The “Kyla” suffered a casualty whilst on a time charter. Repairs would have cost more than its sound market value but less than its insured value. Owners contended that the
time charter was frustrated because the cost of repairs exceeded the sound market value and suggested that there was a principle of law to that effect. Owners’ claim succeeded in arbitration.
Charterers appealed on a question of law and were successful before Flaux J, who rejected the principle contended for by Owners and, applying general principles of frustration, decided that the charter had not been frustrated, because it provided for H&M insurance in an amount greater than the cost of repairs.
This case note has been contributed by Justin Gan Boon Eng, LLB (Hons) (NUS), an advocate and solicitor of the Singapore Bar
Finally, Bunge v Kyla emphasizes the link between clauses related to insurance and the allocation of contractual risks (see ). However, although an insurance clause is an important indication of the risk allocation arrangements in a contract, care should nonetheless be taken to consider the contract’s full provisions in detail before concluding that the risk of a particular event falls one way or another.