Mississippi Mixture - London Arbitration 13/19
Posted on 4th November 2019 at 09:44
With a premature and otherwise invalid NOR, failure to re-tender, waiver, estoppel, cancellation, damages for repudiatory breach, force majeure, counterclaim for unclean holds and nearly US$ 2.8 million in dispute, London Arbitration 13/19 [(2019) 1031 LMLN 3] is a very striking Award.
The vessel was chartered out by disponent owners on an amended Norgrain 89 form for carriage of soya beans and meal from a Mississippi river terminal, with a laycan of 24 August to 2 September and on other terms that:
"4 ... [If NOR was not tendered and accepted before 2 September] ... charterers [could cancel] ..., but not later than one hour after ... tender of [NOR under] Clause 18.
18 (b) … If the vessel [cannot enter port limits due to berth or anchorage unavailability, NOR may be tendered] from ... outside ...
18 (e) … Unless ... Clause 18(b) [applies, NOR] ... shall be accompanied by [a] National Cargo Bureau ["NCB"] ... certificate of vessel’s readiness …
36. [No party shall] ... be responsible for loss or damage or delay to or failure to supply, load discharge or deliver cargo [due to] Act of God …
77. ... cargo holds ... to be clean [in all respects] ... to the satisfaction of shippers’ ... surveyor [failing which] ... Owners to arrange cleaning at their time and expenses. [NOR] to be considered not valid and Master to re-tender ... after Vessel passing inspection ... .”
The vessel tendered NOR from outside the port on 24 August, but the NCB surveyor later rejected the holds. He subsequently passed them, after which charterers’ agents sent the NCB certificate, NOR and dockage fee to the loading terminal.
On 30 August the vessel was driven aground by a hurricane. She was later refloated without damage, but on 4 September charterers said that (i) she was still not ready, even if a valid NOR had been tendered on 24 August (ii) the laycan had then expired and (iii) all cargo destined for loading had been water-damaged by the hurricane, so this was force majeure under Clause 36.
When on 4 October owners emailed a further copy of the original NOR, charterers sought “to cancel … as per contract and current law”. Owners countered that this was repudiatory breach - charterers were behaving as if they were no longer bound - and themselves adopted that and ended the fixture.
Owners redelivered the vessel to her registered owners, forfeiting US$217,134.10 for bunker ROB and claiming that sum together with US$372,746.61 demurrage and US$316,831.50 loss of profit on the voyage.
Charterers counterclaimed US$1,797,182.82 loss of profit and US$84,500 barge demurrage, saying that owners had breached Clause 77 by failing to present the vessel with clean holds.
The Tribunal ruled that:
1. The 24 August NOR was invalid (a) as premature, since a berth or anchorage had been available and (b) under Clause 77, for unclean holds; thus
2. The vessel should have re-tendered once the NCB had passed the holds, but it did not; however
3. The agents’ inclusion of the NOR with the documents submitted to the loading terminal was acceptance by charterers of the NOR, despite it being invalid;
4. Charterers’ agents had been silent when presented with that NOR, and had sent it to the loading terminal, so charterers had waived the requirement for a new NOR - effectively, they had said that that did not matter - and were estopped from asking for it i.e. it would be unfair to let them later demand a fresh NOR; therefore
5. Charterers had accepted that the original NOR was valid, at least from when their agents sent it to the terminal, and were therefore liable for demurrage and damages;
6. They could not use Clause 36, as the fixture did not refer to a specific cargo (which might have been water-damaged) and there was other cargo available; furthermore
7. As a general exceptions provision, Clause 36 lacked the clear words needed to make it also exclude demurrage; and lastly
8. Charterers’ counterclaim was dismissed, as Clause 77 stated what would follow from unclean holds - it did not entitle charterers to counterclaim.
(Charterers presumably also lost their counterclaim because they were the ones at fault, having wrongly sought to cancel after they had accepted the NOR, as in (3)-(5) above.)
Owners were awarded US$354,109.28 net demurrage and $59,190 in damages.
This Award again illustrates the large sums that can be at stake in contests concerning valid tender of NOR, and further highlights the importance of suitable re-tender.
If that does not happen, many months later owners might have to rely on what charterers or their agents did, on a Tribunal finding the key facts in their favour, and on themselves charting the unfamiliar waters of waiver, estoppel and acceptance by conduct.
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