Voyage Charters. Laycan: Premature cancellation Last updated 22-May-2015

… in affirming the continued existence of the contract, the owners could only avoid operation of the cancellation clause by tendering the vessel ready to load on time …, or by establishing … that their failure was the result of the Charterers’ conduct in representing that they had given up their option, which representation the owners had acted upon by not presenting the vessel on time.
Per Lord Ackner in Fercometal v Mediterranean Shipping Co (The Simona) [1989] A.C. 788 at p. 806.

No anticipatory right to cancel

As it was held in Christie & Vesey v Helvetia [1960] 1 Lloyd’s Rep. 540 and in The Madeleine [1967] 2 Lloyd’s Rep. 224 there is no anticipatory right to cancel in advance of the specified cancelling date vested in the charterer by the cancelling clause, even though it is clear that the owner will be unable to tender the ship in time. Cancellation if exercised until the arrival of the cancellation date constitutes an anticipatory breach and repudiation of the charterparty. Furthermore, there is no implied right to cancel existing concurrently with an express one:

For my part, I have great difficulty in seeing how, where there is an express right given to cancel if the vessel is not delivered by May 10th, an implied right can concurrently exist to cancel under the clause at some earlier point of time, namely, when it becomes inevitable that the stated cancelling date will not be able to be attained by the ship ... I would say that, however reasonable it might be to imply a term such as [counsel for the charterers] sought to imply, it cannot be said to be necessary so to do for the purpose of giving business efficacy to the contract because the contract gives an express right to cancel at a certain date and not at any earlier time.
By Roskill J in The Madeleine [1967] 2 Lloyd’s Rep 224 at p.241.

There is, however, a practical solution when from business point of view, reasonably and conveniently, it is better for both parties to know in advance that the charterparty was finished, then if the charterer gives premature notice of cancellation and the owner accepts it without demur, this will amount to a cancellation by agreement.

It is well to emphasize that, as judgement of Megaw LJ in The Mihalis Angelos [1970] 3 All ER 125 illustrates, the charterers gain no advantages prematurely invoking cancelling clause if they are confident of the non-arrival of the vessel by the cancelling date. There is always an option to send a notice to the owners advising them about intention to cancel the charterparty. Whether the owners agree or disagree with this notice it does not impede any arrangements the charterers think necessary to make to have their cargo shipped in time.

If the charterers are confident that the vessel is going to miss her cancelling date, and for some reason are minded to put an end to the charterparty before that date has arrived, there is nothing whatever to prevent them from asking the owners to agree that the charterparty should be cancelled. That does not require cl 11. If the owners do agree, cl 11 neither helps nor hinders. There is no need to read into it words that are not there to achieve that which can be achieved by mutual consent. If the owners do not agree, is there any possible advantage to the charterers in reading these suggested words into the clause? In the absence of agreement by the owners, the charterers are no better off as a result of the rewriting of the clause. Without any forced construction of the clause, the charterers can, if they are confident of the non-arrival of the vessel by the cancelling date, go ahead and make whatever arrangements they wish in anticipation of exercising their option under the clause when the cancelling date arrives. Of course, if they prove wrong in their forecast of the vessel’s arrival, and if the vessel in fact, after all, makes the cancelling date, the charterers will be in trouble if they have already made other arrangements. But that is not a good ground for giving a bold interpretation to the clause. It is really in only a very odd and exceptional case, such as the present, that the suggested extension of meaning could be of any importance; and here, if it were important, it would only be of importance because the charterers misinterpreted their rights under other provisions of the charterparty. No conceivable harm would have been done to them if they had waited until 20 July and then invoked the cancelling clause. The bold construction is called for by the charterers, not because the natural construction leads to practical difficulty, but in order to try to save themselves from the consequences of their own error.

Since unaccepted repudiation has no legal effect, it was held in The Simona [1989] A.C. 788, that refusal of the owners to accept cancellation does not absolve them from tendering further performance and that the charterers had not lost their option to cancel the charterparty when they became legally entitled to do so. Such cancellation will be legally valid and effective if by that date the vessel is not ready to load in accordance with the terms of the charterparty.

Some charterparty forms as for example BPVOY3, BPVOY4 and EMV 2005 give charterers an option to escape problems with premature cancellation described by Megaw LJ in The Mihalis Angelos above. For example BPVOY3 form clause 17 provides:

If it appears to Charterers that the Vessel will be delayed beyond the Cancelling Date Charterers may require Owners to notify Charterers of the date on which they expect the Vessel to be ready to load whereupon Charterers shall have the option to cancel this Charter and such option shall then be declared by Charterers within 96 hours, Sundays and holidays excepted, of the receipt of the said notification from Owners.

BPVOY4 clause 16.3 give owners only 12 hours to respond to any request for an ETA. Failure to respond in time may itself lead to cancellation, even if the vessel is able to meet her cancelling date.
Read also Cancelling date achievability

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