Charter Party Terms
In contract law, including charter parties (contracts for the hire of a vessel), terms are classified into three categories: condition, warranty, and innominate term (also known as intermediate term). These terms have specific legal implications and are used to determine the remedies available in the event of a breach.
Charter Party Terms:
- Innominate Terms
These are the fundamental terms that go to the heart of the contract. If a condition is breached, the innocent party has the right not only to claim damages but also to terminate the contract. For example, in a time charter, the delivery date of the vessel might be a condition – if the vessel is not delivered by the agreed date, the charterer may have the right to cancel the contract.
Warranties are lesser terms and do not go to the root of the contract. If a warranty is breached, the innocent party can claim damages, but they can’t terminate the contract. For instance, a warranty in a charter party might be that the vessel meets certain safety standards. If those standards are not met, the charterer might be able to claim damages for any loss that resulted from the breach of warranty, but they can’t cancel the charter party unless the breach is so serious as to constitute a breach of condition.
Both conditions and warranties are important to a charter party as they define the rights and obligations of the parties involved. However, they have different implications when breached, with the breach of a condition being viewed as more serious. It’s also important to note that what counts as a condition or a warranty can sometimes be a matter of interpretation and may depend on the circumstances of each case.
Conditions are said to go to the root of the contract. This includes any term that is part of the description of the thing sold.
A condition can be a statement of fact or a promise. If the statement of fact proves to be untrue, or if the promise is not fulfilled, the innocent party may treat the breach as a repudiation and is then allowed to refuse further performance of his side of the contract.
The following are the tests that the courts use to ascertain whether a term is a condition or not. Relative importance to the parties (description of the subject matter). The more important a term is to the parties, the more likely it is to be a condition.
What is Innominate Term in Charter Party?
A condition in a charter party agreement, in essence, forms the backbone of the contract. It stipulates crucial obligations that must be fulfilled by each party. Failure to fulfill these obligations typically allows the non-breaching party to terminate the agreement.
For example, another condition could be the seaworthiness of the vessel at the beginning of the charter. If the vessel is not seaworthy at the time of delivery, the charterer may be entitled to terminate the agreement and could also potentially seek damages. In a voyage charter, a condition might be that the vessel arrives at the loading port within an agreed cancellation date. If the vessel doesn’t arrive within this period, the charterer could terminate the contract.
Warranties, on the other hand, tend to focus on less critical aspects of the agreement. These are essentially promises made by one party to another, assuring the other party of a specific fact or state of affairs.
For instance, a ship owner might provide a warranty that the crew onboard are competent and capable. If this warranty is not fulfilled and the crew is found to be incompetent, the charterer might seek damages for any losses incurred due to this breach. However, they would typically not be able to terminate the contract for this breach unless it has rendered the ship unseaworthy, which would be a breach of condition.
The distinction between conditions and warranties in a charter party is quite significant because it impacts the remedies available to the parties in case of breach. However, the categorization of a term as either a condition or a warranty isn’t always clear and can often be a complex issue requiring legal judgment.
It’s also worth mentioning that some terms might be categorized as “innominate” or “intermediate”. These are terms that can’t be definitively categorized as either a condition or a warranty, and the remedy for a breach of such terms would depend on the nature of the breach and its impact on the contract.
Overall, when drafting a charter party, parties should strive to be as clear as possible in defining their obligations, and the consequences of breach, to reduce ambiguity and potential disputes.
An innominate term is one where the status of the term and the resulting consequences for a breach of that term are not predetermined but rather depend on the nature and extent of the breach.
In the context of a charter party, an innominate term might be one which doesn’t fall neatly into the category of either a ‘condition’ or a ‘warranty.’ Instead, whether a breach of an innominate term gives the innocent party the right to terminate the charter party (or only to claim damages) will depend on the seriousness of the breach.
For example, consider a term in a charter party that the ship must be ‘seaworthy.’ If the ship is slightly less seaworthy but still safe for a voyage, this might be considered a minor breach, and the charterer may be entitled to some damages but not to terminate the charter. But if the ship is seriously unseaworthy and cannot safely make the voyage, this could be considered a serious breach, entitling the charterer to terminate the contract.
