Time Charters. Charterers’ Orders Last updated 01-Apr-2016

Whatever the charterer may order, a service which falls outside the range encompassed by the owner’s original promise is not one which he can be compelled to perform …There is thus to be a measuring of the service called for against the service promised.
The Gregos [1995] 1 Lloyd’s Rep 1 per Lord Mustill at p.7.

Legitimate and/or illegitimate …

A time charter contract is for a period of time during which the shipowner promises to furnish the services of the vessel. Therefore in the course of the charter the owner must obey legitimate Charterers’ orders or he will be in a breach and liable to pay damages to the charterers for loss suffered. On the other hand, if the owner sustains loss as a result of his compliance with the Charterers’ legitimate orders he can seek an indemnity under Employment and Indemnity clause. In case when in pursuance of legitimate Charterers’ order the vessel is delayed in excess of duration of time charter by matters for which neither party is responsible, the charter is presumed to continue in operation until the end of that voyage, even though it extends beyond the charter period. The hire is payable at the charter rate until redelivery, even though the market rate may have gone up or down.

Taking into account duration of time charter, it was held in The Gregos [1995] 1 Lloyd’s Rep 1 at p.7, that "initially practical implications of the owner’s promise are undefined, since they depend on how in the future the charterer decides to employ the vessel; but they are not unlimited, being constrained from the start as to duration, nature and extent by express terms in the charter." Therefore any orders which request from the owner service outside of the range encompassed by his promise he is not compelled to perform and can consider any such orders as illegal. It was held, however, that the issuing of an invalid order is not an automatic ground which entitles the shipowner to treat the contract as at an end.

When uncontractual Charterers’ orders received the owners has an option to either reject these orders or to accept them, in which case the owners waive their rights to reject these illegal orders on any later stage but retaining their right to claim damages from the charterers for breach of contract. If the shipowner accepts the direction and goes on the illegitimate last voyage, he is entitled to be paid - for the excess period - at the current market rate, and not at the charter rate. The hire will be payable at the charter rate up to the end of the charter period, and at the current market rate for the excess period thereafter.

If the owner elects to refuse to comply with an illegitimate order, the Charterers’ persistence will show that they do not intend to perform their obligations under the charter, which entitled the owners to treat the contract as ended .

Unlike to contractual Charterers’ orders, when the owner received illegitimate orders he can chose whether to claim damages for breach of contract, or indemnity under the express or implied provision of the contract. If the owner elects to recover his losses under indemnity claim he does not have to prove breach of contract nor does he have to show that the loss suffered was not too remote.

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