When the Smoke Clears: Maritime Contract Claims After Hormuz Disruption

The Strait of Hormuz remains one of the world's most strategically significant maritime chokepoints. Heightened geopolitical tensions have increasingly transformed the waterway into a zone of active danger – exposing seafarers to immediate safety risks and creating complex legal consequences for shipping companies, charterers and cargo interests. But the legal implications in the Strait are not unique and apply to nearly any maritime waterway abutting an armed conflict. This Holland & Knight alert addresses the principal contractual and charterparty claims seen arising from Strait of Hormuz delays, drawing on legal principles and precedents developed during COVID-era port congestion.

Potential Claims for Delays in the Strait of Hormuz

When delays occur, parties may seek compensation or relief under their contracts. Common claims include:

• Demurrage Claims. In a charterparty or contract of affreightment (COA) circumstance, if a vessel is delayed beyond agreed laytime, demurrage considerations will be implicated for charterers of ships. It is more complicated with containerized shipping, where consideration of through bills of lading and whether the goods are shipped on store door or container yard terms may result in different demurrage considerations.
• Force Majeure Provisions. Many contracts include force majeure clauses that excuse or suspend performance due to extraordinary events. Under U.S. law, force majeure is a creature of contract and is construed strictly; applicability will depend on the clause's wording and whether the asserted event is beyond the parties' control and within the risks the clause allocates.
• Deviation and Delay Clauses. Charterparty agreements may contain specific provisions addressing delays caused by deviation from the planned route or waiting at anchor.
• Frustration/Commercial Impracticability. Prolonged delays may support an argument that the contract is discharged. Under U.S. law, frustration and commercial impracticability are narrowly applied and require that the supervening event render performance radically different – not merely more difficult or expensive.

The legal analysis typically hinges on the precise terms of the charterparty, cause of the delay and whether the event falls within the scope of force majeure or other relevant clauses.

Comparison with COVID-Era Port Congestion

The COVID-19 pandemic caused unprecedented port congestion issues, with vessels waiting days, weeks or months to berth due to facility closures, labor shortages, health protocols and logistical failures. This experience with COVID-19 pandemic issues generated valuable charterparty claim precedents applicable to Strait of Hormuz delays. Key parallels include:

• Nature of Delay. Both scenarios involve delays outside the parties' direct control, though COVID congestion stemmed from public health measures, while Hormuz delays are linked to security, war and geopolitical factors.
• Force Majeure Interpretation. Pandemic-era decisions generally required proof that the force majeure event directly prevented performance and that the party invoking the clause could not reasonably avoid the effects. The same causation and proof issues would likely arise for Hormuz-related delays.
• Demurrage and Laytime. In both contexts, the calculation of laytime and demurrage turned on whether the delay fell within the contractual definition of "waiting time" or "force majeure," reinforcing the importance of precise contract language and causation evidence.
• Mitigation Duties. Parties need to demonstrate reasonable efforts to avoid or minimize losses. Under U.S. law, the duty to mitigate is well established, and courts will usually reduce recoverable damages where a party failed to take reasonable steps to avoid foreseeable harm. Failure to mitigate in connection with Hormuz delays may therefore limit recoverable damages.

These precedents underscore the importance of robust contract drafting, clear risk allocation, reengaging with your broker or the insurer directly to address the scope of coverage, and proactive communication between parties when facing chokepoint disruptions.

Frustration of Contract

The doctrine of commercial impracticability and frustration of purpose may discharge contractual obligations where a supervening event, beyond either party's control, renders performance radically different from what was undertaken. Under U.S. law, the threshold is high, as previously reported by Holland & Knight. Rerouting a vessel around the Cape of Good Hope, though more costly than transit through the Suez Canal, may not render performance commercially impracticable. The analogy to a Hormuz closure is direct: Mere increased cost or delay is usually insufficient; the event must fundamentally alter the nature of the contractual obligation. Voyage charterparties are more susceptible to these arguments than time charterparties, where charterers bear a broader allocation of risk. Pandemic-era case law reinforced that frustration is unavailable where the supervening risk was foreseeable and could have been addressed through contract drafting – a particularly important consideration for parties regularly transiting the Strait of Hormuz.

Potential Impact on P&I Clubs

Protection and Indemnity (P&I) clubs provide shipowners and charterers with indemnity cover for third-party liabilities not covered by hull and machinery policies. Hormuz disruptions raise several significant coverage issues. War risk exclusions are the primary concern: Standard P&I rules typically exclude liabilities arising from war, warlike operations or hostilities. Where losses are attributable to military activity – such as vessel seizures or drone attacks – members may need to procure and rely on separate war risk cover. Beyond war risk, clubs may face exposure from cargo claims arising from prolonged delays, crew injury claims and third-party collision liability. Members should notify their clubs promptly upon any incident, engage closely when agreeing to Letters of Undertaking and review their certificates of entry to understand the precise scope of cover.

Conclusion

Delays in transiting the Strait of Hormuz pose significant legal and operational challenges for the international shipping sector. COVID-era precedents highlight the critical importance of contractual clarity, precise force majeure language and active mitigation. Parties should consider the following recommendations:

1. Contract Review. Conduct a thorough review of existing COAs and charterparties to assess provisions relating to force majeure, laytime, demurrage and deviation, with particular attention to whether Hormuz delays would fall within existing protective clauses.
2. Insurance Coverage Assessment. Review P&I and war risk insurance policies to determine the extent of coverage for delays or losses arising from geopolitical events in the Strait of Hormuz.
3. Documentation Practices. Maintain contemporaneous records of all communications, voyage data and delay-related events. Strong documentation is essential for supporting or defending claims.

Early engagement can assist with assessing the merits of claims or defenses, drafting contract amendments to address emerging risks, coordinating with P&I clubs on coverage, and representing parties in Society of Maritime Arbitrators arbitration or court litigation.

For more information or questions, please contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.