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Chapter 5 - Voyage Charterparties

The Law of Carriage of Goods by Sea
Resource type: Chapter
Status: Published on 01-Dec-2011
Jurisdiction: United Kingdom
This is a chapter from the Bloomsbury Professional book The Law of Carriage of Goods by Sea, which is a comprehensive overview of the legal aspects of sea
carriage and the issues that surround it. It provides readers with a general introduction to the subject as well as more detailed chapters on bills of lading,
charterparties, international and domestic regulations, rights and obligations of the parties under a contract of carriage, limitations of liability and remedies. The book
includes relevant case excerpts, statutory materials, sample questions, diagrams and chapter summaries. This title provides a comprehensive overview of carriage
of goods by sea for both students and practitioners of shipping law.
This chapter, the index and the table of contents are FREE to view, as a sample of the book's contents. To view the other chapters, please subscribe to Books
online.
Lachmi Singh
Chapter 5 Voyage Charterparties

Table of Contents
Introduction
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PLC - Chapter 5 - Voyage Charterparties http://uk.practicallaw.com/books/9781847667038/chapter05
Standard form charterparties

Gencon 1994 charterparty
Introductory clauses
Cargo clauses
Freight clauses
Other clauses
Problems with Gencon standard form
Performance clauses
Preliminary voyage
Nomination of port of loading
Voyage to the port of loading
Expected readiness to load
Cancellation clause
The near clause
Loading operation
Division of responsibility
Provision of cargo
Mutuality of obligations
Exception clauses
The arrived ship

Shifting risk
Readiness to load or discharge
Notice of readiness to load
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Actual readiness to load
Laytime
Calculation of laytime
Suspension of laytime
Completion of loading
Demurrage
Damages for detention
Despatch money
Carrying voyage
Discharging operation
Introduction
5.1 This part of the book deals with the two main types of charterparties, namely the voyage charterparty and time charterparty. In this chapter we will be examining
the voyage charterparty where the charterer takes over the vessel for a specific voyage; however, the owner and his crew will manage the operations of the vessel.
The charterer will pay freight to the owner for the use of the vessel.[1] The voyage charterparty is not subject to any statutory regimes, rather they are more
commonly applicable by the use of standard form contracts used in particular trades. However, the parties may choose to incorporate the provisions of the
Hague-Visby Rules in the charterparty. The owner and the charterer will negotiate certain clauses such as the type of cargo to be shipped, the rate of freight as well
as the laytime available for loading and unloading the goods. The main questions to be considered are:
1. What is the role of standard form contracts in voyage parties?
2. What are the various types of cargo clauses?
3. When will the ship be deemed an 'arrived' ship?
4. What is the effect of tendering a notice of readiness to load?
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5. When will laytime begin to run?
6. What are the consequences of exceeding laytime?
Standard form charterparties

