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Case law: London Arbitration 7/21

News & Insights 31 May 2021


Key words: Deadfreight

Charterparty – Deadfreight – Owners having option to load between 27,000 and 33,000 MT of coal cargo – Owners exercising option to load 33,000 MT – Maximum draft at loading berth preventing owners from loading full quantity of cargo – Whether charterers are liable for deadfreight

The vessel was chartered for the carriage of a cargo of coal. Under the terms of the charterparty, the charterers were bound to provide a safe port/berth. The owners had the option to load between 27,000 and 33,000 MT of coal at the port/berth nominated by the charterers.

The owners elected to load 33,000 MT and provided a stowage plan indicating a maximum departure draft of 10.99m. Prior to the fixture, the charterers’ agents had advised that the maximum draft at the terminal was in excess of 13m and that the vessel would have no issues to load 33,000 MT.

However, subsequently the charterers ordered the vessel to load at a berth where the maximum departure draft was 10.5m. Accordingly the owners loaded in line with the maximum permitted draft at the nominated berth, resulting to a shortfall of 1,590 MT.

The owners claimed deadfreight in the total amount of US$ 19,512.28 (net) against the charterers on the basis that there was an implied term in the charterparty that a safe berth would be nominated allowing the vessel to load the maximum quantity of the agreed cargo. The charterers rejected owners’ allegations, on the grounds that there was no promise as to which berth would be used and that the burden is on the owners to check whether the cargo quantity, which they chose to load, was within the safe limits of the berth.

The matter was referred to arbitration, where it was held that:

  1. the owners’ right to choose the quantity of cargo to load was unfettered; and,
  2. the charterers were bound to load whatever amount the owners opted for. By failing to do so, the charterers were found to be in breach of the charterparty and were liable for damages/deadfreight. 

Comment

The decision of the tribunal does not provide whether there was such an implied term in the charterparty as argued by the owners.  In cases where the owners have the right to exercise their option as to the quantity of the cargo to be loaded, charterers should carefully consider and take into account their obligations under the terms of the charterparty when nominating a berth/port.  If in practice charterers have little or no choice as to which specific berth at a discharge port the vessel can use (and thus which berth they order the vessel to proceed to), then the risk of not being able to load the amount nominated by owners may still rest with charterers.

  1. Link to i-law can be found here

Category: Caselaw

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