LAWS6316

SHIPPING LAW
Lecture 4: CHARTERPARTIES I
Introduction
What is a Charterparty ?

It is a contract, between the shipowner and charterer.

The consideration for this type of contract will be:

o The owner supply ship the vessel (the ship), as description in the
contract
o The charterer will pay for the use and hire of the ship

-The payment will be usually calculated by the ships tonnage

-Like other contract, there will be terms, conditions and warranties described in
the charterparty.

-Breach of these will lead to loss and damages for the parties.

-Also, a charter party will have a possibility to be frustrated, like other contracts

Three main categories:

Demise Charterparty (Bareboat Charterparty)

- Entire ship is leased to the charterer, the demise charterer will be responsible
for everything.

Demise Charterparties:
the charterer will bear all the responsibility for operating the ship .

management :
the charterer will manage and control the ship.
master and crew :
The charterer will hire the master and the ships crew .(* unlike time charter)
Expenses:
The charterer support the fuels and other expenses.
Responsibilities for the damages of the cargo:
The actual ship owner will not be responsible for the cargo during the demise
charter.
The charterer , not the shipowner will be sued by the cargo owner

Insurance :
- the demise Charterer will look at the every aspects of the ship

Advantage for the shipowner :

it is a trouble free - income way for ship owner , as the charterer will bear all the
responsibility for operating the ship , at the same time shipowner will have the
actual ownership of the ship

General category: in oil industry and ship financing

Time Charterparties
Ship will be hired for agreed period of time.

Management and control

can be from months to years, subject to the charterparty
Master and crew
Ship Owner will hire Master and crew, and provide for charterers. (unlike demise)
Expenses
Charterer pays ships costs during hire period ,including fuel(ship
bunkers),stores, and equipment , port use
Owners Advantage:
- have a guaranteed income from the charterer from a specific time
- benefit from the reduction of the overall operation costs of the vessels ,as the
expenses is responsible by the charterer
Charterers Advantage:
- they can use the ship at the specific period of time and price , instead of
actually buying a ship itself
Both sides Advantages
- it can protect both sides from the fluctuation of the market price over the time
during the period of the charter

Common Standard Forms

- Although there is standard form, it will mostly be amended , so they can
accurately and flexibly reflected the agreements by the both sides( flexibility)

Example :
New York produce exchange time charter (NYPE)
versions:
1.1946
2.1993
Note : read it extremely carefully, due to the multiplicity of the amendment ,

As there will be any deletion , modification and addition clauses and , we should
never assume any terms for the contract.

Charterers Main Obligations (4)

Charterers main obligations under the charterparty are:

1.The duty to pay hire

2.The duty to nominate a safe port the master acts on behalf of the day-to-day instruction from the time-charterers.

3.The duty to ship lawful good only and which is specified in the charterparty

4.The duty to redeliver the ship, back to the shipowner , at the end of the hire
period
- there is no specified in the particular date,usually the buffer will be usually 2
weeks

1. Duty to Pay the Hire

The chartered must pay hire and received by the shipowner :

1.in full amount 2.each period as agreed 3.on time

failure will lead to the breach of the charterparty

Amount : fixed and listed in the charterparty

Reasons: The shipowner need to use the paid money to pay the master and the
crew.

Calculation : usually calculated in the tonnage , ie the capacity the ship carried,
may be in daily rate

Typical example :
NYPE(New York produce exchange)
clause 5: Common hire clauses- semi-monthly in advanced

Others practice : payment on or before due date.

Complete in bank transfer process

Practically, the payment is in the shipowners bank account on or before the due
date

The LACONIA

facts :
charterer : Mardorf Peach
Ship Owner :Attica Sea Carriers
Period : 3.5 months ( time charter)
charterparty : NYPE
clause 5 :
hire will be paid in cash , US dollars , semi monthly in advanced in the bank
account in London.
>failure the punctual and the regular payment by the charterers, the shipowner
will have the liberty to withdraw the vessel.

What happen :
7th and the final instalment has failed, because London bank closed in sat and
sun

- charterer payment arrived at shipowners bank at 3pm the following Monday

afternoon.

After receiving payment , the bank told the shipowner , and ship owner told the
bank to reject the payment and send it back.

