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Charles Priday Successfully Appeals Fundamental Issue For Charterparty Cancellation

2nd Oct 2019

The Commercial Court today handed down judgment in arbitration appeals concerning the validity of cancellations by Charterers and Sub-Charterers.  The judgment highlights a very important issue as to the effect of laycan deadlines and rights of cancellation.

Nearly all charterparties stipulate for a cancelling date on which charterers will have the right to cancel, and most charters state that the right to cancel arises at that time if notice of readiness has not been tendered.  It is also standard for charters to require that notice of readiness must be tendered in a specific manner and during office hours.

What happens if the ship arrives before the deadline but outside office hours?  Many ship-owners assume that it is sufficient for the vessel to have arrived and sent a notice of readiness before the deadline, to prevent charterers having the right to cancel.   So, if the cancelling time is noon on a Sunday, ship-owners think that they have until then for the ship to arrive.  However the judgment of Teare J has held that even where the vessel arrived and NOR was tendered at 0750 on Sunday, charterers still had the right to cancel at noon on that day.

This was because, as is very common in many standard forms, the cancellation clause said that charterers may cancel on the cancelling date unless NOR has been tendered “as per”, or in accordance with, the NOR clause.  If the NOR clause requires notices only to be given during weekday office hours or by 11 on Saturdays, a notice given later on Saturday or on Sunday morning will not prevent the option to cancel arising.

This creates a potentially serious pitfall for ship-owners: when using such standard Charterparty forms, if the cancelling date is agreed or narrowed to be a Sunday, the vessel must arrive and tender NOR before that day during the preceding office hours.

Charles Priday acted for the successful appellant Sub-Charterers, overturning the award under the sub-charter.  The Charterers’ appeal on similar arguments against Head Owners failed because of different wording in the head charter.

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