Spar Shipping v Grand China: is punctual payment of hire a condition?
The 2016 Court of Appeal decision holding the hire payment obligation an innominate term and The Astra wrongly decided, and how the owners still recovered loss of bargain.
Grand China Logistics Holding (Group) Co Ltd v Spar Shipping AS [2016] EWCA Civ 982, decided 7 October 2016, settled a question that had divided the Commercial Court: whether the obligation to pay time charter hire punctually and in advance is a condition of the contract.
Three supramax bulk carriers had been let in 2010 on amended NYPE 1993 forms with parent company performance guarantees. From April 2011 the charterers paid hire late persistently; the owners served anti-technicality notices, withdrew in September 2011 and terminated for repudiation and renunciation. The Court of Appeal held unanimously that the obligation is an innominate or intermediate term, not a condition, and that Kuwait Rocks Co v AMN Bulkcarriers Inc (The Astra) [2013] EWHC 865 (Comm) was wrongly decided on that point. Without more, late payment entitles the owner to withdraw under the withdrawal clause but not to damages for loss of bargain, and the withdrawal clause is a contractual option to terminate rather than an indicator that the term is a condition.
The owners nevertheless won on the facts, because the charterers’ sustained conduct amounted to renunciation. The full article will cover the two first instance decisions, the reasoning of Gross and Hamblen LJJ, the practical drafting response of making punctual payment an express condition, and what an owner must now document to establish renunciation.