#17372 - Charterparties And Freight - Shipping and International Trade

CHARTERPARTIES; FREIGHT

SUMMARY

Incorporating a term into the B/L

• What do you do if you want to ensure that you are successful in incorporating a term?

• 1) The more specific you are, the more effective it will be

• 2) If you use general words, the Courts tend to take a narrower approach

  • They will tend to focus on the terms of the charterparty that relate to the carriage of goods

  • E.g. a demurrage clause is more likely to be incorporated than an arbitration clause if you use only general words

  • In the Varenna, arbitration clause wasn’t incorporated by virtue of the word “condition”

  • Varenna: “all conditions” was taken to incorporate only conditions applicable to the carriage and delivery of goods

• 3) Even if an incorporation clause satisfies those first 2 rules, it may still fail to incorporate IF it is inconsistent with the other terms of the B/L

  • E.g. if you have conflicting provisions relating to freight, then the freight clause from the charterparty will NOT be incorporated successfully

  • Consistent with the fact that you’re interpreting the B/L contract!

• 4) Even if a charterparty term is successfully incorporated into a B/L contract, the effect of that term, obviously depends on what the term actually says

  • For e.g. if you manage to incorporate a demurrage clause, but that term says that “charterer has to pay demurrage” in a situation, it’s not going to bind an indorsee!

Loading/Unloading Cases

• Three consecutive chronological periods to talk about: laydays (contractually available for charterer to use as he wishes), demurrage (liquidated damages for detention of vessel beyond laytime), damages at large

• When does laytime start to run?

  • (1) Ship must be an arrived ship

    • For a port charter: ship must be (1) within port limits and (2) at immediate and effective disposition of charterer (The Maratha Envoy)

      • In Maratha Envoy, this wasn’t met, because they were at the waiting area that was outside the jurisdiction of the port

      • They tried to dip inside the port limits briefly, but this didn’t affect the final outcome

    • For berth charter: ship must be in the berth or dock

  • (2) Notice of readiness must be issued

  • (3) Ship must be in fact ready to load

    • IMPT: consider whether an event that causes damages in addition to demurrage might also affect readiness to load

    • E.g. if barnacles form on the ship, you can argue that it’s not ready to load as a result! So laytime ceases to run

• Exceeding laytime is a breach of contract (AS Reidar)

Damages in Addition to Demurrage

• Need to establish (1) separate breach and (2) separate type of loss (AS Reidar as interpreted in The Bonde)

  • But make sure you point out that there can be alternate interpretations of AS Reidar -> that only separate type of loss is required

  • For e.g. DN’s view that even though Atkin LJ thought that there were two breaches, it’s not clear whether he was actually resting his decision on there being a separate breach

  • Then consider the implications for your answer on either interpretation of AS Reidar

• Separate breach

  • Separate breach alone is insufficient

    • In Chandris, a vessel was chartered to carry general cargo, excluding “dangerous cargo”. Charterers loaded some turpentine in steel drums (amounting to 1,546 tons).

    • It was held that this was a “dangerous cargo” and that the owners had not agreed to vary the charterparty so as to permit this cargo to be carried.

    • This subsequently caused a delay in unloading of 16 days

    • An arbitrator awarded the owners 16 days’ damages for detention.

    • However, Devlin J allowed the owners only to recover demurrage in respect of the 16 days

  • In AS Reidar, this was the failure to load a full and complete cargo

• Separate type of loss

  • What does demurrage clearly cover?

    • Loss of freight

    • Costs of running the ship during the delay (e.g. fuel, port fees, etc)

  • What might be a separate type of loss?

    • Deadfreight (AS Reidar)

    • The loss of freight due to the ship carrying less cargo

Rights of the Carrier to Claim Freight

• (a) Delivery at an intermediate port

  • Starting position is NO

  • It’s an entire obligation, and the obligation is to deliver to the stipulated port

  • Exception: could be an implied contract for pro rata freight if charterer voluntarily accepts intermediate delivery (Hopper v Burness)

  • Another Exception: if delivery was at intermediate port due to fault of charterer

• (b) Delivery of only part of the goods

  • In Thomas v Harrowing, they only got 2/3rds of the cargo to the destination, but they were entitled to the entirety of the freight because it was lump sum

  • So you can get the entirety of the freight so long as you deliver more than a de minimis amount

  • If they’ve lost most off your goods, you might have a claim for damages

    • Depends on why they were lost

    • If lost due to peril, then no claim!