This concept is based on the landmark English case Hong Kong Fir Shipping v Kawasaki Kisen Kaisha Ltd (1962), where the term ‘seaworthy’ was treated as an innominate term. The determination of whether a breach of an innominate term allows for termination depends on whether it can be said to go to the ‘root’ of the contract – that is, whether it deprives the innocent party of substantially the whole benefit that it was intended that he should obtain from the contract.
Hong Kong Fir Shipping v Kawasaki Kisen Kaisha Ltd (1962) Case
“Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd” (1962) is a landmark English contract law case. It introduced the concept of “innominate terms,” a provision that is neither a “condition” nor a “warranty.”
In this case, a ship was leased from Hong Kong Fir Shipping Co Ltd by Kawasaki Kisen Kaisha Ltd for a period of 24 months. The ship was in a poor state, and due to the incompetence of the engine room crew, it spent a total of 20 weeks undergoing repairs.
The defendant (Kawasaki) claimed the claimant (Hong Kong Fir) had breached their contractual obligation to provide a seaworthy vessel for the whole duration of the contract and sought to terminate the agreement. Hong Kong Fir, on the other hand, claimed that the defects did not deprive Kawasaki of the use of the ship for a considerable time.
The court needed to determine whether the term requiring the ship to be seaworthy was a condition or a warranty. A breach of condition could entitle the aggrieved party to terminate the contract, whereas a breach of warranty would only entitle them to damages.
In the court’s judgment, it was decided that the term was not clearly a condition or a warranty but rather an “innominate term,” meaning that the remedy for its breach would depend on the nature of the breach’s effect. In this case, as the ship was out of service for 20 out of 104 weeks (i.e., not a significant part of the charter period), the breach did not go to the root of the contract and therefore did not entitle the defendant to terminate.
This case is frequently cited for its establishment of the concept of “innominate terms,” helping to further refine the understanding and application of contract law. The effect of a breach of such terms is looked at in the round, considering the actual impact on the parties’ agreement. If it deprives a party of substantially the whole benefit of the contract, it may be treated as a breach of condition, and the contract may be terminated. Otherwise, the remedy would only be damages for breach of warranty.
The decision in the Hong Kong Fir Shipping case established the “innominate term” concept, which has a significant impact on future contract law cases. Before this case, terms in a contract were generally classified as either “conditions” or “warranties”. The breach of a condition would result in the innocent party being able to terminate the contract and claim damages, while the breach of a warranty would only result in a claim for damages.
The introduction of “innominate terms” provided a more nuanced approach. Under this framework, a term that cannot be definitively classified as a condition or a warranty would be treated on a case-by-case basis. The court would consider the nature and consequences of the breach and determine the appropriate remedy. If the breach deprived the innocent party of the contract’s whole benefit, the court might allow contract termination, similar to a condition’s breach. However, if the breach was less severe, the court might only award damages, akin to a warranty’s breach.
While this development added complexity to contract law, it also allowed for greater flexibility and fairness. It recognized that not all breaches should automatically lead to contract termination, which can be a drastic outcome. Instead, the actual impact of the breach on the parties involved should be taken into account.
In practical terms, the implications of the Hong Kong Fir Shipping case are significant for anyone drafting or interpreting a contract. It underscores the importance of carefully considering and defining the terms of a contract, and understanding that the classification of terms as “conditions,” “warranties,” or “innominate” can have substantial implications for the parties’ rights and remedies in the event of a breach.
Ship Speed and Consumption Warranty in Time Charter Party
Under a time charter agreement between the Charterer and the Ship Owner, the Ship Owner guarantees that their vessel will perform according to the specified parameters outlined in the description clause. Failure to meet the specified speed and fuel consumption requirements may result in a breach of contract, leading to a claim for damages by the Charterer. It is crucial for senior shipboard personnel to fully comprehend the implications of such a breach.
