UK: The Astra: Single Hire Default Entitles Owners To Withdraw And Claim Loss Of Profit For Remaining Charter Period

Last Updated: 24 April 2013
Article by Fionna Gavin and David Richards

Kuwait Rocks Co v. AMN Bulkcarriers (Astra) [2013] EWHC 865 (Comm)

A Commercial Court judge has decided that a failure to pay hire under an NYPE charterparty amounts to a breach of condition, entitling a ship-owner to terminate and seek damages. This goes against the previous view generally held in the market that the obligation to pay hire under a time charter as it falls due is not a condition such that, if an owner wants to recover its future losses following a termination, it must seek to bring the charter to an end for repudiatory breach of contract, the latter invariably involving a series of consecutive defaults by the charterers.

The Court also considered whether the arbitrators had correctly applied the law on repudiatory breach and whether an addendum to the charter, stating that if the time charter was terminated the owners would be entitled to recover future loss of earnings, constituted a penalty clause.

The background facts

The Astra was chartered on an amended version of the NYPE 1946 form dated 6 October 2008 for a period of five years. Under Clause 5 of the NYPE form, a charterer is required to pay hire in advance and "failing the punctual and regular payment of hire... the Owner shall be at liberty to withdraw the vessel...". The charterparty also contained an anti-technicality provision which required the Owners to give the Charterers two banking days' notice of a failure to make a hire payment.

After the commencement of the charter, the market continued to decline and the Charterers found they could not employ the vessel at a profit. On various occasions, the Charterers sought a reduction in the hire rate and threatened that, if the Owners did not agree, then they would liquidate the company. In July 2009, the Owners agreed to reduce the hire rate for one year and the parties entered into an addendum to the charter. Amongst other things, the addendum recorded that "In the event of the termination or cancellation of the Charter by reason of any breach by or failure of the Charterers to perform their obligations, Charterers shall... pay to the Owners compensation for future loss of earnings...". This was referred to in the judgment as the "Compensation Clause".

Even after the addendum was agreed, the Charterers continued to insist on further reductions of hire. When the Charterers failed to remit the hire payment due for August 2010 on time, the Owners withdrew the vessel from the Charterers' service and terminated the charterparty. The Owners then claimed their future loss of earnings for the remainder of the charter period in arbitration, arguing that: (i) the Charterers were in breach of condition in not paying hire on time and, alternatively: (ii) their conduct was a renunciatory/repudiatory breach of the charter.

The arbitrators' decision

As to the first argument, the arbitrators found that, whilst their instinct as commercial arbitrators would be to treat the obligation to pay hire on time as a condition, they were not persuaded that the current state of English law reflected this view. They stated that the generally accepted position under English law is that a failure to pay hire is not a breach of condition.

On the second argument, the arbitrators determined that the Charterers' conduct evinced an intention no longer to be bound by the charterparty and therefore there was a renunciation of the charter. While the late payments were not evidence of renunciatory conduct, the repeated threats by the Charterers that they would declare bankruptcy unless the Owners agreed to adjust the hire rate, compounded by the failure to honour the compromise reached in July 2009 (when the Owners agreed to reduce the hire rate) could be interpreted as an intention by the Charterers not to perform the charter in a manner consistent with its terms.

The Charterers obtained permission to appeal on two questions. First, whether evincing an intention to perform a contract in a way which is inconsistent with its terms, but which does not deprive the innocent party of substantially the whole benefit of the contract, is capable in law of amounting to a renunciation. Second, whether the obligation under the Compensation Clause to compensate the Owners for their loss of earnings following a termination of the charter amounted to a penalty clause.

The Owners obtained permission to appeal from the arbitrators' decision that a failure to pay hire did not amount to a breach of condition entitling an owner to terminate and claim damages.

The Commercial Court decision

Breach of condition

The most significant question considered by the Court was the Owners' contention that the requirement to pay hire was a breach of condition. Mr Justice Flaux reviewed in detail the various previous cases which, over the last 100 years or so, have touched upon the question of whether a failure to pay hire amounts to a breach of condition as opposed to a breach of an innominate term. (A breach of an innominate term only entitles an innocent party to terminate the contract where the breach is sufficiently serious, whereas a breach of condition entitles the innocent party to terminate a contract regardless of the severity of the breach).

It was clear from the review of the authorities that the arbitrators were right to say it has been widely recognised that, as a matter of English law, a breach of the obligation to pay hire does not constitute a breach of condition. In particular, in The Brimnes, the Commercial Court decided that Clause 5 of the NYPE form was not an essential term of the contract and so did not amount to a condition. In The Kos, both Mr Justice Smith in the Commercial Court and Lord Sumption in the Supreme Court stated that the general view is that a failure to pay hire when it is due is a breach of an innominate term and not a breach of condition.

