Ilovepdf Merged 2

Defence Guides
Notices of redelivery in a nutshell

The purpose of a notice of redelivery is to enable the owner to have enough
time to fix the ship for her next employment. Usually the charter party
will provide for example that “Charterers are to give Owners not less than
20/15/10/7 days approximate notice of vessels expected date of re-delivery,
and probable port and 5/3/2/1 day(s) definite notice of redelivery”.
Is the tender of a redelivery Although an approximate notice Can a redelivery notice

notice a prerequisite for of redelivery does not need to be be withdrawn unilaterally
redelivering a ship? precise, it must be given honestly and by charterers?
upon reasonable grounds. Owners
It is important to note that charterers will not be able to claim damages if English law states that parties are
can redeliver a vessel back to owners the timing of such a notice is incorrect not bound by representations made
without issuing notices of redelivery. but was deemed reasonable and “WP” or “WOG”. As a result, if
Although charterers will be in breach given honestly at the time when the charterers tender a redelivery notice
of contract, owners will not be able to notice was issued. Many events can with reservations such as “AGW,
reject the delivery of the ship arise between the first notice (20 days WP, WOG”, owners subsequently
and insist in continuing the charter. in the above example) and the actual fix the ship for her next employment
redelivery (port congestion etc.). but in contravention with this notice
Does an approximate notice need charterers then decide to employ
to be accurate? Definite notices of redelivery her for another voyage (within the
allowed charter period), owners will
An approximate redelivery notice A definite notice will have to be correct not be able to refuse such order nor
implies that there is no absolute and accurate. claim damages for loss of profits
obligation to redeliver on the
If charterers redeliver the vessel for cancelling the next fixture (The
approximate date given. An
within the charter party permitted Zenovia [2009]). To avoid this risk,
approximate redelivery notice is not
period but give a definite redelivery owners should insist on an unqualified
contractually binding or a condition
notice with a shorter time frame than notice from charterers.
precedent to redelivery, unless the
charter party and/or the notice state that required in the charter party and/
otherwise. or do not serve any notice, owners
will have a right to damages, although
owners will still be obliged to take
delivery of the ship.
The breach will only occur on the date

of redelivery and not before, even if it is
obvious that charterers will be in breach.
Defence Guides
About the Author
Julien Rabeaux
Claims Team Manager
T +65 6416 4894
E Julien.Rabeaux@westpandi.com
Damages
The amount of damages payable by Julien is a Claims Team Leader in West
Where charterers serve contractual
of England’s Singapore Office. He
charterers will be measured by putting redelivery notice/s but then redeliver studied law in France and England and
owners in the position in which they the vessel late, owners will be entitled subsequently qualified as a solicitor in
would have been in had notice(s) been to claim damages at the charter party a London shipping law firm. Julien was
properly tendered (see The Great hire rate for the “overspill” period. based in West of England’s Hong Kong
Creation [2014]). Office for 5 years, before moving to
In any event, owners cannot usually Singapore when the Club launched its
Where charterers redeliver the vessel claim additional damages for loss office there. Prior to joining the Club,
without having served the redelivery of business opportunity / lost profits Julien worked for another IG Club in
London for 7 years.
notice/s required by the charter and/ in relation to an actual or potential
or redeliver the vessel earlier than the follow-on fixture that has been lost Get in touch
notice period in the charter, owners due to charterers’ late redelivery of West of England Insurance Services
will be entitled to the hire which would the vessel. These types of losses are (Luxembourg) S.A.
have been earned during the balance not considered to be recoverable
of the notice period after charterers’ because these were not within the Singapore Office
77 Robinson Road
actual (premature) redelivery. For contemplation of the parties at the
Level 15-01, Robinson 77
example, if 20 days’ notice is required time the charter party was entered Singapore 068896
and charterers only give a notice 7 into. However, if when fixing the
T +(65) 6403 3885
days before redelivering the vessel charter, owners were also fixing a
then the starting point for damages follow-on fixture and owners state London Office
would the amount of hire owners this to charterers at the time of fixing, One Creechurch Place
would have earned during the 13 days owners may be able to claim damages Creechurch Lane
after actual redelivery. Credit will for the loss of such follow-on fixture, London EC3A 5AF
then be given to charterers for the hire for example, if the follow-on fixture is T +44 20 7716 6000
earned by owners in any subsequent above market rates at the time of fixing. E publications@westpandi.com
charter party in reasonable mitigation W www.westpandi.com
of their loss.
January 2019
© West of England Insurance Services.
This article was written by Julien All rights reserved. The opinions expressed
Rabeaux in the Club’s Singapore office, in this publication are those of the authors.
with additional input from Mills & Co. This note is intended for general guidance
only and should not be relied upon as legal
advice. Should you require specific advice
on a situation please contact us.
DCG-NRD-GBR-19-V1
The West of England Ship Owners Mutual Insurance Association (Luxembourg)

UK office One Creechurch Place, Creechurch Lane, London EC3A 5AF
Tel +44 20 7716 6000 Email mail@westpandi.com www.westpandi.com Follow us on
Defence Guides
Cancellation in a nutshell
Exercising a right to cancel a charterparty terminates the charterparty along
with all contractual obligations resulting in parties no longer being bound to
one another. The right to cancel may also be exercised even when there is no
breach on the part of owners (see The Democritos [1976] 2 Lloyd’s Rep 149).
a) Cancelling dates – Fixed, b) Readiness as a pre-requisite This position can be varied

laycan and narrowing clauses to cancellation contractually. For example, if the
charterparty states that “the vessel’s
The right to cancel usually arises when Certain charterparties like the Gencon
holds shall be clean and in all respects
owners fail to deliver the ship by the 76, Gencon 94 and Asbatankvoy
ready …. on arrival at first loading port
cancelling date or if the ship is not state that the right to cancel accrues
if different from place of delivery. If
ready to load by the cancelling date. when the ship is not ready to load
the vessel fails hold inspection then
The cancelling date can either be a by the cancelling date. Readiness in
the vessel shall be off-hire…until
fixed date or a laycan period to which the laytime context is different from
the vessel has passed a subsequent
the right to cancel is only exercisable readiness in the cancellation context.
inspection.” (NYPE 2015), it is arguable
after the laycan period. The length of In the former, a vessel is not ready
that for a ship to be off hire, the ship
the laycan period is a matter for both even if a material defect to the vessel
must have first been accepted and
parties to agree on. can be remedied quickly.
that the ship was ready. This implies
Charterers would be interested in However in the latter, the defect that charterers will have to accept the
a fixed date of arrival so that they preventing the vessel from being ship and that their remedy is to place
can make firm arrangements for the ready must be material in relation the vessel off hire and charterers
loading of cargo. On the other hand, to the commercial purpose of the cannot cancel the charterparty just
it would be in owners’ interest to have charterparty. For example, unless because the holds are unclean.
a flexible date for arrival to take into a charterparty provides otherwise,
account delays in delivering the ship. a shortage of bunkers on delivery
may not be seen as material for
Parties may also agree on a narrowing
the purposes of cancelling the
of the laycan prior to the ship’s
charterparty (The North Sea [1997]
delivery. Again, the choice of who
2 Lloyd’s Rep 324).
should narrow the laycan is a matter
for both parties to agree on. If the
onus is on charterers to narrow the
laycan, a failure to serve a valid laycan
narrowing notice would not change
the laycan period. On the other hand,
if the onus is on owners to narrow
the laycan, a failure to serve a laycan
narrowing notice may open owners
to claim for damages by charterers.
If the charterparty does not have
a stipulated time of delivery or a
cancelling date, owners would
be under an implied duty to deliver
the ship with reasonable despatch
(see The Democritos [1976]
Defence Guides
Advance cancellation deemed to be amended such that the Damages

seventh day after the new readiness
a) Can owners require charterers a) Charterers’ exposure to damages
date shall be the new cancelling date.
to cancel in advance if owners in the event of early cancellation
A similar cancelling clause can be
cannot deliver the ship by the
found in clause 16 of the NYPE 1993. In the event charterers prematurely
cancelling date?
The inclusion of such a clause may cancel a charterparty, there would
In the absence of an express provision, assist owners in the event their ship be a repudiatory breach of the
owners are not entitled to compel is delayed but they do not wish to charterparty (see The Mihalis Angelos
charterers to exercise their right to perform any unnecessary [1971] 1 QB) and this would expose
cancel. Owners may therefore be ballast voyage. charterers to a claim for damages by
placed in a difficult position if they owners. If owners had fixed another
b) Can charterers cancel in advance
know that they are unable to deliver charter with lower rates because the
of cancelling date?
the ship in time. Owners will be market had fallen, owners would be
contractually obliged to proceed to Under English law, there is no entitled to damages for the difference
the delivery port at their expense, anticipatory right to cancel a between the previous charter rate and
knowing that there will be a risk that charterparty (see The Madeleine the current market rate. The duration
charterers will cancel the charterparty [1967] 2 Lloyd’s Rep 224). In other to which owners are entitled to claim
on arrival. words, charterers are not entitled such damages is the time period of the
to a premature cancellation of the previous charterparty. As for voyage
This situation is remedied by certain
charterparty before the cancellation charterparties, owners are similarly
pro-forma charters. For example,
date or before the laycan period. entitled to damages for the difference
should owners anticipate that the
Charterers’ premature cancellation is in freight rates. The duration would be
ship will not be ready to load by the
likely to lead to a claim for damages a reasonable time taken to complete
cancelling date, the Gencon cancelling
by owners arising out of a repudiatory the voyage in the cancelled charter.
clause allows owners (provided
breach of the charterparty.
they have exercised due diligence to Needless to say, should the market
Notwithstanding the above, the fact
meet the cancelling date) to notify rates go up, there would arguably be
that there is no anticipatory right to
charterers of a new readiness date no loss on the part of owners
cancel a charterparty does not affect
and to ask whether charterers will and owners would only be entitled
the other rights of a charterer. Hence,
exercise their option of cancelling to nominal damages.
charterers are entitled to terminate
the charterparty or to agree to a new
a charterparty if owners are in a b) Charterers can only claim for
cancellation date. Charterers’ option
repudiatory breach of the charterparty damages against owners if they
must be declared within 48 hours
or if the contract is frustrated (see The can establish a breach on the part
after receipt of owners’ notice. If
Madeleine [1967] 2 Lloyd’s Rep 224). of owners
charterers do not exercise their rights
to cancel, the charterparty shall be Whilst charterers have an option to
cancel a charterparty, the right of
cancellation does not automatically
give rise to a right to claim damages
against owners. Charterers’ right to
claim for damages would only arise if
they can successfully prove a breach
on the part of owners.
Defence Guides
c) Owners do not have an absolute note that the owner’s appeal against e) Charterers can only claim for
duty to arrive on time Popplewell J’s decision is due to be damages against owners if damages
heard in October 2018). were not caused by charterers’
Owners are under no absolute
own breach
obligation to ensure that the vessel The difference in formulation reflects
will arrive by the cancelling date and the fact that in a time charterparty A charterer may not rely on a cancelling
are not in breach if she does not. the service commences when the clause if his own breach caused the
However, the cancellation date clearly vessel arrives at the load port, whereas ship to arrive late. For example, where
reflects the parties’ expectations as to in a voyage charterparty the service charterers had initially ordered a ship
when the vessel will in fact arrive. The includes the approach voyage, to proceed to a particular range of
law accordingly seeks to give effect which must be prosecuted with ports but had subsequently nominated
to those expectations by implying a utmost dispatch. a specific port in another geographical
term with regard to the vessel’s arrival range, the court held that such a
d) Owners do not have an
relative to that date. The scope of that nomination was unreasonably late
absolute duty to deliver
term varies according to the nature of especially when the nomination was
the ship in good condition
the charter. In a time charterparty, the made after the ship had taken her
term is that the owners will exercise There is no obligation arising out course towards the first range of ports
due diligence to ensure the arrival of of the cancelling clause that the vessel (see Shipping Corporation of India v
the vessel by the cancelling date. In a must be in a condition conforming with Naviera Letasa S.A. [1976] 1 Lloyd’s
voyage charterparty, if there is no date the charterparty by the cancellation Rep 132). As a corollary to the above,
in the charterparty to which the vessel date. As such, damage to the ship charterers would not be entitled to claim
is expected to load, the law implies a which could not be repaired in time for damages if the damages stem
term that owners must (as an absolute before the cancellation date was from their own breach or fault.
obligation – and not simply one of due not considered a breach of the
f) A charterer cannot claim for
diligence) commence the approach charterparty (see The Democritos
damages which solely arise out
voyage by a date when it is reasonably [1976] 2 Lloyd’s Rep 149).
of his decision to cancel the charter
certain that the vessel will arrive at
the load port by the cancelling date Unless charterers can show that the
(PACIFIC VOYAGER [2017]), although decision to cancel amounted to a
reasonable mitigation of their losses,
charterers cannot claim damages for
losses which are solely due to their
decision to cancel.
Defence Guides
About the Author
Eugene Cheng
Claims Executive
T +65 6416 4895
E Eugene.Cheng@westpandi.com
Eugene is a claims executive in West of

England’s Singapore office, handling
both P&I and FDD matters.Prior to joining
the Club, he practised law at a boutique
shipping law firm for close to five years.
Apart from his contributions to the Club’s
When do charterers lose if charterers had re-nominated a load
defence guides, he has contributed to
the option to cancel port after the ship was not Halsbury’s Laws of Singapore (Shipping)
able to reach by the cancellation date. and his articles have also been published
a) Expiry of the time stated (see St Shipping & Transport Inc v in the Singapore Academy of Law Journal.
in the clause Kriti Filoxenia Shipping Co SA [2015]
EWHC 997 (Comm).) Get in touch
Cancellation clauses often set an
West of England Insurance Services
express time limit within which the d) Charterers’ own breach (Luxembourg) S.A.
right to cancel can be exercised.
For example, clause 14 of the NYPE As stated in 3(d) above, charterers Singapore Office
1946 form provides for charterers may not rely on a cancelling clause if 77 Robinson Road
their own breach caused the ship to Level 15-01, Robinson 77
to have the option to cancel “at any
arrive late. Singapore 068896
time not later than the day of the
vessel’s readiness”. In the absence of T +(65) 6403 3885
Consequently, the charterer is also
any such express time limit, it is likely barred from claiming damages. London Office
that a term would be implied that the
One Creechurch Place
option to cancel be exercised within Conclusion Creechurch Lane
a reasonable time of the vessel being London EC3A 5AF
tendered for delivery. The cancellation of a charterparty
T +44 20 7716 6000
is an act bearing significant
c) Charterers’ waiver E publications@westpandi.com
consequences for both owners and W www.westpandi.com
However, if charterers say or do charterers. Members are advised to
anything before the expiry of the right approach their usual contact/claims
to cancel and this expressly indicates handler at the Club if they require any © West of England Insurance Services.
clarifications on the rights in relation to All rights reserved. The opinions expressed
that charterers have opted not to
in this publication are those of the authors.
cancel, the right to cancel will be lost. the cancellation of a charterparty.
This note is intended for general guidance
Obvious examples would be where only and should not be relied upon as legal
charterers accept delivery of the ship advice. Should you require specific advice
and begin to load the ship (see Moel March 2018 on a situation please contact us.
Tryvan v Weir [1910] 2 KB 844). The This article was written by Eugene
right to cancel would also be waived Cheng in the Club’s Singapore office,
with additional input from
HFW Singapore.
DGC-C-GBR-19-V1

Defence Guides
Clause paramount in a nutshell

Introduction: Delivering the vessel to satisfied. The duty would only be
what is a clause paramount? charterers at the beginning satisfied if due diligence is shown by
of the charterparty: how does every person to whom any part of the
A clause paramount incorporates the
the incorporation of a clause work has been entrusted, whether
United States Carriage of Goods by
employees, agents or independent
Sea Act or the Hague/Hague Visby paramount affect owners’ rights
contractors (see The Muncaster Castle
Rules (“the HV Rules”) into a contract. and obligations?
[1961] 1 Lloyd’s Rep 57).
Although the HV Rules were designed a. The condition of the vessel: an
to regulate the legal relationship The replacement of the absolute
absolute obligation vs due diligence
between carriers and shippers, and the warranty of seaworthiness by
same would usually be found in the Under English common law, the an obligation to exercise due
reverse sides of bills of lading, the HV obligation on ship owners is to diligence relieves ship owners from
Rules can also be incorporated into provide a seaworthy ship. This is responsibility for latent defects in the
charterparties. unconditional and, on delivery of ship. For example, ship owners will be
the vessel to charterers, owners will protected against defects which could
For instance, a clause paramount can usually be liable, irrespective of fault, not be discovered by the ship owner or
be found in the NYPE time charter for any breach of the undertaking. by competent experts exercising due
form. As for voyage charterparties,
diligence. (See The Muncaster Castle
such clauses are in the Asbatankvoy, However, when a clause paramount
[1961] 1 Lloyd’s Rep 57). Under most
Baltimore 1976, Amwelsh 1993 and incorporates the HV Rules into a
charterparty forms, a ship has to be
Norgrain 1989 forms. charterparty, ship owners are only in
delivered, ready to receive cargo with
breach of their duty if they fail, for
Provided that the charterparty (either clean swept holds which are “tight,
example, to exercise due diligence to
voyage or time charterparty) makes staunch, strong, and in every way
make the ship seaworthy before and at
it clear that the parties intended to fitted for the service”. This is a strict
the beginning of the voyage. (see The
incorporate a clause paramount into obligation. Thus, the ship owner is in
Fjord Wind [2000] 2 Lloyd’s Rep 191).
the charterparty, the English courts breach if the vessel is not “in every
will give effect to that intention, even b. Under a clause paramount, way fitted for service”, regardless of
though this may involve manipulating how strict is owners’ obligation any fault on his part.
the wording of the clause paramount of due diligence?
However, as mentioned above, with the
and even though it may mean that The notion of exercising due diligence incorporation of the clause paramount,
some of the terms referred to in the entails two basic requirements. the absolute duty is converted to one
clause paramount have to be ignored Firstly, ship owners must carry of merely exercising due diligence to
(see The Saxon Star [1959] AC 133). out any inspections, repairs or make the ship seaworthy for loading
other preparations which, in the and the cargo-carrying voyage.
circumstances, a skilled and prudent
For example, if the vessel’s cranes
ship owner would reasonably carry out
break down on delivery and the
to ensure that the ship is seaworthy.
charter does not include a clause
Secondly, any work in fact carried out
paramount, the owner will be in
must be done with reasonable skill,
breach, regardless of fault. If the
care and competence (see Union of
charter contains a clause paramount,
India v Reederij Amsterdam [1963]
the owner may be able to defend a
claim from the charterers if he can
Engaging competent contractors to demonstrate that he exercised due
perform the necessary work does diligence to comply with his obligation
not mean that ship owners’ duty to make the vessel “in every way fitted
to exercise due diligence has been for service”.
Defence Guides
c. Under a clause paramount, do owners d. Does the clause paramount vary During the charterparty: how
have to exercise due diligence at the the ship owner’s obligations when does the incorporation of a
beginning of each voyage or just at tendering an NOR? clause paramount affect owners’
the beginning of the charter? rights and obligations?
Ship owners should note that the
Under time charters with consecutive presence of a clause paramount in a. Obligation to maintain the ship
voyages, there is no obligation of a charterparty does not affect the
seaworthiness at the beginning of requirements for tendering a valid As noted in 2) a) and c) above, the
each voyage under the charter. The notice of readiness (“NOR”) (For more incorporation of a clause paramount
obligation of seaworthiness only exists on NOR, please refer to our Notice into a time charter converts owners’
at the beginning of the charter when of readiness in a nutshell defence absolute obligation of seaworthiness
the ship is delivered. However, if the guide. Therefore, even if due diligence when the ship is delivered to an
clause paramount is incorporated in is exercised by ship owners but the obligation of due diligence at the
the time charterparty, the ship owner vessel’s holds are nonetheless unclean beginning of each voyage under
is bound to exercise due diligence at and not ready to receive cargo, the the charter.
the beginning of every voyage. tendering of the NOR would not be This fresh obligation of due diligence
effective to commence the running is in addition to owners’ pre-existing
Notwithstanding the above, the courts
of laytime nor would charterers have obligation under clause 1 of the
have yet to fully accept the above
to accept delivery of the vessel. NYPE form to maintain the ship’s
proposition that due diligence must
be exercised at the outset of every hull, machinery and equipment
voyage in the event the HV Rules are throughout the entire charter period.
incorporated into a charterparty (The As such, members should note that the
Hermosa [1980] 1 Lloyd’s Rep 638). continuing duty to maintain the ship
Consequently, ship owners should be would still exist under the NYPE form
cautious and ensure that due diligence notwithstanding the clause paramount.
is exercised at the beginning of every
voyage if a clause paramount exists
in the charterparty.
Defence Guides
b. Can ship owners use the exclusions Notwithstanding the above, members for financial losses due to delays in
of liability contained in the HV Rules should note that the above cases loading the cargo, as well as expenses
to avoid liability? are confined to their own facts and for extra tank cleaning and pumping
members should not assume a similar of the cargo which were held to be
i) Article IV rule 2 of the HV Rules:
outcome would be found in a case losses and damages related to goods
the HV Rules contain a list of
with different facts. and therefore time barred due to the
exclusions of liability under Article IV
incorporation of the HV Rules into
rule 2. One of the most important of ii) Deviation: certain standard form
the charterparty (See The Ot Sonja
these states: “Neither the carrier nor charter parties such as the NYPE only
[1993] 2 Lloyd’s Rep 435 and The Stolt
the ship shall be responsible for loss state that the vessel has the liberty
Sydness [1997] 1 Lloyd’s Rep 273).
or damage arising or resulting from... to deviate in order to save life and
(a) act, neglect, or default of the property but does not specify that Moreover, claims in respect of
master, mariner, pilot or the servants the ship owners’ liability resulting damaged or lost property belonging
of the carrier in the navigation or in from such deviation is excluded. to charterers which are kept on board
the management of the ship…”. the vessel may be caught by the one-
The HV Rules on the other hand
year time bar if they are regarded as
Ship owners are entitled to rely on all specifically state that ship owners
“goods” which are due to be delivered
further exceptions provided by the HV would not be liable for any losses or
at a later date. However, a claim for
Rules so long as they are able to prove damages resulting from reasonable
loss of charterers’ bunkers on board
that they fall within such exceptions. deviation. As such, a clause paramount
the vessel would not be caught by the
which incorporates the HV Rules may
An interesting use of this exception is one-year time bar as such bunkers
be a useful means excluding liability
illustrated in a case where charterers were meant to be consumed and not
for reasonable deviation.
had ordered the master to load as delivered (See The Seki Rolette [1998]
much cargo as possible so as to have iii) Limitation of liability (financial limit): 2 Lloyd’s Rep 638). Equally, a claim
sufficient draught to enable her to ship owners may also benefit from the by charterers for damages arising out
go through the Panama Canal. Upon limitation regime afforded by the HV of owners’ delay in issuing bills of
arrival, the ship was refused entry Rules. However, this is only confined lading will not be time-barred after
into the Panama Canal because to ship owners’ liability in respect of one year due to the incorporation of
she had exceeded her permitted loss of or damage to goods carried the HV Rules into the charterparty (see
draught. The ship was not off hire and under the charter (The Kapitan Petko The Standard Ardour [1988] 2 Lloyd’s
charterers therefore made a claim for Voivoda [2003] 2 Lloyd’s Rep 1). Rep 159). Notwithstanding the above,
damages. However, charterers’ claim as most charterparties incorporate
iv) Limitation of liability (time limit):
for damages was defeated because the Inter-Club New York Produce
since the HV Rules originated within
the loss was found to have arisen Exchange Agreement (“ICA”), the ICA
bills of lading, the one-year time bar
from the neglect of the master in the will prevail over the HV Rules in terms
under the HV Rules was specifically
management of the ship (which is an of liability and time bar.
designed to operate in relation to
exception under the HV Rules). The
cargo claims. Therefore, where the It is also important to note that the
court found that the neglect of the
HV Rules have been incorporated one-year time bar only applies to
master caused the vessel to exceed
into a charterparty, the one year time claims by charterers against owners
the permitted draught and excused
bar in the HV Rules would only apply but does not cover proceedings by
the owners from liability (See The
to claims in relation to cargo that owners against charterers (see The
Aquacharm [1980] 2 Lloyd’s Rep 237).
arise between owners (or disponent Khian Zephry [1982] 1 Lloyd’s Rep 73).
Further, in a case where ship owners owners) and charterers under the
were in breach of a speed warranty charterparty (See The Agios Lazarus
in a voyage charterparty due to [1976] 2 Lloyd’s Rep 47). In this regard,
an engine breakdown, the ship “claims in relation to cargo” does
owners were allowed to rely on the not just refer to cargo claims per se
exceptions under the HV Rules to (i.e. claims for cargo damage and/
avoid liability (The Leonidas [2001] 1 or shortage) but also includes claims
Lloyd’s Rep 533).
Defence Guides
About the Author
Eugene Cheng
Claims Executive
T +65 6416 4895

