No frustration of charterparty where cost of repairing vessel exceeded her market value
The principal issue in this case was whether a time charterparty was frustrated after the vessel was involved in a collision and the costs of repairing the vessel exceeded her market value. The particular feature distinguishing this case from previous case-law on the issue was that the charterparty contained an express continuing warranty by the owners to maintain the vessel’s hull and machinery insurance up to a specified amount throughout the charterparty. Mr Justice Flaux in the Commercial Court said there was an absence of any authority directly on the point and, reversing the decision of the arbitrator, he held that the presence of this clause in the charterparty meant that the owners could not argue that repairing the vessel and continuing with the charterparty were, at the time of the collision, commercially impossible or that the vessel was a commercial loss. Rather, the clause in question meant that there was an assumption of risk and responsibility by the owners to repair any hull damage up to the insured amount. In this case, the insured amount exceeded the costs of repair and the judge concluded, therefore, that the charterparty was not frustrated…
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The orthodox view is that damages are limited to losses suffered during the overrun period only. Similar issues were explored in a recent judgment from the Commercial Court in the Great Creation.