Download The Charterer`s Right to Order the Master

The Charterer’s Right to Order
the Master
Examensarbete i transporträtt, 20 poäng
Handledare: Docent Johan Schelin
Författare: Peter Alstergren
HT 2002
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Contents
Contents 3
Abbreviations 7
1. Introduction 9
1.1. Background 9
1.2. Purpose 9
1.3. Disposition 9
2. Method 11
2.1. General 11
2.2. The relevant legal sources 11
2.3. The Swedish maritime code 12
2.3.1. The modern code 12
2.3.2. The rules concerning time chartering 12
2.3.3. The principle of freedom of contract 13
2.4. Other legal sources 14
2.4.1. The use of Scandinavian law 14
2.4.2. The use of English law 15
2.4.3. Standard charterparty forms 16
2.5. The method and process of construction 17
2.5.1. The construction of statutes 17
2.5.2. The construction of time charterparties 17
3. The nature of the time charterparty 19
3.1. The characteristics of a time charterparty 19
3.2. The practical use of time charterparties 21
3.3. The master’s position 21
3.3.1. General 21
3.3.2. The legal position 22
4. General on orders 23
4.1. The master’s duties 23
4.1.1. The duty to obey orders 23
4.1.2. The duty to render customary assistance 24
4.2. The different types of orders 25
4.3. The master’s response 25
4.4. Factors to take into account when acting on a given order 27
4.4.1. General 27
4.4.2. Safety factors 27
4.4.3. Commercial factors 28
4.4.4. Legal factors 29
4.5. Consequences of an initial refusal 29
4.5.1. The master’s possibility to seek instructions 29
4.5.2. The master’s delay in obeying the given order 30
4.5.3. The Houda Case 30
4.5.4. Conclusions 32
4.6. Legal consequences 32
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5. Orders concerning the ship’s destination 35
5.1. General 35
5.2. Nomination of the port of call 35
5.2.1. General 35
5.2.2. The obligation to nominate a safe port 35
5.2.3. The relevant period of time 37
5.2.4. Definition of a safe port 37
5.2.4.1. General 37
5.2.4.2. The core meaning of a “safe port” 38
5.2.4.3. Extended definition of a “safe port” 39
5.2.4.4. Conclusions 40
5.2.5. The legal consequences of ordering the ship to an unsafe port 40
5.2.6. The master’s position 42
5.3. Limitations in the charterparty 43
5.3.1. General 43
5.3.2. Trading limits 43
5.3.3. Ice clauses 44
5.3.4. War clauses 44
5.3.5. The master’s position 45
6. Orders concerning the voyage itself 47
6.1. General 47
6.2. The charterer’s authority to give voyage orders 47
6.3. The separation between commercial and navigational orders 49
6.3.1. General 49
6.3.2. The Hill Harmony case 49
6.4. The master’s position 51
7. Orders concerning the loading and discharging process 53
7.1. General 53
7.2. The loading and discharging process 53
7.2.1. The charterer’s control 53
7.2.2. The definition of seaworthiness 54
7.2.3. The master’s position 55
7.3. Orders concerning the disposal of the ship’s transport capacity 55
7.3.1. General 55
7.3.2. Unlawful cargo 56
7.3.2.1. General 56
7.3.2.2. Various situations when cargo can be classified as unlawful 57
7.3.2.3. Conclusions 59
7.3.3. Dangerous cargo 60
7.3.3.1. General 60
7.3.3.2. Different types of dangerous cargo 61
7.3.4. The master’s position 62
8. Orders concerning the signing of the bill of lading 64
8.1. General 64
8.2. The master’s obligation to issue a bill of lading 64
8.3. Orders concerning the content of the bill of lading 66
8.3.1. General 66
8.3.2. A request to sign a clean bill of lading 66
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8.3.3. Other misstatements in the bill 67
8.3.4. Bills containing clauses which are inconsistent with the charterparty 68
8.3.5. Bills incorporating a “manifestly inconsistent” term 69
9. Orders concerning the delivery of the cargo 70
9.1. General 70
9.2. Delivery to a receiver who does not posses a bill of lading 70
9.2.1. The special nature of the bill of lading 70
9.2.2. An order to deliver to an unauthorized receiver 71
9.2.3. The Houda case 73
9.2.4. The master’s position 75
9.3. Orders concerning changes in the port of discharge and in the bill of lading 76
9.3.1. General 76
9.3.2. Changes in the bill of lading 76
9.3.3. The issuance of a new set of bills 77
9.3.4. Changes of the port of discharge 78
10. Redelivery of the ship 80
10.1. General 80
10.2. Time of redelivery 80
10.3. Last voyage orders 82
10.4. The master’s position 83
11. String charters 84
11.1. General 84
11.2. The charterer’s right to sublet the ship 85
11.3. The legal consequences of the ship being sublet 85
11.4. The master’s position 86
12. Conclusions 87
List of sources 89
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Abbreviations
Acts
The Swedish Maritime Code
Sjölag 1994:1009 (i.e.: the maritime code).
MC
The Swedish Maritime Code.
old MC
The 1891 Swedish Maritime code. The old
code that was replaced by the new code from
1994.
Sjöloven
Lov om sjöfarten (Sjöloven) (i.e.: the maritime
code). The Norwegian Maritime Code, from
1994.
Preparatory works
SOU
Prop.
Svensk Offentlig Utredning (i.e.: reports from
commissions appointed by the government).
Proposition (i.e.: a government proposal to the
parliament regarding enactments).
Law journals and law reports
AfS
Arkiv for Sjörett.
Ll. L. Rep.
Lloyd’s List Law Reports (1919-1950).
Lloyd´s Rep.
Lloyd’s List Law Reports (1951-1967),
Lloyd´s Law Reports (1968- ).
LMCLQ
Lloyd’s Maritime and Commercial Law
Quarterly.
ND
Nordiske Domme I Sjöfartsanliggender (i.e.:
law report containing maritime law decisions
from Scandinavian countries).
NJA
Nytt Juridiskt Arkiv (i.e.: law report
containing Swedish Supreme Court decisions).
Standard charterparties
Baltime
Gentime
Uniform Time-Charter. A time charterparty
form issued by BIMCO. The original version
was issued in 1939, but was last time revised
in 1974.
General Time Charter Party. A time
charterparty form issued by BIMCO. Issued in
September 1999.
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NYPE 1946
New York Produce Exchange Form. A time
charterparty form which were replaced by the
NYPE 1993 form. Revised, Revised October
3rd 1946.
NYPE 1993
New York Produce Exchange Form. A time
charterparty form issued by the Association of
Ship Brokers and Agents (U.S.A.), Inc.
Revised, September 14th 1993.
Shelltime 4
A time charterparty form issued by Shell in
December 1984. The form is designed to be
used for the leasing of tank ships.
Other abbreviations
BIMCO
Baltic and International Maritime Council. An
international
organisation
based
in
Copenhagen.
FONASBA
Federation of National Associations of Ship
Brokers and Agents. An U.S. organisation.
UN
United Nations.
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1. Introduction
1.1. Background
There are, initially, two parties to the time charter, the shipowner and the charterer.
They are the ones that agree to the contract. However, once the ship has been delivered
to the charterer, and the hire continues to run, a third party, the master, appears. The
master’s position can be described as unique and ambivalent. He is forced to divide his
loyalty between the shipowner, who employs him, and the charterer, whose orders he is
obliged to obey. To this comes that the master, as the highest authority on the ship, is
responsible for the security of the ship, her crew and cargo. The master will, because of
his position, often face uncertain situations and must, even though he usually have some
discretion, act prudent.
A time charterparty grants the charterer an extensive of control over the ship and its
crew. This extensive control tends to make it hard to determine the exact scope of the
charterer’s general authority to use the ship and, in the end, his right to give orders to
the master.
To this comes the master whose position complicates the relationship further. The
master is obliged to obey the legal orders that the charterer gives, i.e. such orders which
the charterer has authority to give. It can be problematic to determine whether an order
is legal or not since there are a number of factors that limits the charterer’s authority
which must be accounted for. There is not always a straightforward and clear-cut
answer to the question whether an order is legal or not. To this comes that the charterer
may not always require that a given order shall be carried out immediately. In certain
situations the master is granted some time for consideration and consultation with the
shipowner.
1.2. Purpose
The purpose of this paper is to examine, and discuss, the relationship between the time
charterer and the ship’s master. I will try to determine what authority the charterer,
according to Swedish law, has to give orders to the master. The different types of orders
which the charterer may give and the master’s possible responses will be examined.
1.3. Disposition
The paper’s disposition is as follows: Chapter two is about the method used. It takes the
form of an account of the relevant legal sources and how I intend to use those sources in
the paper. Chapter three examines the nature of the time charterparty. To examine and
discuss this is important since it is possible to base an argument in that nature. The
master’s position will also be examined. Chapter four contains a general survey of the
different orders which the time charterer can give to the master. After this chapter
follows an account of the different types of orders that the time charterer may give.
Chapter five examines the charterer’s right to nominate different ports of discharge.
The charterer’s obligation only to order the ship to safe ports is examined. Also, three
common charterparty clauses (the agreed trade are, ice clauses and war clauses) are
discussed. These four limitations of the charterer’s right to dispose of the ship are
considered to be of a so called “guarantee character”. Chapter six examines orders
which concern the voyage. The difference between orders as to the ship’s employment
and as to the ship’s navigation is examined. Chapter seven is about the loading and
discharging process. The charterer’s authority to give orders concerning the processes’
themselves and what kind of goods the charterer is allowed to transport onboard is
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examined. Chapter eight will deal with the questions that arise when a bill of lading is
issued. Chapter nine examines orders as to the discharge of cargo. Chapter ten concerns
the question of the ship’s redelivery and to what extent the master is obliged to obey the
so called last voyage orders. Basically the question is to what extent the charterer may
order the master to undertake a last voyage before the ship is to be redelivered to the
shipowner.
After this account, of the different types of orders, follow two concluding chapters.
Chapter eleven deals with the question of sub-letting. I will examine what kind of
orders, given by a subcharterer, the master is obliged to obey. The final chapter, chapter
twelve, contains a short summary of the paper.
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2. Method
2.1. General
The starting-point for my examination will be the Swedish maritime code and the
relevant Swedish case law. Since the maritime code does not provide a comprehensive
solution to all aspects of a time charter other circumstantial law must also be taken into
account. Other Scandinavian precedents will, because of the common Scandinavian
maritime law, also be used. The discussion will be widened by looking at English law
and English cases. This comparative study is necessary since I believe that the English
solutions may be quite useful when one is trying to determine what applies according to
Swedish and Scandinavian law. Such comparative studies also have a purpose of its’
own. It is a way to widen the discussion and to get ideas and arguments which may be
applied when discussing Swedish law. Further, since there is, in the business, a wide
spread use of standard charterparty forms I will exemplify the discussion with these
forms.
To these sources comes the nature of the time charterparty itself. The relationship
between the parties must be viewed upon and, consequently, interpreted in the light of
the special type of legal figure which the time charter represents. The provisions in the
Swedish maritime code and the clauses in the standard forms are, after all, based upon
this legal figure.
2.2. The relevant legal sources
In order to determine the legal order one must examine the relevant and available legal
sources. It is, for the purpose of this paper, possible to categorize the relevant legal
sources into four groups.1
The first relevant legal source is the charterparty itself. Since the principal of
freedom of contract prevails in this area of law the contract itself is important. The
relationship, between the charterer and the shipowner, rests upon the charterparty and
the charterer acquires his right to give orders to the master through it. The second source
is the existing mandatory rules. Even though they are few, some mandatory rules exist.
These rules must be obeyed; they may not be set aside through a contract. Naturally
such rules will limit the parties’ authority, i.e. the charterer’s right to give orders to the
master. The third category is the existing supplemental rules. Due to the prevailing
principle of freedom of contract other rules provided by law are, by necessity,
supplemental. There are essentially two types of supplemental rules, legislation and
precedents. To this comes, in Swedish law, the preparatory works. Finally, standards of
good seamanship and customary commercial practice are of importance. These factors
must, for two reasons, be taken into account. First, the charterparty must be construed in
the light of the relevant business practice. Second, the relevant supplemental rules may
be based on this practice. Also, when it comes to customary commercial practice it has,
in Swedish law, the same effect as optional legal rules when a court fills out a
commercial contract.
Since the Swedish legal system is a code based one an inquiry such as this must,
quite naturally, start in the Swedish maritime code and the preparatory works that
preceded the code. Other, circumstantial codes may also be of importance. The
maritime code contains some rules which concerns time charters. Since the provisions
in the code, in principal, are optional they may be set aside by the parties to the
1
Cf. Falkanger, Introduction to Maritime Law, p. 374.
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charterparty. Because of this the standard forms which are used will therefore, in
principal, decide the relationship between the parties. However, even though optional,
the maritime code will affect Swedish courts when they construe the different clauses in
the charterparty (see 2.5.2.). A clause will be construed in the light of the corresponding
regulation in the code.2 Thus, the starting-point of my inquiry will be in the relevant
sections of the maritime code.
The maritime code, as all Swedish legislation, is based upon preparatory works. The
purpose of these works is to, in detail, discuss and explain the proposed legislation. The
preparatory works are considered to be of utmost importance and they are heavily relied
on by a court when construing a statute. This reliance is based on, and should be viewed
in the light of how the legislative process is designed. Most of the legislative work is
done within the ministry that initiated the legislative process and by appointed
legislative commissions. When the proposed legislation finally is presented to the
parliament the debates concerning it are mostly very short and, in principle, of no legal
importance. It is only in exceptional cases that the members of the parliament introduce
last-minute amendments in a proposed bill. Thus, all the relevant aspects of the
legislation have been considered in the written preparatory works. I will, therefore, use
the relevant preparatory works in order to construe specific sections in the maritime
code and to examine and discuss the more general, underlying principles of the code
(see 2.5.1.).
2.3. The Swedish maritime code
2.3.1. The modern code
The Swedish maritime code dates back to 1994. The Nordic countries, Norway,
Denmark, Finland and Sweden, then implemented a common maritime code. Iceland is,
however, excluded. A series of meetings and conferences took place during the 1980’s
and 90’s.3 This common work made way for a common maritime code. There are some
differences in the code’s individual rules, but in general the rules are the same in all four
countries. It is, at least partly, because of the common code possible to speak about a
common Scandinavian maritime law (see 2.4.1.).
The old maritime code, which was replaced by the 1994 code, dated back to 1891.
The old time charter rules were updated and adapted to fit the modern charter market.
When drafting the code the legislative committee aimed to make the code’s rules
consistent with the prevailing time charter practice. It is, in the preparatory works,
expressly stated that, the rules concerning the chartering of ships, should be regarded as
a composite of rules, gathered from various important standard forms.4
2.3.2. The rules concerning time chartering
The rules concerning time charters are contained in chapter 14 of the code. According to
MC 14:1 paragraph one the chapter has a wide scope of application. The section states:
“The provisions on chartering apply to whole vessel chartering and part chartering.”
Thus, chapter 14 regulates all forms of chartering. Both voyage- and time charters are
covered by the regulations therein.
2
Cf. SOU 1990:13, pp. 85-6.
Cf. SOU 1990:13, p. 70.
4
SOU 1990:13, pp. 12, 16.
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Before the modern code was implemented there were few statutory rules concerning
time chartering in Swedish maritime law, and those statues that existed were worded in
general terms.5 According to the preparatory works, there were two reasons for
implementing such rules in the code. First, attention was, during the Nordic
deliberations that preceded the MC, called to the increasing significance of the practice
of time chartering in the modern maritime business. An underlying purpose of the
provisions is that they should provide a well though-out solution. The solution in the
code is to be viewed as a “normal” solution. Since this “normal” solution applies unless
the parties have agreed to contrary, passivity becomes an option. The code’s regulation
of time charters can be seen as a service to the Nordic shipowners and charterers.
Instead of regulating one or more aspects of the time charter in the charterparty they can
instead rely upon the code’s “normal” solution.6 Second, the implementation of these
regulations was also believed to facilitate the possibility to hold arbitration proceedings
in the Nordic countries. The majority of time charterparties names London or New York
as the place of arbitration. This practice has, over time, become increasingly costly and
time-consuming for Nordic shipowners and time charterers. The creation of these
modern rules, the “normal” solution, would then facilitate for such proceedings to be
held in one of the Nordic countries.7
However, even though the purpose was to create a “normal” solution, the
regulations in chapter 14 does not form a comprehensive set of rules. The regulations do
not cover all situations which may arise during the charter period. This was, however,
acknowledged in the preparatory works. It is expressly stated that circumstantial law
may be used as a supplement to the code’s rules.8
2.3.3 The principle of freedom of contract
The overriding principle that governs chapter 14 of the Swedish maritime code is the
principle of freedom of contract. The principle is expressly established in MC 14:2
paragraph one. It states:
“The provisions of this chapter are not applied to the extent that anything else follows from the contract,
any practice developed between the parties or any custom of the trade or other usage which must be
considered binding upon the parties.”
Thus, the principal rule is that the code’s provisions are optional. According to MC 14:2
the rules concerning time charters may be set aside in three ways. First, an express
agreement between the parties can set aside the optional rules. Such an agreement is,
most easily, done through the charterparty itself. It is done by using one of the standard
forms or by making an individual agreement. Second, if any practice, which deviates
from the rules in the code, has developed between the parties this practice substitute the
code’s rules. In other words, if such practice evolves it is considered to have become a
part of the agreement between the parties.9 Third, an existing custom of the trade or
other such usage will, if deviating, also apply instead of the code’s rules. An additional
prerequisite is that only custom or usage which is considered to be binding set aside the
code’s optional rules. When determining the validity of such custom or usage one must
5
SOU 1990:13, pp. 200-1.
SOU 1990:13, pp. 85-6, 200-1.
7
SOU 1990:13, p. 201.
8
SOU 1990:13, pp. 200-1.
9
SOU 1990:13, p. 172. Cf. Lehrberg, Praktisk juridisk metod, pp. 82-4.
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always consider the circumstances in each individual case. Examples of such
circumstances are the custom’s firmness and prevalence, the parties’ knowledge of it,
the custom’s origin and its suitability.10 If such deviating rules exist the consequence is
then, quite naturally, that they substitute the code’s rules and applies to the time charter.
There are, however, some limitations to the principle of freedom of contract. In the
Swedish maritime code a number of such limitations are expressly stated. For the
parties to a time charterparty it is only MC 14:5, which MC 14:2 paragraph four refers
to, that is of interest. The section states:
“If the carrier issues a bill of lading for goods carried on the ship, the bill of lading determines the
conditions for the carriage and delivery of the goods as regards the relationship between the carrier and
the third party holder of the bill of lading. Provisions in the charterparty which have not been inserted in
the bill of lading may not be invoked against the third party unless the bill refers to them.
The provisions on bill of lading in chapter 13 sections 45-47 apply also to such a bill of lading as is
mentioned in the first paragraph. Where the provisions of chapter 13 apply to a bill of lading by virtue of
section 3 of that chapter, the carrier’s liability and rights in relation to the third party are determined by
appropriate application of the rules of chapter 13 sections 4 and 24-40.”
As can be seen from the text the parties’ possibility to form their own solutions is
limited by the rules that concern the bill of lading. The reason for this is that these rules,
which originate in The Hague- and The Hague-Visby Rules, are mandatory. As will
later be discussed, these mandatory rules will indirectly affect the time charterer’s
authority to give orders to the master (see 4.4.4.).
Another limitation to the principle of freedom of contract derives from an
underlying, general legal principle. A rule or regulation which purpose is to protect the
interest of a third party is deemed to be mandatory. The parties involved in an
agreement may not deprive a third party from such a protection. 11 An example of this
principle is the express ban in MC 14:5. This principle also limits the charterer’s
possibilities when he sub-charters the ship (see 11).
These limitations of the principle of freedom of contract are of importance for this
paper. If follows, quite naturally, that the parties behaviour, when being subjected to
Swedish law, must comply with the mandatory rules that exists in the maritime code.
These situations will be thoroughly discussed below (see 4.4.4.).
2.4. Other legal sources
2.4.1. The use of Scandinavian law
It is possible to talk about a Scandinavian maritime law. There are, in principal three
reasons for this. First, there is a common Scandinavian legislation in the maritime
area.12 The maritime codes that are currently in use in the Scandinavian countries have a
common origin. There has been a conscious effort from the Nordic legislative
assemblies to create this common legislation. Second, there is a common Scandinavian
case law in the area of maritime law. This common practice is, of course, based on the
common legislation. Since the maritime codes, and the preparatory works which are
used when construing the codes, have a common origin the case law has become
similar. However, the roots of the common practice goes deeper than so. The respective
countries Supreme Courts look at, refer to and, usually, follow each others decisions on
10
SOU 1990:13, p. 172. Cf. Lehrberg, Praktisk juridisk metod, pp. 84-6.
SOU 1990:13, p. 84.
12
Cf. Grönfors, Sjölagens bestämmelser om godsbefordran, p. 13, cf. NJA 1978 p. 24.
11
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maritime matters. This has, of course, reinforced the development of such common case
law. Finally, it is also important to remember that the legal traditions and systems of the
Scandinavian countries are quite similar. It is, after all, possible to distinguish a
separate, Scandinavian legal family.
Of course the laws in the different Scandinavian countries are not completely
homogenous. Despite the effort to create a common legislation some differences exists
between the different codes. The case law will, in some cases, differ as well. It lies in
the subjective nature of case law that deviations, however slight, will always arise
between different decisions. Case law can never form a perfect, homogenous, noncontradictory set of rules. These deviations are further enhanced since there, after all,
are four independent judiciaries. However, these variations and differences are slight
indeed. Thus, it is possible to talk about a common Scandinavian maritime law.
I will, in the paper, therefore use other Scandinavian legal sources. Foremost
Scandinavian case law and the works of legal writers will be used. What has been
established in another Scandinavian country will, unless otherwise has been proved, be
regarded as Swedish law.
2.4.2. The use of English law
I will also, in the paper, refer to a number of English cases which I believe are of
interest. One must then ask the question how relevant such cases are to Swedish law.
Can such cases be used at all? I believe so. It is apparent that Scandinavian and English
law, on many points, are similar. These similarities are, of course, not a coincidence.
There are, at least, four various explanations for this.
First, the legal figure, the time charterparty, is the same in both legal systems. It is
the same type of contract and the parties’ purposes for using the contract is the same.
There is also a corresponding view on the division of functions and risk allocation
between the parties. In other words, the nature of the time charter is considered to be the
same in both Scandinavia and England. Second, the principle of freedom of contract
applies in both legal systems. It leaves it up to the parties to determine their respective
rights and obligations. As a consequence of this there is a wide spread use of standard
forms. Thus, it is the same contracts which are construed by both Scandinavian and
English courts. Third, the maritime business is a highly international market. From this
follows that it is the same parties who act on both the Scandinavian and the English
market and that these parties use the same standard forms. There are, however,
numerous standard forms which are used by the parties on the market. Due to this
internationality these different forms are designed in a similar way though. Thus, the
parties using these forms naturally wants the same rights and obligations to apply each
time they use these forms, they do not intend their contractual relationship to differ in
different countries. Finally, one must keep in mind that, in the field of maritime law,
England and English law has had a great influence on Scandinavian law (as well as the
laws in other countries world wide). A lot of the general rules and principles which are
acknowledged world-wide come from English law.
In the light of this I believe that English cases could be most useful as a reference
when examining Swedish and Scandinavian law. However, two caveats are in place.
First, the underlying law which is used by the courts to fill out the time charterparty
differ. Even though the principal rule is freedom of contract, there exists an underlying
law. If a charterparty is silent on a disputed question, it must be filled out. In the
Scandinavian countries the respective maritime code, together with general legal
16
principles, are used to for this task. In England, on the other hand, the common law is
used. Even though most of the general principles and some of the actual, specific rules
may be in concordance, one must keep in mind the differences between the two legal
systems. Second, the theories behind and the processes used when construing a business
contract, like a charterparty, differ. Since Scandinavian and English courts do not
construe a contract in the same way similar clauses may, as a consequence, be construed
in different ways.13 Apparently one can not use English law or an English case as a
blueprint when one wishes to determine what applies according to Swedish and
Scandinavian law. Nevertheless, I believe that English law might be most useful. Since
there, after all, is a great deal of similarities one could look to English law for
inspiration. Even though one must bear in mind that a Swedish court may reach a
different conclusion on a maritime question, English cases are still well worth their time
studying.
2.4.3. Standard charterparty forms
I will, also, in the paper refer to some of the standard forms that are used on the market.
They will be used as examples and compared to corresponding provisions in the
Swedish maritime code. I have chosen to focus on the Gentime, the NYPE 1993 and the
Shelltime 4 forms as examples. The reason I chose to use the Gentime and the NYPE
1993 is that they are the forms that are latest issued by their respective drafting
organisation (see abbreviations). They can therefore be considered to be the most
modern forms, i.e. the forms that are most up to date with the prevailing business
practice. The Gentime and the NYPE 1993 forms should therefore also be the forms that
are mostly in concord with the 1994 Swedish maritime code. A problem is, however,
that the two forms are not widely used in practice. The shipping business still, to a large
extent, uses the two older forms, i.e. the Baltime and the NYPE 1946 forms.14 Due to
this practice I will, in the discussion below, try to take at least the NYPE 1946 form into
account. In some cases the old form contains a different solution than the solution found
in the new form. Such deviating solutions may be of interest when comparing the
Swedish code to the existing standard forms.
The time charterparty has been known for quite a long time, and its use has
increased over the last hundred years.15 The time charterparty has, as so many other
English documents, developed slowly over time. Today, the standard forms that exist
are used in the vast majority of time charters. These forms are internationally used and
there are a number of different forms which are adapted for different trades. The use of
these standard forms involves both advantages and disadvantages.16 The advantage is
that the document itself is well known by the people who works with it and comes in
contact with it. Shipowners, brokers, charterers, lawyers and judges are familiar with it.
The uncertainties that exist in the documents find, over time, their interpretation. There
are, however, also some disadvantages with the usage of standard forms. A time
charterparty is, after all, a business contract. Such a document should, in order to avoid
conflicts, be drafted in a plain and clear way. Its clauses should be coherent and placed
in a natural sequence. The standard forms which exist today are, for two reasons, not
drafted in such a way. To begin with, their evolution over time has contributed to this.
13
Cf. Falkanger, AfS 9, pp. 537-66.
Cf. Michelet, Håndbok i tidsbefraktning, pp. 2-3.
15
Cf. SOU 1990:13, pp. 200-1.
16
Cf. Michelet, Håndbok i tidsbefraktning, pp. 1-2.
14
17
The meaning, the interpretation of the forms’ clauses has constantly been disputed.
Over time, such disputes have been settled and the clauses have got their meaning. The
problem is that the wording of the clauses may not, necessarily, be in concordance with
the meaning which is put in them. Further, it is, after all, a standardised form. Even
though the parties have a wide range of forms to choose from such forms does not take
the parties’ individual factors into account. In order to make the form fit their specific
relationship or situation, the parties may need to fill out or change the form’s clauses.
Such changes and amendments may complicate the construing process.
