155. Hyundai Merchant Marine Co Ltd v Gesuri Chartering Co Ltd (The “Peonia”) [1991] 1 Lloyd’s Rep 100

Redelivery – interpretation of amended NYPE redelivery clause

The facts

The vessel was let on the NYPE form containing the following provisions:

[Line 14]…About minimum 10 months maximum 12 months time charter, exact duration in charterers’ option

[Line 15]…Charterers have further option to complete last voyage within below mentioned trading limits.

Before the terminal date, the charterers entered into a sub-voyage charter. The projected redelivery extended beyond the agreed terminal date.

The owners objected and suggested that alternative voyage orders be given.

The charterers refused to amend the final order and the owners withdrew the vessel from service.

The charterers argued that line 15 gave them the option of issuing final voyage orders following which late delivery was anticipated. Their argument ran as follows:

The existing authorities were to the effect that late delivery following upon a legitimate final voyage was not a breach of contract and did not attract liability for damages; The presumption against surplusage required line 15 to provide the charterers with rights beyond those which they already enjoyed in terms of precedent; therefore the effect of line 15 was to allow the charterers to issue final voyage orders which would otherwise be illegitimate because of the projected overrun.

Findings

The Arbitrators appointed, Clifford Clark and Mark Hamsher were persuaded by the charterers.

Evans J gave leave to appeal to the Commercial Court where Saville J rejected the charterers’ contentions. He concluded that the authorities did not support the proposition that the overrun on a legitimate final voyage was not a breach of contract.
He interpreted line 15 as giving the charterers the right to complete a legitimate final voyage without attracting liability for damages. This did not, however, entitle the charterers to issue order for an illegitimate final voyage.

The Court of Appeal (Slade, Balcombe and Bingham LJJ – main judgement by Bingham LJ) confirmed the findings of Saville J.

Commentary

Saville J analyses the relationship between judicial precedent and the interpretation of contracts. He cautions against the courts making contracts for the parties and stresses the golden rule of interpretation which is to give the words used by the parties their ordinary meaning as a starting point of interpretation.

The judgment of Bingham LJ contains a summary of the authorities dealing with the compensation payable to the owners upon the late delivery of a vessel under a time charter.

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