i-law

Offshore Floating Production

Appendix C

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Legal glossary

Term Definition
Agreement to agree An agreement between parties to negotiate a contract or a contractual term. However, agreements to agree (or to negotiate in the future) are not binding or enforceable as they do not have the certainty that is needed for a contract to form. As such, agreements to agree are unenforceable ( Von Hatzfeldt Wildenburg v Alexander [1912] 1 Ch 284, [1911] 7 WLUK 91, Walford v Miles [1992] 2 AC 128, [1992] WLR 174, [1992] 1 All ER 453 and, more recently, Barbudev v Eurocom Cable Management Bulgaria EOOD [2012] EWCA Civ 548, [2012] 2 All ER 963 (Comm)) and Teekay Tankers Ltd v STX Offshore & Shipbuilding Co. Ltd [2017] EWHC 2533 (Comm), . [2018] 1 All ER (Comm) 279.
  See further HG Beale, Chitty on Contracts (34th edn, Sweet & Maxwell, 2021) at paragraphs 4–167 to 4–171.
Anticipatory breach A party to a contract expresses an intention to not perform its obligations, or acts in a way that would lead a reasonable person to the conclusion it does not intend to perform its obligations, before the time to perform has arrived ( Universal Cargo Carriers Corp v Citati [1957] 2 QB 401, [1957] 2 All ER 70, ). The innocent party may: (i) accept the breach which discharges it from further performance and entitles it to sue for damages; or (ii) not accept the breach, continue performing its own obligations and sue for damages at a later point ( Hochster v De La Tour [1853] 2 E&B 678, [1853] 6 WLUK 148).
  See further Chitty on Contracts (ibid) at paragraphs 27–070 to 27–077.

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Assignment		 Party A, which has contracted with party B, transfers its rights/contracted benefits/receivables under that contract to party C. Unless otherwise provided, no consent from party B is required for A to be able to do so. Under an assignment, party A (or B) may only transfer the benefits it is entitled to receive under the contract; it cannot assign its duties without the other party’s consent (contrasted to -novation – see later – whereby A and B may novate both their contractual entitlements and obligations) ( Tolhurst v Associated Portland Cement Manufacturers Ltd [1902] 2 KB 660, [1902] 8 WLUK 24 and, more recently, Bedford Investments Ltd v Sellman [2021] EWHC 799 (Comm), [2021] 3 WLUK 559).
  See further Chitty on Contracts (ibid) at Chapter 22.
Best endeavours The phrase best endeavours means “what the words say; they do not mean second-best endeavours” ( Sheffield District Railway Co v Great Central Railway Co (1911) 27 TLR 451, [1911] WLUK 27). Under the obligation of best endeavours, the obligor is “bound to take all those steps in [its] power, which are capable of producing the desired results … being steps which a prudent, determined and reasonable [obligee], acting in his own interests and desiring to achieve that result would take” ( IBM United Kingdom Ltd v Rockware Glass Ltd [1980] FSR 335, [1976] 3 WLUK 150).
  A best endeavours obligation is not absolute, but it is a legally binding obligation, which could, for example, require the obligor to incur expenditure (see v Blackpool Airport Ltd [2012] EWCA Civ 417, [2012] 2 All ER (Comm) 1053, [2012] 4 WLUK 28).
Causation Causation is required in a claim for damages (not in a claim for a debt that is due) in order to establish that the act/omission/event which is under dispute was the cause of the loss that was suffered.
  Generally, this is satisfied, whether it be direct or consequential loss, by the claimant showing that but for the breach of contract the promised performance would have been received and/or the consequential losses that were suffered would not have been suffered ( Bunge SA v Nidera BV [2015] UKSC 43, [2015] 3 All ER 1082, [2015] 2 All ER (Comm) 789).
  Equally, where a claimant can demonstrate that an act committed by the defendant is the ‘effective’ or ‘dominant’, but need not be the sole, cause of loss causation will be satisfied ( Galoo v Bright Grahame Murray [1994] 1 WLR 1360, [1995] 1 All ER 16)
  See further Edelman J et al McGregor on Damages (21st edn, Sweet & Maxwell 2020) at paragraphs 8–141 to 8–144.

