Charterparties And Freight Notes

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...

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