At 7 pm , the owner withdraw the vessel , as exercising their right in clause 5.

------------------------------------------According to the arbitration in London, the charterer conceded that they should
make the instalments in the friday before.

issue : whether the shipowner has the right to withdraw the vessel after the
payment has arrived late ?

CFI held,

As long as the payment is not punctual , the shipowner has the right to withdraw
the vessel,even after the payment is arrived afterwards.
-------------------------------------------------------------------CA held ( overturn CFI),

As the bank have accepted the money at 3pm , they have waived the right to
withdraw the vessel.
----------------------------------------------------HL( uphold CFI , overturn CA):
issue 1 : the actual meaning of clause 5?

recall clause 5 failure the punctual and the regular payment, the shipowner will
have the liberty to withdraw the vessel.

As the hire payment clauses of in advancedis needed to be strictly construed,

1 day late is not punctual, the shipowner has the right to withdraw the vessel.

issue 2 : had owners waive the right to withdraw the vessels, as they received
the payment and 3pm and reject immediately and is it reasonable time and
withdraw the vessel at 7pm?

As the rejection is within a reasonable time( 3pm - 7pm ) , the owners did not
waive the right to withdraw the vessels.

Conclusion,

According to LACONIA , the shipowner has the right to vessel as there is an

express right mentioned in the clause.

There must be an expressed right to withdrawal vessel, the owners must make
an unequivocal notice to the charterer that they want to withdraw ,but this notice
had not to be in writing.

Effect of Withdrawal:
Effect : the charter party ( contract ) comes to an end .
The ship owners still be liable to cargo owners ,according to the Bill of Lading
issued during the period of the original charter party. Owners Bill of Lading
Only exception ,the Bill of Lading is stating it is a the Charterers Bill of Lading.
Practical Issues :
The reasons of the strictly construed of the clause of hire payment clauses:
- the state of the market is fluctuating.
- immediate available cash for the shipowner,for alternative use by the shipowner.

Solution :
Anti-Technicality Clause:
- The way for mitigate the liability of the charterers.

Means of mitigating harsh effect of withdrawal clause

- potentially hard punishment of the chart
- may not be the charterer actual fault,
eg the technical problems made by the banking system.

Express Clause will be added to the charter parties,either added clauses or an

amended version of the charterparty.
It will be an express clause , and it states that ship Owners has to give notice to
the charterers to pay the outstanding amount of hire within the specific number
of days ,it is known as Grace Periods.
During Grace Period,the owner cannot withdraw the vessels.

Example:
The AFOVOS
ship owner = Afovos, from Greek
charterer = Pagnan brothers from italy
time charter : 2 years and 3 months
Charter party : NYPE
it contained the standard clause 5 ,
Details : the payment method,First international bank in Chicago,USA ,
currencies = US dollars , semi-monthly.
failure :liberty to withdraw the vessels.
Clause 31 : there is an Anti-Technicality Clause:
Before exercising the options of withdrawing the vessels, there will be an 48 hrs
notification to withdrawal.
What happen :
late of one of the payment ,which is due 14/06/1979, thursday
Reasons: No fault of the charterer, but the charterers bank has used wrong
Telex number

As a result, owner gave notice to withdraw at 16:40,in that day,

'in case we do not receive the hire which is due today
issue 1 : Whether the charterer has make a punctual of the hire payment ?
issue 2 :Whether The withdrawal is effective ?
CA , Denning , Held ,
1. the notice was given after working hours, it is too late for the practical
possibility to make the payment.

2. the notice that was given at 16:40 will be too early ,as the exact due time is
the 23:59 of 14/06/1979 theoretically.
Also, the charterer did make the payment in the midnight, therefore it is the
problem that the ship owner also did not wait until midnight.
According to the facts, the charterer actual pay in the midnight.

Also, owners did not follow clause 31 that waiting for the 48 hours from
14/06/1979.

Conclusion ,As the shipowners had not strictly complied with the terms of the
withdrawal clause, their withdrawal was ineffective and therefore the withdrawal is
a repudiatory breach of the charter.

