Consideration is an important element of a contract. A contract can only be binding once the parties have offered their considerations (Macleod 2012: Marson 2013). In Kuwait Rocks Co v AMN Bulkcarriers Inc. [2013] EWHC 865 (Comm) (18 April 2013), the charterers agreed to make payments for hire of a vessel called Astra. Under clause 5 of the contract between the two parties, the payment was net of bank charges. The clause further indicated that a breach of the charter party would grant the owner authority to remove the vessel from the charterers without predisposition to any claim (Holman Fenwick Willan 2014). However, clause 31 of the contract provided provisions for errors and omissions. The provisions of this clause required the charterers to inform the owners in writing of such errors and to correct the same within two days (Hill Dickinson LLP 2013).
Prior to the case, the general position “was that non-payment of hire allowed the owners to withdraw the vessel and to claim for unpaid hire only, but the owners had to show a repudiatory breach of contract” (Serzhantova 2014, p. 1). In this case, the owners of the vessels had to show indications of not being bound by the terms of the contract and to recover further damages. In the earlier cases that were ruled, the market for the vessel was doing well and in most cases the owners stood a chance to gain immensely from such withdrawal.
In this case, the judge issued a decision that was contrary to the general position. The judge ruled in favour of the owners of the vessel and this implied that the owner stood a chance to recover the amount of the unpaid hire as at the date of withdrawal and other damages that arose from loss of future earnings. Further, it can be pointed out that the market for hire was deteriorating and there was a high possibility that the owners were going to incur substantial losses from the premature withdrawal. Thus, it can be observed that the decision made by the judge implied a change in the earlier general position that was used to decide the cases relating to hire of vessels.
The ruling in this case will have an impact on the future cases relating to hiring of vessels. For instance, the ruling is likely to have an impact on pending cases that relate to the credit crisis. Also, the decision in this case lowers the risks to which owners of vessels are exposed to especially in a falling market. The ruling increases the choices that the owners have especially when faced with a defaulting charterer. However, the owners must ensure that they end the contract appropriately otherwise they may be in a repudiatory breach. On the other hand, the decision in the Astra case increases the responsibility of the charterers (Rainey 2013: Worthington 2003). Thus, the charters will need to take extra precaution before delaying payments, not making payments or making undecided deductions from the payment for hire. Further, the decisions in the Astra case may result in a change of the wording of the contracts. The changes in the wording may focus areas that deal with making deductions from the payment for hire. This will offer some safety to the charterers (Ince $ Co International Law Firm 2013a: Ince $ Co International Law Firm 2013b).
References
Hill Dickinson LLP 2013, Payment of hire: finally a condition of certainty! The Astra, Web.
Holman Fenwick Willan 2014, Payment of hire is a condition – an end to a charterer’s ability to deduct from hire? Web.
Ince $ Co International Law Firm 2013a, Shipping e-brief, Web.
Ince $ Co International Law Firm 2013b, The Astra: single hire default entitles owners to withdraw and claim loss of profit for the remaining charter period, Web.
Macleod, J 2012, Consumer sales law: the law relating to consumer sales and financing goods, Routledge, USA.
Marson, J 2013, Business law, Oxford University Press, USA.
Rainey, S 2013, The law of tug and tow and offshore contracts, CRC Press, USA.
Sterzhantov, I 2014, Recent English case law, Web.
Worthington, S 2003, Commercial law and commercial practice, Hart Publishing, USA.