2.5. The method and process of construction
2.5.1. The construction of statutes
The starting-point of a process to construe a statute must be the text itself, i.e. the
language of the statute in question. The statute is, after all, edified by the text.17 It is not
possible to stop here though. The language of a statute can never provide an answer to
what the statute actually lays down. Words and language are by their nature ambiguous
and vague.18 A purely linguistic construction of a statute would therefore lead to both an
unpredictable and undesirable result of the construing process. The key to statutory
interpretation is instead to determine the purpose of the statute in question. Since the
words of a statute rarely gives a straightforward and clear solution to a legal problem,
statutes can only become meaningful if their words fit a meaningful purpose. If the
statute’s purpose can be determined, that purpose can be used to solve the legal
problems which arise.19
When construing Swedish statutes an additional complication exists. The
preparatory works that precedes the legislation are considered to be of utmost
importance for the construction of the statute in question. There are a number of reasons
why one should rely on these works.20 Since the text statute itself is, by necessity,
briefly written the preparatory works can be used as a guide in order to find the
underlying purpose of the statute in question. The works can contain information about
the situations which the statute aims to regulate and linguistic uncertainties may be
straightened out by statements in the works. Further, another reason to pay regard to the
works lies in the fact that the persons who have written them usually are highly skilled
within the subject.
2.5.2. The construction of time charterparties
The question of how to construe a time charterparty was discussed in the preparatory
works of the Swedish maritime code. It was stated that the comprehensive model which
the optional rules fashions should be considered to be a well thought-out and a wellbalanced “normal” solution. Since this solution is an expression of legal political
considerations it should not be easily set aside by the parties. Thus, a court should not
construe a “common intention of the parties”, based on external circumstances only,
which would deviate from this “normal” solution. Instead, there are good reasons to, in
the first place, apply the “normal solution” when construing a charterparty. Only when
17
Lehrberg, Praktisk juridisk metod, pp. 79-80.
Carter, Reason in Law, pp. 23-4, 69-70, 84, Lehrberg, Praktisk juridisk metod, pp. 79-80.
19
Carter, Reason in law, pp. 83-85.
20
Cf. Lehrberg, Praktisk juridisk metod, pp. 86, 92-96.
18
18
the parties clearly have agreed on a deviating solution that solution should be
recognized by a court.21
It might, at first glance, seem like a far-reaching rule of construction. However, it
was further stated that if a court was construing an English form that the parties had
used on the international market the traditional English interpretation of its clauses
should be applied. If the Swedish, optional solution would provide a different
interpretation of a clause in the charterparty, the Swedish solution must yield to the
traditional English interpretation.22 Apparently, the parties, as a rule of construction, is
then considered to have implicitly agreed to the English interpretation of the form’s
clauses. Such use is considered to be such expressed behaviour that set aside the code’s
optional rules.
So, where does this discussion lead to then? When a Swedish court is faced with the
task to construe a charterparty clause it shall construe it in the light of the maritime
code. The rules concerning time charters may be optional, but the parties are expected to
clearly manifest any intentions to deviate from these rules. How the optional provisions
may be set aside by the parties was discussed above (see 2.3.3.).
21
SOU 1990:13, pp. 85-6. It should be mentioned that the discussion in the preparatory works were held
on a general level. Such a rule of construction is considered to be generally applied in Swedish law, not
just to the maritime code.
22
SOU 1990:13, p. 86.
19
3. The nature of the time charterparty
3.1. The characteristics of a time charterparty
The rights and obligations of the shipowner and the time charterer are laid down in the
contract, i.e. the charterparty. The charterparty reflects the nature of the time charter
and, thus, it reflects the relationship between the parties to it. To quote Gaskell,
“(c)harterparties are examples of contracts in which one party, the charterer, is entitled
to exercise some control over the conduct of an employee of the other party, the
shipowner.”23 It is in the charterparty where the shipowner and the charterer agree on
their respective rights and obligations. Essentially, the scope of the charterer’s right to
dispose of the ship is laid down in the charterparty. It follows that the charterer’s right
to give orders to the master also is determined, explicitly or implicitly, therein. Thus,
the starting-point, when examining the relationship between the charterer and the
shipowner, must be the charterparty. First when one has examined and clarified this
relationship, it is possible to bring the master into the equation. The charterer’s authority
to give orders and the master’s position when receiving such an order must be viewed in
the light of the charterparty. It is then possible to examine the different types of orders
the charterer may give and how the master may respond to such orders.
The charterparty is, quite naturally, agreed to before some time before the charterer
is entitled to take control of the ship. When the ship is delivered to the charterer the
contract begins to apply, i.e. the ship goes on charter. It is at this moment that the
charterer’s right to, in accordance with the charterparty, dispose of the vessel and give
orders to the master sets in.24 It has been stated that the nature and purpose of a time
charter “is to enable the charterers to use the vessels during the period of the charters for
trading in whatever manner they think fit.”25
It is possible to account for some general characteristics that all time charterparties
have in common. It is these general characteristics or qualities which makes the
charterparty a time charterparty. If these are changed one would instead end up with a
hybrid form or a totally different type of charterparty. In other words, these
characteristics are the essence of the legal figure which is called the time charterparty.
When one discusses the nature of the time charterparty, that nature is a result of these
characteristics. They can, roughly, be categorized into four groups.
First, the charterer leases the commercial capacity of the ship. Since he, through the
charterparty, obtains the commercial control of the ship the charterer decides, for
example, what cargo is to be loaded, when the loading operation and the laden voyage
shall commence. The time charterer’s right to use the full commercial capacity of the
ship is considered to be one of his fundamental rights under a time charter. It has been
stated that the time charterer shall have the “full reach and burden” of the ship.26
Second, the shipowner retains the navigational control of the ship. The division
between the commercial and navigational control is inherent in the nature of time
charterparties. If the charterer also would obtain the navigational control of the ship, it
Gaskell, Master and Charterer, p. 49, Gaskell, Charterers’ liability and damage to the vessel, pp. 3-4.
Falkanger, Introduction to Maritime Law, p. 426, Michelet, AfS 11, p. 592.
25
The Nanfri [1979] 1 Lloyd’s Rep., p. 206.
Cf. Time Charters, p. 327
26
Honka, Fartygets skick och egenskaper, pp. 405-407. Cf. Grönfors, Sjölagens bestämmelser om
godsbefordran, pp. 257-8.
23
24
20
would become a bareboat charter instead of a time charter. A part of this navigational
control is that it is the shipowner who appoints the ship’s master and crew.27
Third, the division of the incurred expenses distinguishes a time charterparty from
other types of charter. In principal, all charterparties contain one or more clauses which
regulate the division of expenses.28 The principal rule is that the shipowner shall bear
the “fixed costs” while the charterer bears the “variable voyage costs”.29 Thus, the
shipowner is responsible for keeping the ship properly equipped, properly manned and
maintained in a seaworthy condition. Capital costs is also be borne by the owner. The
charterer must pay such expenses which are associated with his orders, i.e. port
expenses, loading and discharging costs, bunkers and other voyage costs.
Finally, the concept of risk allocation is an important feature of a time charter. The
division of the risk allocation between the shipowner and the time charterer is laid down
in the regulations concerning off-hire and indemnity. The underlying principle in
Scandinavian law is that the hire runs continuously from the time when the ship is
delivered to the charterer. The exception, i.e. when the ship goes off-hire, is when time
is lost due to “hindrances on the part of the owner”. It is not a question of fault. If the
cause rests with the charterer, or anyone he is responsible for, the underlying reason is
irrelevant. It follows that the principal rule is that it is the shipowner who stands the risk
of the ship being damaged due to normal, nautical events, the so called “perils of the
seas”. When it comes to claims for damages or indemnity the underlying principle, in
Scandinavian law, is that the loss falls on the party on whose side the responsibility for
the damage lies. The shipowner or the time charterer is liable for the damages he, or any
person he answers for, causes through fault or neglect (see 4.6.).
These four, general characteristics deal with the relationship between the shipowner
and the charterer. Since they apply to all time charterparties they have both a theoretical
and practical use. The general legal principles that apply to time charters are based upon
these characteristics. When discussing a legal question it is possible to support an
argument with these principles. It is, when doing that, common to refer to the nature of
the time charter. It follows from these characteristics that a time charterparty is not
considered to be neither a lease nor a contract for hire. It is more correctly described as
a contract for a provision of services.30 The shipowner provides a service for the time
charterer. He undertakes to, in return for hire, let the charterer use his ship, including the
master and crew, for an agreed period of time. A summary of this view was stated in an
English case, The London Explorer. It was stated that:31
“Under such a charter there is no hiring in the true sense. It is not disputed that throughout the chartered
vessel remains in the possession of the owners, and the master and crew remain the owners’ servants.
What the charterer gets is a right to have the use of the vessel.”
27
Grönfors, Sjölagens bestämmelser om godsbefordran, p. 254.
Cf. Gentime cl. 13, NYPE 1993 cl. 6,7 and 9, Shelltime 4 cl. 6 and 7.
Cf. MC 14:67. It states: “The time charterer shall bear such expenses for the performance of voyages as
are not borne by the carrier according to the provisions of this chapter.”
29
Cf. Falkanger, Introduction to Maritime Law, pp. 434-5, cf. Grönfors, Sjölagens bestämmelser om
godsbefordran, p. 255, cf. Michelet, Håndbok i tidsbefraktning, pp. 142-147, cf. Time Charters, p. 217222.
30
Time Charters, p. 530.
31
The London Explorer [1971] 1 Lloyd’s Rep., p. 526.
28
21
A similar statement was made in The Madeleine case. It was stated that:32
“An owner delivers a ship to a time charterer under this form of charter-party by placing her at the
charterers’ disposal and by placing the services of her master, officers and crew at the charterers’
disposal, so that the charterers may thenceforth give orders (within the terms of the charter-party) as to
the employment of the vessel to the master, officers and crew, which orders the owners contract that their
servants shall obey.”
These two statements summarize the nature of the time charter quite well.
3.2. The practical use of time charterparties
Today, a significant proportion of the world’s, and the Nordic, fleet operates on time
charter.33 What are then the motives behind using such a charter type? From the
charterer’s point of view, the principal advantage is that he, through time charter, may
secure transport capacity without incurring the risks and burdens of having a fully
owned fleet. This is useful when a temporary need of increased transport capacity
arises. Another advantage with using chartered ships is that it is easier to phase-out a
chartered ship than an owned one if the freight market turns sour or the charterer’s need
of transport capacity for other reasons decreases.
From the shipowner’s point of view, the principal advantage is economic security.
Compared to voyage charter, which is the other major charter type, time charters has
traditionally being considered to grant a larger economic security. The reason for this
lies in the risk allocation that applies, i.e. the time charterer assumes a number of risks
which the shipowner otherwise would bear. Since the shipowner assumes relatively few
risks in a time charter it is possible for him to calculate the economic outcome of the
charter period to a great extent. There are, essentially, three such risks that the time
charterer assumes. First, the charterer carries the risk of delay. It is up to him to decide
how the ship is used and how the voyages are to be performed during the charter period.
The drawback with such an extensive right of disposal is that he must pay the hire
continuously even though he might not be able to use the ship as planned. For example,
if the ship is held up in a port because the port is congested the hire continues to run.
The charterer can not make a claim against the shipowner for such losses. Second, the
charterer is also obliged to pay a number of expenses as, for example, bunkers and port
fees. The consequence of this is that the charterer carries the risk of a future increase of
these expenses. Especially bunkers may, from time to time, be subject to steep rises in
price. Third, the charterer carries the risk of arranging trips for the ship. It is up to the
charterer to put the ship in use. Even if the market for carriage by sea drops and it is not
possible to find employment for the ship the hire continues to run.
3.3. The master’s position
3.3.1. General
The master has a particular and an ambiguous position. On one hand, he is the
shipowner’s employee and is expected to look after his interests. On the other hand, he
is obliged to obey the charterer’s orders and assist him during the charter period. The
problem, for the master, is that the shipowner’s and the charterer’s interests will, from
time to time, be in conflict with each other. To this comes the fact that the master is
32
33
The Madeleine [1967] 2 Lloyd’s Rep., p. 238.
Cf. SOU 1990:13, pp. 200-1.
22
responsible for the security of the ship, her crew and cargo. He must make sure that the
ship, continuously, is seaworthy and that no other dangers threaten this safety (see
4.4.2.). Such safety concerns may, from time to time, come in conflict with the
charterer’s interests.
It is important for the master to act prudent. He must try to conciliate these different
interests and concerns when a conflict arises. However, the master’s particular and
exposed position has been acknowledged and he has been granted certain relief. The
master is, if the charterer gives an order which the master is hesitant to obey, not
expected to immediate determine how to act. He is, in such situations, allowed to
contact the shipowner in order to get instructions from him (see 4.5.).
3.3.2. The legal position
One might, when considering the master’s peculiar position, ask what his legal position
and status is. In other words, when the master acts, in what position does he act? In the
Swedish maritime code there is one provision, MC 14:52 paragraph two, which is of
interest. It states that:
“On delivery the carrier shall ensure that the vessel’s … manning … fulfil the requirements of ordinary
carriage in the sailing range stated in the time charterparty.”
The paragraph indicates that the master is the shipowner’s employee. 34 Nothing else can
be construed from reading the text and nothing in the preparatory works indicates that a
different interpretation ought to be made.
Further, Michelet has stated that the master, in all situations, should be considered to
be the shipowner’s employee. There is nothing in Scandinavian case law or legal
literature that indicates that the master in some situations should be considered to be
acting on the time charterer’s behalf. Thus, even when the master executes the
charterer’s orders he does that in the capacity as the shipowner’s employee. 35 A
consequence of this is that the shipowner may be held liable for the wrongs and
mistakes that the master commits when he executes the charterer’s orders.36
34
Michelet, Håndbok i tidsbefraktning, p. 67.
Michelet, Håndbok i tidsbefraktning, p. 68.
36
Cf. MC 6:11, paragraph two which refer to section 4:1 of the Tort Liability Act (1972:207). According
to the section in question, the employer is responsible for such damages which his employee causes
through fault or neglect. An employee may only be held personally responsible for such damage if
“particular reasons” exist.
35
23
4. General on orders
4. 1. The master’s duties
4.1.1. The duty to obey orders
As been stated above, the charterer acquires, through the charterparty, a right to give
orders to the master. However, all rights have a corresponding duty. Quite naturally the
master has, during the charter period, a duty to obey the charterer’s orders. The rights of
the charterer and the duties of the master form an intertwining relationship. To quote
Gaskell, “(c)harterparties are examples of contracts in which one party, the charterer, is
entitled to exercise some control over the conduct of an employee of the other party, the
shipowner.”37
In the standard forms, such as the Gentime and the NYPE 1993, the charterer’s right
to give orders to the master is explicitly stated. Gentime cl. 12 paragraph one states:
“The Master… shall at all times during the currency of this Charter Party be under the orders and
directions of the Charterers as regards employment, agency or other arrangements. The Master shall
prosecute all voyages with due dispatch…”
NYPE 1993 cl. 8 (a) states:
“(a) The Master shall perform the voyages with due despatch and shall render all customary assistance
with the Vessel’s crew. The Master… shall be under the orders and directions of the Charterers as regards
employment and agency… “
There is no corresponding clause, which explicitly states that the master is under the
“orders and directions” of the charterer, in the Swedish maritime code. However, the
charterer’s general right to dispose of the ship is stated in MC 14:58 paragraph one. It
states:
“During the period of the charter the carrier shall perform the voyages which the time charterer orders in
accordance with the charterparty. …”
The paragraph lays down the shipowner’s principal obligation during the charter
period.38 In the Swedish code it is expressly stated that it is the charterparty itself which
determines the limits for the charterer’s authority to give orders. In the two charterparty
clauses this is implied.39 When comparing MC 14:58 paragraph one with the Gentime
and NYPE 1993 clauses it is apparent that the master’s duty to take orders from the
charterer is not expressly stated in the code’s section. However, such a duty must be
considered to be implied in the maritime code. There are two reasons for this. First, it
follows from the nature of the time charter that the charterer should be entitled to give
orders directly to the master. After all, he leases the commercial capacity of the ship.
This capacity includes the master and crew. The commercial use of the ship would be
hampered if he would not be able to give orders directly to the master. Second, it is an
existing custom of the trade that a time charterer acquires a right to give orders to the
master. Since it is such a wide spread practice it ought to, in accordance with MC 14:2
Gaskell, Master and Charterer, p. 49, Gaskell, Charterer’s liability and damage to the vessel, pp. 3-4.
Prop. 1993/94:195, p. 313, SOU 1990:13, p. 206. Cf. Grönfors, Sjölagens bestämmelser om godsbefordran, pp. 253, 262.
39
Cf. Michelet, Håndbok i tidsbefraktning, pp. 62-3.
37
38
24
paragraph one, be considered an implied right in the charterparty which are binding
upon the parties (2.3.3.).
4.1.2. The duty to render customary assistance
Besides the duty to obey the charterer’s orders the master is also under a duty to render
so called “customary assistance”. A provision laying down such duty is found in MC
14:61 paragraph two. The paragraph states:
“The time charterer may require such assistance by the master and crew as is customary in the trade in
question. Compensation for overtime work and other special expense for such work shall be paid by the
time charterer.”
The paragraph seems to state a clear enough rule, the master seems to have a general
duty to render customary assistance. However, MC 14:61 deals with loading and
discharge (7.2.1.). One must ask then the question whether the paragraph applies to the
whole relationship or just to the loading and discharge process.
It is, in the preparatory works, stated that the paragraph is modelled after the basic
division of functions between the shipowner and the time charterer which is considered
to be the prevailing practice in time charterparties. Thus, the purpose of the section was
to codify the prevailing practice.40 Since the common practice is that the crew are to
render customary assistance through out the charter period, the paragraph ought to
reflect this general principle. Despite its editorial placement, the paragraph should be
given a wide scope of application. It lays down the basic duty of the ship’s master to
render the charterer assistance during the entire charter period. Such an interpretation
also seems to be in line with other legal writers. Michelet seems to consider that the
corresponding paragraph in the Norwegian maritime code (Sjöloven § 381) has such a
wide scope of application.41
The next question that arises is then what kind of assistance the charterer can expect
from the master. The section states that the charterer may require such “assistance… as
is customary in the trade in question”. Apparently the question must be answered in
each individual case. It all depends on, for example, the type of ship that are chartered,
the type voyage which is performed and the type of trade that the charterer intendeds to
undertake.42 The charterer has, due to this provision, the authority to require that the
master shall help him perform such tasks that, due to the division of functions, falls
upon the charterer to execute. In practice this assistance is usually connected with the
handling of the cargo. The charterer may require that the master shall assist during the
loading or discharge operations or during the cleaning of the cargo holds.43 Anyway,
when the charterer instructs the master to perform a task which is considered to be such
a “customary” assistance, it is obvious that the master has a duty to obey that order.
40
Prop. 1993/94:195, p. 315, SOU 1990:13, p. 208.
Michelet, Håndbok i tidsbefraktning, p. 71.
42
Cf. Time Charters, p. 286.
43
Cf. Grönfors, Sjölagens bestämmelser om godsbefordran, pp. 258-9.
Cf. The Bela Krajina [1975] 1 Lloyd’s Rep., pp. 144-5. The master and crew were considered to be
obliged to help the time charterer to clean the holds of the ship. This obligation did not, however, stretch
as far as removing rust from the hold.
41
25
4.2. The different types of orders
In a time charter the charterer may give a wide range of orders to the master. Since the
ship is under the complete commercial control of the charterer it is necessary for him to
be able to issue orders covering all situations that arise during the commercial use of the
ship. Gaskell has divided the types of orders which the charterer may give into six
groups.44 Those groups are the following:
1. The nomination of ports. Both loading and discharge ports.
2. The conduct of the voyage itself.
3. The loading and discharge itself. The order can relate to both the method and the
time for the process.
4. The signing of bills of lading.
5. The delivery of cargo to a third party.
6. The time and place of the ship’s redelivery.
Each of these different types of order will be discussed and examined in detail below. A
short summary of the different types of orders and their further examination may be in
order though.
Point 1 and 2 are connected to each other. They both concerns orders which states
how the voyage as such is conducted. For example, to which ports and to which areas
may the charterer order the ship? What limitations exist implicitly and explicitly? To
what detail may the charterer control the conduct of the voyage itself? Under point 3 all
questions which concerns the loading and discharge process are gathered. The first
question is if, and to what extent, the master is obliged to participate in these operations.
The second question is to what extent the charterer may dispose of the ship. What types
of cargo may he order the master to load and transport on the ship? Point 4 and 5 are
also connected with each other. The problem under both points originates in the bill of
lading. The special nature of the document and the mandatory rules which apply affects
the charterer’s authority to give orders concerning a bill. Point 6 concerns the so called
last voyage order.
4.3. The master’s response
When receiving an order from the charterer the master have certain choices. These
choices can be summarized as follows:45
1. He can accept and obey the order.
2. He can refuse the order.
3. He can, initially, refuse the order and ask the charterer if he is sure about his
order.
4. He can, initially, refuse the order and contact the shipowner in order to get
instructions.
When the master receives an order he must chose how to respond. When making this
choice he must consider the shipowner’s position and how his actions will affect him.
44
Gaskell, Master and Charterer, p. 51. Cf. Gaskell, Charterer’s liability and damage to the vessel, pp. 4-
5.
45
Gaskell, Master and Charterer, p. 52-53.
26
The master is, after all, the shipowner’s employee, not the charterer’s. The initial four
responses will give rise to a number of sub-choices and legal consequences.46
1. The master accepts and obeys. It does not matter if the order is accepted
immediately or if it is accepted after an initial refusal, the same legal
consequences arises.
a. The order is correct. There are no problems.
b. The order is incorrect. The charterer issued, if this is the case, an illegal
order. There are, in principal, four possible outcomes of such an order that
may give rise to a legal responsibility for the charterer. First, the vessel could
be damaged. Second, a delay could arise. Third, there could be a cargo loss.
Fourth, a liability to a third party could arise. The charterer may be held
legally responsible for these occurrences.
2. The master refuses the order.
a. The order is correct. A number of different legal consequences could,
depending on the circumstances, arise for the shipowner. The charterer may,
for example, terminate the charterparty, claim damages or claim that the ship
went off-hire.
b. The order is incorrect. Since the order was illegal the master was entitled to
refuse to obey it. In this case, the shipowner may hold the charterer legally
responsible for the illegal order. He may claim indemnity for damages that
arose because of the order or he may, in some cases, terminate the
charterparty.
3. The master initially refuses the orders, waits and seeks new orders.
a. It was the correct choice to wait. There are two situations where such action
is correct. First, if the initial order was an incorrect one. The master is under
no obligation to obey such an order. Second, if the master had a well-founded,
legitimate cause to seek confirmation from the charterer or the shipowner. This
could, for example, be the case if the order itself was unclear or if it was
unclear whether the person giving the order had the authority to do so. The
master is, in certain situations, considered to have a certain room for delay (see
4.5.).
b. It was the incorrect choice to wait since the initial order was correct. The
charterer then has, depending on the circumstances, a number of choices. First,
he could terminate the charter and claim indemnity for the damages that arose
due to this. Second, he could declare the ship to be off-hire until the order is
complied with. Finally, he has the alternative to change his orders, even
though his initial order was correctly issued. If he does this the master, again,
have the initial four choices of response. Despite that the charterer changes his
orders he may still claim damages which arose due to the delay.
46
Cf. Gaskell, Master and Charterer, p. 52-53.
27
These different responses and their consequences will be discussed in detail below.
4.4. Factors to take into account when acting on a given order
4.4.1. General
When the master receives an order he must, when considering an appropriate response,
take a number of factors into account. There are, in principal, three different types of
factors the master must consider.47 These are: safety factors, commercial factors and
legal factors. Each of these factors may affect the charterer’s right to dispose of the ship
and, consequently, order the master. What the master needs to do is to determine
whether the order is legal or illegal, i.e. within or without the charterer’s authority to
request.
4.4.2. Safety factors
Questions of safety are often a relevant issue when it comes to ships. Since safety
questions, when at sea, is the responsibility of the master they must be taken into
account when the charterer issues an order. If a given order raises questions of safety a
conflict may arise between the charterer’s commercial interest and the master’s safety
interest. Such conflicts are mostly manifested when an order concerns nautical matters
or the nominating of ports. The principal rule is, however, that the safety of the ship, her
crew and cargo takes precedence before the commercial interests of the charterer.48
There are, in principal, two distinct types of safety factors. The first is the concerns
for the general seaworthiness of the ship. The second is the need to avoid such severe
dangers that may, even though the ship is considered to be seaworthy, endanger the
ship, her crew and the cargo. It is the master who, at the end of the day, is responsible
for the seaworthiness of the ship. Since the master physically is onboard the ship it is
reasonable to put such responsibility on him. In the Swedish maritime code this
responsibility is laid down in MC 6:1. It states:
“Before a voyage begins, the master shall ensure that the vessel is seaworthy, in accordance with chapter
1 section 9.
During the voyage the master shall ensure that the vessel is maintained in seaworthy condition as
above.
If any defect or lack of seaworthiness cannot be immediately remedied, the master shall promptly
notify the owner or operator.”
Besides the general seaworthiness of the ship, the master must also make sure that other
dangers do not endanger the safety of the ship. Such dangers could, for example, be
storms, shoals, sand banks, ice or war. It may sometimes be more difficult to correctly
judge the situation at hand when being onboard the ship. However, the master may very
well contact the shipowner, the time charterer or some public- or private agency to seek
advice. That the master has such responsibility to keep the ship safe is explicitly stated
in MC 6:2 paragraph one. It states:
“The master shall ensure that the vessel is navigated and managed in a manner consistent with good
seamanship.
47
48
Gaskell, Master and Charterer, pp. 51, 56, 59.
Cf. The Anastasia [1971] Lloyd’s Rep., p. 379, cf. The Houda [1994] 2 Lloyd’s Rep., pp. 547, 554.
28
That the ship is kept safe are both in the interest of the shipowner and the charterer.
Neither of them is interested in the ship being damaged. However, even though the
charterer may not wish to put the ship in danger he does wish to use the ship in a normal
trade. A sea voyage can never be completely without any risks, risks are inherent in the
nature of sea voyages. Disputes may therefore arise if the charterer believes that the
master is acting over-cautious. The master must be able to justify a decision to override
the charterer’s order. Unless the master’s safety concerns are legitimate the charterer is
likely to protest or take legal actions. He may claim that the ship went off-hire during
the delay, claim damages for any consequential losses or, if the master’s refusal is
lengthy, terminate the charterparty (see 4.6.).
An example of such an over-cautious master is found in ND 1952.442 NA
Hakefjord.
The facts of the case were the following: The time charterer complained to the court that the ship had
been withdrawn from his control a number of times during the charter period. The ship had, on several
occasions, been lying in port despite the fact that it was ready to depart. The reason stated by the master
was that the weather had been too bad. Since the weather had been quite normal for the season the
charterer claimed that the ship had gone off-hire during the delays and claimed damages for the extra
costs that these delays had caused. The shipowner, on the other hand, claimed that the weather objectively
had been so bad that the master’s delays were justified.
The Norwegian court stated that during a time charter the master is, within certain
limits, sovereign when it comes to making nautical decisions. If he finds that the ship
should lie still in a port awaiting better weather such decision must usually be respected.
The principal rule is that the charterer can not override the master’s decision. However,
there is a limit to the master’s authority. The time charterer must be protected against an
over-cautious and tardy master. First, the master’s decision must only be respected if a
reasonable master under the same circumstances would have made the same decision.
