Gans Steamship Line v. Isles Steamship Co.

United States Court of Appeals for the Fourth Circuit · Contracts

ContractsFrustration of purposeImpossibilityCharter partiesRequisition by governmentfrustrationimpossibilityrestraint of princes

Facts

In 1913, Gans Steamship Line chartered the Belle of Ireland from Isles Steamshipping Company for about five years at £1,370 per month under a charter containing the usual restraint of princes clause. After the vessel entered service in January 1914, the British Admiralty requisitioned it in June 1915 while it was on voyage and retained it beyond the charter period, paying the owner £2,361 15s. per month. The charterer insisted the charter remained in force, tendered the monthly hire throughout, and sued to recover the value of the vessel's use or at least the excess government compensation. The owner denied breach and argued the requisition completely frustrated the charter.

Issue

Did the British government's wartime requisition of the vessel for an indefinite period frustrate the time charter and terminate the parties' rights and obligations, so that the owner could retain the compensation paid by the government? A related question was whether admiralty had jurisdiction over the charterer's claim.

Rule

Admiralty has jurisdiction over a claim arising from breach of a maritime charter contract where the owner admits nonperformance and asserts requisition as an affirmative defense. On the merits, a requisition for a definite period materially shorter than the unexpired charter term causes only interruption, while a requisition extending beyond the charter term causes frustration; when the requisition is indefinite, the court asks whether, in light of the circumstances existing at the time of requisition, release before the charter's end was probable or improbable. If release during the charter period was improbable, the charter is frustrated, both parties are discharged, and any compensation paid by the government belongs to the owner, whether more or less than the charter hire.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lake Meridian Shipping, owner of the M/V North Shoal, time-chartered the vessel to Harbor Crest Traders for 24 months beginning in Seattle. Ten months into the charter, the Canadian government requisitioned the vessel for a fixed 60-day emergency supply mission from Vancouver and then returned it in working order.

What is the strongest argument about the effect of the requisition on the charter?

Explanation. The majority drew a distinction based on the extent of interference. A requisition for a definite time materially less than the unexpired charter period causes only interruption, not frustration. Because only 60 days remained under government control while 14 months were left on the charter, the better view is temporary interruption rather than termination. (Derived from Gans Steamship Line v. Isles Steamship Co. (n.d.).)