340. O K Petroleum A.B v Vitol Energy S.A (the “Chemical Venture” and the “Jade”) [1995] 2 Lloyd’s Rep 160

CIF sale – demurrage provision not an indemnity – time bar in charterparty not incorporated into sale contract.

The facts

Pursuant to two contracts of sale between the same parties, gasoline was sold CIF Genoa and Mogas, CIF Dunkirk.

Two different vessels were chartered each on the Asbatankvoy form.

Both contracts contained their own lay time provisions. 

The two contracts provided for demurrage “as per charterparty” and “as per charterparty rate, terms and conditions pro rata for part cargo” respectively.

The charterparties’ lay time regime differed from the contracts of sale in that the charterparties provided for aggregation of lay time at both loading and discharging ports.  The contracts of sale allowed for distinct periods of lay time at the loading and discharge ports.

Each charterparty contained a time bar requiring demurrage claims to be made within 90 days from disconnection of hoses.

Laytime was exceeded and sellers notified the buyers of their claim for demurrage outside the 90 day period allowed for in the charterparties.

The issue of whether the time bar clause in the charterparties had been incorporated into the sale contracts was tried first and separately.

Findings

Colman J found that the time bar clause was not incorporated.

In reaching his conclusion he dealt with all leading cases on incorporation including Hamilton and Co v Mackie and T W Thomas and Co v Portsea Steamship Co.

He remarked on the dual role of the sellers:  in the contract of sale they were the beneficiaries of the demurrage provisions whereas in the charterparties, the demurrage provisions operated adversely to them. 

He found, in passing, that the buyers’ liability for demurrage was not an indemnity but rather a stand-alone obligation because of the difference of the lay time regimes in each of the two different contracts. 

The deciding factor in his judgment was that the time bar provisions were not germane to the demurrage provisions and that therefore specific words were needed to achieve incorporation.

Commentary

If the demurrage obligation on the buyers had been to indemnify only, the sellers’ argument against incorporation would have been unassailable on this point alone.

Ultimately, the Court embarked on an enquiry into the intention of the parties as reflected in the two contracts in question, namely, the contracts of sale and the charterparties.

The judgment contains a careful and perceptive analysis of all the leading incorporation cases.

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