Can a tug or supply vessel suddenly be withdrawn by owners from active operations without warning where charterers are late on hire payments?  The commonly used BIMCO Supplytime 1989 form of charter, and in particular rights regarding payment of hire and suspension, have recently been discussed by the Commercial Court in the United Kingdom in Greatship (India) Limited v Oceanografia SA de CV.[1]

Importantly, the Court affirmed that based on the wording of an unamended Supplytime 1989 charter, owners are not required to give five banking days notice in order to exercise their right to suspend provision of the vessel’s services.

The Contract

Clause 10(e) of the BIMCO Supplytime 1989 form states in relevant part as follows:

Payments of Hire, bunker invoices and disbursements for the Charterers’ account shall be received within the number of days stated in Box 23 from the date of receipt of the Invoice…

 In default of payment herein specified, the Owners may require the Charterers to make payment of the amount due within 5 banking days of receipt of notification from the Owners; failing which the Owners shall have the right to withdraw the Vessel …

While payment remains due the Owners shall be entitled to suspend the performance of any and all of their obligations …

The Case

In Greatship, following instances of Charterers failing to pay hire in accordance with the terms of the Charterparty, Owners purported to suspend provision of the vessel’s services without providing five banking days notice, relying on Clause 10(e).

The Charterers objected to this suspension and argued that the 5 day grace period that Owners would have been obliged to give in the case of withdrawal of the vessel altogether should also apply before Owners were entitled to suspend provision of the vessel’s services.

However, the Court rejected this argument. Following the principle that clear and unambiguous language in a contract should be given effect, the Court found that the express language of the clause did not require any notice or grace period to be given. Looking at the charterparty as a whole, there were numerous clauses where notice or grace periods were provided. If the parties had intended there to be a notice or grace period before Owners could exercise their right to suspend for non-payment of hire, the parties could have made express provision for it.

Charterers argued that the consequences of suspension could be commercially severe.  The Supplytime form is often used for work involving extreme time pressure, and losses where a crucial vessel suddenly ceases to assist could be high.  The Court confirmed that commercial arguments will not necessarily be sufficient to overrule the express wording of a clause where that clause is unambiguous and Charterers’ commercial argument was not successful in this case.

Commercial Application

The express wording of Clause 10(e) of the BIMCO Supplytime 1989 form – if unamended – provides owners with a powerful right to suspend their vessel’s services for non-payment of hire without notice to the charterer. Where the Supplytime 1989 charter is used, charterers would be well advised to amend clause 10(e) to provide a period of grace before owners are entitled to suspend the vessel’s services for non-payment of hire.

[1] [2012] EWHC 3468 (Comm).

This information is intended to provide a general summary only and should not be relied on as a substitute for legal advice.

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