Claims Service Letter 9 – February 2015
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Cancelling Clauses
Cancelling clauses are for the benefit of the charterers. It gives charterers the right to cancel
the C/P if the vessel does not arrive at the specified destination by the agreed time. It does
however not give charterers the right to claim damages unless the C/P expressly says so.
However, owners will be liable for damages in case the vessel will not only miss her
cancelling date but if separate from that owners will be in breach of another obligation
under the C/P. This will be discussed further below.
Voyage Charters
The following cancelling clauses are
respectively incorporated in the standard
Gencon 1976 form and the standard
Gencon 1994 form:
Gencon 1976 C/P – clause 10
line 121 - 129
Should the vessel not be ready to load
(whether in berth or not) on or before the
date indicated in box 19 (cancelling date)
Charterers have the option of cancelling
this contract, such option to be declared,
if demanded, at least 48 hours before
the vessel’s expected arrival at the port of
loading.
Should the vessel be delayed on account
of average or otherwise, Charterers to be
informed as soon as possible, and if the
vessel is delayed for more than 10 days
after the day she is stated to be expected
ready to load, Charterers have the option of
cancelling this contract, unless a cancelling
date has been agreed upon.
Gencon 1994 C/P – clause 9
line 138 – 153
• Should the vessel not be ready to load
(whether in berth or not) on the cancelling
date indicated in box 21, the Charterers
shall have the option of cancelling this
Charter Party.
• Should the Owners anticipate that,
despite the exercise of due diligence,
the vessel will not be ready to load by
the cancelling date, they shall notify the
Charterers thereof without delay stating
the expected date of the vessel’s readiness
to load and asking whether the Charterers
will exercise their option of cancelling the
page 1, February 2015
Charter Party or agree to a new cancelling
date. Such option must be declared by the
Charterers within 48 running hours after
the receipt of the Owners’ notice. If the
Charterers do not exercise their option of
cancelling, then this C/P shall be deemed
to be amended such that the seventh day
after the new readiness date stated in the
Owners’ notification to the Charterers shall
be the new cancelling date.
The provisions of sub-clause (b) of this
clause shall operate only once, and in case
of vessel’s further delay, the charterers shall
have the option of cancelling the C/P as per
sub-clause (a) of this clause.
Under both clauses the starting point is the
same: Charterers have the option to cancel
the C/P if the vessel is not ready to load by
the cancelling date. Charterers may exercise
their option until the vessel is ready to load
or, depending on the circumstances, within
reasonable time thereafter.
A late exercise of the option to cancel is
invalid. The owners may not accept it, agree
to it or accept it as a repudiatory breach of
the C/P.
“Ready to load” means that the vessel must
have arrived at the specified destination,
usually from which a valid NOR can be
tendered. However for the purpose of
the cancelling clause the vessel does not
necessarily have to be that ready as for the
purpose of tendering a valid NOR. The
burden of proving that the vessel is not
ready to load due to a significant defect is
on charterers.
The remainder of both clauses (which is
paragraph (b) of the 1994 form) gives
owners a tool which they may use to enforce
charterers to decide whether they will
cancel the C/P or not. Both clauses have
been phrased differently in this respect and
will be discussed here below.
Gencon 1976 C/P
When the cancelling date has passed,
owners may demand from charterers to
declare whether they will cancel the C/P or
not. Thus charterers do not have to consider
earlier requests for cancelling the C/P or
extension of the cancelling date. In order to
avoid the risk that a cancellation of the C/P
will be considered as unlawful, charterers
better wait until the cancelling date has
passed.
After the demand is made the charterers
have to decide what to do at least 48 hours
before vessel’s expected arrival or within a
reasonable period in case such demand is
made within 48 hours of vessel’s ETA.
The reason behind this mechanism is
to protect owners against performing a
long approach voyage, only to hear upon
arrival that the C/P has been cancelled.
However this clause only affords the owners
protection of minimum 2 days, at least
assuming that the demand to cancel has
been made before 48 hours of vessel’s ETA.
Gencon 1994 C/P
Clause 9 (b) of the Gencon 1994 form
offers owners more protection but
charterers less flexibility.
Under clause 9 (b) owners do not have to
wait until the cancelling date actually has
passed. If they expect that the vessel will
not be ready in time, owners have to notify
charterers about this together with vessel’s
ETA and their request whether charterers
are going to cancel or not.
Now charterers have to declare within the
next 48 hours whether they will cancel or
not and if they do not exercise their option
to cancel, the original cancelling date will
be extended to the seventh day after vessel’s
ETA as stated in owners’ notification.
The last paragraph of clause 9 (b) makes
clear that owners can call on sub-clause (b)
only once. In case the vessel does not meet
the new cancelling as well, owners will have
to face sub-clause 9 (a) only.
