxton (2018) para. 9. d.
330
S. Jia and H. Yu