Second, when the master refuses to obey an order he, or the shipowner, must be able to
show, on the balance of probabilities, that the refusal were reasonable. If the master can
not show this the charterer may claim that the ship went off-hire during the
unreasonable delay and claim compensation for any other damages which arose due to
the master’s refusal.49
4.4.3. Commercial factors
Since the time charterparty is built upon the idea that the charterer is to control the
commercial use of the vessel, it is natural that the charterer may issue a wide range of
orders based on commercial judgements. As long as the orders, and its consequences,
purely have commercial consequences, there are no problems. The master must then
obey the order. However, these clear-cut situations are not always the case. Even though
the charterer may base his order upon commercial considerations, the order might have
legal and safety consequences for the master and/or the shipowner.
49
ND 1952, pp. 447-8, 456-62. After examining the different situations the court granted parts of the
charterer’s claims.
29
4.4.4. Legal factors
There are two different legal aspects which the master must consider. First, he must
consider mandatory laws, rules and regulations that are imposed by public authorities.
Second, he must consider the charterparty itself.
The master can never be obliged to obey an order which is unlawful in itself, i.e. he
may not be ordered to commit a criminal act or infringe some mandatory law or
regulation. The master may, for example, not be ordered to issue a so called clean bill of
lading if it is apparent that the cargo is damaged. Such fraudulent behaviour is not part
of the job description. He may neither be ordered to commit less severe acts as, for
example, violate a harbour regulation. One aspect which is necessary to consider is
according to which law the act is unlawful, i.e. where the act is unlawful. This issue will
be discussed more extensive below in connection with the question of unlawful cargo
(see 7.3.2.).
Further, the master is, in principal, neither obliged to obey an order which is in
violation with the charterparty itself. It is, after all, upon this document that the charterer
bases his right to give orders to the master. It follows, from general legal principles, that
the master is not obliged to obey an order that the charterer is not entitled to give under
the terms of the charterparty. This principle was explicitly stated in an English case, The
Sussex Oak. It was stated that:50
“I cannot think that the clause in a time charterparty which puts the master under the orders of the
charterers as regards employment is to be construed as compelling him to obey orders which the
charterers have no power to give.”
Thus, the master may refuse to obey an order if it can be considered to be unlawful.
4.5. Consequences of an initial refusal
4.5.1. The master’s possibility to seek instructions
The master will, when given an order, not always know how he should act. He may not
be able to evaluate the situation if he is not able to fully asses the three relevant factors,
i.e. the safety, the commercial and the legal factor. One must remember that the master,
after all, is onboard the ship. In some situations, for example when the ship is about to
call at a port or during the loading or discharging operation, it may be preferable to be
onboard when evaluating the situation. In other situations the master may instead be in a
poor situation to estimate the wisdom of a given order. This is, for example, the case
when he is confronted with the task to determine if a questionable order is within the
limits fixed in the charterparty or to decide if he should accept a guarantee from the
charterer.
Therefore, a prudent master will in such situations, if it is possible to do so, seek
instructions from the shipowner. He is, after all, the shipowner’s employee and is
suppose to look after his interests. In this context MC 6:8 paragraph three may be of
interest. It states:
“The master shall inform the owner of any steps of importance which he finds necessary for the safety of
the vessel or those on board, of the progress of the voyage and any transactions undertaken in the course
of it, as well as any other facts which may be useful for the owner to know of. Before taking any
important step, the master should seek instructions from the owner or his appointed agent. …”
50
The Sussex Oak [1950] 83 Ll. L. Rep., p. 307.
30
Thus, it has been expressly acknowledged that the master should seek instructions from
the shipowner. The paragraph does not necessarily entitle the master to seek such
instructions on the charterer’s expense though. One must therefore examine if such a
delay in obeying an order may be acceptable vis-à-vis the time charterer as well.
4.5.2. The master’s delay in obeying the given order
The master must, when given an order, decide how he shall respond. However, at the
end of the day there are only two possible outcomes of his considerations. Either he
obeys the order or he refuses to obey it. Even though he may consult the charterer or the
shipowner he is, sooner or later, bound to act. After all, even total passiveness is
considered to be an act. If the order was legal such passivity will, after a while, be
viewed as a flat-out refusal. The question is then how much time the master may
dispose before he has to act. When will he be considered to be in delay in obeying the
order?
4.5.3. The Houda Case
A recent case, The Houda case51, dealt with the issue of delay in obeying the charterer’s
orders. The case is, for English law, important since it extensively deals with the
question of delay. I believe that it may, besides to serve as a good illustration to the
problematic situation, be valid to Scandinavian law as well.
The relevant facts of the case were the following: The Houda was chartered on a Shelltime 4 form. The
Ship operated under standing instructions which had been issued by the charterer. These instructions
stated that “(a)ll instructions relating to the voyages of your vessel will be issued by Kuwait Petroleum
Corp. in Kuwait.” However, on August 2nd 1990 Iraq invaded Kuwait. After the invasion the management
of the charterer moved to London. Subsequently, the London office then began to give orders relating to
the ship’s voyages. On August 8th the charterer ordered the ship to proceed to the Red Sea for orders. The
shipowner did not obey the given order. The reason for this was the confused situation which arose as a
consequence of the invasion. The shipowner was concerned whether the order was legal or not. First, he
was doubtful about the ownership of the cargo onboard the Houda. Second, he was doubtful whether the
given orders would result in a breach of any of the imposed U.N. sanctions. Thirdly, he was doubtful who
had the authority to give orders on behalf of the charterer. Because of this, the shipowner was not
prepared to obey the given order until he had obtained legal advice. This was the starting-point for an
extensive legal brawl. However, on September the 27 th the parties finally reached an agreement and the
Houda resumed performing the service required by the charterer.
The charterer contended that the shipowner, in breach of contract, refused to obey the charterer’s legal
orders. As a consequence of that breach the charterer lost the services of the Houda for a period of 36
days. The charterer claimed that the ship had been off-hire for this period or, alternatively, damages for
breach of contract.
One of the issues raised in the case were then whether the shipowner under a time
charter is obliged to comply with a given order immediately or, if he has reasonable
doubts about the order’s legality, if he is entitled to a reasonable time to carry out the
order. Lord Justice Neil wrote the leading opinion. He stated that:52
“I am unable to accept that the right, or indeed the duty, to pause can safely be confined to specific
categories of cases. I consider that it is necessary to take abroad a comprehensive view of the duties and
responsibilities of the owners and the master and to ask… How would a man of reasonable prudence have
acted in the circumstances? …It will depend on the circumstances.”
51
52
The Houda [1994] 2 Lloyd’s Rep., p. 541.
The Houda [1994] 2 Lloyd’s Rep., p. 549.
31
Lord Justice Leggatt stated further:53
“It is obvious that lawful orders have to be obeyed, unless to do so would imperil the safety of ship, crew
or cargo. It is not obvious that they have to be obeyed unthinkingly. …In my judgement when a master
receives an order relating to the cargo his duty… is to act reasonably. Orders ordinarily require immediate
compliance. But the circumstances in which an order is received or the nature of it may make it
unreasonable for the master to comply without further consideration or enquiry. When an order is
reasonably regarded as ambiguous, it must be clarified. When the lawfulness of an order is reasonably
called into question, it must be established. When the authenticity of an order is reasonably doubted, it
must be verified. The delay introduced by any of these processes will usually be brief.”
Lord Justice Millet stated further:54
“In my judgement the authorities establish two propositions of general application: (1) the master’s
obligation on receipt of an order is not one of instant obedience but of reasonable conduct; and (2) not
every delay constitutes a refusal to obey an order; only an unreasonable delay does so.”
After these principal discussions the judges examined the facts of the case. They found
that the circumstances constituted reasonable grounds for delay.
Further, there was, in the judgement, a discussion about different categories of
situations where the master’s delay in complying with the charterer’s orders was
justified. Previous case law had established three such categories.55 The first is where
the instructions were unclear, and the master must seek clarification before proceeding.
This exception, from the principal rule of immediate obedience, was easily explained. If
the charterer wants his orders to be obeyed immediately, he must make them plain and
unambiguous. The second is where the master was in possession of information not
available to the charterer which might reasonably be expected to affect his wishes. The
master could then seek confirmation of their instructions before proceeding. This
exception derives from the community of interests of the shipowner and the charterer.
Both parties wish to see the voyage to be successfully completed. The third exception is
where there was reasonable apprehension for the safety, whether physical or otherwise,
to the ship, her crew or cargo. This exception derives from the overriding responsibility
of the master to ensure that the voyages are conducted safely. This responsibility arises
from the master’s position and it is independent of the charterer.
The outcome of the case might, if following this line of reasoning, establish a fourth
category where the master’s delay is justified. Thus, when the master has reason to
doubt the authority of the person giving the order he may seek confirmation before he
obeys the order. However, in the light of the case, and the statements made by Lord
Justice Neil and Lord Justice Millet, there is apparently no reason to suppose that these
four categories of exceptions in any way should be considered to be exhaustive. There
might be other such situations as well.
The Houda [1994] 2 Lloyd’s Rep., pp. 552-3.
The Houda [1994] 2 Lloyd’s Rep., p. 555.
55
The Houda [1994] 2 Lloyd’s Rep., pp. 547, 554.
53
54
32
4.5.4. Conclusions
Thus, it is not up to the master to, unduly, question an order as to the employment of the
ship. He is, however, not always obliged to obey the order immediately. It may, in
certain situations, be unreasonable to demand that the master shall comply with the
order. It may be necessary to grant him time for consideration or enquiry. The
circumstances of each individual case will determine whether such a delay is
acceptable, and if so, the length of it. The starting-point, for an English court, is how a
person of reasonable prudence would have acted in the circumstances.56 The principal
rule should be in line with Lord Justice Millet statement that was quoted above. First,
“the master’s obligation on receipt of an order is not one of instant obedience but of
reasonable conduct.” Second, “not every delay constitutes a refusal to obey an order;
only an unreasonable delay does so.” The consequence of such a view is that one, when
determining if a delay is acceptable, must be look at the circumstances of each
individual case.
I see no reason why these principles should not be the same according to
Scandinavian law. The principle rule and its underlying reasons are valid in there as
well.
4.6. Legal consequences
When a dispute arises over whether one of the charterer’s orders was legal or not, legal
consequences may arise as a result of this dispute. It is possible to categorize these
consequences into three main areas, cancellation of the time charter, off-hire and
damages. Even though it is not the purpose of this paper to discuss and examine the
legal consequences of the charterer’s orders and the master’s response, these
consequences are still important. The master must, when acting and making his
decisions, take the legal consequences of his actions into account. To some extent they
will determine how he acts.
Delay and other breaches on the shipowner’s side are regulated in MC 14:64
paragraph one. It states:
“If… there is delay on her [the ship’s, my note] voyages or other breach on the carrier’s side, the time
charterer may cancel the charterparty, if otherwise the purpose of the charterparty would be essentially
frustrated. …”
The paragraph states that the charterer may terminate the charterparty in case of delay
on the ship’s voyages or because of other breaches by the shipowner, or someone he
answers for. However, such termination is only possible if the purpose of the
charterparty is, because of the breach, considered to be “essentially frustrated”. This
precondition means, in principal, that the contract ceases to be of use for the charterer.57
In practice, all charterparty forms contain an off-hire clause.58 The purpose of these
clauses was discussed in an English case, The Mareva A.S. It was stated that:59
56
Time Charters, p. 291.
Cf. The Anastasia [1971] Lloyd’s Rep., p. 379. Mr. Justice Donaldson’s statement about the master’s
position summarizes the nature of a reasonable master. This statement was also noted in the Houda case.
57
Prop. 1993/94:195, p. 318, SOU 1990:13, p. 211.
Grönfors, Sjölagens bestämmelser om godsbefordran, p. 269.
58
Cf. Gentime cl. 9, NYPE 1993 cl. 17 and Shelltime 4 cl. 21.
59
The Mareva A.S. 1977] 1 Lloyd’s Rep., p. 382.
33
“But I think that the objective is clear. The owners provide the ship and the crew to work her. So long as
these are fully efficient and able to render to the charterers the service then required, hire is payable
continuously. But if the ship is for any reason not in full working order to render the service then required
from her, and the charterers suffer loss of time in consequence, then hire is not payable for the time lost.”
In Scandinavian law the rules concerning off-hire are based on a system of risk
allocation. The rules are found in MC 14:72. The section states:
“Hire shall not be paid for time lost to the time charterer in salvage operations, maintenance of the vessel
and repair of damage for which the time charterer is not liable nor for any other occurrences on the
carrier’s side.
The time charterer’s liability for expenses in the operation of the vessel shall be limited in a
corresponding manner.”
The first paragraph states the underlying principle in Scandinavian law. It originates
from the basic division of functions that applies between the parties. The principle
simply states that the hire runs continuously from the time when the ship is delivered to
the charterer. Thus, the economic risk of not being able to use the ship lies on the time
charterer. The exception, i.e. when the ship goes off-hire, is when time is lost due to
“hindrances on the part of the owner”. It is not a question of fault. If the cause rests with
the owner, or anyone he is responsible for, the underlying reason is irrelevant. It is, after
all, a system of risk allocation.60 The second paragraph is, compared to the old code,
completely new. The paragraph simply states that the time charterer is not obliged to
pay the ship’s operational costs during the off-hire period. The rule should be viewed as
a system of risk allocation between the shipowner and the charterer. It is a consequence
of the rule concerning the freight in the first paragraph.61
Even though the different standard form always contain an off-hire clause they does
not show a uniform practice when it comes to off-hire regulations. The agreed risk
allocation may vary considerable between different forms. Due to this lack of uniform
practice the legal situation may be considered to be somewhat unclear. The regulation in
MC 14:72 may therefore be useful in cases where these clauses are incomplete, unclear
or not sufficiently detailed. The purpose of the regulation is to give the parties and the
courts a paragraph to fall back upon in such cases.62
The time charterer’s right to claim damages is regulated in MC 14:64 paragraph
two. It states:
“The time charterer is entitled to compensation for… loss arising through any fault or neglect in such
assistance by the master or crew as is mentioned in section 61 second paragraph, in the execution of the
time charterer’s instructions or through other breach than such mentioned in the foregoing sentence.”
The shipowner is liable for damages that he, or any person he answers for, causes
through fault or neglect. No rule of presumption applies, it is up to the charterer to show
that damage occurred and that causality exists between the damage and the alleged fault
or neglect.63 It is expressly stated that the shipowner answers for the fault or neglect of
the crew when they perform work for the time charterer. This rule follows the basic
60
Grönfors, Sjölagens bestämmelser om godsbefordran, p. 266. Cf. Falkanger, Introduction to Maritime
Law, pp. 443-5.
61
Prop. 1993/94:195, p. 325, SOU 1990:13, p. 218.
62
SOU 1990:13, p. 218. Cf. Falkanger, Introduction to Maritime Law, p. 443.
63
Prop. 1993/94:195, p. 318, SOU 1990:13, p. 211.
34
division of functions that, according to Scandinavian law, applies between the parties in
a time charter.64
The shipowner’s right to claim damage is regulated in MC 14:65. It states:
“The carrier is entitled to compensation for damage to the vessel due to fault or neglect of the time
charterer or any one for whom he is responsible.
If the time charterer has ordered the vessel to an unsafe port, he shall be liable for any resulting damage
to the vessel unless he shows that there has been no fault or neglect.”
The first paragraph reflects the basic division of responsibility and the burden of risk
that applies according to Scandinavian law. Thus, the principal rule is that the
shipowner stands the risk for damages to the ship unless he can show that the time
charterer, or anyone who he is responsible for, has caused the damage through fault or
neglect.65 The second paragraph, which regulates the charterer’s responsibility to
nominate safe ports only, is somewhat special. It is extensively discussed below (see
5.2.2.).
I will return to these legal consequences below when I believe that they are of
interest for the master’s approach to a given order.
64
65
Prop. 1993/94:195, pp. 318-9. Cf. Grönfors, Sjölagens bestämmelser om godsbefordran, p. 272.
Prop. 1993/94:195, p. 319, SOU 1990:13, pp. 211-2.
35
5. Orders concerning the ship’s destination
5.1. General
There are two questions which must be answered here. First, what is the charterer’s
authority to order the ship to a port that may not be considered safe? Second, what other
limitations may the charterparty contain that limits the charterer’s authority to order the
ship to different ports?
5.2. Nomination of the port of call
5.2.1. General
Since the charterer has the commercial control of the ship he has, quite naturally, the
right to nominate a port of call. The principal rule is that the charterer has an obligation
to nominate only safe ports.66 As long as the nominated port is safe the master is obliged
to obey the charterer’s order. If the port, on the other hand, is clearly unsafe, the master
may refuse to obey the order. It is, of course, possible for the shipowner and the
charterer to explicitly agree to otherwise. If the charterer wishes to take the ship to an
unsafe port, an express clause stating such right could be brought into the charterparty.
When receiving an order to take the ship to a certain port, there are, from the
master’s perspective, three different starting-points. First, the nominated port is safe.
Second, the nominated port is unsafe. Third, it is a doubtful situation; the master does
not know whether the port is safe or unsafe. As long as the port is safe or the order
otherwise is consistent with the charterparty the master is, in principal, obliged to obey
it. The problems arise when the situation is doubtful, i.e. the master does not know
whether the port is safe or not.
5.2.2. The obligation to nominate a safe port
Most charterparties contain a clause that states that the charterer only may order the ship
to safe ports. Examples of this can be found both in the Gentime and the NYPE 1993
forms. Gentime cl. 2 (a), states:
“…The Vessel shall be employed in lawful trades… between safe ports or safe places where she can
safely enter, lie always afloat, and depart.”
NYPE 1993 cl. 5 states:
“The Vessel shall be employed in such lawful trades between safe ports and safe places… as the
Charterers shall direct.”
However, even if there is no clause explicitly stating that the charterer only may order
the ship to safe ports, a court is likely to, by construing the charterparty, impose such a
duty.67 The reason for this is that such a duty usually can be considered to be an implied
condition between the parties. Since the charterer only has the commercial control over
the ship it lies in the nature of the charterparty that he may not expose the ship to
unreasonable dangers. A port that is classified as “unsafe” could per se be considered to
be such an unreasonable danger.
66
67
Cf. Gaskell, Master and Charterer, p. 57, cf. Michelet, Håndbok i tidsbefraktning, p. 74.
Michelet, Håndbok i tidsbefraktning, p. 74.
36
That such a duty exists in Scandinavian law can also be concluded from the
maritime code. The relevant provision is found in MC 14:58 paragraph two. It states:
“The carrier is not obliged to perform a voyage on which the vessel, persons on board or the cargo may be
exposed to danger as a consequence of… any other danger… which he could not reasonably have
contemplated when the contract was concluded.”
MC 14:58 is also discussed extensively elsewhere in the paper (see 6.2.). Here it is the
term “any other danger” that is of interest. The master may, due to the provision, refuse
to obey an order on how to perform a voyage. The scope of the term ought to be
construed so widely that it comprises any type of physical danger to the ship. Thus, it
should comprise unsafe ports.68 Consequently, the master may then, by referring to MC
14:58 paragraph two, refuse an order to take the ship to an unsafe port. The paragraph
must also bee read in its context. MC 14:65 paragraph two, which regulates the
consequences of damage to the ship, is therefore of interest. It states:
“If the time charterer has ordered the vessel to an unsafe port, he shall be liable for any resulting damage
to the vessel unless he shows that there has been no fault or neglect.”
Since the charterer, under MC 14:65 paragraph two, can be held liable, he must be
under an implied duty not to consciously order the ship to a port which he knows, or
suspects, is unsafe. If he issues such a conscious order he may be held liable.
One should also note that the “any other danger” exception in MC 14:58 also is
dependent on a precondition. The master may not refuse the order if the shipowner,
when he agreed to the charterparty, reasonably should have contemplated that such a
danger was likely to arise due to a specific voyage or cargo. 69 However, I believe that
this provision ought to, in these situations, be construed restrictively. The shipowner
must have known, or should have understood, that the charterer intended to order the
ship to a specific port and that the port in question was dangerous. The nature of the
danger and its extent should have been obvious. If these facts were not clear, it would
not be reasonable to consider that the shipowner implicitly have agreed to expose the
ship to the dangerous port in question.70
However, the provision in MC 14:65 paragraph two is not only of importance when
there is no clause in the charterparty regulating safe and unsafe ports. The purpose of
the paragraph is to contribute to the construction of charterparty clauses, foremost
clauses of a guarantee character. Thus, a Swedish court will take the rule and its purpose
in consideration when interpreting such clauses as Gentime cl. 2 (a) and NYPE 1993 cl.
5. The consequence is these clauses will be construed restrictively to the benefit of the
charterer.71
68
Grönfors, Sjölagens bestämmelser om godsfefordran, pp. 254-5.
SOU 1990:13, p. 206.
70
Cf. Michelet, Håndbok i tidsbefraktning, p. 75.
71
SOU 1990:13, p. 212.
69
37
5.2.3. The relevant period of time
The relevant period of time, when the port must be considered to be safe, is during the
time when the ship will be using it. The safety of a port, for a particular ship, may vary
from time to time. Situations may arise where the ship, due to the weather conditions or
other reasons, may not be able to enter the port immediately when it arrives there. Such
temporary obstacles do not make the port unsafe.72 In an English case, The Stork, a
statement was made concerning such temporary obstacles.73
“The law does not require the port to be safe at the very time of the vessel’s arrival. Just as she may
encounter wind and weather conditions which delay her on her voyage to the loading port, so she may
encounter similar conditions which delay her entry into the port, and the charterer is no more responsible
for the one than the other.”
The natural thing for the master to decide whether to obey or refuse the order is at the
point in time when it is given. However, if the port, after the charterer has issued his
order, becomes unsafe at a time when the ship can still avoid the danger, the master is
not obliged to carry out the order. The master may stop the ship before it has entered the
port or leaving the port in order to avoid the dangerous situation.74
5.2.4. Definition of a safe port
5.2.4.1. General
The first question one might ask is whether the place where the ship was ordered to
actually is a port or not. What does it take before a construction becomes a port? That
question is mostly of an academic nature though.75 Looking at the Gentime cl. 2 (a) and
NYPE 1993 cl. 5 they state that the charterer may bring the ship to “safe places” as
well. Under those charterparties it is the factual situation that matters. 76 The important
thing is that the ship is ordered to safe places, if the place fulfils the definition of a port
or not is of no real importance to the shipowner. The same applies according to the
provisions in the Swedish maritime code. MC 14:58 paragraph two states that the
master may refuse an order due to “any other danger”. It is not the place itself that is
important, it is the danger which the place presents that gives the master the right to
refuse the order. Thus, when defining what a “safe port” one is, usually, in practice
trying to determine the definition of a “safe place”.
It is not easy to provide a clear-cut and straightforward definition of the term “safe
port”. The term is wide; there are many circumstances that can make a port unsafe. In
principal there are two types of circumstances which can give rise to dangers that may
affect the ship.77 First, there are natural and navigational hazards which may directly
damage the ship. Second, there are other hazards, such as political unrest and epidemics,
which may expose the ship, her crew and cargo to danger. These hazards are always
relative. For example, a large tanker needs a different kind of port than a small freighter.
Cf. The Sagoland [1932] 44 Ll. L. Rep., p. 138, cf. The Eastern City [1958] 2 Lloyd’s Rep., p. 172.
The Stork [1954] 2 Lloyd’s Rep. 415.
74
Cf. Time Charters, pp. 178, 187-8.
75
Cf. Michelet, Håndbok i tidsbefraktning, p. 74.
76
The NYPE 1946 form is not as clear though. It is, at line 27, stated that the charterer may order the ship
“between safe ports and/or ports”. However, it is stated, at line 68, that the charterer may load or
discharge cargo “in any dock or at any wharf or place”. It seems that the NYPE 1946 form leaves less
room for the charterer to bring the ship to such “safe places” that the Gentime and NYPE 1993 forms
prescribes.
77
Cf. SOU 1990:13 p. 212, cf. Michelet, Håndbok i tidsbefraktning, pp. 74-5.
72
73
38
Thus, the port must be safe for the particular ship in question.78 A statement concerning
the necessity of putting a relative view upon the danger which makes a port unsafe is
found in an English case, The Sagoland. It was therein stated that:79
“…the Port of Londonderry in Northern Ireland was not a safe port within the meaning of the charterparty for the particular ship which was the subject of the charter-party. Let not the finding of the umpire
be misunderstood. It was not a finding that the Port of Londonderry was not an entirely safe port for 99
out of 100 or even a larger proportion of the ships which may seek to resort thereto, but merely that it was
not a safe port for the ship on question, the Sagoland…”
When discussing and examining this subject there are reasons to look towards English
law for guidance. There are numerous English cases which deal with the question
whether a port should be classified as safe or not.
5.2.4.2. The core meaning of a “safe port”
Michelet has expressed the view that one should define a “safe port” as a port that at
least protects the ship against such natural dangers which a good port normally should
protect a ship against.80 In other words, there is then, in a sense, an objective definition
of a safe port. In the individual situation one must look at the ship in question and then
determine whether the port in question provides such a protection for the ship. The core
meaning of the term “safe port” is then that the ship should, when lying in the port, be
safe from such dangers which are usually connected with the sea. The harbour should,
to begin with, be deep enough, i.e. the ship should be able to lie in the port without
being in danger of grounding. Shallows and sandbanks may also damage the ship when
it moves to a particular berth in the port. The port should also be able protect the ship
from the elements, foremost rough waves and hard winds.
A port is not expected to protect the ship in every conceivable situation though. If a
ship is damaged after being exposed to an exceptional storm or some other abnormal
event the damage is not considered to have arisen due to the port being unsafe. The
danger, which renders the port unsafe, must arise out of the port’s own qualities or
attributes, i.e. the port must be inherently unsafe.81
Further, it is not uncommon that there, within a certain port, are certain regulations
which must be followed in order for the ship lie safely. Such regulations do not prevent
a port from being considered safe. An example of this is founding The Sagoland. It was
there stated that:82
“…if it were established also that ships can and do pass through with assistance of tugs and that is an
ordinary method of navigation… then the fact that the entrance to the harbour or port was to narrow to be
passed through by a ship under its own steam would cease to render the port unsafe.”
Thus, if the port’s safety depends on navigational aids, such as pilots, buoys and lights,
such aids may neutralize a hazard which would otherwise constitute a danger to
navigation. However, the aid in question must be adequate, i.e. if it does not neutralize
78
Michelet, Håndbok i tidsbfraktning, pp. 74-5, Time Charters, p. 179.
Cf. The Terneuzen [1935] 52 Ll. L. Rep., p. 148.
79
The Sagoland [1932] 44 Ll. L. Rep., p. 137.
80
Michelet, Håndbok i tidsbefraktning, p. 75.
81
Michelet, Håndbok i tidsbefraktning, p. 75, Time Charters, p. 184.
Cf. [1935] 52 Ll. L. Rep., p. 148, cf. The Evia (No. 2) [1982] 2 Lloyd’s Rep., p. 319.
82
Cf. The Sagoland [1932] 44 Ll. L. Rep., p. 138.