A “condition” is a fundamental term of the contract, and if it is not adhered to, the contract itself becomes significantly different from the original agreement. A breach of a “condition” allows the other party to refuse to fulfill their obligations under the contract, and damages can be claimed.
A “warranty,” on the other hand, is a term that is not essential to the contract but is secondary to it. In the case of a breach of warranty, the innocent party is entitled to damages, but they do not have the right to terminate the contract.
Determining whether a particular term is a condition or a warranty depends on the intention, interpretation, and construction of each individual contract.
In the context of a time charter agreement, the time charterer assumes the role of the owner, known as the “disponent owner.” They can either use the vessel for transporting their own goods or sublet it to a sub-charterer for a specific period or voyage. The speed and fuel consumption warranty determines the expected performance of the vessel, and the disponent owner’s voyage estimates and profitability calculations rely on the parameters specified in the time charter party, particularly under the “Description” clause. These parameters form the basis for calculations that influence business decisions.
Example of a Typical Speed and Consumption Warranty in a Time Charterparty Generally mentioned under the Ship Description Clause:
…The owners guarantee that the vessel will maintain the following speed and consumption throughout the duration of this charterparty, under good weather conditions:
- Speed loaded: Approximately 13 knots
- Speed ballast: Approximately 13 knots
- Type of bunkers: VLSFO (for Main Engine)
a. At sea: Approximately 25 mt VLSFO + approximately 2 mt LSMGO
b. In port idle: Approximately 2 mt LSMGO
c. Gear working per 24 hours: Approximately 4 mt LSMGO
Good Weather Conditions in Time Charter Parties
For clarity, it is advisable to include a clarification of the term “Good Weather Conditions,” typically referring to weather and sea conditions such as the Beaufort Wind Scale and Douglas Sea State, against which a vessel’s performance should be evaluated. These conditions help determine whether the vessel is performing as expected.
Claims for underperformance and overconsumption are frequently raised by time charterers when the vessel does not meet the speed and fuel consumption specifications outlined in the charterparty. To defend against such claims, owners heavily rely on accurate and comprehensive data collected by the Master and officers.
To ensure that the vessel’s performance is accurately assessed as described in the charterparty, the Master should rely on information acquired during periods of good weather, as specified in the charterparty. The required basic data, recorded on a daily basis, may include factors such as sea state, course changes, and the effects of tidal waters and currents, which are usually documented in the vessel’s deck log book.
Routing companies can provide expert evidence in case of disputes regarding the impact of weather on a voyage. These companies collect data from various sources and determine prevailing weather conditions along the route, offering guidance to the Master for taking the shortest route. They also study the effect of weather on vessel speed. As an independent party, routing companies play a significant role in assessing vessel performance, especially if the contract stipulates that their opinion will be sought in case of disputes.
The question of whether the time charterer has the right to appoint a weather routing company was addressed in the SMA (Society of Maritime Arbitrators) New York Arbitration Award No. 2125, where it was stated:
“Because, under a time charter agreement, the risk of delay due to weather is on the Charterer, there is no question that Charterer has the right to nominate a weather routing service of its choice, for its account. However, the Ship Master is not under an absolute obligation to follow the advice of any routing service; he is the sole judge when it comes to deciding upon the best and safest course to take from the point of origin to destination, considering the best interests of both Owner and Charterer, as well as the safety of the vessel, cargo, and crew.”
In case of disputes, different interpretations of weather data can arise. When time charterers employ a performance monitoring company to assess the vessel’s performance, the company may rely on statistical material for a specific area rather than current, factual information at the precise location and time. As a result, the conclusions drawn from their evaluation, including performance details, may differ from the vessel’s logbook entries.
In the absence of a contractual clause that favors performance monitoring companies over the vessel’s log entries, it must be acknowledged that the parties intended to rely on the vessel’s weather data to determine whether the vessel was operating under good weather conditions. However, Charterers may produce evidence that challenges the accuracy of the vessel’s observations, leading to a consideration of alternative sources of weather information. In such cases, Charterers might employ weather routing services, like Fleet Waether, to independently determine the prevailing wind, sea, and current conditions near the vessel’s position and evaluate their impact on the vessel’s ability to maintain the warranted performance.
