Hague or Hague-Visby Rules effect in Time Charter

The Hague Rules, in the version adopted in the United States Carriage of Goods by Sea Act 1936, are expressly incorporated into the NYPE form by Clause 24. This, notwithstanding that Section 5 of the Act provides that the Act is not to apply to charter parties.The effect of incorporating the United States Act into a time charter (by means of the USA Clause Paramount in Clause 24) is generally considered to be as follows: ● the express obligation of seaworthiness in Line 5 of the NYPE form is reduced from an ‘absolute’ duty to an obligation to exercise due diligence. (The Hague Rules relate only to liability for loss or damage resulting from unseaworthiness. Consequently, this dilution of owners’ obligation does not apply for the purposes of the cancelling clause); ● owners will be obliged to exercise due diligence before and at the beginning of every voyage to make the vessel seaworthy in accordance with Section 3(1) of the Act; ● all the provisions in the Act, including the important excepted perils listed in Section 4, are to be given effect, as if written out in full in the charter.The above conclusions are drawn from the House of Lords speeches in Adamastos Shipping v Anglo-Saxon Petroleum (The SAXON STAR) [1958]
However that case did not involve a time charter, but a consecutive voyage charter. Since the Adamastos case the courts and arbitrators have accepted that clause 24 of the NYPE form has the effect of incorporating into a time charter all the provisions of the United States Act. It should be noted, however, that the courts have not yet fully considered the impact of the Adamastos decision upon the NYPE form of charter. In The ‘HERMOSA’ [1980] Mustill, J., expressed the following reservations: ‘The difficulties created by the inclusion of the Hague Rules into a time charter have not yet been worked out by the courts. The analogy with a consecutive voyage charter is not exact. For example, the charterer pays directly for the whole of the time while the ship is on hire, including ballast voyages; and there are in most time charters express terms as regards initial seaworthiness and subsequent maintenance which are not easily reconciled with the scheme of the Hague Rules, which create an obligation as to due diligence attaching voyage by voyage. It cannot be taken for granted that the interpretation adopted in [the Adamastos case] in relation to voyage charters applies in all respects to time charters incorporating the Hague Rules.’ It is relatively seldom that the fact that owners’ obligation of seaworthiness has been reduced by the Clause Paramount to a duty merely to exercise due diligence makes a practical difference. For it is unusual that a defect that renders a vessel unseaworthy could not have been discovered by reasonably diligent inspection. The due diligence required is due diligence in the work itself by owners and all persons, whether employees or agents or independent contractors, whom they engage in the task of making the ship seaworthy. Owners do not, therefore, dis- charge the burden of proving that due diligence has been exercised by proof that they engaged competent experts to perform and supervise the task of making the ship seaworthy.