39
the hazard the port is still considered to be unsafe.83 A port may be considered unsafe
for other reasons as well. For example, mooring facilities may be inadequate or the
berth to which the ship is ordered may be dangerous.84 It follows that a danger which
may be avoided by ordinary good navigation and seamanship does not cause the port to
be considered unsafe.85 It was stated in The Polyglory that “the port will be safe if an
ordinarily prudent and skilful master can find a way of reaching it in safety”.86
5.2.4.3. Extended definition of a “safe port”
However, the definition of a “safe port” becomes wider than so if one puts more
criterions in the term than purely navigational hazards. The classical, English definition
of a “safe port” is found in The Eastern City. It was stated that:87
“If it were said that a port will not be safe unless, in the relevant period of time, the particular ship can
reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to
danger which cannot be avoided by good navigation and seamanship, it would probably meet all
circumstances as a broad statement of law. Most, if not all, navigable rivers, channels, ports, harbours and
berths have some dangers from tides, currents, swells, banks, bars or revetments. Such dangers are
frequently minimized by lights, buoys, signals, warnings and other aids to navigation and can normally be
met and overcome by proper navigation and handling of a vessel in accordance with good seamanship.”
This definition has, compared to the Scandinavian view, lead to a narrow definition of a
“safe port”. To begin with, it has been established that the ship must be able to reach the
port in safety. In practice this usually means that the navigable channel or fairway
which leads up to the port in question must be safe.88 If follows, from this line of
reasoning, that the port will not be considered safe if the ship can not depart from it
without being exposed to a danger. It is not clear how far away, after the departure, the
ship must be free from such exposure. However, as long as there is only one possible
route the ship may take when departing, that rout must be free from dangers.89
It has also been established that other perils which endangers the ship may make the
port in question unsafe. It has been held that the risk of hostile seizures or attack en
route to a port may make the port unsafe. It follows that the port also must be
considered to be politically safe. There must no be an absolute political safety though.
The risk of attack or seizure must be sufficiently serious.90
83
Time Charters, p. 183.
Time Charters, p. 182.
Cf. The Houston City [1956] 1 Lloyd’s Rep., p. 6.
85
Time Charters, p. 186.
Cf. The Eastern City [1958] 2 Lloyd’s Rep., p. 131.
86
The Polyglory [1977] 2 Lloyd’s Rep., p. 362.
87
The Eastern City [1958] 2 Lloyd’s Rep., p. 131.
88
Time Charters, p. 180.
Cf. The Sussex Oak [1950] 83 Ll. L. Rep., pp. 304-5.
89
Time Charters, p. 183.
Cf. The Sussex Oak [1950] 83 Ll. L. Rep., pp. 308.
90
Time Charters, pp. 180-1.
Cf. The Saga Cob [1992] 2 Lloyd’s Rep., pp. 550-1.
84
40
5.2.4.4. Conclusions
As can be seen, the English view is quite far from the point of departure, i.e. that one
should define a “safe port” as a port which will protect the ship against natural dangers.
As can be seen from the discussion above, the English definition of a “safe port” is quite
narrow. The scope of the definition is considered to be wider in Scandinavian law. The
difference lies in the fact that it is, according to English law, easier to make the charterer
liable for any damages that arises due to the port. Thus, political and other such risks are
included in the Scandinavian definition.91
A possible explanation to the different scope of the term lies in the legal
consequences of an order to take the ship to an unsafe port (see 5.2.5.). According to
Scandinavian law, the charterer is, if he orders the ship to an unsafe port, only is liable
if his fault or neglect has caused the damage. The underlying reason for this is that it is,
according to the principal rule of risk allocation, the shipowner who stands the risk of
natural and navigational damages. Michelet has suggested that the effectiveness of this
principal rule ought to increase outside the port itself.92 The reason for this is that it is
harder to prove fault or neglect on the charterer’s side when the ship is approaching the
port, i.e. when it sails in navigable channels and fairway. It would be even harder to
prove such fault or neglect when the ship is still on the open sea. Thus, the fact that the
ship may be exposed to dangers on its way to the port, or on its way from it, does not
necessarily make the port itself unsafe.93
5.2.5. The legal consequences of ordering the ship to an unsafe port
It may then, since they will affect the master’s behaviour, be of interest to examine the
legal consequences of ordering the ship to an unsafe port. The legal consequences, of
ordering the ship to an unsafe port, differ between Scandinavian and English law. If the
charterer issues such an order and the ship, as a consequence of this, suffers damage, he
may become liable according to MC 14:65 paragraph two (see 4.6.). This provision
reflects the fact that the time charterer, according to Scandinavian law, does not have a
strict liability for ordering the ship to an unsafe port. Unless he has given an express
guarantee he does not have such strict liability.94 An underlying purpose of the
provision is to contribute to the construction of such charterparty clauses, i.e. the clause
shall be construed in the light of the statutory rule (see 2.5.2.). Thus, a Swedish court
will take the provision and its purpose in consideration when interpreting clauses as
Gentime cl. 2 (a) and NYPE 1993 cl. 5. The practical consequence is then that such
clauses will be construed restrictively to the benefit of the charterer.95 An order to go to
a particular court will then not be considered to contain a guarantee that the port in
question is safe. The order itself is not enough; if such a guarantee shall arise the
charterer must agree to it explicitly. When is the charterer, according to Scandinavian
law, liable then? Liability may, for example, be claimed when the charterer orders the
ship to a port which he knows is or may be unsafe for the ship to call at.
91
Michelet, Håndbok i tidsbefraktning, pp. 82-3, Grönfors, Sjölagens bestämmelser om godsbefordran, p.
263.
92
Michelet, Håndbok i tidsbefraktning, p. 84.
93
Cf. ND 1928.108, p. 111, cf. ND 1935.436, p. 437
94
Prop. 1993/94:195, p. 319, SOU 1990:13, p. 212.
Cf. ND 1972.183, p. 202.
Cf. Michelet, Håndbok i tidsbefraktning, pp. 82-3.
95
SOU 1990:13, p. 212.
41
According to English law the charterer is considered to have warranted the safety of
the port once he has ordered the ship there. The principal rule is then that the charterer is
liable for damages to the ship which arises due to a nominated port being unsafe. Thus,
the master or the shipowner does not, in principal, have a duty to check the safety of the
nominated port before proceeding to it. The charterer is not strictly liable though.96 A
statement of the master’s responsibility is found in the Sussex Oak. It was stated that:97
“…the master should not follow the instructions of the charterers if they led to obvious danger. …The
giving of an order does not necessarily cause the damage that flows from an act done in pursuance of it.
Put more specifically, the decision of the master to obey the order may in certain circumstances amount to
a novus actus interveniens.”
One might ask the question how these differences between Scandinavian and English
law is justified.98 In principal, the difference is based on different beliefs on how the
risk should be allocated. In other words, is it the shipowner or the charterer who shall
bear the risk for a port being unsafe? The principal rule, under a time charter, is that the
shipowner shall bear all nautical risks (see 3.1.). Accordingly, it is the shipowner who,
according to Scandinavian law, bears the risk of damage to the ship unless it was the
charterer’s incautious act that caused the damage. Further, it is the shipowner who
insures the ship and it is the master who makes the final decision to expose the ship for
the danger that is connected with the port in question.99 The fact that it is the charterer
who nominates the port has not been considered to justify an exception from the
principal rule of risk allocation.
The reasoning behind the English solution is different though. Since it is the
charterer who actually orders the ship to the port in question it is considered reasonable
that he bears the risk of the port being unsafe. Thus, the charterer should examine the
port before he orders the ship there. The charterer is also believed to be in a better
position to examine the port than the shipowner or the master. A factor which may have
contributed to the English view is their readiness to include political and other dangers
in the definition of a “safe port”. The nature of these dangers is such that the charterer
may examine the situation in the port in question before ordering the ship there. It
follows, from this view, that it is easier to place the risk of damage on the charterer.
These different legal solutions affect the master’s position. Since an order to go to a
particular port, according to English law, is considered to contain a guarantee that the
port in question is safe, the charterer’s liability is, in principal, strict. This relieves some
of the pressure and responsibility that is usually put upon the master. He knows that the
shipowner, in principal, may make the charterer liable for any damages that will occur
due to the calling at the port in question. If the situation is doubtful, i.e. the master can
not determine whether the port is safe or not, he may satisfy himself by protesting
against the order. That is usually considered to be enough, the charterer can then, in
most cases, be held liable for any consequential damages that arise. The Scandinavian
solution, on the other hand, puts more responsibility upon the master. Since the
charterer only can be made liable if his order constitutes fault or neglect, the master
96
Time Charters, pp. 189-90.
Cf. The Evia (No. 2) [1982] 2 Lloyd’s Rep., pp. 317-20.
97
The Sussex Oak [1950] 83 Ll. L. Rep., p. 308.
98
Cf. Michelet, Håndbok i tidsbefraktning, p. 83.
99
SOU 1990:13, pp. 211-2.
Cf. MC 14:65 paragraph two. The provisions in the paragraph reflect this view.
42
must act prudently during the whole act of calling at the port. Thus, even if the master
would protest against the order, he must still, if obeying it, consider the perceivable
risks when calling. Even though the charterer’s liability is not strict according to
English law, the scope of the master’s responsibility is larger according to Scandinavian
law.
5.2.6. The master’s position
The principal rule is then that the charterer has an obligation only to nominate safe
ports. As long as the nominated port is safe the master is obliged to obey the charterer’s
order. If the port, on the other hand, is clearly unsafe, the master may, unless otherwise
has been agreed, refuse to obey the order. Problems arise when the situation is doubtful,
i.e. the master does not know whether the port is safe or not. In such situations the
master has two principal courses of action. The first is to obey the order. He then
continues to the port and risk, if the port turns out to be unsafe, damage to the ship. If
damage occurs the master must rely on that the shipowner, in some way, is able to make
a successful indemnity claim against the charterer. As was discussed above (see 5.2.5.),
Scandinavian and English law differs on this point. This difference affects the master
and his behaviour. The second course of action is to refuse the order. If he refuses the
order he must contact the charterer and state his reasons for refusing the order.
If the master refuses the given order, the charterer has two courses of action
available to him. The first is to accept the master’s initial refusal, and renominate a port.
If such a renomination is made, and the master accepts the new order, the charterer may
still make a legal claim against the shipowner. He may claim that the ship went off-hire
during the delay and he may claim damages if he has suffered an economic loss due to
the refusal. The second course of action is to insist on the original nomination. If the
charterer does this the master is put back into his original position. The master must,
once again, choose whether he shall accept or refuse the given order. If the master, once
again, refuses to obey the charterer may have enough cause to terminate the
charterparty.
The master’s position, when confronted with such a doubtful situation, is not an
easy one. In certain types of situations, especially when confronted with natural and
navigational hazards, the master is, usually, in a good position to determine the course
of action. He is, after all, onboard the ship. In other situations it may be necessary for
the master to completely leave the decision on how to act to the shipowner. A master
may, for example, not be in a good position to judge the severity and magnitude of an
approaching storm or the political situation in an area. The shipowner, who is a shorebased observer, is usually able to estimate such situations quicker and more correctly.
Thus, he may give instructions to the master in an early stage, before the situation
becomes acute.
43
5.3. Limitations in the charterparty
5.3.1. General
There are three common limitations on the charterer’s right to dispose of the ship. Those
are a limited trading area, an ice clause and a war clause. Since the purpose of these
clauses is to limit the charterer’s freedom to use the ship it is up to the shipowner to
demand that such limitations is agreed upon. After all, it lies in his interest to impose
them. Without such limitations the charterer would, in principal, have the authority to
order the ship anywhere it could safely go.
These clauses are somewhat similar to the “safe port” clauses that were discussed
above (see 5.2.2.). They are all considered to be clauses of a so called guarantee
character, i.e. the charterer is considered to have guaranteed that he will not give an
order that will violate the clause in question. It is because of this similarity I have
chosen to deal with the three clauses in the same chapter as the discussion about safe
ports.
5.3.2. Trading limits
It is common to provide the charterparty with a clause that limits the permissible
geographical scope where the charterer may order the ship.100 This is called the trading
area and the clause limits the charterer’s authority, he may not order the ship outside of
this area.101 The trading area, and its particular limitations, is individually agreed upon
in each charterparty. When coming to this agreement the shipowner’s foremost
consideration is the safety of the ship. If damage occurs the ship is likely to go off-hire.
The owner must also make sure that the ship’s insurance cover is not lost due to that the
ship being ordered outside the geographical scope of the policy. The charterer must, on
his side, consider what type and scope of trade he wishes to employ the ship in before
he agrees on a limited trading area. Thus, when determining the scope of such trading
area it is necessary to draft the clause carefully. Examples of such trading clauses can be
found both in the NYPE 1993 and the Gentime forms. NYPE 1993 cl. 5 states:
“The vessel shall be employed in such lawful trades between safe ports and safe places within…
excluding… as the Charterers shall direct.”
As can be seen the clause is very open. It leaves it up to the parties to agree on a general
trade area and exclusions therein. The Gentime form limits the trading area in more
detail. Gentime cl. 2 (a) states:
“…The Vessel shall be employed in lawful trades within Institute Warranty Limits (IWL) and within the
trading limits as stated in Box 13 between safe ports and safe places…”
The reference to the Institute Warranties the trading area that is allowed according to
ordinary English insurance conditions. The reason for this reference is that the
shipowner shall not, because of the charterparty, be obliged to let his ship go to an area
which his insurance does not cover.102
100
Cf. Falkanger, Introduction to Maritime Law, pp. 430-1, cf. Michelet, Håndbok i tidsbefraktning, p.
72, cf. Time Charters, p. 141.
101
Grönfors, Sjölagens bestämmelser om godsbefordran, pp. 253, 262.
Cf. The Temple Moat [1945] 79 Ll. L. Rep., p. 10.
102
Cf. Grönfors, Sjölagens bestämmelser om godsbefordran, p. 262, cf. Michelet, Håndbok i tidsbefraktning, p. 72.
44
However, what limitations the parties agree upon is, for the purpose of this paper,
not important. What matters are the consequences of such a clause being inserted in the
charterparty. Since the clause limits the charterer’s dispose of the ship it also, quite
naturally, limits the charterer’s authority to give orders concerning the ship’s destination
to the master. Since the charterer is under an obligation not to take the ship outside the
allowed geographical area the master may refuse to obey such an order (see 8.3.5.). 103
5.3.3. Ice clauses
The basic idea behind an ice clause is that the master shall not be under a duty to take
the ship to an icebound port. Under the term also falls the situation where the ship,
while entering or leaving the port, would be endangered due to ice. 104 In the Swedish
maritime code a corresponding provision is found in MC 14:58 paragraph two. It states:
“The carrier is not obliged to perform a voyage on which the vessel, persons on board or the cargo may be
exposed to danger as a consequence of… ice… which he could not reasonably have contemplated when
the contract was concluded.”
Since the time charterer has the commercial control of the ship the principal rule is that
the master is obliged to obey an order to perform a certain voyage. 105 The paragraph
states an exception to that rule though. If the ship, her crew or cargo would be
endangered due to ice the master may refuse to obey the order. There should be no room
for subjective considerations when the master refuses an order due to such a situation. It
is not enough that the master believed, even though on excellent reasons, that the ship
was in danger because of ice. If it later turns out that they misjudged the situation the
refusal was incorrect. The time charterer may then, towards the shipowner, invoke those
legal sanctions which are available (see 4.6.). The exception is also dependent on
another precondition. An order may not be refused if the shipowner, when he agreed to
the charterparty, reasonably should have contemplated the danger (see 5.2.2.).106
Thus, ice clauses are, according to Scandinavian law, considered to be a limitation
of the area which the charterer may order the ship to. The problems that arise are
viewed upon in the same way as the problems which are connected with the charterer’s
obligation to only order the ship to safe ports.107
5.3.4. War clauses
Most charterparties contain a war clause.108 The meaning of these clauses are somewhat
shifting and it is not possible to speak of a uniformed practice. However, the point of
departure of these clauses is that the ship shall not be exposed to any serious danger of
war.109 The different charterparties have different definitions of war, and the term is
usually defined by enumerating different situations which are likely to arise. If such
103
Michelet, Håndbok i tidsbefraktning, p. 73, Time Charters, p. 141.
Cf. Todd [2000] LMCLQ, p. 409.
Cf. The Sussex Oak [1950] 83 Ll. L. Rep., p. 307.
104
Michelet, Håndbok i tidsbefraktning, p. 84.
Cf. Gentime cl. 2 (c) and NYPE 1993 cl. 33. These two clauses may exemplify such ice clauses.
105
Grönfors, Sjölagens bestämmelser om godsbefordran, p. 253.
106
SOU 1990:13, p. 206.
107
Michelet, Håndbok i tidsbefraktning, p. 86.
108
Cf. Gentime cl. 21 and NYPE 1993 cl.32. These clauses may exemplify such a war clauses. It is woth
pointing out that the Gentime clause is, by far, more comprehensive than the one in NYPE 1993.
109
SOU 1990:13, p. 219.
45
situation arises the war clauses grants the shipowner the right to conduct certain
measures to protect the ship. Without a war clause such measures might be considered
to be an illegal deviation.
However, not all standard forms contain such a war clause. A good example of a
form lacking such a clause is NYPE 1946. A Swedish court will, normally, fill out such
a charterparty with the relevant provisions in the maritime code. Only if it is clear that
the parties do not wish to apply the code’s supplemental rules the court will refrain from
applying the so called “normal solution”110 (see 2.5.2.).
The Swedish maritime code contains two sections which are of interest when one
wishes to determine the limitation of the charterer’s right to dispose of the ship in war
situations. The first provision, in MC 14:58 paragraph two, limits the charterer’s right to
give voyage orders. It states:
“The carrier is not obliged to perform a voyage on which the vessel, persons on board or the cargo may be
exposed to danger as a consequence of war, warlike conditions… which he could not reasonably have
contemplated when the contract was concluded.”
The provision is written in a negative way. It limits the charterer’s right to expose the
ship to war and warlike conditions. The discussion above concerning the paragraph is
relevant here as well (see 5.2.2.).
The rule in MC 14:74 paragraph one instead grants a positive right, to the shipowner
and the master, to remove the ship from such a danger. It states:
“If the vessel is at a port or in any other area where war breaks out, warlike conditions occur or the danger
of such conditions increases essentially, the carrier is free to take the vessel immediately from the vicinity
into safety.”
As can be seen the two provisions are in harmony. The master may, with the support of
the former, refuse to take the ship into such area, while the latter conveys a positive
right to remove the ship from the area in question. The two rules complement each other
and grant the shipowner a fairly comprehensive protection against war situations.
Further, the provision in MC 14:74 paragraph one is based upon an appraisement
between the two parties’ different interests. The underlying purpose was to make the
appraisement reasonable and to form the provision so it did not contradict the prevailing
charterparty practice.111
5.3.5. The master’s position
The master must, when receiving a voyage order from the charterer, determine whether
it violates any of the limitations that are put upon the charterer’s right of disposal. In
clear cases there is usually no problem. If the order is legal, i.e. within the charterer’s
authority as stated in the charterparty, he must obey the order. If it is illegal he may
refuse to obey it. Problems arise, quite naturally, when the situation is doubtful. There
are, in principal, two factors which may cause such uncertainty and doubt. First, the
master must classify the situation at hand. He must, for example, determine whether the
ice coverage pose an objective danger to the ship. Second, the master must determine
whether the danger is severe enough to allow him to refuse the given order. It is
important to remember that the master, and the shipowner, is obliged to expose the ship
110
111
Michelet, Håndbok i tidsbefraktning, p. 11.
Prop. 1993/94:195, pp. 326-7, SOU 1990:13, p. 219.
46
to certain risks. No voyage can be completely free of risk. What is apparent is that the
master must act with great caution. How other ships in the same area acts is of great
importance. The behaviour of other ships will, without doubt, be used as evidence in a
possible later legal examination.112
The most natural way for the master to act, when in doubt, is to standby and contact
the shipowner. The shipowner may be in a better position to judge the situation and then
issue instructions to the master. One solution, when the situation is unclear, is that the
shipowner instructs the master to give the charterer an oral or written protest. If the
charterer persists the master is further instructed to obey the given order and proceed
despite that the ship may be exposed to danger. If it later turns out that the situation was
dangerous and the ship is damaged due to such a peril, the protest may have legal
significance for the shipowner. The protest may be used as evidence that it was the
charterer’s fault or neglect that caused the damage.113 However, it is important to
remember that the charterer, according to Scandinavian law, is not considered to have
guaranteed the ship’s safety just because he has ordered the ship to a particular place or
area. The principal rule is, after all, that the shipowner, despite the charterer’s order,
stands the risk of the ship being damaged.114 Thus, the master must all the time proceed
with caution. This risk allocation may affect the usefulness of issuing a protest to the
charterer. The apparent drawback with issuing such a protest is that the charterer later
may claim that the master knew about the danger since he, after all, protested against
the order. However, it is, at the end of the day, probably better for the master to issue a
protest than not.115
112
Michelet, Håndbok i tidsbefraktning, p. 86.
Cf. MC 14:65 paragraph one.
114
Cf. ND 1928.11, pp. 11, 14.
115
Michelet, Håndbok i tidsbefraktning, p. 87.
113
47
6. Orders concerning the voyage itself
6.1. General
In the chapter concerning voyage orders I will deal with the type of orders that concerns
the performance of the individual voyage itself. The principal rule is that the charterer is
free to give orders as to the ship’s voyages within the parameters set out in the
charterparty. There is, in a time charter, a fundamental division between the authority of
the charterer and the master concerning the control over the ship. The charterer only
controls the commercial use of the ship while the master and shipowner retain the
control over the navigational aspects (see 3.1.). The problem is, not surprisingly, to
determine what a commercial and what a nautical decision is. The questions and
disputes that arise over the charterer’s voyage orders usually reflect the inherent conflict
of interest which exists between the parties to the time charter.
6.2. The charterer’s authority to give voyage orders
There is, in most charterparties, a clause that states that the master is under the time
charterer’s orders. Such clauses are found in both the Gentime and the NYPE 1993
forms. Gentime cl. 12 paragraph one states:
“The Master… shall at all times during the currency of this Charter Party be under the orders and
directions of the Charterers as regards employment, agency or other arrangements. The Master shall
prosecute all voyages with due dispatch…”
NYPE 1993 cl. 8 states:
“(a) The Master shall perform the voyages with due despatch and shall render all customary assistance
with the Vessel’s crew. The Master… shall be under the orders and directions of the Charterers as regards
employment and agency… “
As can be seen, the two clauses are worded in a similar way. The language may, at first
sight, appear to give the charterer a wide-range authority over the master and the ship.
However, these clauses must, due to the nature of the time charter, be interpreted
restrictively.116 Both clauses uses the terms “employment and agency” in order to
describe the time charterer’s authority. That expression is considered to refer to
commercial orders only.
The principal rule in Scandinavian law is in concordance with the developed time
charter practice which is reflected in the Gentime and NYPE 1993 clauses. The
charterer acquires, after the initial delivery, the commercial control over the ship while
the shipowner maintains the nautical control.117 This may, indirectly, be concluded from
the regulation in MC 14:52 paragraph one. It states:
“The time carrier shall place the vessel at the time charterer’s disposal at the place and time agreed.”
The delivery of the vessel constitutes the boundary line, in place and time, where the
basic division of functions, between the parties to the time charter, begins to apply (see
3.1.). A consequence of this is that the charterer assumes the commercial risks of the
116
Falkanger, Introduction to Maritime Law, pp. 432-33.
Prop. 1993/94, p. 307, SOU 1990:13, p. 202, Grönfors, Sjölagens bestämmelser om godsbefordran, pp.
253-4.
117
48
ship’s operations.118 There is one section in the Swedish maritime code that is directly
concerned with such types of voyage orders. MC 14:58 paragraph one and two states:
“During the period of charter the carrier shall perform the voyages which the time charterer orders in
accordance with the charterparty. …
The carrier is not obliged to perform a voyage on which the vessel, persons on board or the cargo may
be exposed to danger as a consequence of war, warlike conditions, ice or any other danger or essential
inconvenience which he could not reasonably have contemplated when the contract was concluded.”
As can be seen, the two paragraphs contain distinct rules. The first paragraph, which is
quite general and straight forward, states the principal obligation. The master must obey
the time charterer’s voyage orders as long as these orders are in concordance with the
concluded contract. The second paragraph admits, in certain specific situations, an
exception this principal obligation.119 It is the fourth exception, “any other danger”, that
is of interest here. It is a broad exception, any physical danger, outside the first three
named dangers, ought to be covered by the expression. Thus, the master may, out of
safety considerations, refuse to obey an order. The safety of the ship, her crew and
cargo, takes precedence over the charterer’s right to dispose of the ship (see 4.4.2.).
However, the exceptions in paragraph two are also dependent on another
precondition. If the shipowner, when he agreed to the charterparty, reasonably should
have contemplated that such a danger or inconvenience was likely to arise due to a
specific voyage or cargo, the shipowner may not refuse to obey the order in question.120
The consequence of this is that the shipowner must bear any economic losses that arises,
for example due to that the crew resigns or that the insurer denies to cover the particular
risk that arises.
There should be no room for subjective considerations when the shipowner or the
master invokes one of the exceptions in MC 14:58 paragraph two. If the refusal
objectively falls under one of the exceptions it is correct. It should not be enough that
one of them believed, even though for excellent reasons, that one of the situations in
question were at hand. If it later turns out that they misjudged the situation and refused
to obey a given order, the refusal was incorrect. The time charterer may then, towards
the shipowner, invoke those legal sanctions which are available (see 4.6.).
It is apparent that the master’s conduct must be different depending on the situation.
The master may be well suited to determine if the ship is endangered due to some
navigational and elemental hazards as, for example, a reef, a channel or a storm. The
master is, after all, both experienced in these matters and he is the one that is actually
onboard the ship. However, some form of communication with the shipowner is usually
in place. A shore-based observer has a general view of the situation that the master may
not be able to obtain.
118
Prop. 1993/94:195, p. 307, SOU 1990:13, p. 202.
SOU 1990:13, p. 206, Grönfors, Sjölagens bestämmelser om godsbefordran, pp. 254, 262.
120
SOU 1990:13, p. 206.
119
49
6.3. The separation between commercial and navigational orders
6.3.1. General
The boundary line between commercial orders, i.e. orders concerning the employment
of the ship, and navigational orders is not fixed in the Swedish maritime code. The
provision in MC 14:58 is of no help when one examines and tries to determine this
boundary line. It is possible to look towards English law for guidance though.
6.3.2. The Hill Harmony case
A recent case, The Hill Harmony121, dealt with the issue of the charterer’s voyage
routing orders. The case was, quite naturally, important when looking at, and
classifying, routing orders alone. However, it deals extensively with the nature of
voyage orders in principle and it may serve as a good illustration to the problematic
situation.
The facts of the case were the following: The ship, the Hill Harmony, was chartered on an amended
NYPE 1946 time charterparty, which incorporated the Hague-Visby Rules. The dispute related to two
trans-Pacific voyages. The charterer had ordered the master to take the northerly, more direct “Great
Circle Route”. These instructions were based on an advice which the charterer had received from a
weather routing service, the Ocean Routes. However, the master decided instead to take the southerly,
less direct “Rhumb Line Route”. This resulted in longer voyages and an increase in the bunker
consumption. In total, the voyages took nine days longer than it would, had the master taken the “Great
Circle Route”. The master’s decision was based on the fact that he had experienced bad weather the two
previous times he had taken the northerly route. However, the charterer was not satisfied with the
master’s explanation and they deducted their calculated loss from the hire due to the shipowner. The
shipowner denied liability and commenced an arbitration proceeding in London.