5.2 As mentioned above, the voyage charterparty is not subject to any statutory regimes governing carriage of goods by sea. However, parties are free to
incorporate such rules as they see fit. Most commonly, the voyage charterparty will be regulated by the use of a standard form contract which is particular to the type
of goods being shipped. In this chapter we will examine the Gencon 1994 charterparty which is one of the most widely used general purpose voyage charterparty
forms, used for all kinds of trades and for various types of cargoes.
Gencon 1994 charterparty
5.3 The Gencon charterparty is recommended by The Baltic and International Maritime Council (BIMCO), which is an independent international shipping trade
association with membership worldwide, comprising shipowners, managers, brokers, agents and many others with a vested interest in the shipping industry. [2] Since
first being issued in 1922, the Gencon form has been revised in 1976 and 1994. The form contains two main parts: Part I is made up of 26 boxes for the owner and
charterer to provide specific details as to the voyage charter, whilst Part II contains 19 relevant clauses which pertain to the rules governing the charterparty.
Introductory clauses
5.4 In Part I of the Gencon 1994 charterparty the parties can specify certain introductory clauses which stipulate the names of the parties, the carrying vessel, the
port of loading and the port of discharge.[3] The carrying capacity of the vessel is stated in Box 7 as dead weight tonnage this figure will be an approximate one
and is usually qualified by the use of the word 'abt' (about). Box 8 of the standard form contains information as to the position of the vessel at the time of contracting.
Cargo clauses
5.5 The charterer has an obligation to provide a cargo for loading on board the vessel. It is common practice that a charterer will specify a range of cargoes that
could be loaded on board the vessel on arrival, for example wheat or maize or rye. As the amount of cargo is the shipowner's entitlement to freight, any failure to
provide cargo on the part of the charterer will amount to a breach of contract. When the charterer contracts to provide a 'full and complete cargo' this creates a duty
to provide cargo for the whole of the vessel; in the event of a failure to do so the charterer will be liable to pay the owner dead freight. [4] Box 12 of Gencon 1994
stipulates that the parties must state the quantity of goods to be shipped; if not a full and complete cargo the phrase 'part cargo' must be used. Clause 1 in Part II of
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Gencon states that if cargo is to be shipped on deck this remains at the charterer's risk.
Freight clauses
5.6 Freight will usually be stated in express terms of the voyage charterparty. The quantity of cargo will usually determine the amount of freight payable. The quantity
can be measured in several ways; for example it can be by weight, number of packages or by cubic measurement. If freight is determined by weight or volume of
cargo, it is essential that the contract specifies when the quantity was assessed, this will be done either at the port of loading or port of discharge. Box 13 of Gencon
1994 contains the rate of freight to be paid by the charterer, it will also specify whether freight is prepaid or payable on delivery. Clause 4(a) states freight is to be
paid in cash based on the quantity of cargo shipped at the port of loading. If freight is paid in advance it is not returnable even if the cargo is lost. [5] Box 14 deals
with the payment of freight, namely the currency and method of payment.[6]
Other clauses
5.7 The Gencon form also contains other relevant information concerning the specifics of the charterparty. Box 16 sets out the provisions for laytime; clause 6
stipulates that laytime will commence, weather permitting with the exception of Sundays and holidays, unless the parties use such times, in which case these will be
counted. Laytime will run from 1300 hours if the notice of readiness is tendered at or before 1200 hours; if notice of readiness is tendered after 1200, laytime will
commence at 0600 hours. Box 20 and clause 7 sets out the provisions as to demurrage payable if laytime is exceeded. Demurrage is payable by the charterer at the
port of loading and discharge at the rate stated per day. If demurrage is not paid within 96 hours of notice, the owner is entitled to terminate the charterparty and
claim damages.
Problems with Gencon standard form
5.8 In some circumstances the 1976 version of the Gencon standard form contract is still used by some parties. There have been some criticisms of the use of the
Gencon form by the UNCTAD Secretariat.[7] These criticisms include the ambiguity of interpreting some of the clauses contained in the form. For example in the
case Louis Dreyfus & Cie v Parnaso Cia Naviera SA (The Dominator),[8] Diplock J stated:
'I am somewhat sorry to come to that conclusion, despite its according in my view with common justice, because that compels me now to construe the
"Gencon" exceptions clause, which, although it apparently came into force as long ago as September 15, 1922, has so far escaped construction by the
courts. It is my misfortune, apparently, to have to try to make sense of it.' [9]
5.9 In this case a charterparty using the 'Gencon' terms stated in cl 1 that the SS Dominator was to proceed to the stipulated port 'and there load a full and complete
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cargo of not more than 10,450 tons and not less than 8,550 tons wheat in bulk, quantity in owners' option, to be declared by the master in writing on commencement
of loading '. Clause 2 of the charterparty stated: 'Owners are to be responsible for loss of or damage to the goods or for delay in delivery of the goods only in case
the loss, damage or delay has been caused by improper stowage of the goods or by personal want of due diligence on the part of the owners or their
manager'. Furthermore, 'the owners are responsible for no loss or damage or delay arising from any other cause whatsoever '. On arrival at the port of loading
the master of the vessel informed the charterers that the holds could carry 'approximative' 10,400 tons or cargo. The charterers brought the maximum quantity of
cargo to the port. However, the master had overestimated the capacity of the vessel and 331 tons of cargo was unable to load. As a result of this the charterers
incurred expenses and brought a claim to recover damages from the shipowners. The shipowners proceeded to rely on cl 2 of the charterparty to prevent them from
liability. At the Court of Appeal the judgment of Diplock J was reversed, as the courts held that the use of the word 'approximative' could be construed as meaning
'about'; therefore, it allowed some leeway which was wide enough to cover the shortfall in the carrying capacity of the vessel. As such, by the charterers not
objecting to this, the result was that the shipowners were not liable for any breach of contract. [10]
5.10 In the case Salamis Shipping (Panama) SA v Edm van Meerbeeck & Co SA, (The Onisilos),[11] which dealt with the interpretation of a strike clause in the
Gencon form, the clause stated: 'Neither charterers nor owners shall be responsible for the consequences of any strikes preventing or delaying the fulfilment of
any obligations under this contract', and: 'If there is a strike affecting the discharge of the cargo on or after vessel's arrival at or off port of discharge and same has
not been settled within 48 hours, receivers shall have the option of keeping vessel waiting until such strike is at an end against paying half demurrage after
expiration of the time provided for discharging, or of ordering the vessel to a safe port where she can safely discharge without risk of being detained by strike'. The
clause was described by Lord Denning as:
'It seems to me that the words of the strike clause are ambiguous. They are capable of either construction. The owners read the words as if they read
"paying half demurrage after expiration of the time provided for discharging (until such strike or lock-out is at an end)", whereas the charterers omit that
limitation "until", etc.'[12]
5.11 On appeal by the charterers it was held that the words 'consequences of any strikes' in the clause must be read to include events which follow as a result of the
strike, these include events such as delay due to congestion, and therefore could not be limited to consequences of the strike itself. Similarly in the case of Superfos
Chartering A/S v NBR (London) Ltd (The Saturnia)[13] the ambiguities of the Gencon strike clause were once again the subject of dispute; in this case the question
was whether or not the charterers were only obliged to pay half demurrage. The strike clause in the Gencon charter stated that should a strike occur, which affected
the discharge of the cargo after the arrival of the vessel the receivers were to have the option of either keeping the vessel waiting until the strike had ended, for
which they would pay half demurrage after the lay days had run out. When the vessel arrived at Lagos and went on demurrage, a number of strikes then delayed the
discharging operation. The courts reversed the decision of the arbitrators and found that the clause could not be construed to be applied to a new situation which
occurred after the lay days had expired.
5.12 Overall the Gencon form has been criticised for not being clear or comprehensive enough and thus, as a result, needs to have additions or amendments made
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to it which often have the effect of being poorly drafted.[14]
Performance clauses
5.13 There are four main stages for which the voyage charterparty is comprised:
1. the preliminary voyage to the specified port of loading;
2. the loading operation, this stage covers both the loading and the stowage of the goods;
3. the carrying voyage to the port of discharge; and
4. the discharging operation.
The preliminary voyage and the carrying voyage will be the responsibility of the shipowner, whereas the loading and discharging operation will be a shared operation
between the shipowner and the charterer. However the charterparty will contain specific clauses as to which party shall bear the risk of loss or damage during a
particular stage. In the absence of such express clauses the risk will lie on the party responsible for the stage where the loss or damage occurred. Although in most
circumstances it is straightforward to identify when one stage ends and the other stage begins, the most disputed area tends to centre on when the ship becomes an
'arrived ship' for the purposes of laytime. The following sections will examine each of the four stages in the voyage charter.
Preliminary voyage
5.14 The first stage in the voyage charterparty is the preliminary voyage to the port of loading.
Nomination of port of loading
5.15 The charterer is under an obligation to nominate a port or berth, this may be fixed for example, 'Marseille.' Alternatively the charterer may reserve the right to
nominate a port from a range of ports, for example, 'Le Havre/Marseille/Brest.' Once the nomination is given by the charterer the shipowner is under an obligation to
proceed to the specified port. If there is a specified time stated for the charterer to make a nomination, the charterer must comply with this, while failure to do so
does not entitle the shipowner to withdraw the vessel. If, however, the delay is extensive this may result in frustration of the contract. The charterer is not obliged to
nominate a port that is convenient for the shipowner. In the case of Reardon Smith Line v Ministry of Agriculture[15] Willmer LJ stated:
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'Subject to an implied obligation not to nominate an utterly impossible port as in the above instances, the principle is well established that where a
charterparty provides a choice of named places for loading or discharge, the charterer is free to exercise his option as he chooses, and in doing so is in
no way bound to consult the convenience of the shipowners '.[16]
In this case the charterers had nominated a port for which a strike was due to take place and were able to successfully invoke an exception clause to prevent liability
for demurrage. However, if the charterer fails to nominate a port in the specified period, they could be held liable for damages to the shipowner for any losses
caused by the delay in nomination. In the case Zim Israel Navigation Co Ltd v Tradax Export SA (The Timna)[17] it was held that the charterers were in breach of
their obligation to give orders for the first discharging port, as a result they were liable in damages from the time when the orders should have been given to when
they were in fact given.
Case excerpt
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Zim Israel Navigation Co Ltd v Tradax Export SA (The Timna) [1971] 2 Lloyd's Rep 91
Lord Denning MR:
' the umpire rejected the owners' claims altogether both for demurrage and damages. I find this surprising, seeing that the charterers were clearly in breach in
failing to order the vessel to a port. I can only think that the umpire thought it was a berth charter-party: and that no berth was available until she was ordered to
Brake on Jan 19, 1969. He seems to have accepted the charterers' contention that the vessel "suffered the misfortune of any ship consigned to a congested port
or ports, namely, that she had to wait her turn" for a berth. Such a misfortune is often countered by a provision that "time lost in waiting for berth to count as lay
time": but there was no such provision in this charter-party.
'That contention is not available, however, here because the charter-party was a port charter-party. The charterers ought not to have kept her waiting. They ought
to have ordered her to one of the ports on the River Weser, such as Bremerhaven (where she could be discharged into lighters or lightened) or Nordenham or
Brake. If the vessel had been ordered to one of those ports and she had got close enough to become an "arrived ship", and given notice of readiness, then the
lay-days would have begun to run, even though there was no berth available for her. It was all the charterers' fault that she was not able to do so. The Judge so
held and held the charterers liable in damages for all the delay.
'The charterers appeal to this Court. Two points arise in the appeal. First, the charterers say that the "Remark" (which they wrote on Jan 3, 1969) amounted to an
order for the ship to proceed to Brake. The Judge held that it did not. I agree with him. It was only a "remark" put on the back of the notice of readiness. It indicated
that the Kleine Allocation had allocated the vessel to Brake, in the expectation that she would be able to discharge there. But it was only an expectation. It was not
a firm order.
'The second point arises on damages. The shipowners say that the damages should be calculated on the 17 days, from Jan 2 to Jan 19, that the vessel was kept
waiting for orders. Taking the damages at the demurrage rate, it comes to $43,255.20. Mr Goff, for the charterers, says that the owners must go further and prove
more. They must prove, he says, that, if the charterers had nominated a port, the owners could not have got sufficiently close for her to be an "arrived ship". The
charterers might, he said, have nominated a port where she could not get in close enough to be an "arrived ship"; in which case the loss would have fallen on the
shipowners.
'I think that Mr Eckersley gave a complete answer to this argument. He said that there was one port, at any rate, to which the charterers could have ordered her so
as to be an "arrived ship", namely, to Bremerhaven. She was in fact there. There was in fact an elevator there which could be used to discharge cargo to lighten
the ship. Once lightened, she could have gone up to Bremen. So the charterers could have nominated Bremerhaven.
'In any case, I think that Mr. Goff was wrong in putting the burden of proof on the shipowners. It was the charterers who were in breach. It was for them to nominate
a port. It does not lie in their mouth to say: "If we had nominated a port, the vessel could not have got there as an 'arrived ship'". The matter was never put to the
test, and it was their fault it was not put to the test. If they wished to say that there was no damage, they ought to have proved that there was no port at all to which
the vessel could get as an "arrived ship". They got nowhere near proving it.
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'I think the Judge was quite right in holding that the owners are entitled to damages for detention of The Timna in the sum of $43,255.20. I would dismiss the
appeal accordingly.'
However it must be noted that the charterer does not have an unfettered choice if he has to choose from a range of ports. When given a choice of 'one or two safe
ports in India' the courts held that the charterer was to nominate them in geographical order. Pilgrim Shipping Co Ltd v State Trading Corp of India Ltd (The
Hadjitsakos) [1975] 1 Lloyd's Rep 356.
5.16 Furthermore, once the charterer has nominated a port or berth he cannot change his nomination. In the case Anglo-Danubian Transport Co Ltd v Ministry of
Food,[18] a charterparty was entered into to transport a cargo of potatoes from Rotterdam to a range of ports including London and from there deliver it to the usual
safe berth, as was customary. The charterer nominated New Hibernia Wharf located above London Bridge as the point of discharge. However, on arrival, the
charterer changed the nomination to Hay's Dock, where the cargo was finally discharged. The freight payable to the shipowners was less at Hay's Dock than it
would have been at New Hibernia Wharf. It was held that when the charterer nominated New Hibernia Wharf this was to be treated as if it was written into the
charterparty as the place of discharge, and it could not be changed unilaterally by the charterer.
Case excerpt
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Anglo-Danubian Transport Co Ltd v Ministry of Food [1949] 2 All ER 1068
Devlin J:
' the first point counsel for the charterers has taken is that a charterer is not debarred from changing his mind after he has nominated the vessel's berth, but that
he can nominate another berth at any time before the ship begins to discharge, or, at any rate, before she becomes an arrived ship. It is, clearly settled by the
authorities that where there is an express reservation in the charterparty to the charterer to nominate the port or berth, that port or berth, when nominated, is to be
treated as if it had been written into the charterparty. I have not been troubled in detail with the authorities that may cover the position where the right to nominate
is implied rather than expressed, counsel for the charterers has conceded that there can be no difference, as clearly there cannot. That being so, the position
seems to me to be that when the charterers nominated New Hibernia Wharf it was to be treated as if it was written into the charterparty as the place of discharge,
and it follows from that that it cannot be altered by the charterers. To permit the charterers to alter it would be to permit a unilateral alteration of the contract.
Accordingly, I think that point fails.
'The next point made for the charterers is that, if there was a breach of the charterparty, it was waived by the master on behalf of the plaintiffs. That makes it
necessary to determine what the material breach is. I think that the material breach is that the charterers failed or refused to discharge the vessel at New Hibernia
Wharf. I think, in substance, that that is what did happen that the change of orders, given in the circumstances in which it was given, carried with it the implication
that the charterers were not going to discharge the ship at New Hibernia Wharf. In those circumstances, when one talks of waiving a breach, it is necessary to be a
little more precise. That counsel for the charterers would have to establish in order to succeed would be that the master on behalf of the shipowners agreed to
abandon their right to damages. Once I am satisfied that the breach occurred, unless the shipowners did something which amounted to an abandonment of their
right to damages (and that could only be by agreement), they are entitled to pursue their right to damages, I dare say that, if the master had been a lawyer, he
would have sent for the charterparty, and, after having read it carefully, would have discussed the legal position with Mr Windle, the boatman who was selected to
convey the message relating to the change in instructions, and would have told Mr Windle expressly that he was reserving his right to damages. Whether Mr
Windle would have made very much of that, I gravely doubt. I have to be satisfied, since it is not suggested that the master expressly abandoned his right to
damages, whether anything in his acts necessarily amounted to that, and I am clear that it did not. By taking what was in the circumstances the sensible course, if
only to minimise the damages, of taking the vessel where the charterers wanted her to go and discharging, I do not think that he in any way prejudiced the position
of the shipowners to claim damages for any breach there might have been. The damages clearly are the amount claimed, viz, the sum which the owners lost by
reason of the fact that they discharged at Hay's Dock instead of above London Bridge. They lost a profitable rate and had to take instead a less profitable rate, and
I do not think it is contested that that is the right measure of damages. It is not, therefore, necessary to deal with the point argued before me which may very well
be right that the ship was entitled to be paid freight at the higher rate quite apart from her claim for damages inasmuch as she had arrived off New Hibernia
Wharf and had done everything to make herself an arrived ship '
However, the charterparty may expressly allow the charterer the right to change his nomination. Bulk Shipping AG v Ipco Trading SA (The Jasmine B) [1992] 1
Lloyd's Rep 39.
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5.17 While the charterer is under an obligation to nominate a port which is prospectively safe[19] in the case of Aegean Sea Traders Corporation v Repsol Petroleo
SA and Another (The Aegean Sea)[20] it was stated by Thomas J that:
'I would accept that in the case of a voyage charterparty there must be an implied warranty that any port nominated must be one that it is possible for a
vessel to reach But beyond that, it is an open question whether any term should be implied into a voyage charter where there is a range of unnamed
ports and where there is no express warranty of safety in contradistinction to voyage charterparties where there is in such standard forms such as
NORGRAIN and ASBATANKVOY. This is an important question as there are, I understand, some standard forms of voyage charterparty that do not
contain an express warranty of safety.'[21]
Thus, where it is stated in the voyage charterparty that the charterer has the option of nominating a port from a range of unnamed ports, the warranty as to port
safety will not be automatically implied; rather it will depend on the terms of the charterparty itself.
Diagram 5.1: Nomination of port of loading
Voyage to the port of loading
5.18 In most cases the vessel will not be already present at the port of loading when the nomination is made by the charterer. Rather the vessel will have to
undertake a preliminary voyage to the port of loading. As the loading operation is a shared responsibility between the charterer and the shipowner, the charterer will
need to know how far the away the vessel is from the port of loading in order to make preparations to have the goods ready. This usually entails transporting the
goods from a warehouse storage facility. If the shipowner is delayed on the preliminary voyage this can mean that the charterer will incur unnecessary storage or
demurrage costs. The shipowner however will try to avoid committing to a specific date as he could be in breach of contract if detained by unforeseeable events.
Some standard forms, for example Gencon Box 8, will state the position of the vessel when the charterparty is formed. If the accuracy of these coordinates is
incorrect then it can allow the charterer the right to repudiate the contract.[22] In the absence of an express undertaking, then at common law the shipowner is under
an obligation to proceed to the port of loading with all reasonable dispatch. The charterer may claim damages for any losses incurred as a result of any delays,
however he may not terminate the charter unless the delay is so extensive as to amount to frustration of the contract. In Evera SA Commercial v North Shipping Co
Ltd[23] the plaintiffs chartered the defendant's vessel, which was already engaged on another charter; the wording of the charterparty stated that the vessel was 'now
due to arrive UK to discharge about August 30, estimating fourteen days to discharge, expected ready to load under this charter-party about September 27, 1953'.
Furthermore: 'the said steamship shall with all convenient speed sail and proceed to Fort Churchill.' The vessel was delayed from the previous voyage, and could
not arrive in Fort Churchill as it was ice-bound. The plaintiffs cancelled the charter and brought a claim for damages. It was held that the wording of the charterparty
imposed an absolute obligation on the defendants to ensure that the vessel should arrive on or about the expected date.
Case excerpt
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Evera SA Commercial v North Shipping Co Ltd [1956] 2 Lloyd's Rep 367
Devlin J:
' A charterer manifestly wants, if he can get it, a fixed date for the arrival of the ship at the port of loading. He has to make arrangements to bring down the cargo
and to have it ready to load when the ship arrives, and he wants to know, as near as he can, what that date is going to be. On the other hand, it is to the interest of
the shipowner if he can have it, to have the date as flexible as possible. Because of the inevitable delays due to bad weather or other circumstances that there
might be in the course of a voyage, he can never be sure that he can arrive at a port on a fixed and certain day. Therefore, in order to accommodate these two
views as far as possible, it has been the general practice for a long time past to have a clause under which the shipowner, without pledging himself to a fixed day,
gives a date in the charter-party of expected readiness, that is, the date when he expects that he will be ready to load. The protection that is afforded to the
charterer under that type of clause is this. As was clearly settled in Samuel Sanday & Co v Keighley, Maxted & Co, (1922) 27 Com Cas 296, he is entitled to have
that statement of position, as it is called-the statement of expectation as to when the ship arrives or is likely to arrive-made honestly and made on reasonable
grounds.
'Thus, the result is that, in a perfectly simple case, where at the time when the charter-party was entered into the ship was free to proceed to the port of loading,
her obligation is simply to set out in good time so that under normal circumstances she will arrive at the port of loading at or about the day which she has given as
being the one when she expects to be ready to load. If something occurs on the voyage to the port of loading which delays the ship without her fault, then the
owners under this type of clause are not liable.
'The complication arises if the charter-party is made a little ahead so that it is not anticipated by either party that the ship is likely to sail at once for her port of
loading. If she is going to have some intervening period, how can she dispose of it?
'It was quite clearly settled in Monroe Brothers Ltd v Ryan [1935] 2 KB 28; (1935) 51 Ll L Rep 179 and I have in mind the point in Lord Justice Greer's judgment
(at pp 37 and 182 of the respective reports) where he deals with this particular matter that the charterers have no right in such circumstances to expect the ship
to keep herself free and unoccupied. If the shipowners wish to charter the ship by means of an intervening charter-party, or otherwise to employ her, they are
entitled to do so. But if the new engagement into which she enters prevents her from fulfilling her obligations under the next voyage, they take the risk that they will
be liable in damages for that. In other words, they take the risk, as it is put in Monroe Brothers Ltd Ryan, sup, of clashing engagements.
'But what then happens, the shipowner having entered into the intervening charter, if the intervening charter interferes with the performance of the second voyage.
The simplest case, and one that was settled as long ago as 1907, is the case in which the shipowner, having entered into a charter-party, then deliberately enters
into an earlier charter-party which he knows is bound to make him late for the following voyage. In those circumstances there is no need, really, to invoke any
