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Common Tanker Charterparty Clauses: the law and how to navigate the issues
Peter Glover Senior Associate / Master Mariner 31 May 2013
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Common Tanker Charterparty Clauses: the law and how to navigate the issues
Outline of Presentation: Description of vessel Repudiation of charterpaty
It has been observed, perhaps somewhat cynically, that there is almost a "tradition" of those parties involved in a maritime collision giving flatly contradictory evidence on all material points. Port Kembla Coal Terminal Ltd v Braverus Maritime Inc. (2005) 140 FCR 445
Description of Vessel
Common for a description of the vessel to be found in introductory part ASBATANKVOY PART I A. Description and Position of Vessel: [ ] Deadweight: tons (2240 lbs.) Classed: [ ]
Loaded draft of Vessel on assigned summer freeboard ft. in. in salt water. Capacity for cargo: [ Coated: [ ] Yes [ ] No Coiled: [ ] Yes [ ] No Last two cargoes: [ Now: [ ] Expected Ready: [ ] ] ] tons (of 2240 lbs. each) [ ] % more or less, Vessel's option.
Description of Vessel
SHELLVOY 6 Part I (A) Description of vessel (I) Owners warrant that at the date hereof, and from the time when the obligation to proceed to the loadport(s) attaches, the vessel (i) Is classed (ii) (a) Has a deadweight of [ ] tonnes (100kg) on salt-water draft on assigned summer freeboard of [ ] m. and if applicable, (b) Has on board documentation showing the following additional drafts and deadweights (iii) Has capacity for cargo of [ ] m3
(iv) Is fully fitted with heating systems for all cargo tanks capable of maintaining cargo at a temperature of up to [ ] degrees Celcius and can accept a cargo temperature on loading of up to a maximum of [ (v) Has tanks coated as follows: [ ] ] degrees Celcius.
(vi) Is equipped with cranes/derricks capable of lifting to and supporting at the vessels port and starboard manifolds submarine hoses of up to [ ] tonnes (1000kg) in weight. (vii) Can discharge a full cargo (whether homogenous or multi grade) either within 24 hours, or can maintain a back pressure of 100 PSI at the vessels manifold and Owners warrant such minimum performance provided receiving facilities permit and subject always to the obligation of utmost despatch set out in Part II, clause 3 (1). The discharge warranty shall only be applicable provided the kinematic viscosity only exceeds 600 centistokes on part of the cargo or particular grade(s) then the discharge warranty shall continue to apply to all other cargo/grades.
Description of Vessel
General rule words in charter which describe the vessel or equipment are not representations but terms of the charter Question is the term a condition, warranty or intermediate term? condition gives rise to a right to terminate warranty gives rise to a right to damages intermediate term right to terminate if it is sufficiently serious, but otherwise damages
Hongkong Fir Shipping Co. Ltd. v Kawasaki Kisen Kaisha Ltd. [1961] 2 Lloyds Rep. 478
Pennsylvania Shipping Company v Compagnie Nationale de Navigation (1936) 55 Ll. L. Rep 271
Time charter for 12 months for tanker Vendemiaire Protracted negotiations Charterers asked Owners:
what was the diameter of the ships cargo lines and how many inches from her bottom the heater coils were placed?
Owners responded:
pipelines 350 millimeters intake; 300 millimeters outlet; heating coils fitted right at bottom of tanks.
These statements were embodied in the charterparty as guaranteed by Owners Owners also guaranteed Vendemiaire was in every way fitted to carry crude petroleum or molasses On inspection by Charterers Vendemiaire was not:
fitted with limber holes sufficient in number or size to prevent free flow of molasses to suction pipes not fitted with a sprinkler system (required for vessels transiting the Panama Canal) with gasoline cargoes not fitted with four master valves being required for the carriage of molasses cargo discharge pipes and pipelines were not satisfactory heating coils were not fitted right at the bottom of tanks, but on top of frames 12 inches from the bottom
Pennsylvania Shipping Company v Compagnie Nationale de Navigation (1936) 55 Ll. L. Rep 271
Held per Branson J.: I think that the word guarantee in 11 of the 52 clauses shows an intention to lay a special emphasis upon the obligations assumed under these clauses and to treat them as conditions of the contract as distinguished from mere warranties. (emphasis in underline) Emphasis on the word guarantee Charterers entitled under the charterparty to refuse Vendemiaire when tendered Pennsylvania Shipping Company Co authority that descriptive elements may be conditions However .
Reardon Smith Line v Hansen-Tangen (the Diana Prosperity) [1976] 2 Lloyds Rep. 60
To secure financing for new building of 88,000 ton Japanese motor tanker Vessel chartered before building work started Two charterparties on Shelltime 3 form Charterparties referred to vessel to be built at Osaka with yard or hull number 354 Vessel finally built at Oshima bearing yard or hull number Oshima 004 Physical attributes of vessel met those required under the respective charters Vessel delivered in 1974: market had collapsed due to oil crisis charterers sought to escape obligations by rejecting vessel vessel tendered did not correspond with the contractual description in that it was Oshima 004 and not Osaka 354 Charterers sought to argue that every aspect of the vessels description was a condition breach would entitle charterers to terminate the charterparty
Reardon Smith Line v Hansen-Tangen (the Diana Prosperity) [1976] 2 Lloyds Rep. 60
Per Lord Wilberforce Even if a strict and technical view must be taken as regards the description of unascertained future goods (e.g. commodities) as to which each detail of the description must be assumed to be vital, it may be, and in my opinion is, right to treat other contracts of sale of goods in a similar manner to other contracts generally so as to ask whether a particular item in a description constitutes a substantial ingredient of the identity of the thing sold, and only if it does to treat it as a condition. Endorsing approach in Cargo Ships El-Yam Ltd v Invotra [1958] 1 Lloyds Rep 39 and Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 Q.B. 26 in attending to the nature and gravity of a breach or departure rather than in accepting rigid categories which do or do not automatically give a right to rescind Look to the nature and gravity of a breach for remedy Casts doubt - but does not overrule - Pennsylvania Shipping Co v Compagnie Nationale de Navigation
Athenian Tankers Management S.A. v Pyrena Shipping Inc. (the Arianna) [1987] 2 Lloyds Rep. 376
Amended Esso time form Charterparty for 10 years 2 months more or less in charterers option Charterparty provided: Preamble:and equipped with Butterworth Tank Cleaning machinery, and fitted throughout in all cargo and bunker compartments with heating coils and Vessel is capable of heating cargo to a maximum temperature of 135oF and of maintaining such temperature throughout entire discharge, the Vessel being so constructed and equipped on delivery under this Charter
57A) The vessel to be employed in general product trading with all liquid cargoes that can safely be handled by product tankers and for which the ship is suitable according to tanks segregations
69) Owner to at all times maintain tank cleaning system in good order such that 6 machines can run simultaneously, at seawater temperature of 180oF at 170 PSI pressure.