Last paragraph of clause 10 of the
Gencon 1976 form
Should the vessel be delayed on account
of average or otherwise charterers to be
informed as soon as possible, and if the
vessel is delayed for more than 10 days
after the day she is stated to be expected
ready to load (box 9) charterers have the
option of cancelling this contract, unless a
cancelling date has been agreed upon.
This paragraph only operates in case no
cancelling date has been agreed. The
“expected ready to load” date as stated
in box 9 becomes determining for the
purpose of cancelling the C/P.
Other Voyage C/P’s
The most standard forms have a cancelling
clause of the same tenor as described here
above but not always accompanied by a
possibility for owners to force charterers to
make up their mind.
Examples of other occurring variations are:
• Charterers have a right to cancel in
case no valid NOR has been given before
the cancelling date has passed, until a
valid NOR has been given (or one hour
thereafter).
• Should the vessel not be ready to load
on the cancelling date, charterers to give
notice to owners of their option to cancel
within 24 hours after the cancelling date,
otherwise the C/P to remain in full force
and effect.
Claims for Damages
As mentioned in the first paragraph the
cancelling clause gives no right to claim
damages. However if the vessel missed her
cancelling date because of a separate breach
of the C/P, owners are liable for damages.
In the standard Gencon 1976 and 1994
forms, clause 1 in combination with box 8
and 9 could be relevant in this respect.
If the owners wrongly stated vessel’s
present position (which is the position at
the time of fixing) in box 8 or the date on
which she is expected ready to load in box
9, they may face a claim for damages. If on
top of that the vessel missed her cancelling
date, the cancelling clause may operate
independently from this breach.
Linked with these provisions is the
obligation to proceed to the loadport (with
reasonable despatch). In the Gencon C/P
this phrase is stated in clause 1.
The combination with “expected ready
to load” means that the approach voyage
must be commenced timely so that it can
reasonably be expected that the vessel,
proceeding normally, will be ready to load
at the date stated in the C/P.
Finally the owners may be required to
give notices of vessel’s ETA at the port
of loading. This is not so in the Gencon
form but in other forms (f.e. without an
“expected ready to load” provision) it might
be a standard requirement.
In case owners fail to provide a reasonable
estimate or do not give such notice at the
prescribed time or not at all, in principle
charterers may claim damages as a
consequence of such failure which puts
them in the same position as if respectively
a reasonable estimate had been given or
as if the notice was given at the prescribed
time.
Time Charters
Most Time Charters have a cancelling
clause of the same tenor as discussed here
above under “Voyage Charters”
The “New York Produce Exchange 1946”
form states by virtue of clause 14 that:
“If required by charterers, time not to
commence before....... and should the vessel
not have given written notice of readiness
on or before......but not later than 4 p.m.
charterers or their agents have the option of
cancelling this Charter at any time not later
than the day of vessel’s readiness”.
The notice of readiness to which this clause
refers is the notice which has to be given to
allow delivery of the vessel into charterers’
service. This means that the vessel has
to be at the place and in the condition as
required under the C/P. Likewise, clause
21 of the Baltime form allows charterers to
cancel if the vessel has not been delivered
by the cancelling date (box 22) and clause
16 of the NYPE 1993 form states that
charterers may cancel if the vessel is not
ready for delivery on the agreed date.
The same basic principles apply to these
clauses as discussed under “Voyage
Charters”. Charterers are not allowed to
cancel before the cancelling date but may
wait to cancel until owners have delivered
the vessel properly.
More or less similar to the Gencon 1994
form, the Baltime and the NYPE 1993
forms allow owners to demand from
charterers whether they will cancel or not
already when it is clear that the vessel will
not arrive in time. The accompanying
procedure bears similarities as well.
So, compared to these forms, the older
NYPE form gives charterers’ more room
to manoeuvre and affords owners less
protection.
Claims for Damages
Also under a Time C/P a separate breach
may give rise to a claim for damages. A
mere cancelling of the C/P pursuant to the
cancelling clause does not have this effect.
Apart from owners’ obligation to exercise
reasonable diligence to deliver the vessel
before the cancelling date, the C/P may
contain an estimated time of arrival or a
requirement to provide delivery notices.
Such presentations should be given
reasonably and honestly. If owners fail to
do so they will be liable for damages which
should put charterers in the same position
in which they would have been if the
information (ETA or delivery notices) was
given on reasonable grounds.
Condition of the vessel on delivery and
place of delivery
If the vessel is not in the condition or at
the place as required by the C/P (Voyage
C/P or Time C/P) by the cancelling date,
apart from the right to cancel under the
cancelling clause, this could be a separate
breach of the C/P as a consequence of
which damages can be claimed.
However this subject (Delivery of the vessel,
tender of a valid NOR) requires separate
consideration and has been discussed in
previous service-letters.
This letter has been drafted with the utmost care on basis
of information which is believed to be correct but which
cannot be guaranteed by Charterama.
page 2, February 2015