Hire and Withdrawal
Miranda Karali
Partner
The right to withdraw (1)
 Refusal or failure to pay hire or a late payment amount to a breach of
contract
 Refusal to pay is probably a repudiatory breach and the owner may elect
to cancel the charter
 Failure to pay or late payment in the first instance gives a right to claim
damages only, as the breach is not repudiatory
 BUT the charter usually sets out an express right to withdraw the vessel
The right to withdraw (2)
 Where the charter gives an express right to withdraw the vessel, the owner
can elect this remedy
 If there has also been a breach of the charter the owner may also claim
damages
 Clear notice is required
 No particular form of words is required
 Withdrawal is final
Previous late payments - waiver
 Generally the acceptance of late payment does not amount to a waiver of
the right to withdraw unless the owner accepts it on those terms
 But a waiver will arise if the owner fails within a reasonable time of receipt
of the late payment to give notice of withdrawal
 Where there has been a history of late payments being accepted, this may
be a variation of the contract or establish an estoppel
 If waiver or estoppel, then new notice is required
Anti-technicality clause
 Most time charterparties contain an anti-technicality clause
 The details of an anti-technicality clause must be meticulously followed
 The anti-technicality clause may include a right to suspend performance of
the contract as an alternative to withdrawal of the vessel
Effect of withdrawal
CARGO INTERESTS
 A problem area where bills of lading have been issued to third parties
 These are distinct contracts
 The owner must continue to perform in accordance with the bills of lading
 Even where no bills of lading are issued, owners have an obligation as
bailees to take reasonable care of the cargo
CHARTERERS
 At valid withdrawal the owners can claim hire earnt, but what about
damages?
Can a shipowner withdraw the vessel and also
claim damages? Repudiation
 The owners would only be entitled to damages if the charterers’ failure to pay
amounted to a repudiation of the charter
 Assuming that the obligation to pay hire punctually is not a condition of the
charter, when will failure to pay it on time amount to a repudiation of the charter?
 Conduct may amount to repudiation where it shows:
– an intention no longer to be bound by the contract, or
– an inability to perform sufficient to have the effect of depriving the owners of
substantially the whole benefit of the charter
 Failure to pay an instalment of hire on the due date would not satisfy this test
 However, where the conduct of the charterers is such that unwillingness or
inability on their part to pay can be reasonably inferred, then there may well be
repudiation
 Owners can accept repudiation and sue for damages or refuse repudiation, affirm
the contract and sue for hire
Measure of damages
 The purpose of contract damages is to put the injured party in as good a financial
position as he would have been in had the contract been performed
 Damages are limited to those that were foreseeable at the time the contract was
entered into. Recovery of consequential damages will not be allowed
 The proper measure of direct damages for a wrongful withdrawal or cancellation
of charter is the difference between the original charter rate and the prevailing
market rate for equivalent business at the time of the breach
 Duty to mitigate damages
Remedies against parties other than the time
charterer
 Lien on cargo
 Lien on sub-freights / sub-hires
Miranda Karali
Partner, Clyde & Co
miranda.karali@clydeco.com
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