    • But in any case, the counterclaim for damages is separate from payment of freight

• (c) Delivery of the goods in a damaged condition, the damage being due to his breach of the contract of carriage

  • Asfar v Blundell

  • Unless the cargo is, in a commercial sense, no longer the same thing

• (d) Delivery of no goods at the agreed destination, the loss being due to an excepted peril

  • To earn a freight, you’ve got to earn something

  • Even though it’s not your fault you can’t deliver something, you’ve got to earn a freight

• Thus if the carrier delivers any part of the cargo, at the port of destination, in a merchantable condition, he is still entitled to freight

• What difference does it make if the freight is advance freight?

  • Payable after loading

  • Once paid, freight is deemed to be earnt

  • Even if goods are entirely lost, freight is still validly earnt

  • Subject to counterclaim for damages

  • Could you not claim for restitution for unjust enrichment?

    • NO, because they have done what they have to do to earn the freight which is loading

Withdrawal/Cancellation Clauses

• Is late payment of hire a breach of condition?

  • Probably not (Spar Shipping)

  • Probably an innominate term (Spar) so you need deprivation of substantially the whole benefit (Hong Kong Fir)

• The fact that there’s a withdrawal clause doesn’t mean you’ve lost the right to terminate (Leslie v Webstead)

• Withdrawal clause must be exercised within a reasonable period of time (Jotunheim)

Relief from Forfeiture

• Court has no jurisdiction to grant RFF in time charter (The Scaptrade)

• Court has jurisdiction to grant RFF in demise charter, but whether they grant it will depend on the facts (Jotunheim)

  • On the facts, RFF was not granted due to (a) the commercial character of the freely negotiated contract and the need for certainty in a commercial context and (b) the fact that the charterer’s conduct was “not meritorious” and “worthy of censure”

  • Can distinguish subsequent fact patterns if the conduct there is less unmeritorious

  • Although DN: the need for commercial certainty is very strong, high bar before RFF will be granted

Baumwoll v. Furness [1893] A.C. 8

Notes

• This is basically a demise charterparty case

• The question here is: is the owner liable when he parts with possession and control of the ship, and the B/L is signed by the captain as a servant of the charterer with no authority from the owner to pledge the owner’s credit?

  • Answer: NO

• Note: demise -> means to completely divest power and control of the ship?

• Also, there can be demise of a ship without the use of the word “demise”

Facts

• The owner of a ship rented her out by charterparty for four months

  • The charterparty provided that the captain, officers and crew should be paid by the charterer, that the captain should be under the orders of the charterer as regards employment, agency or other arrangements; that the charterer should indemnify the owner from all liabilities arising from the captain signing bills of lading; and that the owner should maintain the ship in a thoroughly efficient state in hull and machinery for the service and should pay for the insurance on the ship.

• The charterer took possession of the ship and appointed the captain, officers and crew, except the chief engineer who was appointed by the owner in exercise of the option given him by the charterparty.

• The charterer sent the ship to New Orleans, where goods were shipped under bills of lading some of which were signed by the captain and some by the agents of the charterer.

  • The goods were lost at sea during the currency of the charter, owing allegedly to the unseaworthiness of the ship

  • Shippers sued the owner for the loss

Held (Lord Herschell, with Lord Morris and Field simply “concurring”)

• 1) “This case… turns on the construction of the charterparty, and the question is what was the related created by it between the parties”

  • Part of the question is whether it was a demise of the ship, or otherwise an agreement which vested the power and control of the ship in the charterer instead of the owner

  • “Was it a “demise” of the ship, or if not strictly speaking a demise was it an agreement which put the vessel altogether out of the power and control of the then owner, and vested that power and control in the charterers, so that during the time that this hiring lasted she must be regarded as the vessel of the charterers, and not as the vessel of the owner”

• 2) The use of the word “demise” is not necessary to create a demise

  • “In order to create what has been called a demise, it is obvious that the use of the word “demise” is not necessary.”

• 3) There was strong evidence in favour of there being a demise of the ship

  • The charterers had control over the use of the vessel, and appointed and paid the master and crew (except...