Voyage Charter Party - Renunciation

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					                                   Voyage Charters by Igor Sterzhantov LLM




Voyage Charter Party - Renunciation

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The charterers under a strict obligation1 to pay freight to the owners under a voyage
charter. This obligation is not qualified by such external factors as financial difficulties,
drop in freight rates, market conditions, etc. In such cases there is no doubt that the
charterers are liable2.

The English law on the subject of renunciation is well settled. In Universal Cargo
Carriers Corpn v Citati [1957] 2 All ER 70, [1957] 2 QB 401, [1957] 2 WLR 713, affd
CA, [1957] 3 All ER 234, [1958] 2 QB 254, Devlin J. defined several main principles as
below:

          A renunciation can be made either by words or by conduct, provided it is clearly
         made. It is often put that the party renunciating must "evince an intention" not to
         go on with the contract. The intention can be evinced either by words or by
         conduct. The test of whether an intention is sufficiently evinced by conduct is
         whether the party renunciating has acted in such a way as to lead a reasonable
         person to the conclusion that he does not intend to fulfil his part of the contract...

           Since a man must be both ready and willing to perform, a profession by words
         or conduct of inability is by itself enough to constitute renunciation. But
         unwillingness and inability are often difficult to disentangle, and it is rarely
         necessary to make the attempt. Inability often lies at the root of unwillingness to
         perform. Willingness in this context does not mean cheerfulness; it means simply
         an intent to perform. To say "I would like to but I cannot" negatives intent just as
         much as "I will not".

           ...If a man says "I cannot perform", he renounces his contract by that statement,
         and the cause of the inability is immaterial.

It is also well settled that the party in breach is under a secondary obligation to pay
damages related both to breaches committed before rescission and to losses suffered as a
result of the defaulting party's repudiation of future obligations3.

In Zodiac Maritime Agencies Ltd v Fortescue Metals Group Ltd [2010] EWHC 903
(Comm) the High Court has been invited to decide the issue of an awkward renunciation
of Consecutive Voyage Charterparty (CVC) by the charterers.

1
  Strict liability means that it is not usually necessary to prove fault in order to establish the existence of a
breach, McKendric
2
  It is axiomatic that, in relation to claims for damages for breach of contract, it is, in general,
immaterial why the defendant failed to fulfil his obligation, and certainly no defence to plead that
he had done his best. Per Lord Edmund-Davies in Raineri v Miles [1981] AC 1050 at 1086
3
  The Law of Contract, G. Treitel, 10Th ed., 790
                           Voyage Charters by Igor Sterzhantov LLM




The owners let their capesize bulk carrier "the Kildare to the charterers under (CVC)
dated 5 December 2007. In November 2008, when there was 4 and a half years remaining
for CVC to run, the charterers, on the plea of financial crisis and changed market
conditions, proposed to the owner reduction in the Charterparty freight rate (from US$16
pmt to US$6 pmt) and together with its extension from 5 to 10 years. The owners in their
reply called such proposals as "totally unacceptable" and that there are no “permissible
excuse for failing to perform a contractual obligation under English law". In subsequent
correspondence the charterers approached the owners advising that they exercised
suspension of all of its long term contracts. In their respond the owners requested the
length of suspension period and the precise cause for the suspension, which request has
never been replied.

Meanwhile the vessel completed her sixth consecutive voyage and arrived at loading port
and tendered NOR.

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Description: The charterers under a strict obligation to pay freight to the owners under a voyage charter. This obligation is not qualified by such external factors as financial difficulties, drop in freight rates, market conditions, etc. In such cases there is no doubt that the charterers are liable.