An 'acceptable level of uncertainty' in shipping trade

Certainty is usually considered as being a good thing; it equates to predictability and is highly valued by both merchants and companies alike as it enables them to plan and make decisions confident in the knowledge of likely outcomes. However, the concept of certainty has come under attack in recent years.

The Court of Appeal has had to contend with the issue of uncertainty when deciding whether or not the payment of time charter hire is a condition i.e. a term of a contract any breach of which, however small, gives the innocent party the opportunity to claim damages for loss and terminate the contract.

In the case between the Grand China Logistics Holding (Group) Co Ltd and the Spar Shipping AS, the Court of Appeal upheld the decision of the Judge at first instance that payment of hire was not a condition.

By doing this the Court overruled the decision of Flaux J in The Astra, restoring what was the general understanding of the position since the judgment in The Brimnes in 1973. This meant that non-payment of hire would only result in the contractual right to withdraw the vessel and not to seek additional damages.

Boatowners, however, are entitled to negotiate for the right to damages due to loss of bargain, an example of which is given in the NYPE 2015 revision; common in bareboat charters. On the other hand, charterers would be advised to avoid this term, and would most probably be successful in doing so in today’s market.

In general, it seems that the position is unclear and a difficult judgement call is often necessary.