Time Charter Breach of the Speed Warranty

Terms of a Time Charter differ radically from those of a Voyage Charter because of the difference of function. In the time charter the shipowner is placing the ship for an agreed period at the disposal of the charterer who is free to employ it for his own purposes within the permitted contractual limits.

As the time charterer controls the commercial function of the ship, the time charterer is normally responsible for the resultant expenses of such activities and also under- takes to indemnify the shipowner against liabilities arising from the master obeying his instructions.

While there is a variety of standard forms of Time Charter, the following clauses are usually found to constitute the core of the contract.

Efficiency of the chartered ship is of vital importance to the time charterer since the entire success of the commercial enterprise may depend on it.

The preamble to the charter therefore sets out in detail the specifications of the ship, the most important of which are normally those relating to speed, loading capacity and fuel consumption. There are differing views as to the legal significance of such statements and the remedies available in the event of them proving inaccurate.

While New York arbitrators generally regard specifications as to speed and fuel consumption as constituting continuing warranties that the ship will maintain such capabilities throughout the charter, English courts treat them merely as warranties as to the state of the ship at the time of delivery under the charter.

In the event of breach of any of these warranties, it would appear that the appropriate measure of damages would be the difference in the market rate of hire between a ship with the indicated specifications and the chartered ship.

In the case of a breach of the speed warranty, it has been suggested that an alternative remedy might be to treat the ship as off-hire for the appropriate period.

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Ship Speed Warranty in Time Charters

A ship speed warranty in time charters is a contractual clause that guarantees the ship’s performance in terms of speed and fuel consumption during the charter period. It is a critical element in time charter contracts, as it ensures that the ship operates at optimal efficiency while meeting the requirements of the charterer. This warranty helps to minimize disputes between the shipowner and the charterer and promotes a smooth and successful voyage.

Components of Ship Speed Warranty

A ship speed warranty typically includes the following components:

a. Guaranteed Speed: The shipowner guarantees that the ship will maintain a specific average speed during the charter period, taking into account certain conditions such as weather, sea state, and loading.

b. Fuel Consumption: The shipowner also guarantees that the ship will consume a certain amount of fuel at the specified speed, ensuring that the charterer can estimate their fuel costs accurately.

c. Allowances: The contract may include allowances for adverse weather conditions, which may affect the ship’s speed and fuel consumption. These allowances provide a buffer for unforeseen circumstances that could impact the ship’s performance.

Importance of Ship Speed Warranty

Ship speed warranties are essential in time charter contracts for several reasons:

a. Cost Management: By specifying the guaranteed speed and fuel consumption, the charterer can effectively manage their costs and make accurate financial projections.

b. Operational Efficiency: A ship speed warranty ensures that the ship operates at an optimal level, which is crucial for both the shipowner and the charterer.

c. Dispute Resolution: Speed warranties help to minimize disputes between parties, as they establish clear expectations for the ship’s performance during the charter period.

Consequences of Breaching Ship Speed Warranty

If a ship fails to meet the speed and fuel consumption guarantees outlined in the time charter contract, the shipowner may face consequences such as:

a. Off-Hire: The ship may be considered off-hire, and the charterer may be entitled to withhold hire payments for the period during which the ship’s performance was below the warranted levels.

b. Damages: The charterer may claim damages for any additional costs incurred due to the ship’s underperformance, such as increased fuel consumption, lost time, or additional port charges.

c. Termination: In extreme cases, the charterer may have the right to terminate the time charter contract if the ship’s performance is consistently and significantly below the warranted levels.

A ship speed warranty in time charters is a vital element in the chartering process. It ensures that the ship operates efficiently, helps manage costs, and minimizes disputes between the shipowner and the charterer. By clearly outlining the expectations for the ship’s performance, both parties can work together to achieve a successful and profitable voyage.

Ship Speed Warranty in New York Produce Exchange (NYPE)

The New York Produce Exchange (NYPE) time charter form is one of the most widely used standard forms in the shipping industry for time charter contracts. It provides a framework for parties to negotiate and agree upon various terms and conditions, including ship speed warranties. In the NYPE, ship speed warranties are crucial in establishing the ship’s performance criteria, ensuring that both shipowners and charterers have a clear understanding of the expected speed and fuel consumption during the charter period.

Ship Speed Warranty in NYPE

In the NYPE time charter form, ship speed warranties are usually incorporated into the description of the ship, which is included in the form’s first clause. The ship’s warranted speed and fuel consumption rates are typically specified, taking into account certain conditions such as weather, sea state, and the ship’s loading condition.

Importance of Ship Speed Warranty in NYPE

Ship speed warranties in the NYPE form are essential for several reasons:

a. Cost Management: By specifying the warranted speed and fuel consumption, the charterer can effectively manage their costs, making accurate financial projections and budgeting for fuel expenses.

b. Operational Efficiency: A ship speed warranty ensures that the ship operates at an optimal level, which is crucial for both the shipowner and the charterer in terms of performance and profitability.

c. Dispute Resolution: Speed warranties help to minimize disputes between parties, as they establish clear expectations for the ship’s performance during the charter period.

Consequences of Breaching Ship Speed Warranty in NYPE

If a ship fails to meet the speed and fuel consumption guarantees outlined in the NYPE time charter contract, the shipowner may face consequences such as:

a. Off-Hire: The ship may be considered off-hire, and the charterer may be entitled to withhold hire payments for the period during which the ship’s performance was below the warranted levels.

b. Damages: The charterer may claim damages for any additional costs incurred due to the ship’s underperformance, such as increased fuel consumption, lost time, or additional port charges.

c. Termination: In extreme cases, the charterer may have the right to terminate the time charter contract if the ship’s performance is consistently and significantly below the warranted levels.

Ship speed warranties in the NYPE time charter form are vital for ensuring that the ship operates efficiently and for managing costs. By establishing clear expectations for the ship’s performance, both shipowners and charterers can work together to achieve a successful and profitable voyage. It is essential for parties to carefully negotiate and incorporate ship speed warranties into their NYPE time charter contracts to minimize disputes and maintain a smooth chartering process.