Conclusion defence guides, he has contributed to
seaworthiness and cargoworthiness Halsbury’s Laws of Singapore (Shipping)
In light of the potentially far-reaching
and his articles have also been published
effects of a clause paramount outlined of the vessel will then arise at the
in the Singapore Academy of Law Journal.
above, members are advised to start of each voyage under a time
carefully consider whether to include charter, not just on delivery of the Get in touch
such clauses in their (time or voyage) vessel to charterers. However, even West of England Insurance Services
charter parties. Generally, owners are here, if the charter is on NYPE terms, (Luxembourg) S.A.
advised to include clause paramount owners/disponent owners will in any
Singapore Office
in their charterparties as (1) they may event be under a continuing warranty
77 Robinson Road
be entitled to rely on the exceptions of seaworthiness/cargoworthiness Level 15-01, Robinson 77
under the HV Rules, (2) their absolute (previous section, par a.). Singapore 068896
duty of seaworthiness is reduced to
T +(65) 6403 3885
one to exercise due diligence and
(3) they may be able to rely on the January 2018 London Office
one year limitation period for cargo One Creechurch Place
This article was written by Eugene Creechurch Lane
claims under the HV Rules. The only
Cheng in the Club’s Singapore office, London EC3A 5AF
potential disadvantage to owners (and
with additional input from Mills & Co.
disponent owners) of incorporating T +44 20 7716 6000
a clause paramount into a charterparty E publications@westpandi.com
W www.westpandi.com
is that owners’ obligation to ensure the

All rights reserved. The opinions expressed
DGC-CP-GBR-19-V1

Defence Guides
Detention in a nutshell
If a vessel is delayed or detained because of a breach by the charterers,
the owners should have a claim in damages for the time lost.
A claim in damages for detention Charterers’ failure to provide cargo meant that the owners could not
can arise: tender an NOR. The court held that the
If the charterers fail to provide cargo
owners were entitled to claim damages
Before the vessel is in position and the vessel is delayed, the owners
for the delay to the vessel (The Boral
to tender a notice of readiness may have a claim in damages for
Gas [1988] 1 Lloyd’s Rep 342).
(“NOR”); detention. For example, if under a berth
or charter, a vessel was denied access to In The Mass Glory, the charterers
After the end of laytime, demurrage the berth because the charterers did not ordered the vessel not to proceed to
or on completion of cargo operations have a full cargo available for loading, the berth due to issues with the cargo
charterers would be liable for detention documents. As a result, an NOR could
Can an owner or disponent (Owners of Panaghis Vergottis v not be tendered and laytime could not
owner claim damages against William Cory & Sons (1926) 25 Ll L start to run. The charterers were found
charterers for delays suffered Rep 64; Samuel Crawford Hogarth and to be liable for damages for the delay
others v Cory Brothers & Co Ltd (1926) to the vessel (The Mass Glory [2002]
before the vessel is in position
25 Ll L Rep 464). 2 Lloyd’s Rep 244).
to tender an NOR?
Charterers’ failure to organise Charterers’ failure to nominate
General pre-loading procedures a port within sufficient time
In a voyage charterparty scenario, Other examples of damages for Delays can also arise in a charter
demurrage will usually compensate detention can be found in the cases of with multiple discharge ports where
an owner for any delay. However, The Boral Gas and The Mass Glory. the charterers do not nominate a
before demurrage can accrue, an NOR In The Boral Gas, the vessel loaded subsequent discharge port within
must be tendered so that laytime can anhydrous ammonia. The shippers sufficient time. In The Timna, a ship
commence. If the vessel is delayed were to supply ammonia for the purging chartered to carry grain to multiple
before the NOR is tendered then the and pre-cooling of the cargo. The NOR discharge ports did not receive
owner may have a claim for damages could only be tendered after purging instructions for the second discharge
for detention. and pre-cooling was done. There was port after unloading at the first
If not expressly stated in the a delay in supplying the ammonia due discharge port.
charterparty, it would be an implied to a mistake by the charterers, which
term that the charterers will do
whatever is reasonable to enable
the ship to reach the place at which
she becomes an arrived ship so that
the Master may tender an NOR.
Defence Guides
The vessel tendered a notice of Likewise, in a case where there were cargo is placed on a vessel such that
readiness at a further discharge delays caused by a new law requiring the vessel can proceed on her voyage
port upriver and claimed for both charterers to apply for an export in safety (The Argobec (1948) 82 Ll.
demurrage and detention. licence, the court dismissed owners’ L. Rep 223). Therefore, time taken for
claim for detention even though the securing and bagging the cargo, even
Although the demurrage claim failed,
licence was obtained 15 days after if done outside of the berth, would
the court found that owners were
loading was completed because the still be part of cargo operations and
entitled to damages for the delay.
charterers and their agents proved that may be counted as demurrage, but
The court held that in circumstances
they had utilised their best efforts to other operations which do not relate to
where the charterers had failed
procure the licence without any delay safety, e.g. fumigation or draft surveys
to nominate a discharge port,
(Owners of the Spanish Steamship to calculate the quantity of cargo,
they would be prima facie liable
Sebastian v Sociedad Altos Hornos would not be part of cargo operations
for damages for detention (The Timna
de Vizcaya (1919) 1 Ll L Rep 500). and delays caused may result in
[1971] 2 Lloyd’s Rep 91).
a claim for damages for detention.
The recurring question which should
For example, in London Arbitration
Can an owner or disponent owner determine whether a claim in detention
33/04, fumigation which took place
claim damages against charterers will succeed is whether charterers have
two hours after the completion of
for delays suffered after the end taken all reasonable steps to enable
loading was held to be detention.
of laytime, demurrage or cargo the ship to sail as soon as possible.
Similarly, in London Arbitration 6/92,
operations? The court is likely to look at whether
delays for a draft survey to calculate
charterers have exercised reasonable
General the quantity of cargo which was carried
diligence but will not impose a high
out after the completion of loading was
The principle of making a claim in standard upon charterers (The Atlantic
held to be detention and damages for
detention where the delay occurs Sunbeam [1973] 1 Lloyd’s Rep 482).
such delays were borne by charterers.
after the end of laytime, demurrage When does laytime or demurrage end?
or cargo operations is similar to a When does detention start?
claim in detention for delays which
occur before the notice of readiness One potential problem faced by
is tendered. A claim for detention can owners is that it may be difficult to
be made if owners can show that the determine when demurrage ends
delay arises out of the breach or fault and when detention starts because
of the charterers. it is difficult to determine precisely
when cargo operations end. Cargo
Not all delays lead to a valid claim operations are only completed (and
in detention demurrage will only end) when the
Again, an important factor for owners
to prove is that there was a fault or
breach, in the absence of which the
claim for detention would fail. For
example, in a case where delays arose
because a railway company engaged
by receivers to transport cargo was
operating at an over capacity, it was
held that there was no default on
the receivers and that the delay was
reasonably foreseeable given the
circumstances of the port at that point
in time (Lyle Shipping Co Ltd
v Corporation of Cardiff (1900)
5 CC 397 (CA)).
Defence Guides
Can an owner or disponent Owners may therefore be entitled Can damages for detention be
owner claim damages against to a higher compensation than the claimed in addition to demurrage?
charterers where there has been demurrage rate if the running costs
of the vessel during the delay are As the saying “once on demurrage
an agreement regarding always on demurrage” goes, demurrage
higher than the demurrage rate and
delays suffered? continues to be payable until the
if the delay occurs outside of laytime
There may be instances where both or the running time of demurrage. cargo operations are completed and
owners and charterers agree to delay is not replaced by damages at large.
Hence detention cannot be claimed
the voyage. The dispute that typically Is the calculation of the rate of
ensues is the determination of the rate when demurrage is being incurred.
detention different from that
of compensation payable to owners. For example, in a situation where a
of demurrage?
disponent owner’s demurrage rates
In The Saronikos [1986] 2 Lloyd’s Rep Detention is classified as unliquidated are only half of the charter rates which
277, there was an agreement between damages and one of the main issues he has to pay to the headowner, any
owners and charterers to wait outside faced in a detention claim is calculating delays would result in the disponent
the discharge port for about nine days the quantum of the claim. It is common owner suffering a loss because the
in order to resolve problems over the for parties to agree that damages demurrage earned would not be
sale of the cargo. The demurrage rate for detention be calculated at the enough to bear the full charter rates.
was less than the running costs of demurrage rate. However, this will Unfortunately, the disponent owner
the vessel and if the vessel had not not always be the case and there will is unable to claim additional damages
been delayed, the vessel could have be instances where the owner is able in detention against his charterer
completed her discharge before laytime to show that his loss is greater than because the demurrage incurred is
expired. Under such circumstances, the agreed demurrage rate. A good a form of liquidated damages which
the court held that owners were example would be the case of is meant to be his relief for any delays.
entitled to their running costs, extra The Saronikos, which was discussed
bunker costs and the profit margin in the preceding section.
owners would have received, were
owners able to have traded the
vessel at that time.
Defence Guides
About the Author
Eugene Cheng
Claims Executive
T +65 6416 4895

defence guides, he has contributed to
Halsbury’s Laws of Singapore (Shipping)
and his articles have also been published
Can an owner or disponent owner This article was written by Eugene
in the Singapore Academy of Law Journal.
exercise a lien for detention? Cheng in the Singapore office with
additional input from Chris Metcalf Get in touch
A clause entitling owners to exercise a of Clyde & Co. West of England Insurance Services
lien for demurrage would not extend to (Luxembourg) S.A.
a claim for detention (Clink v Radford
& Co [1891] 1 QB 625) unless the Singapore Office
charterparty expressly states that the 77 Robinson Road
owners are entitled to exercise a lien
Singapore 068896
for damages due to detention.
T +(65) 6403 3885
Conclusion
London Office
In conclusion, owners’ claim for One Creechurch Place
detention is very much dependent on Creechurch Lane
London EC3A 5AF
the facts of the case. However,
a useful indicator as to whether T +44 20 7716 6000
a claim for detention exists is to E publications@westpandi.com
W www.westpandi.com
identify the potential fault or breach
by charterers. Where this fault
or breach is the cause of the delay © West of England Insurance Services.
suffered by owners, a claim for All rights reserved. The opinions expressed
detention may arise. However, in this publication are those of the authors.
owners should note that a claim This note is intended for general guidance
in damages for detention is unlikely to only and should not be relied upon as legal
succeed where the delay occurs during
the running of laytime or demurrage –
see paragraph 6) above.
October 2018

Defence Guides
Disponent owners’ contractual

risks in a nutshell
Disponent owners can often be lulled into a false sense of security by
assuming that their contractual position is risk free on the basis that they
can simply pass up or down any liability. We shall first look at the position
when the disponent owner is time chartering in and out on the same terms
and then the situation where the disponent owner is time chartering-in and
voyage chartering-out.
Back to Back charter: Disponent Owners’ obligations throughout As a result, the disponent owner may
owner’s risks when time chartering the CP: “That the owners shall be in breach of his delivery obligations
in and out on the same terms provide and... maintain her class vis-à-vis the sub-charterer but
and keep the vessel in a thoroughly may not have any recourse against
Disponent owners often believe that their efficient state in hull, machinery the head owner as he will have to
contractual position is risk free on the and equipment for and during the prove that head owners were in breach
basis that they have entered into back service.” (Clause 1). of their due diligence obligation to
to back charters. The presumption can maintain the cranes. The legal costs
be misconceived as owner’s obligations Whilst owners’ obligation on delivery and risk of proving a breach of a due
on delivery and during the course of the is a “strict” one, the responsibility to diligence obligation are also greater
charter are not the same. The four most maintain the ship is a “due diligence” as a lot of evidence has
common examples are with regards to obligation. to be considered.
cranes, speed and consumption, hull
This means that unlike the situation One way of avoiding such a situation
fouling and hold cleaning.
when the cranes breakdown during is to incorporate a clause paramount
the course of the charter, charterers in the sub-charter which renders the
Cranes
do not have to prove fault or lack of strict obligation to deliver the ship
In the NYPE 1946 charter for example, maintenance if the ship’s cranes do not in a seaworthy condition into a due
there are two different sets of work on delivery. All that needs to diligence obligation.
obligations. Namely these are: be demonstrated is that the crane(s)
did not work on delivery. For more information, please read
Owners’ obligations on delivery: “… WEST defence claims-guide: defence
Vessel on her delivery to be ready clause paramount in a nutshell.
to receive cargo with clean-swept
holds and tight, staunch, strong
and in every way fitted for
the service…” (Line 22).
Defence Guides
Speed and consumption Hull fouling Very often the charter will have a
clause stipulating that the owners
Unless the charter specifies that speed If fouling occurs during the currency
are not responsible for intermediate
and consumption is a “continuing” of the charter this will invariably affect
hold cleaning and that this will be
warranty, this warranty only applies on the performance of the ship. Unless the
for the charterer’s account and risk.
delivery and not throughout the duration speed and consumption warranty is
Even in the event that such a clause
of the charter. The disponent owner continuous, disponent owners will not
is not present in the charter, owners
could therefore find himself in a position be able to make an under-performance
only have an obligation to maintain
where after a period of time, the ship he claim as the warranties are only given on
and render customary assistance.
has chartered-in, does not perform as delivery whereas the fouling occurred as
Owners are responsible for exercising
well as it did on delivery. a result of a natural consequence of the
due diligence to clean the ship with
service of the ship during the charter.
If the description of the ship in the sub- reasonable care, skill and speed.
However, if, by the time the ship enters
charter is not changed to reflect the loss The crew are not regarded as skilled
into service of the sub-charterers, the
of performance, then disponent owners cleaning operatives and, therefore,
hull is already fouled and this affects the
may find themselves in breach of the there is a limit on what cleaning can
ship’s performance, then sub-charterers
warranty towards their sub-charterers reasonably be done whilst at sea.
will be able to put the ship off hire for
but with no real recourse against the (More details can be found in WEST
any time lost as it will be considered
owners (unless the disponent owner defence claims guides: hold cleaning
a “defect to the hull” (The “Ioanna”
can prove a breach of owners’ in a nutshell.)
[1985]).
obligation to maintain).
As a result, a situation can easily
If possible, it is therefore recommended Hold cleaning arise when disponent owners are in
for disponent owners to either request breach of delivering holds in breach of
Charterparties will generally state that
that warranty in the head charter is a contract but being unable to pass on
the vessel will have to be delivered
continuous one, or to state that the the liability to owners.
with holds cleaned up to a certain
performance figures in the sub-charter
standard (e.g. “grain clean”). Attention should therefore be paid to
are “without guarantee”. If this is not
Failure to deliver the ship to the what hold condition is warranted on
possible then, the performance of the
specified standard will render delivery to the sub-charterers, the
ship should be reviewed before entering
the owner in breach of contract. previous cargo (whether it is dirty), the
into the sub-charter in order
cargo to be loaded in particular if it
to accurately describe the ship. However, this standard of hold
requires a high standard of cleanliness
cleanliness only applies when the
and whether it is feasible to clean the
ship has been delivered and does not
holds in time.
apply during the course of the charter
(intermediate hold cleaning).
Defence Guides
Risks relating to disponent

owner time chartering-in
and voyage chartering-out
When a disponent owner charters in
on a time charter and charters out on a
voyage charter, disponent owners can
find themselves at greater risk
of not being able to pass on risks
and liabilities up and down the chain.
Loss of time
The most obvious situation where A further example can be found where The laytime provisions may state that
disponent owners will not be able the voyage charter will have a clause if the ship arrives after the cancelling
to pass on the loss of time to head for breakdown of the cranes whereby date, the laytime will only start upon
owners is when time lost is not a laytime will be adjusted pro-rate to loading and the terminal has discretion
Weather Working Day or the sub- the number of working cranes whether as to when the ship may berth. If these
charter is a berth charter in which or not time is actually lost. Although terms are not incorporated into the
case congestion is for disponent this is an easy system to calculate head charter then the loss of time
owner’s account. time lost, this is not the way off hire is will fall on the disponent owner with
calculated in most time charterparties probably no recourse again the head
A time charterer may also find that
where the ship will be off hire for the owner, unless the delay was due
the voyage has been naturally delayed
time actually lost. to a breach of the charter.
without fault or an off-hire event,
will still have to pay hire but will still Another clause which will rarely exist
Force majeure clauses
collect the same freight. in time charters is the “strike clause”,
which amongst other things suspends Unlike time charters, most voyage
laytime. Lastly, voyage charters can charters will include a “force majeure”
be found to incorporate the terminal’s clause where charterers will be
laytime provisions. excused from performing the charter
due to the occurrence of an event
which is external, unpredictable and
irresistible. As a result, disponent
owners will have no recourse against
owners under a time charter for
the losses suffered due to the
force majeure event.
Defence Guides
Specific port requirements Very often a voyage charter will not About the Author
include an ICA clause. This makes
Some ports will request specific
it harder for disponent owners to
certificates or equipment. With
bring an indemnity claim against their
regards to certificates, a ship only
charterers, even though they may bear
has to possess documents which are
a significant liability under the ICA
customarily required, or which may be
regime. In effect, under clause
required by the law of the vessel’s flag
8 c) and d), head owners can claim
or law and regulation of the port of call.
an indemnity of 50% of the cargo
However, under a time charter the ship
claim if it was for shortage, over Julien Rabeaux
can be traded to a wide range of ports
carriage or any other cause (other than Claims Team Manager
and owners are not required to have
seaworthiness or loading, stowing
certificates which are only particular T +65 6416 4894
and discharging).
to a certain port. A particular port E Julien.Rabeaux@westpandi.com
If the voyage charter does not have
may insist for example that the ship
an ICA clause, it may be very difficult Julien is a Claims Team Leader in West
have lines which are longer than what
for disponent owners to pass on this of England’s Singapore Office. He
is customarily necessary, resulting in studied law in France and England and
liability to their charterers. Even if
disponent owners having to bear the subsequently qualified as a solicitor in
the sub-charter does include an ICA
cost of renting additional lines. a London shipping law firm. Julien was
clause, disponent owners may only be
based in West of England’s Hong Kong
able to claim 50% of their own liability Office for 5 years, before moving to
Other clauses towards head owners. Singapore when the Club launched its
Some voyage charters will not include office there. Prior to joining the Club,
Another example of potential Julien worked for another IG Club in
a clause paramount, making the
exposure relates to stevedore damage, London for 7 years.
seaworthiness obligation absolute as
whereby many voyage charters will
opposed to a due diligence obligation. Get in touch
state that charterers will not be liable
(More details can be found in WEST West of England Insurance Services
in case of damage to the ship due to
defence claims guides: clause (Luxembourg) S.A.
stevedores.
paramount in a nutshell.)
Singapore Office
As a result, if the head charter contains 77 Robinson Road
such a clause, disponent owners may May 2018 Level 15-01, Robinson 77
not have a recourse against owners if Singapore 068896
This article was written by Julien
they exercised due diligence in making Rabeaux in the Singapore office with T +(65) 6403 3885
the ship seaworthy. additional input from Wikborg Rein.
London Office
One Creechurch Place
Creechurch Lane
London EC3A 5AF
T +44 20 7716 6000

