C CHALLENGER - To Rescind Or Not To Rescind?
Published date | 21 December 2020 |
Law Firm | Quadrant Chambers |
Author | Mr Chris Smith QC |
OVERVIEW
In what circumstances will a party to a contract lose a right to rescind for misrepresentation, or will a Court exercise its discretion to refuse rescission?
SK Shipping Europe PLC v (3) Capital VLCC 3 Corp (5) Capital Maritime and Trading Corp [2020] EWHC 3448 (Comm)
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Approximately 8 months into a 2 year time-charter for the vessel C Challenger, the charterer purported to rescind/terminate it on account of alleged fraudulent misrepresentations and repudiatory breaches of the charter relating to the Vessel's consumption capabilities. Judgment has just been handed down by the Commercial Court after a 10-day trial of the ensuing dispute. Chris Smith QC was instructed by Fanos Theophani, and the associates Harriet Thornton and Hayley Flood at Preston Turnbull LLP.
Whilst at first glance, this might appear to be a relatively niche shipping case, it in fact gave rise to some issues of general importance namely:
- In what circumstances will a party, when offering to contract on certain terms, be held to have made implicit representations as to the subject-matter of those terms;
- When considering whether there has been an affirmation, what is the relevance of the fact that the innocent party has consistently reserved its rights;
- In what circumstances should the Court exercise its discretion to award damages in lieu of rescission and, in particular, where the representee has purported to rescind the contract, what is the relevance of the fact that if the Court refuses to rescind the contract, that will render the representee's purported rescission a repudiation of the contract;
- In what circumstances will documents signed by a broker constitute a written memorandum of a guarantee for the purposes of the Statute of Frauds 1677.
The facts were straightforward. In November 2016, the Claimant, the owner of the Vessel, circulated details of the Vessel's speed and consumption capabilities to the market as part of its attempts to find a long-term charterer of the Vessel. Those attempts were successful and in December 2016, it was agreed that the Vessel would be chartered out to the 3rd Defendant ("the Charterer"), with 5th Defendant ("the Guarantor") agreeing to act as guarantor thereof. The Charter contained consumption warranties in a standard form.
The Vessel was delivered in February 2017. Throughout the life of the Charter, the Vessel consumed bunkers in excess of the warranted levels. The Charterer complained about this and, as early as March 2017...
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