We last commented in News Update No. 38 on the question of how to treat the time when vessels take on bunkers. Unfortunately, the number of disputes shows no sign of abating and as most charter party disputes are dealt with by arbitration, we are likely to have to wait a long time before we receive a definitive judgment from the courts. In the meantime, we do not believe that charterers can automatically rely on the High Court case of in The Stolt Spur [2001] to avoid paying for the time when a vessel takes on bunkers while waiting for a berth. After seeing a number of such disputes, we have reached some basic conclusions. Asdem's opinion is that if a vessel bunkers while waiting for a berth and no time is lost for the charterer, laytime/ demurrage will continue to run. This assumes that the vessel is waiting where ships of that type customarily wait and the vessel is held in a state of commercial readiness so that it could move to the berth whenever required to do so by the charterers. In such circumstances, unlike the Stolt Spur case, the vessel is continuing to follow the charterers' orders, i.e. to wait until called to the berth. If the owners can take advantage of the waiting period, they are entitled to do so in the same way as they could carry out routine maintenance, change the crew or take on stores.
If the vessel moved away from the customary anchorage or waiting place to take on bunkers, it would be the owners' obligation to show that the vessel was still an "arrived ship" and was continuing to maintain a state of commercial readiness. If it wasn't, owners risked being in breach of the "Reid Test" as propounded by Lord Reid in the House of Lord's case of The Johanna Oldendorff [1973] case: "Before a ship can be said to have arrived at a port she must, if she cannot proceed immediately to a berth, have reached a position within the port where she is at the immediate and effective disposition of the charterer. If she is at a place where waiting ships usually lie, she will be in such a position.... If the ship is waiting at some other place in the port then it will be for the owner to prove that she is as fully at the disposition of the charterer as she would have been if in the vicinity of the berth for loading or discharge."
Martin Stokes, Asdem's Senior Technical Consultant, appeared as an expert witness on behalf of Choil Trading in the recent High Court case of Choil Trading SA v. Sahara Energy Resources Ltd. [2010]. This was a quality dispute over the abnormally high amount of MTBE (650 to 2300 ppm) in a cargo of naphtha. The normal maximum MTBE contamination accepted in naphtha is 50 ppm. The sales contract specified the quality as "Naphtha of normal running production as produced by Port Harcourt Refining Company with following actual specifications as determined at loadport on the basis of samples drawn from shore tanks". Sahara Energy, the sellers, claimed that the naphtha was sold without any guarantee of quality and in accordance with an email which confirmed the sale was "as is". The judge agreed that the cargo was being sold to Choil in the state it was being provided to Sahara and accepted that cargoes of Nigerian naphtha were often sold "as is" without a warranty as to quality. However, this did not mean that there was absolutely no guarantee of quality whatsoever. Choil were obliged to accept a cargo which was "PHRC naphtha quality" but they were not obliged to accept a cargo which was heavily contaminated by MTBE, a substance which was not the result of naphtha production and was not normally present in Port Harcourt refinery's naphtha. Sahara were in breach of the implied condition that the naphtha would be of the normal running production from the refinery and of the implied term that it should be of satisfactory quality.
Article from Andrew Wilding, Managing Director, Asdem Asia Pte. Ltd.
Most tanker voyage charters have a clause that expressly states that the vessel must proceed "directly to the discharging port", "with all convenient despatch" or "with utmost despatch". Apart from such express clauses, English law also implies a term into all voyage charters that the vessel will commence and proceed upon its voyage with "reasonable despatch and without deviation". We have recently come across a number of cases where a vessel operating under a voyage charter has bunkered after completion of loading or stopped for bunkers on the voyage. This action has delayed the vessel's arrival at the discharge port and in some instances has caused charterers a loss of profit and exposed them to a claim for demurrage which cannot be recovered from their buyers.
We are not aware of any case law which directly supports charterers who wish to make claims for these losses. However, our view is that, in the absence of a clause permitting owners to take on bunkers en route, the vessel has to be fully bunkered, in advance, for the entirety of the chartered voyage because of the implied obligation of "reasonable despatch". Certainly, the express term "utmost dispatch" requires the vessel to take the route which is shortest and therefore quickest. In our opinion, this is inconsistent with and precludes the vessel taking on bunkers after completion of loading or stopping somewhere for bunkers. A vessel that does so is in breach of the express or implied obligation to take the quickest (safe) route.
Article from Andrew Wilding, Managing Director, Asdem Asia Pte Ltd.
In our experience delivery clauses in sales contracts are negotiated by the parties themselves and are often written into the contract without reference to a standard form of wording. As a consequence, a wide variety of delivery clauses are found in sales contracts and we are often asked to consider whether or not a delivery clause fixes the date of delivery, thereby making it a condition of the contract. Delivery dates are only conditions when the delivery clause unambiguously states the actual delivery date or provides a mechanism for clearly identifying or calculating the delivery date. It is only when the delivery date is fixed that the seller who fails to deliver by that date is in breach of his delivery obligations, entitling the buyer to reject the cargo and terminate the contract.
If words such as "expected ready to load", "on or about" or "consistent with loading on [date]" appear in the delivery clause, such a clause does not "fix" the delivery date with the necessary precision required to make it a condition of the contract. If the delivery date has not been fixed, the seller's obligation is to deliver the cargo within a reasonable time. A buyer who is not certain whether the delivery date has been fixed must act with caution. He may find himself facing a claim for damages from the seller if he refuses to accept delivery because he mistakenly believes that the delivery date was fixed in the contract.
The recent High Court case of Glencore Energy UK v. Transworld Oil [2010] related in part to the previous article. The court confirmed that under an FOB contract the seller was not entitled or obliged to deliver a cargo other than at the time specified in the contract. Additionally, the buyer was not entitled to call for or accept delivery outside the contractual delivery dates. In this case, while Glencore's vessel was waiting to load a cargo of Nigerian Ukpokiti crude purchased from Transworld, the crew of the tug which was going to assist in berthing was kidnapped. The ship had to sail without a cargo. Although the contract would normally have been considered at an end, the judge agreed with Glencore that there had been a subsequent oral agreement to maintain the contract with pricing based on the original delivery dates of 25-29 March 2008.
However, this cargo was never supplied and Transworld, who had denied there was ever an oral agreement, argued that in any event Glencore's claim was time barred under Article 33 of the 2008 version of Nigerian National Petroleum Corporation's GTC's. This contained a 14-day time bar for "Any existing claims, costs, expenses" etc. from "the expiration of the contract period or the early termination of this contract". There followed an argument over whether the 2007 GTC's that did not include Article 33 or the 2008 version which neither party had been aware of applied. In the event, the judge concluded that Glencore had complied with the time bar clause by giving notice in writing with supporting documentation within 14 days of early termination of the contract in May 2008. Glencore was entitled to the difference between the contract price and the value of the cargo at the time it ought to have been delivered, some USD 11 million. Interestingly, having accepted Transworld's breach as terminating the contract, Glencore was required to mitigate its losses by closing out the hedges which it had taken out. After taking the hedging in to account, Glencore's was entitled to USD 8,665,496.