This issue of Asdem’s News Update concentrates on a number of recent judgements from the High Court that relate to oil trading and shipping.
The High Court case of Bernuth Lines Ltd. v. High Seas Shipping Ltd. (The Eastern Navigator)[2006] 683 LMLN 1 has been particularly helpful in recognising that communication by email is essentially no different from mail, fax or telex. This case concerned the giving of notice of appointment of a sole arbitrator, but it could equally be applied to the sending of demurrage claims. If a specific method of communication has not been agreed in the charter party or sales contract, there is no reason why a claim with the necessary supporting documents cannot be sent by email. The only problem is establishing that the email has actually been received. This is why we would normally recommend that claims should be sent by courier.
The supplier under an FOB contract (with delivery defined by Incoterms 2000) has an obligation to complete the loading within the delivery period (often described as the shipment period). Conversely, the buyer has to ensure that his vessel arrives at the loading port in sufficient time to allow the cargo to be loaded before the end of the shipment period. The same provisions apply to a standard CIF contract, i.e. there are guaranteed loading dates, but no guaranteed arrival dates at the discharge port. However, a delivery or shipment period should not be confused with a “laycan”. In the High Court case of “The Azur Gas” (SHV Gas Supply and Trading SAS v. Naftomar Shipping and Trading Co. Ltd.) [2005] 680 LMLN 1, the CIF contract said “Laycan February 17-19 2003; consequently eta Gabes Feb 20 am, La Goulette Feb 19 pm”. The judge concluded that the contract did not contain a guaranteed loading period. “Laycan” was a charter party term that defined the period in which the ship had to arrive at the loadport. This was not the same as a shipment period. There was only an implied term that the seller would load the cargo within a reasonable time. The buyers had cancelled the contract (a) on the grounds that the sellers had failed to ship the cargo within the agreed period, or (b) on the basis that they had not shipped the cargo within a reasonable period, or (c) because the eta’s at the discharge ports had not been given reasonably or honestly. The judge dismissed the first two grounds, but agreed with (c). The eta’s at the discharge ports had not been given on a reasonable basis. If the sellers had made even rudimentary checks they would have ascertained that there was no prospect of the vessel berthing on arrival on 17 February. The sellers should have known that Melilli, the loadport, had been been closed for bad weather for three days and that this was a common occurrence in winter. The buyers had been entitled to terminate the contract.
The definitive answer to this question will have to wait until the Court of Appeal considers the High Court judgement of Judge Mackie QC. The case is Tidebrook Maritime Corporation v. Vitol SA. “The Front Commander”, [2006] 682 LMLN 1. The charter party was an amended Asbatankvoy with additional clauses, including the clause “The vessel shall not tender notice of readiness prior to the earliest layday date specified in this charter party and laytime shall not commence before 0600 local time on the earliest layday unless the charterer consents in writing.”
The charterers had emailed the owners confirming that the vessel should tender NOR on arrival at Escravos, the loadport. The vessel arrived and tendered NOR at 00.01 on 8 January. The vessel commenced loading at 16.48 on the same day. However, the laydays in the charter were 9-10 January. The judge held that the charterers had not consented in writing and their consent could not be implied. The charterers’ emails confirmed that they wanted the vessel to berth and commence loading early, but because the charterers had not specifically given their consent in writing, laytime did not commence until 0600 on the first day of laydays. According to one London law firm, Lawrence Graham, this judgement “flies in the face of commercial reality”. We therefore look forward to the Court of Appeal’s decision.
Sales contracts often state that the independent inspector’s determination of quality will be final and binding. However, this will not be the case if the inspector has used a wrong test method - the result will be a nullity. Furthermore, as the court held in AIC Limited v. ITS Testing Services (UK) Limited [2006] 1 Lloyd’s 1, an inspection company “was under a contractual duty to take reasonable care that any certificate it issued was accurate as to those matters on which it was instructed to report.” The judge found that the inspection company, by using the wrong test method, had been negligent in the initial analysis of the cargo and in issuing incorrect certificates of quality. In awarding damages to AIC, the judge defined in considerable detail the obligations of the independent inspector when issuing test certificates.