What is LAYCAN? Lay Days Cancellation Days

When dates are fixed; the charterparty will state, for example, “lay/can 25/30th April”. The abbreviation ‘lay/can’ means that the ‘laydays start 25th April, cancelling date 30th April’. This means that the ship must arrive on or after 25th April and before 30th April. The charterer can refuse to load if the ship arrives before the first date, in fact the cargo may not be available. If the ship arrives after the cancelling date (or often after 16:00 on the cancelling date), the charterer is at liberty to cancel the ship and find another vessel to carry his cargo. This would prove to be a useful option if the freight rates had fallen since the charter was fixed and if the charterer were therefore able to obtain a cheaper ship; however, the converse is not necessarily the case: if a ship is late arriving and rates have risen in the interim and if the charterer confirms that the ship is still wanted, then the owner must proceed with the charter.

Shipowner calculates the cost of the proposed voyage by means of the voyage estimate and compares it to the anticipated freight to decide whether the voyage will be profitable. It is important that the owner knows how long the intended voyage will take, as the calculations are based on income per day, hence a delay may make the difference between a profitable or a loss-making voyage.

Charterparties contain a clause giving the charterer the right to cancel the charterparty if the ship does not arrive at the loading port in a ready to load condition by a stated time and date. This option arises whether or not the late arrival is due to breach by the owner. Therefore, if the vessel arrives late through no fault of the owner, that is, she has suffered a breakdown whilst on the approach voyage which is excepted by the terms of the charter then the charterer will still be entitled to terminate the charterparty for late arrival of the vessel but will not be entitled to claim damages for the vessel’s late arrival. On the other hand, if the vessel arrives late for some reason for which the owners are not protected by one of the charterparty exception clauses then the charterer will be entitled to cancel the charterparty and also claim damages. Unless the charterparty makes some special provision to deal with  the situation, the charterer does not have to exercise his option to cancel until the ship has actually arrived. This is the case even if the cancelling date has long passed. The shipowner cannot, where the cancelling date has passed, call upon the charterer to declare whether or not he will load the vessel. If the charterer cancels the charter before the cancelling date, that is, he recognises that the vessel is unlikely to arrive before the cancelling date or suspects this to be the case, and therefore cancels prematurely, then the owner may terminate the contract, treating the charterer as in breach, and claim damages. However, it should be noted that if it can be shown that the vessel is unlikely or would not have reached the loading port by the cancelling date then, whilst technically in breach by cancelling prematurely, the charterer’s damages are likely to be nominal. It therefore follows that, if the charterer gives notice of cancellation before the cancelling date, the owner has a choice; he may terminate the contract and, provided that he can show that the vessel would have reached the load port before the cancelling date, claim damages or he can continue on the voyage and tender the vessel for loading, in effect gambling that she will arrive before the cancelling date. If the owner adopts the second of these choices it will then be open to the charterer to remedy his breach by exercising his contractual right by loading cargo or, if the vessel arrives after the cancelling date, to cancel the contract.

The canceling date is the final layday and the date beyond which, if the chartered vessel has not been presented for loading, the charterers may not accept the ship and may cancel the charter. The terms of this pro- vision will usually be found in a canceling clause, which provides that the charterers will not be entitled to cancel the charter before the stated canceling date, even when it is obvious that the vessel cannot arrive at the loading port by this date. Laydays and canceling are often called the laycan; they represent the period within which the vessel must be presented at the agreed port or place. If the vessel arrives before the first day of the period, the charterers do not have to accept her until commencement of the agreed laydays. If she arrives after the final layday, the charterers are entitled to reject the vessel and cancel the charter. Laycan is a ship’s arrival window (the time between tendering NOR and the cancellation date and time provided for in the charter party). In The Front Commander (2006), Rix L. J. defined laycan as  (a) the earliest day upon which an owner can expect his charterer to load; and (b) the latest day upon which the vessel can arrive at its appointed load- ing place without being at risk of being canceled. This window is very short, hence ships may arrive earlier to make sure that they are present within the laycan window.

When a charterer quotes a cargo perhaps the worst scenario is that no ships offer for the business. This would be rare in the major bulk trades but, for those involved in the coastal or middle trades, such an event is not unknown. The other scenario, which is a major source of trouble, is when the ship as fixed does not arrive, or indeed does not arrive in time to load the cargo. The purchase contracts for the charterers’ cargoes will state that a cargo must be loaded within certain dates, or even on a given day in some tanker loading ports. Penalties are likely to accrue against the charterer if the vessel does not arrive timeously for loading. The charterers therefore need to be able to cancel a ship that is running late so that they are able to find a commercial solution such as fixing an alternative, earlier vessel as a substitute. It is perhaps unseemly to point out that the charterers may at times, in a falling market, use the ploy to cancel a more costly vessel to enable them to fix a cheaper alternative. It may be cynical to ask is a ship ever cancelled for being late if the market has risen since the original fixture was concluded. Thus it is necessary, these days, for a voyage charter to be negotiated with a ‘Laydays/Cancelling'(Laycan). In dry cargo trades the dates could be as wide as 10 or 15 days, say 1/10 April or 1/15 April. In the oil trades it is common for the sale contract to have a 48-hour supply window so we would see the business quoted as 1/3 April. At first view this appears to be three days, 1, 2 and 3 April – but on closer scrutiny the sale contract states 12.00 hrs 1st to 12.00 hrs 3rd which is 48 hours. The charterers, under the terms agreed with the owner in the charterparty, may take the risk of the vessel arriving before 12.00 hrs on the 1st and indeed arriving after 12.00 hrs on the 3rd. However Shellvoy6 has a commencing and cancelling time of 12.00 hrs on the unamended form.  Accepting that the charterers need the right to cancel a ship that is running late, or perhaps more accurately will not be ready within the cancelling time/date it may be no surprise to the student that various charters have different ways of dealing with late readiness.