The Laconia [1976] 1 Lloyd’s Rep. 395 (C.A.); [1977] 1 Lloyd’s Rep. 315 (H.L.).

A charter of the Laconia required the charterers to pay hire to owners’ dollar account with the First National City Bank’s branch in Moorgate, London. The charterers’ bank in London, the Midland Bank, sent the First National Moorgate a payment order issued under the (now defunct) London Currency Settlement Scheme, a paper-based system. This instructed the First National to make a payment to the owners’ account and stated that the First National’s account with the Midland had been credited with the necessary funds. Under the scheme, the payment order was regarded as the equivalent of cash.

However, since the payment order had to be processed, the owners’ account was not credited until about 24 hours after the order had been presented to their bank. In the Court of Appeal, [1976] 1 Lloyd’s Rep. 395, at page 399, Lord Denning, M.R., said, “The paying bank is the agent of its own customer to make the payment. The receiving bank is the agent of its customer to receive it. The banks themselves regard the ‘payment order’ as equivalent to cash … If the paying bank had sent actual currency, the payment would be made when it was handed over the counter to the receiving bank … So also with the ‘payment order”’.

The case went to the House of Lords, [1977] 1 Lloyd's Rep. 315 but was decided on other grounds.

However, three members of the House expressed tentative opinions on the point.

Two considered that payment was effective upon delivery of the payment order to the owners’ bank.

Lord Salmon expressed the view, at page 327, that, “there is no real difference between a payment in dollar bills and a payment by payment orders which in the banking world are generally regarded and accepted as cash”. Lord Salmon rejected the idea that because time was necessary for processing the payment order, the payment

order did not give the owners immediate use of the funds. He pointed out that even a cash deposit requires processing before a credit is raised on a customer’s account: see page 326.

Lord Russell said, at page 333: “I would as at present advised incline to the view that, a payment order being as between the banks the equivalent of cash—meaning I take it irrevocable and ‘good’—it should suffice for punctual payment that such cash equivalent be tendered in due time to the nominated bank to be credited to the named account: this was the method of payment laid down: you cannot pay ‘into’ an account, whether you are tendering cash or its equivalent.”

Lord Fraser expressed the contrary view, that payment should be made in sufficient time to enable the owners’ account to be credited by the due date.

The Right of Withdrawral In appropriate circumstances a ship owner can withdraw a vessel from service and escape the charter party if the hire is not paid on time by the charterer. This is an important topic since it has wide ranging effects on the parties. Exercise of the right to withdraw the vessel by the ship owner will depend normally on economic issues. The shipping industry is a very volatile market and can go from extremes of depression to high demand in a very short time. During a trade slump when large numbers of vessels are tied up idle at the quays vessels can be hired at very low rates since while a vessel is at sea the ship owner does not have to pay any dock charges. If the demand for shipping rises the ship owner will use any excuse to escape from a charter party that has been negotiated during the slump period. The Laconia 22 is the leading case on this topic.

The Laconia. 12th April Sunday : The Hire was due for payment. 13th April Monday : The charterers paid the hire. 14th April The ship owner directed the bank to return the money and at 18:55 p.m. The ship owner informed the charterers of withdrawal.

The court held that once a punctual payment of an instalment has not been made a right of withdrawal accrued to the owners. The clause required ʹPayment of hire, in advance, and failing punctual and regular payment the ship owner can withdraw.ʺ

Wilberforce: The word advance is important, and thus it should have been paid by Friday the 10th. The requirement of punctuality is strict.

Fraser: The ship owner cannot be deprived of the right of withdrawal by the tender of an unpunctual payment. Once the charterer had failed to pay in advance nothing could be done to remedy the breach : p320 ibid.

The Mihalios Xilas.26 Clause 39 regarding the payment of hire stated that each monthʹs hire should be paid in advance except for the final monthʹs hire when items of the owners liability could be deducted up to the expected redelivery time. On the 13th March the 9th monthʹs hire was due for payment within 7 working days, that is to say the 21st March. The Charterers deducted $31,000, which represented an underpayment, and on the 26th March the Ship owner withdrew the vessel.

