Seaworthiness and Duty To Maintain
Seaworthiness and Duty To Maintain
Seaworthiness and Duty To Maintain
of affreightment
In addition to the express clauses agreed by the parties, every contract of affreightment is
negotiated against a background of custom and commercial usage from which a series of
obligations are implied which are automatically incorporated into the contract in the absence
of agreement to the contrary. Since such obligations are derived from a common source in
the law merchant, a similar result follows at common law irrespective of whether the terms
of the contract are enshrined in a charterparty or evidenced by a bill of lading. There is, how-
ever, one important proviso. In contracts of carriage which are governed by the Hague or
Hague/Visby Rules the scope and application of some of these implied obligations have been
modified while the ability of the parties to exclude their operation by mutual agreement has
been considerably restricted. In the following pages each of these implied obligations will
be considered separately and a final section will be devoted to the effect of frustration on a
contract of affreightment.
1
Field J in Kopitoff v Wilson (1876) 1 QBD 377 at p 380.
2
Lord Blackburn in Steel v State Line Steamship Co (1877) 3 App Cas 72 at p 86.
9
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
one which is reasonably fit for the purpose intended. The standard required ‘is not an
accident-free ship, nor an obligation to provide ship or gear which might withstand all con-
ceivable hazards. In the last analysis the obligation, although absolute, means nothing more
or less than the duty to furnish a ship and equipment reasonably suitable for the intended
use or service.’3 The test would appear to be objective in that ‘the vessel must have that degree
of fitness which an ordinary careful and prudent owner would require his vessel to have at
the commencement of her voyage having regard to all the possible circumstances of it’.4 The
standard required will therefore be variable depending on the nature of the voyage, the type
of cargo to be carried and the likely dangers to be encountered en route. This common law
obligation can, however, be excluded by an appropriate clause in the contract of affreight-
ment, although the courts are inclined to treat such clauses in the same way as all exceptions
and apply a restrictive interpretation to them. Thus in Nelson Line v Nelson5 a clause exempt-
ing the shipowner from liability for any damage to goods ‘which is capable of being covered
by insurance’ was held not to be effective in excluding liability for damage to cargo resulting
from unseaworthiness.6 To be effective any such clause must be expressed in clear and unam-
biguous language. A rare example of a clause satisfying this test is to be found in The Irbenskiy
Proliv7 where a bill of lading contained a provision excluding liability for loss or damage of
any kind ‘arising or resulting from: unseaworthiness (whether or not due diligence shall have
been exercised by the carrier, his servants or agents or others to make the vessel seaworthy).’
The trial judge, in holding the clause sufficiently widely drafted to exclude all liability for
unseaworthiness, rejected the claimant’s argument that it was repugnant to the main object
of the contract by reducing the contract to a mere declaration of intent.8
Where the contract of affreightment is governed by the Hague or Hague/Visby Rules, the
absolute obligation at common law is replaced by a duty to exercise due diligence to make
the ship seaworthy.9 Accordingly, while the carrier will no longer be strictly liable in the
absence of any fault, he will be liable not only for his own negligence but also for the negli-
gence of any party, even including an independent contractor, to whom he has delegated
responsibility for making the vessel seaworthy.10 This reduction in liability is, however,
accompanied by a provision invalidating any attempt by the carrier further to reduce or
exclude his responsibility under the rules to provide a seaworthy ship.11
Many modern standard charter forms have now adopted the Hague Rules formula with
regard to the requirement of seaworthiness. Thus the NYPE charter, by the use of a ‘clause
paramount’, expressly incorporates into the charterparty the provisions of the US Carriage of
Goods by Sea Act 1936, while the Baltime form excludes the liability of the shipowner for loss
or damage to cargo unless such ‘loss has been caused by want of due diligence on the part
of the Owners or their Manager in making the vessel seaworthy and fitted for the voyage’.12
3
District Judge Kilkenny in President of India v West Coast Steamship Co [1963] 2 Lloyd’s Rep 278 at p 281.
4
Channell J in McFadden v Blue Star Line [1905] 1 KB 697 at p 706 quoting with approval a passage from an
early edition of Carver on Carriage by Sea.
5
[1908] AC 16.
6
See also Ingram v Services Maritime [1914] 1 KB 541; The Rossetti [1972] 2 Lloyd’s Rep 116.
7
[2005] 1 Lloyd’s Rep 383.
8
The bill of lading in this case was not subject to either the Hague or Hague/Visby Rules.
9
See Art III rule 1.
10
The Muncaster Castle [1961] AC 807. For further treatment, see infra at pp 188–90.
11
See Art III rule 8.
12
See clause 13. See The Gundulic [1981] 2 Lloyd’s Rep 418.
10
2.1 THE UNDERTAKING AS TO SEAWORTHINESS
In both of these cases it would appear that the common law absolute obligation to provide
a seaworthy ship has been replaced by a duty to exercise due diligence.
13
The position is identical under the Hague and Hague/Visby Rules, see Art III rule 1. The US view is expressed
in the following terms in The Framlington Court [1934] AMC 272 at p 277: ‘Seaworthiness is a relative term
depending for its application upon the type of vessel and the character of the voyage. The general rule is
that the ship must be staunch and strong and well equipped for the intended voyage. And she must also be
provided with a crew, adequate in number and competent for the voyage with reference to its length and other
particulars, and have a competent and skilled master of sound judgment and discretion.’
14
Hong Kong Fir Shipping Co v Kawasaki [1962] 2 QB 26; The Amstelslot [1963] 2 Lloyd’s Rep 223.
15
Paterson Steamships Ltd v Robin Hood Mills (1937) 58 LlLR 33.
16
Kish v Taylor [1912] AC 604; The Friso [1980] 1 Lloyd’s Rep 469.
17
The Makedonia [1962] 1 Lloyd’s Rep 316; Hong Kong Fir Shipping Co v Kawasaki [1962] 2 QB 26; The Farrandoc
[1967] 2 Lloyd’s Rep 276; Heinrich C Horn v Cia de Navegacion Fruco [1969] AMC 1495.
18
McIver v Tate Steamers [1903] 1 KB 362; Northumbrian Shipping Co v Timm [1939] AC 397.
19
The Madeleine [1967] 2 Lloyd’s Rep 224. See also Golden Fleece Maritime Inc v St Shipping & Transport Corp
[2008] 2 Lloyd’s Rep 119.
20
See The Derby [1985] 2 Lloyd’s Rep 325, where a vessel was delayed in port for 21 days by a strike of steve-
dores resulting from failure of the vessel to comply with manning levels, rates of pay and conditions of
employment of the crew as recommended by the International Transport Workers Federation. See also The
Silver Constellation [2008] 2 Lloyd’s Rep 440.
21
Cf. Stanton v Richardson (1875) LR 9 CP 390.
11
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
voyage, the shipowner is liable because he is an insurer, except in the event of the damage
happening from some cause in respect of which he is protected by the exceptions . . .’22 It
follows that, in the case of a consecutive voyage charter, the obligation arises at the beginning
of each voyage undertaken in performance of the charter.23 Again, in the case where a voyage
charter is divided into stages by agreement between the parties, there will be a duty to make
the vessel seaworthy at the commencement of each stage of the voyage.24 The position is,
however, different in respect of the time charter where the obligation attaches only at the time
of delivery of the vessel under the charterparty. In this case the initial seaworthiness under-
taking is normally supplemented by some form of maintenance clause under which the
shipowner is required to ‘keep the vessel in a thoroughly efficient state in hull, machinery and
equipment for and during the service’.25 But this express undertaking to maintain the vessel
throughout the charter is entirely distinct from any obligation as to seaworthiness.
The second aspect of the common law undertaking as to seaworthiness relates to the
cargoworthiness of the vessel. The shipowner is under an obligation to ensure that his ship is
in a fit state to receive the contractual cargo. This requirement would not be satisfied where
the vessel’s holds needed fumigating or cleaning before being in a fit state to receive cargo,26
where frozen meat was to be shipped and there was a defect in the vessel’s refrigeration
plant,27 or where the pumps were inadequate to drain surplus water from the cargo.28 In each
case the implied undertaking as to cargoworthiness is operative as from the commencement
of loading. ‘The warranty is that, at the time the goods are put on board, she is fit to receive
them and encounter the ordinary perils that are likely to arise during the loading stage; but
. . . there is no continuing warranty after the goods are once on board that the ship shall
continue fit to hold the goods during that stage and until she is ready to go to sea, notwith-
standing any accident that may happen to her in the meantime.’29 So in McFadden v Blue
Star Line,30 after cargo had been safely loaded, the ship’s engineer opened a sluice door on a
watertight bulkhead and on closing it, failed to secure it properly with the result that water
percolated through and damaged the claimant’s cargo. It was held that, since the defective
closure of the sluice door occurred after the cargo had been loaded, it did not constitute a
breach of the cargoworthiness undertaking.