Ship Performance Clause in NYPE 46, NYPE 93, and NYPE 2015

The New York Produce Exchange (NYPE) time charter forms have evolved over time to address the changing needs of the shipping industry. The NYPE 46, NYPE 93, and NYPE 2015 are three versions of the form, each with its unique features. The Ship Performance Clause, which outlines the expectations and guarantees related to a ship’s speed and fuel consumption during the charter period, is a critical component of these forms.

Ship Performance Clause in NYPE 46

The NYPE 46 form, first introduced in 1946, is the oldest and most basic version of the NYPE time charter forms. The Ship Performance Clause in NYPE 46 is generally included in the ship’s description, which is part of the form’s first clause. This clause addresses the warranted speed and fuel consumption, but it does not include specific allowances for adverse weather conditions or other factors that could affect the ship’s performance.

Ship Performance Clause in NYPE 93

The NYPE 93 form, introduced in 1993, updates and expands upon the NYPE 46 form. The Ship Performance Clause in NYPE 93 is more comprehensive than its predecessor. It includes more detailed provisions related to warranted speed, fuel consumption, and performance allowances for adverse weather conditions. This version of the clause helps to clarify expectations and reduce potential disputes between shipowners and charterers.

Ship Performance Clause in NYPE 2015

The NYPE 2015 form, introduced in 2015, is the most recent and modern version of the NYPE time charter forms. The Ship Performance Clause in NYPE 2015 is even more detailed and comprehensive than the previous versions. It addresses warranted speed, fuel consumption, and performance allowances, as well as guidelines for determining whether the ship’s performance is in line with the guarantees. This version also includes provisions for the use of alternative fuels and compliance with environmental regulations, reflecting the evolving concerns of the shipping industry.

The Ship Performance Clause in NYPE time charter forms, including NYPE 46, NYPE 93, and NYPE 2015, plays a vital role in ensuring efficient ship operation, cost management, and dispute resolution. As the shipping industry evolves, it is essential for parties to carefully negotiate and incorporate the Ship Performance Clause into their NYPE time charter contracts to minimize disputes and maintain a smooth chartering process.

Ship Performance Clause in BALTIME 2001

The BALTIME 2001 time charter form is another standard form used in the shipping industry, developed by BIMCO (the Baltic and International Maritime Council). The Ship Performance Clause in BALTIME 2001 outlines the expectations and guarantees related to a ship’s speed and fuel consumption during the charter period, ensuring that both shipowners and charterers have a clear understanding of the ship’s performance criteria.

Ship Performance Clause in BALTIME 2001

The Ship Performance Clause in BALTIME 2001 is typically incorporated into the ship’s description and performance warranties, which are included in the form’s first few clauses. It addresses the following aspects:

a. Warranted Speed: The shipowner guarantees that the ship will maintain a specific average speed during the charter period, considering certain conditions such as weather, sea state, and loading.

b. Fuel Consumption: The shipowner also guarantees that the ship will consume a predetermined amount of fuel at the specified speed, allowing the charterer to accurately estimate fuel costs.

c. Performance Allowances: The clause may include allowances for adverse weather conditions or other factors that could affect the ship’s speed and fuel consumption. These allowances provide flexibility for unforeseen circumstances impacting the ship’s performance.

Importance of Ship Performance Clause in BALTIME 2001

The Ship Performance Clause is essential in the BALTIME 2001 time charter form for several reasons:

a. Cost Management: By specifying the warranted speed and fuel consumption, the charterer can effectively manage their costs, making accurate financial projections and budgeting for fuel expenses.

b. Operational Efficiency: The clause ensures that the ship operates at an optimal level, which is crucial for both the shipowner and the charterer in terms of performance and profitability.

c. Dispute Resolution: The Ship Performance Clause helps to minimize disputes between parties, as it establishes clear expectations for the ship’s performance during the charter period.

Consequences of Breaching Ship Performance Clause in BALTIME 2001

If a ship fails to meet the speed and fuel consumption guarantees outlined in the Ship Performance Clause in the BALTIME 2001 time charter contract, the shipowner may face consequences such as:

a. Off-Hire: The ship may be considered off-hire, and the charterer may be entitled to withhold hire payments for the period during which the ship’s performance was below the warranted levels.

b. Damages: The charterer may claim damages for any additional costs incurred due to the ship’s underperformance, such as increased fuel consumption, lost time, or additional port charges.

c. Termination: In extreme cases, the charterer may have the right to terminate the time charter contract if the ship’s performance is consistently and significantly below the warranted levels.

The Ship Performance Clause in the BALTIME 2001 time charter form plays a vital role in ensuring efficient ship operation, cost management, and dispute resolution. By establishing clear expectations for the ship’s performance, both shipowners and charterers can work together to achieve a successful and profitable voyage. It is essential for parties to carefully negotiate and incorporate the Ship Performance Clause into their BALTIME 2001 time charter contracts to minimize disputes and maintain a smooth chartering process.

Ship Speed and Performance Clause in New York Produce Exchange (NYPE)

The Ship Speed and Performance Clause in the New York Produce Exchange (NYPE) time charter form is a critical component that outlines the expectations and guarantees related to a ship’s speed and fuel consumption during the charter period. This clause plays a significant role in establishing clear terms between the shipowner and the charterer, ensuring efficient ship operation and minimizing potential disputes.

Ship Speed and Performance Clause in NYPE

The Ship Speed and Performance Clause is typically incorporated into the description of the ship, which is included in the first clause of the NYPE form. It addresses the following aspects:

a. Warranted Speed: The shipowner guarantees that the ship will maintain a specific average speed during the charter period, considering certain conditions such as weather, sea state, and loading.

b. Fuel Consumption: The shipowner also guarantees that the ship will consume a predetermined amount of fuel at the specified speed, allowing the charterer to accurately estimate fuel costs.

c. Performance Allowances: The clause may include allowances for adverse weather conditions or other factors that could affect the ship’s speed and fuel consumption. These allowances provide flexibility for unforeseen circumstances impacting the ship’s performance.

