Putting You On Notice: Penalties May Not Be Enforceable

Lloyd's List, 20 May 2009

In a case involving late redelivery of a bulker, the tribunal took the view that the amount payable under a penalty was "unconscionable" writes Richard Mabane.

When is a penalty not a penalty? When it is a genuine pre-estimate of the loss recoverable in law, confirmed the English Court in an interesting recent late redelivery case (Lansat Shipping Co v Glencore Grain BV 2009 EWCH 551 Comm).

The vessel, a handysize bulker, had been chartered for three to five months at $29,500 daily. Additional clause 101 stated: "The charterers hereby undertake the obligation/responsibility to make thorough investigations and every arrangement in order to ensure that the last voyage of this charter will in no way exceed the maximum period under this charter party. If, however, the charterers fail to comply with this obligation and the last voyage will exceed the maximum period, should the market rise above the charter party rate in the meantime, it is