Transfield Shipping and the Mercator Shipping


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Transfield Shipping and the Mercator Shipping Transfield Shipping Inc v Mercator Shipping Inc (“The Achilleas”) [2008] UKHL 48

This is a shipping case that was originally taken to arbitration. The case involves Transfield Inc. (charterers) and the Mercator Shipping Inc. (the owners).  The charter party agreed on a time charter on which the ship (“The Achilleas”) would be returned to the owner no later than 2 May 2004. Consequently, the owners went ahead to fix the vessel for a subsequent period of up to six months with a new charterers at a rate of £39,500 a day, date of commencement being May 8, 2004. The new charter provided for a laycan period (i.e. the delivery period fro the vessel) which allowed the new charterer to cancel the fixture if not met by the latest May 8, 2004. Transfield Shipping and the Mercator Shipping .

But Transfield did not return the ship until May 11, 2004. By this time, the market rate had fluctuated. The new charterer agreed to take the ship, but only at £31,500 a day, down from the £39, 500 a day (Chew & Wood, 2010).

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Therefore, when these uncertainties arise and the spirit of the contract can not be upheld, who should bear the loss? From business point of view, the ruling of the House of the Lord was the best for a commercial case. They focused on protecting the shipping industry and were concerned against ‘opening the floodgates’ which could result out of relaxing the laid down rules of remoteness and foreseeability of damage.  Therefore, the House of Lord ruling was the best. The lower courts had focused so much on the letter of the law but not on the spirit of the law.

References

Chew, A. & Wood, G. (2010). Case note: Contractual damages- Remoteness of damage and assumption of liability. Business law international. Vol. 11(1), pp. 85-99.

Transfield Shipping Inc v Mercator Shipping Inc (“The Achilleas”) [2008] UKHL 48 retrieved on October 27, 2011 from http://www.publications.parliament.uk/pa/ld200708/ldjudgmt/jd080709/trans-1.htm