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Law and Sea.
Laycan - Cancelling Clause.

The purpose of a cancelling clause in a voyage or time charterparty is to fix a definite date by which, if the owners fail to deliver the vessel to the charterers, the charterers are entitled to wait no longer for the vessel to be delivered.
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Cancelling Clause
Last updated: 06-Oct-2014

Per A.L.Smith J in Smith v Dart & Son (1884) 14 QBD 105 at p.110:

The shipowner does not contract to get there by a certain day, but says: ‘If I do not get there you may cancel’. It is an absolute engagement that if the vessel does not get there the charterers may cancel.

Per Devlin J in Noemijulia Steamship Company, Ltd. v Minister of Food, [1951] 1 K.B. 223, at p. 228:

It must always be remembered that this is a forfeiture clause. It would be a misfortune, I think, if defects of no real significance in the adventure were to be used as a means of throwing up a charter at the last moment.

Per Lord Denning, M.R. in Marbienes Compania Naviera S.A. v Ferrostaal A.G. (The Democritos) [1976] 2 Lloyd’s Rep. 149 at p.152:

Next the cancelling clause. Its effect is that, although there may have been no breach by the owners nevertheless the charterers are, for their own protection, entitled to cancel if the vessel is not delivered in a proper condition by the cancelling date. That is the sole effect.

Per Lord Justice Longmore in Mansel Oil & VITOL S.A. v Troon Storage Tankers SA [2009] EWCA Civ 425

The purpose of a cancelling clause in a voyage or time charterparty is to fix a definite date by which, if the owners fail to deliver the vessel to the charterers, the charterers are entitled to wait no longer for the vessel to be delivered. In the absence of a cancelling clause an owner would be in breach of charter for failure to deliver on the contractual date but a charterer would not be able to treat the owner as being in repudiatory breach of contract until the delay was such as to frustrate the commercial purpose of the adventure. The length of that delay is notoriously difficult to agree or fix with any certainty and it is, therefore, not surprising that parties to a voyage or time charter are ready to agree a cancelling date in order to avoid all arguments about whether delay in delivery is such as to frustrate the adventure.


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