Torvald Klaveness A/S v Arni Maritime Corporation (The Gregos)

27 October. LORD TEMPLEMAN. My Lords, in a time charter, the time for redelivery of the vessel by the charterer to the owner at the end of the charter is of the essence of the contract, absent any provision in the contract to the contrary. If the charterer in the course of the charterparty evinces an intention not to redeliver the vessel by the date or last date fixed for redelivery, the charterer will evince an intention no longer to be bound by the contract and will thus repudiate the contract. The owner may ignore the repudiation and claim damages resulting from breach of contract by any late delivery or accept the repudiation, withdraw the vessel from the control of the charterer and claim damages resulting from repudiation.

In the present case, the charterparty of the vessel, the Gregos, began on 8 January 1988 and the last day for redelivery was 18 March of the same year. During the currency of the charterparty, the charterers were entitled to give orders to the master of the vessel with regard to the loading and sailing of the vessel but they were bound to give orders which would result in the vessel being redelivered to the owners not later than 18 March. Orders were lawfully given by the charterers for the vessel to deliver a cargo of bauxite at Matanzas, a port in Venezuela on the Orinoco River and thereafter to load a cargo of iron ore at the neighbouring port of Palua, also on the Orinoco for delivery to Fos in Italy prior to redelivery at an authorised port in Europe on or before 18 March. The Gregos was ready to load at Palua on 25 February. Following the grounding of the vessel Philippine Roxas in the Orinoco, it was then possible for the Gregos to escape from the Orinoco unladen in time for redelivery on 18 March. If, however, the Gregos took on a cargo of iron ore at Palua, as had been ordered, it was no longer possible for the Gregos to clear the Orinoco until the obstruction of the channel caused by the grounding of the Philippine Roxas had been overcome. In that event, according to the owners it was not possible for the Gregos to be redelivered by 18 March. The charterers ordered the master to load at Palua. This order, if complied with, would have prevented redelivery by 18 March and was therefore a repudiatory breach of contract. If the master had accepted the order to load at Palua, the owners would have lost their right to accept repudiation and would only have been entitled to damages for late delivery. The master refused to load at Palua and requested fresh orders to enable the Gregos to be redelivered on time. On 29 February the charterers refused to give fresh orders and the owners treated the conduct of the charterers in ordering and attempting to insist upon loading at Palua as a repudiatory breach of contract and accepted that repudiation.

In the arbitration which inevitably followed, the charterers contended that they would have been able to redeliver by 18 March 1988 even if the Gregos had loaded at Palua and unloaded at Fos but this contention was disproved by events and was rejected by the arbitrator. It follows that the charterers were not entitled to order the vessel to be loaded at Palua, that their refusal to give an alternative order evinced an intention no longer to be bound by the contract to redeliver not later than 18 March and that the owners were entitled to accept the conduct of the charterers as a repudiation of the contract. In the event the owners did not suffer any damages from the repudiation but immediately after 25 February, while the charterers were still contending that they were not guilty of breach of contract or repudiatory conduct and that the owners were bound to allow the vessel to be loaded at Palua, the charterers and the owners entered into an agreement whereby the Gregos lifted the iron ore from Palua and the charterers agreed that if the owners were held to be entitled to accept the conduct of the charterers at Palua on 25 February as repudiatory, the charterers would pay the current increase in freight rate over the charterparty rate plus a notional ballast bonus. The arbitrator...