Quote ;
In time charterparties there is very often a clause giving the shipowners the right to withdraw
the vessel from service in case the charterer fails to make regular and punctual payments of
hire. This is called a 'withdrawal clause'. When market rates are rising shipowners look at the
time of payment very keenly. If the charterer falls behind, even by a second or two by the
slightest mischance, the shipowner will seize the opportunity and issue a notice of withdrawal.
As a rule there is no actual withdrawal because of the difficulties which would arise for the
cargo owners, with the bills of lading, and the like. After the notice of withdrawal is given, in
nine cases out of ten the parties agree to go on just as before. If it turns out that notice of
withdrawal was rightly given, the charterer will pay the increased market rate. If it was wrongly
given, then the rate remains the same.

That means a new charter party or new terms will be formed in the common
practice in the market.

Waiver of Withdrawal Right

3 Examples
(1) Reasonable time to exercise right: BALDER LONDON
(2) Acceptance of late payment: The LACONIA
(3) Insufficient Payment: The MIHALIS XILAS

(1) Reasonable time to exercise the right:

The BALDER LONDON
if the owners delay is beyond the reasonable time , in which they exercise the
right to withdraw , this may be construed as a waive of these rights.
Issue : What is a reasonable amount of time?
- it depends on circumstance for individual cases.
eg : time will be allowed for :
- obtaining some legal advice
- checking with the bank accounts that the payment has not been received
(BALDER LONDON)

(2) Acceptance of late payment: The LACONIA

- In LACONIA,
the mere receipt from the bank account is not sufficient to amount to an
acceptance of a late payment, the charter needs to give some further indications ,
commonly when the charterer made a serious late payment , and if the owners
did not complain , it can be treated as waiver of the withdrawal rights.

(3) Insufficient Payment: The MIHALIS XILAS

- If the payment of hire is made on time , but the amount is not sufficient ,it is
unlikely for the ship owner to waive their rights of withdrawal.( as they will be
likely to seek full payments according to the charterparty)

- The only exception is only in the circumstances , where the shipowner has
deducted the hire payment , for the reasons connecting with the operation of the
ship.

Deductions from Hire

As mentioned, Deductions from Hire will be entitled by the charterer that
connecting with the operation of the ship.
What can Charterers deduct from hire payments?
- entitled to make some deduction , - they don't have to pay the owners in full
first ,or they can seek the covered afterwards

Examples( as mention in the chart party) :

1.The value of the Bunker that used on board of the vessel during the time of
redelivery .
2.Any Port disbursements
- any extra expenses while in port
3.Fuel used when vessel off-hire
-the broken down and the repair , known as off hire :
-typical example , during the time charter, the vessel needs repair.
4.Speed & Consumption clauses
- consume a certain amount of fuels,
- if using up more fuel and only drive at a slower speed, ie breach of the contract,
the charterer will entitle deduction of hire
5.Equitable Set-Off ( hold the vessels)
- potential deduction due to equitable set off
- if the owners breach of the time charter,as a result of the breach , the charter
deprived of the use of the vessel , and suffer loss . The charterer can entitled a
deduction in the hire payment due to the equitable set off.

Off-Hire
Definition : The charterer has been prevented the full use of the vessels , the
charterer don't pay higher than the loss or aas time compensation for the more
time needed .
Sample Clause: NYPE 46 Clause 15
Quote :
. . . deciency of men or stores, re, breakdown or damages to hull, machinery
or
equipment, grounding, detention by average accidents to ship or cargo,
drydocking
for the purpose of examination or painting bottom, or by any other cause
preventing
the full working of the vessel..
- Breakdown or Damages to the hull , machinery and the equipment, eg
Grounding , ie the collision with the rocks
- Detention , due to the accidents of ship or cargo
-Drydocking
suspected problem of the hull( as it is below the water) ,the ship will go for a
surveying and a check for the condition.

-------------------------------------------------------------------------------

Claim for deduction due to Off-Hire

Charterers obligation to prove the vessel is off-hire:

1st.Off-hire event occurred

-one of the events in the off-hire clause
2nd .that event has preventing full working of vessel
- not capable of the services of the immediate need of the charterers., ie (any
defective)
3rd. Time lost as a result of the vessel's incapability of being fully worked

THE AQUACHARM:

Shipowner : Sanko steamship

Charterer : Aquacharm

time charter
- details : carry the coal : from USA to Japan , the route will pass through the
Panama canal.

