Breach of Charterparty
Basic English Contract Law. Before embarking on the specific topics set out above, it is necessary to understand some basic English contract law concepts. This is particularly important in the context of whether an owner or charterer is entitled to terminate the charterparty in light of the other’s breach of charterparty.
Every breach of contract gives rise to a cause of action but not every breach gives a discharge from liability. One party to a contract may, by reason of the other’s breach, be entitled to treat himself as discharged from his liability further to perform his own unperformed obligations under the contract and from his obligation to accept performance by the other party if made or tendered.
In other circumstances the innocent party is merely entitled to a particular remedy, often in the form of damages. English law recognizes three (3) classes of contractual terms:
1- Condition: the breach of which will always entitle the innocent party to bring the contract to an end;
2- Warranty: the breach of which will never entitle the innocent party to bring the contract to an end; and
3- Innominate Terms: the breach of which may entitle the innocent party to bring the contract to an end, but only if the breach goes to the root of the contract.
Therefore, subject to a contractual term containing an express right of termination, shipowners or charterers may only terminate a contract for breach if the other party to the contract breaches (1) a condition of the contract or (2) an innominate term in such a way as to go to the root of the contract.
The right to terminate for breach, where it arises, is in the nature of a right of election. The innocent party must choose whether to accept the breach and bring the contract to an end or allow the contract to continue but claim damages.
The effect of termination for breach is to relieve both parties of the obligation to perform their duties under the contract. Thus an accepted repudiation brings the primary obligations of the parties which remain unperformed to an end as from the time of acceptance but does not affect the rights which have accrued before then.
If a party purports to terminate a contract for breach on grounds subsequently held not to entitle him to do so, it is open to him to rely instead upon other grounds, even if they were not known to him at the time.