It has already been noted that many modern charter forms expressly include the provi-
sions of either the Hague or Hague/Visby Rules and this practice may affect the operation
of the implied seaworthiness obligation. Thus in the case of Adamastos Shipping Co v Anglo-
Saxon Petroleum31 the voyage charter involved included a clause paramount incorporating the
22
Channell J in McFadden v Blue Star Line [1905] 1 KB 697 at p 703.
23
See Adamastos Shipping v Anglo-Saxon Petroleum [1958] 1 Lloyd’s Rep 73.
24
The Vortigern [1899] P 140.
25
NYPE 93 form, clause 6.
26
Tattersall v National Steamship Co (1884) 12 QBD 297; The Tres Flores [1973] 2 Lloyd’s Rep 247.
27
Cargo per Maori King v Hughes [1895] 2 QB 550.
28
Stanton v Richardson (1874) 9 CP 390.
29
Channell J in McFadden v Blue Star Line [1905] 1 KB at p 704. Cf. the position under the Hague and Hague/
Visby Rules where the Privy Council has held that the obligation to exercise due diligence to provide a sea-
worthy ship under Art III rule 1 covers ‘the period from at least the beginning of the loading until the vessel
starts on her voyage’. Maxine Footwear Co Ltd v Canadian Government Merchant Marine [1959] AC 589 at p 603.
See infra at p 187.
30
[1905] 1 KB 697.
31
[1958] 1 Lloyd’s Rep 73.
12
2.1 THE UNDERTAKING AS TO SEAWORTHINESS
provisions of the US Carriage of Goods by Sea Act 1936 which were treated by the court as if
written verbatim into the charter. In these circumstances a majority of the House of Lords was
prepared to give full effect to the provisions of the Hague Rules in respect of all voyages under
the charter irrespective of whether they were to or from ports in the United States, or whether
they were in ballast or with cargo. Some writers have been prepared to go further by suggest-
ing that, as the seaworthiness provisions of the Hague Rules32 are applicable ‘before and at
the beginning of the voyage’, the obligation to exercise due diligence to provide a seaworthy
ship would arise in respect of each voyage under the time charter.33 A note of caution has,
however, been sounded by Mustill J in The Hermosa34 where he pointed out that ‘there are in
most time charters express terms as regards initial seaworthiness and subsequent maintenance
which are not easily reconciled with the scheme of the Hague Rules, which create an obliga-
tion as to due diligence attaching voyage by voyage. It cannot be taken for granted that the
interpretation adopted in [the Adamastos case] in relation to voyage charters applies in all
respects to time charters incorporating the Hague Rules.’
32
See Art III rule 1.
33
See Wilford, 34.14. Cf. obligation in context of a contract of affreightment: The Kriti Rex [1996] 2 Lloyd’s
Rep 171.
34
[1980] 1 Lloyd’s Rep 638 at p 647.
35
See The Europa [1908] P 84.
36
[1955] 2 Lloyd’s Rep 218.
37
The Thorsa [1916] P 257; Elder Dempster v Paterson, Zochonis & Co [1924] AC 522.
13
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
seaworthy vessel was classified as an innominate or intermediate term by the Court of Appeal
in Hong Kong Fir Shipping Co v Kawasaki.38 In refusing to categorise the term once and for all
as either a condition or a warranty, Diplock LJ pointed out that such an undertaking ‘can be
broken by the presence of trivial defects easily and rapidly remediable as well as by defects
which must inevitably result in a total loss of the vessel’.39 As the results of a breach could be
so variable it would be as unreasonable to permit a party to repudiate a charter because a few
rivets were missing as it would be to prevent him from doing so in the event of the defects
in the vessel being irremediable.40 Thus, while objectively a compass defect was a serious
matter, it would be illogical to permit the rejection of a 24-month charterparty if the defect
could be repaired by a compass adjuster within a matter of hours. While damages would
always be available for breach of the undertaking, a charterer should only be allowed to
repudiate his obligations under the charterparty where the breach deprived him ‘of substan-
tially the whole benefit which it was intended that he should obtain from the contract’.41
Everything would depend on the effects of the breach in each individual case and, in the view
of Diplock LJ, the test as to whether a party had been deprived of substantially the whole
benefit of the contract should be the same whether it resulted from breach of contract by the
charterer or from the operation of the doctrine of frustration.42
What remedies are then available to the charterer in the event of a breach of this inter-
mediate obligation by the shipowner? A distinction has to be drawn between the situation
where the breach is discovered before performance of the charterparty has commenced and
the position where the breach only comes to light after the vessel has sailed. In the former
case the charterer will be able to treat his obligations under the contract as discharged if the
breach deprives him of substantially the whole benefit of the contract and it is a breach which
cannot be rectified within such time as would prevent the object of the contract from being
frustrated. Thus in the case of Stanton v Richardson,43 where the pumping equipment on the
chartered vessel was inadequate to deal with the surplus water from a cargo of wet sugar, the
charterer was held entitled to repudiate the contract when it was established that new pumps
could not be installed within a reasonable time. On the other hand, if the effects of the breach
are less severe, the charterer will be restricted to his remedy in damages. In this respect it must
be remembered that the permissible time allowance in which to remedy the defect will
vary as between a voyage and a time charter. While a relatively brief delay may be sufficient
to frustrate the object of the former, the Court of Appeal held in the Hong Kong Fir case that
the absence of a vessel for five months undergoing repairs was insufficient to frustrate the
objects of a 24-month time charterparty.
The provisions of the time charter itself may, however, provide the charterer with an oppor-
tunity for escape if the shipowner cannot make good the defect before the cancelling date,
even though the breach would not otherwise have entitled the charterer to repudiate. Thus
under clause 22 of the Baltime form the charterer is entitled to cancel the charterparty unless
the vessel is delivered to him by a specified date, ‘she being in every way fitted for ordinary
38
[1962] 2 QB 26. The US courts take a similar view: see Aaby v States Marine Corp (The Tento) [1950] AMC 947.
39
[1962] 2 QB at p 71.
40
See Bunge Corp v Tradax Export [1981] 1 WLR 711.
41
[1962] 2 QB at p 69.
42
For an example of a court applying an identical test to a situation which involved both a breach of the
seaworthiness undertaking and an alleged frustrating event, see The Hermosa [1982] 1 Lloyd’s Rep 570.
43
(1875) LR 9 CP 390. See also Snia v Susuki (1924) 18 LlLR 333.
14
2.2 OBLIGATION OF REASONABLE DISPATCH
cargo service’. The charterer in The Madeleine44 was able to take advantage of this clause when
the shipowner was unable to produce the required deratisation certificate by the cancelling
date. In the words of Roskill J, ‘there was here an express warranty of seaworthiness and unless
the ship was timeously delivered in a seaworthy condition, including the necessary certificate
from the port health authority, the charterers had the right to cancel’.45 Such right to cancel is
not, however, dependent on any breach of obligation by the shipowners.
Where the unseaworthy state of the vessel is not discovered until after it has set sail, mere
acceptance of the vessel does not amount to a waiver of the charterer’s right to damages.46 Nor
does it necessarily amount to a waiver of the right to repudiate the charter provided that
the breach, when discovered, is sufficiently fundamental. This is particularly true of the time
charter47 though, in the case of the voyage charter, if the breach is not apparent before the
vessel sails, for all practical purposes the charterer may have little opportunity to discover it
before the vessel arrives at its destination and performance of the contract is complete.
44
[1967] 2 Lloyd’s Rep 224.
45
Ibid at p 241. For a more detailed account of the effects of a cancellation clause, see infra at pp 66–7.
46
The Democritos [1975] 1 Lloyd’s Rep 386 at p 397.
47
Cf. Hong Kong Fir Shipping Co v Kawasaki [1962] 2 QB 26.
48
See Baltime, clause 9; NYPE 46, clause 8.
49
Lord Watson in Hick v Raymond [1893] AC 22 at p 32. For a modern example in the context of a contract of
affreightment, see The Kriti Rex [1996] 2 Lloyd’s Rep 171.
