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CHARTERPARTIES: TERMINATION, TIME AND DAMAGES By David McInnes, Partner

CHARTERPARTIES: TERMINATION, TIME AND DAMAGES By David McInnes, Partner. Areas of dispute. Whether a party has the right to terminate. If they do have the right to terminate how long does that right last? What damages can the innocent party recover?.

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CHARTERPARTIES: TERMINATION, TIME AND DAMAGES By David McInnes, Partner

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  1. CHARTERPARTIES: TERMINATION, TIME AND DAMAGES • By David McInnes, Partner

  2. Areas of dispute • Whether a party has the right to terminate. • If they do have the right to terminate how long does that right last? • What damages can the innocent party recover?

  3. 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.

  4. 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.

  5. 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.

  6. 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

  7. COMMERCIAL EFFECT • IT’S A TOUGH CALL FOR OWNERS

  8. 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).

  9. 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)

  10. David McInnes, Partner David.McInnes@incelaw.com

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