The law of the sea

by George L. Canfield; J. Y. Brinton; George W. Dalzell

23. Dissolution of Charter.—

Like all other contracts, the charter party becomes dissolved by performance or by the acts of the parties amounting to a cancellation by agreement or waiver of performance. It may, however, be dissolved against the will of the parties and by causes extrinsic to them. Thus, although legal when made, if it becomes illegal before performance, it is as wholly void as if it were illegal at the outset. A state of war, for example, making all commercial intercourse with the enemy illegal, would annul all obligations under a prior charter for a voyage to an enemy port. So would legislation forbidding the importation of the cargo in question. A voyage charter may be dissolved by an accident to the vessel which prevents her making the voyage at the time contemplated. For example, in Jackson v. Union Marine Insurance Co., L. R. 10. C. P. 125, the ship was to proceed with all possible despatch (dangers and accidents of navigation excepted) from Liverpool to Newport, and there to load and carry to San Francisco a cargo of iron rails. She left Liverpool January 2, and on the following day ran aground, sustaining considerable damage. It would necessarily have been many months before she could be got off and put in repair to enable her to continue the voyage. The court held that in the commercial sense the voyage contemplated by the charter party had been brought to an end, and, under those circumstances, the contract was held to have determined. The voyage, if resumed, would have been a different voyage, "as different," in Baron Bramwell's words, "as though it had been described and intended to be a spring voyage, while the other, after the repair, would be an autumn voyage." The season within which the adventure was to be carried out was of importance to both parties, and it was thus easy to imply a condition that, if the voyage became impossible of completion within that season, the contract would be at an end. The exception as to dangers of the sea and accidents of navigation showed that the parties contemplated providing for some delay from these causes, but it was held that they were evidently not contemplating a delay so great that the spring voyage would become altogether impossible.

The particular adventure being a voyage to be carried out within reasonable limits of time furnished a definite standard by which it would be determined whether the delay which actually occurred was or was not within the exception clause. There was, therefore, no inconsistency between the implied condition and the express provisions of the contract.

Termination of a charter by frustration of adventure is not applicable to time charters. Thus the taking of the ship for the use of the government does not dissolve a time charter. This was held by the House of Lords, upon a very full consideration in the recent case of Tamplin Steamship Co. v. Anglo-Mexican Products Co., Ltd., 2 A. C. 397. There a vessel was chartered for five years for a fixed sum per month for the carriage of oil as the charterers or their agents should direct. The charter party contained an exception of arrests and restraint of princes, and the charterers had the liberty of subletting the steamer on admiralty or other service. After the outbreak of the war, when the charter party had nearly three years to run, the steamer was requisitioned for an indefinite period by the admiralty, which made extensive alterations and used her as a transport. The owners contended that the charter party had been determined by the requisition. The charterers, who were willing to continue to pay the charter hire (no doubt in order to entitle themselves as temporary owners to the compensation paid by the government) contended that the charter party had not been annulled and this contention was sustained by the House, which held that the interruption was not of such a character that the court ought to imply a condition that the parties should be excused from further performance of the contract and that the requisition did not determine or even suspend the charter. Earl Loreburn said:

The violent interruption of a contract may always damage one or both the contracting parties. Any interruption does so. Loss may arise to some one whether it be decided that these people are or that they are not still bound by the charter party. But the test for answering the questions is not the loss that either may sustain. It is this: Ought we to imply a condition in the contract that an interruption such as this was to excuse the parties from further performance of it? I think not. I think they took their chances of lesser interruptions and the condition I should imply goes no further than that they should be excused if substantially the whole contract became impossible of performance or in other words impracticable by some cause for which neither was responsible. Accordingly I am of opinion that this charter party did not come to an end when the steamer was requisitioned and that the requisition did not suspend it or affect the rights of the owners or charterers under it and that the appeal fails.[16]

Where the charter provides for the return of the vessel at the expiration of the term in as good condition as when taken, fair wear and tear from reasonable and proper use only excepted, and requires the hirer to make all repairs and assume liability for all loss and damage, an absolute obligation to return her is created and her total loss without any fault on his part will not exempt him from liability; he must return the ship or pay her value, and, if the charter party contains an agreement as to what that value is, that amount will be decreed by the court. In Sun Printing & C. Association v. Moore, 183 U. S. 642, the New York Sun newspaper chartered a yacht from Moore for newsgathering purposes in Cuban waters during the Spanish war. The charter party provided that the hirer was to keep "said yacht in repair and to pay all its running expenses and to surrender said yacht with its gear, furniture and tackle at the expiration of this contract to the owner or his agent ... in as good condition as at the start, fair wear and tear from reasonable and proper use only excepted." It was further provided that "for the purpose of this charter the value of the yacht shall be considered and taken at the sum of $75,000." The charter party was accompanied by a paper in the nature of a surety bond given by the Sun to secure the owner against any loss or damage to the vessel in an amount not exceeding $75,000. The yacht was wrecked and totally lost. Moore sued for $75,000 as representing the agreed value of the yacht. The Sun contended that the figure represented a penalty, enforceable only to the extent of actual damage. The court sustained a recovery of the full amount without deducting the charter hire. Justice White said:

It is elementary that, generally speaking, the hirer in a simple contract of bailment is not responsible for the failure to return the thing hired, when it has been lost or destroyed without his fault. Such is the universal principle.... But it is equally true that where by a contract of bailment the hirer has, either expressly or by fair implication, assumed the absolute obligation in return, even although the thing hired has been lost or destroyed without his fault, the contract embracing such liability is controlling and must be enforced according to its terms....

As the stipulation for value referred to was binding upon the parties, the trial court rightly refused to consider evidence tending to show that the admitted value was excessive and the circuit court of appeals properly gave effect to the expressed intention of the parties.