NYPE Specific Clauses

Where the charter is for a stated flat period of time, such as ‘six months’ or ‘two years’ without qualification, the courts generally take the view that time is not of the essence of the contract and are prepared to imply a reasonable and commercially acceptable margin of error – usually in the region of 4 to 5 per cent, which amounts to two weeks on a 12-month charter. An alternative approach is preferred by US arbitrators who apply the so-called‘overlap/underlap rule’ in deciding whether the charterer is entitled to send the vessel on a final voyage under the charter. Under this rule the charterer may, in a choice between under- lap and overlap, select whichever of the two alternatives brings the time of redelivery nearer to the end of the charter period. The insertion of the word ‘about’ before the charter period, as in the New York Produce Exchange form, is taken as an express incorporation of the otherwise implied reasonable allowance. In many cases, however, express provision is made for a specified leeway in the charter clause itself. Clauses of this type take a variety of forms such as ‘a period of 6 months, 20 days more or less in charterer’s option’ or ‘minimum 11/maximum 13 months’. Such clauses are regarded as fixing the maximum permissible tolerance, and the charterer who redelivers the vessel outside these limits will be regarded as in breach of contract. Alternatively, further leeway may be afforded by an estimate drafted in the form, ‘duration about 11/12 months without guarantee’. Liability for any overrun beyond the 12 months will depend on whether or not the original estimate was made in good faith and on reasonable grounds. In contrast it is open to the parties, by express words or by implication, to make time of the essence of the contract. Thus in Watson v Merryweather, where the charter provided for ‘redelivery to owners between 15 and 31 October’, it was held that this clause made time of the essence with the result that failure to redeliver the vessel on 31 October amounted to a breach of contract. It is believed that the deliberate deletion of the word ‘about’ before the stated charter period in the NYPE form will, by implication, have a similar effect. Where the vessel is returned to the owner before the expiry of the stated minimum period of hire, it would appear that the charterer is not entitled to a refund but must pay the full hire for the agreed period. If such early redelivery be regarded as a breach of contract, then it is arguable that the owner is under a duty to mitigate his loss by rehiring the vessel should this be commercially possible within the balance of the charter period. There are, however, dangers in adopting such a course of action as is exemplified in The Zenovia. The last per- missible redelivery date for the vessel was 22 November but, towards the conclusion of the charter, the owners were given a 30-day approximate notice of redelivery on 6 November. As the result of the speedy completion of the last voyage it was found possible, on a rising market, to fit in an extra voyage before the contractual redelivery date, whereupon the charterers gave the owners a revised redelivery date of ‘about 20 November.’ The owners argued that, on the basis of the earlier redelivery date, they had concluded a new fixture and that the charterers were not entitled to change the redelivery date. They accordingly withdrew the vessel from the charter on 2 November. The trial judge, Tomlinson J, held that the owners were liable in damages for wrongful repudiation of the contract. On the facts, he was not prepared to imply a term that the charterers would do nothing to prevent the earlier redelivery date being met, nor did he consider that there was a clear and unequivocal promise sufficient to raise an estoppel.