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Friday, July 5, 2013

A question from a reader..

Quote

learningshipping has left a new comment on your post "Shipbroker commissions.": 

Hi, I am a shipbroker based in the Philippines. I am actually an old timer in shipbroking, but more of an snp shipbroker than a chartering broker. I am not an expert in chartering problems.

I am having a problem deciding whether a situation my shipowners are in is a case of deadfreight or a breach of contract.

It is said that when the charterer advises the shipowner that he cannot load any cargo
on the vessel, this becomes a breach of contract and not deadfreight because the shipowners can still mitigate his losses by finding a substitute cargo.

But what if the vessel has waited at the load port for more than 30 days (laytime agreed is only 5 days and a complete voyage would only be 15 days), shouldn't that
be considered deadfreight because the time lost is already equivalent to more than one voyage. In other words, the ship owner does not have any time to mitigate his losses.

Would appreciate your comments.

This will help me determine how much brokers commissions I deserve to get. If it is deadfreight,
I believe I should get 100% but if it is a breach of contract, according to clause 15 of gencon, I can only collect 30% from the party at fault.

More power to you!

Bobby 


Unquote





Bobby - excellent question and here are my thoughts...

Simple really - This in my opinion is a breach of contract. If the charterer took 30 days to notify the shipowner that no cargo will eventuate and the ship waited in good faith for that time - then the shipowner should be able to sue for the total amount of freight and any losses for waiting 30 extra days (detention).

The shipowners has been given no opportunity to mitigate so they should sue for the full amount i reckon.

So at the end of the day your commission will need to be claimed when and if the parties go to court and the amounts are settled. 

A deadfreight claim (again in my opinion) is only if part of the contract has actually been fulfilled (or started).

If anyone else has a different take own this matter - feel free to contribute

Good luck Bobby and thanks for the email

VS


9 comments:

  1. Dear Bobby,

    That’s the reason it pays to get a CLEAR third party guarantee, to solve such issues with more accuracy and efficiency.

    Your shipowner has to claim for detention (unliquidated damages for breach of contract), to compensate the owner for their loss of use of the vessel.

    (Dead freight is the name given to liquidated damages claimed for a charterer’s breach of contract to furnish a full cargo to a ship in accordance with the charterparty).

    In this point, we need to underline that you have to consult the charterparty, which should contain provisions which suspend the running of laytime and/or demurrage in certain circumstances as may have been agreed between the parties. In this sense, neither laytime nor demurrage will run if the loss of time is due to a breach of contract.

    In the same time, the shipowner is obliged to minimize his loss by seeking an alternative cargo..

    But, there are some overlapping meanings, so let’s go a little bit more into detail.

    Under English Law the duty to hold the cargo in readiness can lead to four different situations that are covered by different types of regime. The distinction between those regimes is quite specific. Therefore it pays to examine those regimes briefly with regard of the liability for non-provision of the cargo on time.

     If the charterer does not provide any cargo at all to be loaded, the carrier will be granted damages as in the case Seabridge Shipping Ltd. v. ANTCO Shipping Ltd.
     If the charterer prevents the vessel from becoming an arrived ship because of the non-fulfilment of the duty to hold the cargo in readiness, the ship will be considered as in detention and the carrier will also be granted damages.
     If at the end of the lay-time the charterer has not completed the loading the ship will enter in a demurrage period.
     If after the demurrage period the ship still has to remain in order to be loaded the ship will enter into detention, and once again the carrier will be granted damages.

    Hope to have helped

    All best

    Nikos Noulezas



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  2. Wow - great reply Nikos. Thanks for the Legal view. I guess in short without knowing the full details what we can say (due to your reply) is that there should be a claim for damages but how that plays out depends on the circumstances. We can also say that it is not a 'dead freight" claim because 'no cargo' was ever provided.

    Keep posting Nikos!

    Good luck Bobby!

    Cheers
    VS

    ReplyDelete
  3. Dear VS

    Thank you for your reply and your support.

