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 anti- technicality 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 7 IT’S A TOUGH CALL FOR OWNERS

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

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