11

LAYTIME AND DEMURRAGE LAYTIME AND DEMURRAGE RECENT CASESRECENT CASES

HOUSTONHOUSTONMarch 29, 2007March 29, 2007

William J. HonanWilliam J. HonanHolland & Knight LLPHolland & Knight LLP

22

Clause 5, Part II, ASBATANKVOYClause 5, Part II, ASBATANKVOY

5.5. LAYDAYS. Laytime shall LAYDAYS. Laytime shall not commence before the date not commence before the date stipulated in Part I, except with stipulated in Part I, except with Charterer's sanction . . . Charterer's sanction . . .

33

Clause 6, Part II, ASBATANKVOYClause 6, Part II, ASBATANKVOY6.6. NOTICE OF READINESS. Upon arrival at NOTICE OF READINESS. Upon arrival at

customary anchorage at each port of loading or discharge, customary anchorage at each port of loading or discharge, the Master or his agent shall give the Charterer or his agent the Master or his agent shall give the Charterer or his agent notice by letter, telegraph, wireless or telephone that the notice by letter, telegraph, wireless or telephone that the vessel is ready to load or discharge cargo, berth or no vessel is ready to load or discharge cargo, berth or no berth, and laytime, as hereinafter provided, shall berth, and laytime, as hereinafter provided, shall commence upon the expiration of six (6) hours after receipt commence upon the expiration of six (6) hours after receipt of such notice, or upon the vessel's arrival in berth . . . of such notice, or upon the vessel's arrival in berth . . . whichever first occurs. However, whichever first occurs. However, irrespective of whether irrespective of whether the berth is reachable on arrival or notthe berth is reachable on arrival or not where delay is where delay is caused to Vessel getting into berth after giving notice of caused to Vessel getting into berth after giving notice of readiness for any reason over which Charterer has no readiness for any reason over which Charterer has no control, such a delay shall not count as used laytime control, such a delay shall not count as used laytime or or demurrage. In any event, Charterer shall be entitled to six demurrage. In any event, Charterer shall be entitled to six hours notice of readiness at loading and discharging ports, hours notice of readiness at loading and discharging ports, even if the vessel is on demurrage.even if the vessel is on demurrage.

44

Issue No. 1Issue No. 1

1.1. If a vessel arrives prior If a vessel arrives prior to commencement of the laydays to commencement of the laydays and is ready to load, is the vessel and is ready to load, is the vessel under an obligation to give its under an obligation to give its notice of readiness?notice of readiness?

55

Issue No. 2Issue No. 2

2.2. If the vessel gives its If the vessel gives its notice of readiness prior to the notice of readiness prior to the commencement of laydays, does commencement of laydays, does the six hour free period begin the six hour free period begin running upon the giving of the running upon the giving of the notice of readiness or at notice of readiness or at midnight of the first layday?midnight of the first layday?

66

Issue No. 3Issue No. 3

3.3. Does the giving of an Does the giving of an early notice of readiness require early notice of readiness require the charterer to commence the charterer to commence loading immediately (or at least 6 loading immediately (or at least 6 hours afterwards)?hours afterwards)?

77

Issue No. 4Issue No. 4

4.4. If the charterer upon If the charterer upon receipt of the early notice of receipt of the early notice of readiness, orders the vessel to a readiness, orders the vessel to a berth, can the vessel refuse?berth, can the vessel refuse?

88

Issue No. 5Issue No. 5

5.5. If the charterer orders If the charterer orders the vessel to its berth upon the vessel to its berth upon receipt of the early notice of receipt of the early notice of readiness and begins loading the readiness and begins loading the vessel, all before the vessel, all before the commencement of the laydays, commencement of the laydays, does the time used prior to the does the time used prior to the first layday count as laytime?first layday count as laytime?

99

Mr. Justice Langley’s HoldingMr. Justice Langley’s Holding

1. "[Laytime] never started at all, 1. "[Laytime] never started at all, with the consequence not only that the with the consequence not only that the owners have earned no demurrage, but owners have earned no demurrage, but also that they are obliged to pay the also that they are obliged to pay the charterers despatch money for the charterers despatch money for the whole of the laytime."whole of the laytime."

