Working hours - a dated but still key notion?
Posted on 11th November 2019 at 13:10
A common stipulation is that NOR is tendered during working hours, or more usually within stated such times, thus governing laytime but perhaps also giving charterers the right to cancel.
In Bilgent Shipping v ADM International ( EWHC 2522 (Comm)) (the "ALPHA HARMONY") familiar weekday and shorter Saturday tender ranges (but with the right to cancel arising only on the Sunday) left intermediate owners exposed, as the head and sub charters were not back-to-back.
The head charter was on an amended Norgrain 1973 form between owners and ADM. The sub charter was on an amended Baltimore Form C Berth Grain form between ADM and Bilgent.
Sub charter terms
With laytime to start at 0800 the next working day following valid NOR, Clause 14 required that to be given:
“between 0800 … and 1700 … Monday to Friday [and from 0800 to 1100] … on Saturday.”
Clause 16 said:
“ … [if NOR is not] delivered as per Clause 14 by … noon on ... [10th] May, … Charterers [may cancel] … .”
Head charter terms
Clause 4 said:
“ … Should [NOR] not be tendered ... as per Clause 17 before 2359 on [10 May] Charterers [may cancel] …”
Clause 17 contained other familiar NOR requirements, likewise provided that laytime began at 0800 the next working day following valid NOR, and twice referred to Clause 70. This required NOR to be:
“ … tendered within office hours 0800-1700 hours Monday to Friday and 0800-1100 hours Saturday.”
Neither fixture provided for tender of NOR on a Sunday.
The vessel tendered NOR at 0704 on Sunday 10 May.
Bilgent cancelled the sub charter that evening and ADM cancelled the head charter early next morning. The question was whether these cancellations were valid, as (while the NOR came before the Sunday deadline in the sub charter) it had not been tendered during the fixtures’ matching permitted hours.
The Tribunal held that neither cancellation was valid, but the High Court ruled differently.
The Judge said that (a) Bilgent had validly cancelled the sub charter but (b) ADM had not validly cancelled the head charter.
As regards the sub charter:
1. The Clause 16 cancellation option arose at noon on 10 May unless NOR had been tendered “as per Clause 14”; thus
2. NOR had to be tendered during a working weekday or between 0800 and 1100 on Saturday, and tender on Sunday morning did not comply.
ADM argued that this working hours requirement should not apply to Clause 16, so the right to cancel only arose if NOR had not been tendered before noon on the Sunday, which it had.
But the Judge rejected this, ruling that:
(i) there was no difficulty with (a) a right to cancel if NOR had not been tendered by noon on a Sunday and (b) a restriction that there can be no valid NOR after 11 am on a Saturday;
(ii) it did not matter that NOR tendered at 1059 on Saturday gave no right to cancel (from noon on Sunday) but NOR timed at 1101 on Saturday did. The operation of Clauses 14 and 16 was the clear, simple, commercial and certain application of the bargain; furthermore
(iii) it would here create uncertainty to ignore "as per Clause 14", such that NOR that would not start laytime would nevertheless bar the option to cancel; also
(iv) as charterers should nowadays check emails round the clock, upholding cancellation with NOR tendered before the right actually arose might look unattractive. However, though requirements to tender during working hours dated from when communications could only be validated that way, they were long-standing, well known and spelt out in this fixture, and could not be ignored just because they were arguably outdated.
Conversely, in the head charter amendments had been made to the standard form which:
1. removed the requirement to tender NOR within working/office hours; and
2. were meant to have the very effect discussed at (iii) above i.e. that NOR tendered outside such hours could bar the right to cancel, though it would not start laytime.
So intermediate owners were liable to head owners but could not recover from sub charterers.
This decision highlights the importance of fixing as far as possible back-to-back, or (as here) one might be exposed one way and without recovery the other.
It also illustrates the focus that is needed on any timing restrictions on tender of NOR, especially where there is a right to cancel. The precise terms must always be considered, but it may not matter that (perhaps even depending on how the days of the week fall) such a right only arises after the latest time when protective NOR could have been tendered.
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