principle of difficulty. Manifestly in such circumstances the shipowner who has put it out of his power to perform the engagement which he has entered into is liable
in damages. That was so decided in Thomas Nelson & Sons v Dundee East Coast Shipping Company Ltd, [1907] Sess Cas 927.
'The next stage, so to speak, is reached when the shipowner enters into a charter which he honestly anticipates, and with reasonable grounds, will be completed in
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time to fulfil his earlier obligations, and then, through some circumstances for which he is not responsible, he is delayed on the earlier voyage. That situation was
considered by the Court of Appeal in this country in the case of Monroe Brothers Ltd v Ryan, sup, to which I have already referred. There it was held that the
shipowner must nevertheless pay damages.'
Expected readiness to load
5.19 As there is a conflict of interest between the shipowner and the charterer on the issue of fixing a date for the arrival of the vessel, most charter forms deal with
this problem by having a date fixed for expected readiness to load (ERL). This is then coupled with a cancellation clause which allows the charterer the right to
terminate the charter if the vessel has not arrived by the date specified. This is referred to as a 'lay/can' clause. In Box 9 of the Gencon standard form it specifies the
expected ready to load date, this is qualified by the term 'abt' (about) and supplemented by cl 1. Box 21 stipulates the cancelling date which is supplemented by cl 9,
this states that:
'(a) Should the Vessel not be ready to load (whether in berth or not) on the cancelling date indicated in Box 21, the Charterers shall have the option of cancelling
this Charter Party.
(b) Should the Owners anticipate that, despite the exercise of due diligence, the Vessel will not be ready to load by the cancelling date, they shall notify the
Charterers thereof without delay stating the expected date of the Vessel's readiness to load and asking whether the Charterer's will exercise their option of
cancelling the Charter Party, or agree to new cancelling date.
Such option must be declared by the Charterers within 48 running hours after the receipt of the Owner's notice. If the Charterers do not exercise their option of
cancelling, then this Charter Party shall be deemed to be amended such that the seventh day after the new readiness date stated in the Owner's notification to
the Charterers shall be the new cancelling date '
5.20 When the shipowner gives the date of an ERL this does not automatically amount to a breach of condition if the vessel fails to arrive by that date. However the
shipowner must have reasonable grounds to believe that the vessel will be ready to load on the date given. In the case of Maredelanto Compania Naviera SA v
Bergbau-Handel GmbH (The Mihalis Angelos),[24] the shipowners and the charterers entered into a contract of affreightment. Clause 1 contained an expected
readiness to load date for 'about July 1, 1965'. The charterparty also contained a cancelling clause if the vessel was not ready to load by 20 July 1965. The
shipowners had no reasonable grounds to expect the vessel to be ready to load on 1 July or even 14 July. As such the ship could not have been ready for loading
until 25 July. However, in the meantime the charterers discovered that they had no cargo for loading on the vessel and they cancelled the contract on 17 July as a
case of force majeure. The shipowners accepted this as a repudiatory breach. The shipowners did not charter the vessel to any other parties but instead sold her on
29 July. The courts held that the expected readiness to load clause was a condition of the contract, the breach of which would have entitled the charterers to cancel
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the contract on 17 July, and even if that had not been the case, the charterers would have been entitled to cancel the contract under the cancellation clause, and the
owners would have been entitled to nominal damages only.
Case excerpt
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Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos) [1971] 1 QB 164
Lord Denning MR:
' The question in this case is whether the statement by the owner: "expected ready to load under this charter about July 1, 1965," is likewise a "condition". The
meaning of such a clause is settled by a decision of this court. It is an assurance by the owner that he honestly expects that the vessel will be ready to load on that
date and that his expectation is based on reasonable grounds The clause with that meaning has been held in this court to be a "condition" which, if not fulfilled,
entitled the other party to treat himself as discharged ... Those were sale of goods cases. But I think the clause should receive the same interpretation in
charterparty cases. It seems to me that, if the owner of a ship or his agent states in a charter that she is "expected ready to load about July 1, 1965", he is making
a representation as to his own state of mind; that is, of what he himself expects: and, what is more, he puts it in the contract as a term of it, binding himself to its
truth. If he or his agent breaks that term by making the statement without any honest belief in its truth or without any reasonable grounds for it, he must take the
consequences. It is at lowest a misrepresentation which entitles the other party to rescind: and at highest a breach of contract which goes to the root of the matter.
The charterer who is misled by the statement is entitled, on discovering its falsity, to throw up the charter. It may, therefore, properly be described as a "condition".
'I am confirmed in this view by the illustration given by Scrutton LJ himself in all the editions of his work on charterparties:
"A ship was chartered 'expected to be at X about December 15 shall with all convenient speed sail to X.' The ship was in fact then on such a
voyage that she could not complete it and be at X by December 15. Submitted, that the charterer was entitled to throw up the charter."
' I hold, therefore, that on July 17, 1965, the charterers were entitled to cancel the contract on the ground that the owners had broken the "expected ready to
load" clause.
'In case I am wrong, however, I go on to consider the charterers' second point. They say that they were entitled to cancel on that day under the cancelling clause,
which reads:
"11. Should the vessel not be ready to load (whether in berth or not) on or before July 20, 1965, charterers have the option of cancelling this contract,
such option to be declared, if demanded, at least 48 hours before vessel's expected arrival at port of loading."
'The charterers said that on July 17, 1965, it was plain that the vessel would not be ready to load on or before July 20, 1965: and on that account they were entitled
to cancel the charter. But the shipowners said that the charterers could not exercise the option until July 20, 1965, after office hours on that day.
'We were referred to the antecedents of this clause. The part " such option to be declared", etc, was inserted to modify the decision of this court in Moel Tryvan
Ship Co Ltd v Andrew Weir & Co [1910] 2 KB 844. We were also referred to The Helvetia-S [1960] 1 Lloyd's Rep 540 , 551 and to The Madeleine [1967] 2 Lloyd's
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Rep 224 , where the judges said, of a somewhat similar clause, that a charterer cannot exercise the option to cancel before the cancelling date. That is simply not
true of this present clause. Suppose that the vessel was delayed so that she was not expected to arrive at the port of loading until July 21: and that on July 15,
they told the charterer: "She will not be able to arrive until July 21. Please declare your option." The charterer would be bound, under this clause, to declare his
option at least by July 19. So on those facts the charterer would not only be entitled, but would be bound, to exercise it before the cancelling date. Seeing that
result, it seems to me that the clause is a concise way of expressing this meaning:
"Should the vessel not be ready to load (whether in berth or not), or be in such a position that she will not be ready to load on or before July 20, 1965,
charterers have the option of cancelling this contract, such option to be declared, if demanded, at least 48 hours before vessel's expected arrival at
port of loading."
'So expanded, the clause means that the charterers have the option of cancelling the contract as soon as it becomes plain that the vessel cannot possibly be ready
to load on or before July 20, 1965. This is a sensible interpretation: because, as a matter of commercial convenience, it is better for both sides that, when it is
obvious that the vessel will not arrive in time, the charterer should be able to cancel. The charterer can then engage another vessel: and the shipowner can use his
ship elsewhere.
'I limit myself, of course, to saying that the charterer is entitled to exercise his option before the cancelling date: not that he is bound to exercise it before that date,
save in the circumstances described in the second part of the sentence. The Moel Tryvan case [1910] 2 KB 844 still holds good to show that the charterer is not
bound to exercise it.
'Mr Goff submitted that in any case the charterers cannot rely on the clause for this reason: they did not exercise the option given to them by the clause. They did
not cancel on the ground that the vessel would not be ready to load on or before July 20, 1965. They cancelled on the ground of force majeure, ie, that they
themselves could not load the vessel. But I think that the principle stated by Lord Sumner in British & Beningtons Ltd v North Western Cachar Tea Co Ltd [1923]
AC 48 applies here also. If they had a right to cancel on July 17, they can rely on it, even though they gave a wrong reason for it. I would hold, therefore, that the
charterers on July 17 were entitled to cancel under the cancelling clause.
'In case I am wrong on this second point, I come to the third point. It proceeds on the footing that the charterers were wrong in cancelling on July 17, 1965. If so,
their cancellation was a renunciation of their contract to load the vessel when she arrived at Haiphong. The shipowners accepted this renunciation and called off
the charter. They are entitled to damages. But what are the damages? The arbitrators found that, if the vessel had sailed to Haiphong, the charterers would beyond
doubt have cancelled the charter: and would be within their rights then in so doing. So the shipowners suffered no loss. The arbitrators on this account awarded
the shipowners only nominal damages. But the judge, with regret, found they were entitled to damages of 4,000.
'The reason, as I understand it, was as follows: the shipowners are entitled to damages for "anticipated breach" of contract. The court must, therefore, accept that
there would inevitably have been a breach by the charterers if the contract had run its full course. The court cannot listen to any argument which says that the
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charterers would have committed no breach, not even in reduction of damages.
'This reasoning was supported by the statement of Cockburn CJ in Frost v Knight (1872) LR 7 Exch 111, 114: "the eventual non-performance may therefore, by
anticipation, be treated as a cause of action "; and of Devlin J in Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401, 438, "the injured party is
allowed to anticipate an inevitable breach." I think that the argument is rooted in fallacy. The words "anticipatory breach" are misleading. The cause of action is not
the future breach. It is the renunciation itself. I venture to quote the notes to Cutter v Powell (1795) 6 Term Rep 320 in Smith's Leading Cases, 13TH ed (1929), p
30:
" it is of the essence of every contract that each party thereto should have the right to consider it as of binding force from the moment that it is made
and should have the right to base his conduct upon the expectation of its being fulfilled by the other party. If, therefore, the other party, by an
unqualified refusal to perform his side of the contract, destroys that expectation, he destroys that which is the basis of the contract; and his conduct
may be treated by the opposite party as a breach going to the whole of the consideration."
'Seeing that the renunciation itself is the breach, the damages must be measured by compensating the injured party for the loss he has suffered by reason of the
renunciation. You must take into account all contingencies which might have reduced or extinguished the loss. That is made clear by the very first case in which
that doctrine of anticipatory breach was established, in Hochster v De la Tour itself (1853) 2 E & B 678, 686-687. It follows that if the defendant has under the
contract an option which would reduce or extinguish the loss, it will be assumed that he would exercise it. Again, if it is reasonable for him to take steps to mitigate
his loss, he must do it. And so forth. In short, the plaintiff must be compensated for such loss as he would have suffered if there had been no renunciation: but not
if he would have lost nothing.
Cancellation clause
5.21 When a cancellation clause has been included in the wording of the charterparty the charterer has the freedom to terminate the contract without liability once
the date has passed without the arrival of the vessel. However, if the charterer pre-empts the date of cancellation he may be liable to the shipowner for nominal
damages even if it would have been impossible for the ship to arrive by the cancellation date.[25] The shipowner is under an obligation to proceed to the port of
loading with reasonable dispatch until the charterer exercises the option to cancel. If the delay in the arrival of the ship is due to an exception covered in the
charterparty this does not prevent the charterer from invoking the cancellation clause. However, it may protect the shipowner from liability for damages. Even in the
event that the charterer fails to nominate a port of loading by the cancellation date this does not bar him from exercising the right to cancel. In the case Mansel Oil
Ltd v Troon Storage Tankers (The 'Ailsa Craig'),[26] the charterers were under an obligation to nominate a port of delivery. However, the date of cancellation arose
before the nomination was given and in any case the vessel did not arrive by that date. The courts held that in order to be able to exercise a right of cancellation it
was not necessary for the charterers to have made a nomination as it was futile to do so because, even if the nomination was given, the vessel would never arrive
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by the cancelling date.
Case excerpt
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Mansel Oil Ltd v Troon Storage Tankers (The 'Ailsa Craig') [2009] EWCA Civ 425
Longmore LJ:
'1. The purpose of a cancelling clause in a voyage or time charterparty is to fix a definite date by which, if the owners fail to deliver the vessel to the charterers, the
charterers are entitled to wait no longer for the vessel to be delivered. In the absence of a cancelling clause an owner would be in breach of charter for failure to
deliver on the contractual date but a charterer would not be able to treat the owner as being in repudiatory breach of contract until the delay was such as to
frustrate the commercial purpose of the adventure. The length of that delay is notoriously difficult to agree or fix with any certainty and it is, therefore, not surprising
that parties to a voyage or time charter are ready to agree a cancelling date in order to avoid all arguments about whether delay in delivery is such as to frustrate
the adventure.
'2. The parties to a charterparty have many other obligations to each other before a cancelling date arrives. The owners must be in a position to deliver a
seaworthy ship. If the place of delivery is within a range of ports in the option of either party such options have to be exercised. Frequently owners will be under an
obligation to give notice to the charterers of an estimated date of delivery some days before actual delivery. In the present case the vessel was not delivered by the
cancelling date and the charterers cancelled the fixture. The owners say that the charterers were not entitled to cancel because the charterers had not themselves
given notice of any particular port at which delivery was to take place within the contractual range "WAF-Ghana/Nigeria" in charterers' option. The charterers retort
by saying that:
(i) no such notice was required because the contract did not make it a pre-condition of the exercise of the right to cancel the fixture that any such notice be given;
(ii) any required notice only had to be given at such time as would enable the owners to deliver the vessel before the cancelling date and no such time ever
arrived;
(iii) everyone knew at the date when such notice was alleged to be required that the vessel was undergoing repairs in Piraeus and had no hope of arriving before
the cancelling date. In those circumstances serving a notice of a port for delivery would have been a futile gesture and the law does not compel a contracting party
to do a futile act.
'3. The underlying dispute between the parties is whether it was the owners' or the charterers' responsibility that the vessel was detained in Piraeus under repair.
The charterers say that the owners needed more time than they had expected in order to put the vessel in a state in which she would comply with the contract; the
owners say that the charterers required additional work to the vessel beyond that which owners had agreed to do before delivery. That dispute has yet to be
resolved but meanwhile charterers have sought a declaration that they were entitled to cancel the charterparty and Cooke J has ordered a trial of the issue
whether the charterers:
"were not entitled to cancel the charterparty by reason of any absence of nomination of a delivery port."
'In other less negative words; was there an obligation on charterers to nominate a delivery port and, if so, when did that obligation arise and was the fulfilment of
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that obligation a pre-condition of the right to cancel?
[...]
'13. The judge held that, if matters had proceeded as originally hoped, a time would come when charterers would be obliged to nominate a port of delivery (para
51) and (para 56) that that time would be such time as was:
(i) not so late as would mean that, because of the lateness of the nomination, the vessel could not make her cancelling date;
(ii) early enough to ensure that the vessel suffered no delay resulting from the absence of nomination.
'He added that, before the vessel reached the deviation point of Cape Palmas, the owners could without a nomination do all they needed to do to comply with the
charterparty without any loss (and I might add, inconvenience) to themselves. It followed that the time for the charterers to make a nomination never arrived and
that there was no question of charterers failing to make a nomination. He held further (para 58) that the parties cannot have intended that charterers should not be
entitled to exercise their right to cancel because they had failed to make a nomination before they were obliged to do so. I entirely agree with the judge as a matter
of construction of the particular charterparty with which we are concerned
'This court doubted whether there really was an obligation on the charterers to nominate the particular place in Hong Kong where the vessel was to be placed at
their disposal when it was in Hong Kong already, but also because there were serious difficulties with the judge's view which would apply:
"where a vessel is clearly never going to be able to meet her cancelling date and would require the charterers to go through a futile and premature exercise of
nomination which everyone knew that the vessel would be unable to comply with. If the Charterers were right to say, in the present case that the vessel was not in
a deliverable state and that was so regardless of whether she was given orders to proceed to one or other of the places referred to in the charterparty it is
hard to see upon what basis the failure to give the requisite order in exercise of the option could affect the right to cancel for lack of readiness"'
Diagram 5.2: Voyage to port of loading
The near clause
5.22 In many cases the shipowner may qualify his obligation to deliver the vessel at the port of loading with a clause in the charterparty stating, 'or so near as she
may safely get.' Thus in the event of any impediments at the port of loading the shipowner will still be entitled to the payment of full freight. The use of this clause will
mean that the shipper will have to incur the costs associated with transporting the goods to the new destination for loading. However the courts tend to construe
these clauses narrowly in the circumstances. In the case of Metcalfe v Britannia Ironworks,[27]a cargo of railway bars was shipped under a charterparty from a port
in England to Taganrog, in the Sea of Azof. The charterparty contained a clause: 'or so near thereto as the ship could safely get.' On the arrival of the ship, on 17
December at Kertch, which was as near as it could then get to Taganrog, the captain found the sea blocked with ice until the following spring. The captain proceeded
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to discharge the cargo at Kertch. The bill of lading stated that the cargo was deliverable at Taganrog 'freight and other conditions as per charterparty'. No bill of
lading was produced at Kertch, and the captain placed the cargo in charge of the custom-house authorities where it was delivered to the agent of the railway
company. The captain claimed to retain the goods until the freight was paid. The shipowner brought a claim against the charterers for freight. It was held that the
shipowner was not entitled to full freight, as first, the delivery at Kertch was not a delivery within the wording of the charterparty, and secondly, that the plaintiff was
not entitled to freight on a pro rata basis, as no new contract for such freight had been agreed.
Case excerpt
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Metcalfe v Britannia Ironworks (1876-77) LR 2 QBD 423
Bramwell LJ:
'I am of the same opinion. The plaintiff cannot shew that he has performed the conditions precedent to his right to recover under the charterparty, and he must
therefore, in order to succeed, shew either a dispensation or a new contract, whether he seeks to recover the whole freight or freight pro rata.
'I think that the consignees might have dispensed with the full performance of the contract, if it had suited them, when the ship touched at Kertch, to have the iron
landed there and carried no farther. I think that is so, but I do not affirm it definitely. The plaintiff must, however, make out his case in point of fact, and it is for him
to shew that he has performed his contract, or that there has been a dispensation. To my mind, there is no evidence that the consignees dispensed with the
voyage to Taganrog. The captain landed the iron under a mistaken notion that he had a right to land it, and need not carry it farther. He claimed the freight, and
from first to last shewed no intention to come back in the spring or to send on the iron by another ship, but claimed a right to leave the goods at the risk of the
consignees. I agree that by stopping at Kertch he had not broken the contract, because he could not get any farther, but I think that landing the goods in that way
was a breach of the contract; nor is it necessary to refer to Hochster v De La Tour and similar cases for authority on that point. But, at all events, when he had
landed these goods, and had said, "There are the goods, and you must pay the freight," he certainly gave the consignees a right to take them away; in fact, he
obliged the consignees to take them. It was argued that the captain had no authority to do this; but that does not affect the case.
'As to the argument that the consignees took them voluntarily, no doubt they did so in one sense, just as a man turned out of a hackney cab instead of being
carried to the end of his journey, would probably walk away, though of course he might sit down on a doorstep and wait for the cabman to carry him on. No doubt
the consignees might have left the goods there, but they took them away because they could not help it. The telegram indicates no consent, nor does the receipt,
and throughout the case there is an entire absence of any sign of acquiescence. What reason was there why the consignees should say, "You cannot get further
than Kertch; we do not care; we shall have to pay the carriage from Kertch, but still we will pay you the whole freight." Why should they not have said to the
captain, "Go away if you choose, but you must not ask us to pay the full freight, as we shall have to carry the cargo to Taganrog?" What the consignees did might
not have been very generous, but it was very discreet. They said, "Land your cargo if you like, but take the consequences." It is clear that there was no
dispensation from the full performance of the contract.
'As to the claim for freight pro rata, that can only be made under a new contract. But certainly there was no new contract with the charterers, and the new contract,
if any, was with the consignees, who had no power to bind the charterers. But, in my opinion, there was no new contract; the observations I have made as to the
full performance of the contract not having been dispensed with, shew that there was no new contract. The argument that there was, put shortly, is this: It is said
that, because the captain broke the old contract, there must be a new contract implied. I do not blame the captain for breaking the contract; he was in a difficult
position, and there was no mala fides on his part; but still he broke it, and there was no new contract to pay freight pro rata, and if there was, it did not bind the
charterers.
'Upon these grounds, my opinion is that the judgment of the majority in the Court below ought to be affirmed. It is due, however, to the Lord Chief Justice to shew
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why I do not agree with his judgment. He seems to have proceeded upon two grounds: one, that a new contract ought to be implied, but he does not advert to the
difficulty that the consignees had no power to make a contract which would bind the charterers. He refers to many cases where the shipowner has been prevented
from performing the contract without any fault on his part, and he says, "Ought we not to imply an undertaking to pay for the carriage of the goods as far as it has
gone?" The answer I give is that that is not the present case. Whether we ought in any of the cases put by him to imply a new contract, is a difficult question to
answer. In some no doubt we ought, but there are many cases in which we ought not. The Lord Chief Justice, further, seems to have considered that the
consignees compelled the master to give them the cargo, but on the evidence I have, with all due respect, come to a different conclusion. He further says that they
ought to have given the shipowner a locus poenitenti, and not to have prematurely seized the cargo; but suppose that, instead of this being iron, it had been corn
or sugar, or any such cargo, could the shipowner then expect a locus poenitenti, and ought the consignees to leave the goods to perish? It seems to me that the
law cannot be so, and that the consignees were obliged to act as they did. It is said that these cases are hard, and that we ought always to imply such a contract
as they ought to have made; but if the parties choose they can always provide for this case in the charterparty, and I should be much surprised to see a clause
inserted, "If the captain breaks the charterparty, freight shall be paid pro rata," and yet that is what we are asked to suppose the charterers to have acceded to. In
my opinion the judgment appealed against is right.'
5.23 The shipowner is expected to wait a reasonable period of time before resorting to invoking the 'near to' clause. In Fornyade Rederiaktiebolaget Commercial v
Blake & Co (The Varing),[28] the charterparty stated that the vessel was to proceed to Garston 'or so near thereunto as she may safely get'. The consignees
requisitioned that vessel should discharge the cargo of timber into domestic wagons, however there was a notification by the dock company that the vessel would be
permitted to dock only if discharge into main line wagons was permitted as discharge into domestic wagons was not available due to congestion at the docks.
Although both methods of discharge were customary when the vessel became an 'arrived' vessel, it was held that there was evidence that delivery could have been
made without sorting on the quay or storing ground, the consignees were not entitled to insist upon discharge into domestic wagons, and that the vessel was
wrongfully prevented from reaching the usual discharging place at Garston. It was stated by LJ Scrutton that:
