Transport
Abhinayan Basu
JASN06
International Law on Shipping and Trade
Lund University
September 2012
1
International sale involves several contracts
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Sale contract
Charterparty (C/P)
Bill of lading (B/L)
Letter of credit
2
Order of Existence of the Contracts
Once sale contract has been made a vessel has to be found.
Who finds the vessel?
Different types of sale:

CIF (cost, insurance, freight) 
C&F (cost and freight) 
FOB (free on board) -
seller
seller
buyer
Except in the case of small cargoes that can be shipped in
containers on a liner vessel, a charterparty is necessary. Usually
a charterparty is a contract for the use of a whole ship.
3
FOB
4
CIF
5
Order of Existence of the Contracts

A charterparty is a contract with the owner or
someone who assumes the responsibilities of the
owner,

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whereby the owner agrees to carry a cargo from A to B
(Voyage C/P), or
whereby he makes his vessel available for a certain
period of time (Time C/P)

to enable the carriage of the goods to be
performed.

Once the cargo has been shipped a bill of lading is
issued, usually by or on behalf of the master as
agent of the owner.
6
Types of charterparties

All C/Ps involve some degree of control by the owner. Taking
these in the order of least control to most control:
Demise Charter or Bareboat Charter

Not a contract of carriage but in reality a lease of a ship.
Charterer pays for:
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Crew
Fuel
Insurance
Repairs
The charterers’ only obligation is to redeliver the vessel at the end
of the C/P period. There is often a purchase option at the end.
Demise charters are rarely for less than a year; and can be as much
as 20 years.
When demise charters are used:
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Requisition in time of war
Asset finance
Balance sheet considerations (up to seven years; used by oil
companies)
7
Types of charterparties

Time Charter
Contract with the owner to make his vessel available for a
certain period of time; e.g., 4 to 6 months
Charterer pays hire
Owner provides and pays for
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Charterer provides and pays for
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Crew
Insurance and other running costs
Fuel (except for domestic consumption)
Loading and discharging costs
Port charges
Pilotage
The charterer can, subject to any time charter limits, send
the vessel where he wants.
Accordingly there is always an employment and indemnity
clause
8
Types of charterparties

Voyage Charter
Contract with the owner to carry a cargo from A to B; e.g.,
“one safe port US Gulf to one safe port Amsterdam
Rotterdam Antwerp range”
Charterer pays freight
Owner provides and pays for

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Crew
Insurance and other running costs
Fuel
Port charges
Pilotage
Loading and discharging costs (maybe)
Charterer provides and pays for
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Loading and discharging costs (maybe)
Demurrage
9
Types of charterparties
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Hybrids
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Consecutive voyage charters
Contracts of affreightment
Trip time charters
Sub-charters

Person who assumes the role of owner
10
Formalities
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None needed
Negotiations always conducted over
telephone, by fax and/or email
If c/p signed at all it is signed invariably after
the event, to record an arrangement already
made
When agreement reached “recap” is sent e.g.,
“all other terms as per NYPE 93” or “all
other terms as per fixture of …..”
11
Potential problems

Has an agreement been reached?
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Courts will fill in gaps – implied terms – not rewrite
agreement between parties
Court will find no contract if matters purportedly agreed
made the contract unworkable
Important matters remain to be agreed - no such thing in
English law as an agreement to agree
What are the terms of the agreement?
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No signed c/p – looking at the negotiations – fixture recaps
and telex exchanges
Signed c/p is conclusive – only look for implied terms
Who are the parties?
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Law of agency, bills of lading
12
Warranty
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True warranties (i.e. that only sound in damages) are
comparatively rare and are not found in
charterparties.
The use of the expression "warrant", e.g. where the
C/P says that the owners warrant a certain speed on a
certain consumption is therefore misleading.
(Warranties of this sort are invariably found in time
charters; almost never in voyage charters.)
In marine insurance contracts a warranty means
something entirely different. A breach of warranty
entitles the insurers to withdraw cover or it results in
the cover not applying in the first place.
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Condition

