Time Charters. Off-hire. General notes. Last updated 17-Aug-2014

What the hirer of the ship is guarding against by this contract with the owner of the ship is, that he is not to pay during such period of time as he shall lose (that is, lose time) in the use of the ship by reason of any of the contingencies which this particular clause contemplates.
Hugh Hogarth & others v Alexander Miller, Brother, & Co. (TheWestfalia) [1891] A.C. 48, per Lord Halsbury at p.54

General concept of time charter. Cesser of hire.

General concept of the time charter is that the owners let and the time charterers hire the use and services of the vessel for the carriage of specified cargo(es) in bulk and/or lawful merchandise in consideration of punctual advanced payment of hire during contracted period of time.Therefore, unless expressly stated otherwise, the charterer’s primary obligation is to pay hire continuously until redelivery or unless he can bring himself within the exceptions.

It is settled law that prima facie hire is payable continuously and that it is for the charterers to bring themselves clearly within an off-hire clause if they contend that hire ceases. … The owners provide the ship and the crew to work her. So long as these are fully efficient and able to render to the charterers the service then required, hire is payable continuously. But if the ship is for any reason not in full working order to render the service then required from her, and the charterers suffer loss of time in consequence, then hire is not payable for the time so lost.
Per Kerr J in Mareva Navigation Co v Canaria Armadora SA ( The Mareva AS) [1977] 1 Lloyd’s Rep. 368 at p.381-382:

Naturally, each party is also aware of the possibility of the benefit which party is contracting to obtain, being interrupted by various causes. And each party protects itself against such eventualities. The owner, for example, has a right to withdraw the vessel on the charterer’s failure to make its payments punctually and regularly; on the other hand the charterer is guarding himself against interruptions in ship’s services by the clause which suspends payment of hire during such period of time, when happened by reason of any of the contingencies which this particular clause contemplates.

For off-hire event to start it is necessary that service of the vessel must be interrupted by one of the causes mentioned in the governing off-hire provision. The charterer bear the burden of proof to show that the shipowner has been unable to perform the services required of it by the charterer.

For off-hire event cease to exist it is necessary only that the vessel becomes compliant with the test provided in the charter. For example when relevant clause provides that

"…in the event of loss of time from deficiency of men or stores, break-down of machinery, want of repairs, or damage, whereby the working of the vessel was stopped for more than forty-eight consecutive hours, the payment of hire should cease until she should be again in an efficient state to resume her service,…"

it is not necessary that all the above mentioned causes to be rectified for the vessel’s services to be payable again. What is required is that the vessel is again in an efficient state to resume her service. Steamship Westfalia suffered break down of high pressure engine on her way from the West Africa to Hamburg. She was not able to continue her voyage on her own and therefore was towed to Hamburg by the tug. When arrived to Hamburg the vessel started to discharge the cargo intended for that port, her steam winches and machinery being efficient for that purpose. The House of Lords held that vessel was off-hire for the part of the voyage when she was under the tow, but was on-hire for that part she was discharging in Hamburg. Lord Halsbury said at pp.56-57:

…[the vessel] should be efficient to do what she was required to do when she was called upon to do it; … if she was efficient to do it at that time she would then become, in the language of the contract, to my mind "efficient," reading with it the other words, "for the working of the vessel." How does a vessel work when she is lying alongside a wharf to discharge her cargo? She has machinery there for the purpose. It is not only that she has the goods in the hold, but she has machinery there for the purpose of discharging the cargo. It is not denied that during the period that she was lying at Hamburg there was that machinery at work enabling the hirer to do quickly all that this particular portion of her employment required to be done. It appears to me, therefore, that at that period there was a right in the shipowner to demand payment of the hire, because at that time his vessel was efficiently working; the working of the vessel proceeding as efficiently as it could with reference to the particular employment demanded of her at the time.

Similarly in case where the vessel was refloated after grounding and was still able to unload and reload the charterer’s cargo it was held that hire was still payable. Off-hire events are not necessarily a breach of contract and may occur without any fault or breach from the owner’s side.

When interruption in service is caused by failure of the charterers to perform their obligation under time charter, their right to withhold hire is deemed to be forfeited.

In each given instance detailed analysis of charterparty wording is required to reveal events which trigger and cease cesser of hire, parties’ obligations and risk apportionment related to these events.

Share this article on:

Readers’ comments:

Posted by:   

Be first to comment …
Leave your questions and comments here

Although author encourages visitors to leave their comments using this form, but if you unable or unwilling to use it for any reason you can forward your mail to info@lawandsea.net to contact with him.