ABOUT Term in Ship Speed and Consumption Warranties in Time Charterparties
The term “about” used in the charterparty has a general understanding that Owners have a 0.5 knot margin. For example, if the vessel is warranted to perform at about 13.5 knots, there will be no breach of warranty if the vessel achieves a speed of 13.0 knots. However, it should be noted that while this rule is commonly applied in London arbitrations, it is not legally binding. According to the law, the margin “must be tailored to the ship’s configuration, size, draft, and trim” (The Al Bida 1987 1 LLR 124).
Regarding bunker consumption, English law does not establish a fixed margin. However, it has been widely accepted in the industry that a 5% margin is allowed for the term “about” (London Arbitration 12/85 – add 5% to the warranted figure when calculating bunkers. The calculation should consider the warranted daily figure for the actual time at sea compared to the consumption for the expected voyage duration.
The word “about” in describing bunker consumption does not imply an additional 5% allowance on top of the speed allowance. Instead, it accounts for vagaries in currents, short sea passages, and other minor effects related to navigation procedures.
In a London Arbitration case (reported in LMLN. 233, page 4), the panel examined the effect of the word “about” in a detailed Speed/Performance Warranty. The charterparty stated:
“…economic speed about 11 knots on 4.7 mt Although this charter party LMLN 158; London Arbitration 2/87 – LMLN 188).
In SMA (Society of Maritime Arbitrators) Award No. 2040, it was concluded that there is no inherent or automatic right to included specific performance capabilities of the vessel, the arbitration recognized the importance of the word “about” as expressly agreed upon by the parties. However, SMA (Society of Maritime Arbitrators) limited the margin to a quarter of a knot (0.25) instead of the usual half knot (0.50) used by London arbitrators. This adjustment was made because multiple speeds were stated in the charterparty, and the specified speeds were already lower than those typically stipulated for larger bulk carriers.
It is worth noting that the tribunal also concluded that the allowance for fuel consumption should be proportionately reduced according to the reduction in speed allowed by the word “about.” Therefore, assuming that the vessel was expected to sail at an economic speed of 13 knots on about 25 mt of fuel oil, the allowance for “about” not only reduced the warranted speed by a quarter of a knot to 12.75 knots but also proportionately reduced the permissible fuel consumption to 23.5 mt in accordance with the charterparty figures.
However, the warranted fuel consumption would not be automatically reduced if the obtained speed was only 0.5 knots lower than the Charter Party Speed. The decision would depend on the specific wordings used in the charterparty. In the usual case where the warranty is stated as “about V Knots on about Q mt fuel oil per day,” the plain interpretation is that the vessel should achieve a speed of at least V-0.5 knots on “about Q mt” of fuel oil, and there is typically no implication of a proportional reduction in bunker consumption.
Evaluation of underperformance has been addressed in previous precedents. In one such decision (The Didymi Case 1988.2 LLR. 108), a two-stage test was established to determine the loss resulting from underperformance. The first stage involved assessing underperformance in good weather conditions, while the second stage required assessing underperformance in all weather conditions with the necessary extrapolations provided by an expert.
The Court of Appeal further clarified the evaluation process by introducing a three-stage approach:
- Assess the vessel’s performance in good weather conditions on all sea passages from sea buoy to sea buoy, excluding any period of slow steaming at the charterer’s request.
- If a variation in speed is identified compared to the stipulated norm, apply that variation to all sea passages from sea buoy to sea buoy and all weather conditions, excluding periods of slow steaming at the charterer’s request.
- If a variation in consumption is found compared to the stipulated norm, apply that variation to all sea passages from sea buoy to sea buoy and all weather conditions, excluding periods of slow steaming at the charterer’s request.
Based on this approach, the speed/performance clause should be evaluated under all weather conditions, excluding slow steaming periods where the speed reduction was at the charterer’s request.
