Although the ship may already be at the load port when the charterparty is concluded, this will not usually be the case. The owner will wish to conclude the next fixture in good time before the completion of the current charterparty, so that there is no possibility of the ship being unemployed. The charterer will need to know when the ship will be delivered and ready to load so that it can make arrangements to have the cargo ready at the load port at that time.
The charterer may well have other contractual commitments, such as sale or purchase contracts or a sub- charterparty, to perform and the timing of those contracts and the charterparty must be carefully linked.
The charterer will not wish the ship to arrive too early when there is no cargo available if the risk of delay is for the charterer. If this were the case a time charterer would be liable for time charter hire or laytime would commence under a voyage charterparty but the charterer cannot yet use the ship.
Also, the charterer will not wish the ship to arrive so late that the charterer cannot load within the window.
Protective Clauses in the Charterparty
The charterer will therefore be protected by a number of clauses in the charterparty.
First the charterparty may well record where the ship is at the time that the charterparty is concluded. The charterparty may state “now trading” or “present position”. Such a provision will be a condition of the charterparty so that if the ship is elsewhere the charterer would be entitled to elect to terminate the charterparty. In addition, the charterparty may state when the ship is “expected ready to load”.
The “expected ready to load” date is not, however, a guarantee that the ship will definitely arrive by the date given. Provided the date given is both honest and reasonable at the time it was given, the owner will not be in breach of that provision if the ship is then delayed, for example, by an unforeseen tug strike or there is bad weather. Therefore, it is usual for both time and voyage charterparties to provide for a cut-off date so that if the ship has not arrived by that date, the charterer has an express right to cancel. The period of time starting from the earliest date at which hire will commence under a time charter or the earliest time from which laytime can start counting under a voyage charter and the latest time by which the ship can tender a notice of readiness without the risk of being cancelled is often called the laycan. However, the cancellation clause may only give a right to cancel on the cancelling date and not before. This was the position of Lord Denning in The Mihalis Angelos case. This is irrespective of the fact that the ship would not arrive by the cancelling date.
If the charterer purports to cancel before the right to cancel accrues, the charterer will be in repudiatory breach of charter party, unless it has a right at common law to elect to terminate the charterparty for a breach by the owner.
A simple cancelling clause may be problematic for the owner as, even if it is clear that the ship will not arrive by the cancelling date, the owner is still obliged to proceed to the load port with reasonable, due or convenient dispatch, knowing that the charterer may choose to cancel when the ship does not arrive on time. The charterer is not obliged to tell the owner in advance whether it will cancel or not. Therefore, the more sophisticated cancellation clauses oblige the charterer to advise whether it wishes to cancel if the owner asks prior to the cancellation date, failing which the cancellation date is extended.
The express right to cancel is a very valuable remedy for the charterer. Not only does the ship have to be at the right place by a specified deadline, but she must also be ready.
Like an off-hire clause, the cancellation clause is a no-fault provision. The charterer does not have to ask why the ship is not there by the specified time, or is there, but not ready. All the charterer has to ask is whether the ship is there and ready and if she is not, the charterer can cancel. However, that is the only remedy the clause gives. If the charterer also wishes to claim damages, then the charterer would have to show that the owner was in breach of charterparty, for example, if the ship had failed to proceed to the load port with reasonable despatch and cannot rely on the exceptions clause or had broken down en route due to unseaworthiness.
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