Time Charters. Place of Redelivery Last updated 26-May-2015

…[shipowner] has a contractual right to have the ship kept in employment at the charter rate of hire until the service is completed. This does not happen until the ship reaches the redelivery range,…
Per Mustill, J., in Santa Martha Baay Scheepvaart & Handelsmaatschappij N.V. v Scanbulk A/S (The Rijn)[1981] 2 Lloyd’s Rep. 267 stated at p.270.

Term to define the extent of contractual service.

Place of redelivery together with the time of redelivery are the two terms which define the extent of contractual service. Range "from Japan to Persian Gulf" can encompass Honolulu as it was held in The Sanko Honour because under the provision of charterparty Japan was the central locus. When both terms expressly stipulated in time charter, failure of charterers to comply with either of them, will constitute breach of the charter for which the charterers will be liable in damages. In The Bunga Kenanga  the court held that damages for delivery at the wrong location should be assessed at net loss to the owner after taking into account any remuneration received for alternative employment. Mustill, J., in Santa Martha Baay Scheepvaart & Handelsmaatschappij N.V. v Scanbulk A/S (The Rijn) [1981] 2 Lloyd’s Rep. 267 stated at p.270, that in case when the vessel redelivered outside of contracted place or range, then the owner:

… has a contractual right to have the ship kept in employment at the charter rate of hire until the service is completed. This does not happen until the ship reaches the redelivery range, and the voyage to that range forms part of the chartered service. In a case such as the present, therefore, the tender is not only in the wrong place but also at the wrong time; and full compensation for the breach requires the charterer to restore to the owner the hire which he would have earned if the voyage had in fact been performed.

Correctness of this view was doubted by the authors of Time Charters, 6th Edition, 2008, because, they say, in instances such as The Rijn when the period of the charter had already elapsed, any order would have been an illegitimate order which the owners would not have been obliged to follow, in other words "it is difficult to see how the charter can have the effect that the charterers are simultaneously under a duty to give the ship an order to sail to Japan/Singapore and under a duty not to give that order". Accordingly the authors suggest that:

… when it comes to measuring damages for the charterers’ failure to redeliver the ship in the right place, it seems wrong to use an award of damages for one breach (redelivering in the wrong place), to put the owners in the position they would have occupied if the charterers had committed a different breach (redelivering in the right place, but late). Damages should create (the monetary equivalent of) redelivery at the right time in the right place, whereas Mustill, J.’s measure replicates redelivery in the right place but at the wrong time.

Right place or location is a dimensional characteristic while right time is a temporal one. But both are interlocked in this issue because to reach right place of redelivery the vessel shall utilise certain period of time, which means that she will reach this place when charter period will be elapsed, i.e. it will be late delivery. That is what the authors of Time Charters probably mean: when vessel is at wrong place and charter is already elapsed or will be elapsed when she might be expected to reach proper location. In cases when vessel redelivered late and at wrong place Mustill J.’s formula refers to the cost of a notional final voyage to the right place of redelivery which he would have earned if such voyage had in fact been performed, while the authors of Time Charters suggest that damages should include also monetary compensation for delivery at the wrong time. There are no further comments in Time Charters on what basis or how that compensation would be assessed.

There is also an obiter dictum of Colman J. in Ullises Shipping Corp v FAL Shipping Co Ltd (Greek Fighter) [2006] EWHC 1729 (Comm), where the learned judge expressly approved decision in The Rijn in respect of redelivery at the wrong place. In particular Colman, J., said that:

As to the vessel being at the wrong place for redelivery, the charterer is not prevented from making redelivery, but must compensate the Owner in damages calculated by reference to the loss of time and therefore of hire in making a voyage by the shortest route possible from her actual place of redelivery to the contractual place of redelivery.

Summarising, it is possible to note that at the moment statement of Mustill J. in the Rijn is the only direct law on the subject of compensation for the late redelivery at the wrong place. Whether opinion of the authors of Time Charters will ever prevail remains to be seen. This matter, apparently, is very fact sensitive and, for example, in times when market is falling, damages for delivery at the wrong time would probably of nominal character only, apart from those cases when late delivery ruined projected next employment of the vessel.

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