NOR (Notice of Readiness)

NOR (Notice of Readiness)

The third requirement for the commencement of laytime is the tender of a valid NOR. This is a statement made by the vessel to the charterers or their agents announcing that she has arrived at the agreed destination and is ready to load/discharge the cargo.

Under Common Law:

a. NOR is required at the first load port only.
b. It may be in either written or oral form.
c. It can be given to the charterers, their agents or anyone else the charterers may nominate.
d. It is not necessary for the charterers to know the true facts of the vessel’s position and status.
e. It can be given at any time unless unlawful.
f. It must be a true statement at the time it is given, otherwise it is invalid.

It is the last point that gives rise to many disputes. If a NOR is given which is invalid and is not true, either because the vessel has not arrived at the agreed destination, or is not ready to load/discharge the cargo, then the laytime will not commence at all unless:

a. A fresh, valid NOR is given.
b. There has been a waiver by the charterers of their requirement to receive a valid NOR

this was established in the Happy Day (2002) 2 LLR 487 c. There is an express provision in the charterparty triggering the commencement of laytime without a valid NOR having been given. If an invalid NOR is given, a new NOR must be given when the vessel is in fact ready.

The original NOR does not become valid when the untrue statement becomes true. This principle was established in the Mexico 1 (1990) 1 LLR 507 when the Court of Appeal determined that a NOR does not ‘float, inchoate’ until the facts make it a good NOR. An invalid NOR cannot become automatically valid when the underlying facts change.

In the Mexico 1, the NOR was tendered on arrival at the discharge port but the cargo was overstowed by another cargo and as such it was decided that the NOR was invalid. A later NOR was never given and laytime commenced when discharge of the cargo commenced some four weeks later even though the cargo was accessible after two weeks.

Avessel must reach her destination to be an arrived ship. A NOR tendered before the vessel has arrived will be invalid and this was the position in the Agamemnon (1998) 1 LLR 67. The vessel tendered NOR at the mouth of the river, later proceeded up the river and arrived at Baton Rouge anchorage. A new NOR was not tendered and the court held the NOR tendered at the mouth of the river was invalid. The charterers conceded that laytime would start on commencement of cargo operations. Without these concessions, and absent any other trigger in the charterparty starting laytime independent of a valid NOR, then laytime will not start at all unless charterers waive the invalidity of the NOR or are estopped from arguing it.

Dealing with the waiver by charterers of their requirement to receive a valid NOR we must turn to the landmark case of the Happy Day (2002) 2 LLR 487. Prior to this case it was decided that an invalid NOR never becomes valid and, absent any specific provision in the charterparty, the laytime clock cannot start. The Happy Day judgement changed this. The Happy Day was fixed on the Synacomex form, a berth charterparty. The owner tendered a premature NOR before the vessel arrived at berth. The charterer did not reject the NOR, even though it was invalid as it had been tendered prior to arrival at berth. The vessel then berthed and discharge commenced on the charterers’ instructions and took approximately 3 months, far longer than expected.

Initially the High Court decided that the NOR was invalid and laytime never started – in fact the High Court directed the owner to pay despatch as cargo operations had been completed within the agreed laytime. The owner appealed and the Court of Appeal agreed that the NOR was invalid. However, the court stated that although the charterers were not under a contractual duty to reject the NOR, by failing to do so, and by agreeing to commencement of discharge, they had effectively waived any reliance on the invalidity of the NOR and waived any requirement for a further NOR.

As a result the court decided that the laytime in this case would start upon commencement of cargo operations, and directed the charterers to pay demurrage. In reaching this decision the tests the court set were:

a. that after the invalid NOR was given the vessel becomes able to give a valid NOR (but does not do so);
b. the charterers become aware of the fact (either directly or through their agents);
c. the charterers do not reject the invalid NOR or reserve their rights in respect of it; and cargo operations then commence at the request of the charterer/receiver/shipper.

If all these tests are met, laytime will start on the commencement of cargo operations. As we said above, the basic effect of the Happy Day case is that laytime starts at commencement of operations following an invalid NOR when charterers do not reject the NOR or reserve their rights.