    Shipping is complicated enough through over-regulation (from outsiders..) and into each other overlapping laws (English/US/Swedish/French), so you really need an army of staff to cope with every aspect of technical and commercial operation!

    I believe you are right; there should be a claim for damages (detention), since under English Law the liability of the charterer in regard of the loading is essentially perceived in terms of damages.

    The non-performance of the «duty to have a cargo available» leads to a sanction of the charterer who did not fulfil his commitment.

    However, any sanction of the charterer is conditioned by two elements that influence the regime of liability: Those two elements are the type of non-performance involved, and the substantive law applicable to the contract (A good case for the lawyers!).

    The fundamental distinction concerns the «liquidated damages» and «damages at large». This point is precisely what separates the regime of demurrage («liquidated damages») from the regime of detention («damages at large»).

    In the British conception, demurrage although having the nature of damages is a lump sum of money, which means that the amount is fixed contractually, or in other words that the sum payable by the charterer for demurrage is unaffected by the extent of the loss actually suffered by the ship. In this regard the difference from the regime of detention is still important because there the damages are qualified as «unliquidated compensation for the shipowner’s actual loss».

    (Detention comes to sanction the non-fulfilment of the duty to hold the cargo in readiness precisely when this duty is autonomous because not included in the regime of lay-time/demurrage.)

    Last but not least, we should mention that the duty to hold the cargo in readiness exists in an autonomous way only under English law and only during the laps of time when its non-performance prevents the vessel from becoming an arrived ship. In this sense, it’s clear that this is the sole moment where the duty is not merged with the duty to load within the lay-time and where it has its own regime (damages for detention).

    And now it’s time for a drive to a nice nearby beach!

    All best

    Nikos Noulezas

    ReplyDelete
  4. I think the more interesting question is why the vessel had to wait >25day over laytime before somebody bothered to tell them no cargo would show.. That must be a huge sum of money wasted, so I am wondering what type of advice the charterer got regarding this.

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  5. Whilst I agree with the above comment from VS that the owners should be entitled to claim full deadfreight - there are some mitigating factors that need to be taken into consideration - namely the cost savings as a result of non-performance of the voyage. In this case, the vessel arrived at the port of load and waited for 30 days . Whilst the detention rate should have covered the ships operating costs + some, remaining aspects such as the port DA & stevedoring (if booked on liner terms) would still have to be paid by the owner. Such costs would have been included when calculating the voyage.

    At the port of discharge though, these costs are yet to be realised - hence I would argue that charterers would make a point of deducting the ships time, port DA and anticipated stevedore costs from the total deadfreight amount.

    Whether there was some cargo not presented or all- this still amounts to a deadfreight claim. The fact that the shipping company has secured space on board the vessel (and perhaps declined other business) entitles them to seek deadfreight for this.

    With a view towards future business & perhaps avoid the third parties I think it's important to make such deductions and also advise chrtrs that you will attempt to fill the vessel's space and mitigate the loss further should other suitable cargoes be found.


    James - VS student 2011



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  6. In further disc to last, does the port DA and stevedoring cost become applicable when the NOR is tendered on vsl arrival in anchorage? What port services has the vessel owners utilized for them to be charged? (they may get a fine for fishing at anchorage, but who blames them, 30 loooong days.....) Obviously the vessel would not be allowed to berth by port captain knowing that there is no cargo for them to load, hence wasting berthing slots and reducing port efficiency as a result.

    VS student once upon a time...

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  7. It is completely dependent upon the port and circumstances at in question. For example, you may tender your NOR at an outer anchorage, only for say a fixture to be cancelled - subsequently you may then cancel tugs/mooring plans. Generally with stevedores they do require some notice within a specified time if their labor is to be cancelled. The main thing here though is that should the charterer be able to argue that the owner has not experienced these costs, then they should deduct them from the deadfreight.

    With regards to the port services - these include things like lines launch, navigation fees, customs, berthage, pilotage, port dues.

    30 days waiting will incur other items - perhaps supply of fresh water etc.

    James

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  8. good discussion.

    Basically whatever costs they incur they should be able within reason be able to claim back.

    VS

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