E publications@westpandi.com
W www.westpandi.com

DCG-DOCR-GBR-19-V1

Defence Guides
Interruptions and exceptions

to laytime in a nutshell
1. Difference between 2. Interruptions to laytime: 3. Exceptions to laytime
Interruptions and exceptions There are numerous interruptions An example of exceptions to
to laytime to laytime. The most common are laytime can be found in the Gencon
An interruption to laytime covers a Weather Working Days and Sunday charterparty: the “General Strike
period when time does not count and Holidays excepted. Clause” and “General Ice Clause”.
because it is outside the definition a. Weather Working Days a. Period of application of exceptions
of laytime as expressed in the to laytime
laytime clause. A common example The meaning of the word “weather” is
is “Weather Working Day” (WWD) to be determined as a question of fact. An exceptions clause will normally
laytime period. What might constitute bad weather for only apply to laytime
one vessel will not necessarily be the It will not protect the charterer after
An exception to laytime, refers to a same for another, even though both
period that is within the definition the vessel has come on demurrage,
are in the same port at the same time. unless it explicitly provides so
of laytime, but is excluded by an A period of rain may well prevent the
exceptions’ clause. discharge of a cargo of rice, but not a The charterer’s duty to have the
cargo of crude oil. cargo at the loading place ready
The principal difference between
for shipment at the right time is an
the two is that with an exception Weather days: Is the Statement of Fact absolute one
to laytime it is necessary to show (SOF) binding?
a causal connection between what Exceptions clauses will be limited
is excepted and the failure to work The SOF usually record the weather to the periods when loading and
cargo, whereas with an interruption conditions in the port and is prepared discharging operations are going on,
to laytime all that needs be shown for by the agent. It is usually counter unless the clause clearly indicates
causation is that the excluded state of signed by the master. Although the that it also applies to the operation
affairs exists at the place where cargo SOF is persuasive evidence, it is by no of bringing the cargo down to the
would have been worked. means binding. It is open for a party loading place or removing it after
to rebut the information in the SOF discharge
For example: with, for example, evidence from a
Ship A has a port charter with an local weather station. If owners have b. The clause will be narrowly
interruption to laytime expressed in any doubts as to the objectivity of interpreted
“Weather Working Days” the agent’s SOF, it is recommended Exceptions clauses are construed
to appoint a protective agent to make against the party for whose benefit
Ship B has a similar charter but with
sure the information in the SOF is they are included in the charter
laytime expressed in working days
accurate.
and additional clause excluding time Laytime exceptions will be strictly
lost due to adverse weather b. Sundays and holidays excepted construed and an ambiguous clause
If both are waiting at anchorage for Although Sunday doesn’t pose any will offer no protection
a berth, for ship A, rainy periods on problem in its interpretation, the word
c. The charterer must use reasonable
working days will be excluded from “holiday” can in some cases be harder
means to overcome the hindrance
laytime, but not in the case of ship to define. Whether a day is a holiday
B. This is because the rain did not or not is a question of fact which will The charterer cannot avail himself
delay the cargo operations be decided by looking at regulations, of the exception clause if he can
practice, and custom. A holiday can surmount by reasonable endeavor, the
be decided by a local authority and hindrance. If the port authority orders
may apply to just the port and its the suspension of loading at a berth
local area regardless as to whether but there is another berth where the
work is in fact done. cargo can be loaded, albeit to do so
would be at extra time and expense to
the charterer, then the clause will not
protect the charterer.
Defence Guides
d. Do General exception clauses apply b. What does “fault” mean? If de-ballasting or ballasting delay
to laytime and demurrage? cargo operations and it is not
The mere fact that the shipowner
necessary for these operations to
It is doubtful that a general exception by some act of his prevents the
be carried out but are done for the
clause would apply to laytime and continuous loading or discharging of
convenience of the shipowner then the
demurrage unless specifically stated. the vessel is not enough to interrupt
time lost will be due to his fault and
A typical example is that contained at the running of the laydays; it is
will not count.
clause 19 of Part II of the Asbatankvoy necessary to show also that:
where the wording is too general and If a ship grounds due to the negligence
There a breach of obligation on the
the laytime and demurrage provisions of the crew then time will be
part of the shipowner
have their own code of more limited suspended. Conversely time will count
exceptions. The delay must be for a duty for if the grounding was not due to the
which he is directly responsible negligence of the crew.
There is however an argument that under the charter or for which he has
such clause could constitute an delegated his responsibilities Time lost for non-production of a bill
exception to laytime and demurrage, of lading at discharge port will not
if a general exception clause refers The fault must be the only or the count unless the charter obliges the
to delay in loading or discharging and only effective cause of the delay owners to accept an LOI.
there is no other separate code of The delay must not be beyond
c. Can the fault of the owner
laytime and demurrage exception. the control of the owner and the
be excluded?
owner must do nothing voluntarily
4. Fault of the shipowner to prevent the ship from being Fault of the owner can be excluded
continuously available for cargo however the clause would have to
a. What period of time can charterer
operations be very clearly worded. Clauses
claim for?
incorporating the USCOGSA or
In addition laytime or time on
Laytime and demurrage will not run general exception clauses which make
demurrage will not run if owners
when the delay is caused by the fault the owner not liable for delay arising
voluntarily prevent their ship being
of the shipowner. The delay and the from acts, neglects of the master and
continuously available for cargo
cause of the delay must however be other servants of his in the navigation
operations, whether or not such
contemporaneous and will not include or management of the vessel, will not
operations are planned by the
consequential delay. Only where the be sufficient to exclude the fault of the
charterers
charterers have been deprived of the owner.
use of the vessel at a time when they Examples:
wanted the use of her, will time be
If under a charter, owners are
suspended. For example, where time July 2016
responsible for the stevedores, any
is lost because a berth is no longer
time lost as a result of stevedore’s This article was written by Julien
available because of an earlier fault of
negligence will be for owners’ account. Rabeux in the Club’s Hong Kong office
the owner, charterers will not be able
However if the cause of the delay is with additional input from Mark Doyle
to suspend laytime or demurrage for
beyond the control of the owner, such of Mills &Co.
the time waiting for the berth.
as a stevedore’s strike, the owner will
Charterers may however have a claim This note is for general guidance only and
not be responsible for the delay. should not be relied upon as legal advice.
in damages for breach of a separate
Should you require specific advice on a
obligation under the charter.
particular situation please contact the Club.
DCG-IEL-GBR-19-V4

Defence Guides
Late redelivery in a nutshell

When is the ship redelivered late? 1. Fixed period “About”
A charterer has an obligation to deliver Even when the word “about” is not The NYPE charter for example usually
the vessel in compliance with the included in the redelivery period, qualifies the duration of the charter
redelivery provisions of the charter. “there is a presumption that a definite with the word “about”. There is no
The timing of a redelivery will primarily date for the termination of the charter hard and fast rule to determine the
depend on the duration of the charter. should be regarded as approximate margin imported by the word “about”.
only” (London Explorer 1971). The It largely depends on the duration
Usually a time charter will fall into two precise date agreed for redelivery of the charter and any specific
categories: means “about that date”. Charterers factual circumstances that reflect the
1. A fixed period which could be a flat are allowed a reasonable margin intention of the parties.
period, for example “1 year” or a before and after this precise date.
In one case, for example, a ship was
period of time until a certain date, How big is the margin? chartered for “about 4 to 6 months”
for example “until 15th July”.
The extent of the margin of time for and 5 days was an allowable margin.
2. A variable period (for example, redelivery will depend on many facts. However 12 days was not deemed
“11 to 14 months” or “6 months, For example, a ship redelivered 8.4 reasonable in a charter for “about
15 days more or less”). days beyond the stated period of 6 months”.
a 6 months, 20 days period could If the word about is deleted, the judge/
be deemed as reasonable (see also arbitrators may take this into account
discussion on “about” below). to deny a tolerance margin.
2. Variable period
Trip time charter on a “without
There are broadly two types: “11 to 14
months” or “6 months, 15 days more
guarantee” duration
or less”. If for example the charter provides
a trip between 2 ports for a duration
(i) “6 months, 15 days more or less”:
of “70/80 days WOG” there is no
here the parties have agreed a
minimum or maximum period as
fixed? duration with a built-in
long as the estimate is made in good
tolerance clause. There is therefore
faith. If, for instance, in the above
no implied allowance.
example the voyage lasts 150 days
(ii) “11 to 14 months”: here the answer due to some unforeseen circumstance,
is not straight forward. Whether then the charter will not be liable for
an implied allowance is allowed late redelivery and will just have to
will depend on the period of the continue to pay hire at the agreed rate.
spread. If the spread is 15 days
(“6 to 61/2 months”) the law may Late redelivery
allow an implied tolerance. If the
spread is long (“11 to 14 months”) Charterers have an obligation to
arbitrators and judges are less redeliver the ship within the charter
likely to allow an implied tolerance. period (including the tolerance margin).
There will be no implied tolerance

if the range is defined by a minimum
and/or maximum period (“minimum
6 months, maximum 7 months”).
Defence Guides
What can the owner do if the Time at which legitimacy How to calculate the period
charterer gives an order for is determined of overrun?
a final voyage which cannot The date to keep in mind is the date the The period of overrun is the number of
reasonably be completed performance of the orders falls due. days from the latest date at which the
during the charter period? Charterers will give orders in advance ship could have been redelivered and
This is also called an “illegitimate last of the performance. If at any time the actual date of redelivery.
order”. In such circumstances owners before the performance, circumstances
The period does not start to run from
are entitled to refuse to perform change, a legitimate order will become
the date when the ship would have
such an order and insist on asking illegitimate and owners will be entitled
been redelivered had the last order
for fresh orders. to ask for new orders.
not been “illegitimate”.
If circumstances change after the
What if charterers refuse performance then owners will have to Market rate
to give new orders? carry out the orders and claim damages.
The market rate will be calculated
If charterers refuse to give new orders, on the basis of a charter for a similar
then owners might be able to treat What if owners have
period/region/trade as the original
the charter as repudiated and claim knowingly chosen to accept charter. If the original charter was
for damages. Owners and charterers an “illegitimate” order? one for “10 to 12 months in the
should make sure that their decision to Owners will be deemed to have waived Atlantic trade”, then the market rate
repudiate the charter or insist on the their rights to refuse to perform the will be one for a charter “10 to 12
order is correct as the consequences order. Owners will however not have months in the Atlantic trade”.
of their decision may end up being waived their rights to damages.
very costly. Can the owner claim for the
Owners’ acceptance must be
damages suffered as a result
Can a “legitimate” order become unequivocal although owners must be
of not being able to perform
“illegitimate”? careful not to tacitly accept the order
as in some circumstances silence may
the next fixture?
The obligation to make sure that constitute an agreement. Unless the laycan date of the following
the voyage orders are legitimate is C/P is brought to the knowledge of the
continuing. If there is a change in Damages charterers at the time of entering into
circumstances then new instructions the contract, owners will not be able
must be given. If the ship is redelivered late,
to claim for the loss of profit on
charterers have to pay hire until
the follow-on fixture.
redelivery together with damages.
The normal measure of damages is the

difference between hire earned under June 2015
the charter and what would have been
earned on the market for the overrun This article was written by Julien
period: Rabeux in the Club’s Hong Kong office
with additional input from Ince & Co
(Market rate – C/P rate) x period (Hong Kong).
overrun = Damages
This note is for general guidance only and
should not be relied upon as legal advice.
DCG-LRD-GBR-19-V1

Defence Guides
Liens on cargo in a nutshell

Where hire/freight has not been paid to owners by charterers, it may
be possible for owners to lien the cargo shipped i.e. refrain from releasing
it to receivers, pending payment of the outstanding hire/freight.
When can owners exercise a lien? Where disponent owners are owed Owners cannot usually exercise
freight/hire from charterers, but the this right by stopping the vessel en
Under English law, there must be a
bill of lading is issued by head owners route to the discharge port e.g. when
contractual right to lien.
ie they are the contractual carriers, bunkering. However, there may be
Owners can lien charterers cargo only disponent owners can not exercise special circumstances where (if it can
if the charter party between owners a lien over cargo under the bill, as be proven that at the discharge port
and charterers has a lien clause, such they are not a party to the bill of it is impossible to exercise a lien and
as clause 18 of the NYPE form. lading contract. It is unclear whether any further carriage will lead to the
disponent owners can order head loss of possession/lien of the cargo
In order for owners to lien cargo which
owners to exercise a lien in these following the arrival at the port) a lien
does not belong to charterers, i.e. 3rd
circumstances. may be exercised earlier than at the
party bill of lading holder, the charter
discharge port.
party lien clause must be incorporated
Where and how can a lien
(expressly or by reference) into the Even if there is a contractual right to
bill of lading. Otherwise, whilst the
be exercised? lien under English law, the lien must be
exercise of the lien may be lawful, Usually the lien must be exercised capable – both legally and practically-
as against charterers under the when the vessel is at or anchored off of being exercised in the local
charterparty, it could be unlawful the discharge port, or ashore if the jurisdiction i.e the place of discharge.
as against the receivers under the cargo can be discharged and stored The contractual lien will need to be
bill of lading. General words of in a warehouse under owners’ control recognised and enforceable under the
incorporation in the bill of lading, (although the costs of storage will local law (e.g. by way of a court order).
such as the Congenbill form, “all be for owners account unless there Many jurisdictions, China for example,
terms and conditions, liberties and is an express charter party provision do not recognise the right to lien cargo,
exceptions of the charter party” will for recovery of costs ). Once the cargo unless it is owned by the debtor, so
only include the time charter lien is delivered to the receivers unless the cargo is owned by charterers,
clause if the bill of lading identifies (i.e.is no longer in owners’ control), owners can not lien the cargo.
the time charter as the contract whose the lien is lost.
terms are incorporated. However, if
the bill of lading does not identify the
time charter, the usual presumption
is that the terms of the end voyage
charter under which the bill of lading
carriage is being undertaken will be
incorporated and not those of the
head time charter.
Defence Guides
If owners exercise a lien unlawfully Lien in respect of which debts? Will time lost be for
under local law, then owners can charterer’s account?
Once it has been established that
potentially be exposed to a claim in
owners have a contractual right to lien Subject to the terms in the time
damages for delay and loss of profit
cargo, owners must show that sums charter party, the ship should remain
/arrest of the vessel from the bill of
are actually due and unpaid at the on hire whilst owners exercise their
lading holder.
time the lien is exercised and that the contractual right to lien. Similarly, in
Once the lien is exercised over the type of claim is covered by the lien respect of a voyage charter, laytime,
cargo, owners will still have a duty of clause. For example, in the absence demurrage, detention should be for
care for the cargo as bailees. If the of any specific wording, a lien for charterers account.
charter frieght/hire remains unpaid by non-payment of freight will not cover
charterers, owners may wish to sell the However, owners must act reasonably
a claim for demurrage or any amount
cargo to recover the freight/hire from and if for example, a more practical
due under the charter, other than
the sale proceeds. Unless expressly and cost effective solution is available
freight. (see however the Gencon 1994
stipulated, the lien clause will not but not followed, (warehousing instead
charter party Clause 8, which is widely
give owners an automatic right to sell of refusing to discharge) then time may
drafted and extends the lien to many
the cargo. Even if there is an express be suspended.
claims: “the owners shall have a lien
provision in the lien clause, it may still on the cargo and on all sub-freights, This article was written by Julien
be necessary or advisable to obtain demurrage, claims for damages and Rabeux in the Club’s Hong Kong office
an order from the local court. for all other amounts due under with additional input from Holman
this charterparty including costs of Fenwick Willan (London).
Advice on local law should always
recovering the same”).
be taken before exercising a lien This note is for general guidance only and
over cargo. should not be relied upon as legal advice.
DCG-LC-GBR-19-V1

