Please note: This is a PowerPoint 2003 file. Do not work on this file in PowerPoint 2007 or It will distort the template settings in this file (EVEN IN THE COMPATIBILITY MODE) 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

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