What happen :

When master load the cargo: Maximum load has been made

The consequence unforeseen by the charterers :

when passing the shallow area of the Panama canal , the ship is disallowed to
pass by the Panama authority.

It is concluded that the failure is the fault of the master for allowing the ship to be
fully loaded.

Recall :Time charter details: master is worked for the shipowner.

In order to overcome the problem , alternative solution has been made by using
other vessels comes and offload some cargo. Finally succeed,but the additional
tasks lead to the delay of about 9 days.
The ship owner claims that the exemption clause has been activated.

issue 1 : whether the ship is on-hire or off-hire in this 9 days?

CA , upheld , it is still On - Hire for this 9 days delay .

Reasons : the full working of the vessels have not been prevented by an external
cause, which master fault in overloading.
As long as the vessel is performing its work in this 9 days, the vessel is on-hire in
this 9 days.

Issue 2: can the charterers got compensated from the ship owners for this
delay?

the claim from damages will only succeed only if the charterers can show the
unseaworthy of the vessel after leave of the port.
As long as no unseaworthy, the owner is prima facie not liable for the masters
action, according to the art3 of the Hague rules.

As mentioned in clause 4, the shipowner will be free liable from the negligence of
the masters act in the management of the ship.

----------------------optional:

Shipowner has make another claim against the charterers that the cost of the
transhipment of coal.

Held , it is the master;s fault , shop owner will be unlikely to be succeeded for
the claim.

The ROACHBANK

- NYPE time charter:4 May 1979

destination : Singapore , re-delivered to Caribbean

the vessels was delivered at 16 May , and back to south america.

23 may , the vessels took refugees on board

the ship is deviated and arrived 25 may to Taiwan, but refused by taiwan
authority , but entered taiwan after negotiation.( delay)

the ship finally burst 3 June ,

The charterer claim that the ship has been off-hire , from 25 May, against owners.

Issue : whether the ship is off-hire from 25 May to 3 June ?

CA held ,

the vessel is capable of being fully worked , and is able to perform full services
for the charterer.

External problem is the disallowance by the Taiwan authority .

The presence of the refugees has put no effect for the full working of the ship, as
the problem is brought by extraneous causes during the period, it is less likely to
be considered as off-hire.

when would a vessel be off-hire?

- if any event has prevent the full working of the vessels.

Mastro Georgia
when the ship is under arrest by any reasons, the vessels has been prevented to
be able to perform fully work. It will be considered as off-hire.
Apollo
The fumigation due to the suspected typhus (disease) on the
vessel.
As long as the vessel cannot be fully worked during a certain of period in this
circumstance, it will be considered as off- hire.
Hograth v Miller
if a vessel has to be towed , it will be not likely to be efficient , the charterers
won't be liable during the period the vessel is towed.

Off-Hire Clauses

Two categories of Off-Hire Clauses : a matter of calculation

(1) Net Loss of Time Clauses (NLTC)

( relatively complex)

NYPE 46
Clause 15;
Net loss time clause:
It provides a claim for the net overall time that was lost by the charterers
, as a result for the specific off-hire event
Key Issue :How much time has been lost as a result of the event ?
The calculation will be precise amount of time
Problems :
As there will be a lot of argument over the precise amount of time lost,
courts prefer period clause.
Also, it is common for court to construe any net clause to be a period clause.
(2) Period Clauses (PC)
A relatively easier approach to work out than net clause, commonly preferred by
the court

Key issue : Was the vessel in an efficient state during the period ?

It stated as hire payment will cease to be due from the time the event of off-hire
occur , until the vessel is resumed for the full efficiency .

