Time Charters. Wrongful repudiation Last updated 18-Jan-2015

5.18 Where a master, or his owners, takes objection to the charterers’ order, as being beyond the limitsset by the charter, usually either the charterers withdraw the order (perhaps under protest) or the owners agree to proceed (typically under protest). But if there is an impasse, the charterers insisting that an order be followed and the owners insisting that it will not be, the result will be a wrongful repudiation by whichever party was in the wrong and a damages liability incurred to the other party for the early termination of the charter.
Time Charters, 2008, by Terrence Coghlin, Andrew Baker, Julian Kenny, John Kimball.

When right to terminate is accrued

Repudiation or termination of charter is wrongful when either party misinterpret its right as injured side to bring the contract to an end. Decision to terminate contract is wholly in hands of the innocent party, but the right to terminate is only accrued when an opposite side has broken such clause in charterparty which is:

i) condition or
ii) intermediate term which deprives innocent party of substantially the whole benefit of charterparty (read also Effect of Breach)

Therefore, while each of the parties to contract is free to stop his contractual performance when he considers that happening of certain events gave him a right to do so, such action if later be found by the court as a wrongful termination, may leave him liable for substantial damages.

In Telford Homes (Creekside) Ltd v Ampurius Nu Homes Holdings Ltd [2013] EWCA Civ 577 the Court of Appeal provided a helpful summary on necessary considerations when deciding whether repudiatory breach actually took place:

• What benefit the injured party was intended to obtain from performance of the contract?
• What financial loss has it caused?
• How much of the intended benefit under the contract has the injured party already received?
• Can the injured party be adequately compensated by an award of damages?
• Is the breach is likely to be repeated?
• Will the guilty party resume compliance with his obligations?
• Has the breach fundamentally changed the value of future performance of the guilty party’s outstanding obligations?

In another case Geden Operations Ltd v Dry Bulk Handy Holdings Inc (The Bulk Uruguay) [2014] EWHC 885 (Comm) the High Court considered whether disponent owners were in repudiatory breach of charterparty when they informed time charterers that giving permission to pass GOA would be in all instances dictated by the position taken by head owners because GOA transit was subject to the disponent owners’ consent under the head charter.

The court was to answer the following two questions:

(a) Did the Owners by their words or conduct evince an intention not to perform, or expressly declare that they would be unable to perform, their obligations under the Charterparty?
(b) If so, did such a refusal have the effect of substantially depriving the Charterers of the whole benefit which it was the intention of the parties that they should obtain from the contract?

The charterers contended that there is some principle of law whereby a party who has made his performance dependent on discretion to be exercised by a third party is ipso facto deemed to be evincing an intention not to perform. The judge was not impressed by this argument, he said at para 21:

Where conduct renders future performance uncertain, the self-induced impossibility ground for putting an end to the contract does not arise. The innocent party must bring himself within the doctrine of renunciation. Conduct which renders future performance uncertain may in the circumstances of a particular case be such that a reasonable man would conclude that it evinced an intention not to perform when the time comes. This is the explanation for the lease and marriage cases. Whether the conduct evinces such an intention is a question of fact in each case. Much will depend upon the degree of uncertainty, the nature of the contingency, in whom the contingency is vested, and a host of other circumstances peculiar to each case. Words or conduct which give rise to the uncertainty of future performance, the contingency of which rests upon conduct of a third party, will not necessarily evince an intention not to be bound. If, for example, a person has a contractual obligation to be at a place at 9 am on a particular day, and says that he only intends to fulfil his obligation if the early train is running as usual, he is making clear that his future performance is dependent upon a contingency which is in the hands of another. But he is not ipso facto evincing an intention not to perform his obligation, and the rationale for the anticipatory breach rule does not require some legal deeming that he is. On the contrary, it requires the other contracting party to wait to see whether there is a breach when the time for performance arises, a breach which before that time is not inevitable.

Having answered in the negative the first question, the second question did not need to be decided, but the judge briefly considered it. He held that the competitive disadvantage in being unable to market the vessel as GOA OK, the value the Charterers put upon that competitive disadvantage, and the ability to trade the Vessel elsewhere, are capable of supporting the factual conclusion that the Charterers were not deprived of substantially the whole benefit of the Charterparty.

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