Cancelling Charterparty

If the vessel has not arrived at the first loading port, or is not ready to load at the first loading port, by the cancelling date and time, most charters give the charterer the absolute right to cancel the agreement. The sting in the tail is when the charterer is obliged to advise the owner that the vessel is cancelled. Unsurprisingly this detail is not at the top of the list of priorities for the broker when negotiating a fixture. Ask yourself, who wants to dwell on the cancellation of a contract whilst it is being negotiated? Under English law a charterer is not obliged to declare whether or not a vessel will be cancelled until the vessel arrives at the load port or is ready to load, unless expressly stated in the charterparty. ln the unamended Gencon form the charterer is not obliged to declare their option to cancel until at least 48 hours before the vessel’s expected arrival. So what happens if the vessel is one month late? Obviously she will be cancelled – but what if the market has risen significantly and perhaps the charterers’ next cargo will be suitable for when the vessel arrives. They will be able to take the late vessel at a lower than market rate. The point is that the owner cannot make any sweeping assumptions that because the vessel is late she will be cancelled.  If an owner knows 10 days before the cancelling date that the vessel will not be able to arrive prior to the cancelling date but the charterer is not cooperative then the vessel may have to ballast toward the load port in order to avoid a claim for breach of contract from the charterers. The cancelling clause gives the charterer an express contractual right to terminate the charterparty if the vessel is not ready to load by a particular named date. Some authorities argue that there is no contractual right to cancel under the cancelling clause unless and until the date specified in that clause has been reached (Madeleine (1967) – Roskill J). A more reasonable approach, adopted in many charters, is that within a certain time after the owner advises that the vessel will be late and expects to arrive on (say 48 hours) the charterer will declare whether or not they will cancel the vessel. Ask the question: does the vessel have to be ready to load or should the vessel’s
NOR (Notice of Readiness) be tendered by the cancelling date/time? In practice it is better that both parties, owner and charterer, know as soon as is practicable whether the vessel will be cancelled.