September 2008
This was an appeal by charterers from an arbitration decision concerning a contract of affreightment (CoA) between owners and charterers to carry 6 shipments of cargo. The issue before the High Court was whether the terms of each particular voyage were, once nominated, revocable or whether they were binding on the parties as though they had been original terms of the charterparty?
Clause 23 of the CoA provided that the relevant vessel for each voyage was ‘TBN’ by owners and further provided that:
“Vessel to be of highest Lloyds or equivalent Class, valid ISM code, no tween hatches, max 20 years of age.
Vessel to have unobstructed holds and be suitable for grab discharge.
Charterers to give 30 days notice with 10 days notice laycan spread and Owners to nominate the vessel latest 10 days prior first day with complete itinerary of the vessel including previous port(s) agents’ contact details.
Vessel nomination to be confirmed by the Charterers latest 24 hours after nomination Saturday, Sunday excluded.
Please advise detailed itinerary, vessels present position, where and what the vessel is discharging, agents name and contact details at the time of the nomination.”
The chronology of events was set out by the arbitrators. The dispute concerned the 5th voyage whereby charterers notified owners of a stem of coal, giving named loading/ discharge ports and a specific laycan period:
6 Sept 2007: Baltimore/ Constanza shipment #5 under the subject COA laycan 5/14 Oct.
Charterers sent owners a subsequent message on 13 September stating that due to the impossibility for shippers to provide the stem at the nominated date, charterers wanted to move the laycan period to 21/30 October. The request was declined by owners. However owners suggested as an alternative that the 5th voyage was cancelled and that the proposed new laycan be treated as Voyage no.6. Charterers maintained that they wanted only to move the laycan period due to impossibility to stem at Baltimore 5/14 Oct and offered replacement nomination terms:
“…5th shipment – Baltimore/ Constanza 5-14 Oct 2007
Further our previous exchange and due Chrs impossibility to provide the above stem due shippers had to postpone dates to 21/30 Oct 2007, Chrs can propose below stem to replace the above nominated stem with same dates on which Owners will have to apply the equivalent TC rate coming out from existing freight agreed in the above mentioned COA, please find below terms of cargo to replace Baltimore/ Constanza asfs:
60000/10 pct coal
Newport load rate mts shinc
Nikolaev (where understand there is draft restriction 10.3mt fw wog)”
Owners maintained their position that the substitute voyage was not acceptable, that charterers were in repudiatory breach by failing to perform the 5/14 Oct laycan and that charterers were not entitled to move the laycan which, once given, was irrevocable.
The arbitrators gave as a finding of fact that due to the impossibility of performing the original stems, charterers had proposed in their subsequent message, a replacement voyage.
On charterers interpretation of clause 23, if the relevant vessel had not yet been nominated, they were entitled to move the laycan dates where due to unforeseen events the stem had become impossible. This argument was rejected by the arbitrators who held that once the laycan notice was given, it was written into the COA and could not be changed save by agreement.
On appeal, the High Court considered whether the arbitrators had erred in law. The charterers set out various arguments in support of their position stating inter alia that while the terms nominated for the ports and cargo were irrevocable, the laycan period remained open until a vessel was nominated by owners - the confirmation of which by charterers would then fix the voyage. Owners opposed these submissions, stating that the terms of the nomination were inextricably linked, that once given, such nominations were effectively ‘written’ into the COA and that by attempting to move the laycan, the charterers were purporting not to be bound by an essential term of the COA.
Steel J found in owner’s favour. Dismissing the appeal he held that charterers were not entitled to move the laycan and “it was simply not open to the Charterers to say that in light of the delay in loading they were only proposed an extension of the cancelling date” – they wanted a substitute voyage. The nomination terms were essential in setting out the parties’ obligations and therefore all the elements of the nomination were irrevocable – charterers could not pick and choose those terms which should be binding. Steel J stated that as soon as the notice is given, owners can rely on it. Any other conclusion would be ”commercially unreal and uncertain”. The charterers were therefore bound by their nomination for the 5th Voyage, they were in repudiatory breach for failing to perform and the owners were thereby released form any further obligations under the voyage.
This decision of the High Court confirms that the decision in The “Jasmine B” [1992] 1 Lloyd’s Rep. 39 applies in the context of COAs - even where the vessel has yet to be nominated.In that case, it was held that, once nominated, the terms of the subject voyage are effectively incorporated into the charterparty as though they had been original terms of the contract.
