The recently reported case of Thor Eagle Maritime Agencies v Innovest Bhd [2009] 6 MLJ 74 decided by the High Court in Kuala Lumpur dealt with the features of contracts of affreightment that is instructive for the shipping, logistics and transportation industry.
The case involved a customer that had entered into a contract of affreightment with the shipping line, via a shipping agency, to carry goods.
The time of shipment stated that the date of arrival of the ship would be "about" 10-15 August 1998.
The ship actually arrived on 16 August 1998.
About one week prior to the date of the ship's arrival, the client had communicated clearly to the shipper that it wished to repudiate or terminate the contract.
The facts of the case suggest that the client's act of repudiation or termination was not effective. The court did not deal with the matter. So, we are not able to see why the repudiation by the client was not effective.
The issues before the High Court were:
1. Whether time was of the essence in that contract of affreightment. If it was found that time was of the essence, the client would not be liable to the shipper; and
2. Whether the shipper had made any effort to mitigate losses from the repudiation. If there were no efforts to mitigate, the client's liability would be reduced.
Whether time was of the essence
The High Court relied on 3 matters in ruling that time was NOT of the essence in that case.
a. The contract of affreightment did NOT specifically state that time was to be of the essence in the contract.
b. The contract merely stated that the date of arrival of the ship was "about" 10-15 August 1998.
c. There were previous occasions in dealings between the client and the shipper where the client had proceeded to load the goods even though the ship had arrived later than the scheduled dates.
The High Court made the following observation:
It is trite that in contracts relating to shipping, time may not be of the essence and it all depends on the terms of the contract, intention of parties, custom, practice etc.
Mitigation by the shipper
As with the laws of contract of most nations, Malaysian contract law required the shipper to make an effort to mitigate or reduce its losses from the cancellation of the contract by selling the cargo space to other clients.
In that case, the shipper did not offer any proof that it had attempted to mitigate its losses.
As such, the shipper's claim of USD256,760-00 was reduced to USD80,000-00.
The case involved a customer that had entered into a contract of affreightment with the shipping line, via a shipping agency, to carry goods.
The time of shipment stated that the date of arrival of the ship would be "about" 10-15 August 1998.
The ship actually arrived on 16 August 1998.
About one week prior to the date of the ship's arrival, the client had communicated clearly to the shipper that it wished to repudiate or terminate the contract.
The facts of the case suggest that the client's act of repudiation or termination was not effective. The court did not deal with the matter. So, we are not able to see why the repudiation by the client was not effective.
The issues before the High Court were:
1. Whether time was of the essence in that contract of affreightment. If it was found that time was of the essence, the client would not be liable to the shipper; and
2. Whether the shipper had made any effort to mitigate losses from the repudiation. If there were no efforts to mitigate, the client's liability would be reduced.
Whether time was of the essence
The High Court relied on 3 matters in ruling that time was NOT of the essence in that case.
a. The contract of affreightment did NOT specifically state that time was to be of the essence in the contract.
b. The contract merely stated that the date of arrival of the ship was "about" 10-15 August 1998.
c. There were previous occasions in dealings between the client and the shipper where the client had proceeded to load the goods even though the ship had arrived later than the scheduled dates.
The High Court made the following observation:
It is trite that in contracts relating to shipping, time may not be of the essence and it all depends on the terms of the contract, intention of parties, custom, practice etc.
Mitigation by the shipper
As with the laws of contract of most nations, Malaysian contract law required the shipper to make an effort to mitigate or reduce its losses from the cancellation of the contract by selling the cargo space to other clients.
In that case, the shipper did not offer any proof that it had attempted to mitigate its losses.
As such, the shipper's claim of USD256,760-00 was reduced to USD80,000-00.
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