Time charter - withdrawal



Withdrawal as equivalent to cancellation.

Suspension of hire and suspension of service.

Time is of essence of withdrawal provision.

Underpayment of hire.

A time charter is a contract for services to be rendered to the charterer by the shipowner. In case of non-performance under such contract the common law generally gives to the innocent party only remedies in damages for breach of contract, unless said breach is of repudiatory character. Accordingly, the common law does not treat the late payment of hire by the charterers as a breach of sufficient gravity to give the owners a right to rescind the contract, unless the conduct of the charterers show unwillingness or inability to pay or delay in payment amounts to repudiation of the charter. The most important feature of express withdrawal provision is that any nonconformance in its performance is treated as going to the root of the contract, without regard to the magnitude of the breach. Commercial cases examining operation of withdrawal clauses in timecharter contracts represent vivid examples of owners' persistent efforts to get rid of economically disadvantageous charterparty on raising market.

In A/S Tankexpress v Compagnie Financiere Belge Des Petroles SA [1948] 2 All ER 939 the House of Lords held that time was of the essence of the clause which entitles the owner to cancel. Late payment or repeated late payments of hire will usually fall short of repudiatory breach, in absence of express provision entitling the owners to withdraw their vessel for late or non-punctual payment of hire, unless the charterers show clear intention not to be bound by the terms of the contract. When, however, withdrawal clause expressly incorporated into the time charterparty it is evidently a condition of contract and if breached gives to the owners a right to cancel the charter.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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