Shipping Law Assignment: Charter Parties, Obligations, and Disputes

This assignment solution addresses key aspects of shipping law, focusing on the rights and liabilities of shipowners and charterers under English law, specifically within the context of a voyage charter party. The solution analyzes a case involving a vessel delayed due to a faulty navigation system, industrial action, and underwater damage, identifying the charter party type and outlining the duties and obligations of both shipowners and charterers. It examines the shipowner's duties regarding vessel description and seaworthiness, as well as the charterer's obligations in port nomination. The solution then details the rights of both parties, including the charterer's right to a seaworthy vessel and the shipowner's right to freight. Finally, it discusses the liabilities arising from breaches of these obligations, such as the shipowner's liability for delays and the charterer's responsibility for nominating an unsafe port, emphasizing the importance of due diligence and adherence to the terms of the charter party and relevant international rules.

Question 1
RIGHTS AND LIABILITIES OF SHIPOWNERS AND CHARTERERS UNDER
ENGLISH LAW
Introduction
The material facts of the case are that; a charter party was entered into between Ali Shipping the
Matahari (hereinafter referred to as “shipowner”) and Monsoon Ltd (hereinafter referred to as
“charterer”) with reference to a Panamax vessel. The vessel was to deliver refined fuel oil from
Dubai to one safe, East of England port. Upon departure, the vessel was delayed for 2 days due
to faulty navigation system. Further, it was denied docking due to industrial action. Its woes also
resulted from hitting an underwater object.
What type of charter party is in question in this dispute?
There exist three common categories of charter parties that parties can enter into, namely –
Voyage charter party, time charter party, and bareboat charter party.1 Voyage charter party on its
part is defined as a contract whereby a shipowner hires out a ship to a charterer purposely for
transportation of specified goods.2 Time charter party on the other part is pegged on a particular
or definite period of time determined by the parties.3 Bareboat on its part apply where charterer is
granted by the shipowner complete control and management of the hired vessel.4
From the outset therefore, it can be deduced and concluded that this case concerns a voyage
charter party as it was for a specific voyage namely - delivery of refined fuel oil from Dubai to
one safe, East of England port. Identification of the charter party as above forms the basis of
identification of duties and obligations from which rights and liabilities are derived.
What are the duties and obligations of a shipowner?
From the facts of the case, it was indicated that parties used the standard form a SHELLVOY6
in crafting the terms of the charter party. From the said standard form, the first duty and which is
1 Plomaritou, E., ‘a review of Shipowner’s & Charterer’s Obligations in Various Types of Charter’, (2014), 4, JSOE,
307-321.
2 Pavliha, M., ‘American maritime law of freight under voyage charters,’ (1994), 31, ZRPF ,101-127.
3 Plomaritou (n 1 above).
4 Ibid.

primary is that of a shipowner to ensure proper description of the vessel; this obligation is aptly
captured under Part A (I) of the charter party. Under clause II of the charter party, the shipowner
is under duty to maintain the vessel in as far as possible to the description furnished to the
charterer pursuant to Part A (I) of the charter party. Moreover, according to Clause 28 of the
charter party, the shipowner is required to notify the charterer if the ship has ceased complying
with the description initially availed to the charterer. This notice is required to be reasonable and
communication made in a prescribed manner.
Tied to the duty of proper description of the vessel is that of ensuring that the vessel is
seaworthy. In Kopitoff v Wilson,5 the court gave its rendition of what is meant by seaworthiness
and held that it means the ability of a ship to be fit for the perils that are attendant to a voyage.
Therefore, the ship must be capable of meeting the terms of the voyage as crafted.
Whereas, previously under common law, the obligation of seaworthiness was absolute; Article
III of Hague/Visby Rules have modified it. The charter party having incorporated the above rules,
the shipowner is obliged to exercise due diligence and must take all the reasonable steps in
meeting this critical obligation.6
What are the duties and obligation of Charterer?
The charterer is under duty in accordance with Clause 3 (1) to nominate a port for loading and
discharge of goods. The choice of port must be a safe one where either loading or discharging of
goods is possible.7 Tied to the duty to nominate a port is the duty to order a ship to discharge in a
fresh port in case of extenuating circumstances.
In the Eastern City,8 the court opined that a port is safe if during the period of voyage, a ship can
reach it, use it and return from it without any abnormal occurrence that endanger its safety in
whatsoever and however manner.
Seized with the same principle on nomination of a safe port, the court in the Avia,9 stated that the
5 (1876) 1 QBD 377 at p 380.
6 ‘Implied obligations in a contract of affreightment’, <
https://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/samplechapter/
Wilson_COGBS_C02.pdf > accessed 31st January 2020.
7 Ibid (n 1) above.
8 [1958] 2 Lloyd’s Rep 127 at p 131.
9 [1982] 2 Lloyd’s Rep 307.