The majority of the arbitrators decided the case in favour of the time charterer. They
found that the charterer’s order was legal. The master had no, or at least not established
any, satisfactory reason that justified his decision to disobey the given order. Thus, the
charterer won the arbitration proceeding. The decision was appealed to the High Court
where judge Clarke, J. preceded. The judge came to the conclusion that such a routing
instruction was an order as to navigation rather than employment. Thus, he reversed the
arbitrators’ decision. Clarke, J. justified his decision in the following way:
“In my judgement an order as to where the vessel was to go, as for example to port A or B to load or
discharge or to port B via port C to bunker would be an order as to employment of which the master
would be bound to follow, subject of course (as all parties agreed) to his overriding responsibility for the
safety of the ship. An order as how to get from where the ship was to port A, B or C would not, however,
be an order as to employment but an order as to navigation. …In my judgement these considerations lead
to the conclusion that a decision to whether to proceed across the Pacific by taking the great circle route
or the rhumb route or course would also be a decision in and about navigation of the vessel and not in and
about her employment.”
The Court of Appeal quoted the essence of Clark, J.’s decision and the court
unanimously upheld his decision. The routing instruction was considered to be an order
as to navigation rather than employment. If this decision had been upheld by the House
of Lords the legal consequences had, from the time charterer’s point of view, been
remarkable.122 If the choice of route would be considered to be an order as to the
navigation the master would not have to justify a decision to take a longer, more time121
122
The Hill Harmony [2001] 1 Lloyd’s Rep, p. 147.
Davies [1999] LMCLQ, p. 461.
50
consuming route than the one requested by the charterer. The master’s discretion on
how to perform the voyages would be wide and the price of such discretion would have
been gained on the charterer’s expense. However, the master and the shipowner are
under an underlying obligation to perform the voyages with “due despatch”.123 This
obligation would, unless the charterparty states otherwise, protect the charterer to some
extent.124
The decision was, however, appealed to the House of Lords.
Lord Bingham stated there that “(i)t is not hard to think of orders which plainly relate to the employment
of the vessel and others which plainly relate to its navigation. It is much less easy to formulate any test
which clearly distinguishes between the two. The charterer’s right to use the vessel must be given full and
fair effect; but it cannot encroach on matters falling within the specialised professional maritime expertise
of the master, particularly where safety or security of the vessel, her crew and cargo are involved. He is
the person, on the vessel, immediately responsible. Technical questions concerning the operation of the
vessel are for him. …I am clear of the opinion that the majority of arbitrators were right to hold that the
orders which the charterers were entitled to give and which (on the arbitrator’s findings) the owners were
bound to comply. This does not mean that the charterers usurped the owners’ navigational responsibility.
…The responsibility for making good, so far as practicable, whatever course is chosen of course remain
with the master and crew, as does that for navigating the vessel safely into and out of port, and responding
to maritime problems encountered in the open sea. But subject to safety considerations and the specific
terms of the charter, the charterers may not only order a vessel to sail from A to B but may also direct the
route to be followed between the two.”
As can be seen from the above the House of Lords came to the conclusion that such a
routing instruction from the charterer should be considered to be an order as to
employment, and not an order as to navigation.
If one compares the House of Lord’s decision with that of the High Court and the
Court of Appeal it is apparent that they came to different conclusions as to where the
boundary line between employment and navigation orders ought to be drawn. The first
two courts drew the distinction between the voyage as such, ordered by the charterer,
and the route chosen by the master to accomplish it. The House of Lords, on the other
hand, regarded seamanship as the crucial factor.125
Lord Hobhouse developed the point in the following way: “The meaning of any language is affected by
its context. …‘Employment’ embraces the economic aspect – the exploitation of the earning potential of
the vessel. ‘Navigation’ embraces matters of seamanship. …What is clear is that to use the word
‘navigation’ in this context as if it includes everything which involves the vessel proceeding through the
water is both mistaken and unhelpful. …where seamanship is in question, choices as to the speed or
steering of the vessel are matters of navigation, as will be the laying off a course on a chart. But it is
erroneous to reason… from the fact that the master must choose how much of a safety margin he should
have between his course and a hazard or how and at what speed to proceed up a hazardous channel to the
conclusion that all questions of what route to follow are questions of navigation.”
As can be seen from the quote, Lord Hobhouse defined the concepts of employment and
navigation in their context. To use the concepts without considering the context in
which they are to be used, as he believed Clark, J. had done, would be erroneous. In the
123
Cf. MC 6:5, 14:64, 14:72, cf. Gentime cl. 12 paragraph one and NYPE 1993 cl. 8.
In The Hill Harmony case the charterparty in question incorporated the Hague-Visby Rules. The
shipowner is not, according to Art. IVr. 2 (a), liable for loss or damage which arises due to deviation. The
consequence of this is that the charterer may only claim damages which have arose due to “unreasonable”
deviations.
125
Cf. Baughen [2001] LMCLQ, p. 178.
124
51
case of voyage orders Lord Hobhouse believed that the concepts of “employment” and
“navigation” must be related to issues of seamanship. If the order concerns seamanship
it should be categorized as an order that relate to navigation, if not it would
consequently would fall under employment.
This seems to be a reasonable view on how to use the two concepts of employment
and navigation. To use them without paying heed to the context would, in most cases,
lead to an inexpedient construction of statutes and charterparties. I also believe that a
Swedish court would see it in the same way. If the aim is to discover what purpose a
statute have or what intention the parties to a contract had with a certain clause, it is
necessary to construe words and concepts in the light of the context in which they are
used (2.5.2.). Thus, I believe that The Hill Harmony case is relevant to Scandinavian
law as well. I see no reason why a Scandinavian court would come to the conclusion
that a routing order would be anything else than an order as to the employment of the
ship.
6.4. The master’s position
When receiving an order on how to perform or execute the voyage itself, the master
must first determine whether it is an order as to employment or as to navigation. If the
order can be considered to be an order as to the employment of the ship the principal
rule is that the master is obliged to obey the order. However, there are exceptions to this
rule. The master may justify a contrary position on, for example, the grounds of safety.
These exceptions limit the charterer’s authority (see 4.4.). If the order, on the other
hand, concerns the navigation of the ship it follows, since the charterer has no authority
to give such an order, that the master is not obliged to obey the request. The
navigational decisions are reserved for the master and the shipowner. This is, under a
time charter, the furthest limit of the charterer’s authority (see 3.1.).
It is, as can be seen from the discussion above, not an easy task to draw the
boundary line between the two types of orders. In order to separate the two categories of
orders Donald Davies has expressed the view that “(e)mployment… should be looked
upon as the “strategy”, while strict navigation matters should be considered as “tactics”
which are relevant to the implementation of the strategy.”126 The former is the overall
decisions that are part of the commercial background to the charter. Examples of such
decisions are to take the ship from port A to B and what general route the ship shall take
during the voyage. The latter has to do with decisions on route, i.e. decisions on how to
accomplish the charterer’s order. Examples of such decisions are how the ship shall
pass a reef, avoid a severe storm or call at the port of destination. The House of Lords
referred to, in their decision in The Hill Harmony case, the concept of “seamanship”.
This was considered to be the crucial factor when the court categorized a routing order
as an order of employment. It was stated that it is only possible to categorize the
master’s decision as a navigational decision when it includes some element of
“seamanship”. If there is no such element the master’s refusal to obey an order would
encroach upon the charterer’s right to use the commercial capacity of the ship. These
two sets of guidelines well reflect the commercial nature and the underlying purpose of
the time charter. The basic division of functions between the parties and the risk
allocation which follows from that division are, through the guidelines, considered.
126
Davies [1999] LMCLQ, p. 463. Even though concerning routing orders the statement has a general
applicability. Thus, it can be used as a yardstick when examining other types of voyage orders as well.
The article was referred to by the House of Lords in The Hill Harmony case.
52
The principal rule, when the master is faced with an order as regards the
employment of the ship, is then that he is obliged to obey it. However, as has been
mentioned above, the master may justify a refusal, i.e. he may always show that it was
not reasonable for him to follow the order.127 The security of the ship, her crew and her
cargo always take precedence before an order as to the employment of the ship. It is the
shipowner, and the master, who has the burden of proving that the refusal was
reasonable though. If they, on the balance of probabilities, can justify such a decision
the charterer is prevented from invoking any legal sanctions. However, the master may
not, as the master in The Hill Harmony case did, use an unjustifiable excess of
caution.128 The master is, after all, expected to expose the ship to certain perils; such
perils are inherited in the trade. Thus, a voyage can never be completely without any
risk. When determining what kind of risks the master is expected to accept one must
look at the circumstances in each individual case. If the master can not establish such
reasonable grounds, i.e. to show that compliance with the charterer’s voyage order
would have endangered the ship, the shipowner will be exposed to the charterer’s legal
claims (see 4.6.).
127
Cf. Davies [1999] LMCLQ, p. 461, Baughen [2001] LMCLQ, p. 179, Davenport [1998] LMCLQ, p
504.
128
An example of such an overcautious master is found in The Hakefjord case (see 4.4.2.).
53
7. Orders concerning the loading and discharging process
7.1. General
There are, in principal, two questions which arise in these situations. First, what kind of
orders may the charterer give concerning the loading and discharging processes?
Second, what kind of cargo may the charterer order the master to transport onboard the
ship? I will deal with these two questions separately.
7.2. The loading and discharging process
7.2.1. The charterer’s control
The question that is important here is to what extent the charterer may direct and control
the loading and discharge processes. The charterer’s and the master’s different positions
during these processes may be regulated in the charterparty. Such clauses are found in
both the Gentime and the NYPE 1993 forms. Gentime cl. 12 paragraph one states:
“The Master… shall at all times during the currency of this Charter Party be under the orders and
directions of the Charterers as regards employment, agency or other arrangements. The Master shall…
supervise loading and discharging operations to ensure that the seaworthiness of the Vessel is not
affected.”
NYPE 1993 cl. 8 (a) states:
“The Master shall… render all customary assistance with the Vessel’s crew. The Master shall… be under
the orders and directions of the Charterers as regards employment and agency; and the Charterers shall
perform all cargo handling, including but not limited to loading, stowage, trimming, lashing, securing,
dunnaging, unlashing, discharging and tallying, at their risk and expense, under the supervision of the
Master.”
These clauses establish three things. First, the loading and discharge operation is the
charterer’s responsibility.129 Second, the charterer may demand that the master and the
ship’s crew render him customary assistance and participates in these operations. This
obligation was discussed above (see 4.1.2.). Third, the master shall supervise the
loading and discharge operations. It is only the third point that is of interest here. The
Gentime clause expressly states that the master shall ensure that the ship remains
seaworthy after the cargo operation. Thus, the master must, if there is a risk that the ship
becomes unseaworthy, step in and direct the operation himself. Such an overriding right
is not expressly stated in the NYPE 1993 clause. It is, however, considered to be
implied in the charterparty that the master may stop the operation if there is such a risk.
The consequence of this is, of course, that the charterer’s right to give orders concerning
the loading and discharge operation is limited. He may not give an order if there is a
risk that the ship, as a consequence of the order, becomes unseaworthy.
129
This is not expressly stated in the NYPE 1946 form (see line 76-9). However, a court will usually
construe the charterparty is such a way that it puts the responsibility for the loading and discharge
operations on the charterer.
Cf. Michelet, Håndbok i tidsbefraktning, pp. 127-8, cf. Time Charters, p. 303.
54
The Swedish maritime code regulates this type of order in MC 14:61 paragraph one
and two.130 The section concerns both the loading and the discharge operation. It states:
“The time charterer shall be in charge of reception, loading, stowage, trimming, securing, discharge and
delivery of the cargo. Stowage shall be so performed that the vessel is safely stabilised and the cargo
secured. The time charterer shall follow instructions of the carrier concerning the distribution of the cargo
on board as far as required for the vessel’s safety and stability.
The time charterer may require such assistance by the master and crew as is customary in the trade in
question. Compensation for overtime work and other special expense for such work shall be paid by the
time charterer.”
The principal rule, as stated in paragraph one, is that the charterer is in charge of the
loading and discharge operations. He may also, according to paragraph two, require that
the master and the ship’s crew to assist him during the operations (4.1.2.). However, this
right to give orders has expressly been limited. The ship’s “safety and stability” may not
be endangered by the charterer’s orders. The underlying reason for this limitation is that
the shipowner, throughout the charter period, retains the nautical responsibility of the
ship.131
7.2.2. The definition of seaworthiness
Apparently the master may refuse to obey an order on how to conduct the loading or
discharge operation if the ship’s safety is endangered. What limits the charterer’s right
to give an order then depends on how “seaworthiness” or “safety and stability” is
defined. Seaworthiness is a relative term; its definition varies according to the context.
When defining it one has to consider the type of voyage, the type of cargo to be
transported and the time of the year.132 It should be noted that seaworthiness also can be
a narrow or a broad concept. The narrow, technical sense means that the ship shall be in
a condition to perform the planned voyage without endangering human life. The broad
sense means that the ship shall also be cargoworthy, i.e. the ship shall be in such a
condition that the cargo is expected to reach the planned port of discharge
undamaged.133
Looking at the expression “the vessel’s safety and stability” in MC 14:61 one can
conclude that it means that the ship shall be seaworthy. The question is, however,
whether it is seaworthiness in the broad sense or just in the narrow that is covered by the
section. It is possible to argue that the charterer shall, since he has the commercial
control over the ship, be able to, if he wishes, endanger the cargo. The charterer may,
for example, wish to leave a port quickly. If this means that the cargo risk being
damaged during the voyage he may believe it is worth it. This was the legal order
according to the old maritime code.134 However, the paragraph in the new maritime
code should be read to mean seaworthiness in the broad sense. There are two reasons for
this. First, the shipowner is, according to MC 13:24, responsible for the goods while it is
130
Prop. 1993/94:195, p. 315, SOU 1990:13, p. 208. The two paragraphs are formed after the basic
division of functions between the shipowner and the time charterer which is considered to be common
practice. Thus, the purpose of the paragraphs is not to change the prevailing practice.
131
Prop. 1993/94:195, p. 315, SOU 1990:13, p. 208.
Grönfors, Sjölagens bestämmelser om godsbefordring, pp. 257-8.
132
SOU 1990:13, p. 136.
Cf. ND 1919.364, pp. 366-7, cf. ND1975.85, pp. 91-2, cf. ND 1987.229, p. 233.
133
SOU 1990:13, pp. 135-6. Cf. Falkanger, Introduction to Maritime Law, pp. 290-1.
134
Grönfors, Sjölagens bestämmelser om godsbefordran, p. 258.
55
in his custody. If the goods are damaged he may, according to 13:25, be held liable
towards a third party. These rules are, due to the reference in MC 14:5, mandatory.
Since the shipowner may be held liable for any damage to the cargo it seems reasonable
that the master may make sure that the cargo is distributed in such a way that the risk of
damage is acceptable. Second, further support for this view is found in the preparatory
works. It is stated that the purpose of the term “seaworthiness”, in the new code, shall
cover seaworthiness in the broad sense. The previous distinction between seaworthiness
in the broad sense and the narrow, technical sense had ceased to serve its purpose. Thus,
the term is relative.135
7.2.3. The master’s position
The master’s part in the loading and discharging process is important. Even though
these operations are the charterer’s responsibility it is the master’s duty to supervise it.
Both the Gentime and the NYPE 1993 forms explicitly state that the master shall
perform such supervision. However, since the there are safety aspects involved the
master is entitled to such supervision irrespective of the clauses in question. This right is
expressly stated in MC 14:61, but it would otherwise follow from the nature of the time
charterparty.136 Thus, when receiving an order which concerns the loading or discharge
of the cargo the master must determine whether the order may affect the seaworthiness
of the ship. If there is an evident risk that the ship, because of the operation, risks
becoming unseaworthy the master may refuse the order.
7.3. Orders concerning the disposal of the ship’s transport capacity
7.3.1. General
The ship itself, for example its’ type, condition, and internal lay-out, will set certain
restrictions on what type of cargo the ship in question can transport. For example, oil
must be carried in a tanker and fresh fruit can only be carried on a reefer vessel.137
However, the charterparty itself usually sets further limitations on what type of cargo
the charterer is allowed to transport. It is common to provide the charterparty with a
clause stating that the charterer shall not be allowed to transport unsuitable, dangerous
or illegal goods. Such clause limits the charterer’s right to dispose of the ship’s transport
capacity.138
The consequence for the relationship between the time charterer and the master is
given. The master is not obliged to obey an order that would lead to that such excluded
cargo is transported on the ship. If the charterer, despite this, orders the master to
undertake such a transport and the shipowner either are unaware of this or instructs the
master to obey the order under protest, the shipowner may later claim damages. Such
damages would consist of an additional remuneration based on the difference between
the agreed hire and the current market rate for carriage of the excluded cargo.139
However, even though the consequence may seem clear-cut and straightforward enough
there are numerous problems. To begin with, the master must classify the cargo that the
charterer wishes to carry onboard the ship. He must also determine whether the cargo in
135
SOU 1990:13, pp. 135-6.
Time Charters, p. 305. Such a right to supervise cargo operations exists in English law as well.
Cf. The Panaghia Tinnou [1986] 2 Lloyd’s Rep., p. 591.
137
Cf. Falkanger, Introduction to Maritime Law, p. 431.
138
Cf. The Sussex Oak [1950] 83 Ll. L. Rep., p. 307.
139
Time Charters, p. 166.
136
56
question is unlawful, dangerous or otherwise excluded by the charterparty. The master
must then determine how he shall act. As usual, problems arise in uncertain situations,
i.e. when the master faces a situation where he is unsure of how the cargo shall be
classified.
7.3.2. Unlawful cargo
7.3.2.1. General
The majority of charterparties also contain a clause that states that the charterer only
may carry lawful goods onboard the ship. His right to dispose of the ship’s transport
capacity is limited to such goods. An example of such clauses is Gentime cl. 2(a) and 3
(a).140 The clauses states:
“The vessel shall be employed in lawful trades within…”
“…The Vessel shall be employed in carrying lawful cargo. …”
It also follows from general legal principles that he may not order the master to
undertake to transport unlawful cargo. The charter can, after all, not demand that the
master, or the shipowner for that matter, shall commit an unlawful act. In the Swedish
maritime code there is one paragraph, MC 14:58 paragraph two, which concerns these
situations. It states:
“The carrier is not obliged to perform a voyage on which the vessel, persons on board or the cargo may be
exposed to danger as a consequence of… or any other… essential inconvenience which he could not
reasonably have contemplated when the contract was concluded.”
The exception, “any other essential inconvenience”, aims at situations where the ship is
not in any direct danger of sustaining physical damage. It is applicable if the ship, due
to the charterer’s order, is put in an economic peril. Examples of such perils is if the
ship would risk being withheld or arrested in a port, become subjected to an embargo or
being subjected to a future boycott or embargo due to the political conditions in an
area.141 The foremost use of this provision is in situations where the charterer orders the
master to load and transport cargo which is considered to be unlawful (see 4.4.4.). If
that is the case the master may, with the support of MC 14:58 paragraph two, refuse the
order. The provision is dependent on another precondition though. If the shipowner,
when he agreed to the charterparty, reasonably should have contemplated that such a
danger or inconvenience was likely to arise due to a specific voyage or cargo, the
shipowner may not refuse to obey the order.142 Thus, in certain situations the master
may not refuse to transport unlawful cargo.
140
Cf. NYPE 1946 line 24-5 and NYPE 1993 cl. 4.
Prop. 1993/94:195, p. 313, SOU 1990:13, p. 206, Grönfors, Sjölagens regler om godsbefordran, pp.
262-3.
142
SOU 1990:13, p. 206.
141
57
7.3.2.2. Various situations when cargo can be classified as unlawful
The problem is then how to define lawful and unlawful cargo. There are a number of
different situations where the goods, or the transport of it, could be considered to be
unlawful. These situations could be classified into the following categories:143
1. It is illegal according to the law in the country where the loading port is situated.
There could, for example, be a ban on the export of the goods.
2. It is illegal according to the law in the country where the planned port of
discharge is situated. There could, for example, be a ban on the import of the goods.
3. It is illegal according to the law of the ship’s flag.
4. It is illegal according to the law in the country domicile of the shipowner or the
charterer.
5. It is illegal according to the law of the country which law shall apply according to
the charterparty.
6. A court may consider that some types of goods always should be considered to be
unlawful, despite the relevant laws and regulations.
The first and second situations have a reasonable straightforward solution. If the goods
itself, or the export of it, is unlawful according to the laws, rules or regulations in the
country where the port of loading is situated, the goods should be considered to be
unlawful.144 The same applies if the goods itself or the import of it is unlawful in the
planned the port of discharge. The charterer can not demand that the shipowner shall
undertake such a transport. It will not make a difference if the charterparty explicitly
states that a particular type of cargo, which is unlawful in these situations, shall be
transported. A Swedish court would not uphold such a clause since it follows, from
general legal principles, that a contract that states that one of the parties shall commit an
unlawful act can not be enforced in courts.145
A good example of the second situation is found in The Dodecanese.146
The facts of the case were the following: The time charterer used the ship, the Dodecanese, to transport
military stores and ammunition to the British expeditionary forces in Egypt in 1951. Because of this
transport the ship was black-listed by the Egyptian authorities. On its way from the port of discharge the
ship’s engine broke down. Because of the previous black-listing the Egyptian authorities refused to allow
any repairs to be done in any Egyptian port. It took, due to this, thirty days to repair the ship. The
charterer claimed that the ship went off-hire during this delay while the shipowner demanded hire to be
paid for the whole period.
The court ruled in favour of the shipowner. The court stated:147
“It is clear that if any real meaning is to be given to the words “lawful merchandise” which are, of course
inserted into the charter-party for the protection of the owners, the goods loaded without breach of the law
in force at the port of loading. Inasmuch as the master is under the general orders of the charterer as to
where a cargo shall be carried within the charter limits, it is at least logical to suppose that the charterer
undertakes that the cargo shall also be the type of cargo which can be lawfully carried and discharged at
143
Michelet, Håndbok i tidsbefraktning, pp. 88-91.
Michelet, Håndbok i tidsbefraktning, p. 88, Time Charters p. 165.
Cf. Shelltime 4, cl. 40. The clause explicitly exempts such transports.
145
Adlercreutz, Avtalsrätt I, section 10.1, Lehrberg, praktisk juridisk metod, pp. 101-4.
146
The Dodecanese [1953] Lloyd’s Rep., p. 47.
147
The Dodecanese [1953] Lloyd’s Rep., pp. 55-6.
144
58
the port to which he has ordered the vessel to proceed. …If the cargo could not lawfully be discharged at
the port where the charterers ordered it to be discharged it was not, in my opinion, lawful merchandise.”
This line of reasoning is valid according to Scandinavian law as well.
The third and fourth situation may be examined jointly. A country which the parties
to the contract or the ship itself is connected too may pass a general law that deems the
cargo, or the handling of it, to be unlawful. The two situations may be illustrated by two
questions.148 First, the law according to the ship’s flag may state that ships which are
registered in the country are forbidden to undertake certain types of transports. Such a
law could be, and most likely is, part of a sanction measure. That such law makes the
cargo unlawful for the shipowner to handle is clear. The question is whether the
shipowner is able to refuse to undertake a transport because of the law of the ship’s flag.
Second, the law of the charterer’s or the shipowner’s home country could in, a similar
way, lay down that the particular types of transports are unlawful. The question is then
whether the shipowner is able to invoke such a law in order to refuse the transport in
question, i.e. is he able to avoid the charterparty because of the laws in the parties’
respective home countries? The prevalent position, in Scandinavian law, seems to be
that the shipowner, legally, can refuse to undertake the transport in all of these three
situations. Michelet has justified this position by suggesting that, besides strict legal
aspects, commercial factors shall be taken into account when one determines whether a
particular type of goods is lawful or not.149 Thus, one should, in order to determine
whether a particular cargo is classified as unlawful, look at the consequences for the
shipowner if he undertakes the transport. This should be the principal rule and this view
is in line with the provision in MC 14:58 paragraph two (see 7.3.2.1.).
The most common situations where these problems arise are in cases of boycotts,
i.e. economic sanctions against one or more countries. A boycott could either be purely
national or more wide-spread and, thus, international. The most wide-spread, and
probably most efficient, boycotts are those imposed by the UN. If a shipowner violates
an imposed sanction he may suffer severe economic consequences. The shipowner is, if
the violation becomes known, likely to risk being fined or getting his property
confiscated. The most typical measure would be to arrest the ship if it enters a port in a
country which laws has been violated. Even if the shipowner does not suffer any
immediate consequences the violation may still affect him. If a country is aware of the
violation and its authorities are determined to punish the shipowner, that country and its
ports would be effectively blocked to the shipowner. He could not trade in the country’s
ports since he would risk getting his ship arrested if he did. Because of these
consequences it may seem reasonable that the shipowner may refuse to let the charterer
undertake a transport that is likely cause such consequences.
This line of reasoning may not be taken too far though. Even if violating a boycott
may have economic or legal consequences for the shipowner he may not always be able
to avoid the charterparty because of it. One must bear in mind that the shipowner, after
all, has agreed to put the ship’s commercial capacity at the charterer’s disposal. From
the time charterer’s point of view, it would seem unreasonable if the shipowner had, by
referring to different boycotts, too much discretion to avoid the charterparty. Michelet
seems to believe that there are situations when the shipowner no longer can refer to the
law of his own country in order to undertake a transport. If the ship is owned by
148
149
Michelet, Håndbok i tidsbefraktning, pp. 89-90.
Michelet, Håndbok i tidsbefraktning, p. 89.
59
Swedish interests but registered in a foreign country, the shipowner should not be able
to refuse a transport due to a purely national boycott.150 That a Swedish shipowner
strives after abiding Swedish law is quite naturally. He may in fact, under a boycott law,
also come under a legal obligation to abide the national law. Such an obligation may, by
the home state, be laid upon the shipowner despite that the whole charter operation
takes place outside the country. However, such a legal obligation does not necessarily
release the shipowner from his obligations according to the charterparty. The prevalent
position, in Scandinavian law, seems to be that if a shipowner agrees to a charterparty,
in which he puts the ship at the charterer’s disposal, he can not avoid the contract by
referring to a purely national boycott. Such boycott does not set aside the clauses in the
charterparty.151 However, if a boycott is declared by the UN, it must be respected. A
transport in violation of such a boycott would always be considered to be unlawful.152 In
principal, it all comes down to risk allocation. Which party shall stand the risk of the
goods being classified as unlawful? In cases of purely national boycotts it seems
reasonable to let the shipowner stand the risk. The event can be considered to take place
on the shipowner’s side and the charterer is, after all, in no position to foresee such a
boycott. Since an international boycott is an event that affects the world’s entire
merchant fleet it seems, in that situation, reasonable to let the charterer stand the risk for
that event. It would, after all, not have mattered for the charterer if he had chartered a
ship from a different shipowner, all time charters are affected by such an event.
The fifth situation does not have an easy answer. Should one, when determining
whether the transport is lawful or not, consider the law that governs the charterparty?
The view in English law seems that the master may refuse the cargo if it is unlawful
under the proper law of the charter. This is probably the true in Scandinavian law as
well, at least if the ship risks such an economic peril as is covered by the provision in
MC 14:58 paragraph two.153
That leaves the sixth situation. It is possible that certain types of goods always, by
the courts, may be considered as unlawful.154 Narcotics, contraband goods, NBCweapons are examples of such goods. There are no Scandinavian or English cases on
that subject though.
7.3.2.3. Conclusions
As can be seen from the discussion above, it is hard to exactly pin down what the
Scandinavian law prescribes on this subject. Especially the third and the fourth
situations may seem to be a bit unclear. To separate between boycotts issued by the
shipowner’s home state and the UN may seem to be a bit arbitrary and inconsistent.
