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Withdrawal – NYPE time charter – obligation to pay rental held to be a condition

The Facts

The vessel was chartered on an amended NYPE form for 5 years at US $28 600 per day

Clause 5 read:

“Payment of said hire to be in London nett of bank charges in cash in United States currency 30 days in advance and for the last 30 days or part of same the approximate amount of hire.  Hire is to be paid for the balance day-by-day as it becomes due, if so required by the owners, otherwise failing the punctual and regular payment of the hire, or bank guarantee, or any breach of this charter party, the owner shall be at liberty to withdraw the vessel from the service of the charterers without prejudice to any claim they (the owners) may otherwise have on the charterers …”

Clause 31:

“Referring to hire payment(s), where there is any failure to make punctual and regular payment due to oversight or negligence or error or omission of charterers’ employees, bankers or agents, owners shall notify charterers in writing whereupon charterers will have 2 banking days to rectify the failure, where so rectified the payment shall stand as punctual and regular payment”.

The vessel was chartered on a falling market.  Three months into the charter, the charterers asked for a reduction of hire to US $19 600 per day.  The request was coupled with a threat to declare bankruptcy.

The parties entered into an addendum to the charter.  For one year the rate would be reduced to US $21 500 per day.  The addendum contained the following compensation clause:

“4.        In the event of the termination or cancellation of the charter by reason of any breach by or failure of the charterers to perform their obligations, charterers shall, in addition to any amounts due to owners at the date of termination or cancellation, pay to the owners compensation for future loss of earnings in respect of the unexpired period of the charter on the basis of the difference between the market rate and US $28 600 (the rate initially stipulated)”

Prior to the conclusion of the addendum, the charterers had failed to pay hire on the due date and an anti-technicality clause notice was served on them.

At the end of the year of grace, charterers again failed to pay on time leading to the delivery of a further anti-technicality notice.

A second addendum was agreed to whereby charterers were given a further two weeks at the reduced rate of rental.

The charterers defaulted for a third time.   Again an anti-technicality notice was issued.

Shortly thereafter the owners, in the absence of payment by the charterers, withdrew the vessel.  They concluded a substitute charter for the balance of the charter period at the rate of US $17 500 per day.

Owners claimed substantial damages based on the difference between the stipulated rate and the substituted charter rate.



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Charter Party Casebook