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Concurrent delay		 Concurrent delay, commonly in construction contracts, is a delay to a project that is brought about by two or more causes of approximately equal efficiency. See further Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [2000] All ER (D) 1104, [1999] 10 WLUK 553, 70 Con L R 32, De Beers UK Limited (formerly The Diamond Trading Company Limited) v Atos Origin IT Services UK Limited [2010] EWHC 3276 (TCC), [2010] All ER (D) 231 (Dec), Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm), 2011] 4 WLUK 236, and Walter Lilly v (1) Mackay and (2) DMW Developments Limited [2012] EWHC [1773 (TCC), [2012] 7 WLUK 310, .
Consequential loss Where pecuniary loss is suffered by one party to a contract as a result of the other party to the contract not performing its obligations, such as a failure to deliver goods depriving the other party of the benefit it could have obtained for a further sale of goods contract with a third party ( JP Morgan Chase Bank v Springwell Navigation Corp [2006] PNLR 28 and, more recently, Transocean Drilling U.K. Ltd v Providence Resources plc [2016] EWCA Civ 372, ).
  Consequential loss may also be non-pecuniary, such as loss of reputation, publicity or credit for which damages may be awarded in contract ( Foaminol Laboratories v British Artid Plastics [1941] 2 All ER 393).
  See further McGregor on Damages (ibid) at paragraphs 4–018 to 4–023.
Contra proferentem If the wording of a clause is unclear, and there are two or more possible interpretations of a clause, any doubt or ambiguity is resolved against the party seeking to rely on it. As such, clauses of a contract are generally interpreted narrowly ( Photo Production Limited v Securicor Transport Limited [1980] AC 827, ).
  See Transocean Drilling UK Ltd v Providence Resources Plc [2016] EWCA Civ 372, for a more recent example of the courts dealing with this issue in the offshore contract context.
  See further Chitty on Contracts (ibid) 17–012 and, in the offshore context, Beadnall and Moore, Offshore Construction: Law and Practice (2nd edn, Informa Law from Routledge, 2021) at Chapter 11, paragraphs 11.15 to 11.18.

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Contractual interpretation		 The process adopted by the court to determine the meaning and legal effect of the language used in a contract. The court adopts a holistic process, accounting for a number of components, namely: (i) the objective nature of the assessment; (ii) the factual matrix/background; (iii) the meaning of the language used by the parties; (iv) the need to have regard to the whole contract; (v) the significance of the nature, formality and quality of the drafting of the contract; (vi) conflicting clauses; (vii) unitary and iterative approaches to explaining the meanings denoted; and (viii) striking a balance between the various principles ( Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, [1998] 1 All ER 98 and, more recently, Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173).
  See further Chitty on Contracts (ibid) at paragraphs 15–047 to 15–113 and in The Interpretation of Contracts (7th edn, Sweet & Maxwell, 2021) by Lord Justice Lewison. In the context of offshore projects, see also outline guidance in Offshore Construction: Law and Practice (2nd edn, Informa Law, 2021), Chapter 4.
Damages When contracting, parties may themselves specify what remedies are to follow a specific breach of contract (e.g. see ‘liquidated damages’ (defined later)). If no such remedy is agreed, an innocent party may claim damages which are compensation in the form of money that is intended, as far as money can do it, to put the innocent party in the same situation as if the contract was performed ( Robinson v Harman [1848] 1 Ex 850, [1848] 1 WLUK 169, [1843–60] All ER Rep 383).
  In order to bring a successful claim in damages, a claimant must prove: (i) breach of the obligation it is owed caused the loss suffered (see ‘causation’ (defined earlier)); (ii) the loss suffered is not too remote (see ‘remoteness’ (defined later)); and (iii) it has mitigated its losses by taking reasonable steps to minimise its losses ( Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008] UKHL 48, , [2008] 2 All ER (Comm) 753.
  See further Chitty on Contracts (ibid) at Chapter 29.
Demurrage Demurrage is a sum of liquidated damages (defined later) payable to vessel owners by the charterers for the period that the vessel is detained at the loadport or the disport after the expiration of and in addition to the agreed laytime ( Aktieselskabet Reidar v Arcos [1927] 1 KB 352, [1926] 25 Ll L Rep 513, [1926] 7 WLUK 94). Demurrage is only payable under a demurrage clause contained in a charterparty and is usually agreed in the contract as a rate payable per day or pro rata.
 