However, it all comes down to risk allocation. One must determine whether it is the
shipowner or the charterer who shall stand the risk of certain types of goods or trade
being declared to be unlawful.
150
Michelet, Håndbok i tidsbefraktning, p. 89.
Michelet, Håndbok i tidsbefraktning, p. 89.
Cf. Time Charters, p. 165. It should be noted that the prevailing view in English law seems to be that
the master may refuse the cargo if it is, for any reason, unlawful under the proper law of ship’s flag.
152
Michelet, Håndbok i tidsbefraktning, p. 89.
153
Time Charters, p. 165. Cf. Michelet, Håndbok i tidsbefraktning, p. 90.
154
Cf. Michelet, Håndbok i tidsbefraktning, p. 90.
151
60
As was stated in the section above, Michelet has suggested that, besides strict legal
aspects, commercial factors shall be taken into account when one determines whether a
particular type of goods is lawful or not. In other words, the master may refuse to
transport unlawful cargo if the shipowner may suffer economic damages thereof.155 This
statement is in line with the provision in MC 14:58 paragraph two. Thus, the master
may refuse to transport goods on two grounds. First, if the goods would expose the ship
and the shipowner to direct intervention from the authorities, for example that the ship
risks being arrested in a port. Second, if the goods would expose the ship or the
shipowner to other economic sanctions, for example a boycott. However, this risk
should be serious and the economic risk should be perceptible, i.e. the economic
sanction should have a sufficiently connection to the time charter.
As was stated above, a purely national boycott could then, if laid down by the
shipowner’s home country, never constitute a valid reason for the shipowner to refuse a
transport. However, if the shipowner violates such a boycott he may very well both
expose himself to direct intervention from the authorities or other economic sanctions.
The consequence of the Scandinavian solution is that such risks are always considered
to be borne by the shipowner. One may then ask the question why the laws issued by
the ship’s flag state constitute a valid reason for the shipowner to refuse to undertake a
transport. The underlying reason for this should, as follows from the discussion, be that
the laws of the ship’s flag state always is considered to be so closely connected to the
charterparty that the shipowner is able to refuse a transport by referring to such a law.
7.3.3. Dangerous cargo
7.3.3.1. General
The Swedish maritime code contains one paragraph which regulates the shipowner’s
obligation to transport dangerous goods. The issue is covered by MC 14:58 paragraph
three. It states:
“The carrier is not obliged to load goods of an inflammable, combustible or corrosive nature on board or
the cargo or other dangerous goods, unless delivered in such condition that they can be carried and
delivered in accordance with the requirements and recommendations prescribed by the authorities of the
country where the vessel is registered, of the country where the managing owner has his main office and
of the ports called at on the voyage. Nor is the carrier obliged to bring live animals on the voyage.”
The corresponding rule in the old MC, 142 §, simply stated that the shipowner could
refuse to transport dangerous goods onboard the ship. The current regulation gives the
charterer the right to transport such goods if it can be done safely. The reason for this
change, in favour of the charterer, is the development that has occurred in the industry.
Today, the modern industrial society requires transports of such goods in a much higher
extent than was the case earlier in the century. With the increasing need of these types
of transports a comprehensive system of, both national and international, security
regulations has developed. Since such goods today may be transported safely it is not
unreasonable to require that a chartered ship shall transport them.156 The principal rule
is therefore that the shipowner is obliged to carry dangerous goods if the time charterer
has made sure that the goods can be transported safely. In principal, the charterer fulfils
this requirement by making sure that the goods are packaged in such a way that there is
155
156
Michelet, Håndbok i tidsbefraktning, p. 89.
Prop. 1993/94:195, pp. 313-4, SOU 1990:13, pp. 206-7.
61
no risk that the goods, for example through leakage or spontaneous combustion, may
damage the ship in any way.
However, in order to make sure that the shipowner shall not come into a conflict
with any official rules and regulations it is stated that the carriage shall be performed in
accordance with those requirements and recommendations prescribed by three different
authorities.157 These are: the authorities of the country where the vessel is registered, the
authorities of the country where the managing owner has his main office and the
authorities of those ports that will be called at during the transport. Even though MC
14:58 is worded in a general way, it is only such official, mandatory decrees that the
shipowner is bound to obey which are considered. The shipowner can not refuse to
transport the cargo by referring to a purely voluntary recommendation.158 The
consequence of the code’s regulation is that the master must, if the time charterer has
fulfilled the code’s requirements, accept an order to transport dangerous goods. If the
shipowner further wishes to limit the time charterer’s authority to carry certain types of
cargo he must make an explicit reservation in the charterparty.159
7.3.3.2. Different types of dangerous cargo
If one construes MC 14:58 paragraph three it is obvious that the purpose of the
paragraph is to allow the shipowner to refuse to transport cargo that may cause damage.
There are two types of damage which may arise as a consequence of dangerous goods.
First, damage may occur to the ship itself, her crew and other cargo. Second, damage
may occur to the surrounding environment, other property or people. Such damage will,
in one way or another, affect the shipowner.
There are, in principal, two types of dangerous cargo. The type that is inherently
dangerous and the type that may, under certain circumstances, become dangerous.
However, to establish an adequate definition of the term “dangerous cargo” is quite
difficult. This is because of the second type of dangerous cargo. Most types of cargo
may, for some reason, be considered to be dangerous. For example, a simple barrel of
syrup may, if it springs leak, cause damage to other cargo. However, such risk is not
enough for a barrel of syrup to be classified as dangerous. The risk of damage must be
more severe than an everyday risk; the potential damage must be severe. Thus, it is
necessary, when determining whether a particular cargo should be classified as
dangerous, to look at the circumstances in each individual case.160 Since it is stated that
the shipowner do not have an obligation to carry “other dangerous goods” the scope of
the paragraph is very broad. Thus, a Swedish court is, because of this broad scope,
permitted to compare the situation, i.e. the cargo and the applicable rules and
recommendations, to the provision’s purpose. Thus, a Swedish court would look at the
possible consequences of transporting the goods in question. If there is a perceptible
risk that damage would occur, the goods would be classified as dangerous.
157
Prop. 1993/94:195, pp. 313-4, SOU 1990:13, p. 207.
Ibid.
159
Cf. Prop. 1993/94:195, p. 314, SOU 1990:13, p. 207.
160
Falkanger, Introduction to Maritime Law, pp. 297-8.
Cf. The Agios Nicolas [1968] 2 Lloyd’s Rep., pp. 60, 62.
158
62
A statement made by Stephen Girvin illustrates the modern approach to dangerous
cargo quite discerningly.161
“…(W)e all would be well advised to adjust our terminology and think in terms of dangerous situations
rather than dangerous cargo, and thus to recognise that the nature of the cargo is only one of the elements
in the complex of facts giving rise to the rights and liabilities of the parties to the adventure.”
7.3.4. The master’s position
As can be seen from the discussion above (see 7.3.2. and 3) it can be quite difficult to
determine whether a cargo shall be classified as unlawful or dangerous. It is even more
difficult to establish when a master may refuse to transport such unlawful or dangerous
cargo. A master will rarely come in direct contact with the cargo before the loading
process begins. He may, however, sometimes receive information at an early stage
concerning what kind of cargo the charterer is planning to transport on a coming
voyage. It might then, on that initial information, be possible for the master to determine
whether he is obliged to transport the goods or not. It is usually not until the loading
commences that it is possible for the master to determine the cargo’s status, i.e. whether
it is unlawful or dangerous. That is, of course, rarely an easy task.162
The master’s choices and possible actions, when receiving the order to load a
particular cargo, may be summarized as follows: First, he must determine whether the
cargo is lawful or unlawful. If the cargo is unlawful he may refuse to transport it. The
master is only obliged to obey such orders that concerns lawful goods. Thus, he may
refuse to load the goods or he may, if the goods all ready have been loaded, unload the
goods. Second, if the goods in question are lawful he must then determine whether it is
dangerous or not. As been stated above (see 7.3.3.1.), the master may not refuse to
transport the goods just because the goods may be considered to be inherently
dangerous.163 If the charterer has followed the prescribed rules and recommendations
which concerns transports of the type of goods in question, the master is obliged to
transport the goods. The master may only refuse the goods if these rules and
recommendations have not been followed. He is neither obliged to load such cargo
onboard the ship or transport it.
It is important that the master acts prudently when making his decision whether to
refuse the goods or not. If the master refuses to take the cargo, and the refusal later turns
out to be unjustified, it may have legal consequences for the shipowner. 164 First, the
charterer may claim that the ship went off-hire during the time it is delayed. Second, the
charterer may also claim damages if he has suffered an economic loss because of the
master’s refusal. If the charterer accepts the refusal and decides to transport some other
cargo he may, if the new cargo pays less, claim damages due to the economic loss.
The master must have good reasons for refusing to load a particular cargo or to
execute a transport. However, the master may be put under a substantial amount of
pressure to, nevertheless, load and transport cargo in question. Even the shipowner
himself may sometimes put such pressure on him. The shipowner is not, after all, keen
on the idea of the ship going off-hire. If the master gives in to the pressure and, despite
the unlawful or dangerous nature of the cargo, undertakes the transport that action might
161
Girvin [1996] LMCLQ, p. 487.
Cf. Michelet, Håndbok i tidsbefraktning, p. 95.
163
Cf. Michelet, Håndbok i tidsbefraktning, p. 93.
164
Cf. Michelet, Håndbok i tidsbefraktning, pp. 94-6.
162
63
have repercussions. The charterer may then, in a later legal proceeding, claim that the
master should have prevented the transport. The charterer will make that claim in order
to avoid becoming liable to the shipowner for any damaged caused by the goods. Since
the master, according to Swedish law, is considered to be the shipowner’s employee
during the time charter period such defence is a valid one. If it succeeds it will
effectively put the whole responsibility for the damage upon the shipowner.165
165
Cf. ND 1915.61, pp. 62-3, cf. ND 1959.55, p. 62.
64
8. Orders concerning the signing of the bill of lading
8.1. General
The handling of the bill of lading may give rise to numerous conflicts between the
shipowner and the charterer. The bill of lading is a vital element in today’s international
trade and it is, for the charterer, necessary that this handling works properly. If it does
not, the charterer may not be able to use the full commercial capacity of the ship. The
charterer’s problem lies in the fact that the issuance and content of the bill of lading lies
within the master’s control.166 One must, after all, remember that the purpose of a
normal timecharter is “to enable the charterers to use the vessels during the period of the
charters for trading in whatever manner they think fit.”167 The charterer’s primary
concern is two things: First, he needs a bill of lading to begin with. Without the bill he
is not able to use the full commercial capacity of the ship. Especially when trading
outside of Europe the bill of lading is an integral part of the commercial transaction.
Second, he may wish to determine the content of the bill in detail. He may, for example,
wish to obtain a so called “clean” bill of lading. The question is then what authority the
charterer has, in different situations, to determine the content of the bill itself.
However, it is not necessarily the master who signs the bill of lading. The charterer
may be granted the authority to sign the bill himself or let one of his agents sign it. Such
right can be expressly stated in the charterparty or it could be granted during the
charterperiod.168 However, that situation lies outside the scope of this paper. Since I am,
for the purpose of this paper, only interested in examining the charterer’s right to give
orders to the master I will leave that situation outside the discussion.
8.2. The master’s obligation to issue a bill of lading
That the master has an obligation to, on request, issue a bill of lading is clear. In the
Swedish maritime code this issue is regulated in MC 14:62 paragraph one. It states:
“The carrier shall issue bills of lading for loaded cargo as ordered by the time charterer in respect of the
voyage he is to perform, on conditions customary in the trade in question. If thereby he incurs liability to
the holder of the bill of lading in excess of what follows from the charterparty, the time charterer shall
indemnify him therefor.”
This paragraph corresponds to the old MC 141 § and there were, when the new
maritime code was implemented, no intention to change the purpose of the section. 169
As can be seen the statutory text states that the charterer can order the master to issue a
bill of lading. However, the master is only obliged to issue bills which comprise
“conditions customary in the trade in question”. It follows that the master may refuse to
sign a bill that contains a clause that is not customary in the relevant trade. What is
customary must be decided in each individual case. There is a similar prerequisite in
English law. According to English law a master may refuse to sign a bill if an
“extraordinary term” has been inserted therein.170
166
Cf. Gaskell, Master and Charterer, p. 59.
Time Charters, p. 327.
168
Cf. Michelet, Håndbok i tidsbefraktning, pp. 374-377.
169
Prop. 1993/94:195, p. 316, SOU 1990:13, p. 209.
Cf. Grönfors, Sjölagens bestämmelser om godsbefordran, p. 260.
170
Cf. Michelet, Håndbok i tidsbefraktning, p. 373.
Cf. The Berkshire [1974] 1 Lloyd’s Rep., p. 188.
167
65
The usual standard forms expressly state that the time charterer shall have the right
to demand that a bill of lading is issued.171 Both the Gentime and the NYPE 1993 forms
contain such a clause. The relevant part of Gentime cl. 17 states:
“(a) …(1) The Master shall sign bills of lading or waybills as presented in conformity with mate’s
receipts. …”
(e) …The Charterers shall pay for and/or indemnify the Owners against any loss, damage or expense
which results from any breach of the provisions of this Clause 17.”
The relevant part of NYPE 1993 cl. 30 states:
“(a) The Master shall sign the bills of lading or waybills for cargo as presented in conformity with mates
or tally clerk’s receipts. …
(b) All bills of lading or waybills shall be without prejudice to this Charter Party and the Charterers shall
indemnify the Owners against all consequences or liabilities which may arise from any inconsistency
between this Charter Party and any bills of lading or waybills signed by… the Master at their request.”
The two clauses are very similar and they lay down an obligation for the master to sign
those bills that are presented to him. The bill must, however, be in conformity with the
receipt issued by the mate or the tally clerk. Even though the clauses may seem to grant
the charterer wide powers to order the master to sign a bill, there are certain limits. The
words “as presented” do not mean that the master is obliged to sign any bill which is
presented to him. A statement concerning the effect of such charterparty clauses are
found in The Berkshire. It was there stated:172
“The effect of such clauses in a charter-party is well settled. In the first place, the clause entitles the
charterers to present to the master for signature by him on behalf of the shipowners bills of lading which
contain or evidence contracts between the shippers of the goods and the shipowners, provided always that
such bills of lading do not contain extraordinary terms or terms inconsistent with the charter-party; and
the master is obliged, on presentation to him of such bills of lading, to sign them on the shipowners’
behalf.”
Thus, the master may, due to the nature of the bill of lading and the time charter, refuse
to sign a presented bill in certain situations.173
171
Cf. Falkanger, Introduction to Maritime Law, p. 451.
The Berkshire [1974] 1 Lloyd’s Rep., p. 188.
173
Michelet, Håndbok i tidsbefraktning, p. 368, Time Charters, p. 325.
172
66
8.3. Orders concerning the content of the bill of lading
8.3.1. General
The charterer may have a number of different requests when ordering the master to sign
a bill of lading. It follows, from the nature of the time charter, that the charterer has
quite an extensive authority to determine the form and content of the bills which he
requests the master to sign. A good starting-point of this discussion and a statement
concerning the charterer’s need of bills of lading is found in The Nanfri. It was there
stated:174
“It is important in this connection to have in mind that the present charters are time charters, the nature
and purpose of which is to enable the charterers to use the vessels during the period of charters for trading
in whatever manner they think fit. The issue of bills of lading in a particular form may be vital for the
charterers’ trade… Furthermore… as is usual in time charters, contains an indemnity clause against all
consequences or liabilities arising from the master signing bills of lading. This underlines the power of
the charterers, in the course of exploiting the vessel, to decide what bills of lading are appropriate for their
trade and to instruct the masters to issue such bills, the owners being protected by the indemnity clause.”
I will, below, examine and discuss some of the more common requests that the charterer
may have when it comes to the content of the bill of lading. The discussion is far from
exhaustive though.
8.3.2. A request to sign a clean bill of lading
The charterer may have an interest to obtain a so called clean bill of lading. The reason
for this is that if the master would clause the bill the document may not be commercial
negotiable. To sign such a clean bill might not, from the shipowner’s point of view, be
such a good idea. If the master fails to clause the bill the shipowner can, because of the
Hague-Visby Rules, be held liable by a subsequent third party holder of the bill.175
According to the Swedish maritime code such responsibility is laid upon the shipowner
and he may be held liable according to MC 13:49 and 50. These rules are, due to the
reference in MC 14:5, mandatory. MC 13:50 paragraph one state:
“If a third party suffers loss through the negotiation of a bill of lading on the faith of the statements
therein being correct, the carrier is liable if he realised or ought to have realised that the bill of lading was
misleading to a third party. In such situation there is no right to limitation of liability under this chapter.”
A possible solution in this situation would be if the charterer agreed to indemnify the
shipowner for any economic loss he would suffer because of an issued clean bill. Such
an agreement is called a “back letter” or a letter of indemnity. However, such solution is
not permissible according to Scandinavian law. MC 14:51 paragraph two176, which also
is a mandatory provision, states:
“If the sender has undertaken to indemnify the carrier for loss which arises from the issue of a bill of
lading with incorrect statements or without reservations, he is nevertheless not liable if this has been done
with intent of misleading a holder in due course of the bill of lading. Nor is the sender liable in such cases
according to the first paragraph.”
The Nanfri [1979] 1 Lloyd’s Rep., p. 206.
The Hague-Visby Rules art. III r. 4.
176
The paragraph is modelled after the Hamburg Rules art. 17.
174
175
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In principal, the paragraph states that all of the shipowner’s claims against the charterer
will be lost if such claim derive from any criminal collaboration when issuing the bill of
lading. Thus, if the master signs a clean bill of lading, knowing that the cargo is
damaged, such behaviour would be considered fraudulent. Thus, the shipowner may not
rely on a “back letter” or a letter of indemnity in order to claim indemnification from the
charterer. Such an agreement can not be invoked in a Scandinavian court. Nor can the
shipowner base such a recourse action on any statute. Thus, the shipowner has no means
to, through a legal action, claim indemnity from the charterer.177 Since the shipowner,
due to the mandatory rules, may become liable for such an issuing, the charterer can not
demand that the master shall sign a clean bill of lading. The master may refuse to sign
such a presented bill if the goods are damaged or in an unfit condition. The same applies
according to English law.178
8.3.3. Other misstatements in the bill
The charterer may also request that the master shall sign a bill of lading that contains
other misstatements than the condition of cargo. There are a number of such possible
statements. To begin with, the charterer may present a bill in which the wrong date of
loading is stated. The master may, because of the commercial function of the document,
refuse to sign such a bill.179 It can be stipulated in the sales contract that the goods shall
be loaded before a particular date. This date may be of significance if the sales price is
determined according to the prevailing market price, but it may also be of importance
for the quality of the goods. It is in such situations important for the receiver of the
goods that the bill of lading is correctly dated since the bill usually is the only way in
which the buyer may check the date of loading. If the master would sign such a bill he
would commit a fraudulent behaviour against the receiver. If the receiver would suffer
any damages due to such behaviour he may hold the shipowner responsible according to
MC 13:50. It was laid down in The Almak that the master was not under an obligation to
sign a wrongly dated bill of lading. It was further stated that:180
“The obligation to sign bills of lading as presented could not of course ever require the master to sign bills
which stated a falsehood. He would always be entitled to refuse if he noticed the discrepancy.”
Further, there is an implied requirement that the issued bill of lading correctly should
state the quantity and the nature of the cargo shipped.181 An example of a charterer who
makes such a request is found in The Boukadoura.
The facts of the case were the following: The ship, The Boukadoura, was voyage chartered. The charterer
presented, to the master, a bill stated that a certain quantity of oil had been loaded. The master believed
that the stated quantity was greater than the quantity actually loaded. (It later turned out that he was
correct.) Because of this discrepancy the master wished to clause the bill. The charterer refused to allow
such a clause and the ship was delayed while the cargo was re-measured.
177
SOU 1990:13, pp. 165-6.
Cf. Falkanger, Introduction to Maritime Law, pp. 338-9.
Cf. Tiberg, SvJT 1995, p. 347. The provision originates from the Hamburg Rules art. 17.3. It has been
criticized since it is contrary to the Hague-Visby Rules art. 3.5.
178
Time Charters, pp. 329-30.
Cf. The Nougar Marin [1988] 1 Lloyd’s Rep., pp. 420-2.
179
Michelet, Håndbok i tidsbefraktning, p. 369, Time Charters, p. 331.
180
The Almak [1985] 1 Lloyd’s Rep., p. 561.
181
Time Charters, p. 331.
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It was held that the master was entitled to refuse to sign such a clean bill, i.e. he was
entitled to clause it. The shipowner recovered, from the charterer, the loss that was
caused by the delay. It was also stated that:182
“Apart from the requirements of the Hague Rules… there is, in my judgement, a basic and implied
requirement that the bills as presented shall relate to goods actually shipped and that they shall not contain
a misdescription of the goods which is known to be incorrect.”
Thus, the master may refuse to sign a presented bill that contains an incorrect
description of the goods. If the master believes that presented bill incorrectly describes
the goods, he should clause it.183 It follows from this discussion that the master also may
refuse to sign a bill that contain goods that he knows has not been loaded on the ship.184
Another such request could be that the charterer asks the master to state that the
cargo has been loaded under deck even though it has, in fact, been loaded as deck cargo.
The master has no duty to sign such a bill.185
8.3.4. Bills containing clauses which are inconsistent with the charterparty
The fact that a term in the bill of lading is inconsistent or differs from the charterparty
does not in itself give the master the right to refuse to sign it. In order for the time
charterer to be able to make full use of the ship’s commercial capacity during the
charter period it is, in certain situations, necessary that the master signs such a bill. The
master is obliged to sign the bill as long as the term falls within the “conditions
customary in the trade in question” or is not “extraordinary”.186 It follows that this must
be decided in each individual case (see 8.2.). If the shipowner, as a result of such a bill
being issued, suffers economic damages he may direct an indemnity claim against the
charterer.
However, the master may refuse to sign a presented bill that do not incorporate a
term which the parties, in the charterparty, expressly has agreed shall be incorporated in
all bills of lading which are to be issued during the charter period.187 An example of
such clause is Gentime cl. 17 (b). It states:
“Protective Clauses – The Charterers warrant that Contracts of Carriage issued in respect of cargo under
this Charter Party shall incorporate the clauses set out in Appendix A.”
The master may, however, not refuse to sign a presented bill that does not incorporate
other terms of the charterparty. This may be concluded from The Nanfri. The court
stated, when examining the master’s right to insist to incorporate the terms from the
charterparty into the bill of lading, that:188
The Boukadoura [1989] 1 Lloyd’s Rep., p. 399.
Cf. MC 13:48.
184
Michelet, Håndbok i tidsbefraktning, p. 369.
185
Michelet, Håndbok i tidsbefraktning, p. 370, Time Charters, p. 331.
186
Michelet, Håndbok i tidsbefraktning, p. 373, Time Charters, pp. 328-9.
Cf. MC 14:62 paragraph one. cf. The Berkshire [1974] 1 Lloyd’s Rep., p. 188, cf. The Nanfri [1979] 1
Lloyd’s Rep., p. 206.
187
Michelet, Håndbok i tidsbefraktning, p. 369, Time Charters, p. 329.
188
The Nanfri [1979] 1 Lloyd’s Rep., p. 206.
182
183
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“Then what limitations are there upon this power? It must be clear that the owners cannot require bills of
lading to be claused so as to incorporate the terms of the time charter: such a requirement would be
contrary to the whole commercial purpose of the charterers.”
Thus, the master may only insist to incorporate a particular term in the issued bill if the
shipowner and charterer have expressly agreed to it.
8.3.5. Bills incorporating a “manifestly inconsistent” term
As can be seen from the discussion above, the master may in certain situations be
obliged to sign a bill of lading which terms differ from the terms of the charterparty.
There is a limit to this obligation though. It has been said that the master is not obliged
to sign a bill that is “manifestly inconsistent” with the charterparty. This is the case
when the term in question is expressly prohibited by the charterparty or contrary to the
whole tenor of the agreement.189
Such a situation may arise if the charterer presents a bill of lading that names a port
of discharge that lies outside the agreed trade area (see 5.3.2.). Since the charterer does
not have the authority to order the ship to a port or area outside the agreed trading limit
it follows that he can not compel the master to sign a bill of lading which names such a
port of discharge.190 A statement concerning this situation is found in The Halycon. It
was stated that:191
“Of course, there must be some possible bills of lading which the master would rightly refuse to sign. The
limits of trading for the three or five months of this charter-party are Institute Warranty limits, not north
of Holland. If the charterers shipped a cargo in America and then tendered bills of lading to the captain
under which he was to deliver to Copenhagen or Danzig, of course he would rightly refuse to sign, and
similarly if he was asked to sign a bill of lading for a blockaded port coming within… the war clauses.”
Thus, the master may also refuse to sign a bill that would violate a regulation in the
charterparty. If the charterer’s authority to use the ship has been limited therein, the
master is under no obligation sign a bill that states that the goods are to be discharged in
a port where the charterer is not allowed to order the ship to. Such port could, besides a
port outside the trading area, be a port excluded by a war clause, an ice clause or the
safe port obligation. It also follows that the master may refuse to sign a bill that states
that goods that are to be transported is unlawful or otherwise excluded by the
charterparty.192
189
Michelet, Håndbok i tidsbefraktning, p. 372, Time Charters, pp. 326-7.
Michelet, Håndbok i tidsbefraktning, p. 372, Time Charters, pp. 141, 329.
191
The Halycon [1943] 75 Ll. L. Rep. 80, p. 84.
192
Cf. Michelet, Håndbok i tidsbefraktning, p. 372.
190
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9. Orders concerning the delivery of the cargo
9.1. General
There are four different situations which will be examined and discussed here. First, the
charterer may order the master to deliver the cargo to an unauthorized receiver, i.e. to
someone who can not produce the bill of lading. Second, the charterer may request that
the master shall amend the content of an already issued bill. Third, the charterer may
request that the master issues a completely new set of bills. Fourth, the charterer may
order the master to go to a different port of discharge than was originally planned.
What these four situations have in common is the special problems that arise due to
the fact that a bill of lading has been issued for the cargo. The provisions in MC 13:4,
24-40 and 45-57 is, according to MC 14:5 paragraph two, mandatory if a bill of lading
has been issued for the goods carried onboard the ship. Since the master usually has, on
behalf of the time charterer, issued such a bill these rules applies to the transport. Once
the master has issued the bill, the shipowner has an independent, contractual obligation
towards the bill of lading holder.193 That such an obligation arise follow from the nature
of the bill of lading (see 9.2.1.). However, this obligation also appears from MC 13:36
paragraph one. The relevant part states:
“The subcarrier is liable according to the same rules as the carrier for the part of the carriage performed
by him.”
The paragraph is relevant since the bill of lading usually states that time charterer shall
perform the carriage and, thus, is responsible for its fulfilment.194 The shipowner will, in
those situations, be considered to be a subcarrier. The consequence of the provision in
MC 13:36 paragraph one is that an independent, contractual obligation, towards the
holder of the bill of lading, is placed upon the shipowner. The master must then, when
receiving an order that might affect the bill of lading holder, bear this obligation in
mind.