Importance of Ship Speed and Performance Clause in NYPE

The Ship Speed and Performance Clause is essential in the NYPE time charter form for several reasons:

b. Operational Efficiency: The clause ensures that the ship operates at an optimal level, which is crucial for both the shipowner and the charterer in terms of performance and profitability.

c. Dispute Resolution: The Ship Speed and Performance Clause helps to minimize disputes between parties, as it establishes clear expectations for the ship’s performance during the charter period.

Consequences of Breaching Ship Speed and Performance Clause in NYPE

If a ship fails to meet the speed and fuel consumption guarantees outlined in the Ship Speed and Performance Clause in the NYPE time charter contract, the shipowner may face consequences such as:

a. Off-Hire: The ship may be considered off-hire, and the charterer may be entitled to withhold hire payments for the period during which the ship’s performance was below the warranted levels.

b. Damages: The charterer may claim damages for any additional costs incurred due to the ship’s underperformance, such as increased fuel consumption, lost time, or additional port charges.

c. Termination: In extreme cases, the charterer may have the right to terminate the time charter contract if the ship’s performance is consistently and significantly below the warranted levels.

The Ship Speed and Performance Clause in the NYPE time charter form plays a vital role in ensuring efficient ship operation and cost management. By establishing clear expectations for the ship’s performance, both shipowners and charterers can work together to achieve a successful and profitable voyage. It is essential for parties to carefully negotiate and incorporate the Ship Speed and Performance Clause into their NYPE time charter contracts to minimize disputes and maintain a smooth chartering process.

Ship Warranted Speed in Charter Parties

The ship warranted speed is a crucial aspect of charter parties, as it outlines the expected performance and efficiency of a ship during the charter period. It is a contractual guarantee provided by the shipowner that the ship will maintain a specific average speed under certain conditions. Incorporating warranted speed into charter party contracts helps to manage costs, ensure operational efficiency, and minimize disputes between shipowners and charterers.

Components of Ship Warranted Speed

The ship warranted speed typically consists of the following components:

a. Guaranteed Speed: The shipowner guarantees that the ship will maintain a specific average speed during the charter period. This speed is determined by considering factors such as weather, sea state, and loading conditions.

b. Allowances: Charter party contracts may include allowances for adverse weather conditions, navigational constraints, or other factors that could affect the ship’s speed. These allowances provide a buffer for unforeseen circumstances impacting the ship’s performance.

Importance of Ship Warranted Speed in Charter Parties

Ship warranted speed is essential in charter party contracts for several reasons:

a. Cost Management: By specifying the guaranteed speed, the charterer can effectively manage their costs, making accurate financial projections, and planning for expenses related to the ship’s operation.

b. Operational Efficiency: A ship warranted speed ensures that the ship operates at an optimal level, which is crucial for both the shipowner and the charterer in terms of performance and profitability.

c. Dispute Resolution: Warranted speed helps to minimize disputes between parties, as it establishes clear expectations for the ship’s performance during the charter period.

Consequences of Breaching Ship Warranted Speed in Charter Parties

If a ship fails to meet the warranted speed outlined in the charter party contract, the shipowner may face consequences such as:

a. Off-Hire: The ship may be considered off-hire, and the charterer may be entitled to withhold hire payments for the period during which the ship’s performance was below the warranted levels.

b. Damages: The charterer may claim damages for any additional costs incurred due to the ship’s underperformance, such as increased fuel consumption, lost time, or additional port charges.

c. Termination: In extreme cases, the charterer may have the right to terminate the charter party contract if the ship’s performance is consistently and significantly below the warranted levels.

The ship warranted speed in charter parties is a vital element that helps to ensure efficient ship operation, manage costs, and minimize disputes between shipowners and charterers. By clearly outlining the expectations for the ship’s performance, both parties can work together to achieve a successful and profitable voyage. It is essential for parties to carefully negotiate and incorporate warranted speed into their charter party contracts to maintain a smooth chartering process.

Ship Speed and Consumption Warranties in Time Charterparties

In a time charter agreement between the Charterer and the Ship Owner, the Ship Owner guarantees that their ship will perform in accordance with the conditions specified in the description clause. Failure to adhere to the prescribed speed and fuel consumption may constitute a breach of contract and result in the Charterer seeking compensation for damages. As such, it is imperative that senior personnel aboard the ship understand the gravity of such a breach.

A “condition” refers to an essential term of the contract, the violation of which results in a significant deviation from the original agreement between the parties. A breach of a “condition” allows the other party to refuse to fulfill the contract and seek damages.

A “warranty” refers to a term that is not fundamental to the contract but is merely “collateral” to it. If a breach of warranty occurs, the innocent party may seek damages, but they do not have the right to terminate the contract.

Determining whether a particular term in a contract constitutes a condition or a warranty depends on the interpretation, construction, and intention of each contract.

In a time charter agreement, the charterer assumes the role of the Owner (and is referred to as the “disponent owner”), and may either use the ship for transporting their own goods or sublet the ship to a sub-charterer for a time or a voyage charter. The speed and fuel consumption warranty stipulates how the ship should perform, and the disponent owner’s voyage estimates and profitability calculations rely on the parameters specified in the time charter party, under the “Description” clause. Consequently, these parameters form the basis of the calculations that affect business decisions.

Ship Speed and Consumption Warranty Example

The customary Speed and Consumption Warranty of a Time Charterparty, which is usually outlined in the Description Clause, includes the following conditions that Owners guarantee the ship will maintain during the entire term of the Charterparty, subject to good weather conditions:

Loaded speed: approximately 13.0 knots.
Ballast speed: approximately 13.5 knots.
Type of bunkers: VLSFO 380cst (for Main Engine).
Consumption:

a. At sea: approximately 30 metric tons of VLSFO and approximately 0.5 metric tons of LSMGO.
b. Idle in port: approximately 2.5 metric tons of LSMGO.
c. With gear working for 24 hours: approximately 5.0 metric tons of LSMGO.

What is Good Weather Conditions in Ship Chartering?

To ensure clarity, it is advisable to provide a detailed explanation of the term “Good Weather Conditions”. This typically involves referencing weather and sea conditions, such as the Beaufort Wind Scale and the Douglas Sea State, against which a ship’s performance can be assessed.

