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The cancelling clause gives the charterer the right to walk away from the charter if the vessel is not ready to load on time. But this right is not as straightforward as it appears: its nature, boundaries, and the consequences of wrongful cancellation produce some of the sharpest disputes in shipping law. This article examines the cancelling clause as a mechanism — from the structure of laycan to the practice of English courts. For laycan itself — its structure, the laycan spread, and the NOR mechanism — see the companion article on laycan in charterparty.
What is laycan and cancelling clause
Laycan is shorthand for “laydays/cancelling” — a window of dates in a charter party: the earliest day when laytime may commence (laydate) and the final day by which the vessel must be ready to load (cancelling date). For example, “laycan 10/20 April” means that laytime will not commence before 10 April, and if by 20 April the vessel is not ready for loading, the charterer has the right to terminate the charter.
This right is codified in the cancelling clause — the provision terminating the charter. In voyage charters, it is found in virtually every contract. Clause 9 of the Gencon 1994 form (the most widely used voyage charter form) states:
(a) Should the Vessel not be ready to load (whether in berth or not) on the cancelling date indicated in Box 21, the Charterers shall have the option of cancelling this Charter Party.
Similar provisions appear in Asbatankvoy (Clause 5), Norgrain, and other standard forms.
The nature of the cancellation right: an option, not a remedy
The cancelling clause grants the charterer an option — a right to terminate the charter if the vessel is not ready to load by the specified date. This is not a remedy for breach and does not depend on the shipowner’s fault. The reason for the delay is irrelevant: bad weather, mechanical breakdown, delays at the previous port, inaccurate ETA — the charterer may cancel in any of these circumstances.
The other side of the coin: the vessel’s lateness beyond the cancelling date, standing alone, does not create a right to damages. The cancelling clause is a mechanism to exit the contract, but not a ground for compensation. The charterer may terminate the charter and fix another vessel; however, the charterer can recover the difference in freight rates from the late shipowner only by proving an independent breach — for example, that the shipowner failed to proceed with all convenient dispatch or misrepresented the vessel’s position.
If the charterer decides not to exercise the cancellation option, the charter continues under the original terms. The vessel arrives, loads cargo, and the charterer bears all ordinary obligations, including demurrage, should it arise.
The charterer cannot cancel before the cancelling date
Even if it becomes apparent a week before the cancelling date that the vessel cannot arrive in time, the charterer has no right to cancel before that date. The right to cancel arises only after the cancelling date passes and only if the vessel is not ready for loading at that time. In legal language this is known as the absence of an anticipatory right of cancellation — a right to cancel “in advance,” before the cancelling clause’s condition has actually been tested.
The principle was first articulated by Roskill J in The Madeleine [1967] 2 Lloyd’s Rep 224: in his words, “there is no contractual right to rescind a charterparty under the cancelling clause unless and until the date specified in that clause has been reached.” The Court of Appeal endorsed this approach in the leading authority of The Mihalis Angelos [1971] 1 Q.B. 164.
The facts of Mihalis Angelos were these. The vessel was chartered on the Gencon form to load apatite ore at Hai Phong, with a cancelling date of 20 July 1965. By 17 July, she was still discharging a previous cargo at Hong Kong and could not physically have reached Hai Phong in time. On that same day, the charterers purported to cancel the charter, invoking force majeure (warlike activities around Hai Phong had made apatite cargo unavailable), and the owners treated this as repudiation. The Court of Appeal, by a majority — Edmund Davies and Megaw LJJ, with Lord Denning MR dissenting on this point — held that the charterers had no right to cancel before the cancelling date: until that date had passed, the cancelling clause’s condition had not yet “matured” and the clause could not be triggered. Separately, the court unanimously held that the “expected ready to load about 1 July” clause was a condition of the contract — the owners had no reasonable grounds when entering into the charter to believe the vessel would be ready by that date, and this breach gave the charterers an independent ground for termination.
Practical implication for traders: if the charterer rushes to invoke the cancelling clause before the cancelling date arrives — for example, on seeing that the vessel is stuck at the previous port — the charterer may itself end up in the position of wrongdoer. The correct approach in such a situation is not to cancel early but to wait for the cancelling date and exercise the right then (or to negotiate a new laycan on commercial terms).
Early cancellation — a repudiatory breach
What happens if the charterer cancels before the cancelling date? The House of Lords answered in The Simona [1989] AC 788.
The charterer cancelled the charter before the cancelling date, stating that the vessel would not arrive on time. The shipowner refused to accept the cancellation and asserted that the charter remained in force. The vessel arrived at the loading port before the cancelling date. The House of Lords held that premature cancellation constitutes a repudiatory breach by the charterer. The shipowner is entitled to reject this breach and insist on performance of the charter.
In The Simona, Lord Ackner formulated the principle: until the cancelling date arrives, both parties must perform the contract. A charterer who announces cancellation before that date acts like a party repudiating its obligations, and the shipowner has all ordinary remedies — including recovery of damages for lost freight.
What “ready to load” means for cancelling clause purposes
The cancelling clause operates if the vessel is not ready to load on the cancelling date. But what precisely constitutes “readiness” in this context?
In The Gevalia (1925, 23 Ll. L. Rep. 57), the vessel arrived in port but lay at anchor awaiting a berth. The court held that for cancelling clause purposes, it suffices if the vessel is in port and physically capable of loading, even if it has not yet moved to the berth. In other words, the vessel need not be “in berth” — it need only have arrived and be in a state to commence cargo operations as soon as a berth becomes available.