The Mihalios Xilas [1979] 2 Lloyd’s Rep. 303 (H.L.).

The Mihalios Xilas was chartered on the Baltime form. Additional Clause 39 provided for the payment of hire monthly and for “the last month’s hire to be estimated and paid in advance, less bunker cost and Owners’ disbursements and other items of Owners’ liability up to such time as vessel is expected to be re-delivered …”. Hire for the ninth month was due on 22 March. On 21 March the charterers paid considerably less than a full month’s hire and their agents explained to the owners that the shortfall was because the charterers were deducting in respect of certain advances and estimated bunkers and disbursements on redelivery, showing that they regarded this hire payment as the last under the charter.

The owners, on the afternoon of 22 March, a Friday, asked the charterers for vouchers supporting the deduction for advances and disputed the charterers’ estimate of the redelivery date and the amount of the deduction for bunkers and disbursements on redelivery. They followed this with another request on Monday, 25 March, but no further details were supplied and the owners withdrew their ship shortly after noon on Tuesday, 26 March.

In arbitration the umpire found: (a) that the charterers’ estimate that the ship would be redelivered at the end of the ninth month was not reasonable; (b) that the amount deducted was in any event unreasonable and (c) that the owners’ decision to withdraw had been made within a reasonable time.

The House of Lords held that the owners had made a valid withdrawal. They rejected an argument that the owners had, by their delay, waived their right to withdraw. Lord Diplock said: “Waiver requires knowledge and I agree with the umpire that the owners were entitled to a reasonable time to make enquiries of the charterers and of the master of the vessel (as they did) with a view to ascertaining whether [the charterers’ estimates were based on reasonable grounds] before electing whether to withdraw or not. That being so, his finding that from Mar. 21 to noon on Mar. 26 was a reasonable time to do so is one of fact which cannot be disturbed.”

it was conceded by counsel for the charterers that a timely but insufficient payment gave rise to the right to withdraw.

The Mihalios Xilas was chartered on the Baltime form. Additional Clause 39 provided for the payment of hire monthly and for “the last month’s hire to be estimated and paid in advance, less bunker cost and Owners’ disbursements and other items of Owners’ liability up to such time as vessel is expected to be re-delivered …”. Hire for the ninth month was due on 22 March. On 21 March the charterers paid considerably less than a full month’s hire and their agents explained to the owners that the shortfall was because the charterers were deducting in respect of certain advances and estimated bunkers and disbursements on redelivery, showing that they regarded this hire payment as the last under the charter. In arbitration the umpire found that the charterers’

estimate that the ship would be redelivered at the end of the ninth month was not reasonable, also that the amount deducted was in any event unreasonable and excessive.

It was accepted before Kerr, J., that in these circumstances the owners were entitled to withdraw. The judge said: “In the result there was accordingly an underpayment by the charterers of the ninth months’ hire, and it was not disputed that on the facts found this constituted a ‘default of payment’ for the purposes of the second paragraph of cl.containing the right to withdraw the vessel.”

(The question for decision by the courts, which eventually reached the House of Lords, was whether the owners had subsequently waived their right to withdraw; as to which see paragraph 16.110.)

The Berge Sund 41 discusses an off hire clause in respect of events ʹ.. preventing efficient working of vessel for more than 24 consecutive hours ..ʹ The hold of the vessel had to be cleaned. This took from 20 Dec to 9 Jan. The ship owner claimed this was due to an order of the charterer to load a particular cargo and by virtue of the Employment and Indemnity Clause the charterer had to reimburse the ship owner for all consequences of following chartererʹs orders The court held that ten months of similar cargoes had not caused a need to clean hull, so the cleaning was not a consequence of carrying a particular cargo and not therefore an order of the charterer. A vessel that cannot carry cargo because hold needs cleaning is not in efficient state : Therefore the vessel was off hire whilst being cleaned.