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The nature of the damages that demurrage liquidates has been disputed. According to the judgment of the Court of Appeal in K Line PTE Ltd v Priminds Shipping (HK) Co Ltd (The Eternal Bliss) [2021] EWCA Civ 1712, [2021] 11 WLUK 242, [2022] 4 CL 173) demurrage liquidates all damages that the owners incur as a result of the detention of the vessel. At the time of writing, the judgment has been appealed to the Supreme Court. The owners, appellants before the Supreme Court, seek a declaration that demurrage liquidates only the damages that owners incur as a result of the deprivation of the use of the vessel. Significantly, this was Mr Justice Andrew Baker’s view in the first instance judgment.
  An illustration of how demurrage may arise in relation to offtake operations can be found in Great Elephant Corporation v Trafigura Beheer BV (The Crudesky) [2012] EWHC 1745 (Comm); on appeal [2013] EWCA Civ 905.
  See further Howard Bennett et al Carver on Charterparties (2nd edn, Sweet & Maxwell, 2020) Chapter 9 at paragraphs 9–173 to 9–215.
Duty of good faith The duty to act honestly and to ensure that the reasonable expectations of contracting parties are given effect to.
  As an express term, the effectiveness of this duty will depend upon the construction of the good faith clause and its relationship with the rest of the contract. Further, the contract will define the extent of any good faith obligations under it and implied terms (defined later) cannot add any wider duty of good faith ( Teesside Gas v CATS North Sea [2019] EWHC 1220 (Comm), [2019] 5 WLUK 183).
  If there is no such express term, this duty may be implied into ‘relational contracts’ as an implied term (defined later) if the contract is to lack commercial or practical coherence without it ( Yam Seng Pte Ltd v International Trade Corp Ltd [2013] EWHC 111(QB)), [2013] 1 All ER (Comm) 1321.
  However, there is no general doctrine of good faith applicable in English contract law. It has been held that a good faith clause is unlikely to arise within a commercial contract between two parties of approximately equal negotiating power ( Greenclose Ltd v National Westminster Bank Plc [2014] EWHC 1156, , [2014] 4 WLUK 519). See further Braganza v BP Shipping Limited [2015] UKSC 17, [2015] 1 WLR 1661, Bates v Post Office (No.3) [2019] EWHC 606 (QB), Cathay Pacific Airways Ltd v Lufthansa Technik AG [2020] EWHC 1789 (Ch) and Taqa Bratani Ltd and others v Rockrose UKCS8 LLC [2020] EWHC 58 (Comm), .
  See further Chitty on Contracts (ibid), Chapter 2 and in particular at paragraphs 2–080 to 2–091.

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Economic hardship		 Parties are not permitted under common law to terminate a contract, argue that the contract has been ‘frustrated’ or be released from their obligations, purely on the basis that their bargain has turned into a bad one, or is not as advantageous to a party as it once was ( Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724).
  See further Chitty on Contracts (ibid) at Chapter 39 at paragraphs 39–230.
Estimated time of arrival In the context of delivery of a vessel (often in a time charterparty context) charters contain an estimated time of arrival (ETA) at the delivery port upon which the vessel is expected to be ready for service/use. Where this is stated in a charter, the owners impliedly promise that the ETA is stated honestly and on reasonable grounds. The owners are also often treated as having given an implied undertaking that either: (i) they will exercise reasonable diligence to ensure that the ship arrives by the ETA; or (ii) that the ship will sail for the delivery port at a time when it is reasonably certain that the ship will arrive, ready for the charter service, about the expected date ( Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos) [1971] QB 164, , [1970] 3 All ER 125).
  See further D Foxton, Scrutton on Charterparties and Bills of Lading (24th edn, Sweet & Maxwell, 2019) at paragraphs 7–012 and 9–002.
Estoppel The doctrine of estoppel allows a party to prevent (‘estop’) the other party to a contract from invoking an argument, which is contrary to previous representations made by the latter party.
  For a representee to invoke the defence of estoppel, the previous representations made by the other party must have been precise, unambiguous and unqualified. Nevertheless, a party cannot found an action upon estoppel, since it is not a cause of action, but rather a “rule of evidence” ( Low v Bouverie [1891] 3 Ch 82, [1891] 6 WLUK 36 see also Woodhouse A.C. Israel Cocoa Ltd v Nigerian Produce Marketing Co [1972] AC 741, , [1972] 2 All ER 271).
  There are various types of estoppel which include estoppel by representation, promissory estoppel, contractual estoppel and estoppel by convention and proprietary estoppel.
  See further Chitty on Contracts (ibid) Chapters 6 and 9, in particular at paragraphs 6–093 to 6–126, 6–155 to 6–156 and 9–111.

