UNIVERSAL BULK CARRIERS LTD. v. ANDRE ET CIE [2001] EWCA Civ 588

A laycan-narrowing clause in a voyage charterparty is not invariably a condition precedent to the owners’ obligation to nominate a vessel. Its effect depends on the construction of the particular charterparty and the commercial context.

A clause may impose an obligation rather than confer an option where its language naturally requires narrowing and the parties have used express option language elsewhere. It will be a condition only where the contract and circumstances show that precise compliance was intended to be essential. Relevant considerations include whether performance of one obligation is necessary to enable the other party to perform, the importance of certainty, and whether the contract can operate according to its terms without compliance.

The charterers entered into a voyage charterparty under which a vessel was to be nominated for the carriage of grain. Clause 42 stated that the laycan was to be narrowed to a 10-day spread 32 days before the first layday. The charterers did not give a timely narrowing notice.

The owners refused to nominate a vessel, contending that the notice was a condition precedent to their obligation under clause 8. The arbitrators’ majority held that the clause created an option; the minority treated it as an obligation and a condition. The Commercial Court held that it imposed an obligation but was not a condition. The appeal concerned whether clause 42 conferred an option and, if it imposed a duty, whether that duty was a condition precedent.

1. Appeal dismissed. Clause 42 imposed a duty on the charterers to narrow the laycan; it did not confer an option. The words “to be narrowed” naturally imported an obligation, and the parties had demonstrated in clause 40 that they knew how to express an option.
2. The duty was not a condition of the charterparty and was not a condition precedent to the owners’ obligation to nominate a vessel under clause 8. The question depended on the construction of the particular charterparty and its commercial setting.
3. The principles in Bunge Corporation v Tradax Export SA [1981] 1 WLR 711 required precision where the nature of the contract and circumstances showed that time was intended to be essential. But that case concerned an interdependent notice which was necessary before the other party could nominate a loading port and perform the contract.
4. Here, the charterparty could be performed whether or not the laycan was narrowed. If no timely notice was given, the laycan remained the first half of December. The owners’ ability to nominate a vessel was not dependent on the narrowing notice, and the wider spread gave them greater flexibility.
5. It would make little commercial sense for a late notice, such as one given two days late, to entitle the owners to terminate the whole charterparty. The appropriate construction was that the owners could accept a late notice contractually, or reject it and rely on the unchanged wider laycan.
6. The Niizuru [1996] 2 Lloyd's Rep 66 and the other authorities concerning interdependent or materially significant delivery provisions were distinguishable. The certified question was answered in the negative.

The owners were ordered to pay the costs of the appeal and the proceedings below.

• Court of Appeal (Civil Division): Appeal dismissed, affirming the Commercial Court’s conclusion that clause 42 imposed an obligation but was not a condition precedent.
• Commercial Court: Longmore J dismissed the appeal from the arbitration award: [2000] 1 Lloyd's Rep 459.
• Arbitration: The majority arbitrators held that clause 42 gave the charterers an option; the minority considered it an obligation and a condition precedent.