Athenian Tankers Management S.A. v Pyrena Shipping Inc. (the Arianna) [1987] 2 Lloyds Rep. 376
Owners tendered delivery Charterers declined to accept on grounds vessel did not comply with certain charterparty provisions Arbitrators held re. tank cleaning system:
Taking all the above in to consideration, we consider that it was implicit in Clause 69 that the vessel was, at the date of delivery, capable of operating her tank cleaning system with all six Owners supplied tank cleaning machines (having a total capacity of about 150 m3/hour) running simultaneously at a seawater temperature of 180F (82oC) at 170 psi (12 kg/cm2) pressure when supplied with seawater at an inlet temperature of 15oC.
Athenian Tankers Management S.A. v Pyrena Shipping Inc. (the Arianna) [1987] 2 Lloyds Rep. 376
Held: a charterer who cancels on the ground that the ships gear is defective must (in the absence of express or implied provisions about the gear) show that the defects were such that the ship would probably be unready when the time came to play her part in the agreed method of loading, if any, or in giving the necessary co-operation in any reasonable method that might be employed. Case did not disclose sufficient evidence or unreadiness in this sense imports a temporal connection Charterer was not entitled to cancel the charterparty Considered Pennsylvania Shipping Company v Compagnie Nationale de Navigation It must be remembered that this is a forfeiture clause and so not to be applied lightly. It would be a misfortune, I think, if defects of no real significance in the adventure were to be used as a means of throwing up a charter at the last moment.
Description of Vessel
Practical tips: Description of vessel may not be restricted to preamble by way of additional terms; by way of reference SIRE Term(s) may be (i) conditions; (ii) warranties or (iii) intermediate terms Ask what was intended by the use of the term(s)? Look to language of the charterparty Not necessarily bound by the four corners of the contract No contracts are made in a vacuum : there is always a setting in which they have to be placed. The nature of what is legitimate to have regard to is usually described as the surrounding circumstances but this phrase is imprecise : it can be illustrated but hardly defined. In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating. The Diana Prosperity [1976] 1 W.L.R. 989, 995-6
SHELLTIME 4
4. (a) Owners agree to let and Charterers agree to hire the vessel for a period of [ ] plus or minus [ ] days in Charterers
option, commencing from the time and date of delivery of the vessel, for the purpose of carrying all lawful merchandise (subject always to Clause 28) including in particular;
Crude / Clean Petroleum Products (CPP) / Veg oils / Palms oils and IMO2/3 chemicals per vessels certificate of fitness, including DPP. Cargoes to be accordance with Vessels class, flag state, coating manufacturers resistance list and not harmful to vessels tanks, coating, lines and valves, maximum eight (8) grade segregation within Vessels natural segregation. Within British IWL excluding any areas and /or countries sanctioned, banned or boycotted by the UN and/or US and/or EU and or other countries prohibited by Vessels flag state.
Torvald Klaveness A/S v Arni Maritime Corporation (The Gregos) [1995] 1 Lloyds Rep. 1 charterers originally gave a valid legitimate last voyage prior to completion of present voyage the legitimate last voyage became unworkable charterers insisted the orders were legitimate owners contended: unless legitimate orders were given they would treat charterers as being in repudiatory breach of the charter and withdraw the vessel vessel delivered 8 days late
Isabella Shipowner SA v Shagang Shipping Co Ltd (The Aquafaith) [2012] EWHC 1077 (Comm)
Charterparty on NYPE terms Duration of 59 61 months Express warranty: that the vessel will not be re-delivered before the minimum period of 59 months. Admitted anticipatory breach, charterers stated that they would re-deliver the vessel early Charterers made it plain that they had no further use for the vessel for the balance of the minimum period of charter Owners commenced arbitration seeking: a partial final award that owners were entitled to refuse such re-delivery (as they had done); to affirm the charterparty; and hold charterers liable for hire for the balance of the minimum period Arbitrator held: owners were required to take re-delivery of the vessel; trade the vessel on the spot market by way of mitigation claim damages in respect of their loss
The Aquafaith [2012] EWHC 1077 (Comm) Reformulation of the test for repudiation as set out in Aquafaith
decision of the shipowner need be "beyond the pale" or "perverse" before can be said to have no legitimate interest in maintaining the charterparty evidential bar has been raised for charterers seeking to avoid the bargain agreed owners arguably in a stronger position in difficult tanker trading market may have wider contract law implications
Common Tanker Charterparty Clauses: the law and how to navigate the issues
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