Cesser clause – charterers waiving entitlement to the clause
The vessel was chartered on the Gencon form to carry cotton from Khorrramshahr, Persian Gulf to Constantza on the Black Sea.
En route, the vessel’s boilers began to overheat and it had to put in at Karachi where the voyage was abandoned. The cargo was transhipped at the risk and expense of the charterers by agreement.
The charter provided:
“23. Charterers’ liability shall cease as soon as the cargo is shipped, the owners having a lien on the cargo for freight, deadfreight, demurrage and average.”
“24. At request of owners, a guarantee letter to be signed by or on behalf of the charterers or by their bankers in which case the lien on the cargo not to be exercised by owners.”
The owners claimed a general average contribution from the cargo owners. Their claim was backed by a lien over the cargo.
The parties agreed that the insurers would provide a letter of guarantee and the charterers would provide an average bond to the owners to cover the average contribution against release of the cargo by the owners.
The letter of guarantee was provided but not the average bond.
The owners sued the charterers for the average contribution.
The charterers raised the defence of the cesser clause.
The Commercial Court, (Donaldson J) held that the cesser clause could not operate because of the well established principle of the inter dependency between the cesser clause and the owner’s lien. Because the owners had lost their lien on the release of the cargo which occurred after the supply of the letter of guarantee, the cesser clause could not operate and therefore the charterers’ defence failed.
In addition, he held that because the charterers had taken possession of the cargo knowing that the owners were insisting on a claim for general average, they had waived their right to insist on the cesser clause.
Two further points were mentioned as having merit but were not decided: in that the charterers impliedly represented that the cesser clause would not be relied upon, they were estopped from so doing and, that by paying the average adjuster’s fees, the charterers impliedly accepted liability for the average contributions.
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