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Charterparties And Freight Notes

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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"
o 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
o 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?
o (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

1 --

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

2 --

(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 freightWhat difference does it make if the freight is advance freight?
o 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?
o Probably not (Spar Shipping)
o 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)
o 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"
o 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?
o Answer: NO
3 FactsNote: 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"

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.
o 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"
o 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 for the chief engineer, who was nominated by the owner but still paid by the charterers)
o "The use which was to be made of the vessel during that term rested entirely with the charterers. The then owner had no voice whatever in it."
o "The master of the vessel and the crew were appointed as well as paid by the charterers. The owner had no voice in this at all. All that he had a voice in was the nomination of the chief engineer, but even that officer was to be paid by the charterers."
- 4) Evidence against demise: (a) the owner had slightly restricted the use of the vessel under the terms of the charterparty; (b) the owner agreed to insure the vessel; and (c) he agreed to keep the hull and machinery in thoroughly efficient repair

But these were not strong reasons

4 (a): "It is said that the charterers could not use the vessel for all voyages, and that there was a certain restriction placed on their right so to use her. That certainly is not conclusive against a demise, otherwise there would be no demise of half the houses in this metropolis which are subject to restrictions as to the uses to which they can be put."
o (b) "Then it is said there are other provisions which shew that the owner was not entirely parting with his possession or control of the vessel, inasmuch as he was to insure her. The remark which I have just made applies equally to that provision."
o (c) "Would it be the less a demise of a house or of a chattel because the owner who demised it undertook to keep it in repair during the term for which it was demised"
5) One argument was that the presence of a clause whereby the charters agreed to indemnity the owners from all liabilities "that may arise from the captain signing B/Ls" shows that the parties contemplated liability being imposed upon the owner by the B/L
o This argument was rejected on the basis that the term was not specifically inserted for this agreement, but rather a pre-printed term

NOTE: similarities to Starsin -> HL there similarly gave less weight to pre-printed terms than specifically negotiated ones
 Especially because here, the question is what the term says about the parties'
intentions! (Whereas in Starsin it was simply whether a term was valid/accurate or not) -> pretty much impossible to infer a party's intention or contemplation from a pre-printed term that the parties have not thought about

"this is a document which is not prepared specially for this purpose; a good deal of it is in print, altered in writing to suit the particular arrangement; but some of the provisions that have been left standing were undoubtedly not specifically inserted with a view to this agreement, but have been left standing it may be more or less through an oversight"
6) Reaffirmed the general proposition that a third party to a contract can only be liable if it was entered into by his agent or servant acting within the scope of his authority

"It cannot be disputed as a general proposition of law, that a person who does not himself enter into a contract, can only be made liable upon the contract if it was entered into by one who was his agent or servant acting within the scope of his authority; and it is equally indisputable that a liability by reason of a wrong or a tort can only be established by proving, either that the person charged himself committed the wrong, or that it was committed by his servants or his agents acting within the scope of their authority."
o NOTE: this case was pre-CRTPA
7) Impossible to contend that these contracts were made with agents on behalf of the shipowners!
o "It seems to me impossible to contend that these were contracts made either with the master or the agents on behalf of the defendant Furness."
8) Also cannot be said that it was the shipowner or the shipowner's servant/agent who committed a tort -> no tortious liability either 9) Although the registered owner, the owner in fee simple is the "absolute owner" of the vessel, the demise charterer is the owner during the particular adventure for other purposes

Thus the common law relating to power of a master to bind an owner -> will refer to the demise charterer in such cases!
o--

5 o

"There is nothing in your Lordships' judgment, as I apprehend, which would detract in the least from the law as it has been laid down with regard to the power of a master to bind an owner, or with regard to the liabilities which rest upon an owner. The whole difficulty has arisen from failing to see that there may be a person, who,
although not the absolute owner of the vessel, is, during a particular adventure, the owner for all those purposes."