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Exclusion of liability		 A term of a contract whereby a party performing an obligation excludes or limits its liability for negligence or breach of contract. Such exclusion clauses often do not apply to cases of death, gross negligence and/or wilful misconduct caused by the breaching party.
  For a term excluding liability to be effective, it need be expressed in clear and unambiguous wording, referring to the exact liability that the party in default has purported to get rid of at the inception of the contract ( J Gordon Alison & Co Ltd v Wallsend Shipway and Engineering Co Ltd [1927] 43 TLR 323, (1927) 27 Ll L Rep 285).
  See Transocean Drilling UK Ltd v Providence Resources Plc [2016] EWCA Civ 372, [2016] 2 All ER (Comm) 606 and Interactive E-solutions JLT v O3b Africa Ltd [2018] EWHC Civ 62, [2018] 1 WLUK 476, for more recent examples of the court upholding exclusion of liability clauses.
  See further Chitty on Contracts (ibid) at Chapter 17.
Force majeure A term of a contract whereby performance of obligations under a contract may be suspended for a period of time, or even discharged (and the contract terminated), in part or in whole, upon the occurrence of a specified event (a force majeure event) which is outside the control of the contracting parties ( Lebeaupin v Crispin & Co [1920] 2 KB 714, (1920) 4 LL L Rep 122). The effectiveness of these clauses depends upon the contractual interpretation approach adopted by the parties/court. As such, the force majeure event must be the cause of a contracting party’s failure to perform its obligations and cannot be merely incidental ( Classic Maritime Inc v Limbungan Makmur Sdn Bhd [2019] EWCA Civ 1102, [2019] 2 All ER (Comm) 592).
  See further Chitty on Contracts (ibid) at paragraphs 26–060 to 26–095.
Global claim A claim for global loss in the form of ‘additional costs’ which are claims where possible causes of loss are identified, the contractor’s loss is computed, the company’s contribution to such loss is calculated and the balance is claimed by the contractor. To be successful, a contractor must prove: (i) one or more events for which the company is responsible; (ii) loss and expense covered by the contractor; and (iii) a causal link between the event and loss and expense ( John Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd [1996] 82 BLR 81, [1996] 10 WLUK 151).
  Claims for global loss must be permitted by the contract and proven as a matter of fact and on the balance of probabilities, using the preceding criteria ( Walter Lilly v (1) Mackay and (2) DMW Developments Limited [2012] EWHC 1773 (TCC), [2012] 7 WLUK 310, ).
  See further Offshore Construction: Law and Practice (ibid) at paragraphs 8.77 to 8.86.

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Global loss		 After a contractor budgets performance of a contractual obligation and once performance has commenced, or even been completed, the contractor may have incurred additional costs due to delay and/or disruption whereby it is uncertain who is to bear the responsibility of those costs. The contractor may accept some of those costs are for the counterparty’s account, and some for its own, but the costs to evidence what additional costs are for the counterparty’s account may seem prohibitive (e.g. due to other commercial arrangements that require such funding).
  Instead of calculating what losses the contractor is responsible for, it treats the counterparty as being responsible for all additional costs, minus those costs that are as a consequence of the contractor’s delay and/or underperformance. Once this liability for which the contractor is responsible for is calculated, ‘global loss’ is the difference between the total additional costs and those additional costs the contractor is liable for.
  These claims do not seek to establish a direct link between individual breaches of the counterparty and the loss suffered by the contractor. As such, these claims are traditionally not successful ( McAlpine Humberoak Ltd v McDermott International [1992] 58 BLR 61 (CA), [1992] 3 WLUK 61, 28 Con LR 76) and should be claimed as ‘additional costs’ (see ‘global claim’).
  See further Offshore Construction: Law and Practice (ibid) at paragraphs 8.56 to 8.59.
Guarantees Guarantees largely come in one of two main forms, each of which involves a party guaranteeing performance (or stepping into the shoes) of another party’s contractual obligations.
  A ‘see to it’ guarantee is seen as a pure guarantee, whereby if the contracting party breaches its performance obligations, the guarantor (party giving the guarantee) must perform such obligation. If the guarantor does not, the contracting party will be in breach of contract (and the guarantor will be in breach of the guarantee) entitling the innocent party to a claim in damages ( Moschi v Lep Air Services Limited [1973] AC 331, [1972] 2 All ER 393).
  An ‘on demand’ guarantee is similar in effect, however, the obligation for the guarantor to perform the contracting party’s obligations does not automatically arise if the contracting party is in breach of its obligation. Instead, using the example of a payment guarantee, the guarantor’s obligation to pay only arises once the beneficiary of the guarantee issues a valid and compliant demand for payment. Only after this demand is made is the guarantor’s obligation due ( Goldbell Engineering Pte Ltd v Etiqa Insurance Pte Ltd v Range Construction Pte Ltd [2022] SGHC 1).
 

