## Facts

- Reefer and General Shipping Co., Inc. owned the refrigerated vessel *Kinaros V* and time-chartered it to Great White Fleet, Ltd. (GWF), a refrigerated cargo operator.
- The parties executed a time charter on December 7, 1990, based on a Baltime 39 form pro forma supplied by GWF; the charter term was extended through January 12, 1995.
- The vessel relied on three diesel-powered auxiliary generators; fully loaded operations required two generators, with a third normally on standby.
- The charter included a termination “breakdown” clause allowing GWF to terminate if the vessel or its refrigeration machinery/equipment “break down for any reason whatsoever” on two occasions.
- During 1992 and 1993, the vessel experienced repeated mechanical and operational failures, including generator and refrigeration-related problems that caused delays and impaired commercially reliable refrigerated service.
- GWF treated the events as qualifying breakdowns and terminated the charter before the extended term ended.
- Reefer sued for roughly $2.4 million for wrongful termination; GWF counterclaimed for about $497,857.66 for losses allegedly caused by Reefer’s breaches.
- After a bench trial, the court entered net judgment for GWF of $347,163.68.

## Issues

1. How should “breakdown” be interpreted under the charter’s breakdown clause: only near-total incapacity, or significant malfunctions materially impairing performance?
2. Did the vessel’s incidents constitute the requisite number of breakdowns, making GWF’s early termination contractually justified?
3. Did Reefer materially breach its maintenance/fitness obligations under the charter, and what damages, if any, was GWF entitled to recover?

## Decision

- The court rejected Reefer’s narrow definition of “breakdown” requiring total or near-total frustration of voyage performance.
- The court construed the breakdown clause, in light of its text and commercial purpose in refrigerated service, to include serious malfunctions that materially impaired chartered performance even if the vessel continued operating.
- The court found the record showed multiple qualifying breakdowns and that the contractual preconditions for termination were satisfied.
- The court held GWF’s termination was proper under an express contractual right, defeating Reefer’s wrongful termination claim.
- The court found Reefer materially breached charter obligations to provide and maintain a vessel and machinery fit for the contracted service and awarded GWF damages on its counterclaim.
- Judgment entered for GWF in the net amount of $347,163.68 after offsets.

## Legal Principles

- Time charters are construed according to their plain language in commercial context; termination clauses are enforced as written when their conditions are met.
- A “breakdown” clause covering failures “for any reason whatsoever” may reach repeated significant malfunctions of essential equipment that materially impair contracted performance, not only complete disablement.
- In refrigerated carriage, reliability of propulsion-related auxiliaries and refrigeration systems is central to performance; recurrent failures can justify contractual termination.
- An owner’s duty to provide and maintain a vessel and machinery fit for service is fundamental; persistent mechanical unreliability may constitute a material breach.
- Exercising an express termination right does not bar recovery of damages for the counterparty’s underlying material breaches, provided damages are proven with competent evidence and are not speculative.

## Conclusion

The court enforced a time charter’s breakdown clause to uphold the charterer’s early termination based on repeated serious machinery failures and separately held the owner liable for material breaches of maintenance and fitness obligations, resulting in a net damages award to the charterer.


Reefer & Gen. Shipping Co. v. Great White Fleet, Ltd., 922 F. Supp. 935 (S.D.N.Y. 1996)