You are on page 1of 30

GENERAL AVERAGE

Prepared by: Ms. Norazimah Mazlan

MRI 2310: Elements of Maritime Law

INTRODUCTION
An ancient concept over 2500 years old and
historically used in a variety of contexts.
Now applied solely to the transport of goods by
ship
Rhodian law if in order to lighten a ship
merchandise has been thrown overboard, that
which has been given for all should be replaced
by the contribution of all; retained in other
major legal systems

The claim for G.A arises where a part of cargo or a ship


is destroyed in order to rescue the remainder from some
impending peril.
Without the need to show liability in tort/contract, the loss
can be rateably spread among the parties participating in
the marine adventure during which the loss occurred.
The task of determining what expenses shall be
acceptable under the G.A and the amount to be borne by
each party is carried out by average adjuster.
The task can be extremely complex in the case of a
general cargo carrier with many hundred different cargo
owners involved.

Three main types of losses involved in GA:

vessel
cargo
freight.

EXAMPLE OF SITUATION

If As cargo has to be jettisoned to prevent the ship from


sinking with the loss of both the ship and the other
cargo, the value of As cargo will be apportioned among
all of the other cargo owners and the ship in accordance
with the value of their respective interests.

THE LEGAL POSITION


At Common Law, rights to G.A are regulated by the law of
the port of discharge at which common adventure
terminates.
But, if the voyage has been broken up at an intermediate
port, the adjustment must be drawn up in accordance with
the law of that port.
However, in most cases, G.A. is governed by express
provision in bills of lading or charterparties, which will usually
incorporate York Antwerp Rules.

YORK ANTWERP RULES (YAR)


The YAR contains a standard set of rules relating to the
procedure for adjusting G.A.
YAR does not have the status of an international
convention. They take effect only by being incorporated
into contracts of affreightment.
The YAR have been updated and amended in 1974,
1994, and 2004. Once it is updated , it does not mean
that the previous versions are extinguished.
The latest rules -YAR 2004
Commonly used- YAR1994

The rules consists of:


o seven lettered rules (A to G) which establish
principles and
o 22 numbered rules (I to XXII) which detail with
particular instances of GA.

**The numbered rules must override the lettered ones


in case of any inconsistency between them.

DEFINITION OF G.A. IN YAR


RULE A YAR :
There is a general average act when, and only when,
any extraordinary sacrifice or expenditure is
intentionally and reasonably made or incurred for the
common safety for the purpose of preserving from peril
the property involved in a common maritime adventure.

Burden of Proof (Rule E)

The party claiming in G.A have to prove that both the G.A
act and the amount of any allowance are reasonable.

ELEMENTS OF G.A.
In order to give rise to a claim for G.A contribution, all
elements of G.A. need to be fulfilled.
If any of the elements is not fulfilled, there is NO
right to contribution from the other interests.

1. There must be an extraordinary sacrifice or


expenditure.
2. The loss is intentionally / voluntarily and
reasonably incurred.
3. It arises in a time of peril.
4. The loss is made for the common safety of the
voyage.

1. THERE MUST BE AN EXTRAORDINARY


SACRIFICE OR EXPENDITURE.
Losses must be extraordinary in the sense that it
is not ordinarily expected of the shipowner to incur.

GeneralAverage

EXTRAORDINARY SACRIFICE

Kemp v. Halliday (1865) 6 B&S 723, 746.


Lord Blackburn: so long as the expenditure by
the shipowner is merely such as he would incur in
the fulfilment of his overriding duty as shipowner,
it cannot be general average

EXAMPLES OF EXTRAORDINARY SACRIFICE:


1. BY SHIP/PART OF HER EQUIPMENTS

. Using a sail to stop a leak


. Covering up a hatch broken by shipping a sea in storm.
. Damage to main engines in order to re-float a laden
vessel which is aground and in position of danger.
. Parts of the ships equipment used as fuel to maintain
the constant working of pumps due to a leak.
. Scuttling of a vessel in order to admit water to extinguish
fire.

2. BY CARGO
Jettison (e. throwing overboard of cargo or part of it in
order to lighten the ship and keep her afloat).
jettison of deck cargo will give rise to GA with a
condition that it is carried in accordance with a
recognised custom of the trade/with the agreement of
all interests in the voyage).
E.g it is the custom of timber trade to carry the cargo
on deck.
Burning of cargo as fuel when the coal supply has run
short (provided that the original supply was sufficient).
Damage / loss of cargo during operations to extinguish a
fire on board.