General Off-Hire clause

in the event of the loss of time form breakdown of machinery , want of repairs or
damages, whereby the working of the vessel is stopped for more than 49

consecutive working hours, the payment of the hire shall cease until she be again
in an efficient state to resume her services.
As long as the performance , it will be on hire again .
Hograth v Miller
Facts :
the engine broke down, when the vessel is carrying cargo from Germany to
Africa.
Arrival :
the cargo is discharged by using the equipment in the vessel , but the discharging
equipment is in a good state.
HL,
Issue : Whether the vessels is considered to be off-hire when discharging
goods ?
Prima facie , the vessel is off-hire as the engine broke down and the need to
repair , because it is not fully efficient , and it is under towed.
But once the discharge began, it becomes on-hire,as considering the capability to
work with the task requested, the vessels is fully capable to work on that task.
So the vessel is only off-hire during the period of under towed.Even the vessel
cannot steamed properly, discharging of cargo is considered to be capable of
being fully worked for the specific task at that time.
According to the period clauses ( which is generally adopted by the court), such
period will be excluded from being off-hire.
--------------Note :
If the charterer containing the net loss of time clause , rather than period
clause:
It is necessary to calculate the difference that they would have taken , ie as
steaming normally ,and the time that vessel actually took to complete the voyage
under towed.

2.The duty to nominate a safe port /berth

What is a safe port?

The EASTERN CITY :
Definition of a safe port :
Quote :
. . . in the relevant period of time . . . the particular ship (can) reach it, use it,
[and] return from it without, in the absence of some abnormal occurrence, being
exposed to danger
which cannot be avoided by good navigation or seamanship
A port may be unsafe if the port encounter
1. Risk of physical danger
- grounding
2. Risk of political danger
- riot , bombing, wars
3. Organisational risks:
common : no tug
- eg if there is a tug available in safety tow the vessel to the berth
- possible shallow area, eg Antwerp,big but narrow.
-As the master of the ship will not be familiar of every port in the world
, local help( usually the ship will be towed ) will be needed : of local geographical
conditions , eg . hidden rocks, tides

----------------------

Safe Port clauses:

-both the shipowner and the time charter impossible to predict for the return of
the vessels, it will be according to the details of the
- shipowner dont want their ship to go an unsafe places.
- even there is no express clause, the court may imply one into the charterparty

eg .Baltime , 1939 Clause 2: safe port clauses,

safe port and place , that they can safely lie , always afloat .

The CARNIVAL
The port will not be considered as unsafe - if there is danger , which can be
avoided by the ship by ordinary navigation or seamanship.

The Carnival
2 ships :
Ship C:The Carnival
Ship D : The Danilovgard
1st Def : ship owner of ship C
2nd Def : the voyage charterer for ship D
Ship D is preparing to moor to the berth , so that discharge can commence
- ship C pass the canal so that the discharge can be started
-but as Ship D is not completely moor, the canal is very narrow.
Ship C did not collide with ship D, but the interaction result in surge of the water .
As metal fender in the berth , penetrate the hull of ship D after the
collision

Result : serious damage by the ship D : enter water , and sink

the cargo on ship D is damaged,

- substantial claim brought in italy,

The surge of damages

Ship owner of ship D is sued by the shipper( cargo owner)

Prima facie :
Ship C has not traveled too fast,
also, Ship C l is traveling in a correct lane in the canal,.
Claim : shipper of the cargo on ship D sue ship owner of ship C ( 1st Def) and
charterer of ship C( 2nd Def)
The master has failed to perform good seamanship, as he should wait the Ship D
to moor completely before his move passing the canal.
CFI:
it is foreseeable that the ship will be damages if the ship pass at the a narrow
canal if the ship is not completely moor.
2nd Def:voyage charter
Breach of a term in the charterparty, which amount to a promise that the berth
they nominated would be prospectively safe for the vessel.
2nd def has breach the safe berth warranty , which listed in the charterparty
the conduct of of 1st Def is more blameworthy than 2nd defendant :
Ship D will not suffer such serious damages if the ship C did not pass through the
path in a reckless way.

Conclusion : 1st : , 2nd : remaining

The appeal of 1st def: the surge of water to the damages of the hull by the
fender is too remote to be foreseeable.

the appeal of 2nd Def: claim that there is break of the chain of causation( ie the
collison of the ship C, which makes no liability for the charterer of Ship D.

CA;

as regards of the 1st Def , ie the owner of the ship C,

there is an obviously negligence of passing the ship D in the circumstance.

Appeal of the 1st D is dismissed.

