Behzadi v. Shaftesbury Hotels

If a voyage charterer cannot or will not load a vessel before the expiration of the laydays, when can a shipowner elect to treat the contract as at an end? The traditional view, confirmed by Devlin, J., in Universal Cargo Carriers Corp. v. Citati,1 is that such a right is dependent on the actual or anticipated delay in performance being such as to “frustrate” the underlying commercial purpose of the contract. However, the general law relating to effect of time provisions in contracts where time is not expressed to be of the essence now appears to be quite different. The recent decision of the Court of Appeal in Behzadi v. Shaftesbury Hotels 2 holds that, as soon as the due date for performance has passed, the innocent party can make time of the essence by giving the other a notice requiring performance within a “reasonable” time. It no longer needs to wait for an additional “reasonable” time after the due time has passed before giving such notice. Are time provisions in voyage charters now subject to different rules from those in general contract law? If they are not, will the replacement of the “frustrating time” yardstick by the “reasonable time” one make any difference in practice?

In Citati, the charterer under a voyage charter had failed to nominate an effective shipper at the loading port, with the result that the vessel was sent to the buoys. Three days before laytime expired, the shipowner purported to treat the contract as at an end on the grounds of the charterer’s anticipatory breach. Devlin, J., held that a shipowner, faced with this problem, could do one of two things. It could wait till a “frustrating” time had elapsed and then treat the contract as at an end; unless the contract provided that time was of the essence, it could not terminate merely because loading had been delayed beyond the alloted laydays. Alternatively, it could rely on anticipatory breach and treat the contract as at an end at some earlier stage. Devlin, J., held that the shipowner could validly make such an election as soon as it became clear that loading could not possibly be completed before a “frustrating” time had elapsed. In deciding this question of fact, the court or tribunal could consider not only those factors known to the shipowner at the time of its election to end the contract but also those which only emerged subsequently.