According to the Beaufort Scale, a wind speed of 7-10 knots corresponds to a Gentle Breeze (Beaufort Scale 3), characterized by large wavelets with breaking crests and a glassy-looking foam, with perhaps some scattered white horses. The mean height of waves at this wind speed is about 3 feet.

When the wind speed is 11-16 knots, the corresponding Beaufort Scale is Moderate Breeze (Beaufort Scale 4), which is characterized by small waves that become longer, with fairly frequent white horses. The mean height of waves at this wind speed is about 5 feet.

In the shipping industry, time charterers often file claims against owners for underperformance, which means that the ship is not meeting the speed specifications set out in the charter-party. Such claims are frequently accompanied by claims of overconsumption, indicating that the ship is consuming more fuel per day than specified in the charter-party. To defend against these claims, owners heavily rely on accurate and comprehensive data collected by the ship’s Master and officers.

Under the terms of a time charter, the speed of a ship is typically linked to a specific number on the Beaufort scale, usually 4. The purpose of this is to ensure that the ship can maintain the prescribed speed under prevailing wind conditions of scale 4. If the ship fails to perform at this speed, then the charterer may file a claim for non-performance against the owners.

To verify if the ship is performing in accordance with the charter-party, the Master should only use information acquired during periods of good weather, as specified in the agreement. The essential data required on a daily basis may include factors such as the specific sea state, changes in course, and the impact of tidal waters and currents, which are typically recorded in the ship’s deck log book during each watch.

Routing companies can provide valuable expert evidence in the event of a dispute regarding the effect of weather on a voyage. These companies gather data from various sources and determine the prevailing weather conditions along the route. As part of their services, they advise the Master on the shortest route to take and analyze the impact of weather on ship speed. As an independent party, the opinion of a routing company may carry significant weight on the ship’s performance, particularly if the contract specifies that their opinion will be sought in case of a dispute.

Ship Speed and Consumption Warranty Arbitration Case

In the case of Society of Maritime Arbitrators Inc. New York Arbitration Award No. 2125, the question of whether the time charterer has the right to designate a weather routing company was addressed. The decision stated that because the risk of delay due to weather falls upon the charterer under a time charter agreement, the charterer has the right to appoint a weather routing service of its choice, at its own expense. However, the master is not obliged to follow the advice of any routing service. Instead, the master is the sole judge when it comes to determining the best and safest course from the point of origin to the destination, taking into account the best interests of both the owner and charterer, as well as the safety of the ship, cargo, and crew.

In the event of a dispute, weather is often viewed differently by the parties involved. When time charterers hire a performance monitoring company to evaluate a ship’s performance, the information used for such an evaluation may be based on statistical data for a specific area, rather than current, factual information at a particular time and place. Therefore, the performance details obtained may differ from the entries in the ship’s log book.

If the contract does not contain any qualifying or instructive language, it must be accepted that the parties intended for the ship to provide the weather data to determine when the ship was operating under good weather conditions. However, this does not mean that charterers cannot present evidence that challenges the accuracy of the ship’s observations. If such evidence is presented and it raises questions about the reliability of the records, then it may be necessary to seek weather information from other sources. In this case, Charterers hired Oceanroutes to independently determine the wind, sea, and current conditions near the ship’s position and to provide an opinion on how these conditions affected the ship’s ability to steam at about 13 knots on a consumption of about 33 metric tons IFO.

In the case of discrepancies between the weather data recorded by the ship and the weather routing company, most panels tend to accept the reports of the ship, provided that the differences are not significant. This is because the Master and Officers are considered to be the best judges of actual conditions on the spot. In such cases, the burden is on the Charterers to demonstrate that the ship logs are not trustworthy and should be disregarded. However, if the differences are abnormal and there are unusual trends in the ship’s records, the panel may scrutinize the records in detail and may find the reports from the weather routing company to be more reliable.

For instance, in SMA Award No. 2040, the panel found the reports of the weather routing company to be more reliable than those of the ship. This was because the disparity between the reports was too great to be considered normal, and the panel observed adverse currents and winds consistently throughout the voyage. The weather expert’s testimony was also convincing, particularly in explaining how ocean currents are plotted and their regularity in location and intensity. Moreover, the weather patterns reported by the ship were often at direct odds with those of the weather analysis, to an unusual degree. The panel was able to conclude that the “fair weather” days reported by the weather routing company were more reliable in this particular case.

It is important to note that the estimates of wind force may differ between the bridge of a ship and those of a weather analysis, as the latter are based on reports from many ships and weather reporting stations in the general area surrounding the ship’s position. However, it is unusual to find a continuous series of directional differences.

The impact of the term ABOUT in ship chartering

In recent times, there has been a prevalent consensus that the inclusion of the word “about” in a clause pertaining to speed and performance allows for a deviation of 0.5 knots on either side. It would be inaccurate to express this deviation in percentage terms, although some American arbitrators may choose to do so. It should be noted that the assumption that “about” is synonymous with 0.5 knots is not absolute. The Court of Appeal case of the AL BIDA in 1987 acknowledged the arbitrator’s argument that the leeway with regards to speed ought to be contingent on the ship’s configuration, size, draft, and trim. Consequently, in cases where the ship’s configuration is markedly unusual or atypical, the margin could potentially be widened or constricted. Arguably, a large oil tanker may require a smaller tolerance than a fully laden container ship. Nonetheless, as a rule of thumb, London arbitrators generally suggest allowing for half a knot for the word “about” in the case of ships traveling at speeds up to 15 knots. It is worth noting that arbitrators have, on occasion, permitted margins greater than 0.5 if the ship is warranted to steam at more than 15 knots.

Thus far, the word “about” has only been applied to the warranted speed. However, there have been arbitration rulings where the “margin” has been applied to the consumption aspect of the warranty. For instance, in one London arbitration decision, the arbitrator concluded that the term “about” allowed for a deviation of 0.5 knots in speed and a 4% margin in consumption.