As regards to the 2nd Def, ie the voyage charterers, they

They were liable for the safe berth warranty

The design of the fender was unsafe, for the classic definition of safe port,
the expert evidences have been reviewed that the composition of the fender :
sharp metal edge , insufficient of old rubber tyres for protection,
this result in the failure to disburse the pressure during the collision.

By considering the fender in the berth , the berth is unsafe, concluded by the
expert evidence .
Therefore , there is a breach of safe berth warranty, both 1st Def and 2nd Def are
liable.
When does the Duty to Nominate a Safe Port arise?

It arises at the time of the charterer giving orders to the vessels to a certain berth.
Issue : what happen if the port is safe before sail , but become unsafe during the
voyage?
The charterer must make a fresh nominate an alternative safe port

The EVIA No.2

Charterparty : Baltime Form ,1939
arrive in 1 /July , - the vessel was already in Basrah when the Iran/Iraq war broke
out
the delay is due to the port congestion - finally the discharge of cargo is
completed in sept, (ie .2 months delay )
And the vessel has trapped for more 16 months ( due to a war), then back to
Cuba .
Issue : Is there a breach of safe port clause in the Charterparty?
Held ,
The port was a safe port at the voyage commence, ie before the break of the war.
Firstly , the warranty crystallises at the time that the nomination is made.
As a general rule , If circumstances subsequently change( become unsafe) ,but
not yet arrived,
the charterers must nominate an alternative safe port to the vessels. And it is the
charterers obligation to make a the renomination to a safe port.
However, as in this case , if the port becomes unsafe after the vessel arrives the
port, then there is no breach of the safe port warranty by the charterer.

Owners options to refuse if unsafe port nominated

The HILL HARMONY (refuse to comply)

-facts :
Charterers : suggest a short and dangerous route
master : refuse to follow as he has experienced the bad weather on the similar
route
Arbitration and appeal :
The majority of the arbitrators found as a matter of fact that the master had acted
unreasonably in doing so.
The charterers sued the shipowner for damages consequent upon the
masters failure to obey a legitimate order.
Clarke J and the Court of Appeal both held :
the shipowner was not liable to the charterer, as the masters decision as to
which
route to take was to be regarded as a navigational matter, not an employment
one,
provided that the decision was made bona de on the grounds of the vessels
safety.
The fact that the master had made this decision before setting out on the voyage
did
not alter the position.
HL :
However, the House of Lords has now allowed the appeal,
categorising the decision as to which route to follow as an employment, rather
than a
navigational, matter, while stressing that the master would still be entitled to
refuse to
obey orders that endangered the safety of the crew and the vessel. The decision
is to
be welcomed in that it prevents time charterers from having to bear the nancial
risks,
in terms of loss of time, of a bona de but unreasonable decision of a master to
decline to follow the route that they have specied.

Termination
Damages

3. Duty to Ship Lawful Goods

Cargo must be permitted by C/P
Notification of characteristics
- The charterer has the obligation to notify the shipowner for any particular
characteristics of the cargo , even it is permitted, it may cause damage the ship
or other cargos on the ship.
The ATHANASIA COMNINOS
ideally , hatch cover should be shut and sealed in the duration of the
voyage.
But due to the wind ( bad weather ), there is one hatch cover open
and there is a violent explosion 2 days later , and crews is injured
- it was established the the explosion is caused by the different cargos containing
methane and the coal .
Issue : whether the time charterer is liable to the ship owner
Held,
Although the charterer must not order the shipowner to load the cargo that other
charterer parties, the charterer is needed to inform the shipowner for any
potential risks attached to the cargo, if the shipowner has no knowledge if these
risks.
In this case, the charterer is not liable as the ship owner should know the
potential risk of carrying coal and methane. It is a common inherent risk of
carrying coal cargo .
On the other hand , the charterer has no power to instruct master to load any
cargo , as long as it is permitted in the charterparty.The only thing Charterer need
is to inform the potential risk.

