Notes on timecharter withdrawal


Checklist:

• Is hire due?

• Does the time charter contain a right to withdraw?

• Does the time charter contain an anti-technicality clause?

• Has punctual payment been waived?

• Is hire secured?

• Has the charterer purported to set off counterclaims?

• Is there cargo on board the vessel?

Supplementary Comments:

1. The basic rule is that the charterer is not in default of payment until midnight on the due date. This applies irrespective of whether the due date is a banking day.

2. Payment means actual receipt of cleared funds.

3. An unqualified acceptance of a late payment would operate as a waiver of a right to withdraw for the non-payment, if the late payment is a full payment.

4. Notice of withdrawal is operative at the time it is received by the charterers.

5. Where the time charter contains an “anti technicality clause”, any notice required by the clause should be given after the due date (i.e. once there is a default in payment).

6. A valid notice of withdrawal brings the time charter to an end. A right to “withdraw” is not a right temporarily to suspend services.

7. Upon withdrawal a shipowner has a claim for hire and other amounts that fell due prior to withdrawal but cannot claim damages for periods after withdrawal unless the charterer’s conduct was repudiatory.

8. The exercise of a right of withdrawal at a time when there is cargo on board the vessel would not release the shipowner from any pre-existing obligations to cargo interests under bills of lading or otherwise. The shipowner would be obliged to complete the voyage and discharge the cargo at his own expense. Recovery from the time charterer of compensation for the time and expense involved would not be automatic. It would depend upon whether the charterer’s conduct was repudiatory.

9. The charterer can validly make deductions from hire where expressly permitted by the time charter or that represent claims that arise out of the same transaction or are closely connected to it. This has been interpreted as being limited to claims concerning deprivation of use of the vessel.

10. Repeated late payment is not necessarily a repudiatory breach of the time charter. Where late payments of hire have been accepted without sufficient protest, the shipowner may have acquiesced in the late payment and may have waived the right to insist on punctual payment. In these circumstances, the shipowner may need to give an additional notice reasserting his right to insist upon strict compliance with the payment obligations stipulated in the time charter before he can give a valid notice under the anti technicality clause or a valid notice of withdrawal.

11. Where a right to withdraw has accrued then the right may be waived if the shipowner unreasonably delays in the exercise of the right or if the shipowner affirms the time charter.

12. A right to withdraw for “any breach of this charterparty” is likely to be interpreted as only applicable to repudiatory breaches of the charterparty.”

These notes reflect the author's opinion at the date of publication of the typical issues relevant to this topic from an English law perspective. The notes are only a general guide, they are not comprehensive. These notes do not contain or constitute any representation of fact. Individual circumstances vary and other features of English law may be relevant. It is recommended that you contact us and take detailed advice before taking any decisions. If you would like to be added to the mailing list for these notes then please write to us with your name and mailing address. Comments and suggestions for further topics are welcome. Contact: info@morgans-law.com Copyright © 2006 Morgans. Pursuant to s.78 Copyright Designs & Patents Act 1988, Morgans asserts the right to be identified as author of this work.