scope of the duty bestowed upon the charterer by the charter party is only restricted to the time of
nomination and does not extend to any period after nomination. Further, the court was emphatic
that its finding does not relieve the charterer from exercising due diligence in nomination of a
port. This was also covered under clause 4 of the charter party hence obligatory on the charterer.
Undoubtedly, a charterer must therefore conduct a bit of investigation concerning the port he
seeks to nominate.
Where the nominated port is rendered unsafe due to unforeseeable circumstances, a charterer is
within his rights to make deviations. Article IV rule 4 of Hague/Hague Visby Rules, which Rules
were incorporated and form part and parcel of the terms and conditions of the charter party.
From the above duties arise rights and liabilities which must be analysed in light of the facts
rehashed earlier own. The rights of the parties are those that expressed in the contract as well as
those that can be implied from the circumstances of the case; in Mount Isa Mines Ltd v The Ship
'Thor Commander', 10 the Court of Appeal emphasized the need to appreciate customs as
provided in trade and usage in construction of terms in making sure that there is certainty in
business.
What are the Rights of Charterer?
The charterer has a number of rights. First, is the right to correct description of the vessel.
Second, is the right to be given by the shipowner a seaworthy vessel. Third, is the right to make
choice or nominate a port for loading and discharging of the vessel. Fourth, is the right to make
reasonable deviation from the predetermined route. Fifth, is the right to rescind or repudiate the
charter party in case of violation of terms of the charter party depending on whether the violated
term is a condition or warranty; this was the holding of the court in Hochster v De La Tour. 11
Last, is the right to sue for restitution or compensation in form of damages for the losses that
flows from and are incidental to actions and omissions of the shipowner.
What are the Rights of the shipowners?
A shipowner has a number of rights. Firstly, is that it is entitled under charter party to freight for
hiring out its ship to the charterer. Secondly, it is entitled to demurrage or damages for losses that
10 [2018] FCA 1326 (29 August 2018).
11(1853) 2 E&B 678.

are arising from the acts and omissions of the charterer. Thirdly, it is entitled to rescind or
repudiate the contract depending on the nature of the term of the charter party violated by the
charterer. Lastly, it is entitled to have its ship taken through safe routes and ports.
Having discussed duties and rights, the next bit is liabilities. Liabilities arise from violation of
obligations expected a party to a charter party. Liability of one party is obviously a remedy to the
other party to the charter party.
What are Liabilities of the shipowner?
Recalling the facts of the case thus; the ship was grounded and refloated after two days. This is
in spite of the duty of seaworthiness that the charter party bestowed on the shipowner. Moreover,
under the duty to describe the vessel, the shipowner disclosed the tenacity of the ship and its
ability to withstand perils of the case. It was therefore the legitimate expectation of the charterer
that the ship would remain afloat for the voyage period. It was however, to delay for two days.
Under the duty to ensure seaworthiness, Article IV of Hague/Visby Rules earlier on discussed the
shipowner must exercise due diligence. In this case, and in light of the failure of navigation
system, the only reasonable conclusion is that, the shipowner fell short of the standards
demanded of it under the charter party attendant laws. This if resulted to damages on the part of
the charterer which entitled him to recompense, in view of the fact that the charterer neither
rescinded the contract nor repudiated but affirmed the contract. Consequently, the charterer is
entitled to a remedy as the maxim of equity goes, equity will not suffer a wrong not to be with a
remedy.12
The above is a glaring liability on the part of the shipowner which is ripe for meeting and
settling.
What are the liabilities of a charterer?
The facts of the case disclosed that the charterer was under obligation to nominate a safe port.
This duty as construed by the courts of law and as previously discussed to be restricted to the
time nomination is made however due diligence must be exercised. The charterer elected a port
12 Mutayi, E., ‘The maxims of equity Aims and objectives’, <
https://www.academia.edu/36900269/The_maxims_of_equity_Aims_and_objectives > accessed 31st January
2020.