Withdrawal for Non-Payment of Hire - Time Charter

June 1999

(Sea Venture Volume 18)

At common law, non-payment of hire by charterers will only entitle the owners to treat the governing charterparty as being terminated for repudiatory breach of contract if the charterers’ default evinces an unequivocal intention not to perform their contractual obligations. For this reason, it is fairly difficult to demonstrate that charterers are in repudiatory breach. In order to avoid this trap, most time charters grant the owners an express right of withdrawal for non-payment of hire. By way of illustration, such a right is specifically granted by clause 5 of the New York Produce

Exchange 46 ("NYPE 46") and clause 6 of the Baltime charterparties in the following terms:

"5. Payment of said hire to be made in New York in cash…semi-monthly in advance .… failing the punctual and regular payment of the hire, or bank guarantee, or on any breach of this charter party, the owners shall be at liberty to withdraw the vessel from the service of the charterers .…"

and

"6. Payment of hire to be made in cash…without discount, every 30 days in advance. In default of payment the owners to have the right of withdrawing the vessel from the service of the charterers, without noting any protest and without interference by any court or any other formality whatsoever .…"

The effect of withdrawing a vessel for non-payment of hire is that the charterparty comes to an end, leaving the owners free to employ the vessel elsewhere. The owners will be entitled to recover hire payable up to the date of withdrawal but not any additional damages which they may suffer as a consequence of the early termination of the charterparty. Indeed, the owners will have to account to the charterers for a) any overpaid hire and b) the value of the any bunkers remaining on board at the time of the withdrawal. It can be seen, therefore, that the right of withdrawal is a means by which the owners can get the vessel back from recalcitrant charterers, thereby limiting their exposure to future losses.

However, withdrawal is often only a sensible option if the vessel is free of cargo. This is because withdrawl of the vessel from the charterers’ service does not bring the bill of lading contract to an end. Where the owners are the carriers under the bill of lading contract (as is commonly the case), they will remain under an obligation to deliver the cargo at the port(s) named in the bills of lading despite the withdrawal of the vessel from the charterers’ service. In such circumstances, if the bills of lading in question are "freight prepaid" bills of lading, the owners’ prospects of recovering any of the expenses incurred in the carriage and delivery of the cargo to the port(s) named in the bills of lading will be remote. Where the owners are not the carriers under the bill of lading contract, their position will be somewhat better albeit they will still owe a duty of care as bailees of the cargo to those interested in it. It is clear therefore, that an owner should think carefully

before withdrawing a vessel which is laden with cargo because the charterers have not paid hire on time.

Failure to pay hire by the due date

a) Payment in cash

Although it is now well established that payment in cash money is not required as such, payment must be made in a manner which is exactly equivalent to and as good as cash (the "Brimnes"¹). Where payment is made by way of an inter-bank transfer, it must be on terms which provides that the owners will have unconditional use of the money on or before the due date for payment. Transfer on the due date but for value at a date thereafter is not "payment in cash" and will amount to a late payment (the "Chikuma"²).

b) Part payment of the amount due

It is established that the owners’ right of withdrawal arises not only when a full hire installment is not paid, but also when a timely payment has been made for a sum which is less than the amount due and the outstanding balance is not paid by the due date (the "Mihalios Xilas"³).

c) Tender of payment after the due date but before withdrawal

The House of Lords in the "Laconia"4 (overruling the Court of Appeal’s decision in the same case and the "Georgios C"5) held that owners’ right of withdrawal is not lost merely because the charterers tender the overdue hire before the owners have given notice of withdrawal. If the charterers fail to pay the hire in time they are in default and their tender of hire thereafter cannot alter that position. Having said that, owners in such circumstances would need to consider their position carefully bearing in mind the right to withdraw is not automatically linked with a right to damages.

d) Withdrawal following a deduction made from a hire payment

The answer to the question of whether the owners can withdraw the vessel from the charterers service because they have made a deduction from hire depends on whether the charterers have a right to make the deduction, whether under an express provision of the charterparty or under the doctrine of equitable set-off.

