Laytime – dual charter parties in respect of same vessel and same voyage – demurrage accruing in respect of each contract
The facts
Rice was shipped from the US Gulf to Basrah, Iraq under two charterparties between the same companies, entered about one month apart.
Under each charterparty, the owners were at liberty to nominate a vessel of their choice.
The first charterparty was for a full and complete cargo and the second for a full or part cargo. The freight and the demurrage rates for the second charterparty were slightly lower than that for the first.
In the event, the owners nominated the same vessel. The rice for each charterparty was stowed in separate holds with the rice in respect of the second charterparty being overstowed with general cargo in terms of a liberty given to the owners in the first charterparty.
The vessel arrived at Basrah and gave Notice of Readiness without specifying whether the notice applied to either or both charterparties.
The vessel was delayed for about 3 months before entering a berth. The charterers accepted the Notice of Readiness only once the overstowed general cargo had been discharged.
Both cargoes were discharged simultaneously.
The owners argued that laytime in respect of the first charterparty was activated by the Notice of Readiness and claimed that demurrage should be calculated under each charterparty separately.
The charterers contended that laytime commenced only once the general cargo had been discharged and that demurrage should be calculated at the rate stipulated in the first charterparty.
Findings
The arbitrators found that laytime in respect of the first charterparty was activated by the giving of the Notice of Readiness. They found, however, that the discharge of the second cargo did not contribute to any delay and no demurrage was awarded in terms of the second contract.
Parker J, held that the owners were entitled to demurrage in respect of each of the contracts which added approximately $90 000 to the owners’ claim for demurrage.
Parker J distinguished the Sea Pioneer on its facts and was persuaded that demurrage was to be calculated twice over by the marked and distinct nature of each contract, in particular, the fact that in each, the owners were entitled to nominate a different vessel.
Commentary
It is significant that only one Notice of Readiness was given.
Despite what would have occurred if two separate vessels had been nominated, the voyage should have been seen as a composite transportation including both cargoes.
As the judge recognized, demurrage is liquidated damages for delaying the entire vessel. This was certainly the intention of the parties where a full cargo was contracted for in the first charterparty.
The fact that the general cargo was discharged first is also significant because it had the effect that no extra delay was caused by the discharge of the second cargo. Even if there was further delay this should have been calculated at the demurrage rate stipulated in the second contract on its own without accumulating demurrage in respect of the first cargo, the discharge of which had run its course.
This content is restricted to site members. If you are an existing user, please login. New users may register below.