Ship Owners’ Delivery Obligations in Time Charter

Ship Owners’ delivery obligations are to be found in lines 21–24 of the NYPE form. ‘… vessel on her delivery to be ready to receive cargo with clean/swept holds and tight, staunch, strong and in every way fitted for the service …’  If the vessel does not meet these requirements, owners are not entitled to give a valid Notice of Readiness (NOR) under Clause 14. This clause provides as follows: ‘14. That if required by charterers, time not to commence before (the first day of the Lay/Can period) and should vessel not have given written notice of readiness on or before (the Cancelling date) … .charterers … to have the option of cancelling this Charter … .’ If the vessel is not ready for delivery, charterers have various, often overlapping, remedies.● If the vessel does not comply with lines 21–24, no valid NOR, as required by Clause 14 of the NYPE form, can be given; ● If the situation is not remedied by the cancelling date (Clause 14), charterers may cancel; Even if charterers opt not to exercise their right to cancel under the cancelling clause, they can still refuse to accept delivery until such time as defects have been made good; ● If the defective state of the vessel (or her late arrival) is due to a breach of owners’ obligations under the charter, charterers can claim damages. It was held in The DEMOCRITOS [1976]  that, under the NYPE form, owners’ obligation is to exercise reasonable diligence to deliver the vessel in a fit condition by the cancelling date.); ● Charterers will not be obliged to pay hire whilst the defects remain, unless they waive their right to insist on a valid NOR being tendered. Readiness and fitness (at least as applied to matters other than the condition of the vessel’s holds or tanks) should be considered commercially. This view was approved by the court in The ARIANNA [1987] The ARIANNA, an oil tanker, was let for a 10-year time charter to carry general products. One of the additional clauses provided that six tank- cleaning machines should be capable of operating simultaneously at a stated temperature and pressure. The ESSOTIME charter gave charterers the right to cancel if the vessel was not ready and in every way fitted for the service by the cancelling date. In fact the ship could not run six tank- cleaning machines simultaneously while in port and while at the same time heating cargo destined for other ports. However, the pattern of trading under the charter might well have been such that this scenario would never have arisen and, even if it did, the ship could always run four tank-cleaning machines simultaneously, so that the only consequence would have been some minor delay. Charterers purported to cancel. Arbitrators held that, despite the breach of charter, the ship was nonetheless fitted for the service and the cancellation was unjustified. The court upheld the award. The judge held that a deficiency which had no effect on the safety of the ship or the security or integrity of the cargo did not necessarily render the ship unfit. Whether it did so or not depended upon the significance of the defect. It was implicit in the arbitrators’ award that they regarded the deficiency in this case as of no real significance in a commercial sense. Similarly, the courts are unlikely to allow charterers to cancel under the cancelling clause if an item of ship’s gear or equipment is deficient in a way which does not affect the safety of the ship or cargo. In Noemijulia Steamship v Minister of Food (1950) Devlin, J., said: ‘I find it hard to believe that if, for example, a winch, which would not be needed for some days after the loading began, required an hour or two’s overhaul, the cancellation of the charter would be justified. It must always be remembered that this is a forfeiture clause and so not to be applied lightly.’ There seems little doubt that owners’ obligation to have the ship ready before tendering NOR is stricter in sofar as it concerns the condition of the vessel’s holds or tanks, and that it is less strict as regards other aspects, such as the winch referred to by Devlin, J. above.  Owners must be able to give charterers ‘ . . . complete control of every portion of the ship available for cargo. Groves Maclean v Volkart (1884). It follows that if the crew is still engaged in cleaning a hold, even if that hold is not immediately required by charterers, any NOR tendered by owners will be premature and therefore invalid. But this would not necessarily be so if cargo was to be loaded only into, say, three out of five holds, at the first port of loading, provided that those three holds were ready. As mentioned in the previous chapter, the absolute seaworthiness required by lines 21–24 applies in full for the purposes of the cancellation clause. This strict requirement is not diluted by the incorporation of the lesser ‘due diligence’ obligations contained in the Hague Rules, incorporated by the Clause Paramount in Clause 24, as they relate only to owners’ liability for loss or damage resulting from unseaworthiness.