This issue has not been considered by the House of Lords. However, the Court of Appeal suggested in the "Nanfri"6 that charterers may not in beach of their obligation to pay hire if the deduction is permitted by the charterparty or by the doctrine of equitable set-off, is reasonable and is made in good faith. The position is different where the charterers’ deduction, albeit reasonable and made in good faith, is not permitted under either the express terms of the charter party or the doctrine of equitable set-off. In the latter case, the charterers will be in breach and the owners will be entitled to withdraw the vessel (the "Lutetian"7).

e) Acceptance of late payment by owners

The facts of the the "Laconia"8 are as follows. The vessel was chartered on the N.Y.P.E. form, hire being payable semi-monthly in advance to the owners’ account with the London branch of the First National City Bank. A payment fell due on a Sunday, but it was only at about 1500 hours on the following Monday that the charterers’ bank delivered a "payment order" to the owners’ bank for the appropriate amount. Shortly thereafter, the owners’ bank began processing this document (which is the equivalent of cash betweeen banks but which does not produce a credit in the payee’s account for about 24 hours). The owners’ bank telephoned the owners’ London agents as per its standing instructions when the hire was received. The owners’ bank was told to refuse the payment and return it, which it did by a payment order following morning. Meantime, the owners gave the charterers notice at 1855 hours on Monday evening that they were withdrawing the vessel.The Court of Appeal held that the owners were not entitled to withdraw the vessel and one of the grounds for this finding was that the owners had waived their right of withdrawal since they were bound by their bank’s acceptance of the payment order. The House of Lords overruled this decision, holding that the owners were entitled to withdraw and had done so effectively.

The position would have been different if the owners had been found to have accepted the late payment and thus waived their right to withdraw. However, the House of Lords found that it was not within the owners’ bank’s express or implied authority to make commercial decisions on behalf of the owners by accepting late payments of hire without instructions. Since the bank had returned the payment the following day pursuant to the owners’ instructions, the House of Lords held that this had taken place within a reasonable time

and so it could not be said that the owners had given the charterers any grounds to suppose that the late payment had been accepted.

f) Acceptance of a timely but insufficient payment

The Mihalios Xilas was chartered on the Baltime form with hire to be paid monthly in advance. The charterers mistakenly believed the ninth month to be the last month under the charter party and so they remitted the the ninth hire instalment less US$31,000.00. The owners queried the deduction and then withdrew the vessel five days later without returning the part payment of the advance hire.

The Court of Appeal held that the short payment was not a proper payment and, in the circumstances, the owners could elect to either accept the short payment and not withdraw the vessel or refuse it and withdraw the vessel. The Court of Appeal held that the owners’ retention of the short payment, coupled with their demand for further details about the deduction and the fact that the owners took several days to decide to withdraw the vessel, indicated that the owners had waived their right of withdrawal. This decision was reversed by the House of Lords which held that the owners were entitled to take a reasonable time to ascertain whether the amounts deducted from the hire were reasonable before deciding whether to exercise the right of withdrawal and the five days taken by the owners was reasonable in all the circumstances. The House of Lords also found that the owners’ retention of the part payment of advance hire, which the owners were only obliged to refund following the exercise of their right to withdraw, did not amount to an election to treat the charter as continuing and so did not operate as a waiver of their right to withdraw the vessel.

g) Previous acceptance of late payments of hire

The fact that the charterers have made late payments of hire on previous occasions which have been accepted by the owners may preclude the owners from exercising their right to withdraw when faced with a further failure to pay on time (the "Scaptrade"9). Where a course of dealing has been established by the owners accepting late payment without protest, the owners will not be able to withdraw the vessel if a subsequent hire instalment is paid late pursuant to that course of dealing. In order to re-establish their right to withdraw in such circumstances, the owners need to give notice to the charterers that they require the charterers to adhere strictly

to the hire payment provisions in the charterparty. Only once the owners have re-established that hire must be paid when it falls due will the owners be in a position to exercise their right of withdrawal.

