Time Charterparty
Frustration
In the beginning of the twentieth century an application of the doctrine of commercial frustration to a time charterparty was questioned in Admiral Shipping Co.,Ltd. v Weildner, Hopkins & Co [1916] 1 KB 429. But in Scottish Navigation Co., Ltd v W. A. Souter & Co. [1917] 1 KB 222 and in Bank Line v Arthur Capel & Co [1919] AC 435 this view was regarded as erroneous. During the First World War many charterparties were frustrated either by requisition or by delay or by total loss of the vessel.
When in case of total loss application of the doctrine was straight in line with the Taylor v Caldwell rule, on the other hand, many difficult disputes originated from the cases of requisition and long delays. As a reflection of Lord Parker’s words in F. A. Tamplin Steamship Co.Ltd. v Anglo-Mexican Petroleum Products Co.Ltd [1916] 2 AC 397 that: "The owners are not concerned in the charterers doing any specific thing beyond the payment of freight as it becomes due", there was an opinion that so far as the owners have the vessel afloat and in the charterers’ use the charterers own the duty to pay hire. Swinfen Eady L.J in Scottish Navigation Co., Ltd v W. A. Souter & Co. [1917] 1 KB 222 disagreed with such proposition stating that:
It is the further performance of the contract by one party which formed the consideration for the payment by the other, which has become impossible, and this effects a dissolution of the contract.
The doctrine of frustration has been in large degree developed from the shipping cases dealing with delay and, therefore, the general principles of frustration are not peculiar to contracts of affreightment. Charterparties1 are most commonly frustrated either by the ship becoming an actual or constructive total loss, i.e. destruction of the subject-matter of the contract, or by delay or interruption of the charter service of such length as to render the performance a thing radically different from that undertaken by the contract, i.e. destruction of the commercial purpose of the adventure.
Same principle as in ordinary law of contract applies, that is, when performance of a contract becomes impossible due to some supervening and unforeseen circumstances, arising without default of either party, then the contract cease to bind either party to it.
The charterer is released from the charter. When I say he is, I think both are…
The parties released from the contract even if the cause of frustration was within the contemplation of the parties when they made the contract. In this context the "unforeseen circumstances" means circumstances for which was no provision made in the contract.
Whether supervening event is of such a nature as to frustrate commercial purpose of the adventure depends on the facts of the case and is also the question of probabilities. The matter of probabilities, however, is not an easy one to decide, especially bearing in mind that fact that, the dispute usually appears in the court after some considerable time has elapsed from the moment of occurrence of an alleged frustrating event, so that the actual consequences of such event are already known. It is also evident that the question of probabilities can not be left considered by the parties for an infinite period of time, thus leaving the contract in suspension.
The probabilities as to the length of the deprivation and not the certainty arrived at after the event are also material. The question must be considered at the trial as it had to be considered by the parties, when they came to know of the cause and the probabilities of the delay and had to decide what to do. On this the judgments in the above cases substantially agree. Rights ought not to be left in suspense or to hang on the chances of subsequent events. The contract binds or it does not bind, and the law ought to be that the parties can gather their fate then and there. What happens afterwards may assist in showing what the probabilities really were, if they had been reasonably forecasted, but when the causes of frustration have operated so long or under such circumstances as to raise a presumption of inordinate delay, the time has arrived at which the fate of the contract falls to be decided. That fate is dissolution or continuance and, if the charter ought to be held to be dissolved, it cannot be revived without a new contract. The parties are free.
Per Lord Sumner in Bank Line Ltd v Arthur Kapel & Co. [1919] AC 435
Accrued rights are unaffected by the dissolution, but neither party is liable in damages for breach of an obligation in the charterparty performance of which was not already due at the date of the dissolution, nor can either party be compelled to repay money received by him under the charterparty before it was dissolved, unless at the date of the dissolution a right to this repayment had already accrued. These consequences follow whether the charterparty is for a voyage or for time, and whether the delay is or is not due to a cause covered by an exception in the charterparty.
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