'When you are chartered to go to a discharging place and cannot get there, first of all you are bound to wait a reasonable time before having recourse to
the clause "or so near thereunto as she may safely get." You cannot arrive, and, when you find that you cannot get in at the exact minute, or on the
exact day you desire, you immediately go off to a place which you describe as "so near thereunto as she may safely get." When a reasonable time has
elapsed, and when there is no chance of your getting in to your discharging place within a reasonable time, the ship is at liberty to go to a reasonable
discharging place "as near thereto as she can safely get," and can call upon the consignee to take delivery at the substituted place.' [29]
5.24 The courts also examined whether the impediment preventing delivery at the port of discharge is a temporary or permanent one, the shipowner is usually only
able to invoke the 'near' clause in relation to permanent impediments. In Metcalfe v Britannia Ironworks[30] the blockage of the Sea of Azov by ice was held to be a
circumstance of which the shipowner was aware when the charterparty was signed and therefore he was unable to invoke the clause. However in the Athamas
(Owners) v Dig Vijay Cement Company, Ltd (The Athamas),[31] the charterparty stated that the vessel was to discharge cargo at Phnom Penh, or 'so near thereto as
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she may safely get'. As the river currents made it unsafe for the vessel to proceed further up the Mekong River, the shipowner was forced to discharge the cargo in
Saigon. It was held that the 'near to' clause was correctly invoked as the river current would have continued to be dangerous for several months. The consignee,
having to pay full freight, argued that the port of Saigon was much further from the original destination; however, the courts applied the 'ambit' test whereby the
alternative port chosen would have to be in proximity to the original port. In this case the courts reasoned that the consignee should have known that the range of
available ports in this area were few and thus transhipment costs would be higher if a substitute port was chosen.
Case excerpt
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Athamas (Owners) v Dig Vijay Cement Company, Ltd (The Athamas) [1963] 1 Lloyd's Rep 287
Sellers LJ:
' After all, one goes back to Dahl v Nelson, and as I understand the decision of the House of Lords, it is this: when you are chartered to go to a discharging place
and cannot get there, you are bound to wait a reasonable time before having recourse to the clause "or as near thereto as she can safely get." You cannot arrive
and, when you find that you cannot get in on the exact day you desire, immediately go off to a place which you describe as "as near thereto as she can safely get."
When a reasonable time has elapsed, and when there is no chance of your getting in to your discharging place within a reasonable time, the ship is at liberty to go
to a reasonable discharging place "as near thereto as she can safely get" and can call upon the consignee to take delivery at the substituted place. But the
shipowner must make up his mind what he is going to do and give notice to the consignee, saying, "I am going to such-and-such a place being the nearest
discharging berth to which I can safely get, and you must take my cargo there." Obviously, inasmuch as it involves the question whether the ship has waited a
reasonable time, and whether a particular place is a reasonable place "as near thereto as she can safely get" shipowners should always be slow before taking a
decided course of that sort, and landing themselves with a lawsuit in which it will be uncertain what the result may be on the facts.
'As Mr. Justice McNair uses the word "ambit" I would prefer slightly to adapt his words and say, just as Lord Blackburn and Lord Watson in Dahl v Nelson, that
when considering the question whether an obstacle is temporary or permanent, import the element of reasonableness in relation to time, so in considering whether
a substitute discharging place is within the phrase "so near thereto as she may safely get" the Court or tribunal should apply the conception of reasonableness in
relation to distance. The distance might be so great in relation to the contemplated length, duration and nature of the adventure that notwithstanding that it was the
nearest safe port or place the substituted place of discharge could not be assumed to be within the contemplation of the parties as fair and reasonable men.
'In the present case the arbitrators were clearly of the opinion that the Athamas could not get to Pnom-Penh within a reasonable time. This was based on the
arbitrators' knowledge of the nature of the adventure and of all the factors involved, the period of time, the carrying and earning capacity of the ship and the
expense of the delay to both the charterers who presumably wanted their cargo and the shipowners who would lose if their ship were idle. The arbitrators were
further of opinion that Saigon, in those circumstances, was the appropriate substituted or alternative place of delivery under the charter-party.
'I would agree with the learned Judge that the arbitrators by their findings and on an application of the true principles of law decided this issue in favour of the
claimants.
'The effect of the decision is that the discharge of the Pnom-Penh cargo at Saigon is a fulfilment of the voyage and of the charter-party obligations and that the
demurrage claimed is therefore recoverable on the basis claimed, which, on account of the slower rate of discharge allowed for Pnom-Penh and the better facilities
at Saigon, is in this respect not unfavourable to the charterers.
'In this case, the shipowners get the full freight (paid in advance) for the full contemplated journey and the charterers had to incur heavy expense in lightering the
cargo in question to Pnom-Penh. Lightering might have been necessary if delivery had been made at Pnom-Penh and the cost would have fallen on the charterers,
but nevertheless there has been a heavy additional expense. I do not think it follows that where a clause such as this requires a substituted place of delivery the
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burden will always be on the charterers. In some circumstances the additional expense and delay might fall on the shipowners '
5.25 The shipowner may also include additional clauses in the charterparty to provide further protection from liability and entitle him to payment of freight in the event
he cannot reach the stipulated port. For example the use of the words 'always afloat' protects the ship from damage due to grounding and allows him to discharge
the goods at the nearest port.
Loading operation
5.26 The second stage in the voyage charterparty is the loading operation.
Division of responsibility
5.27 The shipowner and the charterer each have certain responsibilities and obligations to perform once the ship arrives at the port of loading. The shipowner has
the responsibility of getting the ship to a position where it is ready to receive and load the goods. The shipowner also has to provide the charterer with such
information. The charterer has to provide a cargo, make sure it is alongside the vessel and ready to load. The loading must be completed within the time stipulated
in the charterparty. This division of responsibility is usually referred to as the 'alongside' rule as the charterer has the responsibility to bring the cargo alongside the
ship such that it can be loaded on board using the ship's tackle. Similarly when the cargo is discharged the consignee must be ready to receive the cargo once it is
removed from the ship's tackle. In most modern shipping transactions stevedores are used to transport the goods to the place of loading. Gencon 1994, Box 15
supported by cl 5 states that the charterparty provides that the goods are shipped on a free in and out basis (FIOS) whereby loading and discharging of the goods is
at consigner's cost. It also states that loading, stowing and trimming etc. of the cargo shall be carried out by the charterers, free of any risk, liability and expense to
the shipowners. The shipowners shall provide free use of the vessel's gear, including cranemen or winchmen from the crew to operate the cargo's handling gear.
Furthermore any damage caused by stevedores is to be reported as soon as reasonably possible by the master to the charterers and to the stevedores. The master
should obtain the stevedores' written acknowledgement of liability, but the charterers will be liable for repair for any damage caused by the stevedores.
Provision of cargo
5.28 The charterer has an absolute obligation to provide a cargo for loading on board the vessel.[32] The charterparty will state the amount and type of goods to be
shipped on board the vessel. The charterer will not be able to invoke hardship or any other excuse as a reason for not having a full and complete cargo. The
charterer will not be able to invoke any clauses or exceptions to protect him from liability for failure to provide cargo, these clauses are designed to cover delays in
the actual loading of the goods and not the procuring of the goods.[33]
5.29 In the case of Sociedad Financiera de Bienes Raices SA v Agrimpex Hungarian Trading Co for Agricultural Products (The Aello), [34] the plaintiffs chartered the
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defendants' ship to load a cargo of maize at the port of Buenos Aires. The ship arrived in Buenos Aires Roads on 12 October 1954, and remained there until 29
October. The plaintiffs did not have a cargo available on 12 October, and therefore it was impossible for a berthing permit to be issued to allow the ship to proceed
from the roads to the dock until 29 October. The plaintiffs argued that the ship was not an arrived ship until October 29, they brought an action for the return of
demurrage paid by them to the defendants. It was held that the ship was not an arrived ship until 29 October, the reason for this was that until that date the vessel
was not within the commercial area of the port. Furthermore, the provision of a cargo was necessary to enable the ship to perform its obligation of becoming an
arrived ship; this obligation to provide cargo in time was absolute to allow the ship to perform its contractual obligations.
Case excerpt
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Sociedad Financiera de Bienes Raices SA v Agrimpex Hungarian Trading Co for Agricultural Products (The Aello) [1961] AC 135
Lord Radcliffe:
' It is necessary to add only two facts to complete the account of the regime that was in operation when the Aello anchored in the roads on October 12. First, it
was the standing practice of the berthing office not to grant a giro for a vessel loading grain unless she had first received from the shippers a certificate of the Grain
Board allocating the parcel of grain required for the cargo. Secondly, the special regime instituted for maize vessels by the resolution of September 1, was
terminated some time in December, 1954, by which time the disproportion between ships and available cargoes had been adjusted.
'Now, these being the facts, did the Aello become an arrived ship at the port of Buenos Aires on October 12, as the appellants claim, or did she not become arrived
until October 29 when, having obtained her giro, she entered the inner harbour and berthed in second tier beside the grain elevator in the New Port? The latter is
the view which has hitherto prevailed in the courts below, both before Ashworth J., who tried the case, and in the Court of Appeal. It has throughout been assumed
that the governing test for the determination of this issue is to be found in the judgments of Buckley and Kennedy LJ in the case of Leonis Steamship Co Ltd v
Rank Ltd and with that I agree. The decision was something of a landmark in the judicial development of the doctrine of the "arrived ship" and it has stood for so
long in its field that, in my view, all later decisions must be built upon it. The real difficulty of the present case is to be sure how the test propounded there ought to
be applied to the somewhat special circumstances that are now before us.
'There are one or two things that can be said without raising any controversy. The Aello was sailing under a port charter, as distinguished from a dock charter or a
berth charter. Therefore it was not incumbent on her to reach a loading berth before she became an arrived ship and so set the lay days in motion: it was sufficient
if she reached the named destination, the port itself. On the other hand, it is not enough for that purpose merely to be within the confines of the port in the sense of
being at any point within its legal or administrative limits or, I think, at any point within the area of the port as understood by maritime or commercial men. They
might understand by the port different things for different purposes. The thing to remember is that, at whatever moment of time before actually berthing she might
become an arrived ship, her ultimate duty under the charterparty remained the same: to reach with all due dispatch the loading berth to which the charterers might
order her. However, therefore, the exact definition of her destination for "arrival" is to be phrased, it must be some part of the whole area, the port, which marks for
the time being the proper limit of her effort to reach her ultimate berth. If she can go straight in, cadit quaestio. Disputes about arrived ships under a port charter
are essentially disputes about what is a proper waiting place, lay days being, as Lord Sumner once said, "the contractual adjustment of the incidence of risks of
delay."
'It has been said that, to become an arrived ship under a port charter, a vessel must reach the "commercial area" of the port. With this, too, I agree, so long as
there is no misunderstanding as to what is implied by the use of that phrase. If in the law we speak of the "commercial area" of a port, we are not employing a
phrase that has been adopted and used in charterparties themselves, so far as I know, or a phrase that is in use in the speech of maritime or commercial persons.
It is, I think, impossible to hope to identify it in any particular port by inquiring in what part of the port "commercial operations" are carried on. Commercial
operations embrace a great variety of different activities, many of which are properly carried on in different parts of the port, and the parts that may be resorted to
in connection with one class of cargo may be, and often are, different from the parts resorted to for dealing with another. In fact, the phrase "commercial
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operations" does not occur at any point in the judgments in Leonis v Rank. Nor do I find it any more acceptable to try to define it, as has been done by the
judgment of the Court of Appeal in the present case, as "that part of the port where a ship can be loaded when a berth is available, albeit she cannot be loaded
until a berth is available." It is not only that such a description is, if I may say so with all respect, altogether too imprecise as a general guide for identifying the
relevant area: it is also, in my opinion, a misunderstanding of the true significance of the Leonis v Rank decision to seek to treat the "commercial area" for the
purposes of any particular charterparty as if it were a fixed area of defined geographical limits which the ship must be treated as reaching or failing to reach without
regard to the actual circumstances that prevailed at the time when the obligations of the particular voyage matured. "Commercial area" as applied to ships waiting
for cargo is more accurately understood as defining a set of circumstances relevant to the voyage and the port than as delimiting a "part of the port where a ship
can be loaded."
' a vessel can never be an arrived ship unless she has reached the usual "place of loading." I allude to this rather unfortunate passage only because it leads
directly to the statement that the "commercial ambit" of the port as distinguished from the port in a geographical or maritime sense must be understood as "the
usual place of loading" or "the proper place for discharging, whether the vessel has reached a berth or not." It is this attempt to define the commercial area in terms
that ignore the proper or usual place of waiting for those whose purpose it is to load, and instead concentrate upon the proper place of loading even for those who
are not yet able to do it, that, in my view, has confused the issue and has directly led to the Court of Appeal in the present case laying down the rule that a ship
cannot be arrived unless she has reached "that part of the port where a ship can be loaded." Yet, if it is common ground that a ship can nevertheless be arrived
under a port charter though she is anchored in a place where no loading is possible, what significance can there be in her having to reach "the usual place of
loading" when for the time being her only purpose and her only duty are to keep herself in readiness to enter a berth?
It seems to me to do no good to ignore that there is this difficulty in relating what was said by Buckley LJ to the more authoritative statement of the law contained in
Kennedy LJ's judgment. On the other hand, it is important to remember that both judges concurred in explicitly approving the decision of Pyman Bros v Dreyfus
Bros & Co as good law. Now Pyman Bros v Dreyfus Bros & Co was a case in which the charterparty destination was simply "Odessa" and the vessel lay waiting in
the outer harbour, under instructions of the port authority, until she could move into a berth in the inner harbour. It seems that there were berths in the outer
harbour but not one that suited the charterers' purpose. She was held to be an arrived ship, not in the least because she was at a place where ships usually load
no one spoke of that but because she had got herself to the point where she was at the disposition of the charterers. "They had only to indicate the place to
which she was to go for her cargo, and she would have been there immediately." Both the judges who decided the case regarded it as an application of the rule
laid down in Nelson v Dahl: " the notice may be given, though the ship is not then in the particular part of the port or dock in which the particular cargo is to be
loaded." The objection that I entertain to the Court of Appeal's judgment is that it exactly reverses this rule and declares that lay days cannot begin until the ship is
in that particular part of the port where loading is to take place. Indeed, their judgment is in conflict with Pyman Bros v Dreyfus Bros & Co unless "immediately"
excludes two to three hours' steaming under tugs. I do not think that it does.'
5.30 In the wording of the charterparty, cargo may be expressed either as a specific cargo, eg wheat, or it may be a range of cargoes, eg wheat/rye/maize. If there is
a range of cargo to choose from, the charterer must load a cargo that is listed any breach of this obligation can entitle the shipowner to repudiate the contract. The
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shipowner, however, may choose to waive the breach and accept an alternative cargo; in this case the charterer will pay freight at the current rate for cargo of that
kind. In Steven v Bromley[35] the charterers of a ship the Strathcona stated the cargo to be 'a full cargo of steel billets' at a specified rate of freight. In fact the cargo
that was loaded consisted of general merchandise, for which the current rate of freight was higher than the rate for steel billets. The shipowners brought an action
against the charterers for breach of the loading terms, whilst the charterers in turn argued that the shipowners were only entitled to nominal damages beyond the
specified freight. The court held that the shipowners were not merely entitled to nominal damages, but rather the fact that the charterer loaded a different cargo
implied an offer which was accepted by the shipowners. Therefore the shipowners were entitled to freight at the current rate for general merchandise.
5.31 When the charterer has a range of cargo to choose from, he will be prevented from claiming that the unavailable cargo was his intended cargo. There are,
however, some cases where the charterer may have a 'true option' between cargoes. In the case Reardon Smith Line v Ministry of Agriculture,[36] the charterers had
a duty to load a full and complete cargo of wheat, with an option to substitute barley or flour. When there was an elevator strike preventing the availability of the
goods from loading, it was held that the charterers could rely on the strike clause in the charterparty and was not obligated to load an alternative cargo, as the
wording of the charter gave rise to a 'true option' to choose between cargoes, so where one became unavailable the charterer did not have to select an alternative.
5.32 If the charterer fails to provide a cargo this does not automatically entitle the shipowner to withdraw the vessel; rather he must wait for laytime provided for in
the charterparty to expire. Once the laytime is expired the shipowner cannot withdraw the vessel until it is certain that the charterer will not be able to provide a cargo
for the voyage or alternatively the delay is to such an extent as to frustrate the contract. [37]
5.33 The charterparty will stipulate the amount of cargo to be shipped, eg 5,000 tons of wheat. The charterer will sometimes agree to provide a 'full and complete
cargo': this means that he has a duty to provide cargo for the whole of the vessel. The charterer will be unable to argue that the cargo provided was of the capacity
stated in the ship's description. In the case Hunter v Fry, the vessel was stated in the charterparty as having a capacity of '261 tons or thereabouts'. The charterer
sought to rely on this figure when he failed to provide a cargo to fill the whole of the ship. [38]
If there is a shortfall in the amount of cargo provided by the charterer for loading, the shipowner will be able to recover damages in the form of dead freight.
Wallems Rederij A/S v WH Muller & Co Batavia (The Storviken) (1927) 2 KB 99.
Mutuality of obligations
5.34 As stated earlier the loading operation is one that requires the cooperation and exchange of information by the shipowner and the charterer. The shipowner is
to ensure the vessel is ready to receive the cargo and it is the charterer's responsibility to provide the cargo for loading. In the case of China Offshore Oil
(Singapore) International Pte Ltd v Giant Shipping Ltd (The 'Posidon'),[39] the charterer argued that the shipowner had breached the contract as the loading of cargo
had not been completed due to adverse weather conditions. The charterer contended that the wording of the charterparty placed an absolute obligation on the
shipowner to complete the loading of the cargo and that the reason for the failure to complete loading was due to the vessel not being seaworthy. The court held that
the extent of the shipowner's contractual obligation was to receive on board the cargo provided by the charterer. The reason for the failure to load the whole of the
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cargo was not due to the fault of the shipowner, rather it was made by the mooring master who was acting as an agent for the charterers. The loading of the cargo
was terminated because of poor weather conditions and was not completed because the agent for the charterer directed the shipowner to proceed to the port of
discharge. Although the charterparty imposed a mutual obligation on the parties, there was no absolute obligation on the shipowner to load a complete cargo as to
do so was dependent on the charterer providing a complete load. Therefore, the reason the vessel had not loaded a full cargo had been at the charterer's directions.
Case excerpt
China Offshore Oil (Singapore) International Pte Ltd v Giant Shipping Ltd (The 'Posidon') [2001] 1 Lloyd's Rep 697
Tomlinson J:
'25 Here the vessel was permitted to commence loading and loaded about two thirds of the quantity called for. The decision to terminate loading was made by the
terminal or by the mooring master on its behalf, ie by the agents of the charterers. It was a decision which, the arbitrators found, was made solely on the basis of
the weather It would seem that the terminal also decided that, for one reason or another, the vessel would not be permitted to re-berth and resume loading. The
arbitrators found that no clear explanation had been given for that decision, although they inferred that that too was a decision based on the weather
'26 reason why the vessel was not permitted to re-moor and resume loading was because of a contemporary perception by the mooring master that the vessel
was not in a fit state so to do. On the findings that appears to be an attempted ex post facto rationalisation of the terminal's decision not to permit re-mooring and
further loading. However the argument would not avail Miss Blanchard even if it were open to her. The arbitrators have found that the vessel was not in fact
unseaworthy and/or unfit for the voyage The charterers must obviously bear the risk of an erroneous perception of unseaworthiness or unfitness formed at the
time by them or by those for whom they are responsible, which includes their "factors" by whom the cargo is or should be tendered for shipment.
'27 The short point is therefore that the vessel did not load a full and complete cargo because the charterers did not provide one and instead ordered the vessel to
sail for the discharge port when only two thirds full. There was no breach of contract by the owners in failing to load cargo which was not tendered to them for
shipment. Indeed had the charterparty in this case provided that freight was to be payable on intaken quantity, then the owners would have had a cast-iron claim
for damages against the charterers for failing to load a full freight.
'28 In order to succeed in their claim for damages the charterers needed first to identify a breach of contract by the owners. The charterers suggested that the
reason why further cargo was not tendered for loading was because of the owners' breach of contract in presenting an unseaworthy vessel. The arbitrators
rejected that contention, both because it did not accord with reality in that that was not the reason given to the owners at the time and because the vessel was not
in any event, as they found, unseaworthy. If there was no failure by the owners in performing their part of the bargain contained in cl 1 of the charterparty and if, as
the arbitrators also found, the owners remained ready and willing to complete loading if and when the vessel was permitted to re-moor when the weather abated,
there is in my judgment simply no basis on which it can be asserted that the circumstance that the vessel did not load a full and complete cargo renders the
owners in breach of contract.'
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Exception clauses
5.35 Where the charterparty includes an exception clause, the courts tend to interpret these clauses quite narrowly in the circumstances. In the case Brightman and
Company v Bunge Y Born Limitada Sociedad,[40] a charterparty provided that the charterers should load a 'cargo of wheat and/or maize and/or rye' at a fixed rate. In
addition: 'If the cargo cannot be loaded ... by reason of obstruction ... beyond the control of the charterers on the railways ... the time for loading ... shall not count
during the continuance of such causes.' The loading of the cargo was not completed within the allocated lay days. The charterers had elected to load a cargo of
wheat. However, the cargo was not ready at the port on the arrival of the ship. The charterers had arranged to have the cargo sent by rail. However, the workers at
that railway company were operating on a 'go slow' basis, which resulted in the wheat not being ready for the charterers to load at the contract rate. There were
other railways which were operating on a regular service basis that the charterers could have used. In addition, it was customary at the port for wheat to be loaded
directly from railway trucks, and sometimes from warehouses, of which there was an ample supply in the port. After the loading by the charterers the export of wheat
from the port was prohibited by the authorities. The shipowners brought an action for demurrage. It was held that although the 'go slow' policy employed by the
workers amounted to an obstruction, prima facie the exception was restricted to an obstruction which prevented the cargo from being loaded, rather than one which
prevented it from being brought down. The charterers could have had the wheat brought down by one of the other railways, or had it already stored in the
warehouses. Furthermore, although the subsequent prohibition against the export of wheat came into force, the charterers could have exercised the option to load
maize or rye. They would have been allowed a reasonable time to see whether the prohibition would be lifted and to make arrangements for loading alternative
cargo, and for that period of time they should be excused from paying demurrage.
The arrived ship

