What is Laycan?


Here is a brief article about the laycan concept – Please take a look at different charter
parties and learn about laycan clauses. They will answer questions such as:


Can owners ask charterers in advance of charterer’s intention to cancel if it appears
owners will not make the laycan?


Are owners obliged to make the trip to the delivery / loading port even if it appears that
there is no way the laycan will be made?

Here is the article:


The majority of vessel charter parties contain provisions that provide that a charter may
be canceled under certain circumstances.

The most common provision gives the charterer the option of canceling the charter if the
ship is not ready to load cargo or is not delivered by the shipowner to the charterer by a
certain date. This provision is generally referred to as the "cancellation clause."



The cancellation clause (laycan) is an important provision in a charter. Most parties,
however, when chartering vessels, choose standard form charters, and little or no
thought is given to the actual wording of the cancellation clause. Such wording can
become critical if a vessel experiences delays. This is especially true in voyage charters
that are often entered into long before a voyage is performed.


Under a voyage charter, the vessel owner places his ship at the charterer's disposal for
carrying cargo. However, the shipowner retains full control over the navigation and
operation of the vessel. The charterer is responsible for furnishing a specified amount of
cargo and for paying freight. The charterer is entitled to a stipulated period of time to
load and discharge the vessel, known as laytime. If laytime is exceeded, the charterer
then pays an additional charge called demurrage. If the charterer fails to load all of the
specified cargo, he then will pay "deadfreight" to the shipowner.


Once the voyage charter is formed, the vessel owner has an absolute duty to send the
ship to the load port with reasonable dispatch. Usually the vessel will arrive ready to load
before the charter canceling date. The captain will tender a notice of readiness to the
charterer and laytime will begin to run. The charterer then will load the ship, and the
voyage will commence.



Unfortunately, because of uncertainties associated with shipping, vessels do not always
arrive at load ports by their canceling dates. Vessels are delayed due bad weather, port
congestion at a previous port, etc.  When this happens, the specific wording of the
cancellation clause becomes most important. What are the rights and obligations of the
parties if a vessel “misses” her laycan.
Under American and English maritime law, the charterer is given the absolute option to
cancel the charter if the vessel is not tendered (delivered) by the cancellation date.
However, please note that even so, the vessel owner is bound to send the ship to the
load port to tender even if the vessel cannot arrive by the cancellation date. This is
important – the ship must go to the loadport even if it appears it will be late.



Furthermore, without a specific provision in the charter, the charterer cannot be
compelled to disclose if he / she will exercise his option to cancel until the vessel is
tendered at the load port. In other words, absent a clause to the contrary – owners can
not ask charterers in advance of charterer’s intention.


A recent New York arbitration award (Fort St. John S.M.A. 2682) illustrates the
importance of cancellation clause wording.


The relevant clause stated:


"Should the vessel not be ready to load by 4:00pm on the canceling date ... the charter
shall have the option of canceling. . . . by giving the (vessel) owner notice within 24 hours
after such cancellation date."



The tanker arrived at the load port within 24 hours of the canceling date and tendered.
The vessel's tanks were inspected and loading hoses were connected. However, cargo
was not loaded. The charterer canceled within 24 hours based upon the specific
language in the canceling clause.


The owner claimed deadfreight and argued that the canceling option could not be
construed as absolute, but must be viewed in light of commercial considerations. The
arbitration rejected this argument because the clause was clear and unambiguous.
American court decisions and arbitration awards demonstrate that judges and arbitrators
interpret cancellation clauses narrowly. Because these clauses are in effect forfeiture
provisions, it behooves the parties, especially the shipowner, to give careful
consideration when selecting them. This must be done at the time the vessel is
chartered, not when it is sailing halfway round the world.

End Article


OK - Please take a look at the laycan in the NORGRAIN c/p as well as the NYPE 93.
Do you notice any differences? Also – what is the “anti technicality” / grace period clause
state?