## Facts

- Lewis Luckenbach, the owner of the steamship *Harry Luckenbach*, chartered the vessel to Ralph Pierson & Co. on a government time‑charter form.
- The charter term was for ten months beginning in early 1906 (the vessel was delivered in January 1906).
- Hire was $5,500 per calendar month, payable semimonthly in advance.
- The charter contained a withdrawal clause giving the owner the option, on default in hire, to withdraw the vessel from the charterer’s service “without prejudice” to other claims.
- By June 1906, Pierson was in default on hire due June 11, 1906, while the vessel was loading in port.
- On June 27, 1906, Luckenbach sent Pierson a letter stating that if the overdue hire was not paid by 4:00 p.m. that day, Luckenbach would withdraw the vessel from Pierson’s service.
- Luckenbach did not, in fact, take the vessel out of Pierson’s service at 4:00 p.m.; the vessel continued loading and then sailed on the contemplated voyage.
- On June 30, 1906, Luckenbach sent a second letter stating that the vessel would be withdrawn when the present voyage ended and the cargo was discharged.
- Before discharge, Pierson attempted to tender the hire arrears plus interest; Luckenbach refused the tender.
- The cargo was discharged on July 16, 1906, and Luckenbach then withdrew the vessel.
- In the ensuing admiralty dispute over amounts owed under the charter, the district court held Luckenbach acted wrongfully in withdrawing after Pierson attempted to tender payment, awarded Luckenbach hire accrued up to withdrawal, and awarded Pierson damages for wrongful withdrawal (with an offset for hire due). Luckenbach appealed.

## Issues

1. Whether Luckenbach’s June 27 letter effected an immediate withdrawal under the charter’s withdrawal clause, even though the owner allowed the vessel to finish loading and sail on the voyage.
2. Whether, after allowing the charter to continue through the voyage and specifying withdrawal at discharge, Luckenbach could withdraw the vessel based on the existing hire default when Pierson tendered the arrears plus interest before discharge.
3. How liabilities should be accounted for when the owner recovers hire up to withdrawal but the charterer proves damages from a wrongful withdrawal.

## Decision

- The Second Circuit treated the June 27 communication as not accomplishing an actual withdrawal at that time, because the owner’s conduct in allowing the vessel to load and sail was inconsistent with an immediate withdrawal.
- The court regarded the charter as continuing at least through the voyage, with withdrawal (if effective at all) occurring only when the owner later acted consistently with withdrawal at the end of the trip.
- Because the owner kept the charter relationship in place until the later date and the charterer tendered the full arrears plus interest before discharge, the owner’s refusal of the tender and subsequent withdrawal was wrongful.
- The court left in place the district court’s approach to the parties’ monetary rights: the owner could recover hire earned up to the effective withdrawal date, while the charterer could recover damages caused by the wrongful withdrawal, subject to setoff.

## Legal Principles

- A time‑charter withdrawal clause for nonpayment of hire gives the owner an option to terminate that must be exercised clearly and in a way consistent with the owner’s conduct.
- A conditional withdrawal threat, followed by allowing the vessel to continue in the charterer’s service and perform the voyage, is not treated as an immediate withdrawal.
- When the owner elects to keep the charter on foot to a stated later point (such as discharge at the end of the voyage), a timely tender of arrears plus interest before that point cures the default for purposes of withdrawal based on that existing nonpayment.
- Wrongful withdrawal exposes the owner to the charterer’s damages for loss of the remaining charter benefit, while the owner remains entitled to hire accrued through the point the vessel was actually taken out of service, with appropriate offsets in the final accounting.

## Conclusion

*Luckenbach v. Pierson* holds that an owner cannot accomplish an immediate withdrawal for unpaid hire by letter while simultaneously permitting the vessel to continue in the charterer’s service; by allowing the voyage to proceed and setting withdrawal at discharge, the owner treated the charter as continuing, and the charterer’s tender of all arrears plus interest before discharge barred withdrawal based on that default, making the later withdrawal a breach with damages determined by setoff against hire earned.


Luckenbach v. Pierson, 229 F. 130 (1915)