It is widely acknowledged that the usage of the term “about” affords Owners a margin of half a knot. For instance, if the ship is guaranteed to operate at around 14 knots, the warranty would not be violated as long as the ship attains a speed of at least 13.5 knots. While this “guideline” seems to be consistently employed in London arbitrations, it is not, in fact, a legal requirement. The law specifies that the extent of the margin “must be adapted to the ship’s configuration, size, draft, and trim,” among other factors (The Al Bida [1987] 1 LLR 124).

As far as bunker usage is concerned, English law does not stipulate a fixed margin. Nonetheless, it appears to have been generally accepted in the Industry that a margin of 5% would be granted for “about” (London Arbitration 12/85 – LMLN 158; London Arbitration 2/87 – LMLN 188).

However, in SMA Award No. 2040, it was established that:

“This Panel does not believe that there is any inherent or automatic right to calculate bunkers by adding 5 percent to the figure warranted. There is no satisfactory precedent which requires that the Panel give such an allowance. The principle is well established that after making due allowance in assessing the deficiency (if any) in speed warranty, bunkers are to be calculated on the warranted daily figure for the actual time at sea as compared to the consumption at what should have been the voyage duration. Any difference is reflected in the final accounting. The word “about” in describing bunker consumption is not another 5 percent on top of that allowance for speed, which is intended to allow for vagaries in currents, short sea passages and other minor effects of the unknown in navigation procedures.”

This indicates that the arbitrators refused to grant the Owners a “double advantage” of 0.5 knots and 5% consumption.

In a London arbitration, which was reported in LMLN. 233 on page 4, the tribunal was tasked with deciding the effect of the term “about” as it pertains to the detailed Speed/Performance Warranty.

The charterparty provided specific details regarding the ship’s performance capabilities, including its economic speed of approximately 11 knots on 4.7 MT of IF 180, as well as various other speeds on different amounts of fuel consumption. Despite the charter’s specificity, the arbitration determined that effect must be given to the term “about” since the parties had expressly agreed to its inclusion. However, the allowance was limited to a quarter of a knot, as opposed to the customary half a knot awarded by London arbitrators. This limitation was due to multiple speeds being listed in the charterparty, as well as the fact that the speeds were lower than those stipulated in larger bulk carrier fixtures.

It is worth noting that the Tribunal also determined that the allowance for fuel consumption should be reduced in accordance with the reduction in speed allowed by the term “about”. For example, assuming the ship was to steam at its economic speed of 11 knots on approximately 4.7 MT of fuel oil, the allowance for “about” not only lowered the warranted speed to 10.75 knots but also reduced the permissible fuel consumption to 4.45 MT, proportionate to the charterparty figures.

However, as a general rule, warranted fuel consumption would not be reduced solely because the speed achieved was only CP Speed minus 0.5 Knots. This would depend on the specific wording of the Charter Party. In the typical case where the warranty is “about X Knots on about Y metric tons fuel oil per day,” the plain meaning of the words is that the ship will achieve a speed of at least X-0.5 Knots on approximately Y metric tons of fuel oil, and there is usually no reason to imply a proportional reduction in bunker consumption.

Ship Underperformance in Charterparties

In the case of The Didymi 1988.2 LLR. 108, the court established a two-stage test to determine loss resulting from underperformance. The first stage involved assessing the ship’s underperformance based on good weather conditions. Once this was established, the second stage required an assessment of the underperformance in all weather conditions, with necessary extrapolations calculated by an expert.

The Court of Appeal later endorsed this approach and further clarified it by introducing a three-stage approach. The first stage involved assessing the ship’s performance in good weather conditions as defined on all sea passages from sea buoy to sea buoy, excluding any period of slow steaming at charterers’ request.

The second stage required applying any variation of speed from the stipulated norm with necessary adjustments and extrapolations to all sea passages from sea buoy to sea buoy and all weather conditions, excluding periods of slow steaming at the charterers’ request.

Finally, in the third stage, any variation of consumption from the stipulated norm should be applied with the necessary adjustments and extrapolations to all sea passages from sea buoy to sea buoy and all weather conditions, excluding the periods of slow steaming at the charterers’ request.

Overall, this approach required assessing the ship’s speed/performance in all weather conditions, excluding only the periods of slow steaming at the charterers’ request.

Ship Speed Claim Example 1 in Charter Party

In the context of a charter party, the shipowner and charterer may negotiate and agree upon a specific speed for the ship to maintain during the voyage. This speed claim example illustrates how a ship’s performance can be assessed against the agreed-upon speed in a charter party.

Suppose a shipowner and charterer have entered into a charter party agreement for a voyage from Port A to Port B. The agreed speed and consumption for the ship in the charter party are as follows:

Agreed Speed: 14 knots Agreed Consumption: 30 metric tons of fuel per day (MT/day)

Voyage Information:

Distance between Port A and Port B: 1,750 nautical miles (NM)
Weather and sea conditions: calm sea and favorable wind conditions
Ship’s cargo: fully loaded with cargo

Step 1: Calculate the expected voyage duration To calculate the expected voyage duration, divide the distance by the agreed speed:

Voyage Duration = Distance / Agreed Speed Voyage Duration = 1,750 NM / 14 knots ≈ 125 hours or approximately 5.2 days

Step 2: Calculate the expected fuel consumption Multiply the agreed consumption by the voyage duration to determine the expected fuel consumption:

Expected Fuel Consumption = Agreed Consumption * Voyage Duration Expected Fuel Consumption = 30 MT/day * 5.2 days ≈ 156 MT

Step 3: Compare the actual performance with the agreed terms Upon completion of the voyage, the charterer reviews the ship’s logbook and determines the following:

Actual Speed: 13.5 knots
Actual Voyage Duration: 5.45 days
Actual Fuel Consumption: 162 MT

The actual performance of the ship does not meet the agreed terms in the charter party. The ship’s average speed was 13.5 knots instead of the agreed 14 knots, resulting in a longer voyage duration and higher fuel consumption. The charterer may raise a claim against the shipowner for the additional time and fuel costs incurred due to the ship’s underperformance.

