Time Charterparty – employment and agency clause – charterers’ indemnity – when owner’s cause of action arising
A cargo of Icelandic fish was shipped from Reykjavik to Naples under a bill of lading.
The time charterparty in the Baltime form contained an employment and agency clause reading as follows:
“The Master to be under the orders of the Charterers as regards employment, agency or other arrangements. The Charterers to indemnify the Owners against all consequences or liabilities arising from the Master … signing Bills of Lading or other documents or otherwise complying with such orders …”
The charterparty limited the owners’ liability for loss of damage to want of due diligence in making the vessel seaworthy. The parties agreed that the owners’ liability in terms of the bills of lading was more onerous than that in the charterparty. On discharge damage to the cargo was discovered. The receivers instituted action against the owners pursuant to which they obtained judgment in the Italian Court.
The owners contended that their cause of action arising from the charterers’ indemnity arose only upon judgment being entered in the Italian Court.
The charterers, on the other hand, maintained that the cause of action arose, at the latest, when the goods were discharged at Naples. If this date were taken, the owners’ claim would have been time-barred.
The Commercial Court (McNair J) set out to construe the employment and agency clause and found that the parties intended the charterers’ liability to arise as soon as the owners’ liability to the receivers occurred.
The court found that the charterers’ liability arose prior to the judgment in the Italian Court. It did specify exactly when this occurred.
Accordingly, the owners claim was held to be time-barred and judgment was given for the charterers.
The judgment contains a useful description of a common error, to apply a label to an obligation in a contract and then to deduce from that label the legal consequences which follow. As the court pointed out, the primary task is to construe the contract itself in its context.
The owners’ argument may be preferable in that it is the consequences of issuing bills of lading for which they are indemnified – the issuing of bills of lading containing more onerous conditions than those in the charterparty may not in itself be a breach of contract – the cause of action only comes about once the consequences ensue.
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