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See further The Hon Mrs Justice Andrews and Richard Millett QC, Law of Guarantees (7th edn, Sweet & Maxwell, 2015).
Hire/remuneration The payment of consideration that is due from the charterers to the owners of a vessel in a time charterparty arrangement. This obligation is an absolute one, subject to the terms of the contract (see ‘off-hire’ (defined later)) ( Tankexpress v Compagnie Financière Belge des Pétroles (The Petrofina) (1948–1949) 82 Ll.L.Rep. 43, [1948] 2 All ER 939, [1948] 11 WLUK 40). Subject to the charterparty stipulating otherwise, if hire is not paid by the charterers to the owners, the owners will have: (i) a right to withdraw the vessel; and (ii) a contractual claim in damages in respect of the balance of hire due if the owners can prove that they have been deprived of substantially the whole benefit of the charter ( Grand China Logistics Holding (Group) Co Ltd v Spar Shipping AS [2016] EWCA Civ 982, 2017] 4 All ER 124, [2017] 2 All ER (Comm) 701).
  See further Coghlin, Baker, Kenny, Kimball and Belknap Jr on Time Charters (7th edn, Informa, 2014) at Chapter 16.
Implied terms Those terms that are not recorded in the contract or openly expressed at the time of the inception of the contract. These may be implied into the contract by way of: (i) court ruling; (ii) statute; and (iii) custom and usage.
  As such, these may be implied into the contract as:
  • • A matter of fact in order to give effect to the intention of the parties to the particular contract in the light of the express terms of the contract, commercial common sense and the facts known to both parties at the time of entry into the contract ( Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd and Anor [2015] UKSC 72, [2015] 3 WLR 184, [2016] AC 742); or
  • • A matter of law whereby terms are implied into a particular class of contractual relationship, where the parties may have left a good deal unsaid (but the courts have implied the term as a necessary incident of the relationship) ( Société Générale, London Branch v Geys [2012] UKSC 63, [2013] 1 AC 523, [2013] 2 WLR 50).
  See further Chitty on Contracts (ibid) at Chapter 16.
In rem/in personam rights ‘In rem’ rights are those rights that a party has in a particular piece of property. As these are rights in property, they are enforceable against, and have effect against, everyone ( Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, [1996] 2 WLR 802, [1996] 2 All ER 961). A judgment following in rem proceedings refers to the piece of property and binds all parties with regard to their rights over the property.
 

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In contrast, ‘in personam rights’ are those that exist against a particular party. As such, rights in personam are those concerned with the law of obligations ( Gaillard v Chekili (Case C-518/99) [2001] ECJ, [2001] ECR I-2771; [2001] 4 WLUK 104; EU:C:2001:209). A judgment following in personam proceedings only binds the parties involved.
  See further Chitty on Contracts (ibid) at paragraphs 3–084 to 3–087.
Letter of quiet enjoyment An agreement between a lender and a charterer that confirms a lender who has been granted security over a vessel will not enforce its security nor disturb the charterers use and enjoyment of the vessel, provided the charterer continues to perform its obligations under the charter.
Lien A form of security interest over property of another party that secures the payment of a debt or performance of an obligation.
  A lien holder is entitled to possess the property of a party that owes it some obligation until that obligation is complied with. The right to possess the property arises by way of a term of the contract (Re Leith’s Estate (1866) LR 1 PC 296, [1866] 11 WLUK 39), and/or by way of statute ( section 41(1) Sale of Goods Act 1979 ) , 2.41 (1) .
  In the context of cargo, liens often end when, generally, the owners do something which is inconsistent with the existence of the lien ( Metal Market OOO v Vitorio Shipping Co Ltd ( The Lehmann Timber) ).
  See further Chitty on Contracts (ibid) at Chapters 35 and 46 and Coghlin et al Time Charters (ibid) at Chapter 30.
Liquidated damages An express contractual right to a fixed sum that is payable by one party to a contract to the other arising from a breach of contract. Ordinarily, no loss needs to be demonstrated to enforce this right; it is simply a contractual claim for breach of contract.
  They are commonly linked to specific obligations, such as an agreed schedule, and are treated as: (i) an exhaustive remedy for breach of that specific obligation under the contract; and (ii) a limitation on the breaching party’s liability, as liquidated damages are capped at an agreed amount (per Elsley v JG Collins (1978) 83 D.L.R. 1 and, more recently, Triple Point Technology Inc v PTT Public Co Ltd [2021] UKSC 29, [2021] AC 1148, [2021] 7 WLUK 190.
  See further Atkin Chambers Hudson’s Building and Engineering Contracts (4th edn, Sweet & Maxwell, 2019) at Chapter 7.
Material breach Although the right to terminate for ‘material breach’ is common in commercial contracts, the definition of ‘material breach’ is imprecise.
 

