Defence Guides Disponent owners’ contractual risks in a nutshell
Disponent owners can often be lulled into a false sense of security by assuming that their contractual position is risk free on the basis that they can simply pass up or down any liability. We shall first look at the position when the disponent owner is time chartering in and out on the same terms and then the situation where the disponent owner is time chartering-in and voyage chartering-out.
Back to Back charter: Disponent Owners’ obligations throughout As a result, the disponent owner may owner’s risks when time chartering the CP: “That the owners shall be in breach of his delivery obligations in and out on the same terms provide and... maintain her class vis-à-vis the sub-charterer but and keep the vessel in a thoroughly may not have any recourse against Disponent owners often believe that their efficient state in hull, machinery the head owner as he will have to contractual position is risk free on the and equipment for and during the prove that head owners were in breach basis that they have entered into back service.” (Clause 1). of their due diligence obligation to to back charters. The presumption can maintain the cranes. The legal costs be misconceived as owner’s obligations Whilst owners’ obligation on delivery and risk of proving a breach of a due on delivery and during the course of the is a “strict” one, the responsibility to diligence obligation are also greater charter are not the same. The four most maintain the ship is a “due diligence” as a lot of evidence has common examples are with regards to obligation. to be considered. cranes, speed and consumption, hull This means that unlike the situation fouling and hold cleaning. One way of avoiding such a situation when the cranes breakdown during is to incorporate a clause paramount the course of the charter, charterers Cranes in the sub-charter which renders the do not have to prove fault or lack of strict obligation to deliver the ship In the NYPE 1946 charter for example, maintenance if the ship’s cranes do not in a seaworthy condition into a due there are two different sets of work on delivery. All that needs to diligence obligation. obligations. Namely these are: be demonstrated is that the crane(s) did not work on delivery. For more information, please read Owners’ obligations on delivery: “… WEST defence claims-guide: defence Vessel on her delivery to be ready clause paramount in a nutshell. to receive cargo with clean-swept holds and tight, staunch, strong and in every way fitted for the service…” (Line 22). Defence Guides
Speed and consumption Hull fouling Very often the charter will have a clause stipulating that the owners Unless the charter specifies that speed If fouling occurs during the currency are not responsible for intermediate and consumption is a “continuing” of the charter this will invariably affect hold cleaning and that this will be warranty, this warranty only applies on the performance of the ship. Unless the for the charterer’s account and risk. delivery and not throughout the duration speed and consumption warranty is Even in the event that such a clause of the charter. The disponent owner continuous, disponent owners will not is not present in the charter, owners could therefore find himself in a position be able to make an under-performance only have an obligation to maintain where after a period of time, the ship he claim as the warranties are only given on and render customary assistance. has chartered-in, does not perform as delivery whereas the fouling occurred as Owners are responsible for exercising well as it did on delivery. a result of a natural consequence of the due diligence to clean the ship with service of the ship during the charter. If the description of the ship in the sub- reasonable care, skill and speed. However, if, by the time the ship enters charter is not changed to reflect the loss The crew are not regarded as skilled into service of the sub-charterers, the of performance, then disponent owners cleaning operatives and, therefore, hull is already fouled and this affects the may find themselves in breach of the there is a limit on what cleaning can ship’s performance, then sub-charterers warranty towards their sub-charterers reasonably be done whilst at sea. will be able to put the ship off hire for but with no real recourse against the (More details can be found in WEST any time lost as it will be considered owners (unless the disponent owner defence claims guides: hold cleaning a “defect to the hull” (The “Ioanna” can prove a breach of owners’ in a nutshell.) [1985]). obligation to maintain). As a result, a situation can easily If possible, it is therefore recommended Hold cleaning arise when disponent owners are in for disponent owners to either request breach of delivering holds in breach of Charterparties will generally state that that warranty in the head charter is a contract but being unable to pass on the vessel will have to be delivered continuous one, or to state that the the liability to owners. with holds cleaned up to a certain performance figures in the sub-charter standard (e.g. “grain clean”). Attention should therefore be paid to are “without guarantee”. If this is not Failure to deliver the ship to the what hold condition is warranted on possible then, the performance of the specified standard will render delivery to the sub-charterers, the ship should be reviewed before entering the owner in breach of contract. previous cargo (whether it is dirty), the into the sub-charter in order cargo to be loaded in particular if it to accurately describe the ship. However, this standard of hold requires a high standard of cleanliness cleanliness only applies when the and whether it is feasible to clean the ship has been delivered and does not holds in time. apply during the course of the charter (intermediate hold cleaning). Defence Guides
Risks relating to disponent owner time chartering-in and voyage chartering-out
When a disponent owner charters in on a time charter and charters out on a voyage charter, disponent owners can find themselves at greater risk of not being able to pass on risks and liabilities up and down the chain.