9.2. Delivery to a receiver who does not posses a bill of lading
9.2.1. The special nature of the bill of lading
When the ship arrives to the port of destination the charterer will order the master to
deliver the cargo. It is in both the charterer’s and the receiver’s interest that the delivery
is made quickly. As long as the receiver holds an authentic bill of lading there are no
problems. It is in situations where the charterer orders the master to deliver the cargo to
a receiver who does not posses such a bill a conflict arises.
In such situations, the special nature of the bill of lading and its different functions
must be considered. In the hands of the charterer the bill is, in principal, a receipt; it will
not determine the conditions of the carriage. Despite this the charterer is, if he wants to
take delivery of the cargo, obliged to present the bill to the master in the port of
destination. If, however, the bill of lading comes into the hands of a third party, the
For this obligation to arise it does not matter if the bill of lading is a “running” or “recta” bill of lading.
Since the “running” bill of lading is, by far, the most commonly used type of bill I will base the
discussion below on those. However, the difference between the two types is, for this question, not that
important.
Cf. MC 13:42 paragraph two. The definitions of ”running” and ”recta” bills are stated therein.
Cf. Tiberg, Legal Qualities of Transport Documents, pp. 408-9.
194
Michelet, Håndbok i tidsbefraktning, p. 381.
Cf. SOU 1990:13, pp. 156-7.
193
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document takes on a new importance. Such a transfer can be done if the bill originally
was issued to a third party or if the charterer endorses it to a third party. Since the bill of
lading is a negotiable document, the holder of it is entitled to require that the goods shall
be delivered to him. The shipowner, on the other hand, can only be discharged from the
contractual obligation when the master makes the delivery to a person holding the
document.195 It follows from these rules that the master, once he has signed and parted
from the bill, has subjected the shipowner to an independent, contractual obligation
towards the holder of the bill in question.
Thus, if the master delivers the goods to a third party who does not present the bill of
lading he takes an obvious risk. The shipowner is not discharged from his contractual
obligation unless the master delivers the goods to a receiver who is entitled to it. The
only way to be sure that the person claiming the cargo is entitled to it is if the receiver in
question produces an original bill of lading. If the delivery is made to such an
unauthorized receiver the shipowner has no defence if another claimant later shows up
with a bill. The shipowner can then be held liable to the actual holder of the bill.196 The
law is clear on this point; the master who delivers the cargo without the production of a
bill of lading does so at the shipowner’s peril. There is no difference between Swedish
and English law on this point.197
9.2.2. An order to deliver to an unauthorized receiver
The charterer’s main concern is to quickly deliver the cargo; he does not want the ship
to be delayed in port. Because of this, the situation may arise where the charterer orders
the master to deliver the cargo to an unauthorized receiver, i.e. to a receiver who does
not posses one of the issued bills of lading. The question is then whether the charterer
has the authority to give such an order or not. The basic principle, as is stated in MC
13:52, is that it is only the holder of the bill who is authorized to claim the cargo. The
section is, according to MC 14:5, mandatory and it reads:
“The person presenting a bill of lading and appearing, through its content or, in the case of an order bill,
through a continuous chain of endorsements or through an endorsement in blank as the rightful holder in
due course, is authorised as receiver of the goods.
If the bill of lading has been issued in several originals, it suffices for due delivery at the port of
destination that the receiver demonstrates his authority by presenting one original of the bill of lading. If
the goods are delivered at any other port, any other originals must also be returned or security be lodged
for any claim that a holder of any other original in circulation might rise against the carrier.”
Further, it follows, from MC 13:54 paragraph one, that the receiver is “entitled to
receive the goods only if he deposits the bill of lading” to the master. One could then
argue that the consequence of these provisions is that the master may refuse to obey an
order to make a delivery to an unauthorized receiver.198 However, this principle is
inconsistent with the authority that the charterer is granted under the charterparty. The
195
Cf. MC 13:49, 52 and 54. These rules are stated therein.
Cf. Tiberg, Legal Qualities of Transport Documents, pp. 414-5. cf. Grönfors, Sjölagens bestämmelser
om godsbefordran, pp. 278-80.
197
Tiberg, Legal Qualities of Transport Documents, pp. 414-5.
198
Cf. Falkanger, Introduction to Maritime Law, p. 451, cf. Grönfors, Sjölagens bestämmelser om
godsbe-fordran, pp. 278-9, cf. Michelet, Håndbok i tidsbefraktning, p. 384.
196
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master shall, after all, be “under the orders and directions of the Charterers as regards
employment, agency and other arrangements”.199
There are a number of possible reasons why the person claiming the cargo does not
physically posses the bill of lading. The underlying reason is not important though, the
point is that charterer, or the person claiming the cargo, is not able to produce the bill.
In fact, they may not even know where it is or why they can not obtain it. These
situations are, however, regulated in the Swedish maritime code. MC 14:62 paragraph
two states:
“The carrier shall not be obliged on account of the time charterer’s orders to deliver cargo to a party who
does not show authority or otherwise to deliver in violation of the bill of lading terms, if this should
involve dealing contrary to good faith. Otherwise, the carrier may always require security for any
damages which he may become liable to pay on account of any delivery.”
The paragraph regulates the time charterer’s right to give delivery orders. If the
charterer orders the master to violate the rules concerning the delivery of the goods the
shipowner’s interests are protected in three ways. First, the master may refuse to deliver
the goods to a person who does not posses the bill of lading, if such delivery would be
contrary to good faith. Second, the master may refuse to deliver the goods to a person if
such delivery would violate the bill of lading terms, if such delivery would be contrary
to good faith. Finally, the master may, in other cases, require the charterer to give
security for possible third party liability claims. He is, however, obliged to make the
delivery if such security is effected by the time charterer.
As can be seen from the paragraph, the master may only refuse to make the delivery
if it would be “contrary to good faith” to do so. If that is not the case, the master may
not refuse the order. He is, in that case, limited to demand security from the charterer
before obeying the order. It is apparent that the purpose of the provision is to weaken
the shipowner’s position in benefit of the time charterer’s. The paragraph is an
exception from the principal rule that the master is not obliged to make a delivery to a
person who can not present the bill of lading. It is the need of the business that has lead
to this regulation. Since it has become so common that the bill of lading has not arrived
at the port of destination ahead of the ship delivering the goods, it lies in the charterer’s
interest to be able to order such deliveries.200
The question is then how to define the term “contrary to good faith”. The
preparatory works does not contain a comprehensive definition of the term. It is,
however, stated that the master’s, or the shipowner’s, obligation to obey the time
charterer’s orders must be determined in each individual situation on the basis of what
is common in the particular shipping in question.201 In other words, an individual
assessment must be made in each case. Personally, I believe that if the master knows, or
have strong reasons to suspect, that the appointed receiver is not entitled to receive the
cargo he should be able to refuse the order. The shipowner does, after all, have an
independent, contractual obligation towards the holder of the bill of lading (see 9.2.1.).
199
Gentime, cl. 12. Cf. NYPE 1993, cl. 8.
Cf. Michelet, Håndbok i tidsbefraktning, p. 385.
Cf. SOU 1990:13, p. 209. The paragraph is new, there were no corresponding regulation in the old
code.
Cf. The Houda [1994] 2 Lloyd’s Rep., p. 542. The court of the first instance put a lot of weight on the
necessity of business efficacy.
201
Prop. 1993/94:195, p. 316, SOU 1990:13, p. 209.
200
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Thus, it must be considered to be “contrary to good faith” to obey an order if there are
reasons to believe that the rightful receiver is likely to be sidestepped. To obey the order
in such situation would amount to fraudulent behaviour towards the holder of the bill.
The master’s suspicion ought to, however, be substantial. If he would be able to refuse
delivery on account of minor suspicions, the purpose of the provision in MC 14:62
paragraph two would not be fulfilled.
Even though the master may always require that the charterer puts up an adequate
security before he delivers the goods, the section must still be considered to weaken the
shipowner’s position. To demand such security will, in most cases, be both more
cumbersome and unreliable than to demand that the bill of lading shall be presented.
This is especially true if the ship lies at a foreign, shady port. 202 If the master instead
obtains the bill of lading the case, as far as he and the shipowner is concerned, is closed.
In this context, one must also keep in mind that many time charterparties contain a so
called “hold harmless” clause. Such clauses regulate the parties’ right of recourse. Even
though there is no explicit clause, the shipowner may still, on two grounds, claim
indemnity from the charterer. First, such a right of recourse is stated in MC 14:61
paragraph three. Second, most charterparties usually contain a predetermined allocation
of responsibility. Such allocation has, in practice, been construed to contain a
corresponding right of recourse.203 Thus, the shipowner would, without such a security,
still be protected since he may hold the charterer liable for any subsequent claims from
a bill of lading holder.
9.2.3. The Houda case
It may, in this context, be of interest to compare the regulation in MC 14:62 paragraph
two with the corresponding English law. According to English law the master may
always refuse an order from the time charterer to deliver the cargo to a person who does
not present a genuine bill of lading. There is no exception, like the one in the Swedish
MC 14:62 paragraph two, to this rule. This principle has, for a long time, been
undisputed in voyage charters. However, it had been argued that it would not apply to
time charters. That the principle applies to time charters as well was recently established
in The Houda case.204
The relevant facts of the case were the following: The Houda was chartered on a Shelltime 4 form. On
August 2nd 1990 when Iraq invaded Kuwait the Houda was laying at one of the countries ports. The
master interrupted the loading and managed to leave the port. However, the bills of lading, which were
signed by the master, were left behind in the port and had not been seen since. When the charterer wanted
to discharge the cargo the shipowner refused. The reason for this refusal was the signed bills of lading
could not be presented. Eventually, on September the 27 th, the discharge was effected. One of the
questions that were raised was whether the charterer could lawfully order the shipowner to discharge the
cargo without production of the bills of lading.
The judge in the court of the first instance answered this question affirmative. However,
the judges in the Court of Appeal and the House of Lords came to the opposite
conclusion. The Lord Justice Neill formulated the court’s decision. He stated:205
202
Cf. Michelet, Håndbok i tidsbefraktning, p. 385.
Cf. SOU 1990:13, p. 209.
204
The Houda [1994] 2 Lloyd’s Rep., p. 541.
205
The Houda [1994] 2 Lloyd’s Rep., p. 552.
203
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“I can see no adequate ground on which a distinction can be drawn between the rights of a voyage
charterer and the rights of a time charterer. …I can see no good reason to depart from the general rule that
the owners do not fulfil their contractual obligations if the cargo is delivered to a person who cannot
produce the bill of lading. …This is a simple working rule. It is of course open to the shipowner to decide
that he is adequately protected by a letter of indemnity and to deliver in the absence of the bill of lading,
but in my judgement the rights of a time charterer to give orders do not entitle him to insist that cargo
should be discharged without production of the bill of lading.”
So, according to English law the time charterer may not order the master to deliver the
cargo to a person who can not produce the bill of lading. If the charterer wishes to
acquire such a right it must be agreed upon in the charterparty.
Further, the Lord Judge Millett makes, in his opinion, a statement that is of interest
when comparing The Houda case with the Scandinavian solution. He refers, in his
statement, to the decision in the court of the first instance. The court held that:206
“…any general principle precluding a time charterer from ordering delivery of the cargo without
production of a bill of lading would be contrary to business efficacy; the owners’ contention that the
charterers could not lawfully order them to deliver the cargo without presentation of bills of lading would
be rejected; such an order would only have been unlawful if given without the authority of the owners of
the cargo…”
Lord Judge Millet examines and criticizes the consequences of such a solution. He
stated that:207
“But the real difficulty of the Judge’s conclusion is that it leads to this: the charterers can lawfully require
shipowners to deliver the cargo without presentation of the bills of lading if, but only if, the person to
whom the cargo is delivered is in fact entitled to receive it. If that is indeed that law, it places the master
in an intolerable dilemma. He has no means of satisfying himself that it is a lawful order with which he
must comply, for unless the bills of lading are produced he cannot know for certain that the person to
whom he has been ordered to deliver the cargo is entitled to it. One solution, no doubt, is that, since the
master’s duty is not of instant obedience but only of reasonable conduct, he can delay complying with the
order for as long as is reasonable necessary to satisfy himself that the order is lawful, possibly by
obtaining the directions of the Court in the exercise of its equitable jurisdiction to grant relief in the case
of lost bills. But in my judgement the charterers are not entitled to put the master in this dilemma.”
I believe that the judge’s account of the problem is, especially when comparing with
Scandinavian law, quite discerning. However, one must note that there is a slight
difference between the regulation in MC 14:62 and the solution that Lord Judge Millet
criticizes. According to the court in the first instance the master may only refuse the
order if he is sure that the nominated receiver is not entitled to it. The provision in the
Swedish maritime code allows such refusal if it would be “contrary to good faith” to
make the delivery. I believe, as I stated above (see 9.2.2.), that the master may refuse if
he has good reasons to believe that the nominated receiver is not entitled to the cargo.
Thus, a lower level of suspicion is allowed according to MC 14:62. However, that
distinction does not affect the principal legal question.
The point is, as Lord Judge Millet states in the last sentence of the quote, that the
charterer puts the master in a difficult situation. The master takes, after all, an obvious
risk when he delivers the goods to a receiver which can not produce the bill of lading
(see 9.2.1.). The question one must ask is then whether this is such a risk that the
206
207
The Houda [1994] 2 Lloyd’s Rep., p. 542.
The Houda [1994] 2 Lloyd’s Rep., p. 558.
75
charterer, without an express provision in the charterparty, may require the shipowner to
take. It follows from the provision in MC 14:62 paragraph two that the charterer, in
certain situations, may require the shipowner to risk being held liable for wrongful
delivery. Further, the provision may also affect the holder of the bill of lading. Since the
bill of lading is a negotiable document, its holder shall be able to claim the goods in
question. To claim the goods that the bill entitles him to is the likely, underlying
purpose for acquiring the bill in question. The consequence of the regulation is that the
holder may, because of the charterer’s order, be sidestepped in favour of an
unauthorized receiver. He may claim damages from the shipowner though, but this can
not be considered to be an equivalent option for the holder. The consequence of this is
that the bill of lading loses some of its status.208 I believe that these are two good
arguments for the English solution.
9.2.4. The master’s position
English law is clear and straightforward on this subject. The master is under no
obligation to make the delivery unless the receiver can show his authority, i.e. unless he
presents the bill of lading. It is up to the time charterer to make sure that the receiver
possesses the bill in question. The regulation in the Swedish maritime code is not as
clear.
The master’s position, as is the consequence of the provision in MC 14:62
paragraph, can be summarized as follows: First, if being ordered to deliver to an
unauthorized receiver the master must determine whether such a delivery would be
“contrary to good faith” or not. There is no established, comprehensive definition of the
term, its meaning must be determined in the light of the circumstances of each
individual case (see 9.2.2.). Second, if the master believes it to be “contrary to good
faith” to make the delivery he may refuse the order. The charterer may, in such
situation, claim that the ship has gone off-hire, or claim damages for the loss of time.
Since so much weight, due to MC 14:62 paragraph two, is put on business
considerations, the shipowner may have a difficult task proving that a delivery would be
contrary to such “good faith”. Thus, a prudent master should be sure of his case before
he refuses the order. Third, if the master, on the other hand, does not believe it to be
“contrary to good faith” to make the delivery he must obey the order. However, he can,
and should, always demand that the charterer provides security for any possible third
party claims that may arise as a consequence of wrongful delivery. If the charterer does
not, or is not able to, provide an adequate security the master may refuse the order.
Since the rules in chapter 14 is optional it is, of course, always possible to regulate
this issue in the charterparty. There are two possible ways to design such a clause. First,
the shipowner may protect himself by stating that the charterer shall not be authorised to
order a delivery unless the receiver can produce the bill of lading. Second, the charterer
may wish to extend his authority by stating that he shall have the right to order a
delivery, despite that a bill of lading is not presented at the port of delivery.209
208
209
Cf. Todd [1999] LMCLQ, p. 449.
Cf. Michelet, Håndbok i tidsbefraktning, p. 386.
76
9.3. Orders concerning changes in the port of discharge and in the bill of lading
9.3.1. General
The bill of lading that the master issues usually names a particular port of discharge.
The situation may arise that the charterer, during the voyage, decides that he wishes to
discharge the cargo at a different port than the one named. An example of such a
situation is the following: The charterer initially orders the master to perform a voyage
from port A to port B. A bill of lading is then issued for the planned voyage. However,
during the voyage, or after the ship has arrived to port B the charterer changes his mind
and instead orders the master to continue to port C and discharge the cargo there.210
When the bill of lading is issued the planned port of discharge may, in principal, be
described in three ways. First, the bill of lading may state that the cargo shall be
delivered at a particular port. That is usually the case, but the description may also been
done in a wider way. Second, a number of alternative ports may be named. Third, it can
be stated that the cargo should be delivered to a port in a particular geographical area. In
the latter two cases an order to change the port of discharge may not make the bill of
lading invalid. If the new port is covered by the original document there is no problem,
the bill of lading is then still valid. However, if the new port is not covered by the issued
bill a difficult situation arises. The bill of lading is then not in conformity with the
actual port of discharge.
In these situations three questions arises. First, can the charterer require that the
master shall make an amendment in the original document? Second, can the charterer
require the master to issue a new bill of lading? Third, what authority does the charterer
have to order the master to take the ship to a different port of discharge? One must,
when answering these questions take the special nature of the bill of lading into account.
Since the shipowner, due to the mandatory legislation that applies, may be held liable
by a third party holder of the bill, the same considerations that applied in the discussion
above must be taken into account here (see 9.2.1.).
It should be noted that these situations are quite complex, there are a number of
considerations which must be taken into account. It becomes problematic since the
commercial reality may not, in all situations, be in accordance with the legal solutions.
The regulations in the Swedish maritime code are an attempt to adjust the law to the
commercial practices and needs. Because of this the regulations may seem to be tilted in
bias of the time charterer.
9.3.2. Changes in the bill of lading
The first question is then whether it is possible for the charterer to order the master to
make an amendment in the original document. The charterer may, for example, ask the
master to change the named port of discharge. Such a request is most likely to arise
when three bills have been issued and one or two of them are in circulation. In such
situations the receiver must, if he wishes to lay his hands upon the cargo at a different
port then the one named in the bill, present all of the outstanding bills of lading, i.e. a
full set of bills.211 From the charterer’s point of view, an amendment in the bill would
be a quick and easy solution. The charterer, or a receiver which he later gives the bill to,
may then request the cargo at the new port of discharge without having to present a full
set of bills.
210
211
Cf. Michelet, Håndbok i tidsbefraktning, pp. 382-3.
Cf. MC 13:52 paragraph two.
77
However, such an amendment can, under no circumstances, be considered to be
acceptable.212 Since the bill of lading is a negotiable instrument, such a change would
be considered to be a forgery. The master is, after all, not obliged to perform criminal
acts and, thus, he may refuse such an order (see 4.4.4.).
9.3.3. The issuance of a new set of bills
Another possible way for the charterer to get around the nominated port of discharge is
to get a new bill of lading, with a different port of discharge named, issued. He may
give the master a new set of bills to sign, bills which states that the cargo shall be taken
from port B to port C. The master’s concern, in such situations, is that the shipowner
has, once the bill has been issued, an independent, contractual obligation towards the,
named or not, receiver in port B and to the new receiver in port C (see 9.2.1.).
Due to this independent obligation the master may very well not issue a new set of
bills which covers the same cargo. Such behaviour would be considered to be fraudulent
and, thus, he may refuse to obey such a request. There is, however, a procedure that
would allow the master to, upon the charterer’s request, issue a new set of bills. If the
master can assure himself that the possible receiver in port B is not disregarded or
neglected, he may oblige the request. This can be done if the charterer presents, and
hands over to the master, all bills of lading that are in circulation. The master has then
assured himself that no claims, due to an outstanding bill, can be made against the
shipowner. It is, after all, not possible to claim the cargo without possessing the
document itself.213 Such behaviour would be in conformity with the Swedish maritime
code. The right to claim the goods are, as been stated above, regulated in MC 13:52 (see
9.2.2.).214 Even though paragraph two apparently deals with the right to claim the goods
one should be able to apply it to this situation as well. After all, what the charterer in
principal asks the master to do is to deliver the cargo to him onboard the ship and then
to make a new delivery. The practical result is the same as if the charterer, with the bills
of lading, would claim the cargo in port B and then order the master transport it to port
C.
Thus, it is possible for the master to abide the charterer’s request, and issue a new
set of bills, if the charterer can produce all outstanding bills of lading. In fact, the master
will be under a legal obligation to obey such a request. The provision in MC 14:62
paragraph two should apply to this situation as well (see 9.2.2.). The relevant part of the
paragraph states:
“The carrier shall not be obliged on account of the time charterer’s orders to… deliver in violation of the
bill of lading terms, if this should involve dealing contrary to good faith. Otherwise, the carrier may
always require security for any damages which he may become liable to pay on account of any delivery.”
It follows that the charterer has the authority to order the master to make a delivery in
violation of the bill’s terms as long as it would not be “contrary to good faith” to do so.
If the charterer can produce all outstanding bills the delivery can not be considered to be
“contrary to good faith”. If, however, the charterer was not able to present all
outstanding bills, the master may refuse the order. To oblige the request then should be
212
Michelet, Håndbok i tidsbefraktning, p. 383.
Ibid.
214
SOU 1990:13, p. 166. One should note that this section is not based on the Hague-Visby Rules or any
other convention. Instead it is based on custom which has developed in international trade.
213
78
considered to be contrary to such “good faith” per se since the master then knows that
there exists a holder that is entitled to claim the goods at the named destination.
When issuing a new set of bills the master must make sure that the information in
the bills is correct. After all, the shipowner has, after the bill has been issued, an
independent obligation towards the receiver. He must therefore make sure that the
receiver in port C is protected. For example, the master should not sign a new bill that
states that the cargo originates from port B. Instead he must make sure that the original
time and port of loading is stated in the bill so it is clear that the cargo is shipped from
port A and not from port B.215 If the information in the bill is not correct the master may
contribute in deceiving the new receiver in port C.216 If the new bill contain such
incorrect statements the master therefore should refuse to sign it (see 8.3.3.).
9.3.4. Changes of the port of discharge
That leaves the third and final question that shall be dealt with here. What authority
does the charterer have, when the original bill still exists, to order the ship to a different
port of discharge? In other words, what is the extent of the charterer’s authority to
dispose of the cargo during the voyage? The charterer may wish to reroute the entire
transport or just claim the goods at a port other than the original destination.217 The
question has, to some extent, been answered in the discussion above (see 9.3.3.). There
are, in this situation, two conflicting considerations that must be weighted against each
other.218 First, the charterer has the right to use the commercial capacity of the ship as
he wishes. To change the port of discharge is, without doubt, a commercial decision. In
fact, it might seem to be quite a reasonable request. However, the shipowner has, once
the bill has been issued, an independent, contractual obligation towards the, named or
not, receiver in port B and to the new receiver in port C (see 9.2.1.).
Even though it is a common enough problem, most of the standard time charterparty
forms do not contain a clause that covers this issue.219 However, Shelltime 4 cl. 13 (b)
regulates these situations. It states:
“Notwithstanding the forgoing. Owners shall not be obliged to comply with any orders from Charterers to
discharge all or part of the cargo
(i) at any place other than that shown on the bill of lading and/or
(ii) without presentation of an original bill of lading
unless they have received from Charterers both written confirmation of such orders and an indemnity
in a form acceptable to Owners.”
The consequence of such a clause is that the charterer may, after the bill of lading has
been signed, order the ship to a different port if he gives a written order and provides
sufficient security for any possible third party claims. There is no similar clause in the
Gentime or the NYPE 1993 forms.
Even though there is no such clause in the charterparty, the charterer may still order
the master to deliver the cargo to a different port of discharge. The principal rule, in
A so called ”Country of Origin” clause may be inserted in the bill of lading.
Cf. Michelet, Håndbok i tidsbefraktning, p. 383.
Cf. MC 13:52.
217
Cf. Tiberg, Legal Qualities of Transport Documents, p. 417.
218
Cf. Michelet, Håndbok i tidsbefraktning, p. 383.
219
Michelet, Håndbok i tidsbefraktning, p. 390.
215
216
79
Scandinavian law, is that the time charterer has no right to issue such an order. 220 If the
bill of lading contains a number of alternative ports of discharge, the charterer may
reroute of the ship to one of the other alternative ports. Such a change would not be in
conflict with the shipowner’s obligation towards any third party holder of the bill of
lading. The charterer is, however, not considered to have the right to reroute the ship to
a port that is not encompassed by the issued bill.
However, there is no reason why the provision in MC 14:62 paragraph two would
not be applicable in this situation as well. The master could then, due to this provision,
come under a legal obligation to obey the request. It would be a similar situation as
were accounted for above (see 9.3.3.). After all, what the charterer, in practice, does is
to order the master to deliver the cargo in violation of the bill of lading terms. The
master may only refuse to make such a delivery if it would be “contrary to good faith”
to do so. If the charterer is able to present a full set of bills he has shown that he has the
full right of disposal over the cargo. When he has such a right he can be permitted to
reroute the ship or to accept the cargo at a different port of discharge. 221 It can, in this
situation, not be considered to be “contrary to good faith” to obey the order.
Consequently, the master is then obliged to reroute the ship.
If the charterer is not able to present all of the outstanding bills, the master may
refuse the order. Since the master then knows that there exists a holder that is entitled to
claim the goods at the named destination it should be considered to be contrary to such
“good faith” per se to obey it (see 9.2.2.).222 However, the master may, if he wishes,
obey the order even if the charterer can not present all of the outstanding bills.223 Before
he obeys the request he should make some things sure though. First, he should contact
the shipowner in order to get instructions. If the shipowner agrees to the order the
master should contact the receiver in the original port of discharge in order to make sure
that he is in agreement with the change. The master should also request that the
charterer, in accordance with MC 13:52 paragraph two, puts up an adequate security
before he carries out the request since the shipowner may be held liable for the wrongful
delivery.
220
Michelet, Håndbok i tidsbefraktning, pp. 390-2.
Tiberg, Legal Qualities of Transport Documents, p. 417.
Cf. Michelet, Håndbok i tidsbefraktning, p. 391.
222
Cf. Tiberg, Legal Qualities of Transport Documents, p. 409, cf. Michelet, Håndbok i tidsbefraktning,
pp. 391-2.
223
Michelet, Håndbok i tidsbefraktning, pp. 391-2, Tiberg, Legal Qualities of Transport Documents, pp.
11, 13.
221
80
10. Redelivery of the ship
10.1. General
The length of the charter period is fixed in the charterparty. The charterer is obliged to,
at the place and time of the agreed redelivery; once again place the ship at the
shipowner’s disposal. When the ship has been redelivered the charterparty expires and
the commercial control over the ship passes back, from the time charterer to the
shipowner.224 The parties mutual obligations is suspended and the hire ceases to be
payable. Thus, the charterer’s authority to command the master ceases as well. The legal
state is, after the redelivery, clear. The problem is when the redelivery is to take place.
The underlying reason for disputes concerning the time of redelivery are the two
parties’ commercial considerations. If the prices on the freight market are higher around
the time when the redelivery is to take place the shipowner have an interest in a quick
delivery while the charterer may wish to postpone it as long as possible.225 It is, of
course, difficult for the charterer to arrange the redelivery at a specific date. Practical
considerations therefore require that the charterer is granted some margins when
completing the redelivery. The underlying idea is that the time charterer shall have the
possibility to perform a last voyage with the ship before the redelivery shall take
place.226 The order to perform the last voyage before the redelivery is usually called the
last voyage order.