15
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
injured party will always be able to recover compensation in the form of damages for any
unreasonable delay, he will only be able to repudiate the contract if the delay is so prolonged
as to frustrate its object. In Freeman v Taylor50 a vessel had been chartered to take her cargo to
Cape Town and, after discharging it, to proceed with all convenient speed to Bombay in order
to load the charterer’s cargo of cotton. After discharging at the Cape, however, the master
for his own account took on board a cargo of mules and cattle for carriage to Mauritius en
route to Bombay. As the result of this diversion, the vessel was some six or seven weeks late
in arriving in Bombay and the court held the delay sufficiently long to frustrate the object of
the charter. In cases where the delay is not so prolonged, however, the injured party will be
restricted to a claim for damages.51 Even such a claim may be barred if the particular delay is
covered by an excepted peril.52
The owner of a vessel, whether operating a liner service or under charter, impliedly under-
takes that his vessel, while performing its obligations under the contract of carriage, will not
deviate from the contract voyage. Deviation has been defined as ‘an intentional and unrea-
sonable change in the geographic route of the voyage as contracted’.53 In order to determine
whether such a deviation has occurred it is first necessary to ascertain the precise route envis-
aged by the contract of affreightment. A few standard charter forms make express provision
for the route to be followed54 but, in the absence of such provision, the presumption is that
the proper route is the direct geographical route between the ports of loading and discharge.
This presumption can, however, be rebutted by the shipowner adducing evidence as to the
customary route in the trade, or even as to the route previously followed by the particular
shipping line involved.55 So in Reardon Smith Line v Black Sea and Baltic General Insurance56 a
vessel chartered to proceed from a Black Sea port ‘to Sparrow Point’ in the United States,
departed from the direct geographical route to bunker in Constanza, where cheap supplies
of oil fuel were available. On proof that vessels engaged in that trade invariably put into
Constanza and that 25 per cent of ocean-going oil-burning vessels passing through the
Bosphorus followed a similar practice, the House of Lords held that there had been no devi-
ation from the normal route. The relevant law was neatly summarised by Lord Porter:
‘It is the duty of a ship, at any rate when sailing upon an ocean voyage from one port to another,
to take the usual route between those two ports. If no evidence be given, that route is presumed
to be the direct geographical route but it may be modified in many cases, for navigational or
50
(1831) 8 Bing 124.
51
MacAndrew v Chapple (1866) LR 1 CP 643.
52
Barker v MacAndrew (1865) 18 CB (NS) 759.
53
Tetley p 1812. While English courts have restricted the concept of deviation to geographic deviations, US
courts have extended it to other departures from the terms of the contract which materially increase the risks
to cargo such as unauthorised deck carriage (Jones v Flying Clipper (1954) 116 Fed Supp 386) or over-carriage
(The Silver Cypress [1944] AMC 895).
54
For example, Austral, clause 2; Austwheat, clause 2.
55
Frenkel v MacAndrews [1929] AC 545.
56
[1939] AC 562.
16
2.3 OBLIGATION NOT TO DEVIATE FROM THE AGREED ROUTE
other reasons, and evidence may always be given to show what the usual route is, unless a
specific route be prescribed by the charterparty or bill of lading.’57
To constitute an unjustifiable deviation the departure from the contractual voyage must be
the result of a deliberate act on the part of the owner or the ship’s officers. Consequently,
there will be no breach of this implied undertaking if the vessel is blown off course during a
storm, or is set on a wrong course as the result of the illness of its navigation officer or reliance
on a defective compass.58
1. To save human life or to communicate with a vessel in distress in case lives may be in
danger.
‘Deviation for the purpose of saving life is protected and involves neither forfeiture of insur-
ance nor liability to the goods’ owner in respect of loss which would otherwise be within the
exceptions of “perils of the seas”. And, as a necessary consequence of the foregoing, devi-
ation for the purposes of communicating with a ship in distress is allowable, inasmuch as the
state of the vessel in distress may involve danger to life. On the other hand, deviation for the
sole purpose of saving property is not thus privileged, but entails all the usual consequences
of deviation.’59
In the case from which this quotation is drawn, the vessel, having deviated to answer a
distress call, could easily have taken off the crew from the stricken ship, but decided to take
the latter in tow in order to earn salvage. While the vessel was engaged in this operation it
was driven ashore in a gale with the loss of her cargo. The deviation in order to salve the
ship was held not to be justified and the shipowners were held liable for loss of cargo
despite the fact that such loss was covered by the exception of perils of the sea in the
charterparty. The position would have been otherwise had the weather been such that it
had been necessary to take the disabled ship in tow in order to save the lives of the crew.
2. To avoid danger to the ship or cargo. The master is under an obligation to exercise
reasonable care and skill in ensuring the success of the joint enterprise and accordingly is
entitled to deviate from the proper course in order to ensure the safety of the vessel and
its cargo. Indeed, in the majority of cases, he will be under a duty to take such action.60
The risks may arise from natural causes such as storms, ice or fog, or they may involve
political factors such as the outbreak of war or the fear of capture by hostile forces.61 In
either case, however, the danger must be of a reasonably permanent nature, since a master
57
Ibid at p 584.
58
Rio Tinto Co v Seed Shipping Co (1926) 24 LlLR 316.
59
Cockburn CJ in Scaramanga v Stamp (1880) 5 CPD 295 at p 304.
60
See Notara v Henderson (1870) LR 5 QB 346.
61
The Teutonia (1872) LR 4 PC 171.
17
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
‘It is the presence of the peril and not its cause which determines the character of the
deviation, or must the master of the ship be left in this dilemma that, whenever, by his own
culpable act or a breach of contract by his owner, he finds his ship in a perilous position,
he must continue on his voyage at all hazards, or only seek safety under the penalty of
forfeiting the contract of affreightment?’
In such a dilemma the master must clearly be given the benefit of the doubt, since:
‘Nothing could, it would appear to me, tend more to increase the dangers to which life and
property are exposed at sea than to hold that the law of England obliged the master of a
merchant ship to choose between such alternatives.’65
It would appear that a deviation may be justified although the risk to be avoided affects
only the ship and not the cargo.66 On the other hand, in the reverse situation, the position
is far from clear. There is authority for suggesting that where continuation of the voyage
would result in substantial damage to the cargo, the master might be under a duty to
deviate to protect the interests of the cargo owners,67 but it is doubtful whether such an
obligation arises where the apprehended damage is slight or only affects part of the cargo.
While the master is expected to take into account the interests of both ship and cargo, ‘I
am not prepared to hold that the instant it becomes clear that by going on some mischief
62
Hand v Baynes (1839) 4 Wharton 204.
63
Phelps, James & Co v Hill [1891] 1 QB 605.
64
[1912] AC 604. US courts have held deviation not to be justified where the shipowner was aware of the unsea-
worthy condition of the vessel before it sailed: The Louise [1945] AMC 363.
65
[1912] AC at pp 618–19. Compensation in the form of damages would of course be available for any loss
(including delay) resulting from the initial unseaworthiness.
66
The Teutonia (1872) LR 4 PC 171.
67
The Rona (No 2) (1884) 51 LT 28.
18
2.3 OBLIGATION NOT TO DEVIATE FROM THE AGREED ROUTE
will be done to some portion of the cargo that it becomes the duty of the captain to go
back, and perhaps put all concerned to a very enormous expense . . .’68 Presumably the
decision as to whether a deviation is justified in such circumstances will depend upon a
comparison between the gravity of the danger and the inconvenience and expense of tak-
ing avoiding action.
3. Where the deviation is made necessary by some default on the part of the charterer.
Thus it may be justifiable to put into port to discharge dangerous cargo which has been
loaded by the charterer without the knowledge of the shipowner. Again, a master may be
permitted to deviate to obtain more cargo in a situation where the charterer has breached
his contractual obligation to load a full cargo.69
‘The vessel has liberty to call at any port or ports in any order, for any purpose, to sail without
pilots, to tow and/or assist vessels in all situations, and also to deviate for the purpose of saving
life and/or property.’
Clauses in other charters specify a variety of reasons for which deviation is permissible,
including for bunkering purposes,72 for adjusting compasses or radio equipment,73 or for
landing and embarking crew members.74 If such clauses were applied literally, they would
have far-reaching effects, but, as they are inserted predominantly for the shipowner’s benefit,
the courts apply the principle of contra proferentem and where possible give them an extremely
restricted interpretation. Thus in the case of Glynn v Margetson75 a cargo of oranges was loaded
in Malaga on a vessel bound for Liverpool on a bill of lading which gave the owner ‘liberty
to proceed to and stay at any port or ports in any rotation’. Despite the breadth of this clause,
68
Sir John Hannen in The Rona (1884) 51 LT 28 at p 30. See also Cockburn CJ in Notara v Henderson (1870)
LR 5 QB 346 at p 354.
