Travel Wizard v. Clipper Cruise Line

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Travel Wizard, Claimant and Cross Respondent (Charterer) v. Clipper Cruise Line, Inc. Respondent and Cross Claimant (Owner) – The Clipper Odyssey
United States of America: Society of Maritime Arbitrators of New York, Inc.; R. Glenn Bauer, Esq., Howard M. McCormack, Esq. and Charles Bennett, Esq. Arbitrators Number 3906, December 2, 2005
Steven M. Riker of Landy & Riker, LLP for Travel Wizard
Michael D. O’Keefe of Thompson Coburn, LLP for Clipper Cruise Line, Inc.

In its award, the arbitration panel held that the terrorist attacks in New York and Washington, USA, of 11 September 2001, which had led to a general fall-off in cruise bookings, were too remote to provide a defense of force majeure to the Charterer of a cruise ship against performing its obligations under a charterparty for a cruise in November 2002 to see the eclipse of the sun off the Australian coast. The Panel further stated that there was no defense based on impossibility of performance because those events did not prevent the Charterer from paying hire when due

DMC Category Rating: Confirmed

This case note has been contributed by Patrick V. Martin Esq., a maritime attorney and arbitrator, who specializes in charterparty and commodity disputes

On June 12, 2001 the parties entered into a charterparty for the cruise ship "Clipper Odyssey" for the carriage of 128 passengers in 62 cabins from Sydney, Australia, on November 28, 2002 to Melbourne, Australia, on December 8, 2002. Hire payments were to be made in accordance with an agreed schedule. Most of the payments were to be made prior to the vessel entering into Charterer’s service. Although not stated in the charterparty, the purpose of the cruise was to enable the passengers, who were interested in astronomy, to observe, at sea, a total eclipse of the sun. The Charterer had run similar cruises in the past and began immediately to market this cruise. There was prompt interest. After the terrorists’ attacks on September 11, 2001 interest was considerably less.

The Charterer had made the first payment of hire when the contract was agreed. It failed to make the second when due on October 2, 2001. Extensions were given by the Owner. Partial payments were made sporadically by the Charterer but never in accordance with the schedule. This situation dragged on as Charterer tried to book the anticipated number of passengers to make the cruise a financial success. Finally in August, 2002, the Owner "withdrew" the vessel (which under the terms of the charterparty had not yet entered into service) and began marketing a similar cruise. This remarketed substitute cruise did not bring in substantial revenues.

Charterer sought rescission of the Charter and restitution of the partial hire payments in the amount of US$121,766. The Owner sought damages of US$216,832 for breach of contract. The major issue was whether there was a force majeure that would excuse Charterer’s obligation to pay hire in accordance with the schedule. The burden of proving this excuse is on the party seeking to avoid its contractual obligations.

In the context of maritime contracts, force majeure is generally considered to be an unforeseen occurrence, such as war, earthquake, flood, hurricane, which prevents a party from performing its obligations under the contract. It is related to the doctrines of impossibility of performance and frustration of the contract. There was no doubt that the terrorists’ destruction of the World Trade Center towers was a force majeure event and would excuse performance of contracts. The Panel used as an example that the destruction would excuse performance of a scheduled banquet or other events in the Towers. However, here the facts were different.

The Panel found that the terrorist attacks did not prevent either side from performing its obligations. The Charterer could still make hire payments and the Owner could still tender the vessel for service under the charterparty. The cruise itinerary was not hampered in any way. The attacks did cause a shock to the tourist industry in general and bookings were down. The Panel cited, with approval, from a court case where a concert was cancelled in Hawaii after September 11: "’a force majeure clause does not excuse performance for economic inadvisability, even when the economic conditions are the product of a force majeure event.’" Here, the aftermath of September 11 simply made the intended cruise less economically viable. It did not affect the parties’ obligations under the charterparty. The events of September 11 were too remote in time and place to have any bearing on those obligations.

Thus, the Panel found the Charterers in breach and awarded the Owners US$245,117.18.

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