Related topics

Available Market

Damages, Liquidated

Damages, Measure of

Damages, Remoteness of

Damages in a Contract and in a Tort

Time Charter

Time Charter, Damages for repudiation - no available market

Time Charter, Suspension and Withdrawal

Law and Sea.

Damages are the pecuniary recompense given by process of law to a person for the actionable wrong that another has done him. Damages may, on occasion, be awarded where the plaintiff has suffered no ascertainable damage: damage may be presumed.

Time Charter, Damages for repudiation
Last updated: 21-Jun-2015

Koch Marine Inc v D'Amica Societa Di Navigazione ARL (The Elena D'Amico) [1980] 1 Lloyd’s Rep 75, per Goff J at p.87:

…a normal measure of recovery in cases of premature wrongful repudiation of a time charter by the owners, and that normal measure is that, if there is at the time of the termination of the charter-party an available market for the chartering in of a substitute vessel, the damages will generally be assessed on the basis of the difference between the contract rate for the balance of the charterparty period and the market rate for the chartering in of a substitute vessel for that period.…

But what is claimed in the present case is not enhanced damages of that kind. The charterers claim that, by reason of a reasonable effort by them to mitigate their damage, they did not charter in an Italian flag ship, and in consequence they suffered enhanced damages in the form of a loss of profits they would otherwise have earned during the four month period at the beginning of 1974. In considering the submission that these lost profits are recoverable from the owners as damages, in my judgment guidance is provided once again by cases concerned with the sale of goods. Taking again the case of non-delivery, where goods are not delivered on the due date, or the contract is repudiated, the buyer is placed in a situation where he has to decide whether or not to buy in and, if he is going to buy in, whether he should buy in immediately or wait for a time and buy in later. The position in law appears to be that, generally speaking, if there is an available market for the goods in question at the time when they ought to have been delivered, then if the buyer decides not to buy in on that date, which he is fully entitled to do, he cannot visit the consequences of that decision upon the seller. If he buys in later he may, of course, either buy in the goods at a higher price or at a lower price than the available market price at the date when they ought to have been delivered. But if he has to buy at the higher price he cannot, generally speaking, claim the extra cost from the seller; and if he makes a saving then that saving is not, generally speaking, to be brought into account to reduce the damages which are recoverable from the seller.

Woodstock Shipping Co. v Kyma Compania Naviera S.A. (The Wave) [1981] 1 Lloyd’s Rep 521 per Mustill J at p.532:

In principle the applicable measure of damages is the difference between the hire which would have been payable in accordance with the fixture and the hire which the plaintiffs would have had to pay if they had entered into a kindred fixture on or shortly after the date when the contract was repudiated. I add the gloss "or shortly after" to the principle adopted in The Elena D'Amico [1980] 1 Lloyd’s Rep 75, because in practice it would not have been possible to obtain a replacement fixture immediately after the repudiation took place.

In Golden Strait Corporation v Nippon Yusen Kubishka Kaisha (The Golden Victory) [2007] UKHL 12 Lord Carswell stated at para 57:

57. Damages for breach of contract are a compensation to the claimant for the loss of his bargain: McGregor on Damages, 17th ed, (2003), para 2-002. He is entitled to be placed, as far as money can do it, in the position which he would have occupied if the contract had been performed: Sally Wertheim v Chicoutini Pulp Co [1911] AC 301, 307, per Lord Atkinson. They should ordinarily be assessed as at the date when the cause of action arose, that is to say, the date of breach: see Chitty on Contracts, 29th ed (2004), vol 1, para 26-057; and cf Johnson v Agnew [1980] AC 367, 400-1, per Lord Wilberforce and the other cases cited by my noble and learned friend Lord Bingham of Cornhill in paragraph 11 of his opinion. The basic rule in the case of repudiation of a charterparty, where there is an available market, is that the loss is measured as at the date of acceptance of the repudiation. The calculation is made on the basis that the injured party can mitigate his loss by going into the market and obtaining a replacement charter as soon as reasonably possible on the best terms available for the balance of the charter period: see Koch Marine Inc v D'Amica Societa di Navigazione ARL (The Elena D'Amico), per Robert Goff J. His loss will then be calculated by reference to the extent to which he is worse off in consequence. This will normally be the extra cost of chartering a substitute vessel, if the owner has repudiated the original charter, and any reduction in charter rates if the repudiation was by the charterer. In either case the loss is ordinarily assessed over the remainder of the duration of the original charter.

Per Mr. Justice Teare in Flame SA v Glory Wealth Shipping PTE Ltd [2013] EWHC 3153 (Comm) at para 18:

18. Damages are assessed by comparing the position that the innocent party would have been in had the contract been performed (necessarily, as just explained, a hypothetical exercise because the contract had not been performed) with the position that the innocent party was in fact in as a result of the breach. That is why the prima facie measure of damages for non-acceptance by a buyer in breach of a contract for the sale of goods is the difference between the contract price and the market price and why the prima facie measure of damages for breach of a charterparty by the charterer is the difference between the charter rate of hire and the market rate of hire. In the present case, when carrying out the hypothetical exercise of assessing the position of the disponent owner had the contract been performed by the charterer, it would be necessary to consider whether the disponent owner would have been able to perform its obligations under the COA. If, let it be assumed, it is clear that the disponent owner would not have had the resources to provide a carrying vessel and the court or tribunal did not take that matter into account, then, if the disponent owner were awarded substantial damages on the prima facie measure, such an award would put the disponent owners in a better position than if the charterparty had been performed by the charterer. For if the charterer had declared the required laycans the disponent owner would still not have earned the agreed freight. In those circumstances an award of substantial damages would be a windfall and would breach the compensatory principle.

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