Time Charter Overlap

In the event of overlap, the liability of the charterer will vary, depending on whether or not he is in breach of contract. Where redelivery is made within the period of tolerance, and so the charterer is not in breach, he will have to pay for the extra time at the normal charter rate. On the other hand, where redelivery is made outside this period, damages will be assessed in relation to the current market rate of hire.
In recent years the courts have applied the ‘legitimate last voyage’ test in deciding whether a charterer is in breach of contract. Under this test the charterer is not in breach if, when the vessel was dispatched on its final voyage he could reasonably have expected the voyage to be completed within the charter period plus the permitted leeway. The legitimacy of the voyage is consequently judged at the time of the vessel’s departure and not at the time the order was given. Even though the order for the final voyage is legitimate, however, the charterer is still under an obligation to redeliver the vessel on time. Consequently, if supervening events prevent him from doing so, he will be liable for breach of contract even though the failure was due to circumstances beyond his control. In such an event he will remain liable for hire at the charter rate until redelivery, together with damages to cover any excess period when the market rate of hire is higher than the charter rate. Charterparty clauses may, however, relieve charterers from such liability and require owners to complete a legitimate last voyage, free of any liability in damages for late delivery, provided the unexpected delay does not involve any fault on the part of the charterer. Such clauses do not confer a right to require the owners to embark on an illegitimate last voyage unless the clause is so worded as to override the charterer’s obligation to redeliver the vessel on time. An example of such a clause is provided by clause 18 of the Shelltime 3 form which states that, ‘notwithstanding’ the stated charter period, ‘should the vessel be upon a voyage at the expiry of the period of this charter, char-terers shall have the use of this vessel at the same rate and conditions for such extended time as may be necessary for the completion of the round voyage on which she is engaged . . .’ The Court of Appeal in The World Symphony held that these words clearly overrode the clause specifying the charter period and entitled the charterers at any time during that period to give orders for a final voyage in the knowledge that it would overrun the time otherwise stipulated for redelivery of the vessel. Throughout the whole of such a voyage the charterer would be entitled to the use of the vessel at the normal charter hire rate.
The contrasting position was outlined by Lord Denning MR in The Dione. If the charterer sends the vessel on an illegitimate last voyage, that is, a voyage which it cannot be expected to complete within the charter period, then the shipowner is entitled to refuse that direction and call for alternative instructions for a legitimate last voyage. If the charterer refuses to give it, the shipowner can accept his conduct as a breach going to the root of the contract, fix a fresh charter for the vessel, and sue for damages. If the shipowner accepts the direction and goes on the illegitimate last voyage, he is entitled to be paid, for the excess period, at the cur- rent market rate when higher than the charter rate. In The Dione the vessel had been chartered for a period of ‘6 months, 20 days more or less in charterer’s option’. When sent on its final voyage the charterers could not reasonably have expected redelivery by the expiry of this period on 28 September. The vessel was eventually redelivered on 7 October. The charterers were held liable to pay hire at the contract rate up to 28 September and at the market rate thereafter. When assessing damages for breach of contract in such circumstances, the relevant ‘market rate’ is taken to be the current rate for a time charter of equivalent length to the one breached, and not the rate for a theoretical voyage charter based on the illegitimate last voyage. So in The Johnny a vessel had been chartered on a Baltime form for ‘minimum 11/maximum
13 months’, which period expired on 7 November 1974. On 19 September the vessel was sent on a last voyage to Karachi, as the result of which she was redelivered to the owners 29 days late. In assessing the appropriate market rate for those 29 days the court held that the
calculation should be based on the current rate for an 11/13-month time charter and not, as the owners argued, on the current rate for a voyage charter to Karachi.