In order to be considered as ship off-hire period, charterer must be deprived of the use of the ship. Charterer will be unable to rely on the off-hire clause unless charterer is deprived of the use of the ship by the occurrence of one of the specified events.
Engine breakdown at sea might take the ship off-hire. On the other hand, engine breakdown would not have taken the ship off-hire if it occurred while the ship was discharging in port, provided that the ship was otherwise efficient for carrying out that operation. In a similar manner, installation of new equipment by shipowner at the charterer’s request while the ship was waiting for a berth, did not activate the off-hire clause since the charterer was not, in the circumstances, deprived of the use of the ship.
Ship off-hire period depends, on the precise wording of the clause and the strict standards of interpretation adopted by the courts have resulted in superficially similarly drafted clauses producing radically different effects. Majority of standard off-hire clauses fall into one of two distinct categories:
- Period Clauses
- Net Loss of Time Clauses
Period Clause is distinguished by the fact that it designates the start and end of any period for which hire is suspended by linking them to the occurrence of specified events. Any one of a selection of events such as deficiency of men or stores, drydocking etc. might activate the period clause. Normally, period clause would only cease to operate when the ship was restored to a fully efficient state, capable of providing the service immediately required of it. Generally, restoration of partial efficiency of the ship is insufficient to satisfy this requirement. Period clause involves little difficulty in application, provided that the occurrence of the specified events is readily ascertainable. For example, when time was lost as the result of defective loading equipment, it was held that the operation of a period clause was not limited to working hours, but that no hire was payable for the entire time the charterers were deprived of the use of the equipment and that it was immaterial that loading would not have taken place because of strikes, bad weather or unavailability of cargo.
Net Loss of Time Clauses merely provides that hire is not payable for time lost as the result of the occurrence of one of the specified events. For example, in Baltime Charter-party Form (Clause 11A), ‘no hire to be paid in respect of any time lost thereby during the period in which the ship is unable to perform the service immediately required’. Prima facie such wording should mean that hire does not cease to be payable merely on the occurrence of one of the specified events but only if, and to the extent that, time is lost as a result. This is particularly important in the case of partial efficiency of a ship.
For example, in the event of the breakdown of one of several loading cranes, or on the discovery of a speed deficiency. Under the period type of off-hire clause, the obligation to pay hire will resume once the ship becomes efficient and full use is restored to the charterer. As a result, where a ship has been compelled to deviate for repairs, the expense of making up lost ground once the repairs have been completed will fall on the charterer in the absence of provision to the contrary in the charter-party. A similar result apparently follows in English law in the case of the net time lost type of clause, despite the fact that the time taken to make up lost ground would appear to fall within the concept of any time lost as the result of the occurrence of the specified event. Recent cases would suggest the existence of a wider principle preventing the deduction of any time lost under such a clause, once the full operating efficiency of the ship has been restored. Marika M case where a ship went off-hire on running aground, it was held that the charterer could not deduct time lost waiting for a berth after she had been re-floated, even though it was the direct consequence of the original grounding. Express provision for such contingencies can be made in the off-hire clause itself such as BIMCO’s standard tanker time charter party INTERTANKTIME 80 (clause 20).