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.
Updated 19 March 2026
This case summary accurately reflects the decision in The Alaskan Trader (No.2) [1983] 2 Lloyd’s Rep 645. The legal principle described — that an innocent party may affirm a contract following repudiation, but may be precluded from doing so where they have no legitimate interest in keeping the contract alive — remains good law in England and Wales.
The principle has been significantly developed since 1983. The House of Lords in White & Carter (Councils) Ltd v McGregor [1962] AC 413 (decided earlier) established the general right to affirm, and the ‘legitimate interest’ qualification discussed in The Alaskan Trader was further examined and confirmed by the Supreme Court in Société Générale, London Branch v Geys [2012] UKSC 63 and most importantly by the Court of Appeal in MSC Mediterranean Shipping Company SA v Cottonex Anstalt [2016] EWCA Civ 789. In Cottonex, the Court of Appeal applied and refined the ‘legitimate interest’ test, affirming that it represents an established limitation on the right to affirm. Students and practitioners should be aware that the law in this area continues to develop through case law, and The Alaskan Trader should be read alongside these later authorities for a complete picture.