2. Charterer’s awareness that 2. Charterer’s awareness that discharge had commenced without discharge had commenced without protesting or reserving its rights was protesting or reserving its rights was not itself a “sufficient happening” to not itself a “sufficient happening” to cause laytime start.cause laytime start.

1010

Free Pratique: General PrinciplesFree Pratique: General Principles(assumes ASBATANKVOY form)(assumes ASBATANKVOY form)

1.1. Free pratique, absent Free pratique, absent express language otherwise, is not a express language otherwise, is not a prerequisite for the tendering of a prerequisite for the tendering of a notice of readiness andnotice of readiness and

2.2. Free pratique is considered Free pratique is considered granted when it is not denied.granted when it is not denied.

3.3. If the vessel is continually If the vessel is continually available to charterer, no laytime is available to charterer, no laytime is excluded between the time a notice of excluded between the time a notice of readiness is given and the time that readiness is given and the time that free pratique is granted.free pratique is granted.

1111

Clause 6.3.3, BPVOY 4Clause 6.3.3, BPVOY 4Notwithstanding tender of a valid NOR by the vessel Notwithstanding tender of a valid NOR by the vessel

such NOR shall not be effective nor become effective, for such NOR shall not be effective nor become effective, for the purposes of calculating laytime, or if the vessel is on the purposes of calculating laytime, or if the vessel is on demurrage, demurrage unless and until the following demurrage, demurrage unless and until the following conditions have been met:conditions have been met:

6.3.3 free pratique has been granted or is granted 6.3.3 free pratique has been granted or is granted within six (6) hours of the master tendering NOR. If free within six (6) hours of the master tendering NOR. If free pratique is not granted within six (6) hours of the master pratique is not granted within six (6) hours of the master tendering NOR, through no fault of owners, agents or those tendering NOR, through no fault of owners, agents or those on board the vessel, the master shall issue a protest in on board the vessel, the master shall issue a protest in writing (NOP) to the port authority and the facility at the writing (NOP) to the port authority and the facility at the port (the terminal) failing which laytime or, if the vessel is port (the terminal) failing which laytime or, if the vessel is on demurrage, demurrage shall only commence when free on demurrage, demurrage shall only commence when free pratique has been granted . . .pratique has been granted . . .

1212

Clause 7.3.2, BPVOY 4Clause 7.3.2, BPVOY 4

7.3.2 Laytime, or if the vessel 7.3.2 Laytime, or if the vessel is on demurrage, demurrage shall is on demurrage, demurrage shall commence, at each loading and commence, at each loading and each discharge port, upon the expiry each discharge port, upon the expiry of six (6) hours after a valid NOR has of six (6) hours after a valid NOR has become effective as determined become effective as determined under cl. 6.3, berth or no berth, or under cl. 6.3, berth or no berth, or when the vessel commences when the vessel commences loading, or discharging, whichever loading, or discharging, whichever first occurs.first occurs.

1313

““Agios Dimitrios”: Agios Dimitrios”: Clauses 23(b) and 25Clauses 23(b) and 25

Clause 23(b)Clause 23(b)

At loading port(s) when tendering notice of readiness, At loading port(s) when tendering notice of readiness, Vessel's cargo holds and hatch covers shall be clean, Vessel's cargo holds and hatch covers shall be clean, dry of loose rust and otherwise ready and suitable to dry of loose rust and otherwise ready and suitable to receive the intended cargo.receive the intended cargo.

Clause 25Clause 25

Crew and mechanical failure – time lost at loading Crew and mechanical failure – time lost at loading and/discharging port(s) which can be reasonably and/discharging port(s) which can be reasonably attributed to crew and/or ship's mechanical failure, attributed to crew and/or ship's mechanical failure, shall not be counted as laytime or time on demurrage.shall not be counted as laytime or time on demurrage.

1414

““Nikmary” Facts SummaryNikmary” Facts Summary The vessel arrived at the port of Sikka to load a cargo of gasoil on The vessel arrived at the port of Sikka to load a cargo of gasoil on

December 2 and proceeded immediately to its berth.December 2 and proceeded immediately to its berth.