Assessing a ship’s performance against the agreed terms in a charter party is essential for both the shipowner and charterer. It helps ensure that the agreed-upon speed and consumption are met, and in cases where they are not, it provides a basis for claims related to the additional time and expenses incurred due to the ship’s underperformance.

Ship Speed Claim Example 2 in Charter Party

In this example, a shipowner and charterer have entered into a charter party agreement for a voyage from Port C to Port D. The agreed speed and consumption for the ship in the charter party are as follows:

Agreed Speed: 12.5 knots Agreed Consumption: 25 metric tons of fuel per day (MT/day)

Voyage Information:

Distance between Port C and Port D: 2,500 nautical miles (NM)
Weather and sea conditions: moderate sea state with some headwinds
Ship’s cargo: fully loaded with cargo

Step 1: Calculate the expected voyage duration To calculate the expected voyage duration, divide the distance by the agreed speed:

Voyage Duration = Distance / Agreed Speed Voyage Duration = 2,500 NM / 12.5 knots ≈ 200 hours or approximately 8.33 days

Step 2: Calculate the expected fuel consumption Multiply the agreed consumption by the voyage duration to determine the expected fuel consumption:

Expected Fuel Consumption = Agreed Consumption * Voyage Duration Expected Fuel Consumption = 25 MT/day * 8.33 days ≈ 208.25 MT

Step 3: Compare the actual performance with the agreed terms Upon completion of the voyage, the charterer reviews the ship’s logbook and determines the following:

Actual Speed: 12.2 knots
Actual Voyage Duration: 8.67 days
Actual Fuel Consumption: 215 MT

The actual performance of the ship does not meet the agreed terms in the charter party. The ship’s average speed was 12.2 knots instead of the agreed 12.5 knots, resulting in a longer voyage duration and higher fuel consumption. The charterer may raise a claim against the shipowner for the additional time and fuel costs incurred due to the ship’s underperformance.

Evaluating a ship’s performance against the agreed terms in a charter party is crucial for both the shipowner and charterer. It helps ensure that the agreed-upon speed and consumption are met, and in cases where they are not, it provides a basis for claims related to the additional time and expenses incurred due to the ship’s underperformance.

Ship Speed Claim Example 3 in Charter Party

In this example, a shipowner and charterer have entered into a charter party agreement for a voyage from Port E to Port F. The agreed speed and consumption for the ship in the charter party are as follows:

Agreed Speed: 15 knots Agreed Consumption: 28 metric tons of fuel per day (MT/day)

Voyage Information:

Distance between Port E and Port F: 3,600 nautical miles (NM)
Weather and sea conditions: mostly calm seas with some occasional crosswinds
Ship’s cargo: fully loaded with cargo

Step 1: Calculate the expected voyage duration To calculate the expected voyage duration, divide the distance by the agreed speed:

Voyage Duration = Distance / Agreed Speed Voyage Duration = 3,600 NM / 15 knots ≈ 240 hours or approximately 10 days

Step 2: Calculate the expected fuel consumption Multiply the agreed consumption by the voyage duration to determine the expected fuel consumption:

Expected Fuel Consumption = Agreed Consumption * Voyage Duration Expected Fuel Consumption = 28 MT/day * 10 days ≈ 280 MT

Step 3: Compare the actual performance with the agreed terms Upon completion of the voyage, the charterer reviews the ship’s logbook and determines the following:

Actual Speed: 15.3 knots
Actual Voyage Duration: 9.8 days
Actual Fuel Consumption: 274 MT

In this case, the actual performance of the ship meets and slightly exceeds the agreed terms in the charter party. The ship’s average speed was 15.3 knots, slightly faster than the agreed 15 knots, resulting in a shorter voyage duration and slightly lower fuel consumption than expected. The charterer has no basis for a claim against the shipowner in this scenario, as the ship’s performance was in line with or better than the agreed terms.

Monitoring a ship’s performance against the agreed terms in a charter party is essential for both the shipowner and charterer. It helps ensure that the agreed-upon speed and consumption are met or exceeded, and in cases where they are not, it provides a basis for claims related to the additional time and expenses incurred due to the ship’s underperformance.

Ship Speed Claim Vs Off-Hire Claim

Each time a charterparty is entered into, a warranty is established that guarantees the ship’s performance, referred to as a performance warranty. In the context of tanker trade, the performance warranty includes a pumping warranty. However, we are only concerned with the ship’s speed-consumption aspect in this discussion. There are two widely recognized forms in the industry: NYPE (1946 version) for dry cargo and SHELLTIME 4 (revised in 2003) for tanker. Typically, these forms are subject to significant modifications, and additional clauses are added.

The NYPE form’s warranty concerns the ship’s performance capability at the time of delivery. In contrast, the SHELLTIME 4 form’s warranty is ongoing throughout the charter period. In cases where the warranty attaches at the time of delivery, such as NYPE, proof of the ship’s underperformance during the charter period may serve as evidence of the ship’s incapacity at the time of delivery. Several cases have supported this notion, including The Didymi, The Gas Enterprise, and The Ocean Virgo. The owner has a responsibility to maintain the ship in a thoroughly efficient state during the service, and the master has a duty to conduct the voyages with utmost speed. As a result, whether the warranty attaches at the time of delivery or throughout the service, the ship must meet the guaranteed performance. Failure to do so would result in the owner breaching the performance warranty.

In certain circumstances specified in the charterparty, the ship will be considered off-hire, as stipulated in clause 15 of the NYPE form and clause 21 of the SHELLTIME 4 form. One of these circumstances is where the ship’s speed is reduced due to defects or breakdowns during the service. The scope of this circumstance in the SHELLTIME 4 form is slightly broader than in the NYPE form. It is worth noting that a breach of the performance warranty and going off-hire are distinct concepts. However, merchants often confuse the two. The ship is only considered off-hire if the reduction in speed is caused by a defect or breakdown during the service. If the ship’s hull is fouled at the time of delivery, it is considered a defect triggering the off-hire event, as was the case in The Ioanna. However, if the fouling occurs during the service, there are somewhat contradictory views, as demonstrated in The Ioanna and The Rijn. The ship goes off-hire only for the period of time lost due to the off-hire event, referred to as the “net clause,” and not for the entire period during which the off-hire event persists, known as the “period clause.” For example, if the ship completes a voyage in three days due to a defect that would have taken two days under normal circumstances, the ship would only be off-hire for one day, which represents the net loss of time.