69
Wallems v Muller [1927] 2 KB 99. Problems would, however, arise in this situation if cargo owned by third
parties was already on board.
70
The Hague Rules are identical on this point.
71
See infra, pp 208–9.
72
Polcoalvoy, clause 26; Cf. Shellvoy 6, clause 31 requiring prior permission of charterers.
73
Grainvoy, clause 20.
74
Polcoalvoy, clause 26.
75
[1893] AC 351.
19
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
it was held not to protect the shipowner when the vessel called at ports not on the geo-
graphical route to Liverpool with the result that the oranges arrived at their destination in a
damaged state. In a case involving a similar clause, Lord Esher expressed the view that such
a term ‘has always been interpreted to mean that the ship may call at such ports as would
naturally and usually be ports of call on the voyage named. If the stipulation were only that
she might call at any ports, the invariable construction has been that she would only be
entitled to call at such ports in the geographical order; and therefore the words “in any order”
are frequently added; but in any case it appears to me that the ports must be ports substan-
tially on the course of the voyage.’76
Such principles of interpretation are ultimately at the mercy of a skilled draftsman and can
be defeated by the use of appropriate words. Thus clause 13 of the Nubaltwood form gives
the shipowner a liberty to call ‘at any port or ports whatsoever in any order in or out of the
route or in a contrary direction to or beyond the port of destination . . .’ Clauses of this type
have been given full effect by the courts which have described them as conferring on the ship
a liberty to go where she pleased, subject only to the restriction that the essential purpose of
the voyage must not be frustrated.77
A further problem arises in the not infrequent case where the standard charterparty form
expressly incorporates the Hague or Hague/Visby Rules.78 As these regimes prescribe the
minimum protection for the cargo owner which is incapable of being reduced by agreement
between the parties,79 to what extent are such liberty clauses affected by the requirement in
Art IV rule 4 that a deviation, other than to save life or property, has to be reasonable? The
US courts have taken a strict view in such circumstances, holding that liberty clauses in the
charter only take effect to the extent that the deviation is reasonable.80 English courts, on
the other hand, regard the express liberty clause as defining the scope of the contractual
voyage rather than as a provision seeking to excuse the shipowner should he depart from it.
On this view there is no conflict between such a clause and Art IV rule 4 of the Hague/Visby
Rules. In the words of Hodson LJ, ‘the object of the Rules is to define not the scope of the con-
tract of service, but the terms on which that service is to be performed’.81 Presumably the same
result would follow where a bill of lading, issued under a charterparty, included a provision
expressly incorporating a liberty clause in the charter.
76
Leduc v Ward (1888) QBD 475 at p 482.
77
Branson J in Connolly Shaw v Nordenfjeldske SS Co (1934) 50 TLR 418. See also Hadji Ali Akbar v Anglo-Arabian
SS Co (1906) 11 Com Cas 219; Frenkel v MacAndrews [1929] AC 545.
78
For example, Polcoalvoy, clause 28; Nuvoy 84, clause 43.
79
Article III rule 8.
80
The Nancy Lykes 706 F2d 80 (1983).
81
Renton v Palmyra Trading Corp [1956] 1 QB 462 at p 510. (Hodson LJ was referring to an identical provision
in the Hague Rules.) See also Foreman & Ellams v Federal SN Co [1928] 2 KB 424; Stag Line v Foscolo Mango
[1932] AC 328.
20
2.3 OBLIGATION NOT TO DEVIATE FROM THE AGREED ROUTE
the other party to the contract is entitled to treat it as going to the root of the contract, and to
declare himself as no longer bound by any of the contract terms.’82
A fundamental breach was traditionally distinguished from a condition by the fact that, on a
breach of the former, the innocent party was entitled to repudiate his obligations under the
contract and sue for damages at large irrespective of any exceptions or limitation of liability
provisions in the contract of carriage.
The importance attached to the breach stems from the fact that, in earlier marine insur-
ance practice in Great Britain and the United States, cover under a cargo insurance policy was
lost in the event of deviation. The strict liability imposed on the shipowner was therefore
designed to afford protection to the cargo owner. Under present insurance practice, however,
such a policy will normally include a ‘held covered’ clause under which cover can be extended
in the event of deviation in return for the payment of an additional premium. This change in
procedure, together with the practice of incorporating widely drafted liberty clauses into the
contract of carriage, has greatly reduced the practical importance of the deviation concept.
There is now some doubt as to whether the strict view of the concept of deviation, oper-
ating as a rule of law, can survive the combined effect of the strictures of members of the
House of Lords in the two cases of Suisse Atlantique83 and Photo Production v Securicor.84 In their
opinion, the doctrine of fundamental breach, conceived as a substantive rule of law, had been
a judicial aberration initially designed to protect the consumer against the effects of exclusion
clauses. Such protection is no longer required after the Unfair Contract Terms Act 1977. So
far as the commercial world is concerned, a reversion to a strict application of the construc-
tion approach would leave them free to negotiate their own contracts and allocate risks as
they see fit.
What effect will these judgments have on the traditional approach to the concept of
deviation?85 On the one hand, Lord Wilberforce in Photo Production v Securicor extended a
possible lifeline to retaining the concept of deviation as a rule of law when he remarked that
‘it may be preferable that [the deviation cases] should be considered as a body of authority
sui generis with special rules derived from historical and commercial reasons’.86 The alterna-
tive view would be that deviation, as one facet of the wider doctrine of fundamental breach,
survives not as a rule of law, but as a sub-species of construction. This was the approach
adopted by the Court of Appeal in The Antares,87 where Lloyd LJ was of the opinion that devi-
ation cases ‘should now be assimilated into the ordinary law of contract’. Such an approach
would require the courts to take into consideration the entire terms of the contract, includ-
ing both exceptions and liberty clauses, with a view to discovering whether, on their true
82
Lord Atkin in Hain SS Co v Tate & Lyle (1936) 41 Com Cas 350 at p 354. See also Carver 9.043 ff; Gaskell
6.51 ff.
83
[1967] 1 AC 361.
84
[1980] AC 827. The strict view was reaffirmed in the United States in The Nancy Lykes 706 F 2d 80 (1983). See
also Nemeth v General Steamship Corp [1983] AMC 885. Judge LJ in The Kapitan Petko Voivoda [2003] 2 Lloyd’s
Rep 1 at p 16 refers to it as a ‘moribund if not defunct principle’.
85
In this respect it is important to note that contracts of carriage by sea will not normally be subject to the
provisions of the Unfair Contract Terms Act (see Schedule 1) and so their terms will rarely be required to
conform to the standard of reasonableness imposed by that statute.
86
[1980] AC 827 at p 845. An approach still left open by Longmore LJ in The Kapitan Petko Voivoda [2003]
2 Lloyd’s Rep 1, at p 10.
87
[1987] 1 Lloyd’s Rep 424 at p 430. See Mills, C P, ‘The Future of Deviation in the Law of Carriage of Goods’
[1983] LMCQ 587 at p 596.
21
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
construction, it was clear that the parties intended them to apply to the new situation, i.e.
the substituted voyage.88 With such formidable weapons at the disposal of the court it is
doubtful whether there is any need to retain the rule of law approach to the problem raised
by deviation. In the words of a modern writer, ‘All the common law methods of control are
retained and these are strengthened by the requirement of reasonableness. The rules of con-
struction still weigh very heavily against the proferens. A competent judge should find little
difficulty in ousting an unwelcome exemption clause.’89
What then is the effect of deviation on the contract of carriage? The traditional view is
that, in the event of an unjustified deviation, however slight, the charterer or cargo owner is
permitted an election. He is entitled either to treat the breach as a repudiation of the contract
of carriage or to waive the breach with the result that he will be restricted to an action for
damages. A similar approach would presumably be adopted by a court which found that, as
a matter of construction, the terms of the contract of carriage were not intended to be applic-
able to the substituted voyage. The following account of the traditional view must, however,
be treated with some reserve until the full implications of the decision in Photo Production v
Securicor become evident.
88
See Kerr LJ in George Mitchell v Finney Lock Seeds [1983] 1 All ER 108 at p 123. See also the New Zealand case
of The Pembroke [1995] 2 Lloyd’s Rep 290.
89
Mills [1983] LMCQ at p 595. See also Gaskell 6.73 ff.
90
[1916] 2 KB 783.
91
See Internationale Guano v MacAndrew [1909] 2 KB 360.
92
Greer LJ in Foscolo Mango v Stag Line [1931] 2 KB 48 at p 69.
