Principles of the Carriage of Goods by Sea

Paul Todd

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317801702
• Edition: 1
• Topic: Law
• Subtopic: Maritime Law
• Index: Law

Principles of the Carriage of Goods by Sea offers students studying this topic as part of their LLM or LLB course an accessible, comprehensive overview of the subject from a leading expert in the field. Written specifically with students in mind, concentrating on principles, and tailored to common law coverage, this title presents all the essential topics and is supported by the following useful pedagogy:

• Line Diagrams: illustrating the relationships between parties so that this may be understood at a glance; also where appropriate, time lines
• Case Studies: looking at topical matters such as piracy, and problematic areas of law such as reachable on arrival clauses and the carriage of bulk oil by sea
• Sample Problem Questions: problem questions and suggestions to help students to prepare for assessment
• Annotated appendices: concise appendix of the most important legislation and international conventions, with useful annotation from the author that explains these and puts them in context

Part 1

Introduction to carriage of goods by sea

Chapter 1

Introduction, Bills of lading and charterparties

Chapter Contents

1.1 Layout of the book

1.2 Introduction: distinction between charterparties and bills of lading

1.3 Types of charterparty

1.4 More on voyage charter terms

1.5 More on time charterparty terms

1.6 Terms that are common to both types of charterparty

1.7 Erosion of the distinction?

1.8 Does the distinction matter?

1.9 Sub-charterparties

1.10 Standard forms

1.11 Charterparties and markets

1.12 Following chapters

1.13 Questions

1.1 Layout of the book

The substantive part of this book divides into four parts. Part 1 introduces the subject, and considers issues (including general legal principles) that relate to all types of carriage. Part 2 is on the voyage charter, and Part 3 on the time charterparty. Part 4 considers the very different issues that arise from bills of lading (and other contracts for the carriage of goods by sea).

This is intended to be a book for learning as well as reference. At the end of each chapter are self-assessment questions, and ideas about the issues raised.

1.2 Introduction: distinction between charterparties and bills of lading

Traditionally, there are two main instruments used in the carriage of goods by sea, the charterparty and the bill of lading. Though both are absolutely central to any study of this subject, they are fundamentally different types of instrument. In very general terms, charterparties relate to the ship and bills of lading to the cargo.

A charterparty is (nearly always) a contract for the use of an entire vessel. It is used by shippers of large quantities of cargo, and by people who intend to trade as carriers in their own right but without purchasing a ship, either by sub-chartering, or by carrying merchants’ cargo for payment of freight. A charterparty might also be used by a purchaser or seller of cargo, who needs a particular type of vessel. A charterparty provides the charterer with a ship and (unless by demise) the services of the crew. Though it does not relate (directly at least) to cargo, both time and voyage charters usually envisage the carriage of goods, and are therefore, I suggest, properly categorised as contracts for the carriage of goods by sea. By contrast, a demise charterparty, which is in effect a chattel lease of a ship, and has no service element, is not.¹

A bill of lading relates to goods shipped (or at least received for shipment).² It may be issued to a shipper of a single item, or a small amount of cargo insufficient to fill the ship, in which case the bill of lading will relate to that specific consignment. But charterers of vessels who ship their own cargo will usually also take bills of lading for the cargo they load, even if the cargo fills the ship, to enable them to resell on the voyage. (Bulk dry-cargoes are often split among several buyers, whereas tanker cargoes as usually traded in their entirety.) Consequently, the goods described in a bill of lading may or may not fill the vessel. A bill of lading contract is a contract for the carriage of goods, however, and is not a contract for the use of a ship.

More interestingly from a legal viewpoint, a charterparty is itself a contract, not merely evidence of a contract, whereas (at least in the hands of a shipper) a bill of lading usually merely evidences a contract. This is an important distinction, which we examine in chapter 15.³ A charterer may well also hold a bill of lading, either as shipper or subsequent holder, and there can be an issue if charterparty and bill of lading terms differ.

