Delayed mileage report did not justify termination of agreement

A Danish freight forwarder and a Polish haulier entered into a contract regarding trucking of two reefer trailers within Europe. The routes were not fixed and the haulier’s freight was to be calculated on the basis of the freight forwarder’s mileage reports, which the freight forwarder was obliged to send to the haulier by e-mail. No particular agreement had been made as to when the freight forwarder was obliged to send the mileage reports. The haulier argued that the freight forwarder was obliged to send the first mileage report immediately after the conclusion of the first carriage. The freight forwarder argued that they had just agreed that the mileage report should be sent as soon as possible and that it was more important whether payment was made when due.

The haulier expected to receive the mileage report immediately after the first trip. However, this did not happen. The haulier sent a written reminder eight days after the completion of the first carriage and one more the morning after. Having still not received the mileage report during the next day, the haulier terminated the agreement. The mileage report was issued 10 days after the completion of the first carriage.

The freight forwarder claimed to have performed as agreed and that the haulier was in breach of contract by terminating the agreement without justification. Since the agreement contained a clause concerning liquidated damages, the freight forwarder claimed to be entitled to both liquidated damages and compensation. Therefore, this claim was set off against the haulier’s freight claim. Subsequently, the freight forwarder paid the remaining freight to the haulier. However, the haulier held that the termination was justified and therefore the freight forwarder was neither entitled to liquidated damages nor compensation. The haulier summoned the freight forwarder with a claim of payment for the remainder of the freight.

The views of the parties

The haulier claimed that the freight forwarded had promised to send the mileage reports after the end of each carriage. It was important to the haulier to receive these reports at once because the haulier had previously been defrauded by other freight forwarders. The haulier had reminded the freight forwarder several times – also before the written notice of breach eight days after the end of the carriage. For that reason, the termination of the contract was justified.

The freight forwarder claimed that the main interest for the haulier must have been payment of freight and not the mileage reports. Further, the freight forwarder did not agree that the mileage reports should be sent immediately. The freight forwarder held that the haulier’s termination was not justified, because the agreement had not been breached. Since the freight claim had subsequently been paid to the haulier, except for the amount that had been set off, the freight forwarder rejected the claim for further payment.

The Maritime and Commercial High Court: The termination was not justified

The Maritime and Commercial High Court found that the haulier had made it clear to the freight forwarder under the preliminary negotiations that the first mileage report should be sent after the completion of the first carriage. However, the Court did not find that it had been made clear to the freight forwarder how important it was to the haulier. Further, the Court found no evidence that the haulier had given any notice prior to the written complaint, which was not sent until the day before the termination.

The court concluded that the freight forwarder had not been in material breach of the contract. At the same time, the Court emphasized that the haulier had not given the freight forwarder due notice. For that reason, the haulier’s termination of contract was not justified.

The unjustified termination meant that the haulier itself was in breach of the contract. Consequently, the freight forwarder was entitled to charge compensation and liquidated damages against the haulier’s freight claim. Therefore, the court found in favour of the freight forwarder in relation to the claim for payment.

IUNO’s opinion

The judgment of the Maritime and Commercial High Court illustrates how important it is that agreements and complaints can be proven. In this case the haulier could not prove to be entitled to terminate the agreement if the mileage reports were not issued immediately.

At the same time, the judgment illustrates the difference between the main obligation and the minor obligations of a contract. A freight forwarder’s main obligation to a haulier is normally payment of the freight on time. A breach of the main obligation will almost always be a material breach and justify a termination of the contract. An obligation to send the mileage report is by default a minor obligation. If the courts are going to classify a breach of a minor obligation as a material breach and by this justify termination, something more is required. If a minor obligation is of great importance to a party, this party must ensure that this is made clear to the other party, e.g. by stating in the written agreement that any breach constitutes a material breach.

[Judgment of The Danish Maritime and Commercial High Court on 15 October 2013. Case no. H-78-12]