Having reviewed the authorities, however, Mr Justice Flaux came to the view that Clause 5 of the NYPE form is a condition of the contract such that any breach entitles an owner to terminate the charter and seek damages. The following salient points arise from the judgment:

1. The Owners argued that the decision in The Brimnes could be distinguished because of the inclusion of an anti-technicality clause in the subject charter (which was not found in the charter in The Brimnes). Mr Justice Flaux agreed, but also went further than this and decided that, even without an anti-technicality provision, Clause 5 of the NYPE form was a condition.

2. The decision gives rise to an obvious question as to whether an owner can terminate immediately following a failure to pay hire in full or whether they must wait until the anti-technicality notice period has expired. This question may be particularly relevant where an anti-technicality clause only refers to the owner's right to exercise its contractual right to withdraw. Mr Justice Flaux's judgment in The Astra suggests that an anti-technicality clause constitutes a grace period for the payment of hire and, therefore, an owner can only terminate a charter for breach of a condition requiring the payment of hire where such grace periods have expired.

3. It had previously been considered that, so far as this issue required further clarification, this would need to be done by the Supreme Court, given that it was thought the point had already been decided by the Commercial Court in The Brimnes (in a judgment upheld by the Court of Appeal). By deciding that Clause 5 of the NYPE form by itself is a condition, Mr Justice Flaux's judgment directly conflicts with the earlier decision in The Brimnes. Mr Justice Flaux made it clear that he was prepared to refuse to follow the decision in The Brimnes because: (i) it conflicted with later statements by higher courts on the same issue and; (ii) it was based on a decision (in The Georgios C) which had been overruled in a subsequent case (The Laconia). Mr Justice Flaux did not consider he was bound by the Court of Appeal decision in The Brimnes because the point had not been considered at that level. Even so, it seems that this issue will only be settled if and when the Supreme Court has a chance to look at the point.

4. Mr Justice Flaux had already decided to uphold the arbitrators' decision on another ground (see below in relation to the renunciation argument). His decision regarding a breach of condition could therefore be viewed as obiter and not binding in future cases. That said, Mr Justice Flaux was only prepared to acknowledge that his decision on the point might be considered "academic" and an alternative view is that the case is one determined on a number of grounds. Therefore, the status of the judgment on this point is open to debate.


The Owners had succeeded in the arbitration by showing that the Charterers had repudiated the charter. The Charterers argued in the Commercial Court that the arbitrators had applied the wrong test in this regard because they had failed to consider whether the Charterers' conduct was substantially inconsistent with the party's obligations.

Mr Justice Flaux determined that the arbitrators had not made an error. On the evidence, the arbitrators were entitled to conclude that the Charterers were determined to perform the charter in a manner which deprived the Owners of the substantial benefit they should have obtained from further performance and that this breach went to the root of the contract.

Penalty clause

Mr Justice Flaux had little problem dispensing with the argument that the Compensation Clause was an unenforceable penalty clause. He agreed with the Charterers that the reference to "any breach" in the Compensation Clause should be read as meaning any repudiatory breach or breach of condition. That being the case then, in providing that upon a termination the Owners were entitled to recover their loss of earnings, the Compensation Clause only reflected the losses the Owners could claim in a falling market following a termination of the charter.


For the reasons set out above, the status of the decision that the obligation to pay hire under a time charter amounts to a condition is not free from doubt. It will be necessary to see if the case reaches the higher courts on an appeal and how subsequent cases treat the decision. In the meantime, owners may wish to remain cautious when dealing with their charterers' failure to pay hire on time or at all.

The immediate impact is likely to be that arbitration tribunals and/or first instance judges may be more prepared to follow what the arbitrators in this case described as their commercial instinct, i.e. to find that a single failure to pay hire does entitle an owner to terminate the charter and claim damages.

If the decision in The Astra does indeed represent the position under English law on the question of whether a failure to pay hire constitutes a breach of condition, then it will change the balance of power between owners and charterers in a falling market. In the past, owners may have been reluctant to exercise their withdrawal rights where this might mean they could not recover damages for the losses they would suffer when re-fixing the vessel at a lower rate. In such circumstances, owners would have to wait and make a difficult decision as to exactly when charterers' conduct has constituted a repudiatory breach. Given this dilemma, many charterers may have had an expectation that they could miss several hire payments before they were at risk of facing a withdrawal and a damages claim. Such an approach is now fraught with considerably greater risks.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.