Calculating a Ship Speed Claim can be exemplified as follows:
Vessel Name: MV HandyBulk Yagmur
Charter Party Speed: about 14.0 Knots
Charter Party Fuel Consumption: about 24 mt VLSFO
Suppose the vessel undertakes a voyage from Port X to Port Y, which is approximately 8000 Nm (Nautical Miles) apart and takes 655.7 hours to complete at an average speed of 12.2 knots.
On fair weather days, it is observed that the vessel did not meet the warranted performance. A weather routing company appointed by the charterer confirms the underperformance even based on the vessel’s records.
How to Calculate Ship’s Performance Speed
To calculate the “Performance Speed,” the following weather factors are considered: Weather Factor = -0.6 Knots
Current Factor = +0.4 Knots
Taking into account the margin allowed for “about,” we calculate the “Performance Speed” as follows:
Performance speed = Effective Speed + Weather Factor + Current Factor
Performance speed = 13.5 – 0.6 + 0.4 = 13.3 Knots
Chartered Time (Based on Performance Speed) = 8000 Nm / 13.3 Knots= 601.5 Hours
Actual Time Taken = 655.7 Hours
Computed Time Lost = 54.2 hours = 2.2583 Days
Daily charter hire rate is $10,000
Speed Claim Amount = $10,000 x 2.2583 = $22,583
These calculations demonstrate how claims can arise in such cases, and overconsumption can also result in costly claims.
In an actual case (SMA Society of Maritime Arbitrators Award No. 2040), the panel examined various legs of a voyage, considering the vessel’s performance in relation to the adjusted warranty and the weather conditions. The assessment involved a careful evaluation of underperformance and resulted in the awarding of damages to the charterer for the days lost due to underperformance.
How to Avoid Ship Underperformance Claims
To avoid underperformance claims, it is advisable to:
- Avoid clauses that give preference to performance monitoring companies over vessel log entries.
- Maintain accurate and complete records during the voyage.
- Support logging of adverse conditions (e.g., adverse currents, head swell, heavy to moderate swell) with recognized documents or publications.
- Promptly investigate and report any signs of underperformance to the head office.
- Pay special attention to vessel performance on fair weather days to ensure it meets or exceeds the speed/fuel warranty.
- Foster close cooperation between ship managers, ship staff, and operations to identify and mitigate potential causes of underperformance.
By diligently monitoring vessel performance and taking timely action, both in terms of recording accurate data and addressing performance issues, owners can not only minimize losses but also enhance their reputation and improve their claims record.
BIMCO Weather Routing Clause for Time Charter Parties 2006
We kindly suggest that you visit the web page of BIMCO (Baltic and International Maritime Council) to learn more about BIMCO Weather Routing Clause and to obtain the original Charter Party forms and documents. www.bimco.org
What is the Speed and Consumption Clause in Time Charter?
A Time Charter is a type of charter in maritime shipping where the charterer hires the vessel for a specified period of time. The owner still manages the vessel but the charterer decides the ports and directs the vessel where to go. The charterer is responsible for paying for the fuel the vessel consumes, the port charges, and other additional costs related to the cargo.
The Speed and Consumption Clause is a significant provision in a Time Charter party. It stipulates the speed at which the vessel should operate and the amount of fuel it should consume per day. The terms of this clause are usually determined based on the specifications of the vessel when it’s in good condition and operating in good weather.
This clause is critical because it plays a role in determining the total cost of chartering the vessel. If the vessel operates at a slower speed than agreed or consumes more fuel, the charterer may end up paying more than initially estimated.
If the ship does not meet the speed and consumption guarantees as stipulated under good weather conditions, the charterer could potentially claim “off-hire” (meaning that the charterer does not have to pay the hire for that period) or might be entitled to compensation depending upon the terms of the charter party agreement.
On the other hand, from the shipowner’s perspective, these clauses help to ensure that the vessel is not being misused or overworked, which could result in accelerated wear and tear or damage to the ship.
Remember that the exact terms and conditions will depend on the individual agreement between the charterer and the owner, and they can vary widely based on a number of factors such as the type of vessel, the intended journey, and the prevailing market conditions.
