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Container demurrage – carrier obliged to accept repudiatory breach where there was no legitimate purpose in keeping the contract alive

The Facts

A carrier contracted with a shipper to carry 35 containers of raw cotton from Bandar Abbas, Iran and Jebel Ali, Dubai to Chittagong, Bangladesh.

The shipper sold the cotton to a consignee in Bangladesh.

Despite paying for the goods by way of a letter of credit, honoured by the issuing bank, the consignee failed to take delivery of the containers.

Prior to payment having taken place, the consignee had obtained an ineffectual injunction restraining the issuing bank from paying under the letter of credit.

At the same time, customs authorities announced that they would not allow removal of the containers without a court order.

Clause 14.8 of the contract of carriage printed on the reverse of the bills of lading provided as follows:

The carrier allows a period of free time for the use of the containers and other equipment in accordance with the tariff… free time commences from the day the container and other equipment is collected by the merchant or is discharged from the vessel or is delivered to the place of delivery as the case may be. The merchant is required and has the responsibility to return to a place nominated by the carrier the container and other equipment before or at the end of the free time allowed at the port of discharge or the place of delivery.  Demurrage per diem and detention charges will be levied and payable by the merchant thereafter in accordance with the tariff.

The period of free time was fourteen days and the rate of demurrage, US$ 10 per container per day for the first ten days, US$ 18 per day for the next ten days and US$ 24 per day thereafter.

Clause 20 of the contract contained an express provision obliging the shipper to take delivery of the containers.

At the time of the hearing, three and half years after discharge, the containers remained unpacked and impounded by customs.

The carrier sought to recover demurrage at the contractual rate for the full period, the claim amounting to approximately ten times the value of the containers.

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