MarIus

4.4.1 Basis of liability

Detailed analysis of basis of liability-issues falls outside the scope of this thesis, but as we will soon see, the culpable act in short notice situations often occurs after the owner’s real injury from the breach of contract.^{(1) This a translation of the Norwegian term realskade corresponding to the infringement of a protected real interest, whether in torts or contract, see Simonsen (1997), pp. 295–297.} That is peculiar enough to warrant a closer look at whether this implicates the validity of our causal inquiry.

Norwegian law of contract has traditionally held that for liability in damages to arise, there must be negligence or other culpability in addition to breach of contract, unless there are grounds to impose a stricter rule of liability.^{(2) Lilleholt (2017), p. 336. Hagstrøm (2011), p. 468. Strict liability with force majeure-exceptions typically applied to generic performances.} Over the last 50 years, the landscape has changed. Through statutory enactments the so-called control sphere liability has been given a broad scope. And it is increasingly debated whether it offers a basis for liability outside the statutory context.^{(3) Lilleholt (2017), p. 347.}

In the time charter setting, it is still prudent to assume no stricter liability than negligence, in large part because culpability is the liability model of choice in the Maritime Code.^{(4) E.g., MC §275 cf. §383 and §384.} Time charters being subject to freedom of contract, a possible line of argument is that standard forms written with a view to be applied mainly under English law silently incorporate a strict liability rule. That argument will likely not succeed. Any attempt to forego general rules on liability would need express basis.^{(5) Falkanger et al (2017), p. 195. Selvig (1986), p. 26. See also cl.12 Baltime 1939 (2001).}

It will rarely present an issue to show culpability in short notice situations. If the charterer is not negligent by failing to issue notice when he objectively ought to, he will opt to redeliver on short notice in conscious breach of contract. The mere fact that the breach is conscious can likely not, however, be seen as constituting qualified culpability, in the sense of a gross disregard of the owner’s more central interests.^{(6) Hagstrøm (2011), pp. 479-481 on how criminal law’s mens rea concepts do not translate directly to contract law.}

4.4.2 The place of culpability in the causal inquiry

When assessing losses in the short notice situation, the causal chain begins when proper notice objectively ought to have been issued, leading to the owner’s real injury. The nature of the injury is the owner’s lack of information from that time onward, causing his passivity that eventually leads to a financial disposition loss in the time after redelivery, when he could have obtained better employment for the vessel had it not been for the missing notice.

Then, let us incorporate the subjective basis of liability-norm in the analysis. Consider the following practical scenario. There is little over one month left of the charter and the vessel is unloading in port. The charterer plans to utilize the vessel for a month-long voyage after unloading. Then, through no fault of his own, the charterer’s vessel becomes heavily delayed in port. So much so that there is not enough time to perform the planned voyage. He decides to redeliver on short notice since the alternative is to keep the vessel on hire without a satisfactory commercial purpose. The culpable act in that instance is that he chooses to redeliver on short notice. It therefore occurs sometime after he objectively ought to have sent notice.

As we can see, the owner’s real injury transpires before the culpable act. Therefore, the injury and losses cannot be considered as caused by the culpable act. The situation evokes known past losses-problems from other areas of law. An example is when the innocent party wants to recover negotiation costs incurred prior to reaching an invalid agreement, wherein the other party acted culpably. Culpability in relation to invalid agreements sorts as a tort in Norwegian law.^{(7) Hov and Høgberg (2009), p. 312. Simonsen (1997), p. 306. It appears a typo when Simonsen writes “blitt båret frem av den alminnelige kontraktsretten”. Elsewhere on the same page, he refers to rules in tort (‘deliktsretten’), see also p. 332.} In torts as in contract, there must be causality between the breach (rettsbrudd) and the losses, and in torts the breach and basis of liability is one and the same. The culpable act therefore constitutes a limiting causal criterion. Unless the culpable reason underlying the invalidity existed prior to the negotiation costs, they will fall outside the traditional scope of the innocent party’s right to recover.

In contractual damages, it is breach of contract that constitutes the breach (rettsbrudd) and defines the causal perspective. The short notice situation therefore does not have to grapple with the culpable act as a limiting criterion in the causal inquiry. That said, the basis of liability must of course cover the breach in contractual damages. That criterion is fulfilled as there would have been no breach had the charterer not chosen to redeliver on short notice.

4.4.3 The objective norm – breach of contract

Not only does the owner’s injury occur before the culpable act, but it is also antecedent to the act that lets us ascertain the breach–the redelivery. Rix J. observes that the short-given notice can be considered an anticipatory breach until redelivery occurs:

If the charterers had relented and given proper notices, any actual breach would have been avoided.^{(8) [1999] Lloyd’s rep. 649 (672).}

There appears at first sight to be a real problem with our causal inquiry. We have said that the causal inquiry is to be set up to examine the effects of breach of a contractual norm. And we have said that the real injury is the owner’s state of information onwards from the time when he objectively ought to be given notice. If breach is to be assessed at redelivery, then how can the preceding injury be caused by it?

The contradiction is, however, only apparent. We must distinguish between the fact of breach itself i.e., missing notice and the fact that as a practical matter lets us determine the breach. The redelivery reveals the prior deficiency. What occurs is an ex-post assessment of breach. Such assessments are neither unknown nor problematic in contract law.^{(9) Krüger (1989), p. 138. For English law, see [1996] 2 Lloyd’s rep 66 (73) The Nizuuru concerning the converse situation of a laycan narrowing provision and notice of delivery. Note that the Judge’s finding in this regard was entirely obiter, as he had already found that the charterer (unlike the owner in the redelivery situation) had a right of refusal. Quoted in The Liepaya [1999] Lloyd’s rep 651 (672).} The parties are free to agree on a norm with a retroactive element. The short notice-situation illustrates that breach of contract may not always be accurately described as a natural occurrence, but it may always be described as a discrepancy between descriptive reality and a normative standard.

In Transocean v Western Shipping the arbitrators did not accept an ex-post assessment of breach. It is not clear from the ratio whether the arbitrators’ decision follows from a particular construction of the charter norm, or the notion of a general principle concerning breach assessments. In any event, under our interpretation, the point of divergence is the objectively ascertained latest time of proper notice in relation to the redelivery that occurs. In that regard, it makes no difference that the specific short notice may be the first naturally occurring projection of a breach. The formal definition of breach is an objective deviation from fulfilment of a contractual obligation.^{(10)…that cannot be traced to circumstances for which the creditor answers, cf. Hagstrøm (2011), p. 327.} This is the understanding of breach that our causal inquiry must rely on, as it brings forward the content of the contractual right.