Force Majeure in Yacht Charter Agreements
By Christopher Anderson and Stephanie Parra, Robert Allen Law
Both the Mediterranean Yacht Brokers Association (“MYBA”) Standard Charter Agreement and the American Yacht Charter Association (“AYCA”) Recreational Bareboat Charter Agreement have force majeure provisions. The force majeure provisions in the two agreements are similar, as are the contractual consequences should a force majeure event occur.
The MYBA Agreement defines “force majeure” as “any cause directly attributable to acts, events, non-happenings, omissions, accidents, or Acts of God beyond the reasonable control of the Owner, the crew, or the Charterer (including, but not limited to, strikes, lock-outs, or other labour disputes, civil commotion, riots, acts of terrorism, blockade, invasion, war, fire, explosion, sabotage, storm, collision, grounding, fog, governmental act or regulation, contaminated fuel, major mechanical or electrical breakdown beyond the Crew’s control and not caused by lack of maintenance and/or Owner’s or Crew’s negligence). Crew changes and shipyard delays not attributable to the aforementioned causes, do not constitute force majeure.”
On the other hand, under the AYCA Recreational Bareboat Charter Agreement, force majeure is defined as “any cause directly attributable to acts, events, non-happenings, omissions, accidents, or Acts of God beyond the reasonable control of the owner or charterer, including, without limitation, strikes, lock-outs, or other labor disputes, civil commotion, riots, blockade, invasion, war, fire, explosion, sabotage, storm, collision, grounding, fog, governmental act, or regulation, major mechanical, or electrical breakdown beyond the Owner’s control and not caused by the Owner’s negligence. Shipyard delays not attributable to the aforementioned conditions do not constitute force majeure. Crew changes do not constitute force majeure. Force majeure does not excuse the owner from payment of the broker’s commission.”
Events that stem from an unforeseen pandemic (like COVID-19) that might prevent a party from performing a contractual obligation, would qualify and fall squarely within this force majeure contractual language. That would mean that under both the MYBA Standard Charter Agreement and the AYCA Recreational Bareboat Charter Agreement:
• If the Owner is unable to deliver the boat to the Delivery Location within 48 hours or a period equivalent to one-tenth (1/10th) of the Charter Period, or whichever period is shorter, from the beginning of the Charter Period, then the Charterer may cancel and receive back all monies owed.
o In such a situation, the Owner would still be responsible for paying a commission to the charter brokers.
• If a Charterer terminates a charter as a result of COVID-19 (for example, due to a quarantine or flight cancellation), the Owner would have a right to claim all of the instalments paid and due from the Charterer.
o In such a situation, the charter brokers would still be due a commission (and could retain it from any deposits held).
o The Owner/Captain would have a duty to mitigate its losses, which would include trying to re-let the vessel and obtain a refund on any provisions obtained in anticipation of the charter.
o If the vessel is restricted to port, or otherwise unable to sail due to the outbreak, then the Charterer could argue that the vessel was effectively disabled so as to “prevent reasonable use.” This is, likely, an uphill battle.
o The Charterer may also be able to argue the doctrine of “frustration of purpose” (under UK law, with respect to the MYBA) or the doctrine of “impossibility” (under Florida law, with respect to the AYCA) apply, excusing the Charterer from performance. Asserting either doctrine successfully is legally very tricky.
Both the Owners and the Charterers should review their insurance policies to see if any insurance coverage is available.
In summary, the Coronavirus is affecting our everyday lives in unforeseeable ways. If you have pending charter agreements, you should carefully review your agreement and insurance to determine if they provide for any recourse during this time. If you are concerned that your charters may be affected by the Coronavirus and would like to receive advice on your particular situation, Robert Allen Law remains fully operational and its attorneys are available to meet your needs during this difficult time.
* Nothing herein constitutes legal advice. Please contact an attorney to discuss the specifics of your circumstance.
**Special thanks to Lois Henderson.