CANCELLATION CLAUSE

Cancellation clause
 When a cancellation clause has been included in the wording of the charterparty the
charterer has the freedom to terminate the contract without liability once the date has passed
without the arrival of the vessel. However, if the charterer pre-empts the date of cancellation
he may be liable to the shipowner for nominal damages even if it would have been
impossible for the ship to arrive by the cancellation date.[25] The shipowner is under an
obligation to proceed to the port of loading with reasonable dispatch until the charterer
exercises the option to cancel. If the delay in the arrival of the ship is due to an exception
covered in the charterparty this does not prevent the charterer from invoking the cancellation
clause. However, it may protect the shipowner from liability for damages. Even in the event
that the charterer fails to nominate a port of loading by the cancellation date this does not bar
him from exercising the right to cancel.
Expected readiness to load : The laycan within which the vessel
should be presented to charterers for loading.

This is coupled with a cancellation clause which allows the charterer the right to
terminate the charter if the vessel has not arrived by the date specified. This is
referred to as a 'lay/can' clause

 '(a) Should the Vessel not be ready to load (whether in berth or not) on the cancelling
date indicated , the Charterers shall have the option of cancelling this Charter Party.
 (b) Should the Owners anticipate that, despite the exercise of due diligence, the
Vessel will not be ready to load by the cancelling date, they shall notify the Charterers
thereof without delay stating the expected date of the Vessel's readiness to load and asking
whether the Charterer's will exercise their option of cancelling the Charter Party, or agree to
new cancelling date.
 Such option must be declared by the Charterers within 48 running hours after the
receipt of the Owner's notice. If the Charterers do not exercise their option of cancelling, then
this Charter Party shall be deemed to be amended such that the seventh day after the new
readiness date stated in the Owner's notification to the Charterers shall be the new
cancelling date …'

The near clause

 In many cases the shipowner may qualify his obligation to deliver the vessel at the port of
loading with a clause in the charterparty stating, 'or so near as she may safely get.' Thus in
the event of any impediments at the port of loading the shipowner will still be entitled to the
payment of full freight. The use of this clause will mean that the shipper will have to incur the
costs associated with transporting the goods to the new destination for loading. However the
courts tend to construe these clauses narrowly in the circumstances. In the case of Metcalfe
v Britannia Ironworks,[27]a cargo of railway bars was shipped under a charterparty from a port
in England to Taganrog, in the Sea of Azof. The charterparty contained a clause: 'or so near
thereto as the ship could safely get.' On the arrival of the ship, on 17 December at Kertch,
which was as near as it could then get to Taganrog, the captain found the sea blocked with
ice until the following spring. The captain proceeded to discharge the cargo at Kertch. The
bill of lading stated that the cargo was deliverable at Taganrog 'freight and other conditions
as per charterparty'. No bill of lading was produced at Kertch, and the captain placed the
cargo in charge of the custom-house authorities where it was delivered to the agent of the
railway company. The captain claimed to retain the goods until the freight was paid. The
shipowner brought a claim against the charterers for freight. It was held that the shipowner
was not entitled to full freight, as first, the delivery at Kertch was not a delivery within the
wording of the charterparty, and secondly, that the plaintiff was not entitled to freight on a pro
rata basis, as no new contract for such freight had been agreed.

Questions
1. In a voyage charterparty, when is the ship deemed an 'arrived' ship? Why is this
important?
2. What are the main responsibilities of the shipowner during the loading and
unloading process? What are the responsibilities of the charterer and the consignee?
3. What is meant by 'laytime'? What are the circumstances where laytime is
suspended?
4. What are the consequences of the charterer exceeding the allocated laytime?
What if the shipper completes his loading duties with laytime remaining?
5. Charterers, Spruce Inc, entered into a voyage charter with shipowners Timber Co,
for the carriage of lumber from Canada to Argentina on board the vessel 'Moonbeam on
'berth charter' terms.
Clause 8 read:
'Vessel to discharge at the average rate of 5,000 tons per weather working day for 24
consecutive hours.'
The vessel completed loading at Vancouver and Spruce Inc declared Buenos Aires, as the
first discharging port. The 'Moonbeam' entered Buenos Aires on 15 June 2011 and, having
passed the inward inspection, she was ready to berth the same day. A berth was available
for her but she was unable to proceed to the berth because the necessary cargo documents
were not in order and the sellers of the cargo ordered the vessel not to allow anyone to have
access to the vessel without production of the original bill of lading.
The master tendered NOR at 0800 on 16 June.
The problems with the documents were resolved on 20 August whereupon 'Moonbeam'
proceeded to berth and completed discharge on 30 August when the vessel left for Deseado
to discharge the rest of the cargo.
The shipowner claimed damages for detention from the charterers for time lost whilst the
vessel was kept waiting at Buenos Aires.
Advise the parties