22
2.3 OBLIGATION NOT TO DEVIATE FROM THE AGREED ROUTE
regarded the provisions of the Hague Rules, when applicable, as little more than compulsory
terms of the contract of carriage. Doubts have, however, been expressed as to whether devi-
ation would deprive the carrier of his right to limit liability under Art IV rule 5, or invoke the
time bar under Art III rule 6, of the Hague Rules, since both provisions are expressly made
applicable ‘in any event’. In recent decisions involving unauthorised deck carriage the Court
of Appeal has taken the view that the decisive factor in such cases is not the seriousness
or otherwise of the breach, but a straightforward construction of the relevant provisions.93
Adopting this approach, they held that the words ‘in any event’ meant what they said. ‘They
are unlimited in scope and I can see no reason for giving them any other than their natural
meaning.’94 The carriers were accordingly entitled to rely on the respective Hague Rules
defences irrespective of the seriousness of the breaches involved.95 The introduction in the
United Kingdom of the Hague/Visby Rules has reinforced this approach since their provisions
are expressly given ‘the force of law’.96 If they are to be effective as rules of law then presum-
ably they will survive any repudiation of contractual obligations by the parties concerned.97
In the event of the charterer treating the deviation as a repudiation of the contract of
carriage, to what extent can the shipowner rely on exceptions in the charterparty or bill of
lading in respect of losses occurring before the deviation? Alternatively, can he sue for demur-
rage or dead freight incurred at the port of loading? The traditional view relating to breaches
of condition in general was expressed by Lord Sumner: ‘Though a party may exercise his right
to treat the contract as at an end, as regards obligations de futuro, it remains alive for the
purpose of vindicating rights already acquired under it on either side.’98 Opinions are divided
as to whether a similar rule applies in the case of fundamental breach,99 but there seems no
reason in principle why deviation should affect accrued rights, and this is the standpoint
adopted by US courts.100
One final point relates to the effect of deviation on the shipowner’s right to recover freight.
There still appears to be some doubt on this point. While it is clear that there will be no right
to recover the charter freight once the deviation has been accepted as a repudiation of the
contract of carriage,101 there seems no reason why, in appropriate circumstances where the
cargo safely reaches its destination, the shipowner should not be entitled to reasonable
freight on a quantum meruit basis.102
93
See The Kapitan Petko Voivoda [2003] 2 Lloyd’s Rep 1 (limitation of liability); The Antares [1987] 1 Lloyd’s
Rep 424 (time bar).
94
Longmore LJ in The Kapitan Petko Voivoda at p 18 quoting Tuckey LJ in The Happy Ranger [2002] 2 Lloyd’s
Rep 357 at p 364.
95
Cf. the opposite view adopted by the US courts. See Jones v Flying Clipper (1954) 116 Fed Supp 386;
Encyclopaedia Britannica v Hong Kong Producer [1969] 2 Lloyd’s Rep 536.
96
Carriage of Goods by Sea Act 1971, s 1(2). For the effects of the change of wording, see The Morviken [1983]
1 Lloyd’s Rep 1. See infra at pp 184–5.
97
This was the view taken by the Court of Appeal in The Antares [1987] 1 Lloyd’s Rep 424 in respect of the
Hague/Visby time limit.
98
Hirji Mulji v Cheong Yue SS Co [1926] AC 497 at p 511. See also Lord Maugham in Hain SS Co v Tate & Lyle
(1936) 41 Com Cas 350 at p 371.
99
See, to the contrary, Pickford J in Internationale Guano v MacAndrew [1909] 2 KB 360; Scrutton p 259. Cf.
Colinvaux, RP, Carver’s Carriage by Sea, 13th edn, 1982, para 1200.
100
See The Poznan (1922) 276 Fed Rep 418. See also Cooke 12.34 ff; Gaskell 6.58 ff.
101
See Collins LJ in Thorley v Orchis SS Co [1907] 1 KB 660 at p 667.
102
See Lord Wright in Hain SS Co v Tate & Lyle [1936] 41 Com Cas 350 at pp 368–9.
23
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
103
Lord Wright in Hain SS Co v Tate & Lyle [1936] 2 All ER 597 at p 608.
104
[1936] 2 All ER 597.
105
Ibid Lord Atkin at p 601.
106
(1888) 20 QBD 475; see infra pp 130–2.
24
2.4 THE OBLIGATION TO NOMINATE A SAFE PORT
reached its destination, ‘A waiver to be operative so that a party’s claim is estopped, must be
unequivocal, definite, clear, cogent and complete.’107 In this respect there appears to be some
doubt as to whether mere reference of a dispute to arbitration in accordance with a clause in
the charterparty would constitute such a waiver.108 The better view is that it would not.
Whenever a charterer has the right to nominate a port, whether under a time or voyage
charter, the question arises as to whether he is under a corresponding obligation to nominate
a safe port. The right to nominate may take one of two distinct forms. On the one hand the
charterer may be given the right to nominate from a range of ports listed in the charter, e.g.
Sydney/Melbourne/Brisbane. In this case no implied warranty of safety will arise on nomina-
tion since the owner, having agreed to the port being identified in the charter, may reason-
ably be assumed to have accepted any risk as to its safety.109 Alternatively the charterer may be
given the right to nominate from a number of unnamed ports within a specific range, e.g.
Ghana/Nigeria.110 Here a distinction has to be drawn between a time charter and a voyage
charter. In the case of a time charter, where the owner has placed the commercial use of his
vessel at the disposal of the charterer, a warranty as to the safety of any nominated port will
invariably be implied. In the opinion of Donaldson J in The Evaggelos Th,111 ‘I should make
this implication because common sense and business efficacy require it in cases in which the
shipowner surrenders to the charterer the right to choose where his ship shall go and because
I think that this is in accordance with the weight of authority.’
The position with regard to the voyage charter is, however, less straightforward. In the
absence of clear authority, recent cases have suggested that, where a voyage charterer has
the right to nominate from a range of unnamed ports, the implication of such a warranty is
not automatic but depends on the specific terms of the particular charter and on whether the
implication is necessary to give business efficacy to the contract.112
In the majority of charters the need for such an implied obligation is obviated by the
presence of an express term to the same effect. An example of such a term is provided by
clause 2 of the Baltime 1939 form which provides:
‘The vessel shall be employed in lawful trades for the carriage of lawful merchandise only
between safe ports or places where the vessel can safely lie always afloat.’
What then constitutes a safe port for the purpose of such warranties? The case law would
suggest that the basic concept of a safe port remains the same irrespective of whether it relates
107
Slesser LJ in McCormick v National Motor Insurance (1934) 40 Com Cas 76 at p 93.
108
See US Shipping Board v Bunge y Born (1924) 41 TLR 73 at pp 74–5.
109
See Cooke 5.35 ff.
110
See Cooke 5.37 ff.
111
[1971] 2 Lloyd’s Rep 200 at p 204.
112
See Thomas J in The Aegean Sea [1998] 2 Lloyd’s Rep 39 at p 68; Mediterranean Salvage & Towage Ltd v Seamar
Trading [2008] 2 Lloyd’s Rep 628, per Sir Anthony Clarke MR at para 21 ff.
25
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
to an express or implied warranty or to a time or voyage charter. The classic definition was
provided by Sellers LJ in The Eastern City:113
‘a port will not be safe unless, in the relevant period of time, the particular ship can reach it, use
it and return from it without, in the absence of some abnormal occurrence, being exposed to
danger which cannot be avoided by good navigation and seamanship.’
113
[1958] 2 Lloyd’s Rep 127 at p 131. For an alternative US definition, see Bond Smith J in 49 Tulane LR 861:
‘A safe port is a place where a chartered vessel may enter, load or discharge, and leave without legal restraint
and at which the vessel will encounter no perils greater than those of the sea. Whether a port is safe is a fact
to be determined in each case having regard to the vessel concerned.’
114
Grace v General SN Co [1950] 2 KB 383. See also The M/V Naiad [1978] AMC 2049.
115
Palace Shipping Co v Gans SS Line [1916] 1 KB 138. See also The Saga Cob [1992] 2 Lloyd’s Rep 545 (vessel
attacked by Eritrean guerillas while anchored four miles off port).
116
Limerick v Stott [1921] 2 KB 613.
117
[1950] 2 KB at p 391.
118
The Alhambra (1881) 6 PD 68; Reynolds v Tomlinson [1896] 1 QB 586.
119
The Hermine [1979] 1 Lloyd’s Rep 212.
120
The Eastern City [1958] 2 Lloyd’s Rep 127.
121
The Evia (No 2) [1982] 2 Lloyd’s Rep 307; The Teutonia (1872) LR 4 PC 171.
