Deadfreight v Despatch
by Lucinda Roberts
On some occasions, charterparty disputes give rise to interlinked claims, such as deadfreight and despatch claims, for example, where a charterer loads less than the agreed amount of cargo; this may result in a reduction in the number of laydays used. A recent Tribunal decision, London Arbitration 2/12, dealt with both those issues.
The vessel was chartered for the carriage of 46, 000 MT (10% more or less in owners’ option) of bulk iron ore for a voyage from Caldera, Chile, to North China.
The owners’ claim for deadfreight arose when the loadport advised the maximum allowable draft was 11.18 metres, not 11.40 metres as warranted by charterers in the charterparty. The vessel loaded 46, 107.787 MT, but the owners claimed for freight on 47, 265 MT which they said could have been loaded, had the draft been 11.40 metres.
Charterers denied liability on the grounds that:
i) the port authority reduced the draft following an earthquake. The 11.40 metre reference was made in good faith following the exercise of due diligence, but the reason the actual draft was lower, was beyond their control; and
ii) the owners had breached the agency provisions by replacing the charterers’ load port agent. The charterers were unaware of the loading operations until the vessel had sailed, and were consequently prevented from negotiating the loading of more cargo.
The Tribunal held:
i) the evidence showed the charterers were aware of the maximum draft before and during loading, and had the opportunity to negotiate;
ii) even if the owners were in technical breach of the agency provisions, the charterers had not objected to the change of agents, nor suffered any loss;
iii) no force majeure or other exception existed in the charterparty to exclude losses caused by an earthquake’s aftermath; and
iv) the charterers were bound by their warranty of 11.40 metres, and having assumed the risk of any reduction of available draft, were liable for the deadfreight claimed.
The charterers’ claim for despatch arose as the loading operations completed on 20 March – prior to the agreed laydays (1-10 April). Charterers relied on the Recap terms:
i) “Charterer is not bound to commence loading the vessel and, unless otherwise agreed, laytime at the port of loading shall not count before 1st April”; and
ii) “…the acceptance of the vessel by the Charterers outside the said lay days is subject to further consultation…”
It was common ground that no agreement regarding lay days was reached, and laytime never commenced. The charterers argued they were entitled to despatch for the full time allowed for loading, whereas the owners argued that no laytime was saved during loading, meaning no despatch was due.
The Tribunal rejected the owners’ argument as illogical, holding that the charterers should not be deprived of a right to despatch where loading completed prior to the commencement of laytime. The owners’ benefit from the early completion of loading (reflected by despatch paid to the charterers) remained the same whether laytime had begun to count or not.
This case is a reminder that, unless covered by an exclusion clause, parties remain responsible for breach of warranty where the cause of the breach is beyond their control. While the port’s reduction of the draft was beyond the charterers’ control, it was within their control to re-check the details in advance.
The finding on despatch is also of interest although the Tribunal did not adopt the Court of Appeal’s construction of “agreement” in The “FRONT COMMANDER” , where the charterers’ requests for the vessel to tender Notice of Readiness, and berth, constituted their agreement to the early commencement of laytime. However, it should be noted that as this is an arbitration decision, it does not create a binding English law precedent.
(source: Clyde & Co)