Shipowner Withdraw Ship
Common law time is not of the essence of the contract and a shipowner cannot repudiate the charterparty and withdraw his vessel for late payment of an installment of hire unless the circumstances show a clear intention on the part of the charterer not to perform the contract as, for example, by an express repudiation of his obligations or by repeated non-payment.
Clause 5 of the New York Produce Exchange form makes similar provision for self help on the part of the shipowner “failing the punctual and regular payment of the hire”.
The original object of such clauses was to enable pressure to be exerted on a persistent defaulter or to recover possession of the vessel before becoming embroiled in proceedings attending the bankruptcy of an impecunious charterer.
In periods of fluctuating market rates of hire, these clauses have afforded a lifeline to the owner involved in a long-term charter at fixed rates. By invoking the clause and withdrawing the vessel on any default in payment of hire, he has been enabled to re-charter the vessel at current market rates even, in many instances, by offering it back to the original charterer.
In the inimitable prose of Lord Denning MR, ‘when market rates are rising, the shipowners keep close watch on payments of hire. If the charterer makes a slip of any kind – a few minutes too late or a few dollars too little – the shipowners jump on him like a ton of bricks. They give notice of withdrawal and demand thenceforward full payment of hire at the top market rate. Very rarely is the vessel actually withdrawn. Arrangements are made by which she continues in the service of the charterer just as if nothing had happened. Then there is a contest before the arbitrators or in the courts. It is as to whether the notice of withdrawal was justified or not.’
Although such conduct is entirely with- out merit, the courts ‘do not suggest . . . that the owners are guilty of any sharp practice . . . it is just a matter of business – a matter of very hard business’
The charterer must be in default by failing to pay an installment of hire, or failing to pay it on time. He will be equally in default if only part payment is made on the date due, hence the importance of deciding whether or not he has an implied right to make deductions in specified events.
Payments cannot satisfy the requirements of being punctual or made in advance unless they are effected on or before the specified date. In cases where an installment of hire falls due on a day when banks are closed, payment must be effected before the close of trading on the immediately preceding day of business. These requirements are strictly construed and it is immaterial whether late payment involves a matter of days or merely hours.
A late tender of hire made before the shipowner has exercised his right to withdraw the vessel will not rectify the default unless the shipowner is willing to accept such payment as if made on time and waive the breach.
A decision of the Court of Appeal to the contrary in The Georgios C was expressly overruled by the Lords in The Laconia. Clear notice of withdrawal of the vessel must be given to the charterers or their agents. Notice to the master of the chartered vessel is not sufficient. No particular form of words or notice is required, but the charterers must be informed that the owner is treating the non-payment of hire as having terminated the charter party