122
See The Marinicki [2003] 2 Lloyd’s Rep 655 (no proper system in place to investigate reports of underwater
obstructions and to find and remove them). See also Independent Petroleum Group v Seacarriers [2008]
1 Lloyd’s Rep 72.
26
2.4 THE OBLIGATION TO NOMINATE A SAFE PORT
These may range from the lack of adequate safety equipment such as marker buoys, warning
lights and radar, to the absence of suitable weather reports123 or the provision of unsafe
berths.124
123
The Dagmar [1968] 2 Lloyd’s Rep 563.
124
Reardon Smith Line v Australian Wheat Board [1956] AC 266.
125
See Morris LJ in Compania Naviera Maropan v Bowaters [1955] 2 QB at p 105.
126
See The Heinrich Horn [1971] AMC 362.
127
[1979] 1 Lloyd’s Rep 545.
128
See The Universal Monarch [1988] 2 Lloyd’s Rep 483.
129
The Khian Sea at p 547.
130
The Hermine [1979] 1 Lloyd’s Rep 212 at p 218.
27
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
extremely difficult to apply in any given case. How do you judge whether a particular delay is
commercially acceptable?’
The position may, however, be different where the characteristics of the port, giving rise to
the temporary hazard, existed at the time of its nomination and the shipowner is not seeking
to rescind the contract but merely to claim damages for detention. Thus in the recent case of
Independent Petroleum Group v Seacarriers131 the Count had been detained for 4 days in leaving
the port of Beira by a vessel which had run aground on a sandbank and was obstructing the
main channel. Arbitrators had found that marker buoys were out of position as a result of
shifting sands and that there was no adequate system of monitoring the channel. Although
the Count had suffered no physical damage and no question of frustration was raised by
the delay, Toulson J nevertheless held Beira to be an unsafe port and awarded damages for
detention. In his opinion the reasoning in The Hermine was no bar to a finding by arbitrators
that the characteristics of a port, existing at the time of nomination, were such as to create
a continuing risk of danger to vessels, thus rendering it prospectively unsafe. He sought
support for this approach from the words of Lord Roskill, when commenting on his leading
judgment in The Hermine, in the later case of The Evia (No 2).132 In his view the main concern
of the Court of Appeal in The Hermine was as to ‘whether there was a breach of the promise
which had arisen on nomination because much later there was temporary delay of a non-
frustrating kind.’
On their respective facts, it is difficult to reconcile the two decisions. In both cases the
claimants were seeking damages for detention and in both cases their claims relied substan-
tially on characteristics which were endemic to the respective ports, namely, periodic silting
and shifting sandbanks. Yet in one case the port was found safe while in the other, which
involved a shorter period of delay, it was held unsafe. Perhaps the crucial point which distin-
guishes the two cases is the fact that in the Independent Petroleum Group v Seacarriers the port
authorities in Beira were found at fault in failing adequately to monitor the safety of the main
navigational channel. It was a continuing breach of duty from the time of nomination of
the port.
131
[2008] 1 Lloyd’s Rep 72.
132
[1982] 2 Lloyd’s Rep 307 at p 319.
133
But if a shipowner with full knowledge of the danger unequivocally accepts a nomination, he cannot sub-
sequently repudiate his election although he may retain his right to claim damages for breach of contract:
The Kanchenjunga [1990] 1 Lloyd’s Rep 391.
28
2.4 THE OBLIGATION TO NOMINATE A SAFE PORT
which prevents him from recovering compensation for any damage subsequently suffered
by his vessel. The existence of the safe port warranty ‘does not mean that a master can enter
ports that are obviously unsafe and then charge the charterers with damage done’.134 On the
other hand, the courts recognise that, in such a situation, the master is in a dilemma and will
often give him the benefit of the doubt where the choice lies between a loss of freight or a
scratch to the paintwork.135
In the majority of cases the master, on receiving the nomination, will be unaware of the
potential danger and, in any event, is entitled to presume that the charterer is fulfilling his
obligation by nominating a safe port. Consequently, by sailing to the nominated port the
master is not regarded as having waived any breach by the charterer. ‘It does not lie in the
mouth of the promisor to say that a promisee has no right to assume that a promise has been
faithfully carried out and should make his own enquiries to see whether it has or not. If every-
thing done under contract has to be scrutinised and tested by the other party before he can
safely act upon it, many transactions may be seriously held up – in doubtful cases, perhaps
indefinitely.’136 Consequently, when, on arrival at the port, the master discovers the potential
hazard, he is still entitled to refuse to enter. Whether or not the charterer is then entitled
to make an alternative nomination is uncertain, although he will certainly be liable to com-
pensate for any loss of time involved. The cases suggest that such alternative nomination is
possible in the case of a time charter where the vessel has been chartered for a specified period
of time during which the owner has undertaken to carry out the charterer’s instructions. The
position is different with regard to a voyage charter, since here the agreement is to charter the
ship for a voyage between specified ports. Even where a charterer is given the right to nomin-
ate the ports, the cases suggest that, once nominated, the ports are to be treated as if they
had been specified in the original charter.137 No substitutions may therefore be permitted, in
which case the safe port undertaking may be regarded as a condition precedent entitling the
shipowner to repudiate further performance of the charterparty in the event of its breach. In
practice, however, there may be specific provision for such an eventuality in the contract, or
it may be covered by the proviso ‘or as near as she can safely get’.138
Any claims for breach of the safe port undertaking will be limited by the rules of causation
and remoteness of damage. They may take one, or more, of three possible forms:
1. Normally it will consist of a claim for physical damage to the vessel.
2. Alternatively, where no physical damage has been suffered, the shipowner may seek to
recover the cost of avoiding the danger by, for example, engaging tugs or lightening the
vessel where the draught is too great.
3. In cases where the vessel is trapped in a port by a temporary obstruction such as, for exam-
ple, silting or the outbreak of hostilities, there may be a claim for damages for detention
provided the cause of delay is such as to render the port unsafe. Otherwise no remedy
will be available unless the delay is so prolonged as to frustrate the object of the contract.
In such circumstances the charterer will not be allowed to avoid liability by pleading
frustration, since his breach renders the frustration self-induced.
134
Per Devlin J in The Stork [1955] 2 QB at p 77.
135
See American President Lines v USA [1968] AMC 830.
136
Devlin J in Compania Naviera Maropan v Bowaters [1955] 2 QB 68 at p 77.
137
See infra p 62.
138
See infra pp 63–4.
29
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
139
[1982] 2 Lloyd’s Rep 307.
140
For a summary of the case law to this effect, see the judgment of Mustill J in The Mary Lou [1981] 2 Lloyd’s
Rep 272.
141
Donaldson J in The Evaggelos Th [1971] 2 Lloyd’s Rep 200 at p 205. See also Sir Owen Dixon CJ in Reardon
Smith Line v Australian Wheat Board [1954] 2 Lloyd’s Rep 44.
142
[1982] 2 Lloyd’s Rep 307.
30
2.4 THE OBLIGATION TO NOMINATE A SAFE PORT
nominate a safe port. In rejecting the appeal, the Lords were unanimously of the view that
the warranty did not amount to a continuing guarantee of the port’s safety but referred only
to the prospective safety of the port at the time of nomination. In the words of Lord Diplock,
‘It is with the prospective safety of the port at the time when the vessel will be there for
the loading or unloading operation that the contractual promise is concerned, and the con-
tractual promise itself is given at the time when the charterer gives the order to the master or
other agent of the shipowner to proceed to the loading or unloading port.’143
In rejecting the ‘continuing guarantee’ approach, the Lords affirmed that the charterer
would be liable for the prevailing characteristics of the port irrespective of whether they were
known to him. On the other hand, he would not have to accept responsibility for such ‘unex-
pected and abnormal’ events as the outbreak of the Iran–Iraq war. ‘I cannot think that if . . .
some unexpected or abnormal event thereafter occurs which creates conditions of unsafety
where conditions of safety had previously existed . . . that contractual promise extends to
making the charterers liable for any resulting loss or damage, physical or financial. So to hold
would make the charterer the insurer of such unexpected and abnormal risks which in my
view, should properly fall upon the ship’s insurers.’144
If the correct test to be applied in the future is to be based on the prospective safety of the
port at the time of nomination, this cannot be the end of the story. What happens if the port
becomes actually or prospectively unsafe to the knowledge of the charterer while the vessel is
sailing towards it, or even after it has berthed within the port? In the view of their Lordships,
the solution to this problem is to place on the time charterer a secondary obligation, in such
circumstances, to cancel the original nomination and order the ship out of the danger. Where
the vessel is already inside the port, as in The Evia case itself, such an obligation will only arise
where it is still possible for the vessel to leave.145
The decision in The Evia clearly caught the market by surprise – in particular the rejection
of the continuing guarantee formula as a ‘heresy’ by Lord Diplock,146 in favour of a more com-
plicated test based on a combination of primary and secondary obligations. As regards the
new ‘secondary obligation’ concept two points require further clarification. First, how diligent
is the charterer required to be in discovering any subsequent unexpected threat to the safety
of the nominated port? Is the obligation to take avoiding action absolute, or based on due
diligence, or on the actual knowledge of the charterer? Secondly, there is some uncertainty as
to whether a secondary obligation can arise in the case of a voyage charter. Once the voyage
charterer has exercised his right to nominate a port, the normal understanding is that no sub-
sequent variation is permissible.147 Their Lordships in The Evia refused to commit themselves
on this point.
