In the November, 1974, issue of this journal there was an article entitled “When Payment is Made.” Although it stemmed from a number of cases concerned primarily with the rights of shipowners to cancel charter-parties through late payment of hire, it sought to analyse the ancillary question of exactly when payment could be regarded as having been made. This subordinate issue is probably now as important commercially as the principal problem of charter-party cancellation. In fact, changing exchange rates and occasional international banking failures may have made it more important. The purpose of this article is to look at the present position.

The valid termination of a charter-party by a shipowner was seen to depend on three questions: the actual phraseology of the provision relating to the payment of hire; the validity of tender of late payment before formal termination by the shipowner; and the legal decision as to when payment was made or deemed to have been made. The last is the question with which we are still faced. The problem is by no means resolved, but knowledge of the practical and legal situation is necessary to bankers as well as to shipowners and charterers.

Of the three points mentioned above two are not directly relevant to banking: the actual phraseology of the pay provision relating to the payment of hire and the validity of late payment before formal termination by the shipowner. In fact the decision of the House of Lords in The Laconia 1 has firmly overruled the decision in the same case in the Court of Appeal on the second point where, following the decision in The Georgios C. it had been held that, despite a breach by a charterer of the payment obligation, the position could be cured by late payment if it were prior to the termination of the charter-party by the shipowner. In fact it was indicated that the decision should not have been followed in The Zographia M., a case to which later reference is made in this article. As to the first point, it is evident that charterers should ensure that the method of payment predicated in the charter-party achieves certainty in the light of the mechanics of their bankers’ transfer operations.

The banking aspect with which we are concerned is the time of payment. It arises in relation to two facets: the fulfilment of the contract—that is of the charter-party—in that payment has to be determined as having been effected at a particular time; and as to the circumstances in which receipt by a banker of late payment may amount to waiver. Let us see the pertinent decisions.