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Deficiency of men


Off-Hire, Net Loss and Period Clauses

Time Charter

Law and Sea.
Time Charterparty.Off-hire

… being under strict obligation to pay for services rendered by the owners, the charterers are obviously concerned over uninterrupted employment of the vessel. On the other hand, there are many factors peculiar to shipping business make delays inevitable. To deal with consequences of such delays parties insert certain provisions into the time charter contract, which are primarily collected in an ‘off-hire’ clause.

Last updated: 21-Jun-2015

In Mareva Navigation Co v Canaria Armadora SA ( The Mareva AS) [1977] 1 Lloyd’s Rep. 368 per Kerr J at p.381-382:

It is settled law that prima facie hire is payable continuously and that it is for the charterers to bring themselves clearly within an off-hire clause if they contend that hire ceases. This clause undoubtedly presents difficulties of construction and may well contain some tautology, e.g. in the reference to damage to hull, machinery or equipment followed by "average accidents to ship". But I think that the object is clear. The owners provide the ship and the crew to work her. So long as these are fully efficient and able to render to the charterers the service then required, hire is payable continuously. But if the ship is for any reason not in full working order to render the service then required from her, and the charterers suffer loss of time in consequence, then hire is not payable for the time so lost.

Santa Martha Baay Scheepvaart and Handelsmaatschappij N.V. v Scanbulk A/S (The Rijn), [1981] 2 Lloyd’s Rep. 267 per Mustill J at p. 272:

… the words [… any other cause preventing the full working of the vessel] cannot be applied in their full width without qualification by reference to the general purpose of the clause. The draftsmen cannot possibly have intended that hire should cease in every circumstance where the full working of the vessel is prevented. This reading would be commercial nonsense, and would make the second half of the clause redundant. In my judgment, only those causes qualify for consideration which are fortuitous, and are not the natural result of the ship complying with the charterers’ orders. These requirements would be complied with in case of fouling by marine growth, in the exceptional situation where the growth was of a wholly extraordinary and unpredictable nature: See Cosmos Bulk Transport Incorporated v China National Foreign Trade Transportation Corporation [1978] 1 Lloyd’s Rep. 53, a decision on a rather different form of words, where there was a very special finding of fact by the arbitrator. But in the great majority of cases, the accretion of growth is simply a natural consequence of the ship remaining in service, with nothing fortuitous about it. In the present case, furthermore, it is a fair inference from the findings in the award that the excessive growth stemmed from the abnormally long period which the vessel spent at Lourenço Marques awaiting cargo. It was the charterers’ own choice to keep her at rest in tropical waters for nearly three months, and it would be unjust if they could seek financial relief for the natural consequences of the delay.

The Berge Sund [1993] 2 Lloyd’s Rep. 453, per Staughton, LJ at pages 459-60:

A charter party might provide that the Vessel would remain on hire except during delay caused by breach of contract on the part of the owner; or it might provide that the vessel should be off-hire in the event of delay, unless caused by breach of contract on the part of the Charterers. Either solution would provide a rule that was tolerably clear and workable. But those who make charterparties prefer something more complicated. They provide for a vessel to be off-hire in some events which were not a breach of contract by either party for example, interference by authorities in the present case. As is fashionable nowadays, the clause is said to deal with allocation of risks. The only general rule that can be laid down is that one must consider the wording of the off-hire clause in every case.

In the ordinary way a charterer will wish a vessel to be profitably employed continuously throughout the charter period in loading, the carrying voyage, discharging, and if necessary a ballast voyage. Any time spent on other activities brings no immediate return to the charterer. Yet it is manifest that some other activities must take place in the charterer’s time. When a ship has used up the fuel in her bunkers, she must pause to take more on board, and for that purpose perhaps call at a port where she would not otherwise have called. Time may be spent taking on ballast, either for a ballast voyage or to reduce the vessel’s air draft so that she can go under a bridge. Lightening may be necessary, to enable her to go through a canal, as in Actis and Co. Ltd. v Sanko Steamship Co. Ltd. (The Aquacharm), [1982] 1 Lloyd’s Rep. 7; [1982] 1 W.L.R. 119. Or time may need to be spent cleaning the vessel’s holds or tanks. If the charterer orders the vessel to load coal on one voyage and sugar in bulk on the next, he can hardly expect the necessary cleaning to be done in the owner’s time.

Time spent on those activities is, in the ordinary way, to be paid for in hire. The charterer has acquired the services of the vessel, and has the right to determine what cargoes she shall carry on what voyages. If, as a result of his orders, any of those measures become necessary, hire must be paid for the time so spent…

One can justify that result in more than one way. It can be said that there is no "loss of time" when the vessel is carrying out those activities, or that the "efficient working of the vessel" is not prevented, or that she is still able to perform (and is performing) the service required by the charterer. By whichever route one goes, the result is that the vessel is not off hire.

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