5.36 A vessel can become an 'arrived' ship in three different ways depending on the wording of the charterparty. The charterparty can specify that loading is to take
place in berth, dock or a port. Berth and dock stipulations are fairly straightforward: the vessel will be deemed 'arrived' when it reaches the designated location. The
shipowner will bear the risk of any delays in failing to reach the berth or dock this will be the case even where the charterer nominates a busy location. [41]
5.37 One of the main problems with determining when a ship becomes 'arrived' is where the designation is listed as a port. In the early case law, port arrivals were
interpreted as meaning, 'the term is to be construed in a commercial sense in relation to the objects of a particular transaction.' [42] This test was applied in the case
of Sociedad Financiera de Bienes Raices SA v Agrimpex Hungarian Trading Co for Agricultural Products (The Aello), [43] where it was held that the ship was not an
arrived ship until 29 October the reason for this was that until that date the vessel was not within the commercial area of the port as it was 22 miles from the
loading area. However the case of the E L Oldendorff & Co GmbH v Tradax Export SA (The Johanna Oldendorff)[44] adopted a new approach from that of The Aello.
The vessel was chartered under a port charter to carry bulk grain from the United States to Liverpool/Birkenhead. As there was no berth free on the vessel's arrival
the port authority ordered the vessel to anchor at Mersey Bar which was 17 miles from dock but still within the administrative limits of the port. The shipowners
tendered the notice of readiness to load, but the charterers argued that laytime could not commence as the ship was not an arrived ship for the purposes of loading.
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Lord Reid stated:
'On the whole matter I think that it ought to be made clear that the essential factor is that before a ship can be treated as an arrived ship she must be
within the port and at the immediate and effective disposition of the charterer and that her geographical position is of secondary importance. But for
practical purposes it is so much easier to establish that, if the ship is at a usual waiting place within the port, it can generally be presumed that she is
there fully at the charterer's disposal.
I would therefore state what I would hope to be the true legal position in this way. Before a ship can be said to have arrived at a port she must, if she
cannot proceed immediately to a berth, have reached a position within the port where she is at the immediate and effective disposition of the charterer. If
she is at a place where waiting ships usually lie, she will be in such a position unless in some extraordinary circumstances proof of which would lie in the
charterer.'[45]
Case excerpt
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E L Oldendorff & Co GmbH v Tradax Export SA (The Johanna Oldendorff) [1974] AC 479
Lord Diplock:
' Voyage charters have been the subject of litigation in the English courts since the 16th century. Even in those days, merchants and shipowners recognised that
ship's time lost was money lost, and 16th century charter parties contained provision for payment of demurrage by the charterer if loading or discharging were
prolonged beyond the agreed "lay time," specified in the charter party as the period during which it was to be available to the charterer for that purpose.
'Despite the transformation that has taken place in shipping, in port facilities and in communications during the last four hundred years, the business nature of the
adventure to which the contract between charterer and ship owner relates remains essentially the same. It is an adventure which of its nature has always been
exposed to the risk of being prevented, impeded or delayed by a variety of causes beyond the control of either party. If it is known in advance how loss due to
delay from any particular cause is to be borne as between charterer and ship owner, account can be taken of the risk in fixing the freight payable. What matters
from a commercial point of view is not so much that the risk should be borne by one party rather than by the other, but that it should be known, at the time the
charter party is made, by which of them it will be borne.
' It is inherent in the English legal system that when conditions do change this development should at first be piece-meal. The cases that come before the courts
raise specific problems for which it is the practice of English judges to seek empirical solutions by inquiring what the parties, as reasonable businessmen, must
have intended should be the legal obligations of each in those particular circumstances which have given rise to the dispute. It is not their habit to formulate some
broader principle of which the empirical solution is but a specific application. But the time comes when such a formulation is both practicable and desirable.
Practicable, because it becomes possible to identify some factor common to previous empirical solutions; desirable, because it provides a criterion which
businessmen who enter into charterparties can apply in order to ascertain by whom the loss caused by a particular risk will be borne.'
' If a port is congested so that on arrival the chartered vessel cannot proceed immediately to a berth to load or to discharge, it is of no business importance to
the charterer where she waits within those limits, so long as it is a place:
(1) where she counts for turn if the port is one where vacant berths are allotted to waiting vessels in order of arrival;
(2) where the charterer can communicate with her as soon as he knows when a berth will become available for the cargo to be loaded or discharged, and
(3) from which the vessel can proceed to the available berth when she receives the charterer's communication, so as to arrive there as soon as the berth has
become vacant or so shortly thereafter as not to be significant for practical purposes.
' Since it is to the interest of all concerned, of port authorities as well as charterers and shippers, that time should not be wasted by leaving berths vacant when
they are available for loading or discharging cargo, the usual places for ships to wait their turn for a vacant berth are those which do possess the three
characteristics that I have mentioned, if there are any such places within the limits of the port. In days of sailing ships close proximity to berths likely to become
vacant may have been necessary in order that a place should possess those characteristics, but distance from the actual berth becomes of less importance as
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steam and diesel power replaces sail and instantaneous radio communication is available between ship and shore. In modern conditions it is possible for port
authorities and charterers to know at least some hours in advance, when a berth presently occupied by a loading or discharging vessel will become vacant and
available for use by the chartered vessel. Notice of similar length can be given by the charterer to the waiting vessel so as to enable her to reach the berth as soon
as it becomes vacant, if she can make the journey from her waiting place to the berth within that time and if she can she is as effectively at the disposal of the
charterer for loading or discharging while at that waiting place as she would have been if waiting in the immediate vicinity of the berth.'
5.38 In this case when the vessel had been waiting within the limits of the port it was for the purposes of laytime an arrived ship. Shortly following the decision in the
case The Johanna Oldendorff, the courts were once again presented with the issue of the arrival of the ship in port charterparties in the case Federal Commerce &
Navigation Co Ltd v Tradax Export SA (The Maratha Envoy).[46] The vessel was chartered to carry a cargo of grain to Brake, there were no berths available nor
were there any places for the vessel to wait within the port, the vessel was directed to wait at Weser Light, situated about 25 miles from Brake. The shipowner
tendered a notice of readiness to load while waiting. The Court of Appeal in this case held that the vessel could still be an arrived ship even if outside the port limits if
the ship was at the usual waiting place and at the disposal of the charterer. However this decision was rejected by the House of Lords as the ship was not within the
port area.
Case excerpt
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Federal Commerce & Navigation Co Ltd v Tradax Export SA (The Maratha Envoy) [1978] AC 1
Lord Diplock:
' (The Johanna Oldendorff) [1974] AC 479 , the purpose of this House was to give legal certainty to the way in which the risk of delay from congestion at the
discharging port was allocated between charterer and shipowner under a port charter which contained no special clause expressly dealing with this matter. The
standard form of charterparty used in The Johanna Oldendorff was also that used in the instant case the Baltimore berth grain charterparty although in each
case the destination of the carrying voyage was a port, not a berth. The allocation of this risk under this kind of charterparty depends upon when the vessel
becomes an "arrived ship" so as to enable laytime to start running and demurrage to become payable once laytime has expired. Legal certainty on this subject had
been impaired by the earlier decision of this House in Sociedad Financiera de Bienes Raices SA v Agrimpex Hungarian Trading Co for Agricultural Products (The
Aello) [1961] AC 135, which had laid down a test ("the Parker test") of what was an "arrived ship" under a port charter. The Parker test had in the years that
followed turned out in practice to be obscure and difficult to apply to the circumstances of individual cases. So The Johanna Oldendorff [1974] AC 479 was brought
up to this House for the specific purpose of re-examining the Parker test with a view to replacing it by one which would provide greater legal certainty. In order to
ensure that the matter should be fully considered this House refused to adopt the leap-frog procedure for which Donaldson J had given the necessary certificate. It
required the ordinary course to be followed so that this House might have the benefit of the opinions of the members of the Court of Appeal as well. After a hearing
extending over six days in the course of which the position of ports where the usual waiting place lies outside the limits of the port of discharge was fully
considered and cases dealing with such ports were cited, this House substituted for the Parker test a test which I ventured to describe as the "Reid test," which in
its most summary form is stated by Lord Reid thus, at p 535:
"Before a ship can be said to have arrived at a port she must, if she cannot proceed immediately to a berth, have reached a position within the port where she is at
the immediate and effective disposition of the charterer."
' Where charterers and shipowners as part of their bargain have desired to alter the allocation of the risk of delay from congestion at the named port which would
otherwise follow from the basic nature of their contract, they have not sought to do so by undermining whatever legal certainty had been attained as to when a
voyage stage ends. Instead they have achieved the same result without altering the basic nature of the contract, by inserting additional clauses to provide that time
should begin to run for the purposes of laytime or demurrage if, although the voyage stage is not yet ended, the ship is compelled to wait at some place outside the
named port of destination until a berth falls vacant in that port. That is why resort is had by shipowners and charterers to the time lost clause and the standard
clauses which deal specifically with individual ports where a usual waiting place for vessels waiting for a berth lies outside the limits of the port.
'Charterparties are not notorious for stylistic elegance or easy intelligibility by those whose business does not lie in the freight market; but to those who operate in
that market a considerable degree of certainty as to the meaning and application of standard forms and clauses has been achieved by costly litigation over the
years. Your Lordships would be doing a disservice to the shipping community if, so shortly after the Reid test had been laid down by this House in The Johanna
Oldendorff, you did not reaffirm it and insist upon its application to the instant case.
'I turn to the second ground relied on by the Court of Appeal as justifying departing from the Reid test. Again it is not a point that was relied on by the charterers at
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the trial before Donaldson J. The form of charterparty used incorporated as one of the printed clauses dealing with time for discharge:
"Time to count from the first working period on the next day following receipt... of written notice of readiness to discharge, whether in berth or not."
' The parties took a printed form appropriate to a berth charter as respects both loading and carrying voyages, and used it for an adventure in which the
destination of the carrying, though not the loading voyage, was a range of named ports, not berths. The effect of this well-known phrase in berth charters has been
settled for more than half a century. Under it time starts to run when the vessel is waiting within the named port of destination for a berth there to become vacant. In
effect it makes the Reid test applicable to a berth charter. It has no effect in a port charter; the Reid test is applicable anyway. A full discussion of the clause and of
the previous authorities is to be found in the judgments of Buckley LJ and Roskill LJ in the Court of Appeal in The Johanna Oldendorff. These are reported at
[1974] AC 501502, 515517. The matter was not dealt with expressly in the speeches in that case in this House except by my noble and learned friend, Viscount
Dilhorne, who endorsed the reasoning of Buckley LJ. Buckley and Roskill LJJ were in my view only repeating there what had already become a matter of legal
certainty in English law as to the meaning and effect of the phrase "whether in berth or not," save that they were at that time bound by The Aello [1961] AC 135 to
hold that the phrase did not apply unless the place at which the ship was waiting within the limits of the port also satisfied the Parker test of what constituted the
port's "commercial area."'
5.39 The test laid out in The Johanna Oldendorff has not been met with widespread acceptance as it is not always certain whether a shipowner may be directed by
the port authorities to wait at an area which is outside the port area. Rather it is put forth that the test should be whether the shipowner has done all he can to bring
the ship as close as possible to the congested port to wait for a berth to become free so loading can commence.
Shifting risk
5.40 As the shipowner is reluctant to accept liability for delays if the port is congested he may opt to include certain clauses in the charterparty which will shift the risk
of such delays on to the charterer. For example, where the port nominated in the charterparty is one known for congestion the shipowner may opt to nominate a
specific geographical point from where laytime should run. This will be of paramount importance to the shipowner especially where the usual place for waiting for a
berth to become free is outside the port area.[47] In Roland-Linie Schiffahrt GmbH v Spillers[48] the charterparty from Australia to Hull contained a clause that stated:
'if a discharging place was not immediately available demurrage in respect of all time waiting thereafter should be paid.' When the vessel reached the port it was
instructed to wait off Spurn Head, approximately 22 miles from the port of Hull, for a berth; the vessel waited over seven days. The shipowners claimed demurrage,
contending that under the bills of lading the ship was impliedly ordered to the King George Dock at Hull, as this was the customary dock in that port. The charterers
contended that the ship was not an arrived ship and therefore the clause did not come into effect. It was held that as the clause dealt with waiting time, there was no
need for the ship to become an arrived ship. The payment of demurrage arose as a result of the vessel having to wait for a free berth.
5.41 Other clauses may place an obligation on the charterer to nominate a 'reachable berth' when the ship arrives at the port of loading, arrival is to be interpreted as
the physical arrival of the ship to the place where she could be able to proceed to the berth without interruption. In the case The Angelos Lusis,[49] a clause in the
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charterparty stated: 'The Vessel shall load and discharge at a place or at a dock or alongside lighters reachable on her arrival which shall be indicated by Charterers,
and where she can always lie afloat ' On the arrival of the vessel at Constantza the vessel could not proceed to load immediately as there were no berths
available. The shipowners claimed damages for the time spent waiting; the charterers in turn contended that the vessel had not become an arrived ship and thus the
clause did not come into effect. Megaw J stated:
'Here, I think that another meaning can reasonably be attributed to the words "on her arrival", and I have little doubt but that that meaning reflects the
true intention of the parties, and, indeed, the true meaning of the words in that context. The parties, in using the words "on her arrival", did not have in
mind, or at least did not have solely and exclusively in mind, the technical meaning of "arrival" in respect of an "arrived vessel" in a port charter-party:
they had in mind her physical arrival at the point, wherever it might be, whether within or outside the fiscal or commercial limits of the port, where the
indication or nomination of a particular loading place would become relevant if the vessel were to be able to proceed without being held up. At that point
the charterers had to nominate a reachable place, which involves that it was the charterers' responsibility to ensure that there was at that point of time a
berth which the vessel, proceeding normally, would be able to reach and occupy. The time of her arrival, within Clause 6, had come when the vessel had
gone as far as she could go, whether to the verge of or within the port, in the absence of a nomination by the charterers of a place, which she could
reach without being held up, where she could load.'[50]
Thus, if the berth is unreachable the charterer will bear the risk of delays and may be liable for damages resulting from the delays. [51]
In the event that the ship is also an 'arrived' ship for the purposes of laytime to run, the charterer will not be liable to compensate the shipowner for time lost waiting
for a berth. Rather the time saved in loading will be weighed against the time lost in waiting for a berth. The Delian Spirit [1971] 1 Lloyd's Rep 506.
5.42 The Gencon charterparty contains a 'time lost in waiting for berth' clause, which means that any time lost in waiting for a berth to become free will count as time
allocated for loading and unloading the goods. This triggers the commencement of laytime before the vessel is an arrived ship, for example if the ship is outside the
port area in a port charter. The reason for the delay must however be that there is no berth available. In the case of Aldebaran Maritima v Aussenhandel (The
Darrah),[52] a port charterparty was entered into to transport a cargo of cement from Novorossisk to Tripoli. On arrival the vessel was unable to berth due to
congestion at the port. The charterparty contained a clause which stated: 'Time to commence at 2 p.m. if notice of readiness to discharge is given before noon, and
at 8 a.m. next working day if notice given during office hours after noon. Time lost in waiting for berth to count as laytime' The shipowners argued for the seven
days and six hours spent waiting for the berth to be counted without adjustment for the weather working days, Fridays and holidays, amounting to just under
14-days' demurrage. Lord Diplock stated:
'In a berth charter the effect of the clauses is to put the shipowner in the same position financially as he would have been if, instead of being compelled
to wait, his vessel had been able to go straight to her berth and the obligations of the charterer to carry out the loading or discharging operation had
started then. In a port charter the clauses are superfluous so far as concerns time spent in waiting in turn within the limits of the port. This counts as
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laytime anyway; it is laytime.'
Furthermore he stated that if the clause is to treat the vessel as if it were in berth, while in fact it is waiting for a berth, then the clause must be construed as
calculating only those days which would have counted if the vessel were in fact in berth.
If the delay were caused by an exception covered in the charterparty then the clause will not come into effect. The Amstelmolen [1961] 2 Lloyd's Rep 1.
5.43 Another similar type of clause used to shift the risk of delays on to the charterer is the WIBON clause, meaning time to count whether in berth or not. Thus,
once the vessel arrives in the port the shipowner can tender the notice of readiness to load even if there is no berth available. The courts tend to construe the
application of these clauses quite narrowly so that they can only apply in situations where the vessel is delayed as a result of no available berths. In the case of Bulk
Transport Group Shipping Ltd Seacrystal Shipping Ltd (The Kyzikos),[53] a charterparty was entered into to deliver a cargo of steel and steel products from Italy to
Houston. The wording stated that the vessel shall always be afloat, and always an accessible berth(s) at each port. Furthermore time lost in waiting for a berth was
to count as loading or discharging time. The vessel was prevented from entering a free berth for three days due to fog closing the pilot station. The courts held that
the clause was only applicable to cases where the berth was not available for the ship to discharge and not to cases where the berth was available but not capable
of being accessed due to bad weather.
Readiness to load or discharge
5.44 Prior to the commencement of laytime the ship must, for the purposes of loading the goods, be an 'arrived' ship. Furthermore the master of the ship must have
tendered a notice of readiness to load to the charterers and the vessel must be physically ready to load. In the case of the Compania de Naveira Nedelka SA v
Tradex Internacional SA (The Tres Flores),[54] the vessel was chartered to carry a cargo of maize from the port of Varna, the master tendered the notice of readiness
to load however it was discovered that the holds contained pests and the vessel was ordered to be fumigated. The court held that there was a breach of the
condition precedent laid down in the charterparty and that there could be no effective notice of readiness until fumigation was completed, and the ship was ready to
receive the charterer's instructions.
Case excerpt
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Compania de Naveira Nedelka SA v Tradex Internacional SA (The Tres Flores) [1974] QB 264
Lord Denning MR:
' The dispute is whether laytime commenced at the time for which the master gave his notice of readiness, that is, 14.00 hours on Monday, November 23, or only
at the time when the vessel had been fumigated and was suitable to receive the cargo, that is, at 14.00 hours on Tuesday, December 1, 1970.
'It seems to me that this dispute is really covered by the specific sentence in the charterparty which I have already read but which I will repeat now:
"Before tendering notice master has to take necessary measures for holds to be clean, dry, without smell and in every way suitable to receive grain to
shippers/charterers' satisfaction."
'That lays down a condition precedent to the validity of a notice of readiness to load. That condition precedent was not fulfilled until the fumigation had been
completed on November 30, and therefore the notice of readiness could not validly be given until that time.
'That is sufficient for the decision of this case; but, as the contrary has been discussed before us, it may be desirable for the members of the court to give their
views upon it.
'One thing is clear. In order for a notice of readiness to be good, the vessel must be ready at the time that the notice is given, and not at a time in the future.
Readiness is a preliminary existing fact which must exist before you can give a notice of readiness
'The next question, when can a ship be said to be ready? Conversely, if some things are yet to be done, what are the things which make her unready to receive
cargo?
'The leading case is Armement Adolf Deppe v John Robinson & Co Ltd [1917] 2 KB 204, where the hatch covers had not been removed at the time when the
notice of readiness was given. It would be necessary for them to be removed before discharging could take place, The notice of readiness was held to be good.
Then there is Sociedad Financiera de Bienes Raices SA v Agrimpex Hungarian Trading Co for Agricultural Products, The Aello [1961] AC 135, where a police
permit was necessary before a ship could be loaded. It was held that the absence of a police permit did not prevent the Aello from being "ready to load" while at
the anchorage: see per Lord Radcliffe at pp 174175. and finally Shipping Developments Corporation v V/O Sojuzneftexport (The Delian Spirit) [1972] 1 QB 103,
where the vessel had not obtained free pratique and would need it before she could load. It was held that she was entitled to give notice of readiness.
'In considering the cases, it seems to me that the submission which Mr MacCrindle [Counsel] put forward was correct. In order to be a good notice of readiness,
the master must be in a position to say "I am ready at the moment you want me, whenever that may be, and any necessary preliminaries on my part to the loading
will not be such as to delay you." Applying this test it is apparent that notice of readiness can be given even though there are some further preliminaries to be
done, or routine matters to be carried on, or formalities observed. If those things are not such as to give any reason to suppose that they will cause any delay, and
it is apparent that the ship will be ready when the appropriate time arrives, then notice of readiness can be given.
'In the present case there were pests in the hold such as to make the ship unready to receive cargo. Fumigation was not a mere preliminary, nor a routine matter,
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nor a formality at all. It was an essential step which had to be taken before any cargo could be received at all. Until the vessel had been fumigated, notice of
readiness could not be given. It has always been held that, for a notice of readiness to be given, the vessel must be completely ready in all her holds to receive the
cargo at any moment when she is required to receive it. It was said by Lopes J in Groves, Maclean and Co v Volkart Brothers (1884) 1 TLR 92, and accepted in
Noemijulia Steamship Co Ltd. v Minister of Food [1951] 1 KB 223 by Devlin J, as a clear rule, at p 227, and by Tucker LJ at p 235. So on this ground also the
condition of the holds meant that the notice of readiness could not be given.
'So, both under the specific clause and at common law, I am of opinion that the presence of pests in the hold invalidated the notice of readiness. I think the
decision of Mocatta J was right and I would dismiss this appeal.'
Notice of readiness to load
5.45 The notice of readiness to load can take any form in the common law; this includes an oral notice. [55] If the charterparty specifies the type of notice to be given,
the shipowner must comply with these requirements.
There is no requirement of a notice of readiness to discharge the goods. Houlder v GSN [1862] 3 F & F 170.
5.46 Some standard form contracts stipulate that advanced notice of readiness must be given to the charterer so that he may prepare the goods for loading. [56]
However most requirements are designated for an actual readiness to load. In many cases the ship will tender a notice of readiness to load without actually
becoming an arrived ship. If such an invalid notice is given, even if the ship then proceeds to berth for the purposes of loading with the co-operation of the charterer,
laytime will not commence and the shipowners will be unable to claim demurrage in the circumstances. In the case of Transgrain Shipping BV v Global Transporte
Oceanico SA (The Mexico 1),[57] Lord Mustill stated:
'Thus, unless something happened after the notice was sent to make the laytime start, it never started at all, with the consequence not only that the
owners have earned no demurrage, but also that they are obliged to pay the charterers despatch money for the whole of the laytime I confess to
some difficulty in finding the necessary elements of a waiver in the bare fact that a discharge was carried out I would therefore agree with the learned
Judge in his rejection of the argument that the notice was a delayed-action device, effective to start the laytime automatically when, at a later date, the
ship became ready to discharge the contractual cargo: and also the linked argument that time began when the charterers knew or ought to have known
of the readiness.'[58]
5.47 In the later case of Flacker Shipping Ltd v Glencore Grain Ltd (The Happy Day)[59] the vessel was contracted to carry grain from Odessa to Cochin, the vessel
missed the tide and was not able to enter the port. Nevertheless the master tendered a notice of readiness to load. As this was a berth charterparty, and there were
berths available the notice was invalid. The vessel was able to proceed to the berth the following day and started to discharge the goods. The shipowners claimed
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demurrage for the extra time used to discharge the goods. The arbitrators and the court of first instance held that no valid notice of readiness was ever given, and
therefore no demurrage was payable to the shipowners. The shipowners appealed this decision on the grounds that the charterers were estopped from disputing the
validity of the notice of readiness and their acceptance of the notice amounted to a waiver of the contract. It was held that in this case the appeal was allowed
because the charterers accepted the notice and acted upon it without reservation and in such circumstances this could amount to waiver. Potter LJ stated:
' In my view the circumstances of the case and the demands of commercial good sense are such that the Court should be reluctant to apply or adopt
doubts expressed in obiter dicta (even from so distinguished a source as Lord Justice Mustill) so as to arrive at a result whereby, despite the fact that the
vessel has arrived, NOR has been tendered and the unloading operation commenced without any reservation expressed in respect of it, the charterers
are free of any constraints upon the time which they take in unloading and, despite delays for which they would otherwise be liable for demurrage, they
are in fact entitled to despatch.
In the context of this case I would answer the question of law in relation to which leave was granted as follows. Laytime can commence under a voyage
charter-party requiring service of a notice of readiness when no valid notice of readiness has been served in circumstances where:
(a) a notice of readiness valid in form is served upon the charterers or receivers as required under the charter-party prior to the arrival of the vessel;
(b) the vessel thereafter arrives and is, or is accepted to be, ready to discharge to the knowledge of the charterers;
(c) discharge thereafter commences to the order of the charterers or receivers without either having given any intimation of rejection or reservation in
respect of the notice of readiness previously served or any indication that further notice of readiness is required before laytime commences.
In such circumstances, the charterers may be deemed to have waived reliance upon the invalidity of the original notice as from the time of
commencement of discharge and laytime will commence in accordance with the regime provided for in the charter-party as if a valid notice of
readiness had been served at that time. By answering the question in that way, I should not be thought to doubt that, in appropriate circumstances,
the same result may follow by application of the doctrines of variation and estoppel.'[60]
Case excerpt
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Flacker Shipping Ltd v Glencore Grain Ltd (The Happy Day) [2002] EWCA Civ 1068
Potter LJ:
'18 In the absence of contract or custom, there is no common law requirement that the shipowner must give NOR to unload to the charterers. However, where (as
is usual) NOR is required, the proper contents of the notice depend upon the terms of the charter. In the absence of any specific additional requirements it should
state (i) that the vessel has arrived at the place (eg a particular port, area or berth) where, under the terms of the charter, she may tender notice and (ii) that the
vessel is ready to perform the cargo operation required. A notice which states that the vessel is ready, but which is given at a time when it is not actually ready, is
not a valid notice. These matters are not in issue. Nor is it in issue that the purpose of NOR is that of defining the time at, or following which, laytime starts to run
for the purpose of calculating the period allowed to the charterers under the charter for loading or discharging; that will in turn regulate the liability of the charterers
to pay demurrage if the period for loading is exceeded and charterers' right to payment by owners of despatch in respect of working time saved. That being so, if,
having given premature NOR, the vessel arrives at berth and the work of unloading proceeds with the knowledge and consent of the charterers but exceeds the
period of laytime provided for in the charter, the question arises whether the law is such that it permits the charterers to treat laytime as never having commenced,
to deny liability for demurrage and, indeed, to claim despatch for the entire period of laytime. It is the submission of the owners on this appeal that that is a
surprising proposition productive of injustice and cannot be derived from the authorities relied upon before the judge. The charterers, on the other hand, assert (as
the judge held) that such is indeed the effect of the authorities and is in any event the correct position.
'38 the law at the time of the decision of Langley J was to the following effect. In a case where NOR has been given which is invalid for prematurity, the doctrine
of 'inchoate' notice is not available to the owners to start laytime running as soon as the vessel becomes ready to unload (even though the charterers are aware
that it is in fact ready). Time will not start to run until valid NOR is given, in the absence of an agreement to dispense with such notice, or unless there is a waiver or
an estoppel binding upon the charterers in respect of the necessity for further (valid) notice. The question whether or not such agreement, waiver or estoppel can
be established (which is a mixed question of law and fact) must depend upon the circumstances of the case. In particular, in a case where unloading has
commenced with the knowledge and consent of the charterers or their agents and without any reservation of the charterers' position, the question arises whether
that fact alone gives rise to an (implied) agreement, waiver or estoppel '
If the charterer requests early loading then he cannot deny that laytime has commenced upon tendering of the early notice. The Front Commander [2006] 2 Lloyd's
Rep 251.
Actual readiness to load
5.48 When the notice of readiness to load is tendered the vessel must be in fact actually ready to load. This will comprise several factors, namely: the physical
position of the vessel; the state of its holds; and whether the necessary documentation is ready to be presented to the port authorities. Once the ship becomes an
'arrived' ship, or if the charterparty contains a WIBON clause, the ship, although it may not be physically ready to load as there is no berth available, can still
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commence the running of laytime. However once in berth the vessel must have cleared the holds of any previous cargo so that loading can commence and all
equipment necessary for loading must be in working order. In Unifert International Sal v Panous Shipping Co (The Virginia M),[61] the shipowners let their vessel to
the charterers on a Gencon charterparty. The vessel proceeded to Lagos to discharge the cargo, but on arrival the shipowner realised that the ship needed fresh
water for the boilers in order to be able to discharge the cargo. On arrival at Lagos the ship had only enough water for one day of discharge. The shipowner gave
notice of readiness to discharge and the charterer disputed that the vessel was ready to load at that time. On appeal from the arbitrators it was held that the ship
needed to be ready to discharge the entire cargo in order for the notice of readiness to be valid.
5.49 Port charters allow some element of flexibility over berth charters, as in a berth charter the vessel must be ready to load before the notice of readiness is
tendered, but in a port charter, once the vessel is deemed to be 'arrived', the vessel has some time before reaching the berth to ensure all holds and equipment are
ready to receive the cargo. In the case Armement Adolf Deppe v John Robinson & Co Ltd,[62] where the hatch covers had not been removed at the time when the
notice of readiness was given, it was held that this did not prevent the vessel from discharging the goods by the time the vessel had reached its berth.
5.50 The last requirement for the vessel to be ready to load is that all necessary documentation is in order at the time the notice is tendered. [63]
Laytime
5.51 One of the most important clauses in a voyage charterparty is the laytime clause. Laytime is the period of time for which the vessel will be at the charterer's
disposal for the loading and unloading of the cargo. Laytime will be expressly allocated for in the charterparty. Once the charterer has exceeded his allocated laytime
he will be liable for damages to the shipowner either in the form of demurrage or damages for detention. The shipowner will try to negotiate a short period for laytime
as he will want the vessel loaded as swiftly as possible so that he can remain on schedule, whereas the charterer will arrange for a greater amount of laytime in case
of any unforeseen circumstances which may result in delays to the loading. Laytime will be paid for by the charterer in the freight that is quoted.
Calculation of laytime
5.52 Laytime can be expressed as either a specific number of days or hours, eg four working days. Alternatively it can be expressed as a fixed rate of loading, eg
100 tons per day. In some cases the charterparty will be vague as to the amount of laytime allowed, in these cases the courts will imply a duty to load the cargo
within a reasonable time as is customary at that port.[64] In the case Van Liewen v Hollis Bros & Co Ltd (The Lizzie)[65] it was stated by Lord Atkinson:
' If by the terms of the charterparty the charterers have agreed to discharge the chartered ship within a fixed period of time, that is an absolute and
unconditional engagement for the non-performance of which they are answerable, whatever be the nature of the impediments which prevented them
from performing it, and thereby causing the ship to be detained in their service beyond the time stipulated. If no time be fixed expressly or impliedly by
the charterparty the law implies an agreement by the charterers to discharge the cargo within a reasonable time, having regard to all the circumstances
of the case as they actually existed, including the custom or practice of the port, the facilities available thereat, and any impediments arising therefrom
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which the charterers could not have overcome by reasonable diligence'.[66]
A reasonable time will be dependent on the nature of the cargo as well as the vessel, in addition to the day-to-day features of the port and any unusual
circumstances which may have arisen.[67]
5.53 When laytime is expressed using the terms 'days' or 'running days' this denotes a continuous 24-hour period. In some cases the charterparty may state
'Sundays and holidays excepted'. However, if these exceptions are not within the wording of the charterparty it will be expected that loading will continue throughout.
The charterparty may also stipulate laytime as 'working days': this will be a day which is customary for that particular port to be open. Some charterparties will go
even further and state laytime is only to run on 'weather working day': this means that when the weather prevents loading of the goods this will be excluded from the
calculation of laytime. In Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries and Food[68] Lord Devlin summarised the meaning of some of these terms:
'Day: A continuous period of 24 hours which runs from midnight to midnight.
Conventional day: a period of 24 hours which starts from the time when a notice of readiness expires or in accordance with its instructions.
Working day: a period of 24 hours, a day for work as opposed to a day for religious observance or for play or rest.
Weather working day: a day where cargo could be loaded (or discharged) without interference from the weather.'
Weather working days will only apply if the conditions are such that the loading process is affected rather than just the vessel's safety. Compania Crystal de
Vapores v Herman [1958] 2 QB 196.
5.54 Most modern charterparties will make provisions for laytime to be calculated using a daily rate of loading and unloading, eg 200 tons per weather working day.
Lay days will then be allocated by dividing the amount of cargo to be loaded by the daily rate.
If there is a portion of time left over this is to be regarded as a fraction of a working day not a whole day. Houlder v Weir [1905] 2 KB 267.
5.55 Charterparties will also stipulate that the stated rate of loading will be per 'working hatch': this means that laytime is to be calculated by dividing the quantity of
cargo in the hold with the largest quantity by the result of multiplying the agreed daily rate per working or workable hatch by the number of hatches serving that hold.
This method of calculation can be difficult to ascertain as it may vary depending on if the hatches are workable, ie there is a hold under it where cargo can be
loaded.[69] In the case Cargill v Rionda de Pass (The Giannis Xilas)[70] the contract stated that loading was to be completed on the following terms: '150 metric tons
per workable hatch and pro rata with maximum 750 metric tons per weather working day '. The vessel was not of a typical layout in that of her five hatches, three
presented no problems. However two of the hatches were different in that they led into an undivided deck cargo space above two of the holds. Bingham J held that
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in interpreting the loading clause:
' The expressions "working hatch" or "available workable hatch" have the same meaning. The effect of that expression is not to distinguish a cargo
hatch from any other kind of hatch but to denote a hatch which can be worked either because under it there is a hold into which cargo can be loaded or
a hold out of which cargo can be discharged, in either event being a hatch which the party responsible for loading or discharging is not for any reason
disabled from working.'[71]
Suspension of laytime
5.56 The question arises in what circumstances can laytime be suspended; the answer to this is twofold. First, in the absence of any fixed laytime, the charterer will
be excused from failing to load if there are circumstances that arise which are beyond his control. Thus in the case Hick v Raymond & Reid[72] a cargo was to be
shipped to London under a bill of lading which did not specify the time within which the consignees were to take discharge of the goods. On arrival of the ship the
consignees began to unload the cargo, but the unloading was interrupted by a strike of the dock workers which delayed the discharge of the goods. It was stated by
Lord Watson:
'When the language of the contract does not expressly, or by necessary implication, fix any time for the performance of a contractual obligation, the law
implied that it shall be performed within a reasonable time. The rule is of general application, and is not confined to contracts for the carriage of goods
by sea. In the case of other contracts the condition of reasonable time has been frequently interpreted; and has invariably been held to mean that the
party upon whom it is incumbent duly fulfils his obligations notwithstanding protracted delay, so long as such delay is attributable to causes beyond his
control, and he has neither acted negligently nor unreasonably.'[73]
5.57 If there is a provision for fixed laytime in the charterparty then the charterer will bear the risk of any intervening events. In the case Budgett v Binnington,[74] a
cargo was shipped under a bill of lading in which the laytime was for a specified number of days; neither the bill of lading nor the charterparty contained any
exception of strikes. During the discharge of the goods a strike took place and did not end until after the expiry of the laytime. It was held that as the laytime was
fixed, the consignees were liable to pay demurrage.
If the delay was the fault of the shipowner then the time will not count against the charterer. The Fontevivo [1975] 1 Lloyd's Rep 339.
Completion of loading
5.58 The charterer will have the ship at their disposal for the period of agreed laytime. The charterer is free to use the laytime to load the goods at the agreed rate of
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loading. The shipowner cannot insist that the charterer speeds up the loading process. In the case of Margaronis Navigation Agency Ltd v Henry W Peabody & Co
of London Ltd,[75] the full and complete cargo was 12,600 tons of maize, in which all but 11 tons, 4 cwt was loaded by Friday evening. The charterers insisted on
keeping the vessel until the next Monday in order to complete loading, however the vessel sailed within the 21 days of laytime allowed. The shipowners claimed
damages for detention as they argued that the charterers had detained the vessel for the purposes of post-dating the bill of lading and loading could have been
completed on the Friday. The court applied the de minimis rule and held that the amount left to load was not insignificant and thus the charterers were entitled to
detain the ship to load the remaining 12 tons.
5.59 Once a vessel has completed its loading, even if there are laydays left to run, the charterer cannot detain the vessel until the end of this period. In the case of
Owners of the Nolisement v Bunge & Born,[76] the vessel completed its loading with 19 days of laydays left to run. The charterers delayed the departure of the
vessel for three days as it took that time to decide on a port of discharge. The court held that the charterer was liable for two days' damages for detention. Once the
goods have been loaded on board the vessel the shipowner is responsible for the stowage of the goods, and any delays resulting after the goods are stowed will be
at the risk of the shipowner.[77]
Demurrage
5.60 If the charterer fails to load the cargo within the agreed laytime, this will amount to a breach of contract. Breach in these circumstances will entitle the shipowner
to claim damages, demurrage is calculated as an agreed rate per day. In the case Suisse Atlantique Societe v NV Rotterdamsche Kolen Centrale,[78] the
shipowners tried to claim damages on freight they would have earned if the vessel had not been wrongfully detained by the charterers. They argued the demurrage
clause did not apply in the circumstances as the charterer's breach entitled them to repudiate the contract. The courts held that the demurrage clause had to be
interpreted in the light of whole of the contract; in this case the demurrage clause applied to the whole period in question. Furthermore, even if the breach were
repudiatory, this did not mean that the demurrage clause would cease to apply.
5.61 The courts tend to apply the maxim 'one on demurrage, always on demurrage', meaning that if the parties intend that demurrage should not be payable in
certain circumstances this needs to be specified in the contract. The courts tend to construe these clauses quite narrowly. In the case Marc Rich & Co Ltd v Tourloti
Compania Naviera SA (The Kalliopi A),[79] the shipowners chartered their vessel for a voyage from Rotterdam to Bombay. The wording of the charterparty stated
that the vessel could give notice of readiness whether in berth or not and that 'the act of God, restraint of Princes and Rulers ... and all and every other unavoidable
hindrances which may prevent the ... discharging ... always mutually excepted.' The vessel arrived at Bombay, and tendered its notice, however, there was no free
berth due to congestion. The shipowner claimed demurrage, but the charterer argued that the clause operated so as to relieve them from having to pay. It was held
that while the clause could be read so as to exclude liability for demurrage, in circumstances where the vessel was already on demurrage, it could not fit these
circumstances. Thus the principle of 'once on demurrage always on demurrage' was applied.
5.62 The question of how long a shipowner must wait for the charterer before he is entitled to withdraw the vessel was addressed in Universal Cargo Carriers v
Citati.[80] Devlin J stated:
48 of 56 07/16/2016 10:29 AM
'But a party to a contract may not purchase indefinite delay by paying damages When the delay becomes so prolonged that the breach assumes a
character so grave as to go to the root of the contract, the aggrieved party is entitled to rescind. What is the yardstick by which this length of delay is to
be measured? Those considered in the arbitration can now be reduced to two: first, the conception of a reasonable time, and secondly, such delay as
would frustrate the charterparty in my opinion the second has been settled as the correct one by a long line of authorities.' [81]
Therefore a breach of failure to load within the specified laytime does not entitle the shipowner to rescind the contract but to claim damages only. The charterer,
however, may not keep the ship indefinitely on demurrage, when the delay is such as to frustrate the contract, then the shipowner can terminate the contract.
Damages for detention
5.63 Damages for detention are payable where there is no express stipulation in the charterparty on an agreed rate of damages (Demurrage). Damages will be
assessed in relation to the rule of actual losses suffered as well as subject to the limitations of remoteness and mitigation. Alternatively damages for detention may
be payable where the specified period of laytime has expired and the charterer continues to detain the vessel.
Despatch money
5.64 The shipowner may include an incentive clause in the charterparty whereby if the charterer completes the loading and discharge in a shorter period than is
agreed on he may be entitled to receive despatch monies. This payment is only available by agreement of the parties, it is mutually advantageous to both parties as
the shipowner will have the ship at his disposal at an earlier date and the charterer could receive payment for doing so. The general view is that despatch monies is
calculated at half the rate of demurrage and usually includes all time saved at the port.[82]
Diagram 5.3: Sums payable in voyage charter
Carrying voyage
5.65 Upon completion of loading the shipowner has an obligation at common law to proceed with all reasonable dispatch to the port of discharge. Once the ship is
deemed an 'arrived' ship at the port of discharge the carrying voyage comes to an end. The shipowner is under no obligation to tender a notice of readiness to
discharge, rather it is the responsibility of the consignee to be ready to unload the goods on arrival. [83]
Discharging operation
5.66 The discharge operation will commence once the ship becomes an arrived ship. The procedure for discharge is very similar to that of the loading operation in
49 of 56 07/16/2016 10:29 AM
that in entails a division of responsibility on the part of the shipowner and consignee. The same rules of demurrage and damages for detention will apply if the
laytime is exceeded.
5.67 The shipowner is under an obligation to deliver the cargo to the consignee or lawful holder of the bill of lading. If there is no consignee present to take delivery
of the goods the shipowner must wait a reasonable time before he can warehouse the goods. The consignee will be liable to the shipowner for such expenses
incurred.
5.68 The shipowner is under an obligation to deliver the goods to the lawful holder of the bill of lading and will be protected from liability once delivery is made
against presentation. If the shipowner is aware of any other claims against the goods he may be liable for the tort of conversion in such circumstances. [84]
5.69 In the event that the goods become mixed with other goods such that they become unidentifiable as belonging to the consignee, the shipowner may be liable
unless the event occurred as a result of an exception. For example if the goods became mixed during a particularly rough sea voyage this may be covered by the
exception 'perils of the sea'. In such cases the holders of the bill of lading will become tenants in common with the other consignees of the goods in such proportions
as they contributed to the whole. In the case Spence v Union Marine Insurance Co[85] Bovill J stated:
' when goods of different owners become by accident so mixed together as to be undistinguishable, the owners of the goods so mixed become
tenants in common of the whole, in the proportions which they have severally contributed to it.' [86]
In the event that the mixed goods are not covered by an exception, the consignee is not obliged to accept an apportionment of the goods rather the shipowner will
be liable to the consignee.[87]
Questions
50 of 56 07/16/2016 10:29 AM
1. In a voyage charterparty, when is the ship deemed an 'arrived' ship? Why is this important?
2. What are the main responsibilities of the shipowner during the loading and unloading process? What are the responsibilities of the charterer and the
consignee?
3. What is meant by 'laytime'? What are the circumstances where laytime is suspended?
4. What are the consequences of the charterer exceeding the allocated laytime? What if the shipper completes his loading duties with laytime remaining?
5. Charterers, Spruce Inc, entered into a voyage charter with shipowners Timber Co, for the carriage of lumber from Canada to Argentina on board the vessel
'Moonbeam on 'berth charter' terms.
Clause 8 read:
'Vessel to discharge at the average rate of 5,000 tons per weather working day for 24 consecutive hours.'
The vessel completed loading at Vancouver and Spruce Inc declared Buenos Aires, as the first discharging port. The 'Moonbeam' entered Buenos Aires on 15
June 2011 and, having passed the inward inspection, she was ready to berth the same day. A berth was available for her but she was unable to proceed to the
berth because the necessary cargo documents were not in order and the sellers of the cargo ordered the vessel not to allow anyone to have access to the vessel
without production of the original bill of lading.
The master tendered NOR at 0800 on 16 June.
The problems with the documents were resolved on 20 August whereupon 'Moonbeam' proceeded to berth and completed discharge on 30 August when the
vessel left for Deseado to discharge the rest of the cargo.
The shipowner claimed damages for detention from the charterers for time lost whilst the vessel was kept waiting at Buenos Aires.
Advise the parties.
Further reading
Schofield, J, Laytime and Demurrage, 4th ed, (London: Lloyd's of London, 2000).
Solvang, T, 'Laytime, demurrage and multiple charterparties' [2001] LMCLQ 285.
Todd, P, 'Start of laytime' [2002] JBL 217.
51 of 56 07/16/2016 10:29 AM
[1] The issue of freight is dealt with in depth in Chapter 8.