From the perspective of the charterer, one crucial element is the guarantee provided by this clause. This guarantee refers to the speed and fuel consumption rates, which are typically agreed upon under specific conditions such as good weather and smooth seas. If the ship fails to meet these standards due to reasons within the owner’s control, the charterer may be entitled to compensation.
Moreover, the clause typically outlines what happens in case of disputes between the charterer and the owner. In some cases, there could be provisions for third-party arbitrations or predetermined penalties that need to be paid in case the ship does not perform as per the agreed-upon standards.
On the other hand, for the ship owner, the Speed and Consumption Clause can help protect against misuse of the ship. For example, it may have provisions to ensure that the charterer cannot overwork the ship beyond its capabilities, which could lead to damage or excessive wear and tear. The clause may also include language specifying that the charterer has to cover any extra costs related to excessive fuel consumption or slower speeds due to the charterer’s directions.
While the Speed and Consumption Clause is standard in Time Charter agreements, it’s important for both the ship owner and the charterer to fully understand its implications. Legal and maritime experts should ideally be involved in the drafting and reviewing of these agreements to protect the interests of both parties involved.
Finally, it’s worth noting that as technology and fuel-efficiency measures advance, these clauses will likely evolve to reflect new standards and expectations around a ship’s performance. For example, with the push towards more environmentally friendly shipping practices, future Time Charter agreements might include clauses related to emissions or use of alternative fuels.
Ship Speed and Consumption Disputes Under English Law
Disputes regarding ship speed and performance under English law will be examined, specifically focusing on the speed and performance guarantee outlined within the New York Produce Exchange time form of 1993. The customary expressions employed in this type of charter are as follows:
“speed about…knots, fully laden, in good weather conditions up to and including maximum force…on the Beaufort winscale, on a consumption of about…long/metric tonnes of…”.
It is worth noting that alternative forms of charterparties will feature varying language for this particular warranty. For instance, Baltime 1939 Clause 12 refers to:
“speed capability in knots (about) on a consumption in tonnes (about)”
When the vessel fails to perform in terms of speed and/or consumption, it is customary for the charterer to initiate a claim seeking damages for the breach of this specific warranty. It is also worth briefly mentioning other pertinent clauses that may provide alternative grounds for the claimant’s case.
The relevant alternative provisions within the charterparty are as follows:
- Line 5: “with hull, machinery and equipment in a thoroughly efficient state”
- Lines 21/22: “vessel on her delivery to be tight, staunch, strong and in every way fitted for the service”
- Clause 1: “that the owners shall keep the vessel in a thoroughly efficient state in hull, machinery and equipment for and during the service”
- Clause 8: “the Captain shall prosecute his voyages with the utmost dispatch”
- Clause 15: “if upon the voyage the speed be reduced by defect in or breakdown of any part of her hull, machinery or equipment, the time so lost and the cost of any extra fuel consumed in consequence thereof, and all extra expenses shall be deducted from hire.”
When establishing a claim for a breach of the speed warranty is not possible, it is sometimes feasible to argue alternatively that the loss of speed was caused by a pre-existing defect at the time of delivery and/or that the defect arose after delivery, and the owners failed to take reasonable measures to rectify it, thus breaching their obligation to maintain the vessel in an entirely efficient state during service.
Regarding Clause 8, it is conceivable to assert that the owners are at fault for not proceeding promptly. However, this argument would likely be more challenging to substantiate since the master retains navigational control of the vessel.
The Ship master cannot be blamed if they choose a route to avoid anticipated inclement weather or if they reduce speed due to fog or to prevent damage from heavy waves. Errors in navigation are mutually accepted under Clause 16 of the charter, although it has been established that negligent errors of navigation cannot be excused.
A potential scenario where a claim under Clause 8 may arise is when the master wrongfully delays complying with a legitimate order from the charterers to enter a port or load cargo.
Furthermore, breach of the maintenance obligation outlined in clause 1 of the charter could be considered. This obligation is continuous and applies not only upon delivery. However, it is not an absolute guarantee, and if, for example, the engine breaks down and requires a new camshaft, the owners cannot be expected to immediately repair the engine.
