In a significant judgment handed down by the Court of Appeal at the end of 2025, the orthodox approach to damages for late redelivery under time charterparties was reaffirmed, even in circumstances where it was accepted that the owners could not have, in any event, chartered the vessels out at the increased market rate. The case concerned two vessels, the Skyros and Agios Minas, which were redelivered late by the charterers, Hapag-Lloyd. During the charter period, the owners had entered into memoranda of agreement (MOAs) to sell both vessels, agreeing not to re-fix them prior to delivery. The conventional measure of damages in such a case is, in simple terms, the difference between the contract rate and the market rate for the overrun period, on the basis that the owners would have been able to charter the vessel at the market rate but for the late redelivery. The market rate is used even if the owners ultimately charter the vessels for more or less than the market rate.
In this case of course, by reason of the MOA terms, the owners would not have chartered the vessels out at the market rate – charterers therefore argued that they were only liable for the contract rate. An arbitration tribunal disagreed, making a finding that charterers were liable for the conventional measure of damages as explained above. The Commercial Court overturned this however and the owners appealed.
The Court of Appeal unanimously allowed the owners’ appeal and restored the arbitrators’ award. Lord Justice Males, giving the lead judgment, held that the owners were entitled to damages calculated as the difference between the market rate and the charterparty rate for the overrun period, even though they could not have re-chartered the vessels due to their sale commitments. The Court found that the owners’ arrangements under the MOAs were res inter alios acta — collateral matters that the law disregards when assessing damages. The charterers’ breach lay in failing to redeliver the vessels on time, and the owners’ inability to re-fix the vessels was irrelevant to the quantification of loss.
The Court rejected the Commercial Court’s reasoning that damages should be limited to actual loss. It reaffirmed that the standard measure of damages for late redelivery is well-established and does not depend on whether the owner would or could have re-chartered the vessel. The judgment also clarified the distinction between remoteness and the res inter alios acta principle: while remoteness limits recovery based on foreseeability, res inter alios acta excludes collateral facts from the assessment of loss. The Court further declined to introduce user damages as an alternative basis for recovery, finding that the compensatory principle already provided a sufficient and principled route to full recovery.
This decision provides further certainty under English law in relation to the calculation of damages for breach of contract for late redelivery. To ensure that parties know what their exposure might be should they be in breach, reference will be made to the market rate (where that can be established) regardless of other collateral decisions made by the owners. It confirms that charterers cannot rely on an owner’s downstream arrangements — such as vessel sales — to limit their liability for late redelivery. As Lord Justice Coulson observed, treating the owners’ sale commitments as an “accidental circumstance” irrelevant to damages promotes commercial clarity and avoids the need for intrusive disclosure into owners’ future plans.
