September 19, 2007
Hadley v. Baxendale Rides Again
In The Achilleas  EWCA Civ 901 (9/6/2007) the time charterers of a bulk carrier redelivered her 8 days late and got sued for damages by the owners. Big deal, you might say (and the charterers not surprisingly did say): liability is clearly the difference between the charter rate and the market rate for those 8 days, which works out at a fairly modest $160,000.
Wait a minute, riposted the owners. You see, we had fixed the ship for six months end-on with someone else (i.e. Cargill) at no less than $40,000 a day on the assumption that the charterers would redeliver on time. Because the charterers redelivered late we lost the benefit of that contract and Cargill, knowing they had us over a barrel, agreed to take the ship but screwed our rate down to only $32,000 a day. Therefore the damages are six months at $8,000 a day, or something like $1.4 million.
Who was correct? In the event the owners won right along: at arbitration, before the judge and in the Court of Appeal. Once it was found foreseeable that the ship would be fixed end-on and that the benefit of that subsequent charter might be lost with late redelivery, that was it: there was no reason to limit liability to the market difference, and however large and disproportionate the loss caused by the cancellation of the following charter, the charterers were liable for it.
This case has caused, to say the least, some unease among shipping lawyers here (some use rather stronger language). An appeal to the House of Lords, we understand, is not unlikely.
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