Article provided by Phil Stalley, Demurrage Consultant.
Am I becoming the Victor Meldrew of the demurrage industry? I found myself saying these infamous words a while ago when I was submitting a demurrage claim for one of my clients. The recipient of my claim was a large player in this industry and happily they confirmed they had received my claim by email. However they went on to say they cannot look at the claim until they have received the hard copy as required by the contract and implied my claim was not valid and would be time barred unless a hard copy had been submitted. Of course I had checked my contract and there had been a number of exchanges where my side had deleted the need for a hard copy and maintained this position but it struck me what a funny industry we are in.
The original clause required a hard copy but time and energy on both sides had been expended in the never ending exchange of emails and faxes that go on agreeing terms some time after the traders have struck the deal.
I then thought why would the recipient need a hard copy? If it had been required under the contract I would have printed it off and sent it by courier. Surely my recipients could have printed the documents at their end if they wanted to see what it looked like on paper. Perhaps they don't have a printer, or perhaps they do but can't afford to replace the ink cartridge. Anyway it made me think of all the time we waste in this industry on the trivia - they haven't even looked or commented on the merit of the claim yet and I'm already exasperated!
What do you think - is the counterparty right in demanding a hard copy and if so why? Do you agree with me and what else irritates you? Email your comments to me at phil.stalley@hubse.com. I am presenting a paper at the Asdem Demurrage Conference this year on "The Perfect Charter Party" and I will be giving you my opinion of a perfect time bar clause together with other clauses in the charter party.
Since oil companies are unwilling to issue long-term approvals for vessels, the concept that the vessel should be approved by several oil companies before a charterer will consider fixing it taxed the mind of Judge Mackie QC in the recent High Court case of Transpetrol Maritime Services Ltd. v. SJB (Marine Energy) BV [2011]. Nevertheless, he produced a very useful judgment on the subject. The charter party had included clause 18 of Vitol's standard chartering terms "Owners warrant that the vessel is approved by the following companies and will remain so throughout the duration of this charter party". The recap also stated that to the best of the owners' knowledge the vessel was approved by BP/ Exxon/ Lukoil/Statoil/MOH. The judge held that this was a guarantee despite the phrase "WOG" (without guarantee) being included elsewhere in the recap.
The judge considered "approved" meant that the vessel was accepted by the listed oil companies, though they might or might not actually approve it if the possibility to charter it arose. The approval letters issued by the oil companies were non-committing but these had to be in place throughout the charter. He added "At any time when offered to cargo buyers the vessel must not be in a state which to the knowledge of Owners would remove the comfort of the warranted approvals to the potential purchaser of the cargo. For example there will be a breach of the warranty if some event occurs which, to the knowledge of the Owners, would if known to the issuer of the approval letter, cause it to withdraw or cancel that approval. The fact that the commitment undertaken by the writers of the letters is so limited is, as I see it, beside the point."
Unfortunately for the owners a problem with the low suction sea-chest valve was discovered while the vessel was reloading at Antwerp. This was serious enough to cause the potential buyers of the cargo of Vacuum Gasoil in the USA to refuse to accept the ship. The charterers were left with no option but to discharge the cargo into storage and to sell it FOB. The judge assessed the charterers' loss of profit, payable by the owners, at USD 2.7 million. The charterers were counterclaiming against the owners' demurrage claim for USD 450,000. Various issues arose during the hearing concerning the demurrage claim which the judge was unable to deal with without further information from both sides. Rather than go to the expense of a second trial over about USD 150,000 of the demurrage claim which was in dispute, he referred the matter for determination by the Admiralty Registrar.
The anonymous case of X v. Y [2011] EWHC 152 (Comm) concerned a vessel chartered for three consecutive voyages on the Synacomex 2000 Continent grain charter party form. The time bar clause said that a claim would be barred unless the claimant's arbitrator had been appointed "within 12 months of final discharge or termination of this charter party". This was clearly a very ambiguous time bar which was almost guaranteed to lead to a dispute. The charterers considered that owners had commenced arbitration for demurrage incurred on the first voyage one year and fifteen days after completion of that voyage and therefore their claim was time barred. The owners, on the other hand, considered they had twelve months from termination of the charter party, which they took to be the final date for payment of freight for the third voyage. Alternatively, they had twelve months from the date of discharge of the third and final cargo. They were not out of time on either basis. The dispute initially went to arbitration where the arbitrator found in favour of the owners. The charterers appealed to the High Court where the judge was satisfied that the clause included two potential starting points for giving notice of arbitration proceedings. Firstly, the twelve months would run from the completion of the discharge of the cargo on the voyage in respect of which the claim arose. This had been established in previous cases such as The "Simonburn" [1973] 1 Lloyd's Rep 392. Alternatively, the twelve months would run from the termination of the charter party. The judge was satisfied that termination, if it had not occurred earlier, would take effect on the date when the last of the primary obligations under the c/p were due to be performed, not when they were actually performed. The owners' claim was not time barred because their notice of arbitration had been given within twelve months of the termination of the charter party. This was the date the final freight payment was due, 28 days after completion of the third discharge.
The M/T "Bunga Melati Dua", chartered by Masefield, an oil trading company, was carrying a cargo of biodiesel from Malaysia to Rotterdam when it was captured by Somali pirates in August 2008. The cargo was insured for USD 13 million under an all risk policy which did not exclude piracy or theft. The vessel was released at the end of September on payment by the vessel's owners of a ransom of USD 2 million. Unfortunately for Masefield the market for biodiesel had fallen considerably during the intervening period and the cargo was sold for USD 7.6 million less than its insured value.
Masefield had served a notice of abandonment on the insurers on 18 September and claimed that the cargo should be considered to be a constructive total loss as the cargo had not been recovered by that time. The judge in the High Court had disagreed so Masefield took their case to the Court of Appeal in Masefield AG v. Amlin Corporate Member Ltd. [2011] EWCA Civ 24.
The Court of Appeal confirmed the decision of the judge at first instance and gave the following reasons:
Oil trading companies routinely argue over the terms of their sales contracts long after the basic terms of deal have been agreed by the traders, sometimes after the cargo in question has been loaded or discharged. It is therefore worth looking at any new decisions which illustrate how judges may resolve such disputes. In GHSP Inc. v. AB Electronic Ltd. [2010] EWHC 1828 (Comm) the parties disagreed over whose terms should apply to their sales contract following an argument over a consignment of faulty electronic sensors.
The buyers had initially sent the sellers a purchase order which stated that the order was to be subject to the buyers' conditions. They repeated this when they asked for confirmation that the order was being shipped. The sellers eventually sent an acknowledgement of the order which referred to their own terms and conditions which were printed on the back of the acknowledgement.
The buyers argued that the sellers had accepted their order and their terms and knew these were a prerequisite for any contract between them. The sellers, on the other hand, said they had not accepted the order until they sent out their acknowledgement which referred to the inclusion of their own terms.
The judge did not believe the sellers' conduct had indicated they had accepted the buyers' terms. Similarly, the buyers had made clear they were placing an order based on their terms. The judge considered that there was therefore a clear lack of consensus. The sellers' acknowledgement might have been a counter-offer but if the offer was accepted it had been done so without the incorporation of the sellers' conditions. As a result, since neither the sellers' or buyers' terms had been agreed or accepted, neither party's would apply. There were therefore no express terms of the contract. Instead it would be governed by the implied terms of the Sale of Goods Act 1979, in particular clause 14(a) that the goods supplied under the contract were of satisfactory quality.