10.2. Time of redelivery
In most standard forms there is no clause that specifically regulates the last voyage of
the charter. Shelltime 4 cl. 19 contains such a regulation though. The relevant part of the
states:
“If at the time this charter would otherwise terminate… the vessel is on a ballast voyage to a port of
redelivery or is upon a laden voyage, Charterers shall continue to have the use of the vessel at the same
rate and conditions as stand herein for as long as necessary to complete such ballast voyage, or to
complete such laden voyage and return to a port of redelivery as provided by this charter, as the case may
be.”
As can be seen the charterer has the right to extend the charter, at the agreed charter
rate, for whatever time is necessary. This might prove to be a valuable right since such
necessary time could very well be extended to several months. However, such clauses
are likely to be construed restrictively in favour of the shipowner. Since the clause
grants the time charterer a unilateral power to extend the charter period a court is likely
to adopt it only if the words in the clause are unambiguous and the situation at hand
clearly is covered by the clause.227
224
Falkanger, Introduction to Maritime Law, p. 427, Michelet, AfS 11, p. 644.
Cf. Michelet, AfS 11, p. 591.
226
Grönfors, Sjölagens bestämmelser om godsbefordran, p. 264. Cf. Falkanger, Introduction to Maritime
Law, p. 428.
227
Halson, [1993] LMCLQ, pp. 21-2.
225
81
The Swedish maritime code contains two rules which concern the redelivery of the
ship. The principal rule is stated in MC 14:68 paragraph one. It states:
“The time charterer shall redeliver the vessel to the carrier at the time and place agreed.”
Thus, the statutory rule presupposes that a time and place of redelivery have been
agreed upon in the charterparty. The rules concerning the so called over-lap period is
contained in MC 14:69. It states:
”The carrier is obliged to let the vessel proceed upon a new voyage although the agreed time for
redelivery is thereby exceeded. This does not apply if the excess is more than can be considered
reasonable or if a set period for redelivery has been agreed upon.
For such excess of time as is permissible according to the first paragraph, the time charterer shall pay
the agreed hire. For other excess he shall pay current hire, though not less than the agreed hire, and
compensation for any damage which the delay causes the carrier.”
The first paragraph states that there is no room for any under- or overlap if a margin of
redelivery is agreed upon in the charterparty. Such a clause is considered to sufficiently
satisfy the time charterer’s interest in having a somewhat flexible redelivery time.228
The charterer is then obliged to perform the redelivery within that period and,
consequently, he must give the master the appropriate last voyage order. If, on the other
hand, a fixed date of delivery has been agreed upon the charterer is entitled to an
overlap period. Thus, there is considered to be an implied margin in the charterparty. He
may, in other words, order the ship to perform a last voyage even though it is clear that
the redelivery will, due to that last voyage, come to take place after the agreed
redelivery date. The purpose of this rule is to render it possible for the charterer to be
able to fully use the ship’s commercial capacity during the charter period. Without such
rule he could be prevented from this use since it is often difficult for the charterer to
plan his commercial operations so that the last voyage exactly coincides with the
expiration of the charter period.229 Another, underlying reason behind this rule is the
fact that the charterer, according to Scandinavian law, is not considered to have the right
to return the ship before the expiration of the charter period and get a corresponding
reduction of the hire. In the light of that this it is important for the charterer to be able to
prolong the charter period in this way. If he would have the right to get a reduction
when making an earlier delivery, he would be able to estimate the most favourable
alternative and the need of the overlap institute would not be as great.230
However, the overlap may not exceed what is considered “reasonable”. When
determining what such a reasonable period of time is one must make an objective
estimation of the concrete circumstances in each individual case. Significant
circumstances are, for example, the agreed trading area and the time of the year. Other,
more subjective circumstances does not entitle the charterer to a corresponding overlap.
Such circumstance may, for example, be that the ship has been off-hire for a longer
228
Prop. 1993/94, p. 322, SOU 1990:13, p. 215, Grönfors, Sjölagens bestämmelser om godsbefordran, pp.
264-5.
Cf. Time Charters, p, 127. The same rule applies according to English law. Cf. The Penonia [1991] 1
Lloyd’s Rep., p. 107.
229
Prop. 1993/94:195, p. 321, SOU 1990:13, pp. 214-15.
Cf. Time Charters, p, 126. The same rule applies according to English law. Cf. The Penonia [1991] 1
Lloyd’s Rep., p. 107.
230
Prop. 1993/94:195, p. 321, SOU 1990:13, p. 215.
82
period or time or that it has, due to events outside the charterer’s control, been lying
still.231 Further, it should be noted that the length of the basic charter period has, in
some English cases, influenced what has considered being a reasonable period of
overlap.232 This may very well be considered by a Swedish court as well. There is no
reason why the length of the basic charter period could not be considered to be an
objective circumstance. Thus, the extent of the overlap period may vary considerably
between different charters.
10.3. Last voyage orders
As was mentioned above, the charterer’s order to perform a last voyage before the ship
is redelivered is usually called the last voyage order (see 10.1.). Such an order is legal if
it is reasonable to assume that the ship, despite of the order, will be redelivered before
the definite end of the charter period. The master is obliged to obey such a legal order.
Accordingly the master may refuse the order if it is illegal, i.e. if it is apparent that the
ship will be not redelivered before the end of the period. A concise definition of this is
found in The Penonia. It was stated:233
“The cases and books draw a distinction between two cases which have become known as “the
illegitimate last voyage” and “the legitimate last voyage”. In the former case the charterer gives orders for
the employment of the vessel which cannot reasonably be expected to be performed by the final terminal
date. He is therefore seeking to avail himself of the services of the vessel at a time when the owner had
never agreed to render such services. It is accordingly an order which the charterer is not entitled to
give… The owner need not comply with such an order, because he never agreed to do so.”
The legitimacy of a last voyage orders is determined at the time when the order is to be
carried out.234 The reason for this is that the charterer may give the order in question
some time in advance. Since delays may arise during the time between when the order
was given and when it is supposed to be performed, it would not be reasonable to
determine its legitimacy at a different point in time. Thus, an order for a final voyage
given in advance is contingent only. This may be illustrated by an English case, The
Gregos. It was stated, by Lord Mustill, that:235
“Whatever the charterer may order, a service which falls outside the range encompassed by the owner’s
original promise is not one he can be compelled to perform… There is thus to be a measuring of the
service called for against the service promised. As a matter of common sense, it seems to me that the time
for such measurement is, primarily at least, the time when the performance falls due.
My Lords, I have qualified this statement with the words “primarily at least”, because in practice the
interests of both parties demand that the charterer is entitled to give orders in advance of the time for
performance; and this must entail at least a provisional judgement on the validity of the order. If it can be
seen at this early stage that compliance will involve a service which lies outside the shipowner’s
undertaking the latter can say so at once and reject the order. But if the order is apparently valid its
validity is no more than contingent, since the time for matching the service against the promise to serve
does not arrive until the service is due to begin, or in some instances until it is already in progress. Thus,
if and for so long as the service required conforms with those which the shipowner promised in advance
to render the specific order creates a specific obligation to perform them when the time arrives. But only
231
Prop. 1993/94:195, pp. 321-2, SOU 1990:13, p. 215, Grönfors, Sjölagens bestämmelser om godsbefordran, p. 265.
Cf. Falkanger, Introduction to Maritime Law, pp. 428-9, cf. Time Charters p. 128.
232
Time Charters, p. 128.
233
The Penonia [1991] 1 Lloyd’s Rep., pp. 107-8.
234
Time Charters, p. 123. Cf. Falkanger, Introduction to Maritime Law, p. 429.
235
The Gregos [1995] 1 Lloyd’s Rep., p. 7.
83
for so long as that state of affairs persists. If circumstances change, so that compliance with the order will
call for a service which in the original contract the shipowner never undertook, the obligation to comply
must fall away. As I see it, the charterer’s order in advance amounts to a continuing requirement, the
validity of which may change with the passage of time.”
Lord Mustill based his opinion on two basic principles. First, the risk of delay in a time
charter lies on the charterer. Second, the service called for by the charterer must always
be matched against the service promised by the shipowner. It follows that the time
charterer must bear the risk of the original last voyage order becoming obsolete.
10.4. The master’s position
If given a last voyage order the master must determine whether the charterer is entitled
to order the ship on the voyage or not. The master is obliged to obey the order if it, at
the time it is given, is considered to be legal, i.e. the ship can reasonably be expected to
be redelivered before the end of the charter period. This duty to obey is, however, a
contingent duty. If the circumstances change, and the order subsequently becomes
illegal, the master is released from this obligation. He is, after all, not obliged to obey an
illegal order.
If the charterer’s order is considered to be illegal, at the time given or later when it is
to be executed, there are, in principal, two options open to the master.236 First, he may
refuse to undertake the voyage. The master should then ask the charterer to issue a fresh
order. Second, he may point out the illegality of the order and perform the voyage under
protest. The shipowner may, in that case, subsequently claim damages. If the master
undertakes to perform the illegal last voyage, and there has been no waiver on the
shipowner’s right to claim damages, the shipowner are entitled to claim payment
according to MC 14:69 paragraph two.
236
Cf. Falkanger, Introduction to Maritime Law, p. 429, cf. Time Charters, p. 125.
84
11. String charters
11.1. General
It is not uncommon for the time charterer to sublet the ship to another charterer. If the
charterer is not capable of, or have no wish to use the whole commercial capacity of the
leased ship he might as well sublet part of it. Since a string of successive charterers is
formed such constructions are called string charters.
An illustration of such a string charterer may be the following:237
1. The shipowner.
2. The original time charterer. He may, for example. Lease the ship for two years.
3. The subsequent time charterer. He has a contract with the original time charter. He may, for
example, lease the original time charterer’s right to use the ship for six months.
4. Voyage charter. He contracts with the subsequent time charterer. He leases part of the transport
capacity for one, single voyage.
5. Sub-voyage charterer. He contracts with the voyage charterer. He leases part of his transport
capacity on that voyage.
One must separate subletting from assignment of the charterparty. When the time
charterer assigns the charterparty the new charterer takes it over completely. In other
words, he steps into the old charterer’s shoes. Assignment is a different question than
subletting and need not be considered here. Another question that will not be discussed
is the original time charterer’s problems. Depending on the subsequent contracts a
subsequent charterer may hold the original charterer responsible if he, because of the
charterparty, can not use the ship in the way he intended and the parties agreed on in the
charterparty.
In practice such sub-chartering may cause problems for the shipowner and the
master. In some cases the shipowner knows the original charterer well and they may
have a long-standing business relationship. He may not have the same relationship to
the sub-charterer. It is also possible that the ship initially may have been used in a
particular type of trade. This trade may change when the new charterers come in with
their own commercial plans and ideas. Another practical aspect is that the sub-charterers
will give their orders directly to the master. If the master, or the shipowner, believes that
these orders is outside the scope of what the charterparty allows he must protest to the
original time charterer.238
The issue that will be considered is how such string charters affect the master.
Which of the successive charterers may give orders to the master? In other words, what
authority do the new charterers have over the ship and its master?
Cf. Gaskell, Charterers’ Liability and Damage to the Vessel, p. 5. The example is copied from
Gaskell’s article. It was a good example so I decided to use it.
238
Cf. Michelet, Håndbok i tidsbefraktning, p. 494.
237
85
11.2. The charterer’s right to sublet the ship
Most time charterparties grants the charterer the right to sublet the vessel. An example
of such a clause is NYPE 1993 cl. 18. It states:
“Unless otherwise agreed, the Charterers shall have the liability to sublet the Vessel for all or any part of
the time charter covered by this Charter Party, but the Charterers remain responsible for the fulfilment of
this Charter party.”
Not all charterparties contain such clauses though. Gentime is a good example of such a
form, there is no clause that expressly regulates string charters there. However, even
without such an express clause the charterer is considered to have the right to sublet the
ship. Unless there is an express agreement that subletting is prohibited or otherwise
specifically regulated, such right is considered to be implied in the charterparty. This is
the case in both Scandinavian and English law.239
11.3. The legal consequences of the ship being sublet
The legal consequences of the ship being sublet are regulated in the Swedish maritime
code. MC 14:4 paragraph one state:
“If the charterer assigns his rights under the charterparty to someone else or if he subcharters the vessel,
he still remains responsible for the performance of the contract.”
As was stated above, the charterer may assign his rights under the charterparty freely, it
is not necessary for him to get the prior consent of the shipowner. Under a time charter
this grants him the right to sublet the ship to a third party.240 However, as can be seen
from MC 14:4, the original charterer will still remain responsible for the performance of
the contract. Thus, his duties does not cease when he arranges such a subcharter.241
Under a time charter the charterer’s basic performances are to pay the hire and to, on the
agreed time, redeliver the ship. Thus, this remains the original charterer’s responsibility,
how he arranges it with the sub-charterers is not the shipowner’s concern.
Such a sub-charter does not neither create a contractual relationship between the
shipowner and the sub-charter. This follows from a general principle of contract law. A
contract cannot, generally, confer rights or impose obligations on persons who are not
parties to the contract.242 Thus, the original charterer may then not confer any other
rights to the sub-charterer than the rights he himself has acquired from the agreement
with the shipowner. The master is, however, obliged to obey orders from a sub-charterer
that is considered to be legal. A statement concerning this obligation is found in The
Vikfrost. It was there stated that:243
“By cl. 19 the charterers had the option of sub-letting and no restrictions are imposed as to the terms of
the sub-letting, the sub-charterers would be entitled to require the master to sign bills of lading, and to
sign themselves such bills of lading as they were entitled to require the master to sign, and so to create a
239
Michelet, Håndbok i tidsbefraktning, p. 494.
Cf. Adlercreutz, Avtalsrätt I, section 5.2.
240
Prop. 1993/94:195, pp. 268-9, SOU 1990:13, pp. 173-4.
241
Prop. 1993/94:195, pp. 268-9, SOU 1990:13, pp. 173-4.
Cf. Adlercreutz, Avtalsrätt I, section 5.3. Cf. Time Charters, pp. 147-9. The same applies according to
English law.
242
Cf. Time Charters, p. 147.
243
The Vikfrost [1980] 1 Lloyd’s Rep., p. 567.
86
contract between the owners and the holders of the bills of lading… To summarize it, I take this view of
the situation here: (1) the head charter expressly authorized sub-letting; (2) by necessary implication the
head charter authorized the charterer in case of such a sub-letting to put the sub-charterer in the same
position as to signature of bills of lading as the charterer was under the head charter, i.e. to authorize the
sub-charterer to require the master to sign bills of lading or to sign them himself.”
The statement concerned bills of lading, but it reflects the general view of the subcharterer’s position vis-à-vis the master and the shipowner.
11.4. The master’s position
As can be seen from The Vikfrost case, the master is obliged to obey any legal order
which a sub-charterer gives. It is, of course, possible for the sub-charterer to give his
instructions to the original charterer who, in his turn, relays the order in question to the
master. However, in practice an order will go straight from the sub-charterer to the
master. If the master believes that the order is illegal, i.e. outside the original time
charterer’s scope of authority, he has, in principal, has two options. First, he could
protest to the sub-charterer directly and request that he issues a new instruction. Second,
he could protest to the original charterer. This might be the preferable way to act. A
three-part discussion will then commence.244
What determines the sub-charterer’s right to give orders to the master is the
agreement between the shipowner and original charterer. The master is not obliged to
obey a request from a sub-charterer if that request lies outside the original charterer’s
authority. Such an order is illegal, and the master may refuse to obey it.
244
Michelet, Håndbok i tidsbefraktning, p. 494.
87
12. Conclusions
The purpose of this paper was to examine, and discuss, the relationship between a time
charterer and the ship’s master. The aim was to determine what authority the charterer,
according to Swedish law, has to give the master orders. The basis for the paper was the
Swedish maritime code and its’ preparatory works. The code is quite modern and the
regulations therein take, to large extent, the prevailing business practices and business
considerations into account. The code does not, however, contain a comprehensive
regulation of time charters. Due to this it has, for the purpose of the paper, been
valuable to look at the English law that governs the subject. Through this comparative
view I believe it has been possible to, quite correctly and comprehensive, determine the
Swedish legal regime covering the subject.
It is doubtless so that the master is, through the duration of the time charter period,
put in a situation where he has dual loyalties. The underlying reasons for this are found
in the nature of the time charter. As was stated in chapter 3 above, “(c)harterparties are
examples of contracts in which one party, the charterer, is entitled to exercise some
control over the conduct of an employee of the other party, the shipowner.” The master
is employed by the shipowner and is, quite naturally, expected to look after the
shipowner’s interests during the charter period. He will be held accountable for any
display of disloyalty towards his employer. However, the master is also under the orders
of the time charterer. He is, due to this position, expected to obey any legal orders that
the time charterer issues within a reasonable time frame. Usually there is no conflict
between these two loyalties. As long as the time charter issues legal orders the master
should obey such an order more or less immediately. Correspondingly the master is not
expected to obey any orders which are illegal. Problems usually arise in unclear
situations, i.e. situations when the master can not, with sufficient certainty, determine
whether the order is legal or not.
My starting-point of the paper was that it is, in principle, possible to determine the
scope of the charterer’s right give orders to the master. This is done by establishing the
legal boundaries of the time charterer’s control over the ship and the master. Surely this
is a positivistic view of the legal system. Even though there may be strong arguments
against such a view I believe that it is the only feasible way to handle legal questions
like this. In order to regulate such a specific business relationship, as a time charter
undoubtedly is, it is necessary to determine the precise scope of the parties’ authority.
Without such delimitation it would be possible to end up in a legal “limbo”, a grey zone
where neither the shipowner nor the time charterer could enforce his rights according to
the charterparty in a court.
There are, in principal, six different types of orders that the time charterer may give
to the master. Those are orders to 1) the nomination of loading and discharging ports, 2)
the conduct of the voyage, 3) the loading and discharge process, 4) the signing of bills
of lading, 5) the delivery of the cargo to a third party and 6) the time and place of the
ship’s redelivery. There are different considerations that must be taken into account in
each situation. To this come some special problems when the time charterer, in his turn,
sublets the ship in question to a sub-charterer.
When the master receives an order he must, when considering an appropriate
response, take a number of factors into account. There are, in principle, three different
types of factors the master must consider. These are: safety factors, commercial factors
and legal factors. Each of these factors may affect the charterer’s right to dispose of the
ship and, consequently, order the master.
88
The master’s response, or at least what would be considered to be the correct
response, to a given order which falls within one of these six categories is in principal
determined by the charterparty itself. Since the prevailing principle in this field of law is
freedom of contract one must look at the charterparty in order to settle any legal
questions. There are limitations to this principle though. Such limitations especially
apply to orders that involve bills of lading. The reason for this is the mandatory rules
that originate in the Hague-Visby Rules. These rules have been implemented in the
Swedish maritime code. Due to the presence of these mandatory rules the type of orders
that the time charterer may legally give has been restricted. Thus, it is necessary to take
such rules into considerations when examining the charterer’s right to order the master.
Further, even though most of the rules concerning time charters in the Swedish code are
optional, it may still be necessary to take them into account when settling a legal
question. Unless it has been clearly stated in the charterparty or otherwise clearly agreed
that the code’s rules shall not govern the time charter a Swedish court may construe a
charterparty clause in the light of the maritime code. It follows that the Swedish code,
despite the initial impression, may strongly influence the charterer’s right to order the
master.
The legal solutions and the master’s choices have been thoroughly discussed
through chapter five to ten in the paper. Therefore I refer to what has been written there.
The number of different situations that may arise and the types of orders that may be
issued during the charter period is simply too many to be accounted for in this
conclusion.
89
List of sources
Cases
Scandinavian cases
ND 1915.61 NCC Venus
ND 1919.364 NSC Urd II
ND 1928.11 SSC Gylsboda
ND 1928.108 SCA Macedonia
ND 1935.436 NSC Snefjeld
ND 1952.442 NCC Hakefjord
ND 1959.55 NCC Grethe
ND 1972.183 SCA Vale
ND 1975.85. NSC Sunny Lady
ND 1987.229 NCA Ulla Dorte
NJA 1978 p. 14.
English cases
Brostrom & Son v. Dreyfus & Co. [1932] 44 Ll. L. Rep. 136. The Sagoland
Lensen Shipping, Ltd. v. Anglo-Soviet Shipping Co., Ltd. [1935] 52 Ll. L. Rep. 141.
The Terneuzen
Halycon Steamship Company, Ltd. v. Continental Grain Company [1943] 75 Ll. L.
Rep. 80. The Halycon
Temple Steamship Company, Ltd. v. V/O Sovfracht [1945] 79 Ll. L. Rep. 1. The
Temple Moat
G. W. Grace & Co., Ltd. v. General Steam Navigation Company, Ltd. [1950] 83 Ll. L.
Rep. 297. The Sussex Oak
Leolga Compania de Navigacion, S.A. v. John Glynn & Son, Ltd. [1953] 2 Lloyd’s
Rep. 47. The Dodecanese
Compania Naviera Maropan S/A v. Botwater’s Lloyd Pulp and Paper Mills, Ltd. [1954]
2 Lloyd’s Rep. 397. The Stork
Leeds Shipping Company Ltd. v. Societe Francaise Bunge [1958] 2 Lloyd’s Rep. 127.
The Eastern City
Cheikh Boutros Selim El-Khoury and others v. Ceylon Shipping Lines, Ltd. [1967] 2
Lloyd’s Rep. 224. The Madeleine
Micada Compania Naviera S.A. v. Texim [1968] 2 Lloyd’s Rep. 57. The Agios Nicolas
London and Overseas Freighters Ltd. v. Timber Shipping Company S.A. [1971] 1
Lloyd’s Rep. 523. The London Explorer
The Berkshire [1974] 1 Lloyd’s Rep. 185.
Splosna Plovba of Piran v. Agrelak Steamship Corporation [1975] 1 Lloyd’s Rep. 139.
The Bela Krajina
Mareva Navigation Co. Ltd. v. Canaria Armadora S.A. [1977] 1 Lloyd’s Rep. 368. The
Mareva A.S.
Kristiandsands Tankrederi A/S and others v. Standard Tankers (Bahamas) Ltd. [1977] 2
Lloyd’s Rep. 353. The Polyglory
Federal Commerce and Navigation Ltd. v. Molena Alpha Inc. [1979] 1 Lloyd’s Rep.
201. The Nanfri
90
W. & R. Fletcher (New Zealand) Ltd. and others v. Sigurd Haavik Aksjeselskap and
others [1980] 1 Lloyd’s Rep. 560. The Vikfrost
Kodros Shipping Corporation v. Empressa Cubana de Fletes [1982] 2 Lloyd’s Rep. 307.
The Evia (No. 2)
C.H.Z. “Rolimpex” v. Eftavrysses Compania Naviera S.A. [1986] 2 Lloyd’s Rep. 586.
The Panaghia Tinnou
Rudolf A. Oetker v. IFA Internationale Frachagentur A.G. [1985] 1 Lloyd’s Rep. 557.
The Almak
Naviera Mogor S.A. v. Société Metallurgique de Normandie [1988] 1 Lloyd’s Rep. 412.
The Nogar Marin
Boukadoura Maritime Corporation v. Societe Anonyme Marocaine de L’Industrie et du
Raffinage [1989] 1 Lloyd’s Rep. 393. The Boukadoura
K/S Penta Shipping A/S v. Ethiopian Shipping Lines Corporation [1992] 2 Lloyd’s Rep.
545. The Saga Cob
Triad Shipping Co. v. Stellar Chartering & Brokerage Inc. [1994] 2 Lloyd’s Rep. 227.
The Island Archon
Kuwait Petroleum Corporation v. I & D Oil Carriers Ltd. [1994] 2 Lloyd’s Rep. 541.
The Houda
Torvald Klaveness A/S v. Arni Maritime Corporation [1995] 1 Lloyd’s Rep. 1. The
Gregos
Whistler International Ltd. v. Kawasaki Kisen Kaisha Ltd. [2001] 1 Lloyd’s Rep. 147.
The Hill Harmony
Preparatory works
Prop. 1993/94:195. Proposition om ny sjölag.
SOU 1990:13. Översyn av sjölagen 2. Godsbefordran till sjöss.
Books
The Swedish Maritime Code, 2nd edition, Stockholm, 2001. An English translation of
the Swedish Code, published by the Axel Ax:son Johnson’s Institute for Maritime- and
Transportation Law at Stockholm University.
Adlercreutz, Axel, Avtalsrätt I, 11th edition, Juristförlaget i Lund, Lund, 2000.
Carter, Leif H., Burke, Thomas F., Reason in law, 6th edition, Longman, United States,
2002.
Falkanger, Thor, Bull, Hans Jacob and Brautaset, Lasse, Introduction to Maritime Law,
Tano Aschehoug, Oslo, 1998.
Festskrift till Jan Sandström, Nerenius & Santérus Förlag, Göteborg, 1997.
Grönfors, Kurt, Sjölagens bestämmelser om godsbefordran, Norstedts Gula Bibliotekm
Stockholm 1982.
Honka, Hannu, Fartygets skick och egenskaper, Åbo Akademiska Förlag (Åbo
Academy Press), Åbo, 1989.
91
Hellner, Jan, Speciell avtalsrätt II, Kontraktsrätt, 3rd edition, Juristförlaget, Stockholm,
1996.
Lehrberg, Bert, Praktisk juridisk metod, 4th edition, Iustus Förlag, Uppsala, 2001.
Michelet, Hans Peter, Håndbok i tidsbefraktning, Sjorettsfondet, Bergen, 1997.
Tiberg, Hugo (editor), Ship Masters, Skrifter utgivna av Axel Ax:son Johnsons institute
för sjörätt och annan transporträtt (Nr. 11), Stockholm, 1991.
Time Charters, 4th edition, Lloyd’s Shipping Law Library, Lloyd’s of London Press
Ltd., 1995. Michael Wilford, Terence Coghlin and John D. Kimball.
Articles
Baughen, Simon, Navigation or employment?, [2001] LMCLQ 177.
Davenport, Brian, Rhumb line or great circle? – That is a Question of Navigation,
[1998] LMCLQ, p. 502.
Davies, Donald, Rights to routes, [1999] LMCLQ 461.
Falkanger, Thor, En sammenligning mellom engelske og norske prinsipper for
fortolkning av kontrakter, AfS 9, Universitetsförlaget, Oslo, 1965-69.
Gaskell, Nicholas, Master and Charterer, found in Ship Masters, p. 49.
Gaskell, Nicholas, Charterers’ Liability and Damage to the Vessel, Ninth Hasselby
Colloquium, 2001.
Girvin, Stephen D., Shipper’s liability for the carriage of dangerous cargoes by sea,
[1996] LMCLQ 487.
Halson, Roger, Time Charterers – Legitimate last voyages, [1993] LMCLQ 19.
Michelet, Hans Peter, Periodens
Universitetsförlaget, Oslo, 1971-2.
lengde
vid
tidsbefraktning,
AfS
11,
Tiberg, Hugo, Legal qualities of transport documents, found in Festskrift to Jan
Sandström, Nerenius & Santérus Förlag, Göteborg, 1997. (pp. 403-441)
Tiberg, Hugo, Styckegodstransport enligt nya sjölage, SvJT 1995, p. 323.
Todd, Paul, Delivery against a forged bill of lading, [1999] LMCLQ 449.
Todd, Paul, Outlawing dishonest international traders, [2000] LMCLQ 394.