Explanatory notes

Redelivering a ship at the end of a time charter party can sometimes result in a dispute between the owners and the charterers. The charterers may attempt to redeliver the ship before the end of the minimum charter period, or deliver it late. Charter parties are sometimes unclear about how and when redelivery notices should be given and what effect those notices have. There is often uncertainty about what type of damages the owners can claim in case of a late redelivery.

To help reduce disputes, BIMCO has developed a standard redelivery clause for time charter parties that provides clear wording about giving notices and sets out the types of damages the owners can claim.

It’s very important that redelivery notices under a time charter party are given correctly, consistently and reliably. Towards the end of a time charter, the owners need to arrange in advance the future employment for their ship. To avoid claims for late redelivery or damages, charterers should avoid making changes to the date or place of redelivery other than those which are due to events outside their control. 

Subclause (a) (Itinerary for the Final Voyage and Redelivery Notices) – Successfully planning the onward employment of the ship is dependent on good collaboration between the owners and the charterers in the run up to redelivery. The clause encourages the charterers to be proactive in informing the owners of any changes to the ship’s itinerary whenever they occur.

The clause contains a set of approximate notices and one definite notice that the charterers must give. But these notices will not work for all trades or all durations of time charters, so they are suggested figures which the parties can change to suit the particular fixture, if needed.

The clause requires notices to be “consistent with the…agreed spread of notices”. This means that the gap between notices should be as expected, for example, a 10 days’ notice should be sent approximately 10 days after a 20 days’ notice. 

For various reasons, a redelivery notice may sometimes be missed. To avoid the charterers breaching the contract, the clause permits one notice to be missed provided the next notice is consistent with the sequence of notices previously given.

The clause prevents the charterers from redelivering the ship more than 24 hours before the date given in the 5 days’ notice.

The final part of subclause (a) deals with how binding a notice of redelivery is. In The Zenovia ¹, the court had to decide on the effect of commonly used reservations on delivery and redelivery notices. The Charterers argued that their original redelivery notice was qualified by five well known reservations: “about”, “agw”, “wp”, “wog”, and “uce”. They said that the effect of these reservations, in particular the terms “without prejudice” and “without guarantee”, was that no binding representation as to a redelivery date was made at all. The court supported the charterers’ view. This creates uncertainty for owners as it undermines the commercial intent of redelivery notices. To avoid this uncertainty the BIMCO clause makes it clear that the charterers may only qualify their approximate redelivery notices with “weather permitting” and/or “unforeseen circumstances always excepted”. The intention is that a notice containing any other form of qualification like “without guarantee” or “weather permitting” will still count as a valid notice, but the qualification won’t be valid.

Subclause (b) (Late Redelivery) – This subclause sets out the consequences of late redelivery of a vessel.

The “period agreed and declared under this Charter Party” means the charter period plus any agreed options. It is important that the parties are clear about the agreed period of the charter party and that it does not include any optional periods or extensions if they have not been declared by the charterers.

Under English common law, the charterers are obliged to give “legitimate” voyage orders. This means orders for a voyage that the ship can reasonably be expected to complete in time to allow it to be redelivered within the charter period. An “illegitimate” voyage order is an order which the ship cannot reasonably be expected to perform without overrunning the charter period. A voyage order must be legitimate both at the time when it is given and when the ship is ready to perform the voyage. That means that an originally valid voyage order may subsequently become invalid if circumstances change. If that happens, the owners can choose to accept or reject the illegitimate voyage order. If the owners reject it, then the charterers have to give a new, valid voyage order. ² 

Again, under English law, if redelivery takes place after the maximum charter period has expired due to either a legitimate or illegitimate last voyage order, the owners can claim hire for the overrun period at the prevailing market rate, if higher than the charter rate. This position is reflected in the clause. In respect of legitimate last voyage orders, it is intended that the charterers’ liability is limited to the difference in market rate. This has been done for the sake of balance.

The clause also provides that the charterers should be liable for all losses caused by an overrun due to an illegitimate last order. This will apply if the charterers could be expected to know or had been informed by the owners that these losses could occur at the time the order was given, or latest at the beginning of the approach voyage. This provides a balanced approach to the charterers’ exposure to potential liability because it limits the recoverable losses. It also deals with one of the issues discussed in The Achilleas case ³  - the assumption of liability. If the charterers were aware of the possibility of losses as per this subclause, they could be said to have assumed liability for them.

Subclause (c) (Early Redelivery) – Early redelivery of a ship can also create problems for the owners. They have agreed a time charter period with a minimum period with the full expectation of earnings during that entire period. An early redelivery exposes the owners to a potential loss of income if the market has dropped or if no subsequent employment has been arranged. This subclause gives the owners the right to refuse redelivery before the minimum period of the charter party or alternatively, where proper redelivery notices have been given, before the expiry of the two days’ definite notice.

Footnotes

1. IMT Shipping and Chartering GmbH v Changsung Shipping Company Limited (The Zenovia) [2009] EWHC 739 (Comm).
2. Torvald Klaverness v Arni Maritime (The Gregos) [1995] 1 Lloyd’s Rep. 1.
3. Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008] UKHL 48.