What’s Wrong with “Quiet Enjoyment”?

As is to be expected with the U.S. and U.K postal services involved, an old issue of Lloyd’s List arrived this week with the blaring headline, “Maersk Lines’ quiet enjoyment clause sparks lender discontent.” We don’t understand why that would be the case since the clause has been around forever and is, in fact, indirectly beneficial to lenders.

First, what does quiet enjoyment mean? Although it more commonly appears in real estate law, in this context, the phrase refers to the legal right to the undisturbed use and enjoyment of leased property by the lessee or charterer. The charterer in exchange for entering into a long-term agreement with the owner expects, quite reasonably so, to have unfettered use of the property. What incentive would it have to enter into an agreement where its service or trade could be disrupted? The quid pro quo for this is, of course, that the charterer meets all its obligations, including the payment of hire, under the charter.

And, just as importantly, it should also be acknowledged that the uninterrupted use of the vessel is also in the banker’s interest as it insures the certain flow of charter hire, which provides the cash flow to pay the loan.

This is only an excerpt of What’s Wrong with “Quiet Enjoyment”?

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