The Extent Of The Shipowner’s Right To Affirm The Charter Following Early Redelivery Of The Vessel
Author: Ceren Cerit Dindar
Key words:cearly redelivery of the vessel, time charter, repudiation of charter
Under time charters, the ship is chartered for a particular duration. The duration indicates the period of time which the charterer is allowed to use the vessel within trading limits. By way of chartering a ship for a particular period, the charterer impliedly promises that the ship will be returned to the shipowner at the end of charter duration. In spite of existence of this implied obligation, unfortunately in practice the charterer does not hesitate to return chartered ship before the end of charter duration.
Early redelivery of the vessel by the time charterer constitutes a common cause of many disputes in the context of time charters. Such an action by the charterer is especially popular when the charter market conditions are negatively affected by an economic crisis. Time charterer agrees to pay a fixed rate fora charter service from delivery to redelivery of the ship under time charters. This means that if the charter rates in the market drop, existing charters become unattractive from the charterer’sperspective. In this situation, instead of continuing to be bound by their existing charters and agreedcharter rate, most charterers prefer to return to the market and recharter another ship. It makes commercial sense for the charterer to behave in this way as he can protect himself from the fluctuations in the charter rate and increase his own profits. In some cases, the reason behind early redelivery of the vessel may also be simply that the charterer no longer needs the ship. For example, where there is no cargo to carry and the charterer does not find any employment, it will be sensible forthe charterer to return the vessel early instead of continuing to pay hire for a vessel which he does not need.
Although the charterer’s conduct to redeliver the vessel earlier than the expiry of charter duration is understandable due to the reasons indicated above, this does not change the fact that he fails to comply with his implied promise to redeliver the vessel to the shipowner at the end of charter duration. The charterer’s conduct in returning the vessel before the end of the charter is treated as a repudiationof the charter under English law and does not bring the charter to an end automatically. In such a case, two options are provided to the shipowner. The shipowner can elect to refuse early redelivery of the vessel, affirm the charter, continue to provide the charter service and claim the agreed charter rate for the rest of the charter period when it is due. Alternatively, he can elect to accept early redelivery of the vessel, terminate the charter and bring a claim for damages. Although the termination right is always available to the shipowner following early redelivery of the vessel, his right to affirm the charter is not unfettered. This right can be restricted where the shipowner does not have any legitimate interest in continuing to perform the charter. The legitimate interest exception is indeed a little vague and has caused different interpretations since it was first introduced in White and Carter. Different criteria such as ‘adequacy of damages’ , ‘wholly unreasonable’ have been introduced over time for courts to consider in early redelivery disputes while deciding whether or not the shipowner has a legitimate interest in continuing to perform the charter.
The purpose of this paper is to analyse these criteria, discuss their adequacy and practicality, and answer the question about the extent of the shipowner’s right to affirm the charter and continue to claim agreed charter hire in case of early redelivery of the vessel.