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It has been described as “more than trivial but need not be repudiatory” (see ‘repudiatory breach’ (defined later)) ( Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (t/a Medirest) [2013] EWCA Civ 200, [2013] 3 WLUK 391, ). As such, ‘material breach’ is lower than ‘repudiatory breach’ but it is uncertain how much lower this threshold is.
  To establish such threshold, the court is to account for the circumstances of the case, including factors such as: the consequences of the breach, the explanation for breach, and the consequences for continuing and terminating the contract ( Wells v Cathay Investments 2 Ltd [2019] EWHC 2996 (QB), [2019] 11 WLUK 112, [2020] IRLR 281).
  See further Chitty on Contracts (ibid) at paragraphs 25–055 to 25059 and Chapter 27 at paragraph 27–018.
Novation Contrasted to assignment (defined earlier), novation may take place where a new contract between two parties is substituted for an existing contract. This new, substitution contract may (but need not be) between the parties to the original contract, and the consideration (bargain received) is the discharge of the old contract ( Scarf v Jardine (1882) 7 AC 345, [1882] All ER Rep 651, [1882] 6 WLUK 45).
  Alternatively, novation may be made between three parties, whereby party A’s rights under a contract between A and B are assumed by party C, under a new contract with A (subject to receiving B’s consent) ( Energy Works (Hull) Ltd v MW High Tech Projects UK Ltd [2020] EWHC 2537 (TCC), [2020] 9 WLUK 292, ). For this to occur, consent is required (such consent is not usually needed for an assignment (defined earlier) to take place).
  See further Chitty on Contracts (ibid) Chapter 22 at paragraphs 22–089 to 22–102.
Off-hire The term off-hire refers to the period under a charterparty, during which the payment of hire (defined earlier) ceases, thereby resulting in a loss of time for the charterers. The off-hire period is triggered only as a result of reasons expressly stipulated in the charterparty, e.g. if the vessel is not in full working order or if the owners are using the vessel for their account ( Mareva Navigation Co. Ltd. V Canaria Armadora S.A. (The Mareva A.S.) ).
 

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The vessel is placed off-hire irrespective of any breach of the contract on behalf of the owners, e.g. a vessel is placed off-hire while the vessel proceeds to a port to renew a certificate. The period for which the vessel is placed off-hire will depend on the construction of the off-hire clause of the particular charterparty. ( Ocean Glory Compania Naviera S.A. v A/S P.V. Christensen (The Ioanna) , [1985] 3 WLUK 228). See further Coghlin et al Time Charters (ibid) at Chapter 25.
Orders as to ‘employment’ and orders where the master of a vessel has the overall right of intervention on matters of safety Orders as to employment are those that reflect the commercial operations of the vessel; that is, the economic operation and the exploitation of the earning potential of the vessel. Under these orders, the master is typically obliged to ensure that the vessel meets the services and expectations, as stipulated in the charter and instructed by the time charterer or the commercial managers of the vessel. Such orders may refer to operating the vessel at full speed during a voyage, or to navigating to the instructed destination by the most direct route and with utmost or reasonable dispatch ( Larrinaga Steamship Co Ltd v The King [1945] 78 LI Lloyd’s Rep 167, [1945] 1 All ER 329; [1945] AC 246).
  Notwithstanding the preceding, such obligation is qualified by the master’s responsibility for the safety of the vessel, crew and cargo. If the master is given an order that exposes the vessel to a risk which the owners have not agreed to bear, or the issue is one of ‘seamanship’ the master is entitled to refuse to obey it. Moreover, in extreme circumstances, the master is obliged to disobey such an order and may reduce speed or depart from the most direct route ( Suzuki & Co Ltd v T. Beynon & Co Ltd [1926] 24 LI Lloyd’s Rep 49, [1926] 1 WLUK 109 and Whistler International Ltd v Kawasaki Kisen Kaisha Ltd (The Hill Harmony) , [2001] 1 AC 638, [2000] 3 WLR 1954).
  See further Coughlin et al Time Charters (ibid) at Chapters 18 and 19.
Prevention principle Ordinarily a performing party is bound by the strict time limits for performance set out in the relevant contract. However, if the party that benefits from such performance interferes with the work, so as to delay completion in accordance with the agreed timetable, this amounts to an ‘act of prevention’ and the performing party is no longer bound by the strict, agreed timetable ( Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm), [2011] 4 WLUK 236, ).
 