A charterparty is a contract of carriage between shipowner and charterer⁴ and, unlike a bill of lading, it is not a transferable document. It does not directly create contractual relationships with anyone other than shipowner and charterer. There will often be sub-charterparties, but these will be separate contracts in their own right. Conversely, a bill of lading can transfer contractual rights and liabilities to subsequent holders as it is itself transferred.

A bill of lading, then, is evidence of a contract for the carriage of goods, but it is also much more than that. It is the document that enables the goods to be traded at sea, which can transfer rights of property and possession, and contractual rights and liabilities as against carriers. Unlike a charterparty its terms are usually regulated to some extent by law. It is fundamentally a different beast from a charterparty. It is described in Part 4 of the book, beginning at chapter 14.

1.3 Types of charterparty

There are three main types of charterparty, voyage, time and demise. An important point, though, is that charterparties are contracts whose terms are almost entirely unregulated. Almost all aspects of charterparties can be altered by the parties, if so desired. This is, therefore, the starting point, but the evolution of charterparties was driven by the trading parties. It was not (and is not) dictated by the law. So nothing here is set in stone.

Time and demise varieties are both period charters, the demise form being the older.⁵ The demise charter is a demise of the ship alone, and there is no service element. (It is also often described as a bareboat charterparty.) The charterer provides his own crew, and uses the vessel as he wishes (subject to trading limits in the charterparty). Demise charterparties are rarely used these days, apart from for pleasure craft (where if a holidaymaker is qualified as a yacht skipper,⁶ he or she can charter a yacht, providing his or her own crew), and for ship finance. In the latter case the financier is the shipowner, the demise form being used because the financier does not wish to be involved in the day-to-day operation of the vessel. Finance charterparties are often for lengthy terms, with a purchase option on the payment of the last month’s hire – in effect this is a hire-purchase agreement.⁷

The demise charter is really a contract for the hire of a ship, rather than a contract for the carriage of goods by sea. We will therefore not devote much space to demise charters, but you need to be aware of them, because there is a demise charterparty in the background in some of the cases we study.⁸ There are similarities between time and demise charters, the time charterparty deriving many of its terms from the earlier demise form, and there are demise charterparty cases that are also authorities for the time form.⁹ We will also examine some of the differences between demise and time charters, drawing a contrast in order the better to understand the time charter.¹⁰

The overwhelming majority of charterparty coverage in this book, however, is to the time and the voyage charterparty. As its name implies, a voyage charter is usually taken for the duration of a voyage, and a time charter for a period of time, generally sufficient for several voyages to be undertaken. However, this is an over-simplification. A voyage charter may also be taken for a period (for example, two years) of consecutive voyages,¹¹ and a time charter can be used for a single trip.¹² So this is not the basis of the distinction between the two types.

The fundamental difference between the two is as to the risk of delay. In a voyage charter, it is the shipowner who bears the risk of delay. In a time charter, it is the charterer.¹³

Under a voyage charterparty, the shipowner is paid freight, the calculation of which does not depend on the length of the voyage. If there is delay on the voyage, or in the loading and discharge, then (as a starting point – subject to any contrary terms) it is the shipowner who bears that risk. In a time charter by contrast, hire is payable per day or month, whatever use is made of the vessel, and so the cost of any delay is borne by the charterer.

Another (related) difference between the two types is that, with a voyage charter, the charterer can more easily calculate his costs, since the freight paid is (subject to any contrary terms) unaffected by chance events causing delay. Conversely, for a time charterparty, it is the shipowner who can more easily calculate his costs, since the hire paid is (again, subject to contrary terms) likewise unaffected by events causing delay,¹⁴ and because the duration of the charterparty is also approximately fixed.¹⁵

1.4 More on voyage charter terms

So, under a voyage charterparty (which is an older variety than its time counterpart), freight is paid by the charterer for the carriage of his goods for a voyage. The amount of freight payable can be agreed as a lump sum, but more usually it depends on the quantity of cargo carried. It does not depend on the time the voyage takes.

Thus it is th...