Equitable set-off and deductions from hire
When a charterer may deduct a claim from hire: the good faith and reasonable grounds test, the quantification requirement, and the withdrawal risk it runs.
A time charterer that deducts a claim from hire is exercising equitable set-off, and the right is narrower than it is often treated as being. The deduction must be made in good faith, on reasonable grounds, and quantified with reasonable accuracy, and a deduction that fails those tests is simply an underpayment of hire.
The consequence of getting it wrong is severe, because underpayment of hire opens the owner’s right to withdraw the vessel, which in a rising market the owner has every incentive to exercise. The full article will cover the categories of claim that may and may not be set off, the good faith and reasonable grounds test, the treatment of an unquantified claim, the anti-set-off wording used in modern riders, and the partial award for speedy relief that an owner may seek instead of litigating the underlying claim first.