Theodora Nikak | International Recent Development

Cash flow is vital for the orderly administration of the carriage of goods. Therefore, a charterer’s failure to pay hire in accordance with the terms of the charterparty is clearly a breach of contract entitling an owner to claim damages and/or suspend the services or even withdraw the vessel. In 2013, there have been a number of cases dealing with the consequences of nonpayment of hire, which resulted from the financial crisis.

In particular, in Kuwait Rocks Co. v. AMN Bulkcarriers, Inc. (The “Astra”), a Commercial Court judge addressed the legal consequences of nonpayment of hire under an amended NYPE 1946 form, which contained, inter alia, a clause that gave the owners a contractual right to withdraw the vessel in case of nonpayment of hire (clause 5) and an antitechnicality clause (clause 31). The charterparty was also later amended by two addenda providing for a reduced hire to accommodate the charterers’ financial difficulties. Both addenda included the following clause (referred to as the “Compensation Clause”): “In the event of the termination or cancellation of the Charter by reason of any breach by or failure of the Charterers to perform their obligations, Charterers shall … pay to the Owners compensation for future loss of earnings … .”