FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE, MINING AND COMMODITIES TRANSPORT TECHNOLOGY AND INNOVATION PHARMACEUTICALS AND LIFE SCIENCES 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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FINANCIAL INSTITUTIONSENERGYINFRASTRUCTURE, MINING AND COMMODITIESTRANSPORTTECHNOLOGY AND INNOVATIONPHARMACEUTICALS AND LIFE SCIENCES
Common Tanker Charterparty Clauses:the law and how to navigate the issuesPeter GloverSenior Associate / Master Mariner31 May 2013
FINANCIAL INSTITUTIONSENERGYINFRASTRUCTURE, MINING AND COMMODITIESTRANSPORTTECHNOLOGY AND INNOVATIONPHARMACEUTICALS AND LIFE SCIENCES
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: [ ] tons (of 2240 lbs. each) [ ] % more or less, Vessel's option.
Coated: [ ] Yes [ ] No
Coiled: [ ] Yes [ ] No Last two cargoes: [ ]
Now: [ ] Expected Ready: [ ]
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 [ ] degrees Celcius.
(v) Has tanks coated as follows: [ ]
(vi) Is equipped with cranes/derricks capable of lifting to and supporting at the vessel’s 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 vessel’s 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 Lloyd’s 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 ship’s 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 Lloyd’s 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 vessel’s description was a “condition”
– breach would entitle charterers to terminate the charterparty
Reardon Smith Line v Hansen-Tangen (the “Diana Prosperity”) [1976] 2 Lloyd’s 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 Lloyd’s 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