We have been involved with several disputes involving the rejection of demurrage claims on the grounds that the cargo was delivered late. We believe that under English law, if a vessel arrives after the contractual delivery range there has been a fundamental breach of a condition of the contract. The buyer can decide to accept the cargo or he can cancel the contract and sue for damages. Alternatively, the buyer can offer to accept the cargo on revised terms, e.g. with laytime commencing on berthing. The seller then has the choice of delivering under the revised terms or of being in default of the original contract. If the seller declines the revised terms, the buyer may sue for any damages arising from the failure to supply in accordance with the original contract. However, the buyer cannot claim, after the cargo has been delivered, that laytime will only run from the time of berthing when there is no contractual basis for it. If there has been no agreement to vary the terms of the original contract and the cargo has been delivered, the buyer, by remaining silent, has effectively waived the original delivery range. Furthermore, in our experience there is no custom of the trade that laytime automatically starts on berthing when a cargo arrives after the delivery dates. Incidentally, customs of the trade are notoriously difficult to prove in court. It only requires one or two expert witnesses to disagree and any such contentions are quickly discredited.
There are only a few books on demurrage and none of the existing ones has addressed the specific problems of the oil industry. "Laytime and Demurrage in the Oil Industry" by Malcolm Edkins and Ray Dunkley intends to fill this gap and to do so from a practical viewpoint. It gives advice on how to handle claims and highlights the pitfalls in laytime calculations. The book should be available in February from Lloyds of London Press.
We are pressing ahead with our follow up to the issues that came out of the pumping debate at the last Demurrage Conference. The intention is to establish a set of acceptable industry working practices. Some technical information worth considering is known as the "empirical pumping formulae" or "affinity laws". These can be used to determine the flow rates that may be achieved at different back pressures. The logic is that the discharge pressure, H, for a given system varies proportionally to the square of the flow rate, Q. The formula is: H 8 Q². This can best be explained by an example. If the bulk pumping rate is 500 mt/hour at 6 Kg/cm², the rate at 7 Kg/cm² can be calculated as: 500 x v7.0 / 6.0 = 540 mt/hour. We understand that this formula is reasonably accurate so long as the differences in flow rate are not very great, and provided an increase in back pressure does not result in significant vaporisation in the suction lines to the pump. Vaporisation, commonly known as "gassing up" or "cavitation", is another of the technical issues we want to address. After reaching a certain back pressure, any further increase in pump speed will not result in an increase in the flow rate. This phenomenon is related to the viscosity, volatility and temperature of the product and also to the head of product above the pump.
We have encountered an increasing number of disputes over what constitutes a fully- documented claim.
These arguments can be particularly awkward when the sales contracts stipulate that only demurrage "claimed by the ship owner" is recoverable. It is difficult to establish general rules as the details of such clauses vary widely, e.g. some say "paid to the ship owner" or "due to the ship owner". The simplest advice must be to ensure that a list of the documents required to support a claim is always included in the sales contract itself. Failing this, the normal rule is that the recipient of the claim is entitled to receive adequate supporting documentation to allow him to verify it. However, does this mean that evidence of the amount invoiced by, agreed with or paid to the ship owner must be included with the other supporting documents in order to avoid falling foul of a contractual time bar? Our feeling is that the onus will be on the party wanting to rely on a time bar clause to show that this was the clear intention of both parties. There is, for example, no guarantee that a claim will be agreed, let alone paid to the ship owner, within 90 days. In such circumstances, it is unreasonable to attempt to time bar a claim on the grounds that proof of the amount paid to the owner has not been provided.