Select Commodities v. Valdo
The Court considered whether a liberty clause in a voyage charter was so comprehensive that, even though what would otherwise have been a frustrating event had occurred, neither party could rely on the doctrine to avoid its liabilities under the contract. In setting aside the arbitrator’s award, the Court held that clause 29(a) of the Vegoilvoy standard form did not exclude the operation of the doctrine of frustration, because it did not make full and complete provision for the specific circumstances that occurred.
DMC Category Rating: Developed
This case note is based on an Article in the August 2006 Edition of the ‘Marine Bulletin’, published by the Marine team at the international firm of lawyers,DLA Piper. DLA Piper is an International Contributor to this website.
The owners managed to fix the vessel elsewhere after a delay of some eight days and at a substantial loss. They now claimed damages under the charterparty.
The charterers argued that the contract had been frustrated by the government ban. Discharge of the cargo in Lagos would have been illegal. The owners, however, maintained that the event fell within the terms of a liberty clause in the charterparty, so that the charterers could not rely on the doctrine of frustration. The arbitrator found in the owners' favour. The charterers appealed.
The liberty clause
The clause provided that in such circumstances the owner could, before loading or before the commencement of the voyage, require the shipper to take delivery and, failing that, warehouse the cargo at the cargo's expense, or alternatively, discharge the cargo elsewhere at the risk and expense of the cargo. The owners argued that this clause showed the parties had contemplated the very event that occurred and set out various alternative means of performance.
Clause 29(a), however, did not make full and complete provision
for the simple reason that there was no cargo. The clause gave the owner a wide
liberty as to how to deal with the cargo when certain circumstances arose. But
it presupposed that there was actually a cargo that must be dealt with if, for
whatever reason, it was not to be delivered at the discharge port.
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