Ship Redelivery

Under a time charter contract, the ship must be delivered by the owners to the charterers, ready for their commercial use within the agreed period of time. Charterers have an obligation that is expressed in the contract to redeliver the ship to the owners. At the time of fixing, the charterer must choose a period of sufficient length to enable him or her to achieve the proposed trading objectives and to redeliver the ship at the expiry of the charter period. If the ship is redelivered outside the charter period, the charterer will be in breach of contract. It is always a challenge to arrange the end of the charter period to correspond to the last voyage exactly. An express margin of the hire period is often stated to cover for possible delays (e.g., ten days more or less in charterer’s option). In the absence of such an express margin, the courts will imply a reasonable margin. Where a ship is redelivered outside the charter period, the payment for the extended hire will depend on whether the last voyage under the charter was a legitimate last voyage (a voyage that could reasonably be expected to be completed before the end of the charter period) or an illegitimate last voyage (a voyage that could not have reasonably been expected to be completed within the charter period). If, during a legitimate last voyage, the ship is delayed by matters for which neither the charterer nor the shipowner is responsible, the charter is presumed to continue in operation until the end of the voyage. The hire is payable at the charter rate until redelivery, even though the market rate may have changed. Timely delivery of the ship is not a condition, and a short delay in redelivery will not justify the termination of the charter party. If the charterer instructs that the ship proceed on an illegitimate last voyage, however, the shipowner is entitled to refuse that instruction and call for another. If the charterer refuses to give it, the shipowner may regard this as going to the root of the contract, which means that the charterers will find themselves in repudiatory breach of the charter party contract and the shipowner will then be entitled to agree to a new charter for the ship and sue for damages. If the shipowner agrees to the illegitimate voyage, shipowner is entitled to be paid at the current market rate for the excess period. Damages for repudiation of a time charter contract are assessed on the basis of reinstating the party that has suffered loss or damage to his or her original positions. In other words, what would have been the benefit gained by the party that has suffered losses if the charter had continued? The party must be reinstated to its original position. In cases of shipowners’ wrongful repudiation of a time charter, when there is at the time of the termination of the charterparty or shortly thereafter an available market for the chartering in of a substitute ship, the normal measure of damages is the difference between the contract rate for the balance of the charter party period and market rate for the chartering in of a substitute ship for that period.