The two subsequent illustrations of the operation of Lord Roskill’s secondary obligation
have provided no elucidation on either problem. The facts in The Lucille148 were practically
identical with those in The Evia except for the fact that the vessel in the former case was
prevented by congestion from entering Basrah until 20 September, i.e. two days before the
outbreak of the Iran–Iraq war. By that time the court found that Basrah was no longer
143
Ibid at p 310. See Lord Roskill at p 315 to the same effect.
144
Lord Roskill at p 315.
145
Ibid at p 320 per Lord Roskill.
146
Ibid at p 310.
147
See infra at p 62.
148
[1983] 1 Lloyd’s Rep 387. See also The Concordia Fjord [1984] 1 Lloyd’s Rep 385.
31
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
prospectively safe and that consequently the charterer should have ordered the ship to escape
while there was still an opportunity to do so. In failing to take such action, as a result of
which the vessel was indefinitely trapped in Basrah, the charterer was in breach of his safe
port undertaking.
149
Cooke 5.42.
150
[2008] 2 Lloyd’s Rep 628.
151
Ibid at para 45 per Sir Anthony Clarke MR.
152
[1987] 2 Lloyd’s Rep 37.
153
Ibid at p 42.
32
2.5 THE OBLIGATION NOT TO SHIP DANGEROUS GOODS
At common law the shipper impliedly undertakes not to ship dangerous goods without first
notifying the carrier of their particular characteristics. A similar obligation arises irrespective
of whether the goods are shipped under a contract of affreightment governed by a bill of
lading or a charterparty although, in the latter case, the implied undertaking will often be
reinforced by an express clause in the charterparty itself.154 No requirement of notification
will, however, arise where the carriers, or members of their crew, knew or ought reasonably
to have been aware of the dangerous nature of the cargo.
154
See Baltime form clause 2.
155
The final phrase is presumably to be construed eiusdem generis with what has gone before.
156
See Sellers J in Ministry of Food v Lamport & Holt [1952] 2 Lloyd’s Rep 371 at p 382. The goods may be
dangerous even though they constitute no risk to the vessel itself. See The Giannis NK [1998] 1 Lloyd’s
Rep 337.
33
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
and the care with which he carries them in the light of that knowledge.’157 In the case at issue,
the vessel had been damaged by an explosion caused by the ignition of a mixture of air and
methane gas emitted by a cargo of coal after loading. While it was impossible to categorise
coal as either an inherently dangerous or safe cargo, it was common knowledge that it had
a propensity to emit methane gas which might result in an explosion in the appropriate
circumstances. The trial judge took the view that, ‘In such a case, I consider that it is not
correct to start with an implied warranty as to the shipment of dangerous goods and try to
force the facts within it; but rather to read the contract and the facts together and ask whether,
on the true construction of the contract, the risks involved in this particular shipment were
risks which the [shipowners] contracted to bear.’158
The concept has also been extended to cases in which the goods themselves were in no way
physically dangerous. So in Mitchell, Cotts v Steel159 the shippers were aware that the cargo
could not be discharged at Piraeus without the permission of the British Government and
were held liable for the resulting delay when such consent was not forthcoming. In the view
of Atkin J the loading of unlawful cargo which may involve the vessel in the risk of seizure or
delay ‘is precisely analogous to the shipment of a dangerous cargo which might cause the
destruction of the ship’.160
157
The Athanasia Comninos [1990] 1 Lloyd’s Rep 277 at p 282. See also Westchester Fire Ins Co v Buffalo Salvage
Co [1941] AMC 1601.
158
[1990] 1 Lloyd’s Rep 277 at p 283.
159
[1916] 2 KB 610. See also, the shipment of contraband cargo: The Donald [1920] P 56.
160
[1916] 2 KB at p 614.
161
Great Northern Rly Co v LEP Transport [1922] 2 KB 742; Micada v Texim [1968] 2 Lloyd’s Rep 742.
162
(1856) 26 LJQB 49.
163
Ibid at p 54, per Lord Campbell.
34
2.5 THE OBLIGATION NOT TO SHIP DANGEROUS GOODS
where the shipper has knowledge, or means of knowledge, of the dangerous nature of the
goods when shipped or where he has been guilty of some negligence as shipper, as by ship-
ping without communicating danger, which he had the means of knowing and ought to have
communicated.’164 There has been little further authority on this point in the intervening
years. Opinions still differ,165 but in obiter dicta in The Athanasia Comninos, Mustill J supported
the strict liability approach.166 This approach was confirmed in the later case of The Giannis
NK where the House of Lords expressed the view obiter that both limbs of the common law
undertaking were absolute.167
The distinction may not be of great practical importance since the issue will only arise on
the rare occasion when neither shipper nor shipowner knows, or ought reasonably to be
aware, of the dangerous nature of the goods. If the shipowner is aware of the nature of the
cargo or reasonable means of knowledge are available to him, then the shipper will be under
no obligation to give notice. Thus in Brass v Maitland where the cargo had been described as
‘bleaching powder’ the shipper was eventually held not liable since the shipowner ought to
have known that the powder contained chloride of lime. Similarly, it might be argued that
owners of vessels designed for the carriage in bulk of grain or coal ought to be aware of the
propensities of the goods in such conditions even though the goods themselves may not be
inherently dangerous.168
In essence, the object of the obligation imposed on the shipper to give notice is to provide
the carrier with the opportunity either to refuse to carry the goods or to take the necessary
precautions to protect his vessel and any other cargo on board. Once notice has been given,
then, at common law, the shipper’s obligation has been discharged and if the carrier subse-
quently consents to carry the cargo, the shipper will not be liable for any resulting damage.169
The only exception to this rule is where the shipper, in shipping dangerous goods, is in breach
of a term of the charterparty. In such a case, even though the carrier accepts the cargo with full
knowledge, the shipper will normally be liable for any damage caused by it.170 Nor will the
shipper be liable, even in the absence of notice, if the carrier knew, or ought reasonably to
have been aware of, the hazardous nature of the cargo.171 Presumably in the latter case, the
carrier is treated as if his decision to carry the goods had been made in full knowledge of the
risks involved. In the rare situation where the means of knowledge are available to neither
party, there may be much to be said for Lord Campbell’s view of treating the issue purely as
a question of allocation of risk.
164
Ibid at p 57. A similar view was taken by a US court in Sucrest Corp v M/V Jennifer [1978] AMC 2520.
165
See Fletcher Moulton LJ in Bamfield v Goole Transport Co [1910] 2 KB 94 at p 110. Cf. Atkin J in Mitchell, Cotts
v Steel [1916] 2 KB 610 at p 614.
166
The Athanasia Comninos [1990] 1 Lloyd’s Rep 277 at p 282.
167
[1998] 1 Lloyd’s Rep 337 at pp 344–5 per Lord Lloyd.
168
The Athanasia Comninos [1990] 1 Lloyd’s Rep 277; The Atlantic Duchess [1957] 2 Lloyd’s Rep 55.
169
See Cooke 6.50 ff (i.e. 6.51).
170
Chandris v Isbrandtsen-Moller [1951] 1 KB 240.
171
Brass v Maitland (1856) 26 LJQB 49.
172
The provision is identical in Art IV rule 6 of the Hague Rules.
35
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
‘Goods of an inflammable, explosive or dangerous nature to the shipment whereof the carrier,
master or agent of the carrier, has not consented, with knowledge of their nature and character,
may at any time before discharge be landed at any place or destroyed or rendered innocuous by
the carrier without compensation, and the shipper of such goods shall be liable for all damages
and expenses directly or indirectly arising out of or resulting from such shipment.
If any such goods shipped with such knowledge and consent shall become a danger to the
ship or cargo, they may in like manner be landed at any place or destroyed or rendered innocu-
ous by the carrier without liability on the part of the carrier except to general average, if any.’
