Ship Performance Intermediate (Innominate) Term

Under English law the obligations of the parties under a contract, including a charterparty, are divided into three categories which are conditions, warranties and intermediate, sometimes ‘innominate’, terms. Each of these types of obligation differs in the following manner. Generally, a breach of a warranty of the performance of the vessel given by the owners will not have consequences which are so fundamental that the charterers will be entitled to terminate the charterparty, but the charterer will be entitled to recover damages for the time lost and the additional bunkers consumed. However, there may be circumstances where the vessel’s speed is absolutely essential, to the service required by the charterers with the result that that breach entitles them to terminate the charterparty.

The performance obligation can therefore be categorised as intermediate or innominate term. But, what are the performance warranties given by owners?

In most time charterparties there is an initial description of the chartered vessel which includes details of the speed at which the vessel is capable of steaming and the fuel consumption to maintain that speed. The NYPE form stipulates in the description clause that the vessel is: “capable of steaming, fully laden, under good weather conditions about (X) knots on a consumption of about (Y) tons of … best grade fuel oil and in the Baltime Form: “fully loaded capable of steaming about (A) knots in good weather and smooth water on a consumption of about (B) tons oil fuel”. These are the basic promises made by the owners but these are almost always supplemented by specific additional clauses setting out more detailed descriptions and mechanisms for calculating the performance of the vessel and remedies for both under- and over-performance. In fact, there are almost as many types of performance clause as there are types of vessel since, of course, they have different trading patterns and operations all of which can affect how the vessel performs. Other issues covered in more detailed performance clauses will also be the definition of what constitutes good weather and sea conditions, how distances are to be calculated, the effect of currents and the responsibility for and consequences of hull fouling. Although the owner gives a description of the vessel’s capabilities in the charterparty one question that has arisen is – when is the description effective? There was a case over 60 years ago which indicated that the vessel must comply with the description at the time the charterparty was made rather than any other. The continuing obligation to maintain the vessel’s capability of performance after delivery was based on other obligations of the owner, in particular the general obligation of maintenance – see Lorentzen v White Shipping (1943) For many years this was held to be the correct position but in a case in 1978 a different interpretation was raised in a Commercial Court judgment. In ‘The Apollonius’ [1978] the charter was made in August but the vessel was not to be delivered until October. In the charterparty the vessel was described as being capable of steaming at about 14.5 knots. During the period between the making of the charter and delivery, the ship was discharging at a warm-water port with the result that the hull was badly fouled. This fouling meant that when the ship was delivered to the new charterers she was only capable of maintaining an average speed of 10.61 knots. The owners admitted that the vessel was not capable of maintaining the warranted speed but claimed that this only applied at the time the charter was made, that is, August, when she could perform in accordance with the description. However, the judge was not persuaded by this argument and,
despite the decision in Lorentzen v White, decided that the date when the vessel must comply with the description was the date of delivery. His reasons included the fact that commercial considerations favored the charterers’ case. Since that case there has been debate about which interpretation is right and many commentators still favor the earlier concept of the date of the charter rather than delivery. Why is this point important? As a matter of English law, a claim for under-performance by charterers cannot be made merely because the vessel does not maintain the described speed throughout the period of the charter; in one case it was said that it was not a continuing warranty. The charterers must show that either the vessel could not comply with the description at a particular time, namely the date of the charter, or that, after delivery, the owners failed to maintain the standards of efficiency required for the vessel to meet the described speed. Therefore to apply the description at the time of delivery was to extend the warranty and cause a degree of confusion.