Maritime Law: Contracts Of Carriage Of Goods By Sea (Part Two)


Continued From Thursday 




(i)                Clause Describing Vessel


This includes the specifications of the vessel including those relating to speed, loading capacity and fuel consumption.  Commonwealth courts treat those statements as relating to the state of the vessel at the time of delivery while New York Arbitrators regard them as continuing warranties that will be capable of performance throughout the duration of the charter.


(ii)             Charter period


The length of the charter period in days, months or years is specified. However this figure is snot sabcrasant as the vessel may underlap (arrive earlier) or overlap (arrive later), the courts will imply a margin of tolerance of about 5% on the period stated unless the parties have made express provision for same.  The charterer will be expected to pay for the extra time at normal charter rate.  Only after the overlap allowance is exceeded will the charterer be liable in damages for breach of contract.


 Payment of Hire


Hire is calculated on the basis of a fixed sum per ton of the vessel deadweight for a specific period of time.  It is normally payable monthly or Semi-monthly:


In Cash


Payment of hire is to be made in cash.  This has been interpreted to mean any “commercially recognized method of transferring funds, the result of which is to give transferee, the unconditional right to the immediate use of the funds transferred   E.g. are banker’s drafts or payment slips or telex transfers from bank to bank.


In Advance


Payment is generally required to be made in advance at monthly (or 30 days) or semi-monthly intervals.  Where the due date falls on a Sunday, Payment must be made no later the preceding banking day.


(iii)        Currency and Escalator Clauses:


Since hire installments are generally paid over lengthy periods of time they are susceptible to inflation and currency fluctuation.  The currency Clause provides for a fixed rate of exchange between the currency payment and other relevant currencies.  The escalator Clause enables the hire to be adjusted in line with rises with vessel operating costs.


(iv)          Off-Hire


Normally hire is payable throughout the charter period whether or not the charterer making use of the vessel.  However, if because of some accident or problem which falls within the owners sphere of responsibility, the vessel falls into disuse no hire is payable.  The Off-hire clause specifies these instances e.g. dry-docking, breakdown of machinery, damage to the bulk etc, or by any other cause preventing the full working of the vessel.  It is for the charterer to show that an event has occurred that puts the vessel off-hire.


(V)    Right of Withdrawal


The terms of the charterparty usually provide for a contractual right of withdrawal in default of payment.  The right of withdrawal arises as soon as default is made in punctual payment of an installment of hire.  (Mardorf Peach & Co. Ltd v, Altica Sea Carriers Corp of Liberia 1977 AC 850 HL).


(v)             Employment and Indemnity Clause


This Clause stipulates that the charterer will have full use of vessel within the limits stipulated in the charter.  The clause also provides an undertaking that the master will comply with the charterer’s orders and instruction.  The limits specified in the clause may relate to types of cargo to be carried and geographical trade limits.


The Indemnity clause is necessary because the charterer is usually given the right to issue bills of lading which are to be signed by the Ship’s master.


The master is normally the agent of the shipowner.  As such, the terms of bills of lading signed by the Master are enforceable against the shipowner by any endorsee for value who takes in good faith.


With this increased liability to the shipowner, the indemnity clause becomes necessary to indemnify the owner against any additional liability incurred by him as a consequence of the activities of the charterer.


(IV)   Return of the Vessel


The clause provides for the redelivery of the vessel to its owner at a specified port or range of ports in like goods order and condition ordinary wear and tear expected” on a particular date which is generally known as the final terminal date.  References to the terms “delivery” and “redelivery” in a charterparty are not accurate but a relic of the demise charter because the vessel never leaves the possession of the shipowner but are used as a matter of convenience to describe the time when the period of the charter begins and ends.  Failure to confirm with this stipulation renders the charterer liable in damages if the failure is a result of a breach of his obligations under the charterparty.



                                                                                                                To be continued by tomorrow