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.

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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.

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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.

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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

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COMMERCIAL EFFECT

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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).

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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)

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