for loading and discharge of the vessel as the Port of Felixstowe. On the material date however,
it was denied use of the port and had to wait for 4 days.
This brings to question the issue whether the charterer exercised due diligence in making the
nomination regarding the choice of the port. Had the duty been discharged, the charterer would
have established the port was undergoing industrial action during the time. However, it is
incumbent on charterer to discharge the burden of establishing that knowing the presence of
industrial action was beyond his knowledge irrespective of the level of due diligence.
Moreover, as put forward by the facts, the vessel hit underwater object. The port had actually
warned of the presence objects. This brings to fore two issues. Firstly, the charterer failed to
exercised due diligence in nominating a safe port, if he did, he would have received notice of the
presence of objects and chose another port. Secondly, the charterer had the right and leeway to o
make reasonable deviations; he did not make such necessary moves. Having failed and/or
neglected to make deviations, he fell short of the required due diligence under the contract.
Consequently, the damages that arise therefrom must be met by him.
Conclusion
From the above discussion, it is clear that both the parties can be successful in their claims for
compensation on violation of obligations expected under the charter party. However, the same is
pegged on proof. Each party must consequently discharge its burden of proof to be entitled to the
remedies in form of damages discussed above.
BIBLIOGRAPHY

Cases
1. Kopitoff v Wilson (1876) 1 QBD 377 at p 380.
2. The Eastern City [1958] 2 Lloyd’s Rep 127 at p 131.
3. The Avia [1982] 2 Lloyd’s Rep 307.
4. Mount Isa Mines Ltd v The Ship 'Thor Commander', [2018] FCA 1326 (29 August
2018).
5. Hochster v De La Tour (1853) 2 E&B 678.
Article
1. Plomaritou, E., ‘a review of Shipowner’s & Charterer’s Obligations in Various Types of
Charter’, (2014), 4, JSOE, 307-321.
2. Pavliha, M., ‘American maritime law of freight under voyage charters,’ (1994), 31,
ZRPF, 101-127.
3. ‘Implied obligations in a contract of affreightment’, <
https://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/
samplechapter/Wilson_COGBS_C02.pdf > accessed 31st January 2020.
4. Mutayi, E., ‘the maxims of equity Aims and objectives’, <
https://www.academia.edu/36900269/The_maxims_of_equity_Aims_and_objectives >
accessed 31st January 2020.
Question 2

What happens when the charterer fails to meet his obligation to pay the hire fees when it falls
due? Does the ship manager preserve the right to withdraw the vessel? And at any point in time
he or she deems fit?
INTRODUCTION
Commercial entities will get into contracts with the optimism that both parties will carry out their
side of the bargain. However, there may be failure on a party to fulfill such obligations, including
changes in availability or price or possibility because of the financial weakness or insolvency of
one or other of the parties. Similar instances are manifested in shipping contracts between
charterers and sheep owners. It is normally said that the shipping market is naturally cyclical and
that freight rates for carriage under voyage charters or the rates available for time charters will
vary under changing market conditions. It is also worth noting that time charters agreed at the
height of the market began looking very unappealing to charters after the financial crisis of 2008.
The question arose on what is the position of ship owners when charters failed to perform their
obligation to pay hire.
ANALYSIS
Where the charterer fails to pay hire when it falls due
Hire fee is the part of the bargain that needs to be completed by the charter. It is the
consideration to be paid to the ship manager by the hirer for the using and servicing of the ship
and crew. Like any other contractual relationship, it is common for a charter to expressly provide
clause with regard to time perfomance, amount to be paid, the kind of currency and the manner
of payment. While time perfomance may be considered a warrant (only capable of making a
contract voidable) in other forms of contract, the situation is different in charter contracts. A
violation of time perfomance will make a contract void ab initio: In the face of it, a shipowner
may and commonly will reserve the right to withdraw the vessel and terminate the charter if the
charterer fails to pay hire in the way agreed.
However, the court has traversed on this right and looks into the nature of the contract before
finding withdrawal of the vessel as the right move. It has been contested that the right to
withdraw has to be normally be reserved expressly: when there is no withdrawal clause,

