## Facts

- A shipowner time-chartered the bulk carrier *The Achilleas* to a charterer for an extended term with a latest contractual redelivery date of May 2, 2004.
- Relying on the charterer’s redelivery notices, the owner fixed a follow-on charter with a third party at a higher daily rate, with a cancelling date of May 8, 2004.
- The charterer’s final voyage ran late; the vessel was redelivered on May 11, 2004 (nine days late).
- As it became clear the vessel would miss the follow-on cancelling date, the owner renegotiated the follow-on charter: the cancelling date was extended, but the hire rate was reduced substantially due to a sharp market fall.
- The owner claimed damages equal to the reduced profit over the entire follow-on charter period (about US$1.36 million).
- The charterer argued damages were limited to the conventional overrun measure: the market/charter rate differential for the nine late days (about US$158,301).
- An arbitral majority and the lower courts awarded the owner the follow-on charter loss; the charterer appealed.

## Issues

1. Whether a charterer who redelivers late is liable, as contract damages, for the owner’s loss of profit on a follow-on charter renegotiated because of the delay.
2. Whether remoteness in contract turns solely on foreseeability of the type of loss, or also on whether the breaching party can reasonably be taken to have assumed responsibility for that type of loss in the contract’s commercial setting.

## Decision

- The House of Lords allowed the charterer’s appeal and reversed the award of follow-on charter losses.
- The owner’s loss of profit on the follow-on charter was held too remote and therefore irrecoverable on the facts.
- Damages were limited to the difference between the market rate and the charter rate for the nine-day late-redelivery period (about US$158,301).
- The court stressed that, in the relevant market, late-redelivery liability is generally understood to be confined to the overrun period measure unless special arrangements are made.

## Legal Principles

- Contract damages for remoteness are not determined only by whether the loss was reasonably foreseeable; recovery may also require that the loss is of a kind for which the breaching party can reasonably be taken to have assumed responsibility under the contract.
- In time-charter late-redelivery cases, absent special communication or express agreement allocating additional risk, the ordinary measure of damages is the market/charter rate differential during the period of late redelivery.
- Losses driven by the interaction of delay with volatile market movements affecting an owner’s subsequent fixture may fall outside the scope of the charterer’s assumed contractual responsibility.

## Conclusion

The House of Lords held that although follow-on fixture loss could be foreseeable, it was not a type of loss the charterer could reasonably be taken to have accepted as part of the bargain; damages for late redelivery were therefore confined to the conventional overrun-period measure.


Transfield Shipping Inc. v. Mercator Shipping Inc. (The Achilleas), [2008] UKHL 48, [2009] 1 A.C. 61 (H.L. 2008)