Condition, Warranty, Intermediate Term of a Charter Party

A condition of the contract is a promise or undertaking by one party that is fundamental to the contract, with the result that any breach of it will entitle the innocent party to terminate the contract, even if the breach is minor in degree or in effect. Some conditions are implied by law, for example, owners’ obligation that the vessel will proceed on the voyage without unjustifiable deviation; other terms may be made conditions by the way in which they are expressly described as such in the contract, or by the importance attached to them by the parties. However, the fact that the parties refer to a term as a ‘condition’ is not necessarily conclusive, since they may not have intended to use the expression in its technical legal sense described above. A warranty is a term of the charter of relatively minor importance. A breach of warranty will not give rise to any right to terminate the contract. The so-called ‘warranty of seaworthiness’ is in reality an intermediate term, not a ‘warranty’ in the strict legal sense. In the case of breach of an intermediate term, the question whether an innocent party has a right to terminate depends upon the nature and effect of the breach. In order to give rise to a right of termination the breach must be so serious that the charterer is deprived substantially of the whole benefit of the contract (The DIANA PROSPERITY 1976). Charterers may also have the right to treat the contract as repudiated if owners refuse to take steps to bring the vessel up to her described condition. Such refusal would generally be interpreted as evidence that owners no longer intended to be bound by the contract. Finally, all charter parties contain an express right of cancellation which charterers can exercise if the vessel either fails to arrive at the delivery point by the cancelling date or, having arrived, is not made ready before the cancelling date as required by lines 21–24 of the NYPE  form.