A fundamental distinction exists between the consequences of a mere breach of performance warranty and off-hire. In the event of a claim for breach of performance warranty, any fuel conserved during the under-speed period is set against the underperformance claim sum. Conversely, if the claim is for off-hire, no such set-off is made, and the fuel saving accrues to the benefit of the charterer, a fortuitous gain (The Ioanna). It is not necessary to establish any breach by the owner in the case of an off-hire claim, whereas an underperformance claim necessitates a breach by the owner.

Concerning underperformance, the charterer can deduct the underperformance claim sum as an equitable set-off without requiring a contractual provision authorizing such deduction, subject only to any contractual limitation (London Arbitration 17/19). In the case of off-hire, no hire is payable to the ship as per the contract, and no hire is required to be paid during that period. Typically, the contract will also expressly allow deductions. Still, if the sum deducted is excessive, the charterer may be in breach, which entitles the owner to withdraw the ship. There is ambiguity on whether the owner can withdraw, even if the charterer has made a reasonable estimate but deducted an excessive amount (The Nanfri) [vii]. An upcoming article will address the issue of the right of withdrawal based on such deductions.

The implications of initiating a claim on an erroneous basis can be grave. In one arbitration, the charterer deducted the underperformance claim sum from the hire as an off-hire claim. Subsequently, during arbitration, it switched the basis to a performance claim, and the deduction was legitimized as an equitable set-off. The charterer was allowed to make the switch (London Arbitration 4/11). In another arbitration, the charterer attempted to switch the basis after the six-year time limit had expired, which the tribunal denied (London Arbitration 9/18).

In most cases, an underperformance claim would be appropriate, as opposed to an off-hire clause. Charterers who wish to make deductions on an off-hire basis must exercise prudence before doing so.

What is Ship Speed and Consumption claims in Charter Parties?

Ship speed and consumption claims in charter parties refer to the disputes or disagreements that may arise between the ship owner and the charterer concerning the ship’s performance, specifically regarding its speed and fuel consumption.

Charter parties are contractual agreements between ship owners and charterers for the use of a ship to transport goods or passengers. These contracts typically include clauses that outline the expected performance of the ship, such as the guaranteed speed and fuel consumption levels. The ship owner assures the charterer that the ship will perform according to the agreed-upon specifications.

Speed refers to the ship’s ability to cover a certain distance within a specific time frame, while consumption refers to the amount of fuel or energy the ship consumes during its voyage. Both of these factors have a significant impact on the overall cost and efficiency of the transportation process.

If a ship does not meet the agreed-upon performance criteria, such as failing to maintain the guaranteed speed or consuming more fuel than specified, the charterer may raise a claim against the ship owner. These claims are known as speed and consumption claims. They can result in financial compensation or adjustments to the charter party terms.

Resolving speed and consumption claims often involves a thorough analysis of various factors, such as weather conditions, the condition of the ship, and any operational issues that may have affected its performance. Both parties may need to rely on expert opinions and data analysis to reach a fair resolution.

It is essential for both ship owners and charterers to carefully review and negotiate the speed and consumption clauses in a charter party to minimize disputes and ensure a mutually beneficial agreement.

Ship Speed and Consumption Disputes under English Law

“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 this style of phrasing that is most commonly observed in claims brought before the Club. It is pertinent to note that this specific warranty phrasing may differ in other forms of charterparties. For instance, the “Baltime 1939″ charter clause 12 refers to the…”speed capability in knots (about) on a consumption in tonnes (about)”.

In most instances where the ship has failed to perform in terms of speed and/or consumption, it is customary for the charterer to initiate the claim in the form of a demand for damages for a breach of this particular warranty. It may be useful to mention briefly other relevant clauses that may provide the claimant with alternative grounds on which to base their claim.

The alternative charterparty provisions that may be deemed relevant are:

Line 5 – “with hull, machinery and equipment in a thoroughly efficient state”

Lines 21/22 – “ship on her delivery to be tight, staunch, strong and in every way fitted for the service”

Clause 1 – “that the owners shall keep the ship in a thoroughly efficient state in hull, machinery and equipment for and during the service”

Clause 8 – “the Captain shall execute his voyages with the utmost dispatch”.

Clause 15 – “if during the voyage the speed is reduced by any defect or breakdown in any part of her hull, machinery, or equipment, the time lost and the cost of any additional fuel consumed as a result thereof, along with all other extra expenses, shall be deducted from the hire.”

In situations where a claim for breach of the speed warranty cannot be established, it may be feasible to present an alternative argument. Such an argument could be based on the existence of a defect during delivery, or on the fact that a defect developed after delivery and the owners neglected to make appropriate repairs, thereby violating their obligation to maintain the ship in a fully functional state during service. With regard to clause 8, it may be possible to contend that the owners are at fault for failing to proceed with dispatch. However, this would be a challenging argument to make, given that the ship’s master has navigational control and cannot be held responsible for choosing a route that avoids inclement weather or slows down due to fog or rough seas. Although clause 16 of the charter acknowledges navigation errors, it does not excuse negligent ones. A potential scenario where a claim under clause 8 could arise is if the master willfully delays obeying a lawful order from the charterers to enter a port or load a cargo.

Another factor to consider is the maintenance obligation outlined in clause 1 of the charter. This warranty is continuous and applies beyond delivery. However, it is not an absolute warranty, and owners cannot be expected to immediately repair the engine in the event of a breakdown requiring a new camshaft, for example. The owners are only obligated to act reasonably. The typical approach for pursuing a speed and consumption claim is to rely on the warranty specified in lines 9 and 10.

When evaluating whether a ship has violated its performance warranty, it is crucial to exercise caution. The warranty is applicable only when the ship is carrying a full load. The fact that the ship managed to attain a speed of 15 knots during its ballast voyage to the delivery port, as evidenced by the owners, does not serve as conclusive proof that the warranty has been satisfied. Rather, the ship must be capable of maintaining a speed of 15 knots, or thereabouts, when it is fully loaded.