Any breach entitles the charterer to claim
damages and if he elects to do this to treat the
contract as discharged by repudiation
14
Innominate term
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Any breach entitles the charterer to damages. In addition he
may be entitled to treat the contract as discharged by
repudiation; but only if the breach is serious; so serious as to
substantially deprive the charterer of the benefit of the
contract.
In the case of a condition the remedy depends on the nature of
the term broken, whereas in the case of an innominate term the
remedy depends on the nature of the breach.
The modern tendency is to treat contractual terms as
innominate terms.
e.g. The Hong Kong Fir [1962] case which decided that the
seaworthiness obligation is not a condition but an innominate
term.
Similarly in sale of goods cases the tendency is to restrict rather
than expand the category of strict conditions. The Hansa Nord
[1976]
15
The Contract of Affreightment
 Common Law Principles of General
Application
 Obligations of the Carrier
 Seaworthiness
 Care for the Cargo
 No Deviation
 To Deliver Without Delay
 Obligation of the Cargo Owner
 Not to ship Dangerous Goods
 To pay agreed freight
16
Seaworthiness
 Suitable for the contract of carriage: hull,
machinery, all operational parts for particular
voyage – sea conditions, weather, etc.
 Cargo worthiness
 ISM Code
 Undertaking is absolute, but not condition or
warranty
 Depends on seriousness of breach
17
Care of Cargo
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Not an implied term
Arises independently of contract
Carrier bailee of cargo, tortious liability
In case of loss or damage, carrier’s liability determined
by specific contractual provisions (e.g. Art III, r 2 of the
HVR)
 Exemptions
 Act of God
 Queen’s Enemies
 Inherent Vice
 Insufficiency of Packing
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Deviation
 Justified if to save life/safety of ship/cargo
 Not to salvage property
 Scaramanga v. Stamp
 Deviation for repairs should be reasonable
 In the case of Burns v. Cassels, where the
distressed vessel could have put to a nearer port
for repairs, going to a farther port was held to be
a deviation
 Unauthorised transhipment has been held to be
deviation
 Hoskyn v. Silver Liner Ltd (Silvercypress)
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Deviation as a Condition
 Exception clauses do not apply to protect owner
in respect of events after the deviation.
 In J Thorley v. Orchis Steamship Ltd, cargo was
damaged through negligence during its
discharge, but the shipowner was not allowed to
shelter behind the exception clause covering the
incident, because the ship had abrogated the
carriage contract by a deviation earlier in the
voyage.
20
Aftermath of Deviation (Freight)
 Hain Steamship Co v Tate & Lyle Ltd [1936] 2 11 ER 597
(HL)
 Lord Atkin at p 602:
 “I venture to think that the truth is that the departure from
the voyage contracted to be made is a breach by the shipowner
of his contract, but a breach of such a serious character that
however slight the deviation, the other party to the contract is
entitled to treat it as going to the root of the contract and to
declare himself as no longer bound by any of its terms . . .”
 Supported by Lord Wilberforce in Photo Production
Ltd v Securicor Transport [1980] AC 827
21
Delay
 See Cargo Carriers Corp v Citati [1957] 2 QB 401 at 426
 Delvin J:
 “Where time is not of the essence of the contract – in other
words, when delay is only a breach of warranty – how long
must delay last before the aggrieved party is entitled to throw
up the contract? The theoretical answer is not in any doubt.
The aggrieved party is released from his obligations when the
delay becomes so long as to go to the root of the contract and
amount to a repudiation of it.”
 He adds;
 “There must be a delay so great as to frustrate its commercial
purposes”
22
Dangerous Goods
 Implied undertaking not to ship dangerous goods
without notice – strict liability
 Dangerous goods cover cargo with capacity to
endanger ship – eg, wet wheat or copper
concentrate, as in Health Steele Mines v. The Erwin
Schroder
23
Standard Forms
(Voyage)
 Salient Features:
 Identifies contracting parties, agreed voyage, vessel
etc.
 Expected time of arrival –

If fixed, then a condition
 Preliminary voyage must be prosecuted with due or
reasonable dispatch
 Flexibility clauses
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“On or about”
Cancellation clause by charterer
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Statement about Ship
 Found in the beginning of the c/p
 Modern tendency is to treat them as innominate
terms
 Tonnage, Carrying capacity, Dwt or cubic capacity
 Speed and consumption
 Ownership
 Flag and Nationality
 Class
 Name of vessel
 Present position
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Freight
 Freight must be earned – destination
 No freight payable when goods lost or destroyed
 Damaged cargo – full freight
 But in Asfar v Blundell,
 Dates – “pulpy and fermenting mass unfit for human
consumption”
 No set-off
 Advance Freight, irrecoverable in English law
 Dead Freight
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Freight
 When is freight payable?
 In advance – on signing of bills
 At destination or on delivery
 Application of lien
 Specification of currency
 Does freight include cost of loading and
discharging
 Handling charges at destination
27
Performance
 Preliminary voyage
 Loading operation and stowage
 The voyage itself
 The discharge operation
28
Voyage to Loading Port
 Specified in charter
 Charterer nominates
 “Or so near thereto as she may safely get”
 The rules are:
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The charterer need not consult the owner or his commercial convenience.
The charterer may delegate the nomination to the bill of lading holder or to a third party.
The charterer must nominate within a reasonable time
If the charterer does not nominate within a reasonable time he is liable in damages. The
owner cannot however take matters into his own hands and select the port himself.
Once the port has been selected and nominated the selection becomes an election. The
position is as if the nominated port had been written into the charter at the outset.
The only restriction is that the charterer cannot select and nominate in such a way as will
result on the c/p being frustrated. The charterer cannot nominate an "impossible" port.
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Voyage to Loading Port
 It is necessary to draw the distinction between impossibility at the time of
nomination and impossibility at the time of loading.
 at time of nomination: An impossible nomination is a bad nomination and
must be replaced by a good one.