The rationale is that the NOR is deemed to become valid at that time, i.e. commencement of operations, so that the claiming party can recover demurrage. However, in the case of the Northgate (2008) 1 LLR 511, the facts were slightly different. NOR was tendered at the outer anchorage at Guida Island. It was invalid because the relevant clause in the charter said that NOR could only be tendered at the outer anchorage if there was no space at the inner anchorage. In fact, there was space at the inner anchorage so the NOR was invalid.

The NOR had been tendered to the terminal (permitted under the charter) and accepted by them. More importantly, it had also been confirmed by the charterers’ agents. The Court said that the terminal’s acceptance and agents’ confirmation was enough to waive the invalid NOR with the effect that time started running from when it was tendered. This meant the owner’s demurrage claim succeeded in full.

This appears to go further than the Happy Day case because time started at the time of the invalid NOR and not (as in the Happy Day) at the much later commencement of operations. The difference in the Northgate is that the terminal accepted the NOR and the agents confirmed it, whereas in the Happy Day nothing at all was said by anyone. However, it is not clear from the judgement in the Northgate whether the same result would have been reached if the charterers’ agents had not confirmed the terminal’s acceptance. On top of this common law position, many charterparties have other express requirements as far as NOR is concerned and if owners have agreed to these additional requirements any NOR tendered must comply with these additional requirements overriding any common law obligations.

Such additional requirements stipulate NORs to be:

a. given in writing;
b. tendered at each loading and discharging port;
c. tendered to specific, identified people; and
d. tendered within specific hours, for example, office hours.

A distinction must be drawn between the situation where a NOR is not valid since it is stating a position which is not true, and where the NOR is stating the truth but is tendered at the wrong time.

In the Petr Schmidt (CA) (1998) 2 LLR 1 the laytime provisions in the charterparty provided that Notice of Readiness, at loading and discharging port, is to be tendered within 06.00 and 17.00 hours local time. The vessel tendered NOR at 00.01 when she was both an arrived ship and ready but it was not tendered between the hours specified in the charterparty. The court decided that the vessel was ready when the NOR was given and so long as she remained ready at 0600 hours (when the charterers received it) it should be treated as valid at that time.

The principle outlined in the Petr Schmidt would apply to a NOR tendered before the agreed laycan period although it must be pointed out that many charterparties now, particularly in the oil trade, stipulate that NOR cannot be given prior to the first day of the laycan. As we have seen, an invalid NOR never becomes valid and the vessel must give a new and valid NOR at the point she has arrived and is ready. Whilst the Happy Day case has effectively given owners a backstop position if it is found that the NOR is invalid, owners may wish to consider other actions to protect their position as proving a waiver may still be uncertain and expensive.

For example:

a. The owner can tender a second (or more) NOR. If there is any doubt about the validity of the first NOR, there is nothing to stop a master serving subsequent, multiple NORs ‘without prejudice’ to any earlier NORs so as to limit the risk of one of the NORs being found to be invalid.

b. Additional clauses: owners may also include a clause in the charterparty providing for laytime to start on the commencement of loading or some other trigger independent of the NOR.

Clauses like this are often found in tanker charterparties where time will start, for example, ‘ … at NOR plus six hours or commencement of cargo operations whichever first occurs … ‘. This will add certainty and avoid owners having to prove a waiver. Watch out for clauses which state that laytime starts when the NOR is received or accepted. The precise wording is important and often a NOR may be accepted some time after the time it was tendered.

Normally any NOR is tendered first to the agent who then passes it on to the shipper or charterer. Some clauses are more specific and must be followed. Compare Clause 6 of Asbatankvoy which provides that the master can give NOR to ‘the charterer or his agent’ with Clause 6 of ASBA II which provides that NOR shall be given to ‘the charterer’.

If NOR is given to the charterer’s agent but he does not pass it on to the charterer there is a risk that laytime will not start. Similarly,if NOR is given to the shipper or the receiver,but not the charterer, laytime may not start.