Facts
Hong Kong Fir Shipping hired out their ship under a two-year time charter-party to Kawasaki Kisen Kaisha. It was to sail from Liverpool to collect a cargo at Newport News, Virginia, and then to proceed via Panama to Osaka. A term in the charter-party (the hire agreement) required the ship to be seaworthy and to be "in every way fitted for ordinary cargo service." However the crew were both insufficient and incompetent to deal with her old fashioned machinery; and the chief engineer was a drunkard. On the voyage from Liverpool to Osaka, the engines suffered several breakdowns, and was off-hire for a total of five weeks, undergoing repairs. On arrival at Osaka, a further fifteen weeks of repairs were needed before the ship was seaworthy again. By this time, only seventeen months of the two-year time-charter remained. Once in Osaka, freight rates happened to fall, and Kawasaki terminated the contract for Hong Kong's breach. Hong Kong responded that Kawasaki were now the party in breach for wrongfully repudiating the contract.
At first instance, it was held that although the ship was a seaworthy vessel on delivery in Liverpool, Hong Kong Fir had not exercised due diligence to maintain the vessel in an efficient and seaworthy state. However, the trial judge found that this breach was not substantial enough to entitle the charterer to repudiate the contract. Kawasaki appealed.
Read more about this topic: Hong Kong Fir Shipping Co Ltd V Kawasaki Kisen Kaisha Ltd
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