4 Duty to Re-deliver
At the end of each period of the time charter,the charterer has a duty to redeliver
the vessels to the shipowner at the time and places specified.
But normally there is a degree of the flexibility,
eg . redelivery in 4 months , an extension of month and the place will be as
vague as in south asia.
Reasons:
Arrangement difficulty for both parties to coincide an exact re-delivery time and
place, as the time place and cargo of the other charterparty with both parties.
-Ship owner needs to comply with the Charterers instructions for final voyage
-if at the time of performing the final voyage , it appears that it can be completed,
and in fact the redelivery is within the period of the charterparty.
- if the master, act for the owner, needs to follow the instructions , which they
think it is the reasonable range to achieve.
If there is a delay for some reasons,and the redelivery is going to be after the
final termination date , the charterers will be in breach of their redelivery
obligation ,and
the owners may be entitled to claim damages by the breach of the charterers
If , however the charterer give orders for a final voyage , and it is clear that the
ship is no way to comply with the order , ie it is impossible to redeliver,for the
specific period of the charter, and then the master can refuse to comply with such
orders.
If the charterer persist and do not issue a valid alternative orders ,it will be
considered as an evidence that showing the charterer no longer wish to be
bound by the charterparty,
this will amount to a repudiatory breach of the charter ,
the owner can terminate the charter party and to claim damages.

Condition of the vessels of the re-delivery

Charterer has a duty to redeliver vessel in same condition as it was at the
beginning of the charter, with the limitation to ordinary worn and torn .
CANADIAN PACIFIC RAILWAY v BOARD OF TRADE (2/09:30)
A passenger ship originally ,
Liverpool to Canada, across the atlantic Ocean ,
Purpose :troop carrier , carry the troops to south africa and india( ie significant
route difference)
Facts;
During vessels perform as a troop carrier ship , a greater worn and torn ,
compared with before
They claimed that the larger worn and torn is made by the voyage length , the
climate and the vessels cannot repair frequently due to the military needs.
Issue : whether the shipowner can be entitled to be reimbursed by the crown,as
the expenses for the repair work and the corresponding time lost for the repair
work?
HL,held ,
1.the material clauses in the time charter has accepted the charterer to be
responsible for normal worn and torn.
2.The types and seriousness of damages that the ship owner claiming, are
normally expected as a troop carrier ship.
3.As the charterparty expressly stated the function to carry troops, and the
shipowner should treated the worn and torn as within ordinary level.( not out of
ordinary)

After charterer redeliver the vessel, the ship owner found the condition is worse
out of ordinary worn and torn, can the shipowner refuse the delivery , and insist a
the higher payment until the damages has fixed?(NO)
The owners must accept the redelivery , and pursue claim the damages for the
condition of the vessels against the charterers.
-The usual measure the damages of the ship after the re-delivery is :
the reduction and the value of the vessel as the result of the damage.

-Alternatively, owners could claim for the cost of the repair , if it is commercially
reasonable to incur those costs.
Place of redelivery
If the charterer failed to re-deliver the vessels to the agreed re-delivery place,
Owners can claim damages , cost of sailing vessel to the agreed re-delivery
place.

B. shipOwners Main Obligations

1.To give accurate description of vessel
2.To deliver vessel to specified port
3.To provide a seaworthy vessel
4.To maintain vessel
5.To follow charterers orders
6. To prosecute voyage with the utmost despatch

1. To give an accurate description of the vessel

-Time Charter usually give specific description of the ship , with details, e.g. as to
draft, whole capacity, speed, fuel consumption, class, up to date classification,
undertaking of the vessels the fitness for work

-If vessel does not meet description when it is delivered to the charterer, then the
charterers will have a damages claim against the shipowner

However, the charterer cannot refuse the delivery of the vessels unless:

1. Mis-description goes to a condition of contract

eg . the description of the vessel class is not real , it is serious enough to refuse
as it is the vessel identity is a substantial part of the charterparty .

2. Mis-description deprives charterers substantially of whole benefit of contract

eg . although not a condition of the contract, but it is serious enough that the
benefit of the charterer has been undermined

3.Owners refusal to rectify

if the owner fail to take reasonable step to make the vessels comply with the
description in the charterparty, it is serious enough as it show the shipowner
would not bound to the charterparty.

4. Charterparty contains express right of charterers to cancel( cancelling clause)

- the charterer will have an automatic right to cancel as it is expressly list in the
chartparty.
The DIANA PROSPERITY
Performance: Speed & Consumption

facts:
- a new ship built in japan
- the owner entered into the time charter
- by the time the vessel was ready to deliver to the charterer,market collapse due
to the oil crisis
- charterer want to escape from the contract ,
They tried the reject the vessel by saying the vessels is not corresponds to teh
description in the charterparty.