The warranty pertains to the ship’s “capability.” It may be contended that if technical evidence is presented to demonstrate that the ship has the ability to achieve the warranted speeds, even if it failed to achieve them in reality, the performance warranty would still be considered to have been upheld. In practice, the arbitrators will require and scrutinize evidence of actual performance.

Good Weather Description in Time Charter Parties

Our primary focus pertains to the NYPE charter format, with specific attention to the 93 iteration. This form encompasses an open space for parties to declare their definition of favorable weather conditions. Since most individuals are well-versed in inquiries regarding speed and performance, the customary value entered is force four on the Beaufort scale. Therefore, weather conditions equivalent to or below force four on the Beaufort scale are deemed favorable. The proprietor may argue that any evidence indicating unfavorable weather should be disregarded since the warranty only pertains to the ship’s performance during favorable weather. The courts, however, have stated that it is imperative to identify suitable weather conditions and determine if the ship performed below expectations during those conditions. If the ship underperformed during favorable weather, it is logical to presume that it also underperformed during adverse weather.

Shipowners Defending Ship Underperformance

There exist various reasons why a ship may underperform without the owners breaching the charter or an event taking place within the off-hire clause. Some defences that owners can legitimately consider include:

1- Allegations that charterers supplied subpar fuel. However, such claims pose significant problems of proof. Normally, the bunker supplier has a sample allegedly taken from the supply barge that shows the fuel specification. It is challenging for owners to refute such evidence unless they have taken a manifold drip sample during the reception of the bunkers.

2- The occurrence of adverse weather during the voyage. Often, charterers contend that the ship underperformed based on a voyage plan prepared by a routing company that only details expected weather conditions. However, this is insufficient, as the actual weather during the voyage could differ from the anticipated weather. Besides, reliance on post-voyage analysis does not guarantee success. Firstly, the routing organisation may calculate their time loss in an unapproved way. Secondly, the routing organisation may obtain weather reports from ships in the vicinity rather than from the ship itself. London arbitrators and the courts recognise that weather conditions can differ significantly over a short distance. The best evidence of the conditions experienced by the ship should be the man’s experience on the spot, which should be documented in the log books. Nevertheless, relying on these obvious arguments may be impossible if there is a clear clause in the charter party that requires the use of Ocean Routes data in cases of consistent discrepancies between the evidence of the owners and the charterers’.

3- “About” should be taken into account regarding both speed and fuel consumption.

4- Savings in fuel may reduce the damages.

5- The ship master made a prudent navigation decision to avoid adverse weather or deviate to save lives or property. Alternatively, if the master made a navigation error, that is accepted under clause 16 and/or the Hague rules.

Ship Speed and Performance Cases

In the EVDOXIA (1980) 2 Lloyd’s Rep. 107 case, the evidence presented by Ocean Routes prevailed over the log entries during a London Arbitration. This was because the log failed to record a suitable reduction in RPM during alleged heavy weather conditions. Moreover, the soundings recorded in the log were taken during circumstances that were supposedly unsuitable for such operations.
In the RIJN (1981) 2 Lloyd’s Rep. 267 case, the ship’s reduced speed could not be the basis for any claim for damages against the charterers, as the accumulation of hull growth resulted from their own instructions during an abnormally long stay in tropical waters, lasting for three months at Lorneco Marques.
In the London Arbitration (1983) LMLN 98, log evidence concerning the weather was preferred over Ocean Routes’ evidence. An allowance of 1 knot was granted for bad weather up to force 5/6. “Good weather and smooth water,” as stated in the Baltime Form, was treated similarly to “good weather conditions” as defined in the NYPE Form. It was also deemed that restricted visibility did not automatically imply bad weather conditions, as speed was not necessarily reduced in accordance with regulations.
In the IOANNA (1985) 2 Lloyd’s Rep. 164 case, the presence of fouling on the hull of the ship upon delivery was considered a “defect in the hull.” This defect enabled the charterers to put the ship off hire. The owners could not claim credit for bunkers saved since the speed claim was raised as an off-hire claim.
In the London Arbitration 12/1985 LMLN 158, owners were allowed double benefit in instances where the word “about” qualified the speed and the consumption description. An allowance of 0.5 knot was made for “about” in relation to speed. Additionally, 4% was allowed for “about” in relation to consumption. “Good weather and smooth water” was interpreted to encompass conditions up to and including Beaufort Force 4.
In the London Arbitration 2/1978 LMLN 188, when the description of the ship’s speed and consumption was preceded with “Description: all about,” owners were allowed double benefit for “about.” An allowance of 5% was granted for “about” in relation to consumption. The owners were entitled to credit for bunkers saved, as the speed claim was raised for damages, not off hire.
In the case of the DIDYMI (1988) 1 Lloyd’s Rep. 108 (Court of Appeal), where a charterparty was for a period of five years and provided for a guaranteed average speed in good weather conditions, the charterers’ speed claim was calculated by applying an average good weather speed to the entire charterparty.
In the case of the GAS ENTERPRISE (1993) 1 Lloyd’s Rep. 352, even though the charterparty stipulated that the ship’s performance should be evaluated based on her average speed and bunker consumption during good weather conditions, the Court of Appeal ruled that charterers were entitled to apply the ship’s good weather performance to the entire period under review. This was because a ship that underperforms in good weather is likely to underperform in bad weather as well.
In the case of “AL BIDA” (1987) 1 Lloyd’s Rep. 124 – (Court of Appeal), the charterers were entitled to claim compensation for under-performance during certain voyages, regardless of any over-performance during other voyages. This entitlement applied even if the ship was described as “capable of maintaining” certain performance levels. Owners were not entitled to any credit for periods of over-performance, except in cases where the claim was brought as an off-hire claim. When using the term “about”, no specific speed allowance can be established in law, as a reasonable margin must be assessed, taking into account factors such as the ship’s configuration, size, draft, and trim.

Time Charter Breach of the Speed Warranty