[2] https://www.bimco.org/
[3] Boxes 3-5 and 10-11.
[4] Discussed further in Chapter 7.4.
[5] Clause 4(b).
[6] Discussed in Chapter 8.
[7] UNCTAD, Charter Parties: A comparative analysis (report by the UNCTAD Secretariat, 1990, Geneva).
[8] [1959] 1 QB 498, ibid para 24.
[9] [1959] 1 QB 498 at 512.
[10] [1960] 2 QB 49.
[11] [1971] 2 QB 500.
[12] Ibid at 514.
[13]
[1987] 2 Lloyd's Rep 43.
[14] UNCTAD, Charter Parties: A comparative analysis (report by the UNCTAD Secretariat, 1990, Geneva), para 26.
[15]
[1962] 1 QB 42.
[16] Ibid at p 110.
[17]
[1971] 2 Lloyd's Rep 91.
[18] [1949] 2 All ER 1068.
[19] For a further discussion on safe ports see 7.2 below.
[20] [1998] 1 Lloyd's Rep 39.
52 of 56 07/16/2016 10:29 AM
[21] Ibid at 68.

[22] Behn v Burness (1863) 3 B & S 751.
[23] [1956] 2 Lloyd's Rep 367.
[24] [1971] 1 QB 164.
[25] [1971] 1 QB 164.
[26] [2009] EWCA Civ 425.
[27] (1876-77) LR 2 QBD 423.
[28] (1931) 39 Ll L R 205.
[29] Ibid, at 207.
[30] (1876-77) LR 2 QBD 423.
[31] [1963] 1 Lloyd's Rep 287.
[32] For further discussion see 7.14.
[33] Grant v Coverdale (1884) 9 App Cas 470.
[34] [1961] AC 135.
[35]
[1919] 2 KB 722.
[36] [1963] AC 691.
[37]
Universal Cargo Carriers v Citati [1957] 2 Lloyd's Rep 191.
[38] (1819) 2 B & A 421 KB.
[39]
[2001] 1 Lloyd's Rep 697.
[40] [1924] 2 KB 619.
[41] Reardon Smith Line Ltd v Ministry of Agriculture [1963] AC 691.
[42] Leonis Steamship Company Ltd v Rank Ltd [1908] 1 KB 499.
53 of 56 07/16/2016 10:29 AM
[43] [1961] AC 135.