Exercise of the right to withdraw

The owners are allowed a reasonable time in which to ascertain the true position. However, once they are aware of a non or insufficient payment, they must act quickly or else the right to withdraw may be lost. That said, the owners are allowed a reasonable time to seek legal advice once the position is known. Whilst the owners are considering what to do, they should avoid giving any indication whether by word or by conduct to the charterers that the vessel continues to be on charter since this could result in waiver of their right to withdraw.

a) Anti-technicality clauses

Once hire is overdue, the right of withdrawal comes into play subject to the requirements of any anti-technicality provisions contained in the charter party. Typically, the charter party will contain a clause which requires the owners to send an anti-technicality notice to the charterers. Unless the charterparty expressly provides to the contrary, it has been established that in order to be effective an anti-technicality notice must inform the charterers that a) the hire is due and has not been paid and b) the vessel will be withdrawn unless the charterers remedy their default within the time specified. In short, it should say, "You haven’t paid up when you should have done: pay in [48] hours or lose the ship". This is how it was put in a leading case on withdrawal (the "Afavos"10).

The importance of getting the form of the anti-technicality notice right is emphasised by the findings of the High Court in the "Pamela"11 . In this case, clause 7 of the charterparty gave the owners the right to withdraw the vessel if hire was not paid on time, and referred to rider clause 27. Clause 27 was the anti-technicality clause which provided:

"If hire is due and not received, the Owner, before exercising the option of withdrawing the vessel, will give Charterers forty-eight (48) hours notice… and will not withdraw the vessel if the hire is paid within these 48 hours."

Hire was not received on the due date, and owners’ brokers accordingly sent the following message to charterers,

"re PAMELA

Pls inform chrs they are in breach of contract due to non-receipt of hire.Also pls notify chrs of withdrawal of the vsl."

The Court held that this message, referring to non-payment of hire and withdrawal of the vessel was not sufficient as an anti-technicality notice, even if the charterers would have suspected, or presumed, that they could have remedied the default by paying the outstanding hire within 48 hours. The owners’ position would have been secure if they had unequivocally notified the charterers that the vessel would be withdrawn unless charterers remedied their default within the allowed time.

b) Notices of withdrawal

Unless there are express provisions to the contrary contained in the charter party, the notice of withdrawal must be given to the charterers. The owners are not bound to give prior notice of their intention to withdraw to the charterers. All that is required is that the withdrawal notice is unequivocal: i.e., it states clearly that the owner is treating the non payment of hire as having terminated the charterparty and that the vessel is withdrawn. Continuing to perform the bill of lading contract by carrying the cargo to destination does not have the effect of reinstating the charter (the "Tropwind" (No. 2)12).

c) Relief against forfeiture

The concept of "relief against forfeiture" is derived from English property law. In a contract for the lease of property, the owner of the property is usually given a right of forfeiture which is a right to re-possess the property for non-payment of rent. In certain circumstances, relief against forfeiture will be granted by the Courts in order to prevent the abuse of this right.

In the context of charterparty contracts, the owners’ exercise of their right to withdraw the vessel from the charterers’ service can also result in great hardship for the charterers. It has been argued that, by analogy with property law, relief against withdrawal should be available in circumstances where

charterers may suffer heavy losses in consequence of an oversight or error in the payment of hire. However, the House of Lords rejected this argument in the "Scaptrade"13, ruling that the English Courts had no jurisdiction to grant this type of relief in the context of withdrawal under a charterparty.

