GENCON Cancellation Clause

Cancelling clause is of particular value to a charterer since it indicates a time beyond which he is no longer obliged to wait for the arrival of the chartered vessel. Once this date has been reached, he can safely repudiate the charter and make alternative provisions for
the carriage of his cargo. As this is a contractual right of cancellation, he is relieved of the onus of proving that the object of the charterparty has been frustrated or even that he has suffered loss as a result of the delay. But he is not allowed to prejudge the issue by repudiating the charter before the cancelling date even though it is physically impossible for the chartered vessel to arrive at the loading port by that date. A further point to note is that the cancelling clause merely affords the charterer an opportunity to repudiate any further obligations under the charter, it does not entitle him to claim any damages for loss which he has suffered as a
result of the delay. Only if a shipowner has breached his obligation to proceed to the loading port with reasonable dispatch are any damages recoverable. The cancelling clause provides the charterer with an option to rescind the contract which he is not bound to exercise until the vessel reaches the loading port and notice of readiness to load is given. It may be in his interest to delay any decision on exercising the option until the last possible moment in order to test the current state of the market. If freight rates are rising there will be little incentive to cancel, whereas if they are falling an opportunity to renegotiate the charter would be attractive. Until the option has been exercised, however, the shipowner remains under a duty to proceed to the loading port with reasonable dispatch, even if there is no possibility of arriving there before the cancelling date. Nor is the charterer under any obligation at common law in these circumstances to indicate to the shipowner how he intends to exercise his option, and failure to respond to an enquiry from the shipowner will not amount to a waiver of his rights under the option. In order to minimise the resulting loss to the shipowner, many forms require the charterer to declare his option at a specified time prior to the vessel’s arrival at the port of loading, for example, ‘if demanded,
at least 48 hours before vessel’s expected arrival at port of loading’. Even in the absence of such a clause, it may be of advantage to the shipowner to indicate to the charterer that he willnbe unable to reach the loading port before the cancelling date. Should he be in breach of his obligation to proceed with reasonable dispatch, he will provide the charterer with an opportunity to mitigate his loss by enabling him to delay delivery of the cargo to the port and thus avoid unnecessary warehouse charges.