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D r y C a r g o C h a r t e r i n g

C h a p t e r 4

C h a r t e r i n g C o n t r a c t s

Instructor: George Lambrou FCIArb, Solicitor Advocate Partner, Thomas Cooper

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What is a Charterparty?

A contract The terms of which are found: on the standard forms (NYPE, Gencon, Shelltime) Specially typed clauses Fixture re-cap Previous Charterparties Course of dealings between the parties Anything else which is expressly incorporated (international

conventions) Implied terms

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Electronic Charterparty Handling

The New York Arbitration Convention The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 10 June 1958

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Electronic Charterparty Handling

Article IV1. To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply:(a) The duly authenticated original award or a duly certified copy thereof;(b) The original agreement referred to in article II or a duly certified copy thereof.

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Electronic Charterparty Handling

Name and Domiciles Check that this is 100% correct. Company in good standing Company search Do they exist? Any Baltic Exchange announcements?

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How to make sense of all the terms?

Golden Rules of contractual interpretation under English Law

Try to read all the clauses together if that is possible and consider the contract as a whole.

Only where there is a direct contradiction of terms, a specially typed clause will be considered more important than a standard clause

You cannot consider what was deleted from the standard contract

You cannot go behind the plain words of the contract by considering the parties negotiations.

If the word is in the contract, it is there for a reason.

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Breach of contractual terms- consequences

Contractual remedies what did the parties agree should happen?

Breach of contractual terms Damages the aim is to indemnify the victim.

To put the injured party is to be placed in the same position as if the contract had been performed.

What would have happened if there was no breach?

Entitlement to terminate the contract? Does the breach go to the root of the contract?

Specific Performance not a single reported case Injunction to maintain the status quo

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The Cancelling Date

Gencon 92 Clause 1 Owners and Charterers agree that the vessel is at X port and expected ready to load at about the date in box 9.

An implied term that the vessel will sail from X port within a reasonable time [Tarrabochla v Hickle (1856) 1 H & N 183]

Expected ready to load is an undertaking on the part of the Owner that at the date the C/P was agreed, he honestly and on reasonable grounds expects the vessel will be ready to load at the date in box 9

Held to be a condition The Mihalis Angelos (1971) * {modification to para 2.1 of the book}

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The Cancelling Date

Clause 9 of Gencon 94 the Cancelling Clause Charterers have the right to cancel the charterparty if the vessel is not ready to load by the cancelling date.

The contractual right to cancel only accrues when the date has expired and not before.

If charterers exercise their contractual right, there is no breach of the C/P and therefore no right to damages.

But neither do they need to prove breach of contract or demonstrate loss.

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The Cancelling Date - summary

If the vessel is intentionally delayed or was never evergoing to make the cancelling date and Owners know or should have known this, Charterers might be able toterminate the contract based breach of the implied terms and breach of Clause 1 but difficult (reasonable grounds, facts known or ought to have been known) If successful can claim damages.

Charterers contractual right to cancel will accrue on expiration of the cancellation date. Quick and easy but no damages are available.

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The Safe Port

Implied term the Charterers must direct the vessel to a safe port Almost always an express term in the C/P. For example: Load one safe port Ventspils in a voyage charter contained a

warranty by charterers as to the safety of Ventspils [the Archimidis (2008)]

In a time charter, trading was limited to safe ports, safe berths and safe anchorages and places applied as a warranty of safety in respect of St Petersburg even though Owners expressly agreed to a voyage via St Petersburg [The Latanita] (2007) Commercial Court]

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Why Charterers say these should not be interpreted as Safe Port Warranties

Such warranties are intended to protect owners from the being directed to an unsafe port during a charter.

They enable owners to refuse to follow orders to proceed to an unsafe place, and to recover damages from charterers if they proceed to an unsafe port and suffer loss as a result.

It is not obvious that owners should be entitled to this protection when they expressly contract to send their vessel to, or via, a named port, which is what happened in The Livanita and The Achimidis.

It seems reasonable to expect owners to make their own enquiries about the safety of a port before contracting to send their vessel there.

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What the Court held:

Going back to our Golden Rules of contract:

The words "safe port" appears in both cases and so, it must have meaning.

The only meaning of those words that makes sense is that Charterers were giving a safe port warranty

Even if, there was no commercial reason for them to have done so.

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What is a "safe port"?

" a port will not be safe unless in the relevant period of time the particular ship can reach it, use it, and

return from it without, in the absence of some abnormal occurrence, being exposed to danger which

cannot be avoided by good navigation and seamanship"-

"The Eastern City" [1958]

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The Eastern City

The vessel was chartered for a winter voyage from "one or two safe ports in Morocco" to Japan.

The charterers ordered the ship to load at Mogador, where she was driven onto rocks next to the anchorage by a strong gust of wind.

It was held by the Court of Appeal that the port was unsafe because it was exposed to sudden gales in winter which tended to cause ships to drag their anchors in unreliable holding ground in the anchorage area.

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When is a port unsafe?

It follows that a port will be unsafe if

it is always unsafe for any vessel, or sometimes unsafe for any vessel, or always unsafe for the particular vessel, or sometimes unsafe for the particular vessel.

Conversely, a port will be safe if the particular vessel on charter will only be exposed to danger through negligent navigation or seamanship

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The Ocean Victory [2013]

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The Ocean Victory [2013]

A Capesize bulk carrier on 10-year bareboat charter from Ocean Victory Maritime Inc. to Ocean Line Holdings Ltd.

The charter provided that the vessel was to be employed "between good and safe ports".

The bareboat charterer, Ocean Line Holdings Ltd, time chartered the vessel to Sinochart, who agreed to employ her "via safe anchorage(s), safe berth(s), safe port(s)".

Sinochart sub-chartered the vessel to Daiichi for a trip time charter "via safe port(s) safe anchorages(s) South Africa".

On 24 October 2006, while trying to leave the Japanese port of Kashima in a severe gale, part-laden with an iron ore cargo, the vessel encountered force 9 winds and heavy swell. The vessel was set down on the end of a breakwater and then driven aground, before breaking up.

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The Ocean Victory [2013]

The claimants submitted that Kashima was an unsafe port

Charterers, submitted that Kashima was not unsafe, and, even if it was, that the casualty was caused by negligence of the master in

leaving the port when he did and/or by negligent navigation. Kashima could not described as unsafe simply because its

systems did not guard against every conceivable hazard, and that the pertinent consideration as whether there had been "a reasonable" level of safety.

They pointed out that no vessel had ever before been trapped by a combination of wind and swell in the way that happened to Ocean Victory.

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The Ocean Victory [2013]

Court Held: had been unsafe for the vessel the storm that affected the port on 24 October 2006 was not abnormal,

because an abnormal occurrence was one that was unrelated to the prevailing characteristics of the port.

the danger facing Ocean Victory related to two prevailing characteristics of Kashima: the vulnerability of the berth to long swell; and the vulnerability of the Kashima Fairway to northerly gales caused by a local depression.

The judge accepted that it might be rare event for those two events to occur simultaneously, but observed that it could not be a surprise if they did so, and that in any event the key point was that they flowed from features of the port.

reasonable safety rejected. Safety subject to good n