Loss of time
The most obvious situation where A further example can be found where The laytime provisions may state that disponent owners will not be able the voyage charter will have a clause if the ship arrives after the cancelling to pass on the loss of time to head for breakdown of the cranes whereby date, the laytime will only start upon owners is when time lost is not a laytime will be adjusted pro-rate to loading and the terminal has discretion Weather Working Day or the sub- the number of working cranes whether as to when the ship may berth. If these charter is a berth charter in which or not time is actually lost. Although terms are not incorporated into the case congestion is for disponent this is an easy system to calculate head charter then the loss of time owner’s account. time lost, this is not the way off hire is will fall on the disponent owner with calculated in most time charterparties probably no recourse again the head A time charterer may also find that where the ship will be off hire for the owner, unless the delay was due the voyage has been naturally delayed time actually lost. to a breach of the charter. without fault or an off-hire event, will still have to pay hire but will still Another clause which will rarely exist Force majeure clauses collect the same freight. in time charters is the “strike clause”, which amongst other things suspends Unlike time charters, most voyage laytime. Lastly, voyage charters can charters will include a “force majeure” be found to incorporate the terminal’s clause where charterers will be laytime provisions. excused from performing the charter due to the occurrence of an event which is external, unpredictable and irresistible. As a result, disponent owners will have no recourse against owners under a time charter for the losses suffered due to the force majeure event. Defence Guides
Specific port requirements Very often a voyage charter will not About the Author include an ICA clause. This makes Some ports will request specific it harder for disponent owners to certificates or equipment. With bring an indemnity claim against their regards to certificates, a ship only charterers, even though they may bear has to possess documents which are a significant liability under the ICA customarily required, or which may be regime. In effect, under clause required by the law of the vessel’s flag 8 c) and d), head owners can claim or law and regulation of the port of call. an indemnity of 50% of the cargo However, under a time charter the ship claim if it was for shortage, over can be traded to a wide range of ports Julien Rabeaux carriage or any other cause (other than Claims Team Manager and owners are not required to have seaworthiness or loading, stowing certificates which are only particular T +65 6416 4894 and discharging). to a certain port. A particular port E [email protected] If the voyage charter does not have may insist for example that the ship an ICA clause, it may be very difficult have lines which are longer than what Julien is a Claims Team Leader in West for disponent owners to pass on this of England’s Singapore Office. He is customarily necessary, resulting in liability to their charterers. Even if studied law in France and England and disponent owners having to bear the the sub-charter does include an ICA subsequently qualified as a solicitor in cost of renting additional lines. a London shipping law firm. Julien was clause, disponent owners may only be based in West of England’s Hong Kong able to claim 50% of their own liability Other clauses Office for 5 years, before moving to towards head owners. Singapore when the Club launched its Some voyage charters will not include office there. Prior to joining the Club, Another example of potential a clause paramount, making the Julien worked for another IG Club in exposure relates to stevedore damage, London for 7 years. seaworthiness obligation absolute as whereby many voyage charters will opposed to a due diligence obligation. state that charterers will not be liable Get in touch (More details can be found in WEST in case of damage to the ship due to West of England Insurance Services defence claims guides: clause (Luxembourg) S.A. stevedores. paramount in a nutshell.) Singapore Office As a result, if the head charter contains 77 Robinson Road such a clause, disponent owners may May 2018 Level 15-01, Robinson 77 Singapore 068896 not have a recourse against owners if This article was written by Julien they exercised due diligence in making Rabeaux in the Singapore office with T +(65) 6403 3885 the ship seaworthy. additional input from Wikborg Rein. London Office One Creechurch Place Creechurch Lane London EC3A 5AF
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