NYPE Indemnity Clause

Most charters include a clause entitling the charterer to have full use of the vessel within the limits stipulated in the charter and undertaking that the master will comply with the charterer’s orders and instructions to this end.

The limits imposed on the charterer’s trading activities will depend on individual agreement between the parties but may extend to cover the types of cargo to be carried and the geographical limits of permitted trading.

There will also invariably be included an express requirement that the charterer will only employ the vessel between safe ports. Probably one of the most important rights conferred on the charterer is the right to issue bills of lading which are to be signed by the ship’s master on demand even though the terms of these bills may differ radically from the terms of the charter-party. As the master, in signing, is normally acting as agent of the shipowner, the terms of such bills are enforceable against the shipowner by any endorsee for value of the bill who takes in good faith. Nor is the shipowner protected against such claims by the fact that the charter-party includes a clause providing that the shipowner is not to be liable for loss or damage to cargo except where it results from a ‘want of due diligence on the part of the Owners or their Manager in making the Vessel seaworthy and fitted for the voyage, or any other personal act or omission or default of the Owners or their Manager’.

In the absence of a suitable incorporation clause in the bill of lading, such terms in the charter-party are only binding as between shipowner and charterer. It will be evident that the commercial use of the vessel by the charterer, coupled with his right to issue bills of lading, may result in a substantial increase in the shipowner’s liability. To meet this problem it is normal practice to include in the charter-party an express clause under which the charterer undertakes to indemnify the shipowner against any additional liability incurred by him as a consequence of the exercise of these powers by the charterer. Even where the charter fails to incorporate such a provision, the courts are prepared to imply a term to the same effect.