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Contractual damages – right to damages suffered by non-payment not affected by innocent parties’ disposal of the right to payment

The Facts

Charterers reneged on a contract of affreightment in terms of which they were obliged to provide six shipments of coal and coke in 2011.

To shield themselves from their creditors, disponent owners had arranged for both inward payment of freight and outward payment to head owners to be channelled to two separate corporations controlled by them.

Substantial profits would have been made by disponent owners on the cancelled contracts.

Charterers argued that owners suffered no loss because the profits would have been received by a third party.


Arbitrators found for Charterers.

Teare J upheld an appeal by owners. The right to freight lost by owners had value. How they disposed of that right was irrelevant to the loss.


Although Teare J’s conclusion, appears correct in strict logic, the compensatory principle is all-pervasive and may defeat this outcome as it did in the New Flamenco.


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Charter Party Casebook