The vessel's tanks were inspected on December 3rd by an independent The vessel's tanks were inspected on December 3rd by an independent surveyor appointed by the charterer and were rejected.surveyor appointed by the charterer and were rejected.

The supplier, Reliance Petroleum Limited, was prepared to supply the The supplier, Reliance Petroleum Limited, was prepared to supply the cargo on December 3rd.cargo on December 3rd.

The vessel's crew cleaned the holds and, on December 5, the two The vessel's crew cleaned the holds and, on December 5, the two surveyors, one appointed by the owner and the other appointed by the surveyors, one appointed by the owner and the other appointed by the charterer passed the holds and the vessel gave its valid NOR to the charterer passed the holds and the vessel gave its valid NOR to the receiver.receiver.

No cargo was forthcoming and, on December 9, Reliance notified the No cargo was forthcoming and, on December 9, Reliance notified the charterer that due to its other commitments, both domestically and to charterer that due to its other commitments, both domestically and to other vessels, the “Nikmary” would not be loaded until the end of the other vessels, the “Nikmary” would not be loaded until the end of the month.month.

Loading in fact did not commence until January 3.Loading in fact did not commence until January 3.

1515

““Nikmary” Clause 30(c)(v)Nikmary” Clause 30(c)(v)

Owner shall indemnify Charter for Owner shall indemnify Charter for all direct and/or indirect costs and all direct and/or indirect costs and consequences as a result of the Vessel consequences as a result of the Vessel not being clean to the satisfaction of not being clean to the satisfaction of jointly appointed inspector and . . . all jointly appointed inspector and . . . all time until connection of hoses, after time until connection of hoses, after the Vessel has been passed as clean to the Vessel has been passed as clean to the satisfaction of jointly appointed the satisfaction of jointly appointed inspector shall not count as laytime or, inspector shall not count as laytime or, if on demurrage, as time on if on demurrage, as time on demurrage. demurrage.

1616

Charterer’s Duty to Provide CargoCharterer’s Duty to Provide Cargo

A voyage charterer owes an A voyage charterer owes an absolute and non-delegable duty to absolute and non-delegable duty to provide cargo for loading andprovide cargo for loading and

charter exceptions will normally be charter exceptions will normally be read as protecting a charterer only read as protecting a charterer only in respect of its duty to load, and in respect of its duty to load, and not as covering its duty to provide a not as covering its duty to provide a cargo.cargo.

1717

““Cape Equinox”: Clause 9Cape Equinox”: Clause 9

9.9. The cargo to be discharged by The cargo to be discharged by the consignee at port of discharge free the consignee at port of discharge free of expense and risk to the vessel. If of expense and risk to the vessel. If longer detained, consignee to pay vessel longer detained, consignee to pay vessel demurrage at the rate of $10,500 U.S. demurrage at the rate of $10,500 U.S. Currency per day . . . . In case of Currency per day . . . . In case of strikes, lockouts, civil commotions, or strikes, lockouts, civil commotions, or other causes or accidents beyond the other causes or accidents beyond the control of the consignee which prevent control of the consignee which prevent or delay the discharging, such time is or delay the discharging, such time is not count . . . .not count . . . .

1818

Clause 20.1, BPVOY 4Clause 20.1, BPVOY 420.1 Charterers shall be 20.1 Charterers shall be

discharged and released from all discharged and released from all liability in respect of any claim for liability in respect of any claim for demurrage, deviation or detention demurrage, deviation or detention which owners may have under this which owners may have under this charter unless a claim in writing has charter unless a claim in writing has been presented to charterers, together been presented to charterers, together with all supporting documentation with all supporting documentation substantiating each and every substantiating each and every constituent part o the claim within constituent part o the claim within ninety (90) days of the completion of ninety (90) days of the completion of discharge of the car go carried discharge of the car go carried hereunder. hereunder.