[44] [1974] AC 479.
[45] Ibid, at 535.
[46] [1978] AC 1.
[47] Compania Naviera Termar v Tradax Export [1966] 1 Lloyd's Rep 566.
[48] [1957] 1 QB 109.
[49] [1964] 2 Lloyd's Rep 28.
[50] Ibid at 3334
[51] The Laura Prima [1982] 1 Lloyd's Rep 1.
[52] [1977] AC 157.
[53] [1989] 1 Lloyd's Rep 1.
[54] [1974] QB 264.
[55] Franco-British Steamship Co Ltd v Watson & Youell (1921) 9 Ll L Rep 282.
[56] Polcoalvoy 1971 (Rev 1976, 1997) The Baltic and International Maritime Conference Coal Voyage Charter.
[57]
[1990] 1 Lloyd's Rep 507.
[58] Ibid, at 510, 513.
[59]
[2002] EWCA Civ 1068.
[60] Ibid at paras 7785.
[61]
[1989] 1 Lloyd's Rep 603.
[62] [1917] 2 KB 204.
[63] SA v Agrimpex Hungarian Trading Co for Agricultural Products, The Aello [1961] AC 135.
[64] Good v Isaacs [1892] 2 QB 555.
54 of 56 07/16/2016 10:29 AM
[65] [1920] AC 239.

