Early Redelivery

What it does

Early redelivery is the return of the vessel by the charterer before the agreed minimum period of the time charter has expired. Because the charterer has committed to pay hire for at least the minimum period, redelivering early is not normally a right but a breach, often a repudiation of the charter, leaving the owner with the ship back on its hands before it expected and without the hire it had contracted to receive.

The clause and the surrounding law address the consequences: the owner is generally entitled to damages for the hire it loses over the unexpired part of the term, subject to its duty to mitigate by re-employing the ship. Early redelivery is distinguished from a redelivery that merely falls at the early edge of an agreed range, which is legitimate, and it connects to the redelivery, last-voyage, and withdrawal provisions.

Commercial effect

Early redelivery allocates the risk of the charterer wanting out of the charter before its time, typically because the market has fallen and the hire rate now looks expensive. The owner faces the loss of the bargain it struck, and the damages regime is designed to put it, so far as money can, in the position it would have been in had the charter run its course, less what it can earn by re-fixing the ship.

The size of the claim turns on the difference between the charter rate and what the owner can obtain in the market for the unexpired period, and on the owner's mitigation. This makes early redelivery especially significant in a falling market, where the gap can be large, and it is read alongside the redelivery and last-voyage provisions that govern the legitimate end of the charter as opposed to a premature one.

Owner's perspective

The owner treats early redelivery as a breach that deprives it of contracted hire, and it looks to recover damages for the income lost over the remaining term. It wants clarity that redelivery before the minimum period is not permitted, so that the charterer cannot simply hand the ship back when the market turns against it, leaving the owner to absorb the shortfall.

The owner accepts that it must mitigate by seeking to re-employ the ship, but it wants its damages to reflect the genuine gap between the charter rate and the market, including any period the vessel is idle while being re-fixed. It negotiates the minimum period and the redelivery terms to make its expectation of full-term hire clear and its remedy for premature return effective.

Charterer's perspective

The charterer understands that returning the ship before the minimum period is a breach, so where it foresees wanting flexibility it tries to build that into the charter at the outset, for example through a shorter firm period with options to extend, rather than relying on early redelivery. It is conscious that handing the ship back early in a falling market exposes it to a substantial damages claim.

Where early redelivery becomes unavoidable, the charterer focuses on the measure of damages and on the owner's duty to mitigate, arguing that the owner must take reasonable steps to re-employ the ship and give credit for what it earns or could earn. It negotiates the period and structure of the charter to manage this exposure and to avoid being locked into a rate that the market has left behind.

Negotiation points

• Whether redelivery before the minimum period is permitted at all, or is a breach.
• The measure of the owner's damages for the unexpired part of the term.
• The owner's duty to mitigate by re-employing the vessel and the credit for doing so.
• The distinction between early redelivery and redelivery at the early edge of an agreed range.

Common variations

• A firm minimum period with early redelivery treated as a repudiatory breach.
• A charter structured as a short firm period plus options to reduce early-exit risk.
• A clause addressing the damages basis for premature redelivery.
• Redelivery terms distinguishing a legitimate early-range return from early redelivery.