Defence Guides
Liens on sub-freights in a nutshell

How can a ship owner recover hire in circumstances where the charterer
fails to pay hire due under the time charter? Owners could withdraw the
ship or even sue the charterer This would, however, cost time and money
and may prove to be ineffective particularly if charterers have no assets.
One solution would be to tap into the Does a contractual lien Is a shipowner entitled to lien
charterer’s sources of income: on sub-freights include freight under his bill of lading
a. Charterers may be carrying cargo sub-sub-freights? when it stipulates that “freight
for their own account; Under an NYPE charterparty, owners
is payable as per (a sub-voyage)
b. Charterers’ use of the vessel may have the right to lien sub-freights. In charter party”?
generate income by way of the that respect, the sub-charter should Yes. A provision that freight is
following: also contain a lien clause back to “payable as per charter party” (which
back with that in the charter above it, is not the owners’ charter party) does
i. earning freight under bills
thereby providing an uninterrupted not exclude that right. The freight
of lading;
chain of lien clauses within the would still be due to the ship owner,
ii. earning freight under framework of the charter chain. even though it may be payable to
a sub-voyage charter; or
A lien would not extend to sub-sub- another party (The “Bulk Chile” [2013]
iii. earning hire under a sub-time freights if the wording used indicated EWCA Civ 184).
charter. otherwise. For example, the lien
Obtaining a lien on sub-freights is clause in the Baltime charter party When can an owner exercise his
a mechanism which allows the ship refers to sub-freights “belonging to the right to lien?
owner to intercept the income due to time-charterers”. The charterers can exercise full rights
time charterers by requiring the cargo over the sub-freights as their (ie
interests or the sub-charterers to pay Does a contractual lien charterers’) income until there is an
to the owners any freight or sub-hire on sub-freights include actual default in the payment of hire
(as set out in paragraph b. above) that sub-time charter hire? to the owner: possible, probable or
they would otherwise have paid to the inevitable (future) default is not enough
Clause 18 of the NYPE 1946 states
defaulting charterers. (For B/L freight (The Spiros C [2000] 2 Lloyd’s Rep 319).
that “The Owners shall have a
see below).
lien upon all cargoes, and all sub-
A lien on sub-freights can only arise as freights….”.
When is the right lost?
a contractual right (and does not exist The lien must be exercised by way of
There are conflicting court decisions
in common law). A typical wording of a a demand that is to be received before
as to whether the above clause
lien clause is as follows: the freight is paid by the sub-charterer
includes sub-hire. However, the most
“The Owners shall have a lien upon all either to the charterer or to his agent
recent view appears to be that liens
cargoes, and all sub-freights for any (Samsun Logix v Oceantrade [2008] 1
on “sub-freights” do not cover liens
amounts due under this Charter Party Lloyd’s Rep 450).
on sub-hire party (The “Bulk Chile”
and the Charterers to have a lien on [2013] EWCA Civ 184). Express
the Ship for all monies paid in advance wording will, of course, change the
and not earned …” (NYPE 1946, cl 18). position, eg NYPE 1993, cl 23: “lien
See also NYPE 1993, clause 23 and upon all cargoes and all sub-freights
Baltime 1939, clause 17. and/or sub-hire”.
Defence Guides
Formalities in exercising a lien How much may be retained? “Freight pre-paid” B/Ls
By giving notice to the company due to Under the lien the ship owner may A bill of lading containing the mention
pay the sub-freight: retain only those sums which are due “freight pre-paid” will not necessarily
from his time charterer (Samuel v mean that the owners will be barred
The notice does not need to be in any
West Hartlepool (1906) com. Cas. from liening sub-freight. The important
particular form. However, the notice
115). By way of example, if a lien fact to ascertain is whether freight has
should make clear:
over sub-freights is exercised on 15 actually been paid. Sometimes only
that the charterer is in default May, the lien will only be effective in a portion of the freight is paid, or not
of payment of hire; relation to unpaid hire which is payable at all, despite the bill of lading stating
the source of the lien; before that date, but not effective that it is “freight prepaid”.
in relation to hire which falls due on
the demand for payment which 20 May. Similarly, the lien does not What if the sub-charterer
should be quantified as far as extend to a claim by ship owners for ignores the notice of lien?
possible; damages under the time charter.
If the sub-charterer ignores the notice
the consequences of not complying
After deduction of the amounts due, of lien and goes ahead and pays
with the lien notice, namely that the
the ship owner must account to the freight to the defaulting charterer the
party receiving the lien notice may
charterer for the balance. However, sub-charterer will be liable to pay
end up paying the hire/freight that
where there is: the amount of that freight to the ship
is being liened twice over
owner notwithstanding that the sub
(a) unpaid hire which is not covered by
It is recommended to ask a solicitor charterer will already have paid the
the lien (see above); or
to draft the notice in order to comply same to the charterer above him in the
(b) a damages claim by owners against charter chain.
with all the requirements.
charterers,
This article was written by Julien
Owners may have a right of set-off
Rabeux in the Club’s Hong Kong office
and counterclaim over the balance
with additional input from Holman
in respect of the sums accruing
Fenwick Willan (London).
due or the claim for damages
(Samuel v West Hartlepool).
DCG-LSF-GBR-19-V1

Defence Guides
Notices of readiness in a nutshell

A Notice of Readiness (“NOR”) is a notification by the vessel that she
is ready to start the charter service (upon delivery) or is ready to load
or discharge cargo. Giving an NOR has two purposes: (i) to inform the
charterers that the vessel is at their disposal; and (ii) to start the running
of hire or laytime.
Disputes often occur in relation to the a) The vessel must have reached In this regard, the customary
validity of a NOR, in particular under the agreed place: waiting area does not have to be
voyage charter parties. “the commercial area of the port”,
In order for the vessel to be an
“arrived ship”, the NOR must be but can be the “legal, fiscal and
1) The general requirements tendered when the ship has arrived administrative area of the port”.
for a valid NOR: at the contractual place of delivery, However, if the customary waiting
loading or discharging. area is outside the limits of the port,
There are three requirements to be
then no valid notice of readiness can
met in order to tender a valid NOR: The charter party will usually state be served. However, some charters
a) The vessel must have reached the where the vessel must be before (Gencon for example) extend the
agreed place (being an “arrived a valid notice of readiness can be waiting place beyond the port.
ship”); tendered. The ship must be at the
immediate and effective disposition The above basic principles can
b) The vessel must be “physically however be varied by the terms
of the charterer, having come to
ready”; and “whether in berth or not” (“WIBON”)
rest at the place at which she can be
c) The vessel must be “legally ready”. described as an “arrived ship”. Where or “whether in port or not” (“WIPON”).
that place is depends upon the terms The phrase “whether in berth or not”
agreed in the charter party. converts a berth charter into a port
In the most simple case, the place will charter and ensures that under a berth
be the name of a port, dock or a berth. charter party the NOR can be given as
In voyage charters in particular it is soon as the ship has arrived within the
sometimes hard to determine the place port’s commercial area. However, this
when the charter mentions both the is only when the berth is inaccessible
port and a berth. It is always a matter due to congestion and not bad
of construction whether the agreed weather. (This is because the charter
destination is the port or the berth. For party puts the risk of navigational
example, a charter which describes the delays onto owners and of commercial
destination as “one safe berth, London” delays onto charterers.)
is a berth charter, but one which It is thought that the phrase “whether
describes the destination as “London, in port or not” will mean that an NOR
one safe berth” is a port charter (the can be tendered outside port limits as
reference to a berth is to be construed long as the ship is at the port’s usual
as a safe berth warranty). waiting area.
In a berth charter, owners can only Also, some voyage charters
tender the NOR when the vessel commonly contain other exceptions
has actually berthed. and will for instance state that the
In the case of a port charter when commencement of laytime will start
no berth is available, the vessel must “Whether Customs Cleared or Not”
normally have reached a position within (WCCON) and “Whether in Free
the port where waiting ships usually lie. Pratique or Not” (WIFPON).
Defence Guides
b) The vessel must be physically ready: However, as regards hold cleanliness, 3) Additional requirements under
In order to be ready the ship must be see below. the charter party:
prepared in such a way that it is able c) Legal readiness: a) NOR on delivery of the vessel under
to commence cargo operations the charter-hold cleanliness:
In order to tender a valid NOR the
without delay and to comply with
vessel (not the cargo) must be legally It is common for charter parties to have
charterers’ orders whenever they are
ready. This requirement will include: provisions about the cleanliness of
given. The vessel must therefore be
“physically ready” and “legally ready”. Customs clearance or entry; the holds. For example, time charter
parties typically contain a hold cleaning
The requirement for the vessel to be Immigration and police approval; and clause which will state: “on delivery, all
physically ready will include that the Health or free pratique holds to be clean, swept, free from all
holds are suitable to receive cargo in cargo residue … failing which the vessel
accordance with the charter. All papers necessary for the to be off hire from the date and time of
commencement of the charter the failure to the date and time of being
In respect of time charter parties for
service, loading or discharging must inspected and passed by the surveyor”.
example, on delivery, the NYPE (1946)
be in order for the vessel to be legally
forms requires that, at the time of its With such a clause it is arguable that
ready. If charterers are to arrange
delivery, the vessel is to be “ready for a ship to be “off-hire” as stated,
for a certain document or certificate
to receive cargo … with clean-swept the ship must first have been accepted
before the vessel can carry out its
holds and tight, staunch, strong and so that the NOR must have been valid.
cargo operations they have to do
in every way fitted for the service”. This implies that the holds do not
so with reasonable speed to enable
The Baltime form requires by lines need to be ready for the NOR to be
owners to tender a valid NOR. An NOR
25 and 26 that the ship is “in every valid and that if the vessel’s holds are
tendered after this reasonable period
way fitted for ordinary cargo service”. not clean on delivery charterers will
has expired would probably still be
Other rider clauses often supplement have to accept the ship and their only
valid, if all other requirements have
the standard clauses and impose remedy will be to put the ship off hire.
been met.
additional requirements.
Conversely, in respect of voyage
The vessel generally needs to be 2) The format of the NOR: charters, if the cargo holds are not
ready in all respects to load or to ready it is likely that the vessel is not
In law, there is no prescribed form for
discharge the whole cargo. This physically ready and any NOR given
tendering NOR. It merely has to be a
extends to all equipment required will be invalid.
statement that the vessel is ready to
for the cargo operations (such as,
be delivered or load or discharge as [Please also see our Guide
hatches, cargo gear and equipment
the case may be. The NOR must be “Hold Cleaning in a Nutshell”]
etc.). This does not mean, for
accurate in that the vessel is in fact
example, that hatch covers have
ready. Unless the charter party states
to be open before a valid NOR
otherwise nothing else is required.
can be given. It does mean that the
However, charter parties often contain
vessel has to be ready and able
express provisions on form and
to commence the charter service
contents of the NOR.
required of the vessel without delay
when charterers give orders to load
or discharge.
Defence Guides
b) NOR tendered to be tendered during 5) Does an invalid NOR become the cancelling date even though there
office hours: valid once the requirements is no way the ship will ever be ready
Some charters stipulate that the NOR are met? by the cancelling date (although if
should be tendered during office hours charterers can show that the vessel
No. If the NOR is tendered before would not have been ready by the
(eg “notice of readiness to be tendered
the ship arrives at the contractual cancelling date, owners are unlikely
within 06.00 and 17.00 local time”).
destination or is not “ready”, the NOR to be able to prove any loss/damages
The fact that the NOR is tendered
is invalid. An invalid NOR will never against charterers).
outside these hours (say 21.00 hrs) will
become valid. The owners, therefore,
not in itself render the NOR invalid. In the context of voyage charter
have to serve a new NOR when the
Unless the charter provides otherwise, parties there is an argument that if
conditions are met in order not to have
such an NOR will be treated as having the cargo gear (not the holds) are not
the charter cancelled or run the risk
been given the next working day when ready, this would not be sufficient to
that time does not count. If there is
office hours begin. cancel the charter. The situation is not
any doubt, it is recommended to serve
fresh NORs without prejudice to the the same for time charter parties as,
4) What happens if the NOR previous NOR/s. for example, the NYPE forms stipulate
is invalid but there are other that the ship must be “in every way
delaying factors? 6) What is the effect of tendering fitted for service”.
Owners may argue that although an invalid NOR? b) NOR tendered during the charter
the ship was not ready, because of -commencement of laytime and hire
a) NOR tendered on delivery of the
some other factor (port congestion, vessel -rejection of the vessel and With regard to the running of laytime
for example) there was no actual cancellation of the charter: or hire, if the NOR is invalid, time
delay which resulted from the lack of will not start to count. If however
readiness. It is not relevant whether If on delivery owners tender an invalid
charterers start using the ship
the ship was actually delayed in NOR, the ship will be deemed not
(loading or discharging), there is an
carrying out the cargo operations. The to be ready and not to have been
argument that time will start to count
important question is whether the ship delivered and if the ship is not ready
from that moment.
was ready at the time of tendering the by the end of the laycan period,
NOR. If the ship was not ready (apart charterers will have the option to
from minor and routine matters) then cancel the charter. Charterers are,
the NOR will be invalid. however, not entitled to cancel before
Defence Guides
7) What happens if charterers Acceptance of an invalid NOR can This article was written by Julien
accept an invalid NOR? be made by the shippers or receivers Rabeux in the Club’s Hong Kong office
who are considered to be charterers’ with additional input from Stephenson
Even though, as stated above, an agents. Harwood (Singapore).
invalid NOR will never become valid,
In order not to lose any rights, This note is for general guidance only and
charterers may be deemed to have
accepted an invalid NOR either therefore, charterers should accept a
expressly or by their conduct, in potentially invalid NOR on a “without particular situation please contact the Club.
which event, charterers may lose the prejudice to the charter” basis.
right to argue that the NOR is invalid. Just because charterers have
This is particularly so if charterers accepted an invalid NOR does not
had reasonable opportunity to mean that they have waived their
ascertain the vessel’s true condition. right to claim damages for any loss
Acceptance by conduct could be suffered. However, charterers may by
demonstrated if charterers have their conduct be held to have waived
conducted themselves in such a their claim in damages. For example,
way as to show that they intend to where owners have to deliver a ship
be bound by the charter party (for which is grain clean but do not do so
example giving orders to a ship (because there is coal residue in the
to load cargo). hold) and charterers still accept the
vessel and owners’ NOR as they intend
to load steel slabs as a first cargo, if
charterers do not reserve their rights
to claim damages and simply accept
the ship, they may well lose the right
to claim for time lost and cost of hold
cleaning before loading the second
cargo if this was due to the coal
residue in the hold.
May 2017
DCG-NOR-GBR-19-V1

Defence Guides
Off-hire in a nutshell
General Principles When dealing with an off-hire matter, Damages to hull, machinery or
it is important to consider the equipment: it would probably not
Time charterparties invariably contain an
following steps: be an off-hire event if the damage
off-hire clause providing for exceptions
resulted from the charterers’
from the obligation for charterers to
Step 1: check the charter to look use of the ship (see for example
pay hire from the time of delivery until
at the list of events enabling the our article on hull fouling)
redelivery. The specific terms of the
off-hire clause will determine whether
charterer to put the ship off-hire Detention by average accidents to
or not any particular event entitles the A ship will only be off-hire if an event ship or cargo: this is generally taken
charterers to place the ship off-hire, occurs which is specifically mentioned to mean events normally covered by
and for how long. Using a common in the list of events in the off-hire insurance. An average incident does
charterparty such as the NYPE ‘46 by clause. The events discussed below not necessarily mean general average
way of example, a charterer should bear are some of the main off-hire events but general average incidents might
in mind the following general principles listed in clause 15 of the standard be covered in some circumstances.
when bringing an off-hire claim: NYPE ‘46 form. The word “detention” means that
there must be “some physical or
There must be a loss of time to the Deficiency of men: this refers to any geographical constraint upon the
charterers (save where the off-hire numerical deficiency of the officers vessel’s movements in relation to
clause is a period loss of hire clause – and crew (but not contractors) and her service under the charter”. As
see paragraph 4 A) below) not any other type of deficiency or such, damage to cargo which causes
The loss must be caused by their refusal to carry out orders. discharging operations to be delayed
an event listed in the charter Adding the word “default” would (as opposed to the arrest of the
probably cover circumstances in ship) will not constitute detention.
The event must “prevent
which the crew refused to carry out Since such event must not result
the full working of the ship”
charterers’ legitimate and lawful from the natural compliance with the
The burden is upon the charterers orders (note: NYPE ‘93 provides charterers’ orders, there is case law
to prove that the event is within for “deficiency and/or default and/ that detention by pirates would not
the scope of the off-hire clause or strike of officers or crew”) be an off-hire event under this clause
The off-hire clause is an exception to Breakdown to hull, machinery or
the owners’ right to be paid hire from equipment: this is self explanatory.
the time of delivery until redelivery and The word “breakdown” is to
therefore will be construed narrowly be construed in a popular and
against charterers reasonable sense, such as to cover
Off-hire operates independently defects which, when discovered,
of any breach or owners fault would render it necessary in the
opinion of a prudent operator
General exception provisions in the that she should proceed
charter do not usually operate on to a harbour for repairs
the off-hire clause, unless expressly
provided otherwise
Off-hire events must be fortuitous i.e.
not resulting naturally from compliance
with the charterers’ orders
Off-hire events caused by charterers
may in some circumstances prevent
charterers from invoking the
off-hire clause
Defence Guides
Detention by the arrest of the vessel, What is the next operation that the Step 3: how long can the ship
(unless such arrest is caused by charter service requires? be put off-hire?
events for which the charterers, their
This is a matter of fact and can There are two types of clauses;
servants, agents or sub-contractors
sometimes be difficult to ascertain, period loss of hire clauses and net loss
are responsible) - only in NYPE ‘93:
leading to disputes. The question is of hire clauses.
sub-charterers, shippers, consignees
not what service the charterers hoped
are deemed to be charterers’ agents A) Period clauses
or expected the ship would be able
and any arrest by these parties will
to perform, but what service they Under these types of clauses, the
not render the ship off-hire.
actually required at the time of the calculation of the off-hire period is
Or by any other cause preventing off-hire event. Generally a ship is not relatively straightforward. The ship
the full working of the vessel: any prevented from working if, with a view will be off-hire from the start of the
event claimed as an off-hire event to performing the charterers’ orders, off-hire event up until the off-hire
under “any other cause” must she is carrying out an operation which event ceases, whether or not any
be of the same type of event as is in the ordinary way an activity time has been lost.
specifically mentioned in the earlier required by the time charterers.
part of the clause. This could B) Net loss of time
The ship will not be prevented
include for example, legal action or from working if in order to perform This type of clause is the most
administrative acts by a port or other charterers’ orders owners must first commonly used and can be found in
lawful authority (acting properly and carry out an operation which is, the NYPE ‘46, Baltime and Shelltime
reasonably) relating to the condition, in the ordinary way, an activity 4 charterparties. The charterers will
efficiency of the ship or crew (this required by the charterers. only be able to put the ship off-hire
is more restrictive than “Any other for the time actually lost during the
A ship will therefore be performing
cause whatsoever”- below). period that the full working of the ship
the chartered service when bunkering,
“Any other cause whatsoever” is prevented.
ballasting, lightering and hold
(sometimes this wording is added cleaning, if these services were next Difficulties can arise calculating
into clause 15): this means that an required at the time, even if charterers how much time was lost, if any. For
event claimed as an off-hire event would have preferred the ship to carry example, if a ship has 4 cranes and
under “any other cause” does not out another service, such as loading one of those cranes breaks down,
have to be the same type of event as cargo. Some examples follow. charterers may assume that the ship
specifically mentioned in the earlier is off-hire for 1/4 of the time taken
part of the clause. Therefore, if this Examples: Next service required
to complete cargo operations. This
addition was made, off-hire events 1. Delays at the loadport are incurred may however not be the case if no
could include any event causing because of the crew inadequately delay actually occurred because the
loss of time and preventing the full cleaning the holds. The holds need other functioning cranes were used to
working of the ship – for example: to be cleaned further in order to complete the cargo operations
arrest of the ship by cargo interests, load the cargo. The next service without any loss of time.
capricious acts of local authorities, required is not the loading of the
or detention by pirates. cargo, but further cleaning of the
holds. Under NYPE ‘46, the ship
Step 2: check that the event would not be off-hire.
prevents the full working
2. A master is asked to load as much
of the ship.
cargo as possible in order to have
Once charterers have demonstrated a sufficient draft to enter into the
that one of the listed events in the off- Panama Canal but negligently
hire clause has occurred, they must loads too much cargo, requiring the
then prove that the event prevented ship to lighten cargo. Under NYPE
the ship from performing the next ‘46, the ship would not be off-
operation that the charter service hire, as the ship will not have been
required of her at that time. prevented from fully working: in
this case, the next service required
would be the lightering of the ship.
Defence Guides
The second part of clause 15 of would be arguable for the purposes of berth before the end of the 11 days
the NYPE ‘46 charter specifically calculating off-hire under clause 15 of period because of congestion. In this
states that if the speed of the ship NYPE ‘46 that the ship is still off-hire case, the service next required would
is reduced by defect or breakdown for the time spent on the Philippines- be to sail directly to the port, and not
of the ship’s hull, machinery or Hong Kong leg as a result of the to drift in international waters awaiting
equipment, charterers are entitled to off-hire event, even if time was made repairs - the ship would accordingly
reduce hire for the time lost and any up at a later stage. There is authority be off-hire for 11 days.
extra fuel consumed and any extra that a ship will not be performing the
expenses incurred. (For further advice service next required of her, merely Equitable set off: Other events
on making deductions for speed and because she is operating in a manner not listed in off-hire clauses
consumption claims please see that is consistent with performing that permitting charterers to
our separate article). service – therefore in this example, it deduct from hire
would probably be irrelevant for the
C) Net loss of time: do charterers take If charterers have a claim against
purposes of determining whether or
into account additional time lost? owners for breach of the charterparty
not the ship was off-hire that part of
Example:- A ship is off-hire for a the route taken by the ship proceeding and suffer a loss or incur expense as a
small amount of time because of an to Hong Kong for repairs overlapped result, but the breach is not an event
engine breakdown. As a result, she with the route to Shanghai. Sailing listed in the off-hire clause, charterers
misses a tide or loses her berthing towards charterers’ intended may still be able to withhold hire
slot. Under clause 15 of NYPE ‘46, the destination may not be considered by payments in full or in part for the
ship will only be off-hire for the period an English Court or Tribunal as the amount of their claim. Charterers will
when the full working of the ship was same as sailing to that destination. have such a right of set off where:-
prevented (i.e. until the engine was However, in this example, had Owners’ breach of the charterparty
repaired and the ship was able to Hong Kong been the intended next has deprived or prejudiced
continue the next service required). destination, the result might be charterers in the use (partial or total)
Any consequential delay arising from different. of the ship
the off-hire event – such as missing
E) Net loss of time: can owners argue Charterers exercise their right
a tide - would usually not be part
that there has been no loss of time in good faith and on reasonable
of the off-hire period.
if during the period of time lost, the grounds (for example by deducting
D) Net loss of time: do charterers ship would not have been able an amount which is a reasonable
take into account time made up? to berth in any event? assessment of the claim)
Generally, it is not possible for owners If, a ship drifted in international waters Charterers prove that there has
to claim credit for any time which is outside a port for 11 days because of been a breach of the charter
made up after the off-hire event. For an off-hire event, it would be irrelevant by owners
example: a ship is on voyage from the for the purposes of off-hire under
Philippines to Shanghai; she suffers clause 15 of NYPE ‘46 that if the ship
a breakdown at the Philippines which had sailed to the port 11 days earlier,
is an off-hire event, and is required the ship would not have been able to
to sail to Hong Kong for repairs. It
Defence Guides
A) Charterers may have a right to set In the event that the ship was not a defence if the loss was caused by
off a claim for damages from hire off-hire, damages for the time lost the act, neglect or default of the
payments for the following claims:- equivalent to the hire for that period master, mariner, pilot, or servants
Charterers must establish a breach of owners, in the navigation or
Breach of a speed warranty
of the charterparty by the owner. in the management of the ship
Failure by the owners to load a full
Charterers will have to establish In the case of lost sub-fixtures,
cargo causing loss of time, or
that they have, as a result of owners’ charterers would have to prove
Time lost because of the owners’ breach, been prevented from using that the breach by owners caused
failure properly to perform their the ship or have been prejudiced in charterers to incur damages in
hold-cleaning obligations causing their use of the ship, for the relevant respect of the lost sub-fixture,
a loss of time period. This is different to putting and that the damages in respect
the ship off-hire (charterers do not of the same are not too remote
B) Examples of claims that do not
need to show a breach to put the (for example, if the cancelling date
usually give rise to a right of
ship off-hire). under the sub-fixture was missed
set-off from hire payments
and the fixture was thereafter
(this list is not exhaustive):- An off-hire event may for example
cancelled because further time was
cause the ship to lose time by
Claims for damage to cargo lost by a separate intervening event,
missing a tide, a berthing slot
occurring after the owners’ breach,
Loss of an anticipated cargo or incurring a loss as a result of
e.g. the ship missing a tide, it would
to be loaded by charterers missing a fixture. If these losses
be arguable that a claim for the lost
Crew party to a fraud with arise as a result of a breach of
fixture was not a direct result of
bunker suppliers charterparty, charterers may
owners’ breach and was too remote
be able to claim for damages
Bunker claims to recover as damages)
Such a claim would however Note that whether a claim in
Other remedies available be subject to the following:- damages is recoverable or not is
to the charterers Charterers must prove a breach of a specialised topic in English law,
the charterparty by owners (note particularly with regard to causation
It is important to remember that under
that some of owners’ obligations are and remoteness, where detailed
clause 15 of NYPE ‘46, the ship will
not strict, such as owners’ duty to advice may well be needed
only be off-hire for the period where
time is lost and the full working of the maintain the ship. Some obligations
ship has been prevented. If however may be qualified by the obligation
to exercise “due diligence” e.g. May 2016
the event giving rise to off-hire is also
seaworthiness obligations in respect This article was written by Julien
a breach of the charterparty by the
of cargo claims where US COGSA or Rabeux in the Club’s Hong Kong office
owners, a charterer may be able with additional input from Holman
to claim damages for: the Hague/Hague-Visby Rules are Fenwick Willan (Singapore).
incorporated into the charter), and
Additional time lost or other losses
Owners may have defences - for This note is for general guidance only and
incurred resulting from the breach
example, if the US COGSA or the should not be relied upon as legal advice.
of charterparty
Hague/Hague-Visby Rules are Should you require specific advice on a
incorporated into the charter, under
Article 4 rule 2(a), owners may have
DGC-OH-GBR-19-V1

