CHARTERPARTIES: TERMINATION, TIME AND DAMAGES
By David McInnes, Partner
Areas of dispute
1.Whether a party has the right to terminate.
2.If they do have the right to terminate how long
does that right last?
3.What damages can the innocent party recover?
Whether a party has the right to
terminate
EXAMPLE: A Charterer is failing to pay hire on time, or
alternatively, not at all.
•Breach of condition: the easier claim if the clause is a condition.
•A party can terminate a contract and claim damages under English
law if a condition of the contract has been breached.
•A condition is a term that is said to go to “the root” of the contract.
•Until recently the widely held view was that failure to pay hire under a
Charterparty did not constitute a breach of condition.
3
Whether a party has the right to
terminate
•Kuwait Rocks Co v AMN Bulcarriers (the “Astra”) [2013] EWHC 865
(Comm)
•Balance tipped in Owners’ favour?
•Clause 5 of NYPE held to be a condition on the facts of the case
(where Owners had to comply with and did comply with an antitechnicality clause) but also referred to by the Judge as obiter as
applying even without an anti-technicality clause.
4
Whether a party has the right to
terminate
• Breach of innominate term: the more difficult but still possible
claim.
• Will depend on the nature of the facts and of the breach.
• The failure to pay a single hire payment on time is not generally
considered enough to be repudiatory.
• Where, however, the conduct of the Charterers is such that it is
reasonable to infer unwillingness or inability on their part to pay
there may well be repudiation. However, this requires a more
consistent failure.
5
Whether a party has the right to
terminate
What is a more ‘consistent failure’ depends on the facts of the case.
Recent examples:
•LMLN London Arbitration 7/14
•LMLN London Arbitration 16/14
•Januzaj v Valilas [2014] EWCA Civ 436
6
COMMERCIAL EFFECT
IT’S A TOUGH CALL FOR OWNERS
7
How long does that right last?
• The Owner has a ‘reasonable time’ to decide.
• Fact dependant.
• White Rosebay Shipping SA v Hong Kong Chain Glory Shipping
Limited (The Fortune Plum) [2013] EWHC 1355 (Comm).
8
A word on damages
•Issues can arise but generally:
• Claims are usually based on the difference between the charter rate
of hire and the market rate for the unexpired portion of the charter,
assuming that there was a market. (used recently in LMLN 7/14)
• Consider also the losses that flow ‘forseeably’ from the breach.
(considered recently in LMLN 16/14)
9
David McInnes, Partner
David.McInnes@incelaw.com
Beijing
Dubai
Hamburg
Hong Kong
Le Havre
London
Monaco
Paris
Piraeus
Shanghai
Singapore