Voyage Charters

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Chapter 22

Frustration of the Charter

Frustration in general

22.1 The various ways in which a charterparty can be terminated have been mentioned under clause 1.1 Termination by agreement or by complete performance requires no further elaboration, and the consequences of breach of the charter have been examined in the preceding chapter. It remains to consider the question of frustration. A charter is automatically as a matter of law (and without election of either party) brought to an end by frustration when, as a result of an extraneous event outside the control of either party and beyond the scope of the express terms of the contract allocating risk and responsibility,2 performance of the charter according to its terms becomes impossible,3 or the commercial purpose4 of the adventure for which the charter provides5 becomes impossible of attainment.6 This impossibility may arise where performance is prevented (or delayed so as to amount to effective prevention)7 either by physical obstacles or by

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supervening illegality8 under the proper law of the charter or under the law of the place of performance;9 alternatively, it may arise when there is such a radical change of circumstances from those contemplated by the parties when the contract was made that “the circumstances in which performance is called for would render it radically different from that which was undertaken by the contract”.10 It is a doctrine not to be lightly invoked to relieve one party of his contractual obligations, so it is not enough to show that, without default of either party, the contract has become incapable of being performed; it must be shown that the incapability arises because the circumstances at the time would render performance radically different from that which was undertaken by the contract11 and for which the contract made no or no sufficient provision. Rix L.J. has expressed the essential underlying exercise in the following terms:12

What the “radically different” test, however, does not in itself tell us is that the doctrine is one of justice, as has been repeatedly affirmed on the highest authority. Ultimately the application of the test cannot safely be performed without the consequences of the decision, one way or the other, being measured against the demands of justice. Part of that calculation is the consideration that the frustration of a contract may well mean that the contractual allocation of risk is reversed. A time charter is a good example. Under such a charter, the risk of delay, subject to express provision for the cessation of hire under an off-hire clause, is absolutely on the charterer. If, however, a charter is frustrated by delay, then the risk of delay is wholly reversed: the delay now falls on the owner. If the provisions of a contract in their literal sense are to make way for the absolving effect of frustration, then that must, in my judgment, be in the interests of justice and not against those interests. Since the purpose of the doctrine is to do justice, then its application cannot be divorced from considerations of justice. Those considerations are among the most important of the factors which a tribunal has to bear in mind.

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