Defence Guides
Repudiatory Breach & Non-payment

of hire: when can owners cancel
a charter party?
Introduction i) when the contractual term that What happens if charterers have
has been breached, namely the not paid hire - can owners cancel
The non-payment of hire is one of
obligation to pay hire, is what the charter party?
the common problems faced by
English law calls a “condition”
owners and may result in owners As outlined at i) above, if English law
or, alternatively,
wishing to terminate the charter and finds that the obligation to pay hire is a
to re-fix the ship. (For the purposes ii) when the breach of the contractual
“condition” of the charter party, then
of this article, we will only be looking term is so serious that it “goes
charterers’ non-payment of even one
at the non-payment of hire in the to the root of the contract”.
instalment of hire will automatically
strict sense, i.e. charterers’ failure to In the event of a long-term charter, (subject to the requirements of any
pay hire, not where charterers have an early termination of the charter anti-technicality clause in the charter
deducted hire, as to which, please see party allows owners to claim for a party) entitle owners to cancel the
WEST defence claims guide: Off-Hire potentially large sum of damages, charter party.
in a nutshell. representing the lost profit for what
For a long time, there were conflicting
(Note also that the right of cancellation would have been the remaining period
English law cases on whether payment
discussed in this article is different of the cancelled charter party. In this
of hire was a “condition” or a mere
from owners’ right of withdrawal of scenario, owners have the burden
term of the charter party (The Astra
a vessel where this right is expressly of proving that they have suffered
[2013] 2 Lloyd’s Rep 69 for the former
included in the charter party - please losses that cannot be adequately
position and The Brimnes [1972]
see WEST defence claims guide: compensated by re-fixing the vessel,
2 Lloyd’s Rep 465 for the latter).
Withdrawal and suspension of service e.g. where the charter party rate has
Certainty on this issue is important
of a ship. decreased since the original charter
because as we have seen above,
was fixed - please see WEST defence
Whether owners can validly terminate/ the consequences of breaching
claims guide: Cancellation in a
cancel the charter, re-fix the ship and a term or condition of payment
nutshell.
claim damages for lost profit for the are very different.
remaining period of the cancelled What are the dangers if owners The issue of whether a payment of hire
charter party (as opposed to simply wrongfully cancel a charter was a condition was finally put
claiming the hire that has been unpaid to rest by the Court of Appeal in Spar
party?
prior to owners’ termination of the Shipping AS v Grand China Logistics
charter party) depend on whether the If owners wrongfully cancel a charter Holding (Group) Co Ltd [2016] 2
charter party has been repudiated. party and if it is found in subsequent Lloyd’s Rep 447 (“Spar Shipping”).
proceedings that owners were not In overruling The Astra, the Court
“Repudiation” is a specific term in
entitled to cancel the charter party, of Appeal decided that the obligation
English law and in this regard,
the tables are turned against owners to pay hire is not a “condition” but
a contract is repudiated either:
because in that scenario, owners will a mere term of the charter party.
themselves be in repudiatory breach This provides a measure of certainty,
of the charter party and charterers will namely, that owners do not have an
be able to cancel the charter party and automatic right to terminate
claim damages and/or an indemnity the charter party and claim for loss
against owners. of profits where charterers fail
to pay hire.
Defence Guides
However, as can be seen by ii) above, a) The amount of arrears accumulated b) Failure to come up with a concrete
this is not the end of the story. This and the duration of the charter party payment plan to settle arrears
is because, despite coming to a
It has been suggested that a One of the important factors which led
conclusion that payment of hire by
comparison of the arrears against to the finding of a repudiatory breach
itself is not a condition, the court in
the entire duration and sums which was charterers’ failure in coming up
Spar Shipping nonetheless found
could have been earned under the with a concrete payment proposal. A
that charterers’ conduct as a whole
charter party is a way of determining suitable payment plan should include
amounted to a repudiatory breach so
whether the non-payment of hire had a detailed and reasonable timetable
that owners had validly cancelled the
substantially deprived owners of the to pay off certain portions of the
charter party and were successful in
benefit of the contract. For example, debt. The inclusion of an interest
their claim for damages and loss of
a late payment of hire for two to three rate for late payment may also lay
bargain in respect of the future hire
months would be a small proportion further credence to the payment plan.
that owners would have earned under
of the total amount of money which A vague promise to make punctual
the charter party had the charter party
owners could have earned under payment will not usually be accepted
not been repudiated.
a five-year charter. Can such an as a reasonable payment plan.
When there is a non-payment of hire it insignificant proportion be said to
The proposal of a payment plan should
is therefore important to understand deprive owners of substantially the
be carefully drafted as it may be
what constitutes a repudiatory breach. whole benefit of the contract?
construed as an admission of liability.
Whilst the above is a starting point, For charterers, such a payment plan
What factors are relevant in the court cautioned that such a should be accompanied by “without
determining whether a breach is mathematical comparison of arrears prejudice” qualifications and clear
repudiatory? would not be conclusive as to whether words stating that the payment plan is
A conduct is repudiatory if it “goes to a breach is repudiatory. Such a not an admission of liability nor does
the root of the contract” or deprives position negates the fact that a charter it affect charterers’ rights to set-off
the other party (i.e. owners) of party is a contract where the charterer damages for other matters.
substantially the whole benefit of the is essentially obtaining services on
contract. In this regard, the intention of credit if he fails to make payment.
the defaulting party (charterers) is not As such, this mathematical
entirely relevant. What is important comparison may not be definitive
is charterers’ manner and conduct in determining whether charterers’
leading up to the breach. breach was a repudiatory one.
The following factors are relevant

in ascertaining whether charterers’
conduct in relation to non-payment
of hire was a repudiatory breach:
a) The amount of arrears

accumulated as compared to the
entire duration of the charter party.
b) Failure to come up with a concrete
payment plan to settle arrears.
c) Failure to explain in proper detail
why hire was unpaid.
Defence Guides
As for owners, accepting such a In order to mitigate any allegations

payment plan has its drawbacks too. of repudiatory conduct, charterers
The payment plan may be seen as a should be candid with the reasons
compromise of the claim under the why they failed to pay hire. Usual
charter party, thereby extinguishing explanations include having cash
owners’ rights to arrest any of flow problems, experiencing a
charterers’ vessels for security. In falling market or facing an economic
accepting the payment plan, owners downturn as well as unpaid sub-hire.
may qualify and state that such
There may be a concern amongst
acceptance does not extinguish their
charterers that divulging too much
rights to arrest the vessel if there was
information may be seen as a
a subsequent breach of the payment
commercial weakness or may even
plan. However, whether such words
be seen as prejudicing charterers’ legal
would actually extinguish the rights
position. That said, a certain level
of arrest would depend on the local
of candidness is needed because
admiralty laws of the country where the
the courts have found that charterers’
prospective arrest would take place.
failure to give details of when he First, as mentioned above, the
c) Failure to explain in proper detail expects to have incoming fresh intention of the defaulting party
why hire is unpaid funds is one of the types of conduct (charterers) is irrelevant. Evidence
A pattern of non-payment (or amounting to a repudiatory breach. that charterers have the willingness
underpayment) of hire with no or intention to perform the contract
explanation or a refusal by charterers What factors are irrelevant in and pay hire would not change the
to explain the underlying reasons determining whether a breach is fact that there was a non-payment
may be viewed by the tribunal as a repudiatory? of hire. As the court in Spar Shipping
repudiation by charterers. For example, succinctly said, “To say: ‘I would like
There are a number of considerations
where charterers seemed set upon to but I cannot’ negatives intent just as
that tribunals have found to be
paying US$7,000 per day below the much as ‘I will not’”.
irrelevant in determining whether a
charter rate for the remainder of the party is liable for a repudiatory breach. Second, the financial strength of
charter (a period of more than three owners is also irrelevant. Therefore,
years), it was held that the arbitrators it is no defence for charterers to
were entitled to conclude that this argue that because owners have deep
amounted to a breach which went to pockets, owners could have absorbed
the root of the contract (The Astra). charterers’ failures and prospective
inabilities to perform the charter party.
The fact that owners have a stronger
financial backing does not mean that
owners are obliged to accept payment
of hire in arrears especially when the
parties’ intention under a charter was
for hire to be paid in a timely fashion.
Defence Guides
About the Author
Eugene Cheng
Claims Executive
T +65 6416 4895

Conclusion It is also important to note that the
factors as discussed in this article
As seen from above, there are several both P&I and FDD matters.Prior to joining
are not exhaustive and a tribunal’s the Club, he practised law at a boutique
key factors which would determine
determination of whether a breach shipping law firm for close to five years.
whether charterers’ conduct in not Apart from his contributions to the Club’s
is repudiatory or not would depend
paying hire is such as to constitute defence guides, he has contributed to
on the specific facts of the matter.
a repudiatory breach of the charter Halsbury’s Laws of Singapore (Shipping)
In particular, a tribunal is likely to
party that entitled owners to and his articles have also been published
look closely at the correspondence in the Singapore Academy of Law Journal.
terminate the charter party.
between the parties in order to
If charterer members have failed to assess whether or not charterers are Get in touch
pay hire for one reason or another, in repudiatory breach of the charter West of England Insurance Services
(Luxembourg) S.A.
they should take note of such factors party. It is therefore important
and ensure that adequate steps are that members – both owners and
Singapore Office
being taken so that allegations of a charterers -think carefully about 77 Robinson Road
repudiatory breach can be rejected. the content and timing of such Level 15-01, Robinson 77
On the other hand, owner members correspondence. If in doubt, Singapore 068896
should review the above factors please contact the Managers. T +(65) 6403 3885
so that they can judge whether
charterers’ conduct amount London Office
to a repudiatory breach. February 2019 One Creechurch Place
Creechurch Lane
This article was written by Eugene London EC3A 5AF
Cheng in the Club’s Singapore office, T +44 20 7716 6000
with additional input from HFW E publications@westpandi.com
Hong Kong. W www.westpandi.com

DCG-RBNPH-GBR-19-V1

Defence Guides
Speed and consumption claims

in a nutshell
A speed and consumption claim permits charterers to deduct from hire
(by way of set off) any extra time and bunkers spent performing a voyage.
This claim is however not equivalent to putting the vessel off-hire as the
method of calculation can lead to different results. (It is important to keep
in mind that a vessel can only be off-hire if the reduction in speed is due
to an event listed in the “off-hire” clause of the charter party).
When considering such claims, Step 1: check the charter party 3. Is the warranty conditional
it is important to first check: on weather factors?
1. Were any warranties given?
the charter party and what The warranty will normally be subject
The description of the ship’s
exactly was warranted to good weather conditions. The
performance will either be given in
the evidence charter may define what this means,
lines 9-10 of the NYPE charter party
however in the absence of any specific
the calculation in accordance (lines 18-20 NYPE 93) or/and in the
details, “good weather” will probably
with the evidence description clause in the rider clauses.
be taken as periods where the wind
any possible defences If the description of the vessel is given is no more than Beaufort force 4 (11
on a “without guarantee” basis there -16 knots) (London Arbitration 15/06).
will be no warranty and a performance
If the charter does not state that the
claim will probably fail. This is however
warranty is subject to “good weather”
subject to the statement being given in
then there will be no such implied term
good faith. Showing the lack of good
and the warranty will also apply
faith is generally very difficult unless,
to what are usually considered
for example, the vessel has consistently
as bad weather days.
underperformed on previous voyages
prior to delivery. 4. Is the warranty given on an
“about” basis?
2. Was the warranty given for the
duration of the charter period? If the details are given on an “about”
basis, some margin of error will be
There are conflicting judgments as
allowed. The margin of error is a
to whether the warranty is only given
matter of fact and will depend on the
upon delivery (The Al Bida [1987] 1
configuration of the ship, size, draft,
Lloyd’s Rep. 124) or only refers to
trim etc. (The Al Bida). In practice,
the vessel’s capacity at the date of
the cost of arguing such details may
the charter (The Didymi). In any event,
exceed the figure in dispute but it is
unless the charter specifies that
commonly understood to be 0.5 knots
it is “continuing”, the warranty does
and 5% bunker consumption.
not apply throughout the duration
of the charter.
This is however subject to owners’ duty

to maintain the ship in an efficient state.
Defence Guides
5. Can “about” be taken into 6. Average speed Step 2: look at the evidence
account twice?
Where the charter warranty provides When assessing the performance of
Where a charter states that a ship is for an average speed, the average the ship, there are mainly two sources
capable of (for example) “about 13.00 is usually defined over a prescribed of information: the log books and the
knots on about 28.50 mt”, there is no period. In the absence of any defined weather routing reports. The evidential
consensus as to whether the owner charter party period, the averages will value of these documents will depend
may benefit twice from the “about” be taken over the course of individual on what the charter party states.
and therefore perform at 12.5 knots voyages (The Al Bida).
1. What does the charter party say?
and consume 29.9 mt without being in
It is thought that “average” cannot
breach of the warranty (see London Some charter parties will specifically
be substituted for “about” and no
Arbitrations 12/85 and 2/87), although provide that the weather routing
margin of 0.5 knots and 5% bunker
for the last 10 to 15 years the trend company’s finding will be binding
consumption will be allowed (London
has been for tribunals (at least in the on the parties. This is however
Arbitration 13/97).
published awards) to give such the often not the case.
double benefit to owners (London 7. Are the effects of currents to
Such clauses should be carefully
Arbitrations 10/01 and 15/07). However, be taken into consideration?
drafted to have the required effect
where such a double benefit is given
This issue is not settled and there are (London Arbitration 21/04, “data
to owners, it is arguable whether the
conflicting arbitration decisions as to supplied by Ocean routes shall be
tribunal will award the full 5% plus
whether the effects of the currents taken as binding on both parties”,
0.5 knot as this may end up being an
are to be taken into account when the where it was found that only the “raw
over -generous result towards owners,
charter is silent on this point. It is for materials” used in the calculation were
given that a reduction in speed will,
the arbitrators to construe a clause binding, not the calculation itself).
of itself, reduce the vessel’s actual
to interpret the parties’ intention. The
consumption. For the sake of clarity, it 2. Weather routing vs. deck log
better view is that currents should
is recommended that members clearly
be taken into consideration (see If there is a discrepancy in the data
define the “about” tolerance to be given
London Arbitration 21/04 not applying between the weather routing company
in the charter party, stating for example
currents and London Arbitration and the log books, tribunals will
that the ship is capable of “about
15/05 applying currents). usually prefer the log books. The
13.00 knots on about 28.50 mt where
reasoning behind this is simple:
“about” means +/-0.5 Knots and +/-5%
mariners are recognised by the Word
consumption, both tolerances to apply”.
Meteorological Office as trained
weather observers. Furthermore,
the information is collected in two
separate ways. The weather routing
companies will use information from
weather buoys and satellite. Weather
buoys for example cover areas of
about 300 sq/m and can be far away
from the ship’s actual position and
the weather conditions may well be
different. The vessel’s log will record
the weather conditions actually
encountered by the ship.
Defence Guides
It is however open for charterers to Step 3: calculating the vessel’s This is not always the method used
argue that the ship logs are unreliable. performance by the weather routing companies,
Any evidence of inaccurate (or who often calculate an average speed
fraudulent) entries in a log book 1. Look at periods of “good weather”
which includes those days where the
may plant the seed of doubt in an Courts and tribunals will look at weather conditions were not “good”.
arbitrator’s mind, whether they relate the “good weather days” and look A weather factor is then applied to
to the claim or not. For example, at the ship’s performance on these the overall calculation to estimate the
ballast movements may be recorded particular days. If the ship complies extent to which the vessel’s speed was
inaccurately, in order to give the with the warranty on these days the affected by the conditions apparently
appearance that a ballast exchange ship is also deemed to comply for the encountered.
has taken place. It may be possible whole voyage. The reverse will apply
2. Is it necessary to identify “good
to discredit log entries by comparing if the ship does not comply during
weather days”?
them with the ballast log and stability the good weather days. (The Didymi
computer records. Similarly, if the [1987] 2 Lloyd’s Rep. 166 and The Gas Unless the charterparty states
vessel’s performance is poor due to Enterprise [1993] 2 Lloyd’s Rep. 352). otherwise, it is not necessary to
an unauthorised deviation, it should identify one or more good weather
When identifying good weather days it
be possible to compare log positions “days” (in the sense of a period of 24
is better to look at the deck logs than
with AIS data and ECDIS position logs. consecutive hours) in order to be able
the log extracts/abstracts. In effect
When checking weather recorded by a to assess the vessel’s performance.
deck logs give a more accurate picture
vessel, it should be confirmed whether Shorter periods can be considered if
of the vessel’s performance as the
the vessel is a Voluntary Observing they are a sufficiently representative
vessel’s position should be recorded
Ship. Such vessels should be making sample to enable a breach to be
at least every two hours, the weather
more detailed weather situation established. This will be a question
at least every four hours, and the
reports for transmission to a national of fact for the court/tribunal to find.
distance made good, as well as the
meteorological authority than would Therefore if, on a voyage, the ship only
average speed for the preceding day,
be noted in a deck log book. encountered two periods of 14 and 16
and for the voyage so far, at every
hours of “good weather”, the tribunal
If there is information that should noon as well as upon completion
should consider whether these periods
normally be recorded, but is of the voyage. Some vessels may
in total amount to a sufficiently
occasionally omitted, this may lend also possess information pertaining
representative sample, and they
weight to an argument that the to the speed achieved through the
should not automatically be excluded
Master and officers are not wholly water (speed log data) which can be
because they are each less than
diligent in their completion of the compared to speed achieved over
a “day”. (The Ocean Virgo [2015]).
log. Contradictions in the recorded the ground, and may help to show
weather can often be found by the vessel has encountered adverse 3. Performance calculated
comparing the weather information currents and/or tides. Further, high over a voyage
recorded in the relevant boxes with “slip” figures in the main engine log When assessing the performance of
details of weather entered in the can also indicate adverse tides and/ the ship, the performance will usually
narrative section. For example, the or currents. (Slip is the difference be assessed on each individual
Beaufort scale describes force 3 between the theoretical distance the voyage.
as being characterised as having a propeller should have moved (pitch
sea-height of 0.6-1.0m. Should the multiplied by revolutions made)
narrative contain words to the effect: compared to the actual distance
“moderate seas” (Beaufort scale achieved over the ground for
sea height of 2.0 -2.5m) recorded at the same time period).
the same time, then the abilities of
the recording officer as a weather
observer may be called into question.
Defence Guides
4. Calculation c. The breach of warranty is NYPE 2015