1919

Clause 20.2, BPVOY 4Clause 20.2, BPVOY 420.2 Any other claim against charterers 20.2 Any other claim against charterers

for any and all other amounts which are alleged for any and all other amounts which are alleged to be for charterers' account under this charter to be for charterers' account under this charter shall be extinguished, and charterers shall be shall be extinguished, and charterers shall be discharged from all liability whatsoever in discharged from all liability whatsoever in respect thereof, unless such claim is presented respect thereof, unless such claim is presented to charterers, together with full supporting to charterers, together with full supporting documentation substantiating each and every documentation substantiating each and every constituent part of the claim, within one constituent part of the claim, within one hundred and eight (180) days of the completion hundred and eight (180) days of the completion of discharge of the cargo carried hereunder. of discharge of the cargo carried hereunder.

2020

““Bow Cedar” Facts SummaryBow Cedar” Facts Summary On August 27, 2002 at 0130 the vessel tendered its NOR.On August 27, 2002 at 0130 the vessel tendered its NOR.

On September 2, while the vessel waited at the load port, On September 2, while the vessel waited at the load port, the charterer notified the owner that its attempts to find a the charterer notified the owner that its attempts to find a cargo had failed and it was cancelling the charter.cargo had failed and it was cancelling the charter.

On September 3, the owner accepted the charterer's On September 3, the owner accepted the charterer's repudiation and, on September 5, the owner chartered the repudiation and, on September 5, the owner chartered the vessel to a third party in mitigation.vessel to a third party in mitigation.

On July 15, 2003 (i.e., over 180 days thereafter), the On July 15, 2003 (i.e., over 180 days thereafter), the owner's Club presented owner's claim amounting to owner's Club presented owner's claim amounting to $547,468 to charterer.$547,468 to charterer.

2121

““Bow Cedar” Judge’s HoldingBow Cedar” Judge’s Holding1.1. The time periods of 90 and 180 days run The time periods of 90 and 180 days run

from the completion of discharge. With no discharge from the completion of discharge. With no discharge completion date, the 90 and 180 periods have no date from completion date, the 90 and 180 periods have no date from which to run. The Court was unwilling to imply language which to run. The Court was unwilling to imply language such as "from the completion of discharge or when the such as "from the completion of discharge or when the completion of discharge should have occurred.“completion of discharge should have occurred.“

2.2. A claim for wrongful repudiation is not a A claim for wrongful repudiation is not a claim "for charterer's account under this charter." The claim "for charterer's account under this charter." The Court pointed to a number of provisions in the charter that Court pointed to a number of provisions in the charter that called for charterer to pay for certain services or time called for charterer to pay for certain services or time periods. There as no similar provision for wrongful periods. There as no similar provision for wrongful repudiation of the charter. The Court stated that time bar repudiation of the charter. The Court stated that time bar clauses, as they prevent the recovery of monies otherwise clauses, as they prevent the recovery of monies otherwise rightfully due, should be construed strictly against the rightfully due, should be construed strictly against the parties which seek to invoke them.parties which seek to invoke them.

2222

Time Bar General PrinciplesTime Bar General Principles1.1. Contractual time bars are enforced.Contractual time bars are enforced.

2.2. Contractual time bars are construed Contractual time bars are construed strictly against the drafter.strictly against the drafter.

3.3. Contractual time bars are enforced even Contractual time bars are enforced even if there is no dispute concerning the claim in if there is no dispute concerning the claim in question.question.

4.4. Arbitrators require strict compliance to Arbitrators require strict compliance to satisfy contractual time bars. Substantial satisfy contractual time bars. Substantial compliance probably is insufficient.compliance probably is insufficient.

2323

Time Bar Practice TipsTime Bar Practice Tips1.1. If the Owner:If the Owner:

a)a) seek to eliminate altogetherseek to eliminate altogetherb)b) make the clauses mutually applicablemake the clauses mutually applicablec)c) provide as long a period as possibleprovide as long a period as possibled)d) provide training to the persons handling provide training to the persons handling claimsclaims

2.2. If the Charterer:If the Charterer:a)a) include all claims not just demurrage and include all claims not just demurrage and

detentiondetentionb)b) draft the clause so as to avoid obvious draft the clause so as to avoid obvious loopholes loopholes

2424

LAYTIME AND DEMURRAGE LAYTIME AND DEMURRAGE RECENT CASESRECENT CASES

HOUSTONHOUSTONMarch 29, 2007March 29, 2007

William J. HonanWilliam J. HonanHolland & Knight LLPHolland & Knight LLP