Failure to pay Ship Hire

Lord Porter: “Charterers’  obligation  to pay on or before the due date is absolute” Tankexpress  v. Compagnie   Financiere (1948) where  he said ‘apart  from  some  special  circumstances excusing  performance,  it is enough  to constitute  default  that payment  has not in fact been made: neither  deliberate non-performance nor negligence in performing the contract is required’.

If a charterer  wants to change  this general  position they can contract  on Barecon 2001  terms  (or insert  a clause  similar  to that  of clause  28(a)(ii)  of the  Barecon 2001 form) which  provides  that ‘… where there is a failure to make punctual  payment of hire due to oversight,  negligence,  errors or omissions  on the part  of the Charterers or their bankers,  the owners  shall give charterers  written  notice  … ‘ (it then provides  for an anti-technicality clause). The standard  forms of time charter recognisze the importance to the owners of the regular receipt of hire by the inclusion of provisions  which allow the owners to terminate  the time  charterparty if the charterers fail to pay hire on or before  each specified date: see for example NYPE 1946 Form which  provides  as follows: ‘5. Payment  of said hire to be made  …   semi-monthly   in advance,  and for the last  half month  or part  of same  the approximate   amount  of hire, and should  same  not  cover  the actual  time,  hire is to be paid  for  the balance day by day, as it becomes  due, if so required  by Owners,  unless bank guar- antee  or deposit  is made  by the Charterers,  otherwise   failing  the punctual and regular payment  of the hire, or bank guarantee,  or on any breach  of this Charter  Party, the Owners shall be at liberty  to withdraw  the vessel from the service  of the Charterers,  without  prejudice   to any claim  they (the Owners) may otherwise  have on the Charterers.’ Note: the reference to ‘cash’ in clause 5 of NYPE (and similar clauses) includes types of payment which have become in commercial usage equivalent to cash, for example, inter-bank transfers and banker’s drafts. The remedy which most owners wish to employ (particularly on a rising market) is withdrawal of the vessel for non-payment of hire. Many of the standard forms of time charter contain a withdrawal clause: see for example:

(1) Clause 58 of the NYPE 1946 form provides (inter alia) ‘ … otherwise failing punctual and regular payment of the hire, or bank guarantee, or on any breach of this Charter Party, the Owners shall be at liberty to withdraw the vessel from the service of the Charterers, without prejudice to any claim they (the Owners) may otherwise have on the Charterers …’

(2) Clause 11(a) of the NYPE 1993 form provides (inter alia): ‘Failing the punctual and regular payment of the hire, or on any fundamental breach whatsoever of this Charter Party, the Owners shall be at liberty to withdraw the Vessel from the service of the Charterers without prejudice to any claims they {the Owners) may otherwise have on the Charterers .. .’

(3) Clause 6 Baltime 1993 form provides (inter alia):’ … In default of payment the Owners to have the right of withdrawing the vessel from service of the charterers, without noting protest and without interference by any court or any other formality whatsoever and without prejudice to any claim the Owners may otherwise have on the charterers under the charter.’

Note: many of the other standard forms contain withdrawal clauses which are tied into their anti-technicality clauses.