a claim in “damages” and not
a. Speed and consumption The NYPE 2015 has a new clause
an “off-hire” claim
(clause 12) dealing with speed and
The vessel’s performance on the
The mere breach of warranty will not consumption issues. The most
voyage should be measured during
render the ship off-hire. significant difference between this
a good weather voyage, namely by
clause and the one in the NYPE 1993
dividing the distance travelled by the A vessel can only be off-hire if the
charter party is that the speed and
time taken (adjusting for current if reduction in speed is due to an event
consumption warranties given in the
appropriate). This will give you the listed in the “off-hire” clause of the
NYPE 2015 are continuing warranties,
vessel’s “good weather speed”. If the charter party. If it is so listed and the
in that they must be complied with
“good weather speed” is not as good vessel is off-hire charterers will be
throughout the charter period and
as the charter party warranted speed, able to deduct the additional time
not only on delivery (as per the NYPE
it is usually assumed that the vessel taken and fuel consumption equivalent
1993). The clause also provides for a
also underperformed to a similar to the off hire period. This method
procedure to deal with these claims.
extent on bad weather voyages. of calculation can amount to a higher
Owners are to provide copies of
A similar calculation is carried out claim amount than charterers would
the vessel’s deck logs after which
for the vessel’s bunker consumption. be entitled to claim as damages for
the matter shall be referred to an
breach of the performance warranty.
b. Consumption: credit given independent expert or alternative
forunder-consumption? When a ship’s speed is reduced due to weather service selected by mutual
the ship’s bottom being fouled, owners agreement. The independent expert
If slower speed leads to apparent
may have a defence, particularly report shall be final and binding on
under-consumption of one or both of
where the fouling arose during the the parties. The cost of such an expert
the types of fuel used, owners can
charter party – see WEST defence report shall be shared equally. The
set off bunker under-consumption
claims guide: Hull fouling in a nutshell. intention is to try to achieve a quick
against a claim for damages for lost
time (The Ioanna [1985] 2 Lloyd’s and cost effective resolution of speed
Step 4: Defences and performance claims. However if
Rep. 164).
When defending a performance claim, the parties do not agree on a mutual
The next question then arises is how independent expert either side
depending on the charter wording,
much credit is to be given for the is presumably free to pursue
we have already seen that owners
under consumption? If the charter the claim through arbitration.
will usually benefit from the “about”
states that a ship can perform with
allowance and the fact that the This article was written by Julien
a consumption of “about” 40 mts
performance warranty may not Rabeux in the Club’s Hong Kong office
(“about”, for argument’s sake being
be a continuous warranty. with additional input from Smyth & Co
5%) and the ship consumes less than
this, is the saving to be calculated by The underperformance may also be in Hong Kong.
reference to the lower “about” figure due to poor quality bunkers supplied This note is for general guidance only and
of 38 mt, the higher “about” figure by charterers or simply due to should not be relied upon as legal advice.
of 42 mt or just 40 mt? It has been bottom fouling occurring as a natural
held in GAZ ENERGY [2012] (against consequence of following charterers’
vessel owners) that any “over- orders. In such circumstances, owners
performance” should be calculated may have a defence to charterers’
by reference to the best warranted claim – see WEST defence claims
figure, i.e. in this example credit guide: Hull fouling in a nutshell.
for the vessel’s “over-performance
would only arise where the vessel
had consumed less than 38 mt.
DCG-SCC-GBR-19-V1

Defence Guides
Hold cleaning in a nutshell (time charters)

1. On delivery: entitle charterers to cancel the charter absence of an intermediate hold
party. Rather, charterers would be cleaning clause, owners are responsible
In the absence of any specific clause,
restricted to their claim in damages for exercising due diligence to clean
line 22 NYPE requires that the ship
against owners for such delay and/ the ship with reasonable care, skill and
be “ready to receive cargo with clean-
or additional expenses (subject to any speed. Three separate provisions arise
swept holds” i.e. she is ready
Clause Paramount or other defence in the charter in this regard:
to commence loading without delay.
for owners that is incorporated
The maintenance clause (e.g. lines
Can charterers reject the ship if the into the charter party).
21-24 and clause 1 of NYPE 1946);
holds are not clean?
Can charterers claim damages if they Owners’ obligation to render all
If the ship is not in the required have missed their shipment laycan? customary assistance with the ship’s
condition, charterers are entitled to crew (clause 8 NYPE);
If charterers can establish a breach
refuse delivery/reject her, and the
by owners which causes the vessel to Implied term that the crew should
charter period will not start. If owners
miss a laycan due to hold rejection, perform their services with due
are not able to rectify the condition
damages for loss of the sub-charter diligence
of the ship before the cancelling date,
are in principle recoverable (subject
charterers may become entitled
to any Clause Paramount or other The question as to the level of
to cancel the charter.
defence for owners that is incorporated cleaning that the crew can reasonably
What if, despite the holds not being into the charter party). There may be be expected to achieve is a question
in satisfactory condition, charterers arguments about causation (i.e. was of fact.
accept the vessel? this the only reason the laycan was
Cleaning the holds includes removal
missed?) and remoteness (i.e. was it
Where charterers accept delivery of of loose rust scale and loose paint,
reasonably foreseeable that such a
the ship and the ship’s holds are not in always given time and calm weather.
breach would lead to such damages?).
the required condition, owners may be The crew are not regarded as skilled
However, on balance, owners would
liable in damages, subject to any Clause cleaning operatives and, therefore,
be presumed to know that (assuming
Paramount or other defence for owners there is a limit on what cleaning can
there is a liberty to sub-let in the
that is incorporated into the charter reasonably be effected whilst at sea.
charter party) disponent owners
party. (Charterers should however be
would be sub-chartering with terms Cleaning holds & customary
careful not to waive their rights.)
as to the condition of the holds on assistance does not include:
Where charterers accept delivery delivery, subject to arguments about Removal of hard adhering rust
of the ship in circumstances where remoteness, i.e. whether owners and large loose rust patches
owners’ failure to deliver the ship undertook any liability for such losses.
in accordance with the contract Chipping rust
means that charterers are deprived 2. Intermediate hold cleaning: Scaling operations requiring
of substantially the whole benefit of sophisticated tools (pneumatic
Owners have an obligation to maintain
the charter, charterers may still have hammers, high pressure water jets,
the ship which continues throughout
the right to terminate the charter grit blasting equipment)
the charter period. Unless otherwise
party, although the burden would
agreed (for example, where the When extraordinary cleaning is
be on charterers to show that the
cargo loaded has not been one that necessary due to charterers’ choice of
defects in/condition of the holds
is permitted under the charter party cargo (unless this cargo is one that has
prevented charterers from carrying
but the owners have agreed to carry been agreed that owners will carry,
out the trade required of the vessel
it at charterers’ expense/risk and the i.e. at owners’ risk and expense),
and that charterers had not waived
carriage has resulted in additional hold owners’ reasonable costs should be
their right to terminate the charter
cleaning being necessary), owners recoverable from charterers under
party. (If the defects in/condition of
must also pay for all expenses of an implied indemnity.
the holds only leads to delay and/or
intermediate hold cleaning. In the
additional expenses, this is unlikely to
Defence Guides
3. Common issues with Courts will look at the wording of 4. Facts to consider when
charter party clauses: clauses and give them their literal dealing with a claim:
meaning. The words “clean dry,
Very often, charter parties will contain free from loose rust flakes/scales The vessel’s age
rider clauses which will request the and residues of previous cargo” The configuration of the vessel’s
ship’s holds to be delivered up to will not mean that the holds can holds (height and accessibility)
a particular standard and/or that it be rejected if “traces” of previous
will be charterers’ responsibility to Regarding intermediate hold
cargo are found, although there are
ensure that the holds are cleaned at cleaning: was the amount of time
conflicting arbitration decisions
charterers’ risk and cost after having and were the weather and sea
on this issue.
carried a particular cargo. conditions reasonably sufficient to
Upon redelivery, charter parties enable the holds to be cleaned by
If a ship is to be delivered with will often include a provision that the crew? What were the previous
holds clean to a high standard, e.g. charterers are to return the ship in cargoes and the amount of cleaning
grain standard or “hospital clean”, the same condition as it was delivered required? In particular, were dirty
but the holds do not comply with in. Charterers will also have to option cargoes such as petcoke or coal
this standard of cleanliness, it is not of paying a lump sum In Lieu Of Hold previously carried?
relevant whether the failed holds Cleaning (ILOHC). This clause is only The standard of cleaning required in
are still in a suitable condition for intended to cover for the cleaning of the charter party (e.g. “grain clean”)
the particular cargo to be loaded; the holds when debris and residue
charterers will still be entitled to reject What were the reason(s) why
is left inside. It does not extend to
the holds and insist that these are the hold(s) failed the inspection
large amounts of cargo being left in
cleaned to the agreed standard before (removal of soft non-adhering rust
the holds that have been rejected by
charterers accept delivery of the is the duty of the crew, removal of
receivers. In this situation, charterers
vessel. However, if charterers do not hard adhering rust…cannot be done
will have to indemnify owners for the
reject the holds on delivery or reserve by the crew)
extraordinary costs of cleaning.
their rights, charterers will be deemed
to have waived their rights to claim This article was written by Julien
damages when holds are failed Rabeux in the Club’s Hong Kong office
on another shipment under with additional input from Holman
the charter party. Fenwick Willan (London).
DGC-HC-GBR-19-V1

Defence Guides
Nutshell on Deadfreight
A charterer’s obligation to provide cargo is absolute and non-delegable.
A claim for deadfreight arises when a charterer fails in this obligation
to provide sufficient cargo to load a vessel to the contractual stipulated
quantity. This nutshell seeks to explore the subject of deadfreight and
to provide members with a brief guide on deadfreight claims.
What is deadfreight? What is the rate of deadfreight?

Deadfreight is the name for damages In some charter parties (for example stipulated quantity of cargo to be
to which an owner is entitled to claim ASBATANKVOY and ASBAGASVOY), loaded. For example, if the charter
against a charterer if the charterer the rate for deadfreight is states “50,000 MT – 55,000 MT to
fails to load the full quantity of cargo expressly provided for. Under be loaded at charterer’s option”,
as stipulated under the charter. such circumstances, the claim for the charterer is only obliged to load
A claim for deadfreight is only deadfreight is liquidated and payable 50,000 MT so the owner’s claim
available in voyage charter parties in full at the said rate without regard amount will be calculated on this
where freight is earned based on the to any saving of expense by the smaller quantity and therefore lower,
quantity of cargo carried. owners in the voyage. accordingly.
Some other standard forms of

Would the calculation of
voyage charters (GENCON 1994)
do not have a clause specifying
deadfreight be affected by
the deadfreight rate. If so, the demurrage?
owner’s deadfreight claim would In a charter where the laytime is
be unliquidated in nature and such proportional to the amount of cargo
damages are usually calculated by loaded and where there is no express
reference to the freight which would deadfreight rate, owners’ deadfreight
have been earned on the short- claim would need to take into account
loaded cargo less the expenses the credit for the increase demurrage
which would have been incurred by earned due to the shorter laytime
the owners in carrying that cargo. (The Ionian Skipper [1977] 2 Lloyd’s
If the quantity of the cargo is stated Rep 273)
in the contract as a range at the
charterers’ option instead of a fixed
quantity, the minimum quantity of
the range would be the contractual
Defence Guides
Are the owners obliged of Club cover arising out of such a

to mitigate their losses deviation. It is also important to note
in a deadfreight claim? that a permitted deviation under a
charterparty may not necessarily
Owners are obliged to take reasonable equate to a permitted deviation under
steps to obtain a fill-up cargo if the the contract of carriage (as evidenced
additional freight earned exceeds by a bill of lading) because the terms
the expense of loading, carrying and of the contract of carriage may differ
discharging the fill-up cargo. In fact,
from those under the charter.
owners are entitled to deviate to a
reasonable extent, in order to fulfil
Can owners still claim for
their obligation to mitigate their losses.
deadfreight if a partially loaded
Subject to any contrary terms in the
vessel was ordered to leave?
charter, such a right to a reasonable
deviation is an implied term. For This depends on whether the order
example, in Wallem Rederi A/S v to sail is one which the charterers can concerns deadfreight and demurrage
WM H Muller & Co [1927] 2 KB 99, be held responsible for. If the order claims, it was found that there was
the vessel was chartered to load at to sail is given by the charterers, only one breach by the charterer,
Surabaya and to discharge at Madras, the owners will be entitled to a namely the failure to complete
Alexandria and Bristol. The vessel deadfreight claim. On the other loading within the laytime. There was
was short-loaded and the owners hand, if the order is given by the port no breach of the obligation to load a
loaded further cargo at Alexandria authority or terminal to which the full and complete cargo.
to be discharged at Avonmouth. The charterer has no control over such a
charterers attempted to argue that the decision, then there is no breach on However, in recent times, The Eternal
owners were not entitled to a claim in the charterers’ part (The Johnny K Bliss [2022] 1 Lloyd’s Rep 12 clarified
deadfreight because they had illegally [2006] 1 Lloyd’s Rep 666). that it was incorrect for Reidar v
deviated and had breached their Arcos to find that there was no breach
obligation of completing the voyage Can owners exercise a lien for of the obligation to load a full and
with reasonable despatch. The owners deadfreight? complete cargo in a case concerning
were found to have acted reasonably deadfreight and demurrage. It was
Owners must show that the lien further established that if an owner
on an implied term to deviate in order
clause in the charterparty covers seeks to recover damages in addition
to mitigate their losses.
deadfreight claims. In the absence to demurrage arising from delay, it
It is important to note that the of any specific wording, a lien for had to prove a breach of a separate
replacement cargo was to be non-payment of freight will not cover obligation. Hence, an owner is entitled
discharged at Avonmouth which a claim for deadfreight as the two are to deadfreight so long as he can prove
is technically a port in Bristol. two different types of claims. that there was a separate breach to
The application of the case may (See Defence Guides - Liens on cargo load a full and complete cargo as per
therefore be limited to situations in a nutshell) the contractual stipulation.
where the replacement cargo was
due to be discharged in the original Can owners claim deadfreight
discharge port of the voyage and over and above demurrage? This article was written by Eugene
not in a discharge port which was Cheng in the Club’s Singapore
not contemplated by the parties or For some time, it was questionable
office with additional input from Hill
the voyage. Further, if the ship were whether deadfreight was claimable
Dickinson (Singapore).
to deviate to a discharge port which over and above demurrage because
was not contemplated by the parties of the decision in Reidar v Arcos
or the voyage, there would be issues [1926] KB 352. In that case, which
DGC-ND-GBR-22-V2

Defence Guides
Nutshell on Formation of contracts

This article seeks to provide guidance for members on issues relating
to the formation of charter parties, the effects of “subject to” wordings
as well as issues relating to parties to the contract.
Formation of the contract “subject to” wordings
Does a charter party need to be If, during negotiations, the charter Parties may be deemed to have
in any particular form? contains “subject to” wordings, it dispensed with the “subjects” if
means that the parties do not yet they had begun performing the
A charter does not need to be
intend to make a binding contract. charter. For instance, the delivery
made in any particular form. An
There is therefore no intention to and acceptance of the ship would
oral agreement to charter a ship is
create legal relations and a binding be deemed as a performance of the
binding on parties. The form of most
contract does not exist. contract. Such performance will
charter parties includes a recap, the
lead to a binding contract even if the
main terms and the riders. A binding contract is only created
charter was made subject to
when parties expressly agree that all
the signing of an agreement (see
“subjects” are lifted. In The Junior K
The Botnica [2007] 1 Lloyd’s Rep 37).
[1988] 2 Lloyd’s Rep 583, the parties’
negotiations led to a telex stating “sub A note of caution that the position
dets Gencon CP”. Although the telex as set out above under English law
contained all the essential terms of the may differ from that of US law which
charter and there were no unresolved focuses the inquiry on the existence
operational issues between the of the “essential” or “main” terms of
parties, there was no binding contract the charter.
because the contract was still subject
to the details of the GENCON charter
being finalised and such a subject was
not lifted.
Defence Guides
Examples and effects whether such a condition is a pre- properly, ie the performance condition
of “subject to” wording condition or a performance condition. is not satisfied, this may in turn lead to
In the former, no contract exists and a the termination of the contract.
“Subject to” wordings can take
contract only binds when the relevant
many forms. These include “subject A “subject” is more likely to be a
condition is fulfilled. In the latter, a
to contract”, “subject to details”, pre-condition if the subject involves
binding contract exists and the parties
“subject to” a specific condition or the exercise of a personal or
are obliged to perform the condition.
requirement. commercial judgment by one of
It can be difficult to determine
the parties. For instance, if the
“Subject to contract” or “agreement whether a subject condition is a
“subject” is dependent on one party
to be finalised” suggests that a formal pre-condition or a performance
concluding a contract with a third
agreement must be entered before condition and there are differing
party, this is likely to be treated
a contract is deemed binding. This is views in case law. In Astra Trust v
as a pre-condition. As a result,
usually construed as a pre-condition Adams [1969] 1 Lloyd’s Rep 89, the
a “Suppliers’ Approval” subject
to a contract, which has the effect words “subject to satisfactory survey”
was deemed to be a pre-condition
of preventing a contract from were deemed as a pre-condition and
because it involved a commercial
coming into existence altogether. there was no binding contract until a
judgment, namely to choose third-
However, as mentioned above, the satisfactory survey was completed.
party suppliers, the terminal as well
performance of a contract may waive However, in The Merak [1976] 2
as the cargo. Consequently, it was
a party’s right to rely on the “subject Lloyd’s Rep 250, the same words
found that no binding contract was
to contract” wording. were deemed to be a performance
made when such a “subject” had not
condition instead. This meant that
When a contract is “subject to” a been lifted (See Nautica Marine Ltd v
there was in existence a binding
specific condition or requirement, Trafigura Trading LLC (The Leonidas)
contract and the parties were obliged
the nature and construction of the [2020] EWHC 1986).
to carry out the survey. If the survey is
parties’ negotiations will decide
then not carried out or not carried out
1
For example, “subject to survey”, “subject to enough material (STEM)“, “subject to completion of two trial voyages” etc.
Defence Guides
Under certain circumstances, even Do both owners and charterers have Unless otherwise stated, the terms
if the condition is satisfied, a further to sign a charter party? and amendments in the riders will
agreement must be reached between supersede the main terms and the
A charter does not need to be signed
the parties before the contract is recap will supersede the riders
in order for it to be binding. Under
deemed to be binding. For example, because the recap is viewed as the
common law, three ingredients need
in The John S Darbyshire [1977] 2 latest version of the agreement
to be present in order for a contract to
Lloyd’s Rep 457, the words “subject between the parties. The courts will
be binding. These are (i) the offer and
to satisfactory completion of two trial however try to reconcile as far as
acceptance of terms by the parties,
voyages” meant that there was no possible terms which may appear
(ii) an intention to create legal relations
binding contract until the trial voyages to be contradictory.
and (iii) consideration. The presence
were completed and the parties had
of these will create a binding contract However, if a formal charter is
agreed to enter into a contract. The
even if the contract is not signed. eventually drawn up and signed
use of trial voyages suggests that the
between the parties, the terms of the
charterer would have an opportunity What if there are contradictory terms
signed charter will take precedence.
to evaluate the vessel and this meant in the recap, main terms and riders?
The recap will still be relevant as an
that a contract was not automatically
Certain standard form charters aid in construing the final terms of the
concluded once the trial voyages
contain a clause which states that a signed agreement.
were concluded.
particular portion of the charter shall
The pre-contractual negotiations
prevail over the other portions. For
can also shed light on the parties’
instance, the GENCON 1994 states
intentions as to whether certain
that the provisions in Part I shall
portions of the charter would
prevail over those of Part II. In another
supersede others however these will
example, the NYPE 2015 states
not override the terms of the charter.
that the provisions of the riders and
additional clauses shall prevail over
those of the main terms.
Defence Guides
Parties to the contract Are guarantors a party to the charter? In fixing a charter guarantee, owners
need to ensure that the guarantee
What if there is confusion over the Guarantors are not a party to the
is properly issued and that they did
identity of the parties? Will the charter charter. A guarantee is a separate
not merely obtain a promise by the
still be binding? contract between the guarantor
charterers to procure a guarantee.
and the owner. In the event of
If the terms of the charter are In The Anangel Express [1996] 2
non-performance by the charterer,
insufficient to identify the parties, Lloyd’s Rep 299, the fixture contained
the owner’s recourse against the
the relevant factual background, the wordings “Charterers agree to
guarantor is via the guarantee and
including the correspondence performance guarantee to be as
not the charter.
between the parties, will be key per Owners’ wording on … letter
to resolving any uncertainties. It is Do charter party guarantees need headed paper and signed by…”. This
possible to look beyond a mistake to be signed or incorporated into the was deemed to be a promise by the
and construe a charter as if the right charter agreement? charterers to procure a guarantee and
name had been used. not an actual enforceable guarantee.
Generally, guarantees need to be
For example, in The Double Happiness made in writing and signed. However, Although English law can be flexible,
[2007] 2 Lloyd’s Rep 131, the charter a guarantee is enforceable even it is parties seeking to call on the
party mistakenly named the disponent electronically signed by a broker, so guarantee should always check what
owner as Front Carriers Inc instead of long as the broker has authority from the requirements are in the country
Front Carriers Ltd. It was found that his principal. of residence/registration of the
there was a binding contract because guarantor in order for the guarantee
A guarantee is also enforceable
Front Carriers Ltd attempted to rectify to be enforceable. Some countries
even if there is no single document
the error shortly after the fixture was may require that guarantees
containing the whole contract of
concluded and the charterers failed to be registered.
guarantee. For example, in Golden
object to it in a timely fashion.
Ocean Group Ltd v Salgaocar Mining
Industries Pvt Ltd and Another [2012]
This article was written by Eugene
1 Lloyd’s Rep, the guarantee and the
Cheng in the Club’s Singapore
charterparty terms were found to be
office with additional input from Hill
encapsulated in two separate emails
Dickinson (Singapore).
sent by the broker to the owners.
DGC-NFC-GBR-22-V2

