Time Charters. Off-hire Clause. Last updated 12-Aug-2014

A charter-party might provide that the vessel would remain on hire except during delay caused by a breach of contract on the part of the owner; or it might provide that the vessel should be off hire in the event of delay, unless caused by breach of contract on the part of the charterers. Either solution would provide a rule that was tolerably clear and workable. But those who make charter-parties prefer something more complicated. They provide for a vessel to be off hire in some events which are not a breach of contract by either party - for example, interference by authorities in the present case. As is fashionable nowadays, the clause is said to deal with allocation of risk. The only general rule that can be laid down is that one must consider the wording of the off-hire clause in every case.
SIG Bergesen DY A/S v Mobil Shipping and Transportation Co (The Berge Sund) [1992] 1 Lloyd’s Rep 460, Staughton LJ, at p.459.

Off-hire clauses in standard dry and tanker charterparty forms.

Standard time charter forms usually provide for hire either to cease completely or to be reduced pro rata to the degree of inefficiency in certain specified events. It is for the charterers to establish that the events which happened do come within the terms of that clause to be relieved from paying the hire.

The wording of the off-hire clause varies as BALTIME 1939, NYPE 93, SHELLTIME 4 (click toggle button below) forms represented below show.

SHELLTIME 4, issued December 1983 amended December 2003

But in general it purports to release the charterers from their continuous duty to pay hire in the events of loss of time from deficiency of men or stores, breakdown of machinery and other specified events preventing the working of the vessel or interrupting the vessel’s services.

The object of the clause in question seems to me to be fairly clear. The object of the clause in question is to provide for a possible loss of time; and the question is how much time was provided for. In my opinion only such time was provided for as might elapse until the vessel was once more in full working order. When the accident ceased to prevent the full working of the vessel, the hire became again payable. This is the natural construction of the clause, and any other construction would involve intricate calculations as to the time which had been lost.
Per Collins MR at p.257 in Vogemann v. Zanzibar Steamship Company Limited (The Zanzibar) [1902] 7 Com. Cas. 254.

Charterer’s right to cease payment of hire for the time thereby lost, when he is deprived of full working of the vessel, is not affected by the fact whether the owner was or was not in fault and is not restricted by the wording of general exception clause. BPTIME 3 form specifically excludes application of the Hague-Visby Rules to clause 19 (Off-hire) to remove possibility of unintentionally providing the owners with "back door" defences to their liabilities.

BPTIME3

19.OFF-HIRE
19.1 The Vessel shall be off-hire on each and every occasion that there is a loss of time arising out of or in connection with the Vessel being unable to comply with Charterers’ instructions (whether by way of interruption or reduction in the Vessel’s services, or in any other manner) on account of:
19.1.1 any damage, defect, breakdown, deficiency of or accident to the Vessel’s hull, machinery, equipment or cargo handling facilities, or maintenance thereto; or
19.1.2 any default and/or deficiency of the Master, officers or crew, including the failure or refusal or inability of the Master, officers and/or crew to perform the services required; or
19.1.3 any breach of sub-clause 9.6.5; or
19.1.4 any other cause preventing the full working of the Vessel.

Notwithstanding the aforesaid, if the total loss of time pursuant to this sub-clause 19.1 is less than three hours in any one calendar month, the Vessel shall not be off-hire.

19.2 If the Vessel deviates, unless ordered to do so by Charterers, it shall be off-hire from the commencement of such deviation until the Vessel is again ready to resume its service from a position not less favourable to Charterers than that at which the deviation commenced. For the purposes of this Clause the term deviation shall include stopping, reducing speed, putting back or putting into any port or place other than that to which it is bound under the instructions of Charterers for any reason whatsoever, including for maintenance, dry-docking, taking on stores or fresh water, but shall exclude deviations made to save life or property. Should the Vessel deviate to avoid bad weather or be driven into port or anchorage by stress of weather, the Vessel shall remain on hire and all port costs thereby incurred and bunkers consumed shall be for Charterers’ account. Any service given or distance made good by the Vessel while off-hire shall be taken into account in assessing the amount to be deducted from hire.
19.3 Any time during which the Vessel is off-hire under this Charter may be added, at Charterers’ option, to the Charter Period. Such option shall be declared in writing not less than one month before the expected date of redelivery, or promptly if such event occurs less than one month before the expiry of the Charter Period. If Charterers exercise their option to extend the Charter Period pursuant to this Clause, the Charter Period shall be deemed to include such extension and hire shall be payable at the rate(s) which would have been payable but for the relevant off-hire event.

Depending on the construction of the clause, where off-hire event happens as a result of breach of contract by the owner, the charterer may also be entitled to recover damages. NYPE 93, Clause 17 - Off Hire (click toggle button below) is an example of a clause which, because of its short-comings, is commonly amended if not deleted in its entirety and substituted by a far more elaborate rider clause.

NYPE93, cl. 17 Off-hire
NYPE93_CL17_OFFHIRE

There are many standard occasions when, apart from any breach, the owner will be off-hire, as one example – a periodical drydocking which owner is required to undertake to satisfy class requirements and which is always within events triggering operation of off-hire clause.  Since off-hire clauses are included for the sole benefit of the charterer they are traditionally construed narrowly against the charterer. On authority of Royal Greek Government v Minister of Transport(The Ilissos) [1949] 82 LI L 196 and Hyundai Merchant Marine Co. Ltd. v Furness Withy (Australia) Pty [2006] 2 Lloyd’s Rep. 175 a "cardinal rule" of interpretation of a time charter contract is that the risk of delay is fundamentally on a time charterer, so if there is a doubt as to what the words mean, then those words must be read in favour of the owners because the charterer is attempting to cut down the owners’ right to hire.

For off-hire clause to come into operation it would first require for some event to interrupt services rendered by the owner, i.e. preventing full working of the vessel. As Rix J. stated in André & Cie S.A. v Orient Shipping (Rotterdam) B.V. (The Laconian Confidence) [1997] 1 Lloyd’s at p. 150:

… the qualifying phrase "preventing the full working of the vessel" does not require the vessel to be inefficient in herself. A vessel’s working may be prevented by legal as well as physical means, and by outside as well as internal causes. An otherwise totally efficient ship may be prevented from working.

In The Laconian Confidence case it was also held that in absence of the word "whatsoever" in phrase "any other cause", it did not cover an entirely extraneous cause like the interference of authorities unjustified by the condition or reasonably suspected condition of ship or cargo, but should the port authorities acted properly or reasonably pursuant to the (suspected) inefficiency of the vessel, any time lost might well be off hire even in the absence of the word "whatsoever". It was furthermore suggested that if the clause had been amended to contain the word "whatsoever" the vessel would have been prevented from working albeit in unexpected circumstances.

Hire payment resumes when the vessel is again efficient to resume her service. Another legal question arises in assessing the length of any off-hire: whether clause in question is of "net loss" (Baltime, Shelltime 4, up to a certain point, and NYPE 93 charters’ off-hire clauses are all interpreted as net loss of time clauses) or "period" type STBTIME Cl. 11 (a) and VELATIME 2.

BALTIME 1939

BALTIME1939 CL11 SUSPENSION OF HIRE

The latter require only identifying the length of time the vessel was not fully working, whereas in clauses of former type the charterers must also establish the loss of time they have actually suffered.

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