Introduction
Under English law, charterers’ obligation to pay hire as it falls due is absolute but the right to withdraw a vessel in case of default in charterers’ obligation to pay does not arise automatically. An express term will therefore be required.
Express terms
To overcome these difficulties, most standard time-charter forms include an express right to withdraw a vessel for non-payment, or an unjustified underpayment of hire.
This right is typically qualified by the so-called “anti-technicality clause” which require that a notice of default is served on charterers allowing them a specific amount of time to rectify the breach – examples include clause 11(b) of the NYPE 1993 and clause 9(a) of the SHELLTIME4.
Whilst the ability to withdraw the vessel is a valuable right to owners, particularly in rising market conditions, it may not be the best solution when rates are stable or falling.
Mode of Payment
When assessing whether the right of withdrawal has arisen and can be exercised, owners need to be mindful of the mode of payment provisions. These days, the most common method used to effect payment is by electronic funds transfer. The order is sent by charterers’ bank to the owners’ bank instructing the latter to credit the owners’ account and advising how to seek reimbursement…
