3.4 Content of the obligation – result or effort?
3.4.1 Introduction
When the charterer redelivers on short notice, he will often be able to say that the underlying reason for the shortcoming was an unforeseen event or delay necessitating a sudden change of plan i.e., there was no longer time to employ the ship – at least not desirably – on another voyage within the timeframe of the charter, as became the case for the charterer in The Great Creation.(1) Not to invoke associations to the doctrine of broken assumptions. On account of everything that can go wrong in unexpected ways either at sea or in and around ports,(2) Pursuant to the off-hire rule, the charterer typically bears the remuneration risk for loading operations, piloting, tugging and bad weather during the voyage. the charterer may want to argue that it is unreasonable to require of him to predict the unpredictable. Is it not sufficient that he attempted to comply with all the diligence that can reasonably be expected?
The question is – does the obligation require a result or merely an effort of some quality?(3) Hagstrøm (2011), pp, 126-130. Lilleholt (2017), p. 137. UNIDROIT principles, cf. art. 5.1.4. If the charterer promised a result e.g., to issue notice approximately 15 days ahead of redelivery, it is sufficient to observe that he was not able to deliver on this promise to ascertain breach of contract i.e., the obligation is objective. On the other hand, if he only needed to apply an effort of some standard, he may be compliant if non-achievement was excusable under the relevant standard.(4) I.e., excusable already at the breach of contract-stage of analysis. Whether there is basis for liability in damages is formally a separate question. Resultatforpliktelser and innsatsforpliktelser as they are pronounced in Norwegian terminology are merely labels given to interpretive results. Whether the requirement is one or the other (or a combination) is informed by ordinary interpretation. There have, however, been attempts to develop guidelines to assist in doubtful cases.(5)See UNIDROIT principles art. 5.1.5, cf. Hagstrøm (2011), pp. 128-129. In the question at hand, the relevant factors can be summarized as the wording of the provisions on the one hand and the risk and difficulty associated with the charterer’s compliance on the other.
3.4.2 The obligation to inform is objective
When NYPE 2015 requires of the charterer to “serve ‘__ days’ approximate notice”, it describes a result and not merely an effort. The ‘approximate’ qualifier does not alter that impression. It merely helps to define the required result with some wiggle room. Baltime is even clearer in demanding “no less than ten days’ notice”. One can contrast these formulations with an indicated uncertainty as to whether the result should be achieved.(6) As in rt. 2011 p. 670: ‘tar sikte på’ (English: ‘takes aim at’). Textual principles therefore indicate that the charterer is obliged to achieve a positive result i.e., to give notice at the requisite time ahead of redelivery.
We may suspend our conclusion on account of the fact that notice duties universally tend to be obligations of effort. Consider for example NTK Article 6.3, which puts on the contractor a duty to examine and notify the company of errors and discrepancies in company supplied materials.(7) Kaasen (2018), pp. 188-189. While he is required to notify of such errors actually discovered, he is not required to notify of errors that he did not discover and should not have discovered. Likewise, the realdebitor’s pre-contractual duty of disclosure involves a standard of honesty and diligence.(8) Hagstrøm (2011), pp. 162-165 for a discussion of the level of diligence generally required. The same holds true when loyalty in contract – inherently a subjective norm – requires notification.(9) E.g., notification of anticipatory breach, cf. Rt. 1938 p. 602; Rt. 1970 p. 1059. On duty of loyalty: Rt. 1988 p. 1078. This comports with an understanding that notice duties generally are duties of care – concerned with sanctioning and incentivizing a standard of behaviour inter partes. The legislative justification may be to promote honesty and fair practice, but it is also efficient for contracting parties to share at low-cost information that is valuable to the other. Both of these justifications fall short in rationalizing risk allocation on a strictly objective basis.
What is typical, however, carries less weight when specific indicators – the wording in particular – is clear. The parties are of course free to allocate risk in a way that deviates from the typical as part of the bargain struck.(10) An example is the client who hires an attorney on outcome oriented ‘no cure no pay’-terms, as opposed to the more common professional effort-requirement. The redelivery notice provision presents as a specific and positive regulation thus operating independently of the general duties. When the parties regulate redelivery notices, it entails a positive allocation of risk, and this allocation of risk may follow a different logic than the one that usually applies to notice duties. If the logic that follows from a literal interpretation is plausible and reasonable within the contractual scheme, there is little justification to depart from it.
For the owner, a redelivery notice is crucial. To negotiate follow-on charter terms is potentially complex and time consuming, and the alternative cost of idleness is substantial. As the operator of the ship, the owner will absent unforeseen circumstances often be in a fairly good position to deduce when redelivery will occur. From the owner’s point of view, it may therefore be regarded as a regulatory aim of the clause to provide a recourse also when unforeseen events make notification difficult.
A comparison can be made to another risk allocation rule employed within time charters i.e., the off-hire rule. It is important to stress that the off-hire rule concerns the remuneration risk (i.e., is hire payment suspended or not) and not the performance risk (i.e., is there breach of contract or not), as we are discussing here.(11) Hagstrøm (2011), p. 40 on the terminology. The unforeseen events mentioned above may typically be bad weather causing delayed voyages, port side issues like strikes or queues, or problems in the charterer’s commercial relations. These are typically all charterer risks pursuant to the off-hire rule i.e., the ship remains on-hire. While one cannot conflate one type of risk allocation with another, the observation in this regard must be that it is not inconsistent with the system of risk division in the contract, that the charterer bears the risk when such unforeseen events make it difficult to notify ahead of redelivery.
In assessing whether it is reasonable to assign to the charterer the objective performance risk, one must also consider the fact that the owner may not refuse redelivery and demand ‘specific performance’ of the notice obligation. The owner can only claim damages, with the rules and limitations that apply. All things considered, this seems a plausibly balanced arrangement. Consequently, there is insufficient reason to depart from the straightforward reading of the provision.
The charterer’s obligation is objective, but it is not unlimited. It follows already from the formal definition of breach, that the debitor does not answer for irregular performances that can be traced to the creditor or circumstances for which he answers.(12) Hagstrøm (2011), p. 327. Krüger (1989), p. 736: (3). The latter criterion means that the doctrine extends beyond the classical instances of mora creditoris to define an owner’s sphere of risk. Whether an event falls into that sphere turns on a concrete assessment–the owner does of course not automatically answer for any and all circumstances to which he is connected.(13) See especially Lilleholt (2017), p. 261. Most evidently, the owner answers for his own breaches of contract (e.g., issues with crewing, hull, and machinery) and it is otherwise often thought that risk follows function.(14) Hagstrøm (2011), p. 333.
Consider the following example. The window of redelivery is 1 January–31 January. The charterer plans to complete unloading in port on 14 January, complete loading for a final voyage on 16 January and redeliver on 29 January. After unloading on 14 January, the engine malfunctions and it takes 5 days to repair. There is no longer time to complete the final voyage, and the charterer redelivers on short notice. Since the charterer’s predicament can be traced to the engine malfunction, a clear owner risk, it seems likely that the non-performance does not constitute breach and the owner may consequently not claim damages.(15) The answer is not obvious, as the charterer still makes a conscious choice to redeliver on short notice. One will likely have to determine whether it all in all is reasonable to ascribe the performance risk to the charterer in such instances, cf. also Lilleholt’s (2017) remarks on p. 261. In construction law, creditor risks often yield deadline extensions. The instance here can be seen as the converse situation of a notice time reduction.