The owners are solely obligated to act reasonably. The typical route for a claim related to speed and consumption is under the warranty contained in lines 9 and 10.
Ship Speed and Consumption Warranty
- Terms employed to describe the vessel
- Good weather conditions
1- Terms employed to describe the vessel
Caution must be exercised when assessing whether the ship has breached its performance warranty. The warranty solely applies when the ship is fully laden. Evidence from the owners showing that the ship was capable of attaining 14 knots during the ballast voyage to the delivery port does not suffice as proof that the warranty was fulfilled; the vessel must be capable of reaching or approximating 14 knots when laden.
The warranty pertains to the ship’s “capability.” It can be argued that if technical evidence is presented to demonstrate that the ship is capable of achieving the warranted speeds, even if those speeds were not actually achieved, then the performance warranty has been upheld. In practice, arbitrators will require and scrutinize evidence of actual performance.
2- Good weather conditions
We are primarily concerned with the NYPE 1993 Time Charter Form. This charter includes a provision where parties can specify their definition of favorable weather. Since many individuals are familiar with inquiries regarding speed and performance, the commonly inserted criterion is force four on the Beaufort Scale. Consequently, weather conditions involving force four winds or winds below force four are deemed favorable.
The shipowner argues that, given the warranty only pertains to the ship’s performance in good weather, any evidence suggesting unfavorable weather should be disregarded. In response, the courts have maintained that it is indeed essential to identify favorable weather days and determine if the ship performed below expectations during those specific days. If the ship exhibited subpar performance on favorable weather days, it is reasonable to infer that it also underperformed in inclement weather.
In recent times, it seems there has been a widespread acknowledgement that the term “about” included in a speed and performance clause grants a margin of 0.5 knots on either side. It may not be entirely accurate to discuss margins in terms of percentages. Some American arbitrators do utilize percentage-based margins.
The prevailing assumption that “about” equates to 0.5 should not be regarded as absolute. The 1987 Court of Appeal case of the AL BIDA, where the Court concurred with the arbitrator’s arguments, stated that the leeway concerning speed should depend on the ship’s configuration, size, draft, and trim.
Consequently, if the ship possesses a particularly unique or unconventional configuration, it is conceivable that the margin could be expanded or restricted. One could contend that a large oil tanker might require a narrower tolerance compared to a fully loaded container vessel.
However, as a general guideline, London arbitrators tend to recommend allowing half a knot for the term “about” in vessels up to 15 knots. There are instances where arbitrators have granted margins larger than 0.5 if the ship is authorized to steam at speeds exceeding 15 knots.
So far, we have exclusively applied the term ‘about’ to the warranted speed. Nevertheless, there have been arbitration rulings that have extended the margin to the bunker consumption aspect of the warranty. In a specific arbitration ruling in London, the arbitrator concluded that the term ‘about’ permits a 0.5 knot margin for speed and a 4% margin for consumption.
Shipowners in Defending Ship Performance Claims
There exist numerous explanations as to why a vessel may experience subpar performance, without the owners violating the charter agreement or any unforeseen incidents taking place within the off-hire provision. Let me briefly outline some justifiable defenses that the owners may consider:
1- The charterers provided substandard fuel. Such allegations pose intricate challenges when it comes to substantiating the claim. Typically, the bunker supplier retains a sample, supposedly taken from the supply barge, which exhibits the fuel’s specifications. Overcoming such evidence is exceedingly arduous for owners unless they have obtained a manifold drip sample upon receiving the bunkers.
2- Inclement weather conditions occurred during the voyage. Often, charterers argue that the vessel underperformed based on a voyage plan devised by a routing company, which merely provides anticipated weather details. Clearly, this is insufficient as the actual weather encountered during the voyage may have differed from the initial forecasts. Relying solely on post-voyage analysis does not ensure success either. Firstly, the routing organization may carry out their time loss calculation in an unapproved manner. Secondly, the weather reports obtained by the routing organization might originate from nearby vessels rather than the vessel in question. London arbitrators and the Courts acknowledge that weather conditions can fluctuate over short distances. The most reliable evidence of the vessel’s experienced conditions should be the firsthand accounts of the individuals on board, which ought to be documented in the logbooks. However, these obvious arguments may not be viable if the charter party contains a specific clause mandating the use of Ocean Routes data in case of consistent disparities between the owners’ and charterers’ evidence.