[66] Ibid, at 251.
[67] Raymond & Reid [1893] AC 22.
[68] [1963] AC 691.
[69] The Theraios [1971] 1 Lloyd's Rep 209.
[70] [1982] 2 Lloyd's Rep 511.
[71] Ibid, at 513.
[72] [1893] AC 22.
[73] Ibid, at 32.
[74] [1891] 1 QB 35.
[75] [1965] 1 QB 430.
[76] [1917] 1 KB 160.
[77] Unitramp SA v Garnac Grain Co Inc (The Hermine) [1979] 1 Lloyd's Rep 212.
[78] [1967] AC 361.
[79]
[1988] 2 Lloyd's Rep 101.
[80] [1957] 2 QB 401.
[81]
Ibid, at 430.
[82] The Themistocles (1949) 82 LI L R 232.
[83]
Houlder v GSN [1862] 3 F & F 170.
[84] Glyn, Mills & Co v East and West India Dock Co (1882) 7 App Cas 591.
[85] (1868) LR 3 CP 427.
[86] Ibid, at 437
55 of 56 07/16/2016 10:29 AM
[87] Sandeman v Tyzack [1913] AC 680.
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PLC - Chapter 5 - Voyage Charterparties http://uk.practicallaw.

Chapter 5 - Voyage Charterparties

Chapter 5 Voyage Charterparties

Standard form charterparties

Problems with Gencon standard form

Voyage to the port of loading

Expected readiness to load

The near clause

The arrived ship

Readiness to load or discharge

Notice of readiness to load

Actual readiness to load

1. What is the role of standard form contracts in voyage parties?

2. What are the various types of cargo clauses?

3. When will the ship be deemed an 'arrived' ship?

4. What is the effect of tendering a notice of readiness to load?

5. When will laytime begin to run?

6. What are the consequences of exceeding laytime?

Standard form charterparties

Gencon 1994 charterparty

Problems with Gencon standard form

to it which often have the effect of being poorly drafted.[14]

1. the preliminary voyage to the specified port of loading;

3. the carrying voyage to the port of discharge; and

4. the discharging operation.

Nomination of port of loading

Lord Denning MR:

Anglo-Danubian Transport Co Ltd v Ministry of Food [1949] 2 All ER 1068

Diagram 5.1: Nomination of port of loading

Voyage to the port of loading

Evera SA Commercial v North Shipping Co Ltd [1956] 2 Lloyd's Rep 367

Expected readiness to load

Lord Denning MR:

charterers would have committed no breach, not even in reduction of damages.

by the cancelling date.

that obligation a pre-condition of the right to cancel?

Diagram 5.2: Voyage to port of loading

The near clause

Metcalfe v Britannia Ironworks (1876-77) LR 2 QBD 423

The arrived ship

Lord Reid stated:

laytime anyway; it is laytime.'

Readiness to load or discharge

Lord Denning MR:

Notice of readiness to load

Actual readiness to load

which the charterers could not have overcome by reasonable diligence'.[66]

'Day: A continuous period of 24 hours which runs from midnight to midnight.

in interpreting the loading clause:

Damages for detention

Diagram 5.3: Sums payable in voyage charter

The master tendered NOR at 0800 on 16 June.

Advise the parties.

Solvang, T, 'Laytime, demurrage and multiple charterparties' [2001] LMCLQ 285.

Todd, P, 'Start of laytime' [2002] JBL 217.

[1] The issue of freight is dealt with in depth in Chapter 8.

[21] Ibid at 68.

[43] [1961] AC 135.

[65] [1920] AC 239.

[87] Sandeman v Tyzack [1913] AC 680.

Resource ID: C-000-2800

Supply of Goods and Services (http://uk.practicallaw.com/topic0-103-1128)

Commercial Agency Agreements Law and Practice, 3rd Edition (http://uk.practicallaw.comtopicB-000-0003)