Voyage Charters. Laycan. Definition and general notes.

The term "laycan" is habitually used in the negotiation of charterparties, to refer to the earliest date at which the laydays can commence and the date after which the charter can be cancelled if the vessel has not by then arrived.
Per Clarke J. in SHV Gas Supply and Trading SAS v Naftomar Shipping and Trading Co Ltd Inc [2005] EWHC 2528 (Comm) at para 9.

Laycan

LAYCAN is a period of time which Rix LJ defined in Tidebrook Maritime Corporation v Vitol SA of Geneva (The Front Commander) [2006] EWCA Civ 944 at para 38 as:

(a) the earliest day upon which an owner can expect his charterer to load and
(b) the latest day upon which the vessel can arrive at its appointed loading place without being at risk of being cancelled.

As indicated in the name itself, ‘laycan’ is an agreed time range at the end of which comes the time (date and hour) when the charterers are entitled to exercise their option and cancel the charterparty for non-arrival of the owners’ vessel. Usually laycan expressed in final RECAP as "LAYCAN: 27-29 June", which means that laycan starts on 27 June at 0001 in the morning and finishes on 29 June at 2359 in the evening.

It is difficult to underestimate an importance of laycan provision. The owner if missing laycan is under threat of cancellation of the charterparty which means that he incurred futile expenses on ballast leg to load port and furthermore faces new expenses looking for another employment; the charterer, when provided with definite laycan range, does not have to wait for delaying vessel until such delay becomes unreasonable as the common law requires. He is free to cancel charterparty on arrival of cancellation date/time and look for a substitute tonnage. Unless expressly stated otherwise, the charterer have only one thing to do, namely, to give a notice of cancellation to the shipowners.

The charterers can, but are not obliged to exercise cancellation option. It is not unusual for the parties to extend laycan for a day or so, considering market condition and availability of substitute tonnage in the area. Some standard forms of voyage charters, such as SHELLVOY5 and SHELLVOY6 (read more NOR and Laycan page), specifically define procedure for laycan extension. In some cases such extension may not answer the purpose it serve and put the charterers in quite difficult situation (especially when the charterers have commitments to the third parties which dependant on timely arrival of the owners’ vessel) with many concomitant legal issues as case of Progress Bulk Carriers Ltd v Tube City IMS LLC [2012] EWHC 273 illustrates. In that case unauthorised substitution of the owners’ vessel led to almost one month postponement of laycan, which charterers were to accept, but which in its turn led to significant economic losses charterers had incurred under their subsiding sale contract with the buyer. Buyer agreed to shift shipment date but only for considerable discount in purchase price. The owners who initially agreed to compensate the charterers for all damages resulting from their failure to provide the contracted vessel, later, when the charterers hold them responsible for anticipated loss which they would suffer due to late shipment, made a "take it or leave it" offer. The owners required acceptance of the substitute vessel, clean, with a small reduction per metric ton on the freight and the agreement of the charterers to waive all claims for loss and damage arising out of the nomination of a substitute vessel outside the contractual laycan and its late arrival. The charterers were forced to accept the owners’ terms under protest. Fortunately for the charterers that agreement was held voidable for duress both in the arbitration and in the High Court.

It is manifest that the right of cancellation could not be validly exercised until the arrival of the cancellation date and any premature notice purporting to cancel the contract constitutes an anticipatory breach and repudiation of the charterparty.

Laycan is not specific feature of voyage charters only, it is habitually used in the negotiation of charterparties, to refer to the earliest date at which the laydays can commence and the date after which the charter can be cancelled if the vessel has not by then arrived. By extension the term is to be found in FOB sales, so as to provide that the seller can cancel the contract if the vessel, which it is the buyer’s duty to procure, does not arrive at the port by the cancellation date. The expression does not fit so easily into the confines of a CIF contract where it is the seller’s obligation to make a contract of carriage, ship the goods on board and tender the customary documents.

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