Ulgener

R. Zehra Çolak

Associate Lawyer

Charter Agreements are one of the most important elements of maritime transportation and are contracts which impose debts on both parties. While the Charterer undertakes to delivery of the cargo and pay the freight, which is the delivery and transportation fee, the carrier undertakes the obligation of the transportation of the cargo in return for the freight. These contracts, like others, can be terminated after the fulfilment of the performance obligation or without the performance obligation. Well, if the charterer unilaterally terminates the contract before the voyage or does not deliver the cargo at all for any reason, does the carrier qualify for the freight, how and based on what is the entitlement freight determined? The subject of this article will be the carrier's unilateral termination of the contract before the voyage or failure to fulfil its obligations due to the failure to deliver the cargo at all.

Pursuant to the Turkish Commercial Code (TCC), the charterer has the right to terminate the Voyage Charter Agreement until the vessel completes its loading and begins it voyage in accordance to the contract. In Article 1040, which is the former version of Article 1158 of the TCC, If the charterer, terminates the contract before beginning the voyage, it was foreseen to pay a "Dead Freight" to the carrier and accordingly, the dead freight to be paid corresponded to half (%50) of the agreed freight. However, due the “Dead Freight” application being incompatible with today's maritime trade practice and that the paid freight costs correspond to serious amounts, this practice has been abandoned and the law has been amended.

After the amendment of the law, Article 1158 of the TCC stipulates that if the Voyage Charter Agreement is terminated before the vessel's loading is complete, the charterer is required to pay a termination indemnity to the carrier. According to the amended regulation, the carrier has the right to claim the earnings that he has been deprived of due to the termination of the contract and the receivables that have arisen until the time of the termination indemnification. In case of doubt in the amount of the indemnity, thirty percent (%30) of the total freight agreed upon shall be deemed to be the lost income. However, it should not be forgotten that, within the time period required for the performance of the terminated contract, the income earned by the carrier by making new freight contracts will be deducted from the amount of indemnity.

In addition, if the carrier refrains from loading although there is no notice of termination, the wish of the charterer to terminate may also arise implicitly. As a matter of fact, if the loading period and, if agreed, the demurrage period has expired, but the loading has not started yet, the carrier has the right to accept the contract is terminated and to demand termination indemnity in accordance with TCC 1158. However, in such a case, the carrier is obliged to provide written notification, via fax, electronic letter or similar technical means, to the charterer when the period for which he is obliged to wait has expired.

In a precedent case on this matter, the plaintiff claimed that they had signed a freight contract with the defendant company, and although being informed that she was ready to load, the vessel was not loaded, so she left the port at the end of the determined waiting period and for reason that they were entitled to freight. The Court of First Instance decided to dismiss the case on the grounds that there was no damage suffered due to the termination of the contract, as well as no evidence was presented regarding the deprived earnings and so the plaintiff could not prove that there was suffered loss for this case. However, the Supreme Court reversed the decision of the Court of First Instance stating that; in case of doubt, thirty percent of the total freight determined would be deemed for lost earnings. The relevant parts of the decision are as follows;

“…According to the contract of carriage concluded between the parties, it is certain that the contract of carriage has been terminated by the defendant before the vessel has left from Venice Marghera Port and has not yet loaded the cargo during the continuation of the voyage. In Article 1158/2 of the TCC, as an indemnity for termination, the carrier may claim the income lost due to the termination of the contract and the receivables that have arisen until then, in case of doubt, thirty percent of the total freight agreed will be deemed to be the lost income; In relation to this situation, the fact that the vessel does not go out of its normal route and does not experience any loss in terms of time does not mean that the carrier who does not take the cargo does not suffer any damage and therefore cannot claim indemnity. In addition, how the indemnity to be determined in case the loss of earnings cannot be calculated exactly is specified in Article of the TCC.

When all these issues are evaluated together, it is necessary to decide for an indemnity in favour of the plaintiff in line with the principles determined above, it was not correct to dismiss the case with an erroneous assessment, and so the judgment had to be reversed for the benefit of the appellant…”[1]

As it can be seen, even though the Dead Freight application has been abandoned, if the Charterer unilaterally terminates the contract before the voyage or does not deliver the cargo at for any reason, the carrier has the right to demand thirty percent (%30) of the total freight agreed upon shall be deemed to be the lost income.

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[1] The Supreme Court Assembly of Civil Chambers decision numbered E. 2019/5178 K. 2021/5171 T. 17.6.2021