The obligation to renominate depends on an implied term in the charter that the charterer
must not nominate in such a way as to deprive the owner of his right to earn freight
 Supervening impossibility
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loading – contract frustrated.
discharge – position probably the same. Any contract may be frustrated even if part
performed.
 In any event the c/p contains "so near thereto…”; also war, strikes and ice
clauses.
 Refusal to nominate a port amounts to a repudiatory breach, ditto inability
to nominate one. Similarly failure to nominate within a non-frustrating
period of delay
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Voyage to Loading Port
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Position of vessel to be specified
To proceed with reasonable dispatch or damages
Breach can lead to damages but not rescission
Cancelling clause - charterer can repudiate on said
date but no damages
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Safe ports
 Safety of vessel is paramount
 “Or so near thereto as she may safely get and be always
afloat”
 Degree of safety
 Sellers J in The Eastern City:
 “A port is safe if in the relevant period of time, the particular ship
can reach it, use it and return from it without, in the absence of
some abnormal occurrence, being exposed to danger which
cannot be avoided by good navigation and seamanship”
 When must a port be safe?
 The Evia
 At time of nomination, must be prospectively safe
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Laytime
 Need for specificity
 Not “as fast as can” or “according to custom of the
port”
 Loading rate may be given e.g., 3000 tonnes per
day
 Stipulation as to running days
 weather working days, holidays, etc.
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Commencement of Laytime
 Vessel must be “arrived ship”
 Vessel must in fact be ready to load
 NOR must have been given
 Laytime will not commence in the absence of a
valid NOR
 Notice is essential
 The Happy Day [2002] Lloyds Rep 487 – premature
NOR given for discharging but missed tide and could
only discharge the following day. Court of Appeal
invoked doctrine of waiver.
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Commencement of Laytime
 “If a charterer uses a vessel, known to be ready at the
time of use, which has been tendered to him by a valid
notice of readiness, or by an invalid notice whose
invalidity is known, he must expect time to run against
him subject to any express contrary agreement” – The
Front Commander [2006] 2 Lloyds Rep 251 at 259.
35
Port Limits
 Exercise of control
 Exceptions:
 Time lost in waiting for berth to count as loading or
discharging time
 “Whether in berth or not” (WIBON Clause) Only
where berth is not available, not unreacheable. Effect
of this clause is to convert a berth to a port
charterparty, Roskill LJ.
36
Laytime
 Demurrage – charterer exceeds allotted time
(recoverable without proof of loss)
 Once on demurrage always on demurrage
 Despatch – Charterer is well within allotted time
 Detention – Unliquidated damages to be paid by
charterer for delay due to documentation, e.g.
customs clearance
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Laytime
 Courts will not interfere with stipulations as to
laydays unless unconscionable
 Where no clause owner can recover
unliquidated damages - detention
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Beginning of Laytime
 Arrived ship
 Berth charterparty
 Vessel only becomes an arrived ship when it enters the
specified berth – The Mass Glory [2002] 2 Lloyds Rep 244
 Dock charterparty
 Only when it enters a specified dock – Thorman v. Dowgate Ss
& Co [1910] 1 KB 410
 Port charterparty
 Geographical
 Administrative
 Commercial
39
Port Charterparty
 The Johanna Oldendorff criticized the Aello
[1961] AC 135
 The commercial area was that part of a port
“where a ship can be loaded when a berth is
available albeit she cannot be loaded until a
berth is available”
40
Port Charterparty
 Vessel must be within geographical and legal
area
 Immediately and effectively at disposal of
charterer
 Must anchor at place where ships usually lie
while waiting for a berth
 The Johanna Oldendorff [1973] 2 2Lloyds rep
285, Maratha Envoy [1977] 2 All ER 849
41
Actual Readiness to Load
 Owner to comply with all requirements –
 Position
 Port health
 Documentation
 Charterer is entitled to all the holds free of
contamination
 Vessel not ready if discharge not complete
42
Availability of Cargo
 Charterer has to make cargo available – absolute
obligation
 Must meet cargo specification or owner can
rescind
 “Full and complete cargo”
43
Loading and Discharging Operations
 Terms of Operation
 Cargo to be brought alongside in reach of ship’s
tackle (Alongside Rule)
 FIO, FIOS, FIOST - Charterer’s liability
44
The Voyage
 Obligation of owner to proceed with reasonable
dispatch
 Terminates when vessel becomes an arrived ship
 Laytime begins to run again
45
Discharging Operation
 Discharge is joint operation
 Owner – from hold
 Charterer – alongside
 Subject to modification
 Owner to deliver per bill of lading to consignee
 Obligation of owner to deliver or store at
consignee’s expense
46
Failure to Receive
 After stated period owner can auction to recoup
freight or other charges
 Owner needs to be mindful of misdelivery
47