Defence Guides
Safe ports and berths in a nutshell

Generally a port can be rendered II. Safe ports and berths: and mooring facilities, obstructions
unsafe due to: Definition and defective navigational aids may
render the port unsafe. However,
Sandbanks and shallows A port or berth will not be safe unless,
the criteria which have to be applied
“in the relevant period of time, the
Obstructions such as wrecks in determining whether a port is
particular ship can reach it, use it and
An inadequate system at the port safe are questions of law. Dangers,
return from it without, in the absence
(such as weather warnings, mooring whether physical or not, which
of some abnormal occurrence, being
facilities and tug availability) to are avoidable by ordinary good
exposed to danger which cannot
enable a ship to leave the port when navigation and seamanship will
be avoided by good navigation and
weather conditions make it unsafe not render a port unsafe.
seamanship” The Eastern City [1958]
for the vessel to remain at berth 2 Lloyds Rep 127. The effect of weather on the safety
Political situation or war of the port will be a factor which
a. Reaching the port or berth will be taken into account when
Losses due to inordinate delay
A port or berth will be unsafe if the establishing the safety of the port.
caused by temporary and
ship is unable to reach the port safely. Typically one will look at whether
permanent obstructions
For example a port may be considered there are local weather warnings
Outbreak of an epidemic unsafe even if the ship suffers advising the master of adverse
damage during its passage on a river weather as well as whether the ship
I. Where does the obligation or channel when approaching a port. can safely leave the port because
to nominate a safe port/berth The approach can extend to more of the onset of bad weather
than 100 miles (say the Mississippi
come from? A port can become unsafe if the
for example) and does not have to be berthing and mooring facilities are
a. Is there an implied term as to the in the immediate vicinity of the port. inadequate (fenders damaged or
safety of the port/berth? A port for example will be unsafe if missing/damaged mooring bollards)
If the charter does not have a safe the ship is required to lighten cargo
or has an air-draft which exceeds the The fact that the port is safe to
port/berth warranty then owners will
available clearance under a bridge that enter is not enough if it may become
not be able to make a safe port claim.
has to be passed whilst proceeding to unsafe for the vessel to remain there
b. Safe berth warranty but no safe the port. The risk of hostile seizure or
port warranty c. Leaving the port
attack during the vessel’s approach
While a safe port obligation will imply to the nominated port may render The port must be safe for the
a safe berth warranty, the contrary the port unsafe, however such risk of particular vessel in its condition to
is not the case. In the absence of a attack must be sufficiently real. depart. A port will be unsafe if the ship
safe port obligation, the safe berth is endangered when departing from
b. Safety of the port the port. For example if on departure
warranty will only apply to movements
within the port and will not extend The port must be safe for the ice has formed and the ship’s hull is
to the approach to the port. particular ship and for the duration damaged as a result when leaving,
of her stay. A ship may enter a port the port will be unsafe.
which is safe and which subsequently
becomes unsafe due to adverse
weather for example. A port will still
be safe if the ship can safely leave
the port because it has become
dangerous. What makes a port
unsafe is essentially a question of
fact: weather, inadequate berthing
Defence Guides
III. Rights and obligations under c. Owners’ rights Note, however, that if it is found that
the charter Owners are however entitled to act the port was not unsafe, owners may
on the good faith that charterers be held liable for any losses and
Charterers first have an obligation expenses caused as a result of owners’
to nominate a safe port. If the port have nominated a safe port and
proceed to the port without having refusal to comply with charterers’
becomes unsafe after the first orders.
nomination, charterers then have to make further enquiries
an obligation to nominate another The master does not have to d. What happens if the owners accept
(safe) port. instantly obey charterers’ orders charterers’ orders in full knowledge
if he is in doubt of the prospective of the unsafety of the port?
a. Charterers’ obligation to nominate
safety of the port. He will have In such a case, owners may have
a safe port
reasonable time to make enquiries waived their right to refuse to obey
Charterers have an absolute charterers’ orders
Owners are entitled to cease to
obligation to nominate a
obey charterers’ orders and refuse The fact that the master agrees to
prospectively safe port
to proceed or continue to stay call at an unsafe port does not mean
The fact that charterers do not in the port that owners waive their right
reasonably know of the danger to damages
If charterers fail to make a valid
is no defence
nomination within the time required, Owners may however be deprived
The port does not need to be safe owners are entitled to damages for from seeking damages if they
at the time of the nomination the delay incurred in awaiting a valid unequivocally represent to the
However it must be safe when the nomination charterers that they will not treat the
ship is due to reach, stay and leave If charterers persist in giving the order as a breach of the charter or
the port order, owners may be entitled have not acted reasonably in trying
to terminate the charter to minimise damage to the ship
b. What happens if the port becomes
unsafe after the port is nominated?
In such situation:
In the case of a time charter

party, charterers will have to cancel
the original order and nominate
a safe port
If the ship is in port, charterers must
order the ship to leave (if the danger
can still be avoided)
In the case of a voyage charter
party, where the port has already
been nominated, the view is that
charterers have no general duty
or right to re-nominate. If the
charter (and the B/L) have a liberty
clause (e.g. “so near thereto as she
may safely get”), then the owner
may discharge the cargo at some
other port
Defence Guides
IV. Charterers’ defences b. One named port in the charter. of their safe port obligations. However,
to an unsafe port claim Is this a defence? if the war persists then this may become
If for example the charter only a characteristic of the port in relation to
a. Negligence of the crew
names one port such as “one safe port, future nominations of that port.
The negligence of the crew will be Hamburg”, the owner will not have For the purpose of determining
a valid defence to an unsafe port waived his right to make an unsafe port whether charterers are in breach
claim if it is proven that it broke claim even if they knew or ought to of the warranty, the time for judging
the chain of causation. have known that the port was unsafe. whether the occurrence was
“abnormal” is when charterers give the
Whether the master is negligent is a c. Abnormal occurrences order. If an event which was abnormal
question of fact. Courts will generally
Charterers will only be liable if the at the time of giving the order (so that
look at the dilemma in which the
damage to the ship is due to the charterers’ order is valid) but has
master found himself as to whether
prevailing characteristics of the port. become normal by the time of the
or not to proceed and will generally
A port will therefore not be inherently vessel’s call, the case will be one of
decide that if the master acted
unsafe if the damage is due to an supervening unsafety [and charterers
reasonably (even though mistakenly)
abnormal event such as a tsunami. An will be obliged to give alternative
the cause of the damage stems from
event is not an abnormal occurrence voyage orders – see b) above].
following charterers’ orders.
just because it is out of the ordinary. An abnormal occurrence can
Generally courts will be reluctant to Whether an event is an abnormal sometimes be hard to define. A good
accept arguments from charterers that occurrence is a question of fact and it illustration of this problem can be
the master could see that the port was can sometimes be hard to determine found in the OCEAN VICTORY [2015]
unsafe and that the which category this event falls into. case: the OCEAN VICTORY, was
decision to proceed is the true cause
The sudden outbreak of a war will not discharging her cargo at Kashima in
of the damage. Charterers cannot
be a characteristic of the port. This Japan when the berth was affected
generally rely on their own breach
event will be an abnormal occurrence by considerable swell caused by long
to defend a claim.
and the charterers will not be in breach waves and high winds of up to Force 9
on the Beaufort Scale.
Defence Guides
About the Author
Julien Rabeaux
Claims Team Manager
T +65 6416 4894
E Julien.Rabeaux@westpandi.com
Julien is a Claims Team Leader in West

of England’s Singapore Office. He
studied law in France and England and
subsequently qualified as a solicitor in
a London shipping law firm. Julien was
based in West of England’s Hong Kong
Office for 5 years, before moving to
Singapore when the Club launched its
office there. Prior to joining the Club,
Julien worked for another IG Club in
The Master then decided to leave therefore an “abnormal occurrence”. London for 7 years.
the berth for open water, but due to Hence, in this case, there was no
Get in touch
severe gale force winds in the fairway breach of the safe port warranty.
West of England Insurance Services
lost control of the vessel while leaving (Luxembourg) S.A.
This case is under appeal to the
the port and was driven back onto the
UK’s Supreme Court, so the test
breakwater wall. The ship became Singapore Office
for “abnormal occurrence” may 77 Robinson Road
a total loss.
be further redefined. Level 15-01, Robinson 77
At first instance, the court found that Singapore 068896
Kashima port was unsafe because it V. Limitation of Liability T +(65) 6403 3885
did not have a safe system to make
Charterers may be able to limit
sure that vessels needing to leave the London Office
liability for claims relating to pollution
port due to these weather conditions One Creechurch Place
or cargo damage under international Creechurch Lane
(which were not deemed to be an
conventions. Charterers’ liability to London EC3A 5AF
“abnormal occurrence”) could do so
owners for damage to the ship due to T +44 20 7716 6000
safely, and that safe navigation out
charterers’ breach of their safe port E publications@westpandi.com
of the port required more than good
obligation is not limited by international W www.westpandi.com
navigation and seamanship. On appeal
conventions, although charterers may
however, the court concluded that
be able to limit contractually.
the “concurrent occurrence” of (i) the © West of England Insurance Services.
severe swell at berth from long waves All rights reserved. The opinions expressed
that made it dangerous for a vessel to April 2016 in this publication are those of the authors.
remain at the Raw Materials Quay; and This article was written by Julien This note is intended for general guidance
(ii) the severe gale force winds from only and should not be relied upon as legal
Rabeux in the Club’s Hong Kong office advice. Should you require specific advice
the northerly/north-easterly direction with additional input from Holman on a situation please contact us.
in the exit fairway conditions which Fenwick Willan (Singapore).
affected Kashima was rare and was
DCG-SPB-GBR-19-V1

Defence Guides
Hull Fouling in a nutshell

Hull fouling is a well-known problem affecting vessels trading in warm water
ports and is the result of marine growth on the hull. It can lead to diminished
vessel performance as well as additional costs and time lost cleaning the hull.
Commonly, there will be protective party trading limits, charterers will work falls to owners as a risk which
clauses in the charter to deal with be in breach of the charter party and they consented to bear on fixing
this situation. However such clauses are likely to be liable for the cost of the charter party. Such fouling is
are sometimes omitted or may be cleaning the hull and the time taken considered foreseeable at the time
insufficient to encompass the specific for the cleaning operation. Owners of fixing the vessel and falls within
scenario. English law has addressed must still show a causal link between owners’ obligation to maintain the
these issues and the most often used the breach and the hull fouling. vessel, especially where the vessel
charter party forms are considered here. Conversely, charterers would need is permitted under the terms of the
to show that their unlawful order charter to trade in warm waters.
1) Owners’ obligation to maintain: did not cause the hull fouling.
In some limited circumstances,
Clause 1 of the NYPE 1946 form Even if charterers give an unlawful however, an indemnity for hull fouling
(clause 6 of the 1993 form) sets out order, it may be that charterers can may be implied. Such an indemnity
owners’ overriding duty to maintain argue that owners agreed to follow will generally be implied against
the ship. The costs of cleaning fouling charterers’ illegitimate order and unforeseen liabilities, losses or
from the hull, repairing paint work that owners have thereby waived costs incurred by owners as a direct
usually fall to owners as part of the their right to damages. As a general consequence of complying with
maintenance obligation. It is also rule, however, obeying charterers’ charterers’ orders (The Island Archon
worth noting clause 21 of the NYPE unlawful orders will not amount to [1994]), further or alternatively,
1946 form which (while often deleted) a waiver by owners of their right to when fouling is fortuitous or
expressly provides for the vessel to be claim for damage or losses arising. unforeseen events occur.
dry-docked at least every six months As a matter of prudence, owners
It is unlikely that an indemnity
for bottom cleaning and painting. should clearly put charterers on
will be implied in owners’ favour
notice that owners are not waiving
where: time spent at a warm water
2) Owners’ claims that can arise: their right to claim against charterers
port was usual and expected for
for charterers’ unlawful order
a) Can owners claim damages and/or the particular port (see The Kitsa
(The Kanchenjunga [1990]).
an indemnity against charterers [2005]); the marine growth in the
for following charterers’ orders? Hull fouling as a result water was usual and expected at
of a lawful order: that place for that time of year;
This depends on whether charterers’ or if either of the parties had been
order was lawful or unlawful. In other The NYPE form does not contain an aware of the environmental factors
words, did charterers order the vessel express indemnity from charterers prevailing at that place before
to trade to a safe port, anchorage, to owners (unlike the Baltime form). the vessel traded there.
berth or place within the permitted
Furthermore, owners will not be As a matter of good practice,
trading limits?
entitled to claim from charterers it is better to have a comprehensive
Hull fouling as a result under an implied indemnity where clause in the charter party agreed in
of an unlawful order: losses and expenses are incurred advance rather than rely on implied
as a consequence of complying with indemnities which are less certain.
Where the fouling is shown to be a
charterers’ legitimate and ordinary
direct result of obeying charterers’
employment orders. For example,
orders which involve, for example,
the cost of cleaning the fouling
the vessel trading outside the charter
from the hull and repairing the paint
Defence Guides
b) Can owners make a claim 3) Charterers’ claims Similarly, unless the speed and
against charterers for failure to that can arise: consumption of the ship are warranties
redeliver the ship “in like good that apply during the charter party (and
order and condition”? a) Can charterers make an off-hire not just on delivery under the charter),
and/or under-performance claim? charterers will also not be able to make
Charterers’ duty is to redeliver the
If the ship’s performance is affected an under-performance claim as the
ship fully discharged, clean, and free
due to the hull being fouled on or warranties are only given on delivery
of previous cargoes. Owners cannot
before delivery, then charterers will be whereas the fouling occurred as a result
however claim that charterers are in
able to put the ship off hire for any time of a natural consequence of the service
breach of their redelivery obligation
lost (The “Ioanna” [1985]). of the ship during the charter party.
because of growth on the ship’s hull
where, for the particular trade for If the hull is fouled during the currency Charterers might be able to make
which the ship is chartered, such of the charter party, charterers may a claim under owners’ maintenance
growth on the hull is “ordinary wear argue that the ship is off-hire by clause if charterers can show that
and tear”for which charterers cannot claiming that the hull fouling was a: “… owners breached the obligation
be held liable (The Pamphilos [2002]). cause preventing the full working of to maintain the vessel by failing to
the vessel” and/or “defect in the hull” adhere to an appropriate anti-fouling
To summarise, owners have a duty
(clause 15 NYPE). However, where programme during the course of the
to maintain the ship and will not be
a vessel under-performs and time is charter or to clean the hull within
entitled to claim in respect of losses
lost due to hull fouling and that fouling reasonable time. However, if charterers’
arising during the charter party or for
arose as a natural consequence of the trading of the vessel does not give
charterers’ failure to redeliver “in like
service under the charter party, then owners the opportunity to clean the
good order and condition” if:
the vessel cannot be considered to be hull, charterers cannot complain about
The damage arises from obeying off-hire in accordance with clause 15. breach of owners’ maintenance clause
legitimate and ordinary employment and/or under-performance.
orders; and/or
The loss/damage was foreseeable
at the time of fixing the vessel.
c) Can owners claim damages from

charterer for an underperformance
claim in a follow on charter?
This will depend on the terms of the

