Time Charters


Loss of the Ship; Frustration of the Charter

Loss of the Ship; Frustration of the Charter

“102. 16.That should the Vessel be lost, money paid in advance and not earned (reckoning from the date of loss or being last heard of) shall be
103. returned to the Charterers at once… ”
26.1 This chapter deals with the consequences of the loss of the ship, and also other circumstances in which the parties to a time charter may be discharged automatically under the doctrine of frustration.

Loss of the ship

26.2 A ship is lost if she is sunk or destroyed, or so seriously damaged that no repair or recovery for further use is possible, or if the owner is irretrievably deprived of her. In such a case, three consequences will ordinarily follow. 26.3 First, the charterers’ obligation to pay hire comes to an end. Clause 15 of the Baltime form says in terms that hire is to cease if the ship is lost; the same is implicit in Clause 16 of the New York Produce form. Both clauses also require the owners to repay any hire paid in advance but not earned by the time the ship was lost. For further discussion of hire repayment, see et seq., above. 26.4 Second, further performance of the charter will be impossible. A time charter is – unless the parties agree otherwise – a contract for the services of the particular ship: see paragraph above. If she is lost, the contract cannot be performed, unless it has been agreed that, after the loss of the original, the owners either can or must provide a substitute (as to which see paragraph , below). 26.5 Third, the charter will be terminated. This is implicit in the stipulation that hire will cease to be payable from when the ship is lost. In Blane Steamships v. Minister of Transport , at page 166 lhc, a demise charter case, Singleton, L.J., said, “The charter-party does not say in so many words that in the event of the ship being lost the charter-party shall be at an end, though it does say that in such case hire shall be paid up to and inclusive of the day of loss… It seems to me that the object of this is to give a date on which the charter-party is to be deemed to have expired. …” Likewise Morris, L.J., at page 169 lhc, said, “I have come to the conclusion that it is necessary to imply a term in the charter-party to the effect that as from the time when hire-payments cease to be due, the charter-party terminates. Such termination would end the hiring, and its date would mark ‘the expiration’ of the charter-party.”

In 1946, the Empire Gladstone was bareboat chartered by the Minister of Transport to Blane Steamships for 5 years. By clause 7, the charterers promised to keep the ship insured for £130,000. By Clause 11, the charterers were given the option to purchase the ship for her current, depreciated value, at any time “not later than three months before the expiration of this charter”. Clause 8 provided that the obligation to pay hire should cease if the ship was lost or became a constructive total loss. There was no mutual exception for dangers of the sea or errors of navigation.

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