originally it was suggested that a late compensation for hire would not be regarded at common
law as a repudiatory breach entitling the owner to treat the contract as at an end and to come to
this conclusion reliance was placed upon.13 The court will consider a number of factors when
reaching the final verdict. For instance, if the court finds that there was a reasonable delay, the
court may opt for mitigating damages or equitable remedies instead of rescinding the contract. In
the case of Spar Shipping AS v Grand China Logistics Holding (Group) Co., Ltd,14 the question
on whether late payment was a breach of condition or merely a warranty (that does not get to the
root of the contract) was discussed. The case involved three long-term NYPE 1993 charters had
been agreed on the 5th of March 2010 Hire was paid punctually on all three until 11 April 2011
thereafter the Charterers began to default and the Owners withdrew the vessels, reserving a right
to claim loss of bargain damages on the basis that the Charterers were in breach of condition or
in repudiatory breach of an innominate term. The court referred to Financings Ltd v Baldock15
where it was held that in the absence of a serious breach by the hirer there was no right to loss of
bargain damages.
The question of late payment was also discussed in the case in Kuwait Rocks Co v AMN
Bulkcarriers Inc (The Astra)16 where the court held that the obligation of timeous payment of
hire under a NYPE charter party is a condition. In Stocznia v Latco: the court established the
limit of any period of grace, after which if the other party remains in default, the innocent party
is entitled to bring the contract to an end.
The plight of ship owners with regard to the right to withdrawal of vessel is subject to court
discretion particularly when there is a case of late payment. In applying discretionary measures,
the court will look into the implications of the charterer failing to pay hire. Accordingly, a term
is seen to be a condition (meaning its breach would affect the root of the contract) only if any
foreseeable breech would deprive the ship owner of substantially all the contractual benefits.
Therefore, when the timeline for contractual performance is exceeded, the question to be
answered is whether the term (paying hire) is a condition or a warranty in the contract. For the
term of paying hire when it falls due to have a repudiatory effect to the contract, there has to be
an expressed or implied agreement that the breach of it “shall entitle the defaulting party to treat
13 The Georgios C [1971] 1 Lloyd’s Rep 7.
14 [2015] EWHC 718 (Comm)
15 [1963] 2 QB 104.
16 (2013) EWHC 865

the contract as repudiated.” the proper construction of the parties’ agreements will be vital in
determining whether there exists a contractual right to terminate.17
The Ship Manager Has The Right to Withdraw the Vessel and Should Exercise It
Under a time charter, the concept of timing is very fundamental to the contract. It is a prima facie
condition to the contract, and failure to abide by it makes the contract void on the part of the ship
owner. This is because in such charters, the owner is obligated to bear the expenses of
maintaining the ship and the crew. The ship owner ensures that the ship is maintained at a
navigable state. Furthermore, the ship owner also carries the risk of marine accidents in the
course of the voyage. Therefore, it is imperative that the ship owner insures his or her interest in
the vessel appropriately.
A time charter is not necessarily a contract of carriage, but rather an agreement to provide
services of a crewed vessel. Therefore, when the charterer proves to be unreliable in making
payment when the time is due, a ship manager is entitled (and would be reasonable for him to)
withdraw the vessel. A decision in the case of Daebo Shipping Co Ltd v The Ship Go Star also
revealed that ship owners were justified to withdraw vessels from hire from the principal
charterer. 18 This is in a bid to avoid further losses in expenses for taking care of the ship. After
the withdrawal, the ship owner is also entitled to damages suffered in the course of operating the
ship. One of the main common law damages that are awarded is compensatory remedy, which
obligates the charterer to pay the ship owner for losses incurred when taking care of the ship.
Specific performance is another equitable remedy that could be awarded by courts.
In essence, where the contract expressly provides for the right to terminate (and therefore
withdraw the vessel) on the basis of time lapse, there is a very strong indication that the term is a
condition. The essential test that then comes in is whether the term is one any predicted breach of
which deprives the ship owner in this case, of substantially the whole benefit of the contract. If it
is proved that indeed the lack of compliance to the time term injured the ship owner, then the
contract is treated as repudiated by the owner. A contractual termination clause to that effect
stands. However, if the intention for the parties when contracting does not prove repudiation
17 Diplock DJ in the case of Financings v Baldock
18 [2012] FCAFC 156

