The Alaskan Trader (No.2)

The Alaskan Trader (No.2) [1983] 2 Lloyds Rep 645

Contract law – Shipping contract – Charterparties

Facts

The owners of a vessel chartered for a two-year time charter with the defendant. One year into this, the vessel incurred a serious engine issue which would take several months to repair. The charterers told the owners that on this basis, they had no further use for the ship. However, the owners had fixed the ship at the cost of £800,000. Once the repairs were complete, the owners informed the charterers that the ship could be used again but the charterers refused this. The owners refused this repudiation and kept the vessel ready and fully staffed.

Issue

The question for the court was whether the owners could treat the contract as active or whether they should have accepted the repudiation of the agreement by the actions of the charterer and sued for damages.

Decision/Outcome

The court held that the general rule was that the innocent party may choose to accept or reject the repudiation as they so wish. However, it was found that in exceptional cases, the court could exercise its equitable jurisdiction and refuse the innocent party to rely on strict legal rules such as this. The court believed that this was a case that fell into this category as the owners had no legitimate interest in continuing the contract and therefore it was considered that the owners should have accepted the repudiation. On this basis, the charterers were not liable for the value of the hire agreement but they were held liable for damages.