OFF HIRE CLAUSES UNDER NYPE CHARTER PARTIES

The most important obligation of a Charterer under a Time Charter Party is to pay the full hire of the vessel, punctually. Shipowners rely on receiving this money to, in turn, to pay for the crew's wages, the running of the company, and to repay the financing of the vessel. There are however instances where Charterers are able to withhold or claim for a reduction in the hire, by claiming that the vessel is off-hire for a certain duration during the CP period. This happens when Charterers satisfy the express conditions laid out in the off-hire clause of a Time CP.

Clause 15 of the NYPE 46' Form reads:

"In the event of loss of time from deficiency of men or stores, fire, breakdown or damages to hull, machinery or equipment, grounding, detention by average accidents to ship or cargo, drydocking for the purpose of examination or painting bottoms, or by any other cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost."

This means that in order to allege "off hire" based on this clause or equal similarities: 

• (i) There must be a loss of time to charterers. Loss of time would cover idleness of the vessel (as in the case of "The Athena"), reduction in speed (as in the case of the "The Rijn") or any overall delay to the adventure.       
• (ii) The loss must be caused by an event listed in the listed in the charter.
• (iii) The event must prevent the full working of the ship.

The burden is upon the charterer to prove that the event is within the scope of the of-hire clause. Risk of delay to the ship is on the charterers unless they can show that they satisfy the off-hire clause - "The Doric Pride" (2006) .

The off-hire clause is an exception to owner’s right to be paid hire and therefore should be construed narrowly against the charterers. This means that where there is a doubt as to what the words mean, those words must be read in favor of the owner because the charterer is attempting to cut down on the owner’s paramount right to earn hire -- Royal Greek Government v. Minister of Transport (1949)  

The off-hire clause operates independently of any breach of contract or owner’s fault. Charterers must still prove the elements in the off-hire clause.

General exceptions provisions in the CP do not operate on the off-hire clause unless expressly provided otherwise.

Note that the off-hire event must be fortuitous. A common definition of fortuitous would be that the event must be related to fortune, luck, chance and had happened accidentally. Therefore the off-hire event must not have resulted naturally from the compliance of charterer’s orders i.e not a natural consequence of following charterer’s order and therefore not his fault. In the case of “The Rijn” (1981) 2 Lioyd’s Report Rep.267, it was the charterers' choice for the vessel to remain in tropical waters for 3 months and this led to underwater marine growth accumulating on the vessel’s hull causing reduction in the vessel's speed after departure. Charterers claim that there was a "defect in the ship's hull" and that this was "any other cause preventing the full working of the vessel". The courts viewed that the accretion of growth is a natural consequence of the ship’s long rest, not fortuitous, and that the charterers were not entitled to claim off-hire. Thus, in order to qualify for the "fortuitous" element, there must be more or less an element of fault on the charterer’s part and the delay to the vessel must not have arisen from complying with Charterer’s orders. 

"The Saldanha" (2010) is an excellent example showing how the English courts would view and approve the listed events in Clause 15 in summary. The "Saldanha" (2010) involves detention of the vessel by pirates where the courts suggested that the vessel can be considered off-hire if “whatsoever” was added to clause 15. Charterers claimed for off-hire under 3 separate heading:

• (i) Under Default of Master and crew – where Charterers alleged failure or negligence to undertake anti-private measures. The courts held that (a) “default” meant refusal and “deficiency” referred to crew numbers; and (b) negligence is not part of the listed event;  
• (ii) Under average accident – the courts held that piracy could not be an accident in its natural meaning and a Master could not have called shipowners to report the incident as an accident; and    
• (iii)Under “any other clause” – the courts held that this is not a catch all sweeping statement. 

Once charterers have shown that one of the listed events in clause 15 has occurred, he must then go on to show that the event has "prevented the full working of the ship". The question goes as to what “full working of the ship” was prevented? Charterers must show that the off-hire event has prevented the ship from performing the next operation that the charter service had required of her at that time. If the vessel is carrying out a normal incidental operation (e.g. cleaning holds) which is, in the ordinary way, an activity required before it can perform the charterer's intended orders (e.g. loading cargo), there will be no prevention of the full working of the ship.

The test is really as to whether the ship is fully efficient to carry out the immediate operation required of her, and not the eventual operation that charterers had intended or hoped for. In the "The Burge Sund" (1993), there were delays at the load port because the crew did not clean the holds sufficiently. Further cleaning was required before the cargoes can be loaded. The next service here was the cleaning of the holds and not cargo loading. The Court of Appeal held that where the service immediately required was the tank cleaning, the ship was efficient for that purpose and was not off-hired.

In conclusion, the standard Clause 15 of NYPE 46' is beneficial to owners and onerous upon charterers because (i) It operates independently of any separate breach of the CP by owners; and, (ii) Risk of delay to the voyage is on the charterers unless they can prove the elements in clause 15. i.e. come within the listed events and show the ship is not in full working order.  

 FOR MORE INFORMATION regarding this topic, please contact the writer of this Article who is always willing to help. 

Writer's information: 

DARYL LAI

Email: daryl@jtjb-taipei.com
Telephone: 886-2-27720567