Time bar and other matters...
Posted on 21st March 2018 at 13:06
London Arbitration 3/18 [(2018) 995 LMLN 1] is a compact and varied package containing the notorious issue of a time bar, the familiar topics of repudiation, NOR validity and damages when a fixture is not performed, and a rare attempt to argue contract affirmation. It is unusual to find so much in one place.
A November 2012 voyage charterparty for a part cargo of about 2,000 tonnes of oil from Thailand to China included the Asbatankvoy laytime and demurrage terms and a wide choice of disport ranges with different freight rates. There was also by specific clause 7 a barring and waiving provision that protected Charterers “unless [they received] Owner’s claim ... in writing, together with all supporting documents … within 90 days after completion of discharge at last discharging port.”
The vessel arrived at the nominated loadport and tendered NOR which would ordinarily have started laytime (Asbatankvoy clause 6 - NOR + 6) at 00:25 hrs on 5 December. But no cargo appeared and on 19 December Charterers sought to cancel. On 20 December Owners accepted what Charterers had done as ending the fixture and reserved all their rights. In mitigation they secured a substitute lifting of 2,094.70 tonnes at $65/tonne, hence freight of $136,155.50.
In response to Owners’ claim for demurrage and damages Charterers raised a whole array of arguments. We summarise them, with the Tribunal’s decision and brief reasoning, as follows:
No claims were presented within the stipulated 90 days, so all were time-barred and waived.
This was rejected. Clause 7 presupposed that the fixture had been performed and there was in fact a (last) disport. There was no reason to imply a term that a notional discharge location and completion date should be used, or to apply this clause to the substitute lifting.
The Tribunal also contrasted the Hague/Hague-Visby time limitation for cargo claims, running from when the cargo was delivered or should have been, observing that if Charterers had wanted to cover a situation where there was no lifting they should have.
NOR invalid, because:
1. The vessel “could well have been” cleaning her tanks at the time - this speculation was rejected as vessel records showed cleaning as complete before tender;
2. Such was not recorded in the vessel’s log - rejected, as it was not the invariable practice to log NOR tender (on the available information it is anyway unclear what relevance this could have had);
3. The vessel could not carry the minimum cargo of 2,850 tonnes - rejected because (a) the stowplan showed enough capacity and (b) insufficiency would have given Charterers an action for damages but it had no effect on NOR validity.
Pausing here, we are not sure that 3(b) would always be right. For example, it is hard to see that a fully laden vessel could validly give notice that it is ready to carry more.
The polar opposite of acceptance of repudiation (i.e. treating the other side’s conduct as ending the contract and telling them so), affirmation is where someone might have done that but instead in effect says “look, regardless of what has gone before, I want this contract to continue.”
Sometimes defaulters argue that this happened. They try to say that the other party had agreed that the contract had not ended, but instead still existed, sometimes even going on to say that that same party was itself later in breach.
When responding to a charterer who is plainly not going to perform, owners should be careful and clear in their language, and offer no opportunity for this kind of legal judo. Here the Tribunal rejected everything relied on by Charterers as Owners’ supposed affirmation of the charterparty.
Owners’ claim for 12.6 days of demurrage at $11,500 PDPR therefore succeeded and they recovered $145,209.35.
Owners compared their substitute lifting to what they said would have happened if the first fixture had been performed, claiming a loss of ([A] $164,106.96 - [B] $136,155.50 =) $27,951.46.
However, where a defaulting party can perform a contract in several ways, the rule is to assume that he would have chosen the most advantageous one i.e. that which produces the lowest damages payment for him. Here Charterers had not finally exercised their option on disport ranges. Assuming the one that would have yielded the lowest freight produced a figure less than B above, i.e. less than what Owners achieved in mitigation. On this analysis they had suffered no loss so recovered nothing.
As already noted, affirmation is not generally argued, and the above are probably not routine challenges to NOR validity. The damages rule outlined plainly favours a defaulting party, but might meet successful challenge if perhaps a claimant could prove that later events showed that some other route would have been taken.
The core point though is on the time bar.
Provisions like clause 7 are very common. Owners should consider them carefully, mark countdown dates and swiftly obtain all required information and signatures and other validation. They should also see what might apply if the fixture is not performed, always seeking advice if uncertain.
If you would like to discuss any point or topic in this article please contact firstname.lastname@example.org.
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