Cancelling date (Laycan)

Cancelling date (Laycan). This is an abbreviation for the “Laydays and Cancelling” clause in a charterparty. This clause establishes the earliest date, when the ship is required by the charterer, (e.g. “Laytime for loading shall not commence before . . .”) and the latest date for the commencement of the charter (e.g. β€œ . . . and should the vessel’s Notice of Readiness not be given before . . . “) when the charterers have the option of cancelling the charter.

This is the latest date mutually agreed upon between shipowners and charterers, on which the vessel must be ready to load at the first port or be delivered to the time charterer. The arrival of the vessel on time may be essential to the charterer for various reasons. Should the vessel be late, charterers are entitled to cancel the charterparty.

If it appears that a vessel cannot possibly arrive at the port of loading in time and the delay has not been occasioned by events beyond the owners’ control, and. which would automatically terminate the charter, the shipowners are bound’ to send their vessel to the port of loading, irrespective of the delay in arrival beyond the original cancelling date. The charterer can cancel even if there is no fault of the shipowner, for example, if the vessel is delayed by bad weather on its approach voyage to the place of delivery or the first loading port.

Only after notice of readiness has been given to the charterers will they have to decide whether they will accept the vessel or whether they will cancel the charter. Commercially, their decision will be governed mainly by the trend of the freight market. Should the open market rates have risen since the fixture of the vessel in question, it is clear that the original charter will be maintained. Conversely, the charter will be cancelled or a new charter will be closed at a lower rate, if the open market rates have declined in the meantime and suitable cheaper tonnage can be chartered for prompt loading.

The charterparty clause containing the cancelling date also contains another date, the earliest when the charterer expects the ship to commence performing under the charter. This is the “laydays” date and the combined dates are called the “laycan” or “lay/can” dates. The “laydays” date refers to the earliest commencement time for loading, for example, in a voyage charter.

Different charterparties contain the cancelling (or laycan) clause in ways, which sometimes give the charterers what seems to be an unfair option to cancel, even if there is no real breach of the charter by the owner. For example, in the NYPE time charterparty; cl. 14 states:

“14. That if required by Charterers, time not to commence before … and should vessel not have given written notice of readiness on or before . . . but not later than 4 p.m. Charterers or their Agents to have the option of cancelling this Charter at any time not Later than the day of vessel’s readiness.”

The BALTIME charterparty provides that:

“Should the vessel not be delivered by the . . . day of . . . 19.., the charterers to have the option of cancelling.”

The effect of the cancelling clause/date is to allow the charterers the option to cancel even if there has been no breach of the charter terms by the owner. This is different from any right the charterers may have to treat the contract as ended because the owner has breached some term. The “option” also means that the shipowner is deprived of an automatic cancellation of the charter and the freedom to fix the vessel under another charter.

In a charter the commencement of laytime or time on hire depends on the notice of readiness being given before the cancelling time. The cancelling time is the equivalent of the expiry of the period in which notice of readiness can be given.

The notice must be given when the ship is in every way ready and fit, by the cancelling date, for the contracted service. Minor deficiencies may not cause the ship to be “unready”.

In the case of voyage charters the ship’s readiness is viewed more strictly, for example, the condition of the ship’s cargo compartments. Readiness for laytime purposes and for cancelling purposes may be similar but for cancelling purposes courts would be reluctant to apply the two in the same way. A lack of readiness for laytime purposes would have an effect on the counting of laytime, in a voyage charter, but for cancelling purposes, the result is forfeiture or cancelling of the whole contract. This can work hardship on shipowners or lead to unjust results but shipowners and charterers can use appropriate clauses in the charter to reduce the difficulties.

Therefore, a clause can be used which will allow the shipowner to arrange for an extension if it appears probable that the ship will miss the cancelling date. Sometimes the clause provides more precisely for such a contingency by specifying that charterers must decide in such a case within a stipulated period whether they intend to cancel or not. For example in MULTIFORM it is stated in the “Laydays and Cancelling Clause”:

“Laytime for loading shall not commence before 0804 hours on . . . and should the vessel’s notice of readiness not be given before 1700 hours on . . . in accordance with Clause 7, the Charterers shall at any time thereafter, but not later than the time when such notice has been delivered, have the option of cancelling this Charterparty.

If, prior to tendering notice tinder this Charterparty, the vessel’s cancelling date has already passed or, whichever first occurs, the vessel has begun her approach voyage and in the ordinary course of events would be unable to tender notice before the cancelling date, the Owners, having given a revised expected readiness to load date, may require the Charterers to declare whether they elect to cancel the Charterparty and Charterers shall be given up to 48 running hours to make this declaration. Should the Charterers not elect to cancel, the cancelling date shall be extended by three running days, Sundays (or their equivalents) excluded, from the vessel’s revised expected readiness to load date . . .”

In order to eliminate difficulties on this score, it is important to agree upon a fair margin between the beginning of laydays and cancelling date. It is obvious that in case a ship is fixed for a number of consecutive voyages, the risk that she will miss the cancelling date for the last voyage will increase, as the original estimate of the number of days required for the previous voyages may be upset by unforeseen circumstances, such as bad weather, slow discharge, strikes, etc. However, in the case of charters for consecutive voyages, it frequently occurs that a cancelling date is only provided for the first voyage, the other voyages following automatically, subject only to the time the vessel will take to discharge her cargo and return to her loading port for the next voyage.

It is rare for charterers to establish a claim for damages by reason of a vessel having missed her cancelling date, unless, of course, there had been some deliberate misrepresentation on the part of the shipowners with regard to the expected time of readiness. As a rule, the delay will be due to exceptional circumstances, e.g. damage to engines, beyond the shipowners’ control, in which case charterers are not entitled to any indemnification.

With regard to damages, the usual form of cancelling clause does not allow the charterer to recover damages if the vessel is late. It only allows him to cancel the charter. If the charterer wishes to recover damages, he must prove an independent breach of the charter and that the shipowner was aware of the consequences of the breach.

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