Is Payment Of Hire A Condition: A Long-Standing Controversy Resolved

Kuwait Rocks Co v AMN Bulkcarriers Inc (The Astra) [2013] EWHC 865 (Comm)

On 18 April 2013, Flaux J handed down his judgment in Kuwait Rocks Co v AMN Bulkcarriers Inc (The Astra). The judgment provides long-awaited clarification that clause 5 of the NYPE form (the obligation to pay hire) is a condition of the contract, the breach of which entitles Owners to recover both unpaid hire as at the date of withdrawal and damages for future loss of earnings.

Reed Smith acted for the successful Owners.

Facts

The "ASTRA" was the subject of a five-year time charter on an amended NYPE 1946 form. Clause 5 of the charter required hire to be paid punctually and regularly in advance, failing which Owners could elect to withdraw the vessel and terminate the charter. Clause 31 was an anti-technicality provision, requiring Owners to give Charterers two banking days' notice to rectify any failure in payment which was due to oversight, negligence, error or omission.

After a history of problems, Owners issued an anti-technicality notice in respect of unpaid hire, and when payment was not received the Owners withdrew the vessel and held the Charterers in repudiatory breach of contract.

Owners commenced arbitration and claimed damages for loss of earnings for the period from the date of withdrawal to the earliest date when the vessel could have been properly redelivered by Charterers. They argued that the obligation to pay hire under clause 5 was a condition, breach of which entitled Owners to those damages. The Tribunal rejected this argument, but did find that Owners were entitled to damages because, inter alia, the Charterers had, by their conduct, repudiated the charter.

It was Charterers' appeal, but Owners also contended in their Respondents' Notice that the Tribunal had erred in finding that clause 5 was not a condition of the charter. Although this issue was academic, because Charterers' appeal was dismissed on other grounds, Flaux J decided the point at the request of both parties.

What is a condition?

A condition is an essential contract term, breach of which entitles the innocent party to treat himself as discharged from further performance of the contract, even if he has suffered no prejudice as a result of the breach. The innocent party can also claim damages for any loss suffered.

The position before Kuwait Rocks Co v AMN Bulkcarriers Inc

The generally accepted position prior to this case was that although non-payment of hire may allow the owner to...