3- The term “about” should be taken into consideration both in terms of speed and fuel consumption.
4- Savings in fuel may lead to a reduction in damages.
5- The Ship Master made a prudent navigational decision to avoid adverse weather conditions or to deviate in order to safeguard life or property. Alternatively, if the master committed a navigational error, it is accepted under Clause 16 and/or the Hague rules.
Advantages of Weather Routing for Optimal Voyages
Weather routing appears deceptively simple, but in reality, it entails intricate calculations. Weather routing aims to ascertain the optimal course based on meteorological predictions, vessel characteristics, and cargo requirements. Notably, this pursuit does not always prioritize the shortest travel duration. Rather, weather routing seeks to refine voyages by evading hazardous weather conditions, safeguarding the crew, and optimizing fuel consumption simultaneously.
Outlined below are several significant advantages of weather routing and the means to realize these benefits.
- Decrease Operating Costs: Shipping companies often operate on narrow profit margins, with every dollar carrying weight. Weather routing enables vessels to reduce fuel consumption and ensure timely delivery, resulting in substantial cost savings. Additionally, by implementing weather routing to optimize voyages, shipping companies can enhance their profitability by diminishing insurance expenses, minimizing crew overtime wages, and avoiding additional fees imposed by port operators.
- Enhance Safety: Weather represents one of the most significant perils faced by ships at sea, making any tools that aid shipping companies in averting disasters invaluable. Over the past decade, approximately 100 large shipping vessels have been devastated, primarily due to severe weather conditions. Casualty statistics indicate that adverse weather is a contributing factor in one out of every five ship losses. Real-time weather routing empowers ship navigation teams to redirect vessels when necessary, circumventing hurricanes, cyclones, and storms to safeguard the crew and cargo.
Similarly, following the pandemic-induced crisis that left over 300,000 seafarers stranded at sea for months, the International Maritime Organization (IMO) has intensified its focus on crew member safety. The pandemic has reaffirmed the paramount importance of crew member safety, and weather routing can play a pivotal role in preventing accidents not only during the pandemic but also beyond.
- Achieve Decarbonization Targets: Weather routing assumes a crucial role in attaining decarbonization objectives. The Marine Environment Protection Committee committed to a 40% reduction in shipping carbon emissions by 2030, relative to 2008 levels. While achieving this pivotal goal is no easy task, weather routing can contribute significantly.
“Voyage optimization is an exceedingly cost-effective practice as it allows shipping companies to curtail both costs and carbon footprint by circumventing routes where ships might operate less efficiently due to adverse weather conditions,” emphasized researchers.
In 2007, vessels emitted an estimated 1.12 billion metric tons of carbon dioxide. To reach the target, emissions must be reduced by 560 million metric tons, equivalent to the emissions generated by 102 million cars.
- Save Bunkers: As the shipping industry endeavors to meet decarbonization goals, reducing fuel consumption becomes not only more sustainable but also more cost-efficient. The IMO estimates that weather routing can save a minimum of 3% in fuel consumption, with container ships experiencing potential savings of up to 10%. Given that fuel costs constitute an estimated 50-60% of total ship operating expenses, these savings can be substantial.
- Minimize Delays: Supply chain disruptions have dominated recent headlines as shipping companies struggle to recover from pandemic-related shutdowns. Bottlenecks at ports worldwide have impeded the timely unloading of goods from ships. Weather-related delays, which are common during hurricane season, are the last thing ships need.
A lack of understanding of marine weather conditions can account for 80% of the performance impact. By incorporating weather data into route planning, shipping companies can circumvent the most severe weather conditions and adequately prepare for those that are unavoidable. This proactive approach allows ships to minimize delays as much as possible, particularly during these challenging times.