Payment of Hire and  Off-hire 

Prof Martin Davies

International Seminar: Tanker Chartering – A Legal Perspective

Intertanko

Houston, 29 March 20072  

Payment of hire 

Charterers’ primary obligation Must be paid in full without

deduction

o Unless the charter permits deduction

o Or Charterers are entitled to deduct by way of set-off

Non- or under-payment permits Owners to withdraw

o NYPE cl. 5: “…otherwise failing the punctual and regular payment of the hire…or on any breach of this Charter Party, the Owners shall be at liberty to withdraw the vessel from the service of the Charterers”

o Disputed deductions

o Rising market3  

Deductions from hire 

Express provision in the chartero E.g. Shelltime 4, cl 9(ii):

“Payment of hire shall be made…less…(ii) any amounts

disbursed on Owners’ behalf, any advances and commission thereon, and charges which are for Owners’ account pursuant to any provision hereof”

o Ditto STB Form, cl 3(b)

Equitable set-off

o Charterers are entitled to make deductions for claims relating to loss of time

o Only loss of time claims are sufficiently closely related to the obligation to pay hire

o U.S. law generally stricter4  

Deduction must be reasonable 

Permitted deduction may be made even though the amount is still in dispute

o No need to agree amount with Owners

o No need to go to arbitration first

The Nanfri [1978] QB 927 at 975 per Lord Denning MR:

o “If the charterer quantifies his loss by a reasonable assessment made in good faith, and deducts the sum quantified, then he is not in default.  The shipowner cannot withdraw his vessel on account of non-payment of hire nor hold him guilty at that point of any breach of contract.”

5  

Reasonable deductions 

Shelltime 4, cl 9(iii)o “Payment of hire shall be

made…less…(iii) any amounts due or reasonably estimated to become due to Charterers under Clause 3(ii) [deficiencies on delivery] or 24 [speed and consumption] hereof”

6  

Equitable set-off 

The Nanfri: claims that “arise out of the same transaction or are closely connected with it”

Deprivation of use of ship

o Breach of speed warranty (The Chrysovalandou Dyo [1981] 1 Lloyd’s Rep. 159)

o Not cargo damage claims: The Nanfri

If Charterers are not entitled to deduct, Owners are entitled to summary judgment for hire (or can withdraw): The Aditya Vaibhav [1991] 1 Lloyd’s Rep. 573

o Bona fide belief not enough7  

Not for any other reason 

Must pay last month’s (or half-month’s) hire in full even if it is obvious that redelivery will take

place before end of month (or half-month)

Unless specifically permitted by charter:

o E.g. NYPE, lines 58-60: “for the last half month or part of same the approximate amount of hire…”

o Cf. Baltime: no such provision8  

Withdrawal for non-payment of hire 

English law inflexibleo Owners can withdraw for any

late payment or under-payment, however technical

Charter back to Charterers at increased market rate

o No equitable relief against forfeiture: The Scaptrade [1983] 2 Lloyd’s Rep. 253

No matter what the hardship to Charterers

9  

“Anti-technicality” clauses 

Designed to give relief against strictness of English law

In effect, notice of withdrawal clauses

Shelltime 4, cl 9(a)o “In default of such proper and

timely payment,

(a) Owners shall notify Charterers of such default and Charterers shall within seven days of receipt of such notice pay to Owners the amount due including interest, failing which Owners may withdraw the vessel from the service of Charterers…”

10  

“Anti-technicality” clauses 

Owners must give an ultimatum: must make it clear that

withdrawal will take place if payment is not made

The Afovos [1983] 1 Lloyd’s Rep. 335 (HL)

o “Owners have instructed us that in case we do not receive the hire which is due today, to give charterers notice as per cl. 31…for withdrawal of the vessel from their service”

o Insufficient11  

More strictness re anti-technicality 

The Pamela [1995] 2 Lloyd’s Rep. 249

o Notice sent by telex late on Friday night not effective until received on Monday morning

o Too late for anti-technicality clause

The Western Triumph [2002] 2 Lloyd’s Rep. 1

o Owners gave notice of withdrawal by e-mail before hire became overdue

o E-mail not received until after hire was overdue

o Arbitrators held notice invalid because premature

o Immaterial that notice was received after hire became overdue

12  

Waiver of the right to withdraw 

Owners lose their right to withdraw if they act in such a way as to communicate to Charterers that the charter is to continue

o E.g., acceptance of a late payment

o Not enough for Owners’ bank simply to receive payment

o Must retain it for long enough to lead Charterers to believe that it will not be returned: The Laconia [1977] 1 Lloyd’s Rep. 315 (HL)

