Drafting is better than disputing
Posted on 19th March 2018 at 16:44
London Arbitration 27/17 [(2017) 987 LMLN 4] is a straightforward time calculation amid a routine shortlanding claim. It is also an illustration of the meshed trinity of charter party, bill of lading and sales contract, with demurrage often a common thread.
The vessel was fixed on an amended Synacomex form to lift bulk wheat in Ukraine for carriage to Egypt. Having stipulated certified sealing and later verified unsealing of the holds, the key recap provision said that Owners were “not responsible” for cargo shortage “obtained by means of shore scale at [the] discharging port” if the seals were there found intact, which they were.
Charterers were also sellers - so their carriage contract with Owners might have been just the charter party, and not also the bill of lading - under a trade contract containing the familiar term making weight final as per the (sellers’) loadport survey certificate.
Laytime at both loadport (Berdyansk) and disport (Alexandria) was precisely 5 days : 17 hours : 19 minutes, and demurrage was $4,800 PDPR. Loading took 2 days : 15 hours : 30 minutes, hence a saving of 3 days : 1 hour : 49 minutes, but Owners reckoned discharge at 20 days : 2 hours and so calculated 14 days : 8 hours : 41 minutes and claimed $68,936.67 gross demurrage.
The Egyptian receivers alleged a shortage, according to the shore scales, and detained the vessel. Owners settled this at $32,338.25, promptly enough to allow sailing just 10 hours after completion of discharge, and thus (including their demurrage claim) sought over $101,000 in arbitration.
NOR had been validly tendered and there was no relevant provision stopping time running or otherwise disallowing or discounting demurrage, which therefore accrued in the normal way. Though technically the short period after discharge was detention that made no difference, and as often the demurrage rate applied.
Furthermore, Charterers could not offset the time saved at the loadport, as laytime was nonreversible and a provision for free despatch, both ends meant that they derived no credit from that. Loadport and disport demurrage had to be calculated separately and could not be aggregated.
The Tribunal found that the shortage claim was a paper discrepancy and due to measurement error at the disport - hence presumably “by means of shore scale” there.
Since the seals had been properly applied and were found intact, as between themselves and Charterers, Owners were “not responsible” for the receivers’ claim. The Tribunal ruled that, while that provision might not mean that Owners were obliged to address any such claim, Charterers were bound to indemnify Owners for any reasonable settlement.
Owners’ agreement to $32,338.25 was reasonable because (a) the receivers’ claim was probably brought under the bill of lading, and certainly not under the sales contract, so the term for loadport weight finality did not apply and (b) the only alternative would have been to secure and later contest the claim in Alexandria, which would have caused much more delay and resulted only in additional cost, as the Egyptian receivers would almost certainly have succeeded.
This decision highlights several things:
First, while it will always be a matter for negotiation according to particular need and the wider market, where they might expect difficulty at loadport or disport but comparative ease with the other call, Charterers should either seek specific laytime for each or make savings transferable in some way. Here that would have reduced the claim by nearly $15,000.
Second, though it might have been better worded, by their provision addressing shortages due to disport shore scale issues the parties had plainly contemplated that. However, in (perhaps deliberately) only excluding Owners from liability they did not state which party was responsible for handling such a claim, or what any time consequence would be.
For this purpose the relevant period was short, being confined to the 10 hours after completion of discharge, as until then the receivers’ claim was not known and demurrage ran anyway. The aggregate here was small, but it could have been much larger with a greater rate, and especially if Owners had taken a different view and called on Charterers to address the problem, resulting in delay while that issue was argued and resolved.
Third, a demurrage claim can soon build, especially in locations where delay is commonplace and anticipated difficulties can often materialise. Where, in particular, the parties have tackled the issues to some extent, it will often be preferable to think the whole matter through and expressly label liability for something arising, responsibility for handling it if it does, and who shall bear the time consequence and in what circumstances.
Precise clausing on such matters can prevent disputes arising or worsening, and might also enable Charterers to dovetail suitable recourse within their related trade contract.
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