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This principle does not apply to contracts that contain clear and unequivocally worded time extension clauses in respect of particular and relevant events. In such a case, and if the act of prevention falls within the scope of the time extension clause, the contract completion dates are extended accordingly ( Jiangsu Guoxin Corp Ltd v Precious Shipping Public Co Ltd [2020] EWHC 1030 (Comm), ; [2020] 4 WLUK 388).
  See further Chitty on Contracts (ibid) Chapter 39 at paragraph 39–115 and Offshore Construction: Law and Practice (ibid) Chapter 8 at paragraph 8.112.
Privity of contract The general principle that contracts cannot: (i) confer rights on a person that is not a party to the contract; and (ii) be enforced against, or enforced by, a person that is not a party to the contract ( Beswick v Beswick [1968] AC 59, [1967] UKHL 2). This position is set out in the Contracts (Rights of Third Parties) Act 1999 (the “Act”). This principle is not an absolute one and is subject to a number of exceptions such as the parties making it clear on the face of the contract that third parties should obtain rights pursuant to the contract (section 1(2) of the Act).
  See further Chitty on Contracts (ibid) Chapter 20 at paragraphs 20–004 to 20–005.
Quantum meruit The Latin phrase ‘quantum meruit’ means ‘what one has earned’ or ‘as much as he has deserved’. An action available to claimants to recover money for services or goods that were supplied to a defendant for which the defendant did not compensate the claimant. This may, although will not necessarily, include those circumstances where the claimant went over and above what it was contracted to do/provide.
  A claim for quantum meruit cannot arise where the parties have a contract for an agreed sum. In such a case, the claim would be for breach of contract ( Berezovsky v Edmiston [2010] EWHC 1883). As such, these claims may arise where the parties: agree for the defendant to pay a “reasonable sum”; do not have a fixed price; and/or the work carried out falls outside of the scope of agreed work.
  See further Chitty on Contracts (ibid) at Chapter 32.
Reasonable endeavours The contractual efforts which this term requires are not as onerous as those required by the term ‘best endeavours’ (see entry earlier). Whereas a contract which contains a requirement for a party to use its ‘best endeavours’ has been interpreted to mean that that party should subordinate its own financial interest, this is not the case for reasonable endeavours ( P&O Property Holdings Ltd v Norwich Union Life Insurance Society [1993] EG (CS) 69) and is one of the main distinctions between the two terms.
 

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Despite this, ‘reasonable endeavours’ is still an obligation to take all reasonable steps ( Dany Lions v Bristol Cars [2014] EWHC 817 (QB), [2014] 2 All ER (Comm) 403, [2014] 3 WLUK 642) and to do “what a reasonable and prudent person acting properly in their own commercial interest and applying their minds to their contractual obligation [would] have done” to try to achieve the contractual aim ( Minerva (Wandsworth) Ltd v Greenland Ram (London) Ltd [2017] EWHC 1457 at 255, [2017] 6 WLUK 499).
Rectification An equitable remedy where a court may correct the written wording of an agreement that, in its final form, does not express the parties’ mutual intention ( Agip SpA v Navigazione Alta Italia SpA (The Nai Genova and the Nai Superba ) . For a more recent case, see FSHC Group Holdings Ltd v GLAS Trust Corp Ltd [2019] EWCA Civ 1361, [2020] Ch. 365).
  See further Chitty on Contracts (ibid) at paragraphs 5–057 to 5–111.
Relational contract See: ‘Duty of good faith’ (earlier)
Remoteness Relevant for a claim in damages (defined earlier), not for a claim for a debt. Damages will only be recoverable if: (i) the breach of contract in question was actually foreseen by the parties at the time the contract was entered into; and (ii) at the time of contracting, the consequences of such a breach were within the parties’ reasonable contemplation as a not unlikely result of that breach ( Hadley v Baxendale (1854) 9 Ex 341, (1854) ER 145) and, more recently, Koufos v C. Czarnikow Ltd (The Heron II) (1969) 1 AC 350, [1967] 3 All ER 686, and Saipol SA v Inerco Trade SA [2014] EWHC 2211 (Comm), .
  See further Chitty on Contracts (ibid) at 29–126 to 29–143.
Renunciation A form of repudiatory breach and the primary basis for anticipatory breach. Occurs when a party to a contract indicates by words or conduct an intention not to perform, or expressly declares that it will be unable to perform its obligations under the contract in some essential way.
  Whether renunciation has occurred will depend on (i) whether there has been a clear refusal to perform contractual obligations; (ii) the refusal is absolute; (iii) whether a reasonable person would regard the refusal as clear and absolute; and (iv) the word or conduct must be considered as at the time when it is treated as terminating the contract (Chilean Nitrate Sale Corporation v Pansuiza Compania de Navegacion SA and Marine Transport Co Ltd (The Hermosa) and, more recently, SK Shipping (S) PTE Ltd v Petroexpert Ltd (The Pro Victor) [2009] EWHC 2974 (Comm), , [2009] 11 WLUK 566).
 