because of a breach in the time term, then the contract cannot be terminated. The mere existence
of the termination provision does not tell anything about the status of the term without digging
into the intention of both parties to the shipping agreement. Thus, only until it is deemed likely
that the failure to pay will injure the ship owner, will he or she be allowed to withdraw the ship.
BIBLIOGRAPHY
Cases

Daebo Shipping Co Ltd v The Ship Go Star [2012] Fcafc 156
Financings Ltd v Baldock [1963] 2 Qb 104.
Kuwait Rocks Co v Amn Bulkcarriers Inc (The Astra) (2013) EWHC 865
Spar Shipping AS v Grand China Logistics Holding (Group) Co., Ltd. [2015] EWHC 718
(Comm).
Books
Prof. Michael Bridge, Benjamin’s Sale of Goods (9th Edition, Sweet and Maxwell, 2014
Question 3
INTRODUCTION

The Bill of Lading acts as a contract between the parties of the consignment19. In this instance all
rules concerning privity of contracts applies. This means that if a party did not sign the contra)ct
he cannot bring a claim in case of breach. In this case, the bill of laden was a contract between
Marwan and Mohammed who are the consignee and carrier respectively. Therefore the relevant
parties in this case are Marwan and Mohammed. It should however be remembered that
Mohammed was an agent to Hesham who is the owner of the ship.
A. RIGHTS AND LIABILITIES OF MARWAN, THE CONSIGNEE
i) Rights
a) Right to receive the goods
The issue is whether Marwan has a right to receive the goods. Under this right, three things have
to be considered: the document of title, bailment and the provisions of the COGSTA, 9220.
The bill of lading acts as a document of title which means that one of the legal consequences is
that it confers the legal holder the right to delivery of the goods21.
Traditionally under common law, it did not matter whether the bill of lading is non-negotiable.
However, with the modifications in the law22, non-negotiable bills of lading cannot confer the
right to delivery of goods on the legal holder23.
Under the Carrier of Goods by Sea Act of 1992, the bill of lading representing goods upon a ship
or goods already shipped on board a vessel and having been signed by the master, acts as
evidence in favor of the lawful holder against the carrier24.
Therefore, under the umbrella of a document of title, Marwan cannot claim the right to delivery
of goods because the bill of lading he holds is non-negotiable.
When it comes to bailment, which is another common law concept, the bill of lading acts as a
19 Kuoresh Majdzadeh Khandani, ‘Rights and Liabilities of the Consignees/Endorsees: A Comparative Study of the
Rotterdam Rules and English Law’ (DPhil, University of Manchester 2018)
20 Kuoresh Majdzadeh Khandani, ‘Rights and Liabilities of the Consignees/Endorsees: A Comparative Study of the
Rotterdam Rules and English Law’ (DPhil, University of Manchester 2018
21 Prof. Michael Bridge, Benjamin’s Sale of Goods(9th Edition, Sweet and Maxwell, 2014)
22 Section 2(2), Carriage of Goods by Sea Act 1992
23 Kuoresh Majdzadeh Khandani, ‘Rights and Liabilities of the Consignees/Endorsees: A Comparative Study of the
Rotterdam Rules and English Law’ (DPhil, University of Manchester 2018
24 Section 4, COGSA 92