Liquidated

Laytime is the time permitted in a contract for loading and/or discharging a voyage chartered ship. If this permitted time is exceeded, the owner or operator of the ship will be entitled to damages. These damages are normally agreed to be ‘liquidated’ – that is to say that a daily sum (or ‘pro-rata’ for part of a day) will be negotiated in the form of ‘demurrage’, payable for each day or part day of delay. The demurrage rate is usually freely negotiated by the parties concerned during the fixing stage and will reflect market conditions prevailing then. Of course matters can change during the course of the voyage but under most charter parties the rate of demurrage will not alter. Some charter parties – Gencon 76 is a good example – restrict the period in which the demurrage rate applies. If the vessel is still delayed beyond this period the owner can claim ‘damages for detention’ instead of demurrage. Unlike demurrage, damages for detention will need to be proved – i.e. the basis on which they are calculated must be related to the actual loss of the owner and generally they will need to be sanctioned by a court or arbitration. Where the freight market has increased dramatically the damages may well be more than the demurrage that would otherwise have been paid but conversely in a poor market they may be less. An owner who can show that a following, but previously agreed, contract has been cancelled will clearly have a good basis on which to claim damages for detention. Given that proving damages for detention might be a complicated matter it is easy to see why most charter parties – including the Gencon 94 – do not contain provision for any penalty other than demurrage. Interestingly the Gencon 76 form, which is still widely used, gives the owner a right of lien on the cargo for damages for detention and that would surely expedite approval of the damage claim.