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TRANSFIELD SHIPPING INC v MERCATOR SHIPPING INC

When assessing damages for the late redelivery of a chartered vessel, the court should in the usual case restrict the charterer’s liability to the difference between the market rate and the charter rate for the overrun period.

22 July 2008

The appellant charterer (T) appealed against a decision of the Court of Appeal ([2007] EWCA Civ 901, (2008) 1 All ER (Comm) 685) upholding an arbitrators’ ruling on the damages to which the respondent shipowner (M) was entitled following the late return of the ship which T had chartered from M. M had let out its ship to

T for a period of five to seven months, to end no later than midnight on 2 May 2004. T notified M that the ship would be back no later than then. M therefore contracted to let the ship to new charterers for a period of about four to six months, promising that they could have the ship no later than 8 May 2004. The agreed price of hire was US$39,500 a day. The ship was delayed on its last voyage and M did not get its ship back until 11 May 2004. The new charterers agreed to take the ship, but by then the market had fallen sharply and they would only take it at a reduced price of US$31,500 a day. The issue before the arbitrators was whether T was liable to pay o...

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