In the Charterparty:
Construction : Osaka ship building company , 4500 tons
named : no.354

The vessel:
Construction : Oshima shipbuilding company , 50% owned by Osaka ship
building company
it is named as no.004

The ship owner tried to reject the delivery of the vessel by that the vessel has
been built by a different company as listed in the charterparty.

Queens Bench ( CFI):

Although the built by other companies, the charterer cannot refuse the delivery ,
CA , dismiss the charter appeal

the description of the construction company cannot be regarded as the strict

condition of the, and it is not needed to be followed exactly.
charterer appeal in HL,Held ,

the number 354 , were not and never intended to be any description of the
vessels,but only a means for the identify the ship.
conclusion, the charterer cannot be entitled to the reject of the delivery of the
vessel.

2. To deliver vessel at commencement of charterparty with

reasonable dispatch
Even it is not expressly stated, it would be implied.
If the owner breaches this obligation, the charterer will have a claim in damages,
and be able to terminate the charterparty .

Express cancellation clauses- nowadays approach

- saying that is the delivery of vessels has not been punctual , then the charter
will be cancelled.

3.Seaworthiness
May be express or implied obligation, (mostly express)
stated that the the vessel is seaworthy when delivery.

Charterers are not obliged to accept delivery of unseaworthy vessel.

They may require the defects are neede to make good first by the owner.

Effect of Hague/Hague-Visby Rules

- it is impossible that the Hague/Hague-Visby Rules may be incorporated in the
charterparty.
- in the negotiation , the clauses will be added or deleted

If Hague/Hague-Visby Rules corporated,

the owners obligation will be reduced from the absolute standard , to the HV
standard, ie the
exercise of due- negligence.

If Hague/Hague-Visby Rules not incorporated, it will be the express obligation to

ensure the seaworthiness of the vessel before the voyage.( relatively larger)

H/HV will slightly reduce from absolute obligation to due-diligence

4.To maintain the vessel (In a thoroughly efficient state)

Continuing obligation

Usually there is a clause that the shipowner is obliged to maintain the vessel in a
thoroughly efficient state. It is continuous obligation throughout the charterparty
,
eg fuel , machinery equipment , anything, becomes inefficient,
the owners are obliged to take reasonable steps , within reasonable time to fix it.

Any failure : charterer can be entitled to damages , repudiatory breach can be

entitled if there is a deprived the whole benefit of the contract.

5. Duty to follow Charterers Orders

Masters obligation to follow all legitimate order from the chaterener, relating to
use of the vessels

The charterer can tell the master where the vessels will go , and what cargo , how
much cargo the vessel should load.

However,
the master done necessarily comply with the orders they receive immediately, it
may be reasonable for them to have understanding and making further enquiries
before complying instructions by the shipowners.

The HOUDA
Loading Oil in Kuwait ,( invading by Iraq)
the Houda had to load quickly due to the war , only part of the cargo has
delivered.

BOL has been issued but left,

Master received the instruction

Charterer instructed the ship by telex,

the master did not follow immediately,
because there are a number of concerns::
- Ownership of the cargo( due to the lose of the BOL)
- avoiding UN sanction if comply the instruction ( political issues)

charterer claim that the late obedience lead to the loss for them and claims for
damages, as they have been off-hire.

CA;
Issue : how would be a reasonable person would have act in this situation.?

Held, it is reasonable for further confirmation for the check of the source and
validity of the orders. the circumstance is unusual .
master and ship owner will not be liable for any losses alleged by the charterers.

The Shipowner was entitled to a reasonable time in which to verify the legitimacy
of the orders being given by the charterers. The shipowners were held not to
have been in breach by delaying in obeying orders given by Kuwaiti charterers
after the invasion of Kuwait by Iraq in 1990, when time was needed to check the
new source of the orders.

6.Duty to prosecute the voyage with the utmost despatch

it can be changed by the expressed clauses stated in the charterparty.

And finally Importance of express clauses
Always read C/P with care and in full
As mentioned before, the terms may be added modified and deleted

according to the standard forms.