Gencon 1994 directly confirms this approach: Clause 9(a) refers to readiness “whether in berth or not”.
The question whether the readiness standard for the cancelling clause is the same as for commencement of laytime remains contested. In The Tres Flores [1974] Q.B. 264], Mr Justice Brandon (obiter dictum) suggested that the cancelling clause standard is less stringent: the vessel need only be substantially ready, whereas commencement of laytime requires full readiness and service of Notice of Readiness. This is mere obiter, however, and the point remains unresolved in the case law.
In Asbatankvoy, the cancelling clause (Clause 5) is tied to a specific time — 16:00 (4:00 P.M.) local time on the cancelling date. If the vessel is not ready at that moment, the charterer has 24 hours in which to notify of cancellation.
The shipowner’s right to request the charterer’s decision
Gencon 1994 includes a mechanism protecting the shipowner from a wasteful ballast passage — Clause 9(b):
(b) Should the Owners anticipate that, despite the exercise of due diligence, the Vessel will not be ready to load by the cancelling date, they shall notify the Charterers thereof without delay stating the expected date of the Vessel’s readiness to load and asking whether the Charterers will exercise their option of cancelling the Charter Party, or agree to a new cancelling date.
If the shipowner foresees that the vessel will be late, the shipowner must notify the charterer without delay, stating the expected date of readiness and asking: will you cancel or agree to a new cancelling date? The charterer has 48 running hours to respond. If the charterer does not cancel within this period, the cancelling date automatically shifts to the 7th day after the new readiness date stated by the shipowner.
This mechanism operates only once — on a second late arrival, the charterer may cancel under Clause 9(a) in the ordinary way.
An important nuance: the trigger for Clause 9(b) is the language “should the Owners anticipate” and “despite the exercise of due diligence”. If the delay stems not from objective circumstances but from the shipowner directing the vessel into a profitable intermediate voyage, the shipowner risks losing the benefit of this mechanism.
When the charterer cannot cancel
The cancelling clause is a charterer’s right, but it is not absolute. There are situations in which the charterer loses the power to exercise it.
The charterer’s own breach
The charterer cannot rely on the cancelling clause if the vessel’s lateness is caused by the charterer’s own breach. In Shipping Corporation of India v Naviera Letasa S.A. [1976] 1 Lloyd’s Rep. 132], the court held that if the vessel’s delay results from the acts (or omissions) of the charterer, the charterer is barred from cancellation.
A typical example in FOB loading: the charterer fails to nominate a berth or does not ensure that cargo is ready, preventing the vessel from commencing loading on time. If, as a result, the cancelling date is missed, the charterer cannot invoke the cancelling clause based on the vessel’s unreadiness.
Loss of readiness after arrival
If the vessel arrived on time and was ready for loading on the cancelling date but subsequently lost readiness — for example, through breakdown or cargo hold contamination — the cancelling clause no longer applies. The cancellation right attaches to a specific moment (the cancelling date), and if the vessel was ready at that moment, the charterer cannot invoke the clause. Of course, the charterer may have other remedies — such as a claim for breach of seaworthiness warranties.
Until when can the cancellation right be exercised
The common law position was formulated in Moel Tryvan Shipping Co. v Andrew Weir & Co. [1910] 2 K.B. 844: absent special provisions in the charter, the charterer may exercise the cancellation right at any time after the cancelling date — so long as the vessel has not arrived at the loading port and tendered Notice of Readiness. The charterer need not cancel immediately after the cancelling date passes; the charterer may wait.
This creates a risk for the shipowner: the vessel sails in ballast to the loading port, uncertain whether the charterer will exercise the cancellation right. It is precisely to address this problem that Clause 9(b) of Gencon 1994 exists — giving the shipowner the right to ask for the charterer’s decision in advance.
In Asbatankvoy (Clause 5), the problem is solved differently: the charterer must notify of cancellation within 24 hours after the cancelling date. If notice is not given, the charter remains in force.
Notice of cancellation must be unequivocal
For cancellation to be effective, the charterer’s notice must be unequivocal and final. The charterer cannot cancel retroactively or treat the rejection of one cargo as cancellation of the entire charter. If the charterer continues issuing instructions to the vessel after the cancelling date — for instance, directing that the holds be cleaned or that the vessel move to a berth — the charterer may forfeit the right to cancel, as such conduct may be construed as a waiver of the right.
Agreement by the charterer to extend the cancelling date (even if given under economic pressure and without reservation) is also treated as a waiver of the original cancellation right.
Conclusion
The cancelling clause is one of the most practically important provisions in voyage charters, yet both parties regularly make characteristic errors in handling it. Charterers announce cancellation before the cancelling date arrives, shifting themselves from an innocent to a breaching party (The Simona). Shipowners fail to use the mechanism of Clause 9(b) of Gencon, sending vessels on ballast passages without assurance that the charter will not be cancelled on arrival.
Three cardinal rules: the cancellation right arises only after the cancelling date; early cancellation is a repudiatory breach; and the vessel’s mere lateness (without an independent breach by the shipowner) does not entitle the charterer to damages.
If you have questions about cancelling clauses or need assistance with a charter cancellation dispute, feel free to contact me:
