London Arbitration 1/13

The vessel was chartered on the NYPE form for nine months. Six months into the charter period, Charterers suggested that the vessel be redelivered on completion of its current voyage as they were having difficulty in fixing cargoes. The parties agreed an addendum stating that the vessel would be redelivered early “after dropping the outward sea pilot in the port of and completion of outward ice-breaking assistance in Mariupol” on 10 January 2009, subject to Charterers’ payment of a specified sum of US$157,900. That sum was to be paid prior to discharge.

The vessel suffered an engine breakdown on 1 January, causing delays until 8 January. On 13 January, the vessel again experienced engine problems and had to be towed to Novorossisyk.

On 2 February, Charterers purported to give notice cancelling the charter, pursuant to the following clause:

“Should the vessel be off-hire for more than an aggregate of 15 days in any period of 90 days, then Charterers on giving Owners 15 days’ notice in writing shall have the option of cancelling the charter party and of redelivering the vessel where free of cargo in their option.”

By 25 February, it was clear that the vessel could not be repaired there and Owners had her towed to Mariupol, where she completed discharge on 15 March.

Owners claimed the US$157,900 allegedly due under the addendum. They argued that the addendum gave rise to an immediate debt for the agreed sum, payment of which was deferred to no later than before commencement of discharging at Mariupol.

Charterers argued first of all that they had in any event cancelled the charter prior to arriving at the discharge port. As to the addendum, they contended that the event which triggered the debt/payment obligation was early redelivery as agreed in the addendum. The debt was not immediately due: it was to be paid as consideration for early redelivery. Because this had not taken place due to Owners’ fault, i.e. the engine problems, the agreement had not been fulfilled and Charterers were not obliged to pay.

Tribunal’s findings

The Tribunal found in Owners’ favour.

The cancellation clause was irrelevant. Redelivery under that clause could only take place once the vessel was free of cargo, which occurred at Mariupol in any event. The addendum was agreed long after the charter, and so the cancellation clause could not relieve Charterers of any of their obligations under the addendum.

The addendum gave rise to a debt payable no later than commencement of discharge at Mariupol. Charterers could only avoid liability if they could show that the agreement reflected in the addendum had become frustrated, or because Owners had repudiated that agreement, or that the consideration for it had wholly failed.

The agreement had not been frustrated, neither had it been repudiated by Owners. There was no suggestion that the engine breakdown occurred because of a breach of charter. The vessel may have been off-hire during the periods in question, but that did not mean that Owners were in breach. There was also no failure of consideration. Owners gave valuable consideration to Charterers at the time the addendum was agreed by being willing to accept early redelivery and by agreeing to vary the place at which redelivery was to take place.

The Tribunal also considered various other claims and counterclaims for off-hire and damage to cargo.

Comment

This decision highlights the importance of clarity in drafting any agreement, specifically addenda to charterparties. The parties must be clear as to their intentions. Clauses must be tightly drafted to ensure that there is no ambiguity in their meaning. This can lead to parties interpreting the same clause in very different ways, which in turn can lead to costly disputes.

Where an addendum is agreed, careful consideration should be given to whether it is in line with the main terms of the charterparty.