Owners' Remedies On Repudiation Of A Time Charter

In Isabella Shipowner SA v Shagang Shipping Co Ltd (The "AQUAFAITH") [2012] the Court held that the rule in White & Carter (Councils) Ltd v McGregor [1962] does apply to time charters.

White & Carter established that:

If a party to a contract repudiates it (evinces an intention to no longer be bound by the terms of said contract), then the innocent party has a choice to:

(a) Accept the repudiation and claim damages for breach, or

(b) Reject the repudiation and affirm the contract

If the innocent party affirms and completes his side of the contract, then he is entitled to claim the amount due under the contract.

Accordingly, if a charterer redelivers a vessel early, the owner can reject the repudiation and instead continue to claim hire at the charterparty rate, even though the charterer has stated that it will not use the vessel and is not giving orders.

There are some limitations however. An owner cannot affirm the contract where:

1. It requires a significant degree of cooperation (e.g. a bareboat charter where the charterer crews the vessel), or

2. The decision to do so is beyond all reason or "perverse". An example of this may be if the charterer redelivers one month into a five year time charter – although it is worth noting that owners were allowed to maintain the charter for eight months in The "ODENFELD" (Gator Shipping Corporation v Trans-Asiatic Oil Ltd SA...