Acceptance of timely but under-paid hire does not amount to waiver

o Owners entitled to a reasonable time to calculate correctness of deductions before exercising right to withdraw: The Mihalios Xilas [1979] 2 Lloyd’s Rep. 303 (HL)

13  

Effect of withdrawal 

In English law, charter comes to an end immediately upon effective notice of withdrawal

If in mid-voyage, Owner must carry cargo to its destination and deliver on terms of BLs if they were signed by or on behalf of Owners

o Cannot demand freight from receivers if pre-paid to Charterers: The Alev [1989] 1 Lloyd’s Rep. 138

(agreement to pay freight (again) held invalid because of economic duress)

If BLs signed by or on behalf of Charterers, Owners assume Charterer’s obligations after withdrawal:The Lakatoi Express (1990) 20 NSWLR 57

In U.S. law, withdrawal only becomes effective at end of voyage and discharge of cargo: Diana v. Sub-freights of Admiralty Flyer, 280 F.Supp. 607 (SDNY 1968)

14  

Effect of withdrawal 

Owners entitled to payment from Charterers on quantum meruit basis for carrying cargo after withdrawal?

o Scrutton says so

o Market rate, not contract rate?

o Left unsettled in The Tropwind (No. 2) [1981] 1 Lloyd’s Rep. 45 (CA)

Presumably only arises if Charterer insolvent, which makes the question moot

o If Charterer solvent, it may choose to re-charter at new market rate anyway

15  

Off-hire clauses 

“Period” = on/off “Net loss of time” = time lost

Partial efficiency is the key to the difference

o Still off-hire under a period clause

o Lost time only under a “net loss of time” clause

16  

Period clauses 

o E.g. Shelltime 3, cl. 21: “In the event of loss of

time (whether arising from [various specified events] or in any other manner)…hire shall cease to be due or payable from the commencement of such loss of time until she is again ready and in an

efficient state to resume her service from a position not less favourable to Charterers than that at which such loss of time commenced.”

o The Bridgestone Maru No. 3 [1985] 2 Lloyd’s Rep. 160

17  

Net loss of time clauses 

o E.g. Shelltime 4, cl. 21: “On each and every

occasion that there is loss of time (whether by way of interruption in the vessel’s service or from reduction in the vessel’s performance)…the vessel shall be off-hire from the commencement of such loss of time until she is

again ready and in an efficient state to resume her service from a position not less favourable to Charterers than that at which such loss of time commenced; provided, however, that any service given or distance made good by the vessel whilst off-hire shall be taken into account in assessing the amount to be deducted from hire.”

18  

Time lost after full efficiency restored 

No deduction under English law, even under “net loss of time”

o The Marika M [1981] 2 Lloyd’s Rep. 622: vessel lost

berthing turn after grounding; not off-hire while waiting for berth once in full working order

o NYPE, cl. 15: “the payment of time shall cease for the time thereby lost”

Deduction would be permitted under U.S. law

o All time lost as a result of enumerated causes

o Not so for “period” clauses19  

“…or any other cause” 

Eiusdem generis (of the same kind) with listed causes

o Unless “whatsoever” is added

Confined to causes related to physical condition of ship or crew

o Not off-hire during delays from “extraneous” causes

o The Aquacharm [1982] 1 Lloyd’s Rep. 7 (not off-hire during lightening to pass through Panama Canal)

o The Manhattan Prince [1985] 1 Lloyd’s Rep. 140 (not off-hire under Shelltime 3 during boycott by ITF)

Focus should be on effect – preventing full working – not cause

20  

Practice tips 

Read the clause carefully before you do anything, whichever side you are on

Charterers - if in doubt, pay in full (especially in a rising market)

Owners - give clear and unequivocal notice of withdrawal (especially if there is an anti-technicality clause)