3. BY FREIGHT

Freight will be sacrificed when it is payable on delivery of


cargo that is itself sacrificed or that sustains such damage
that it cannot be carried to its destination.
If the freight is payable in advance, it does not depend on
the safe arrival of the goods and a claim to G.A cannot
arise.

EXAMPLES OF EXTRAORDINARY EXPENSES


Salvage
Payment made to salvors engaged by the shipowner when the
safety of the whole adventure is imperilled.
YAR 1974 Rule VI- salvage expenditure is allowed under
GA provided that the salvage operations were carried out for
the common maritime adventure.
YAR 1994 - salvage expenditure is NOT allowed under GA
YAR 2004 - salvage expenditure is allowed under GA
Port of refuge costs.
Incurred when a vessel is put into a port of refuge for the common
safety. The expenses include:
Inward & outward port charges
Pilotage
Harbour dues
Cost of unloading and warehousing cargo

2. THE LOSS IS INTENTIONALLY / VOLUNTARILY


AND REASONABLY INCURRED.
Extraordinary sacrifice and expenses will not constitute GA
unless they are made intentionally.
Rule Paramount in YAR 1994:
in no case shall there be any allowance for sacrifice or
expenditure unless reasonably made or incurred.
The intentional act must be done either with the masters
intention or his sanction/consent.
The sacrifice is voluntary even when it is made by order of port
authorities, the Master assenting if it was made for the benefit
of the ship and cargo.

The masters intentional act must be reasonable i.e.


done in the interests of all concerned in the voyage,
even though it is hazardous.
E.g.
The Seapool :
A ship at anchor was caught up in a sudden gale
and was at risk of losing her propellers and
breaking her back. The master engaged in a risky
manouevre to get her out to sea. Although he was
successful, he caused damage to the ship and the
pier. This losses are allowed in GA.

Example:
Fire occurred by accident and the use of water to
extinguish fire is an intentional act.
Therefore, water damage may be allowable in GA
but damage due to fire itself is not allowed in GA
and remains particular average. (Rule III)
Smoke damage is not allowable in GA as it is
impossible to distinguish between smoke damage
due to fire itself and smoke damage due to
application of water

3. IT ARISES IN A TIME OF PERIL.

The masters intentional act must be made at a time of


actual peril or real danger.
Danger must be substantial and threatening and
something more than the ordinary perils of the seas:
(Societe Novelle dArmement v. Spillers & Baker Ltd.)
If the master is mistaken as to the existence of a peril,
losses sustained in consequence of his actions is not
allowed under general average.

4. THE LOSS IS MADE FOR THE COMMON


SAFETY OF THE VOYAGE.

Expenses and sacrifices must be made for the


common safety of the adventure.
Once an interest (e.g. cargo) has been brought to
safety, it does not oblige to contribute for any
extraordinary expenditure or expenses incurred
afterwards.

GENERAL AVERAGE CONTRIBUTION

Where there is a general average loss, the party on


whom it falls is entitled to a rateable contribution from
the other parties interested.
Such contribution is called a general average
contribution.

The owner of jettisoned cargo will never receive


reimbursement in full, as the aim of GA is to spread the
loss equally among all interests.
E.g. The common adventure consists of ship, cargo A
and cargo B, all worth USD 300, 000 at the port of
discharge and cargo B is jettisoned.
Equal contribution means that each ship and cargo
contribute USD 100,000 to the loss. B will receive USD
200,000 and bear USD 100,000 of the sacrifice itself.

IF CARGO ISNT INSURED


Cargo will not be released until the shipper gives a guarantee.
The guarantee must be in the form of a cash deposit, bank
guarantee, or bond.

IF CARGO IS INSURED
The marine cargo insurer should be notified immediately.
The insurance company will give the G.A Bond.
**G. A Bond is a document whereby it is agreed that shipowner
delivers to the consignees their cargo, and the underwriter will pay
G.A contribution and will furnish the shipowner with full information
as to the value of the cargo so that G.A will be properly assessed.

REFERENCES

Baughen, S. (2012). Shipping Law. UK: Routledge.


Templemen, F. (2008). Marine Insurance: Its
Principles and Practice. UK: Qureshi Press.
n.a. (2012). Shipping Law. Institute of Chartered
Shipbrokers.