Lord Watson
- 1) "At the time when the bills of lading were signed and also at the time when the goods of the appellants suffered damage, the ship was in the possession and under the control of the charterers, who employed their own master and crew in her navigation."
- 2) They tried to argue that the shipowner remains liable for contracts made by the charterers'
agent with shippers with no notice of the terms of the charter

But this was rejected - no authority

President of India v. Metcalfe Shipping (The Dunelmia) [1970] 1 Q.B. 289
Notes
- Question was basically: whether the charterparty or the B/L governed the relations between the charterers and shipowners

In this case, the charterer also held the B/L
- Where, as here, the charterparty authorised the master to sign the bill of lading "without prejudice to" the charterparty, it operated as a mere receipt for the goods or as a document of title, and had no impact on the charterparty.
o This applies regardless of whether the party suing is an indorsee (subsequent holder)
or the shipper (original holder)
Facts
- Charterers entered into a contract with an Italian firm for the purchase of a quantity of urea.
o The contract of sale provided that the risk in the urea was not to pass to the charterers until the bill of lading had been delivered to them.
o The charterparty provided, inter alia, that the ship's master should "sign bills of lading
... without prejudice" to the terms of the charterparty; and clause 17 provided that any dispute arising under the charter was to be settled by arbitration in London.
- The cargo was placed on board by the sellers who took order bills of lading which were then indorsed in blank by the sellers as shippers and forwarded to the charterers, and payment was duly made.
o The bills of lading contained the terms "Freight payable by the charterers as per charterparty" and "All conditions and exceptions as per charterparty" but did not incorporate the arbitration clause.
- Later a dispute arose between the charterers and the shipowners over an alleged short delivery on discharge.
o The charterers sought to refer the dispute to arbitration but the shipowners claimed that the matter was governed by the terms of the bills of lading so that arbitration was excluded
Held (Lord Denning, with whom Edmund Davies LJ agreed)
- 1) The charterparty was prima facie the contract which governed the relations between shipowners and charterers for the carriage of goods by sea unless altered by the parties,
expressly or by implication 6 "whenever an issue arises between the charterer and the shipowner, prima facie their relations are governed by the charterparty. The charterparty is not merely a contract for the hire of the use of a ship. It is a contract by which the shipowners agree to carry goods and to deliver them.
o If the shipowners fail to carry the goods safely, that is a breach of the contract contained in the charterparty; and the charterers can claim for the breach accordingly, unless that contract has been modified or varied by some subsequent agreement between the parties."
- 2) Where, as here, the charterparty authorised the master to sign the bill of lading "without prejudice to" the charterparty, it operated as a mere receipt for the goods or as a document of title, and had no impact on the charterparty.
o This applies regardless of whether the party suing is an indorsee (subsequent holder)
or the shipper (original holder)
o Accordingly the arbitration clause in the charterparty remained the effective machinery for determining disputes between those parties.
o "The signature by the master of a bill of lading is not a modification or variation of it
(the charterparty). The master has no authority to modify or vary it. His authority is only to sign bills of lading "without prejudice to the terms of the charterparty."
o "The bill of lading was a mere instrument to carry out those contracts. It did not evidence any separate contract at all. As between charterers and shipowners, it was only a receipt for the goods."
o "Even though the charterer is not the shipper and takes as indorsee of a bill of lading,
nevertheless their relations are governed by the charter, at any rate when the master is only authorised to sign bills of lading without prejudice to the charter."
- 3) The textbooks which seem to provide a contrary view are mistaken

These textbooks cited Calcutta and Hogarth but misunderstood the dicta
Edmund-Davies LJ
- 1) "The charterparty being a contract, on fundamental principles its terms cannot be altered without the express or implied assent of both charterer and owner"
- 2) "The bill of lading also is, in general, a contract (this time between shipper and owner) and it is common to find in it a provision, as in the present case, that "All conditions and exceptions as per charterparty ..." But where the charterer himself ships the goods, the bill of lading has, not surprisingly, been held to operate as a mere receipt for, and document of title to, the goods, and not to operate either as a new contract between charterer and owner"
o i.e. where the charterer is the shipper, the B/L becomes a mere receipt and document of title, rather than a new contract o

*The Varenna [1984] QB 599
Notes
- A clause in the B/L that incorporates "all conditions" only incorporates conditions applicable to the carriage and delivery of goods

An arbitration clause did not count as such a condition
Facts
- A charterparty provided by clause 46 that "any disputes arising under this charter shall be settled in London by arbitration" and by clause 44 that "all bills of lading issued pursuant to 7

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