Apr 8, 2020

The Effect of COVID-19 in the Maritime Industry: Invoking the ‘OFF HIRE CLAUSE’ in a Time Charter | Pelumi Ajekiigbe



 
In 2019, china recorded the outbreak of coronavirus also known as covid-19, and countries all over the world has had their fair share of the spread of the disease. The World Health Organization has declared that the Covid-19 is pandemic and countries in a way of ensuring safety are closing their borders, restricting travel, locking down cities and banning gatherings.

Countries have recorded low economic growth due to the spread of the virus and the maritime industry is not left behind from the negative impact ranging from dry-bulk market to the tanker and from ship repair business especially in china.

The maritime Industry is timely in nature i.e all activities must be done within a particular time and failure to do this will incur cost and demmurrage against the hirer or chatterer and the wide spread of the covid-19 has delayed the activities and in a time charter, the delay is usually borne by the charterer in the absence of any contrary term. In a way to salvage the risk borne by the charterer, there are some terms that may be introduced in to the time charter, and the essence is to allow a charterer not to pay hire if delay is caused to the operation of the ship. One of the clauses is termed ‘Off Hire Clause’. Off-hire clause is the clause that is included in a time charter that entitles a hirer to stop paying hire when there is delay in the operation of the ship.

Off hire clause can fall into two categories, i) Net loss of time ii) Period.

The net loss of time is the clause that states that in the event of of loss of time from the deficiency of men, breakdown of the hull or machinery, or cargo drydocking for the purpose of examination or painting of bottom or any other cause that prevent the full working of the vessel, the payment of hire will cease for the time lost. while the ‘Period’ clause is wider, it provides that the hirer will cease the payment of hire until the ship is ready and in an efficient state to resume her business.

It should be noted that the types of off hire clause provide for when there is breakdown of the ship and when the ship is not efficient to resume business. Using the literally interpretation, this off hire clause do not provide for where there is economic restriction on the vessel as in recent outbreak of the covid-19 virus. however, when one can establish that the full working of the vessel has been prevented it is necessary to examine whether it falls under the the causes discussed above or ‘Any other Cause’ but interpreting this phrase, one has to examine that the ‘Any Other Cause’ will be relevant if it is a cause that can be attached to the specific causes mentioned in the off- hire clause.

The big question is, does Economic and Political reasons trigger the off- hire clause?  Yes, it does, as long as the restrictions prevent the ship from carrying out her duties.

CONCLUSION
It is very important to conduct due diligence on a time charter before approving and appending signatures in order to exhaust all the remedies available as to prevent excess payment of hire.

Pelumi Ajekiigbe is a graduate of University of Ibadan and Nigerian Law School where she bagged a First Class.
She is an associate in Olawoyin & Olawoyin, where she is currently observing her National Youth Service Corps programme. She has interest in Maritime and Aviation Law.


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