Charterparty. However, if a charter
contains a hull fouling clause whereby,
hull cleaning has to be performed at
charterers’ time, risk and expense but
charterers do not clean the hull before
redelivery, then owners may be able
to claim for the cost of hull cleaning
and the follow-on underperformance
deduction. This is however subject to
the vessel not having had sufficient
time to carry out thorough cleaning
before delivery under the follow-on
charter (London Arbitration 25/17).
Defence Guides
b) Can charterers claim for time To summarise: 4) Protective clauses

lost cleaning the hull?
The vessel will not be off-hire for In order to avoid the risk of delays in
While owners bear the cost of cleaning time lost (for example, due to slow tropical waters it is common for time
the hull, time spent cleaning the hull steaming) as a direct result of hull charter parties to include protective
during the charter will usually be for fouling which arose as a natural clauses. These clauses are however
charterers’ account as the vessel will not consequence of the service under not always adequately drafted and
be off-hire under clause 15. As a matter the charter party; frequently do not offer the protection
of prudence, however, charterers’ Owners have an obligation to which owners had hoped for.
agreement should be obtained as maintain the vessel and should During negotiations, owners and
to the time and place of cleaning. clean the hull within a reasonable charterers may devise their own
If the charter party contains a time if it has become apparent wording. The clause can sometimes
deviation clause, this usually permits that there is fouling; give rise to unintended consequences.
the vessel to be placed off-hire for The vessel may be off-hire whilst Owners should be careful with the
the period when owners deviate the owners carry out maintenance/ following points (this is not intended
vessel from a voyage for owners’ cleaning of the vessel’s hull to be an exhaustive list):
own purposes, such as for cleaning during the charter party Where does the clause apply? Does
the hull. When the vessel is laden,
it apply when the ship is at berth,
deviating to undertake cleaning may
port, anchorage, drifting outside
also constitute a “deviation” under
port limits but waiting to load/
the Hague/Hague-Visby Rules which
unload or at any other place at
in turn could compromise Club cover.
which the vessel is ordered to
The Club should be contacted in such
wait for charterers’ business?
circumstances.
Defence Guides
For what period does the clause Although the cost of cleaning is and samples of the hull fouling).
apply (for example, “the vessel being for charterers’ account, who is Charterers will attempt to allege pre-
at anchor or in port for more than responsible for cleaning? Is it better existing fouling or that the hull was
twenty five (25) days”)? What if the for owners or charterers to undertake fouled to a greater extent than it ought
vessel waits, for instance, 10 days the cleaning? to have to by arguing that owners had
at anchorage and 15 days in port, Evidence: from owners’ perspective, not applied adequate anti-fouling paint
or if the vessel is ordered to leave it is best to have a clause which or that the paint’s efficacy was reduced
the berth for a period to give room simply provides for charterers to due to passage of time and that the
to a priority vessel? clean the hull following a stay at a vessel needed to be repainted as
After how many days does the clause tropical port, without adding the part of planned dry-docking.
take effect? It may be wise for the requirement for owners to prove Tips for owners:
clause to differentiate between any such hull fouling. However,
Where it can reasonably be
tropical and non-tropical waters. practically, charterers may not agree
anticipated that there might be
(Fouling may rapidly occur in warm to such terms. In that event, do
delays and fouling, take pictures
and shallow water) owners have to provide evidence?
of the hull on arrival at the port.
What is meant by “tropical Is it up to charterers to reverse the
Good contemporaneous evidence
waters”? It may be wise to define burden of proof and show that the
of the condition of the ship’s hull
a geographical area or range of fouling occurred prior to the vessel’s
before a voyage will be better rather
latitudes and temperatures within prolonged stay in warm waters?
than relying on an after-the-fact
which the clause is to apply From owners’ perspective it is best
reconstruction;
for the clause to put the burden on
What if the delay is not all suffered charterers to show that the growth Keep good records of the vessel’s
on consecutive days? What if the was not caused by the prolonged cleaning and painting history;
vessel shifts between berths and so stay in a port but, rather, by the lack It is important to have good evidence
the delay is interrupted by steaming of maintenance by owners of the nature and extent of the
a few hours to bunker (e.g. ”The stay
fouling before cleaning, ideally by a
shall not be interrupted by the Vessel To summarise:
good quality underwater survey;
shifting between waiting places and/
If a clause turns out to be ineffective
or berths, nor by sea passage(s) of It may be possible to have an expert
then parties will rely on the case law
less than [12] hours”)? It is common extrapolate from the available
as discussed above;
for charterers to order a vessel to evidence, once fouling has been
take a short local passage to break Owners still need to prove that the discovered, to determine how long
the waiting period and thereby prolonged stay caused the fouling the fouling is likely to have been
prevent the delay from being all present. It is therefore worth asking
on consecutive days 5) Evidence the underwater surveyor to take
samples
Is there a strict obligation on Where there is dispute about whether
charterers to clean the hull (for the prolonged stay caused the hull to
example, “Charterers to clean be fouled (whether or not a prolonged
Vessel at their time and expense, stay clause is incorporated in the December 2017
otherwise owner’s representation of charter), the outcome is likely to turn on This article was written by Julien
Vessel’s speed/consumption to be the quality of the available evidence. A Rabeux in the Club’s Hong Kong office
non-operative…”)?What if this is a claim for hull fouling can be hampered with additional input from Smyth & Co
time charter trip? The above clause by a lack of reliable evidence that the in Hong Kong.
does not impose an obligation to fouling arose as a result of a particular This note is for general guidance only and
clean as it only states that charterers delay and was not pre-existing. It is should not be relied upon as legal advice.
will be unable to make a claim for important to have evidence indicating Should you require specific advice on a
underperformance. What if this is the where and when a particular fouling particular situation please contact the Club.
final voyage and the hull is fouled at took place (for example, with photos
the redelivery port?
DCG-HF-GBR-19-V1

Defence Guides
Early redelivery in a nutshell

When is the ship redelivered early? 2. Variable period Trip time charter on a “without
A charterer has an obligation to deliver There are broadly two types: guarantee” duration
the vessel in compliance with the “11 to 14 months” or “6 months, If for example the charter provides
redelivery provisions of the charter. 15 days more or less”. a trip between 2 ports for a duration
The timing of a redelivery will primarily of “70/80 days WOG” there is no
(i) “6 months, 15 days more or less”:
depend on the duration of the charter. minimum or maximum period as long
here the parties have agreed
a fixed? duration with a built-in as the estimate is made in good faith.
Usually a time charter will fall
tolerance clause. There is therefore If, for instance, in the above example
into two categories:
no implied allowance. the voyage lasts 150 days due to
1. A fixed period which could be a flat some unforeseen circumstance, then
period, for example “1 year” or (ii) “11 to 14 months”: here the answer the charter will not be liable for late
a period of time until a certain date, is not straight forward. Whether redelivery and will just have to continue
for example “until 15th July”. an implied allowance is allowed to pay hire at the agreed rate.
will depend on the period of the
2. A variable period (for example,
spread. If the spread is 15 days
“11 to 14 months” or “6 months, Early redelivery
(“6 to 61/2 months”) the law may
15 days more or less”). When charterers deliver the ship early,
allow an implied tolerance. If the
1. Fixed period spread is long (“11 to 14 months”) then owners have two options:
arbitrators and judges are less Accept the redelivery
Even when the word “about” is not
likely to allow an implied tolerance. and claim damages
included in the redelivery period,
“there is a presumption that a definite There will be no implied tolerance if the Refuse the redelivery with the ship
date for the termination of the charter range is defined by a minimum and/or remaining on hire without owners
should be regarded as approximate maximum period (“minimum 6 months, having to mitigate their loss
only” (London Explorer 1971). The maximum 7 months”).
precise date agreed for redelivery
Owner’s refusal to take redelivery
means “about that date”. Charterers “About”
are allowed a reasonable margin This course of action is however
The NYPE charter for example usually
before and after this precise date. subject to owners having “no legitimate
qualifies the duration of the charter
interest” in continuing to perform the
How big is the margin? with the word “about”. There is no hard
contract. If the owners’ conduct in
and fast rule to determine the margin
The extent of the margin of time for continuing with the charter is “wholly
imported by the word “about”. It
redelivery will depend on many facts. unreasonable” (note the emphasis on
largely depends on the duration
For example, a ship redelivered 8.4 wholly) then owners will not be able
of the charter and any specific
days beyond the stated period of to claim the full hire.
factual circumstances that reflect
a 6 months, 20 days period could
the intention of the parties. In most cases it is generally not
be deemed as reasonable (see also
advised to leave the ship idle and wait
discussion on “about” below). In one case, for example, a ship was
until the end of the charter as owners
chartered for “about 4 to 6 months”
will have to recover the hire due to
and 5 days was an allowable margin.
them. It is usually best to accept the
However, 12 days was not deemed
early redelivery and start the ship
reasonable in a charter for
trading again.
“about 6 months”.
If the word about is deleted, the judge/

arbitrators may take this into account
to deny a tolerance margin.
Defence Guides
What is a “wholly unreasonable”? If a ship was chartered for 12 months What if there is no available
on the Atlantic trade and redelivered market?
Owners’ mere unreasonable behaviour
after 7 months, then the relevant
will not be sufficient. It must be “wholly” In such circumstances, owners will be
market would be for a 5 months charter
unreasonable. What is considered to entitled to such sums as would put
(the remainder of the original charter) in
be wholly unreasonable will depend on them in the same financial position as if
the Atlantic trade.
circumstances. If the ship is redelivered the charter had been performed.
10 days early, it is very likely that the
What if owners re-charter
owner will be able to refuse redelivery What if an event permitting
on a different market?
of the ship and insist that hire is paid termination of the original charter
until the minimum redelivery date. Taking the above example, what if the occurs after redelivery but before
If however the redelivery date is 2 owners decide to relocate the ship from the end of the minimum period?
years early there probably would be the Atlantic to the Asia trade? There is
no “legitimate interest” in owners nothing stopping owners from doing In a situation where an event occurs
insisting on charterers continuing to so, albeit at their own risk. If the owner (after redelivery but before the end
perform the charter. ends up earning less hire in Asia than of the minimum period) which would
he would have done in the Atlantic, have meant that the charterers could
How much damages may the then the damages will still be based on have terminated the charter early (war,
owner recover? the “available market” rate. Owners etc…), the owners will only be able to
will not be able to claim the difference claim damages up to the date of the
The general rule is that owners event which would have triggered the
between the available market and the
will be able to claim the difference termination of the contract.
different market.
between the charter rate and the
“available market” rate if the ship had Taking the previous example (12
What if the owner finds a months C/P redelivered after 7
been promptly re-chartered for the
different market better paid than months), if an event permitting the
remainder of the charter period.
the “available market”? termination of the charter occurred
(C/P rate – Available Market rate) x on the 9th month, then owners would
The fact that owners have suffered
days redelivered early = damages. only be able to claim damages for a 2
fewer losses than under the available
months period instead of 5 months.
market is not relevant. The loss will
What constitutes the “available
still be calculated by reference to the
market” rate?
“available market”. The owner could
The “available market” rate will be potentially make a profit and still claim June 2015
determined by reference to the same for losses against the charterer. This article was written by Julien
market as the original charter i.e. the Rabeux in the Club’s Hong Kong office
same geographical area, trade and for with additional input from Ince & Co
a charter period corresponding to the (Hong Kong).
remainder of the original charter.
DGC-ERD-GBR-19-V1

Defence Guides
Frustration and force majeure

Frustration The fact that the event was Financial loss
contemplated by the parties at the
Frustration occurs when, without Whilst a frustrating event would
time the contract was entered into
default of either party, the inevitably cause financial loss of a
is relevant and is likely to (though
performance of a contract is rendered party if the charter was continued,
not automatically) negate a claim for
impossible or changes the party’s financial loss does not in itself cause
frustration of the contract.
principal purpose for entering into the the charter to be frustrated. “The fact
contract so as to render it “radically that it has become more onerous or
Causation: fault, election
different” (Davis Contractors V. more expensive for one party than
and negligence
Fareham UDC [1956] A.C. 696). he thought is not sufficient to bring
A frustrating event cannot be self- about a frustration. It must be more
What makes a contract “radically
induced. If the alleged frustrating event than merely more onerous or more
different” is a question of fact and will
is due to the deliberate act or choice expensive. It must be positively
depend on a wide range of factors.
of one of the parties, they will not be unjust to hold the parties bound”
The situation in which frustration can
allowed to rely upon the doctrine of (The Eugenia [1963] 2 Lloyd’s Rep
be invoked is tightly controlled by
frustration. A party to the charter will 381 ). For example, the fact that the
courts and the mere incidence
not be able to rely upon the doctrine contemplated route is not available
of expense, delay or onerousness
of frustration if an event which makes will not generally frustrate the charter.
is not sufficient.
further performance impossible has
Among the factors which have to been caused by their breach of the
be considered are the terms of the charter or their own negligence.
contract, the contemplation of the
parties (in particular as to risk at
the time of contract,) the nature
of the supervening event, and the
parties’ reasonable and objectively
ascertainable calculations as to the
possibilities of future performance
in the new circumstances (The Sea
Angel (2007) 2 LLR 517).
Defence Guides
An exception for commercial Delay The same event may frustrate

loss: damage to vessel A charter may be frustrated if
a voyage charter but not a time
However, a line of older cases the performance of the charter is charter
suggests an exception to this rule, sufficiently delayed. The main factor War, ice or strikes for example may
which arises where a vessel sustains is whether the interruption will be, (or not necessarily render the charter
damage on voyage and the costs of likely to be) substantial in relation to frustrated depending on the terms of
repairing her to the extent necessary the remainder of the charter period. the charter. A war or a general strike
to enable her to complete the may frustrate a voyage charter whilst
The length and effect of the
voyage (and the repair could thus be these may not have any effect on a
interruption must be assessed at
temporary) would exceed her repaired time charter with a wider trading limit.
the time that the cause of the delay
value, such that no reasonable owner It does not matter for example that a
operates and without the benefit
would incur that cost. In that case the time charterer intended to trade the
of hindsight. If at the outset of an
situation is treated in the same way as ship between the UAE and Yemen (a
event, the delay appears likely to be
if a repair was physically impossible country now at war); if the charter
of short duration, the contract will
and is considered now to be a species permits the ship to trade between
be frustrated when subsequently
of frustration (The Kyla [2012] EWHC other places then the charter will
it appears that the delay will be
3522 (Comm).). The exception will not be frustrated even though the
inordinately lengthy.
not apply however where the charter charterer may find it hard to find
contains an obligation on owners The type of delaying events capable employment for the ship.
to maintain a certain level of hull of causing frustration are:
insurance coverage, from the proceeds Requisition Events covered in the charter
of which the cost of repair could be
funded; in that case owners cannot War As seen above, strikes, ice and wars
claim that they could not reasonably Strikes may lead the charter to be frustrated.
be expected to fund the repair cost, so What is the position where the charter
long as that cost is within the agreed Ice already regulates these situations?
sum insured (The Kyla). Can the charter still be frustrated
or the fact that the contract already
deals with these events bars one
party from claiming frustration? The
established view is that it is relevant
but not conclusive. Unless a clause
specifically excludes the doctrine of
frustration from operation and is a
complete provision, a party will be
able to claim frustration if the contract
is rendered “radically different”. As
put in the case Fibrosa v. Fairbairn
([1943] AC 32 ): “where supervening
events, render the performance of the
contract indefinitely impossible and
there is no undertaking to be bound
in any event, frustration ensues even
though the parties may have provided
for the case of a limited interruption”.
Defence Guides
Damage, delay in obtaining Because force majeure is not a This was recently illustrated in a case
the cargo common law concept, parties will try Classic Maritime Inc v. Limbungan
to recreate it contractually and set Makmur SDN BHD [2019] EWCA Civ
A charterer owes an absolute and non- out in advance a list of events where 1102 . The charterers had long term
delegable duty to provide cargo for force majeure can be invoked. Most supply contracts in place with two
loading (The Nikmary [2003] EWCA voyage charters will contain force Brazilian mining companies, Samarco
Civ. 1715 ) and if they are able to do majeure clauses such as: “Strikes or and Vale. Under the COA, charterers
so because of their chosen supplier lockouts of men, or any accidents or had the option to either ship from
fails to supply a cargo, that event will stoppages on Railway and/or Canal, the port where Samarco exported, or
rarely amount to a frustrating event and/or River by ice or frost, or any another port where Vale exported.
or an event beyond the control of the other force majeure causes including Following a dam burst, production
charterer (The Mary Nour [2008] 2 Government interferences, occurring at the mine operated by Samarco
Lloyd’s Rep. 526). beyond the control of the Shippers, stopped and as a result charterers
If the intended cargo is damaged or Consignees, which may prevent or were unable to procure any cargo
before shipment, the contract will delay the loading and discharging of from this supplier. Charterers could
not be frustrated unless it related to the vessel, always excepted” (Sugar not procure cargo from Vale. The
a specific cargo. Charterers will have charter party 1969). court held that all charterers had
to find another source of cargo. The to do was to make all reasonable
Force majeure under English law only
same goes if charters are delayed efforts to ship out of the other port
shares two of the three elements of
in obtaining the intended source of instead. If charterers took reasonable
the civil law concept.
cargo. However, if there are no other steps to provide cargo but still failed,
alternative cargo, the contract may then force majeure was the cause of
Externality
be frustrated. charterers’ failure to perform and in
A force majeure clause can only be that event the force majeure clause
Force Majeure invoked if the event occurs without would have given charterers a defence
the intervention of any other parties. to owners claim for damages for
Force majeure is a civil law concept A party relying on force majeure failure to provide a cargo, such that
which does not exist at common law. must show that the non-performance owners had no claim for an award
It is very similar to frustration but has was due to circumstances beyond of substantial damages.
a wider scope. Under civil law a force it’s control.
majeure event will bring the contract
Unpredictability and narrow
to an end and parties will be released
Irresistibility and party’s obligation interpretation by the courts
from their obligations. Three factors
to take reasonable steps to of such clauses
must be show in order to establish
overcome the hinderance
force majeure: This where English law defers from
A party relying on force majeure must civil law. Force majeure will only
Externality
show that there were no reasonable be invoked if the event is listed
Irresistibility measures that it could have taken to in the force majeure clause i.e. a
avoid or mitigate the circumstances foreseeable event. Force majeure
Unpredictability
or its consequences and must use clauses will be construed against the
reasonable means to overcome the party claiming the benefit under the
hindrance, whether or not this causes charter and will be strictly construed.
a loss on the party relying on the force Any ambiguous clause will offer no
majeure clause. For example, if the protection. Broadly speaking they
port authority orders the suspension will be interpreted like any exception
of loading at a berth but there is clauses in a voyage charter.
another berth where the cargo can
be loaded, albeit to do so would
be at extra time and expense to the
charterer, then the clause will not be
of any protection.
Defence Guides
About the Author
Julien Rabeaux
Senior Claims Manager
Effect of a force majeure event unable to do so as charterers had T +65 6416 4894
previously defaulted on its obligations E Julien.Rabeaux@westpandi.com
Unlike the doctrine of frustration
under the COA due to a weak market.
where the contract will come
The Court therefore concluded that Julien is a Senior Claims Manager in
automatically to an end, the effects West of England’s Singapore Office. He
charterers could not rely on the clause
of force majeure will depend on the studied law in France and England and
to excuse its failure to ship cargoes.
wording of the clause. The clause may subsequently qualified as a solicitor in a
for example suspend the contractual London shipping law firm. Julien was
Damages – based in West of England’s Hong Kong
obligations until the event ceases or
Compensatory principle Office for 5 years, before moving to
give the parties an option to cancel
Singapore when the Club launched its
the contract. In the event that the defaulting party office there. Prior to joining the Club,
is unsuccessful in fulfilling the “but for Julien worked for another IG Club in
Force majeure as an exception test”, damages will be calculated in the London for 7 years.
clause and the “but for” test basis of the compensatory principle.
Get in touch
A lot of force majeure clauses are The compensatory principle is a West of England Insurance Services
drafted as an exceptions clause (as fundamental concept in contract (Luxembourg) S.A.
opposed to a frustration clause where law. It provides that parties claiming
causation does not have to be proven). compensation for breach of contract Singapore Office
77 Robinson Road
This will be a matter of construction. can only recover their actual loss and
The distinction is important as, in requires parties to take into account Singapore 068896
order to rely on an exceptions clause, events occurring after termination
T +65 6416 4890
the party relying on the clause has in assessing damages where those
to show that, but for the event, events might affect the loss actually
London Office
performance would have occurred suffered (Bunge SA v Nidera BV [2015] One Creechurch Place
(i.e. causation). If the force majeure UKSC 43). Creechurch Lane
clause is drafted as a frustration London EC3A 5AF
As of the date of this Guide, the
clause, then the relying party can T +44 20 7716 6000
“Classic Maritime” case did not follow
invoke the clause without needing E publications@westpandi.com
this approach on appeal. The Court
to show it could have otherwise W www.westpandi.com
of Appeal distinguished this case
performed its side of the bargain.
from the Bunge SA v Nidera BV case,
This was recently illustrated in the which was concerned with assessing © West of England Insurance Services.
“Classic Maritime” case described damages for an anticipatory breach. All rights reserved. The opinions expressed
above. The force majeure clause was By contrast, the “Classic Maritime” in this publication are those of the authors.
held to be drafted as an exception case was concerned with an actual This note is intended for general guidance
clause and as such charterers were breach. This is arguably a new only and should not be relied upon as legal
development, though the decision is advice. Should you require specific advice
required to show that, if the dam had
not burst, it would have performed subject to appeal.
its obligations under the COA. It was
DGC-FFM-GBR-20-V2


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Defence Guides

Notices of redelivery in a nutshell

Is the tender of a redelivery Although an approximate notice Can a redelivery notice

The breach will only occur on the date

About the Author

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

a) Cancelling dates – Fixed, b) Readiness as a pre-requisite This position can be varied

Advance cancellation deemed to be amended such that the Damages

About the Author

Eugene is a claims executive in West of

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

Clause paramount in a nutshell

About the Author

Eugene is a claims executive in West of

© West of England Insurance Services.

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

About the Author

Eugene is a claims executive in West of

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

Disponent owners’ contractual

Risks relating to disponent

T +44 20 7716 6000

© West of England Insurance Services.

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

Interruptions and exceptions

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

Late redelivery in a nutshell

There will be no implied tolerance

The normal measure of damages is the

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

Liens on cargo in a nutshell

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

Liens on sub-freights in a nutshell

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

Notices of readiness in a nutshell

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

Repudiatory Breach & Non-payment

The following factors are relevant

a) The amount of arrears

As for owners, accepting such a In order to mitigate any allegations

About the Author

Eugene is a claims executive in West of

© West of England Insurance Services.

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

Speed and consumption claims

This is however subject to owners’ duty

4. Calculation c. The breach of warranty is NYPE 2015

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

Hold cleaning in a nutshell (time charters)

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

What is deadfreight? What is the rate of deadfreight?

Some other standard forms of

Are the owners obliged of Club cover arising out of such a

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

Nutshell on Formation of contracts

Formation of the contract “subject to” wordings

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

Safe ports and berths in a nutshell