Maintaining class under a bareboat charter. Condition or innominate term?

 

This was the question before the Court of Appeal in Ark Shipping Company LLC v Silverburn Shipping (IOM) Ltd (The Arctic) [2019] EWCA Civ 1161. In October 2012 a tug was bareboat chartered for 15 years on Barecon 89 form. Clause 9(a) require the demise charterers to “….keep the Vessel with unexpired classification of the class indicated in Box 10 and with other required certificates in force at all times….”. The tug arrived at Astrakhan for repairs and maintenance on 31 October 2017, and the class certificates expired on 6 November 2017, before entering dry dock for repairs, some five years after her last special survey. The Court of Appeal held that the clause was an innominate term and not a condition and therefore did not give owners an automatic right to terminate the contract if it were breached.

Gross LJ gave various reasons for concluding that the term was not a condition. The term in question was not expressed to be a condition, it was not a time clause, and there was no interdependence of the parties’ obligations which weighed so heavily in Bunge v Tradax.           The term was found in the middle of cl. 9A headed “Maintenance and Operation” which set out the distinct but closely connected obligation on Charterers, as to maintaining both the physical condition of the vessel and its class status. The obligations as to the former were not conditions and the structure of cl. 9A, in an industry standard contract, strongly suggested that the term was not to be construed as a condition.

Although cl 9 (A) required Charterers to keep “…other required certificates in force at all times”, this could not be limited, as owners suggested, to the certificates required by class in order to issue the main classification certificate. Charterers’ obligation covered a range of matters, from the trivial to the those of serious consequence. A condition analysis would mean, for instance, that a 15 years’ charterparty could be terminated by Owners if Charterers committed any breach in respect of the certificates required under the BWM or AFS conventions. Breach of the term could result in trivial, minor or very grave consequences, so suggesting that the term was innominate rather than a condition. Although a time charter term that a vessel was in class at the date of delivery was likely to be a condition, per dicta of Rix LJ in The Seaflower, [2001] 1 Lloyd’s Rep. 341, that was not the position with an obligation to maintain class throughout the charter.

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