Redelivery – extension of charter not giving rise to a cumulative tolerance period
The vessel was let on the NYPE form and the period was set out as follows:
“…the said owners agreed to let said charterers agreed to hire the said vessel, from the time of delivery for six months, 30 days more or less at charters’ option… the charterers shall have the option of continuing this charter for a further period of a further 6 months, 30 days more or less at charterers’ option declarable at the end of the fourth month.”
The charterers’ exercised the option and argued that they were entitled to the use of the vessel for 12 months and 60 days.
Cedric Barclay and Clifford Clark were appointed as charterers and Anthony Diamond QC was appointed by them as umpire. They stated a consultative case for the Commercial Court on this point.
Mocatta J in the Commercial Court found in favour of the owners.
In his view, the 30 days more or less in the charterers’ option was not a true option but simply the margin of tolerance which the parties allowed for the completion of the final voyage.
In his view, a margin of tolerance of 60 days as opposed to 30 days was excessive and could not have been intended by the parties.
The Court of Appeal (Lord Denning MR, Orr and Waller LJJ – main judgement by Lord Denning MR) affirmed the judgement of the Commercial Court.
While the solution to the problem seems, at first sight, simple, the reasoning in the judgments is not self evidently correct. Notionally, there is nothing to preclude an interpretation of the agreement which would allow the charterers to exercise the 30 day option twice. Rather than viewing the charter in terms of simply doubling the initial period and the option period, the charterers could be seen as completing the first period by exercising the option for the full extension and then viewing the continuation as a second period with its own margin of tolerance. This interpretation solves the problem of a double and excessively wide period of tolerance and makes commercial sense.
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