Exercise of the right to withdraw the vessel for default in payment of hire terminates the charterparty. The shipowner has no right temporarily to withdraw the vessel in an attempt to put pressure on the charterer to pay the hire unless there is an express term in the charterparty to that effect. Such action by the shipowner amounts to a breach of contract for which damages are recoverable. Nor is the shipowner entitled to take any other action as, for example, withdrawing the charterer’s contractual authority to sign bills of lading or instructing the master not to sign pre-paid bills of lading.
In The Nanfri such conduct was held to amount to a repudiatory breach of contract entitling the charterers to determine the charterparty. Practical problems would, however, arise where an attempt was made to withdraw the vessel after cargo has been loaded. A recent case has held that, in such circumstances, expenses are recoverable in bailment for detention of the vessel during the period of unloading, together with the cost of bunkers consumed in the discharging operation.
Should bills of lading also have been issued before withdrawal, particularly where those bills have been issued to parties other than the charterer, any withdrawal would be subject to the completion of the voyage covered by the relevant bills of lading.
In practice, however, 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 notice of withdrawal was wrongly given, the charter rate remains the same. The effect of exercising the right to withdraw the vessel is to terminate the contract from that point and the shipowner is not entitled to any hire for the remainder of the charter period. Nor is he entitled to retain any unearned hire already paid in advance.
Damages for the unexpired period of the charter can only be recovered where default in payment of hire amounts to a repudiation of the contract by the charterer. As time is normally not of the essence of a time charter, default in payment of hire by the charterer will rarely amount to repudiation of the contract and the shipowner wishing to withdraw the vessel will invariably have to rely on the contractual withdrawal clause.