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Extending time for performance Consider the markets

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Swissmarine Services SA v. Gupta Coal India Private Limited [2015] EWHC 265 (Comm)

This was a dispute arising out of a contract of affreightment (“COA”). The Court awarded the Owners damages for breach of the COA. These, however, were calculated by reference to prevailing market rates on the last date on which, by virtue of the Owners’ indulgence, the non-performing Charterers could have performed, rather than by reference to the prevailing rates at the times that the voyages should originally have been performed. 

The background facts

The COA was for six shipments of coal from Richards Bay to India. Two shipments were to be spread in 2011 and four in 2012.  

The Charterers made the first two nominations under the COA but, by February 2012, were having difficulties in despatching the cargo from the discharge port. The Owners took the position that they expected the Charterers to perform and that they would take legal action if the contract was breached. 

The Charterers then made a nomination for a lifting in March 2012, but that nomination did not materialise. The Charterers apologised for their non-performance and stated that they intended to perform but were hampered by logistical problems at the discharge port. The Owners responded, threatening litigation but giving the Charterers one last chance to perform. 

In the event, no further nominations were made and, on 23 May 2012, the Owners held the Charterers in repudiation of the COA and terminated the contract. 

The Commercial Court decision

The Court was in no doubt that the Charterers’ conduct was repudiatory and that the Owners were entitled to terminate. 

When it came to the question of the level of damages, the Court agreed with the established English law principles, as relied on by the Owners. Where the non-performance occurs after an extension has been granted, or where there is a delay in performance, the market price for the purposes of calculating the innocent party’s losses is assessed at the latest possible time for performance, taking into account any agreed extensions or indulgences. 

Thus the missed shipments were all deemed to have had laycans in mid-May 2012 rather than spread through 2012 up to 31 May. As a result, due to a weakening of the charterparty market in the period between the original dates under the COA and the latest date on which the missed shipments could have been performed following the Owners’ indulgence, the Owners’ damages were much higher than they would have been had the extension not been granted.  

The second issue before the Court was whether the Owners could have mitigated their losses by arranging replacement shipments and whether there was an available market. 

The existence of an available market requires trading from which a market price can be determined. On the facts, the Court found that, at the relevant times, there were insufficient fixtures from Richards Bay to India for the market price to be determined and that there was no available market. The Court agreed with the Owners that the only alternative employment which it could have found would have been for voyages elsewhere in the world and that those voyages could have been performed in any event, chartering in more vessels as required. Damages were, therefore, assessed on the basis that the Owners could not have found suitable alternative employment. 

Comment

This case serves as a useful reminder of the principles applied to calculate damages under English law. The substantially different level of damages awarded as a result of the agreed extension provides a stark illustration of the potential importance of considering market trends when seeking or agreeing an extension for performance.  

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