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Any renunciation will be considered an anticipatory breach of the contract ( Valilas v Januzaj [2014] EWCA Civ 436, [2015] 1 All ER (Comm) 1047, [2014] 4 WLUK 242).
Repudiatory breach A breach of a contract that demonstrates the intention of the party in default to stop performing its obligations under the contract. A repudiatory breach is either a breach of a condition of the contract or a breach of an intermediate (also called innominate) term, which goes to the root of the contract ( Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (The Hongkong Fir) [1962] 2 QB 26, [1962] 2 WLR 474, 1962 1 All ER 474). More recently, Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168, [2011] 2 All ER (Comm) 223).
  A repudiatory breach allows the innocent party to cease the performance of its obligations. In contrast, a breach of a contractual warranty or a simple breach of an intermediate term will only give rise to a claim for damages, and the innocent party will be obliged to continue its performance.
  In the event of a repudiatory breach, the innocent party may either affirm its intention to continue the contract and act accordingly or accept the default party’s breach as a repudiatory breach and declare the contract at an end.
  See further Chitty on Contracts (ibid) at 39–225 to 39–228.
Termination at common law Breach of a condition, whether that term be a condition by virtue of the terms of the contract or statute, entitles a party to terminate the contract. However, not every breach of contract entitles the innocent party to terminate the contract. Under the common law approach, a breach of an intermediate term of the contract can only lead to its termination if, under the surrounding circumstances, the nature of the breach, its gravity and its consequences, the breach is considered to go to the root of the contract and to deprive the innocent party of substantially the whole benefit of the contract ( Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (The Hongkong Fir) [1962] 2 QB 26, [1962] 2 WLR 474, 1962 1 All ER 474) and, more recently, Seadrill Management Services Ltd v OAO Gazprom (The Ekha) (2009) EWHC 1530 (Comm), , [2009] 7 WLUK 3).
  See further Chitty on Contracts (ibid) at Chapter 27.

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Time bars		 A term applicable to a contract either by a specific clause or pursuant to the Limitation Act 1980, whereby the parties are deemed to have waived any claims and are barred from bringing an action based on any such claims, unless they commence proceedings against the other party within a particular period of time. Any claim brought after this period is rejected as ‘time-barred’, without consideration of its merits ( The Mary L (1990) (unreported) and M H Progress Lines SA v Orient Shipping Rotterdam BV and other (The Genius Star 1) ).
  See further Coghlin et al Time Charters (ibid) at 20.73 to 20.75.
Unenforceable penalties Penalty clauses are unenforceable, if they are deemed by a court to not be genuine pre-estimates of loss and to not be commercially justifiable. The key test is whether the penalty clause is intended to protect the legitimate interests of the innocent party, which may include more than just compensation for any loss ( Cavendish Square Holding BV v Talel El Makdessi [2015] UKSC 67, [2016] AC 1172, [2015] 3 WLR 1373).
  See further Chitty on Contracts (ibid) at Chapter 29–203 to 29–210.
Variations Modifications or alterations of the initial contract, resulting from oral or written subsequent agreement. The variation need be only in writing when the initial contract is only valid if it is made in or evidenced by writing ( Goss v Lord Nugent (1833) 5 B & Ad 58, (1824) All ER Rep 305, [1833] 5 WLUK 69).
  For the variation to be enforceable against the parties to a contract, it need be supported by consideration and mutual agreement ( Berry v Berry [1929] 2 KB 316, [1929] 6 WLUK 7; Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, [1990] 2 WLR 1153, [1990] 1 All ER 512). Nevertheless, a contract may give to one of its parties unilateral power to vary the terms of the contract by declaration, e.g. the right of a lender bank to vary the interest rate applicable to a mortgage. Such rights may be limited by implied terms, which would bar the entitled party from acting “dishonestly, capriciously, arbitrarily or wholly unreasonably” ( Nash and Staunton v Paragon Finance Plc [2001] EWCA Civ 1466, [2002] 1 WLR 685, [2002] 2 All ER 248).
  See further Chitty on Contracts (ibid) at paragraphs 25–034 to 25–041.
Waiver The act whereby a party to a contract which is entitled to its counterparty’s consideration, accepts an expressed or deemed request by the other party to not perform its contractual obligations in the manner that is prescribed by the contract. The waiver may be express or inferred from conduct ( Bruner v Moore [1904] 1 Ch. 305, [1903] 12 WLUK 71).
  See further Chitty on Contracts (ibid) at 25–042 to 25–029.

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