It will be noted that this section makes provision for two separate and distinct contingencies.
In the first situation the carrier’s consent to the shipment of the cargo has been obtained in
ignorance of its inflammable, explosive or dangerous nature. In such an event the carrier is
not only entitled to land, destroy or render the goods innocuous without paying compensa-
tion but he is also able to hold the shipper liable for all damages and expenses arising from
such shipment. The second provision covers the alternative situation where cargo initially
shipped with the knowledge and consent of the carrier, subsequently becomes a danger
to ship or cargo. In such an event the carrier is entitled to take similar action to avoid the
danger as in the first case, without liability to the shipper except possibly by way of general
average. On this occasion, however, the shipper will not be liable for the damage and
expenses involved.173
After some doubt as to the exact nature and scope of this provision, the situation has been
greatly clarified by the decision of the House of Lords in The Giannis NK.174 A cargo of ground-
nut extraction meal pellets had been shipped in Dakar for carriage to the Dominican Republic
under a bill of lading incorporating the Hague Rules. On arrival at the port of discharge the
cargo was found to be infested with Khapra beetle, although the infection had not spread to
a cargo of wheat in an adjacent hold. The reaction of the health authorities in the Dominican
Republic and in neighbouring US ports was such that the shipowner had little alternative but
to jettison both cargoes at sea. He then commenced proceedings against the shippers of the
groundnut cargo under Art IV rule 6 of the Hague Rules for damages for delay and other costs,
together with an indemnity to cover any claims by the owners of the cargo of wheat.
The House of Lords, having accepted the finding of the trial judge that the infestation of
Khapra beetle had originated with the shipment of the groundnut cargo, established two
important markers with regard to the interpretation of Art IV rule 6:
1. The expression ‘goods of a dangerous nature’ should be given a broad interpretation and
not be restricted eiusdem generis to goods of an ‘inflammable’ or ‘explosive’ nature. Nor
should its application be confined to goods which are liable to cause direct physical dam-
age to the vessel or other cargo. ‘What made the cargo dangerous [in this case] was the fact
that the shipment and voyage was to countries where the imposition of a quarantine and
an order for the dumping of the entire cargo was to be expected. In that sense the Khapra-
infested cargo posed a physical danger to the other cargo.’175
173
Provided that he is not in breach of a term of the contract not to ship dangerous goods: Chandris v Isbrandtsen-
Moller [1951] 1 KB 240.
174
[1998] 1 Lloyd’s Rep 337. See Gaskell 15.38 ff.
175
Lord Steyn at p 346.
36
2.5 THE OBLIGATION NOT TO SHIP DANGEROUS GOODS
2. Liability under Art IV rule 6 was strict. In reaching this decision the Court declined to
adopt the view taken by US courts that there should be no liability without fault.176 The
US interpretation was based on the alleged overriding effect of Art IV rule 3 of the Hague
Rules which provides that:
‘The shipper shall not be responsible for loss or damage sustained by the carrier or the ship
arising or resulting from any cause without the act, fault or neglect of the shipper, his agents
or his servants.’
In the view of the US courts, the word ‘act’ in this context must be read as connoting a
positive intentional act on the shipper’s part if it is to be reconciled with the alternative
requirement of ‘fault or neglect’. The majority of members of the House of Lords, however,
reached a different conclusion and, while declining to comment on the US interpretation
of the word ‘act’,177 held that Art IV rule 6 was an independent provision in no way sub-
ject to Art IV rule 3. In the words of Lord Lloyd, ‘Art IV rule 6 is a free-standing provision
dealing with a specific subject-matter. It is neither expressly, nor by implication, subject
to Art IV rule 3. It imposes strict liability on shippers in relation to the shipment of dan-
gerous goods irrespective of fault or neglect on their part.’178
176
See Serrano v US Lines Co [1965] AMC 1038 (SDNY 1965); The Stylianos Restis [1974] AMC 2343 (SDNY
1972).
177
Only Lord Cooke supported the more pragmatic approach of the Court of Appeal that the word ‘act’ in
Art IV rule 3 would be triggered by the mere act of shipment itself, irrespective of any specific intent.
178
Lord Cooke objected to the term ‘free-standing provision’, and preferred to justify his decision that Art IV rule
6 was not subject to Art IV rule 3 on the basis of the maxim generalia specialibus non derogant.
179
[2009] 2 Lloyd’s Rep 175.
180
See supra at pp 33–4.
37
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
to provide the master or shipowner with notice of their characteristics before shipment and
also to indicate clearly on the outside of any package or container the nature of such goods.
On failure to take such action the shipper is liable to a penalty of £100 for each offence.
Should unmarked goods be loaded without the required notice being given to the carrier,
s 448 further provides that, on discovery, the master or owner may have such goods thrown
overboard without incurring any civil or criminal liability.
More recent legislation has taken the form of regulations issued by the Secretary of State
for Trade and Industry under the authority of s 85 of the Merchant Shipping Act 1995 which
are designed to implement the provisions of succeeding international conventions for the
safety of life at sea. The current set of Merchant Shipping (Dangerous Goods and Marine
Pollutants) Regulations 1997181 give effect to the provisions of the 1974 SOLAS Convention
and its 1978 Protocol as amended. After defining ‘dangerous goods’ as those classified in the
IMDG Code and other specified IMO publications, the regulations proceed to formulate a
detailed code for their documentation, marking, packaging and stowing. More specialised
codes also exist for the carriage of bulk cargoes such as grain, meat and oil.182
In concluding the present chapter devoted to implied terms, it may not be inappropriate to
make reference to the effect of frustration on a contract of affreightment. In the words of Lord
Radcliffe, ‘frustration occurs whenever the law recognises that without default of either party,
a contractual obligation has become incapable of being performed because the circumstances
in which performance is called for would render it a thing radically different from that which
was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to
do.’183 In its origins in the mid-nineteenth century the doctrine of frustration was justified on
the basis of a term to be implied in order to give effect to the presumed intention of the
parties, although in more recent years it has come to be treated more as a question of con-
struction of the terms of the contract. It has pertinently been remarked that the implied term
theory has never been acted on by the court as a ground of decision, but is merely cited as a
theoretical explanation.184 The more generally accepted view is that of Lord Wright that ‘the
court decides the issue and decides it ex post facto on the actual circumstances of the case. The
data for decision are on the one hand the terms and construction of the contract, read in
the light of the then existing circumstances, and on the other hand the events which have
occurred. It is the court which has to decide what is the true position between the parties.’185
In its operation the doctrine is potentially applicable to all forms of contracts of carriage by
sea, although in practice the decided cases refer almost exclusively to charterparty disputes.
181
SI 1997/2357 Effective as from 1 November 1997.
182
For fuller treatment, see Colinvaux RP, Carver’s Carriage by Sea, 13th edn, 1982, paras 1114–35.
183
Davis Contractors v Fareham UDC [1956] AC 696 at p 728. See Cheshire and Fifoot, Chapter 20; Treitel,
Chapter 19.
184
Lord Wright in Denny, Mott & Dickson v Fraser [1944] AC 265 at p 276. ‘The theory of the implied term has
now been discarded by everyone, or nearly everyone, for the simple reason that it does not represent the
truth’: Lord Denning MR in The Eugenia [1964] 2 QB 226 at p 238.
185
Denny, Mott & Dickson v Fraser [1944] AC at p 274.
38
2.6 THE EFFECT OF FRUSTRATION
186
Tsakiroglou v Noblee Thorl [1962] AC 93.
187
Devlin J in Universal Cargo Carriers v Citati [1957] 1 Lloyd’s Rep 174.
188
For requirements for appeal from arbitration award, see infra at pp 339–43.
189
The Nema [1981] 2 Lloyd’s Rep 239 at p 254.
190
See Blane Steamships v Minister of Transport [1951] 2 Lloyd’s Rep 155; Asphalt International v Enterprise 667 F
2d 261 (1982).
191
For example, NYPE 93 clause 20.
192
See infra pp 69–72.
193
See Aaby’s Rederi v LEP Transport (1948) 81 LlLR 465.
194
See Société Co-opérative Suisse v La Plata (1947) 80 LlLR 530. Cf. The Zuiho Maru [1977] 2 Lloyd’s Rep 552.
39
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
of a foreign country in which performance is to take place.195 Frustration will also occur where
the outbreak of war renders further performance of the contract illegal. Such a situation may
arise when a vessel is owned or chartered by a person who subsequently becomes an enemy
alien, or where performance of the contract involves dealings with parties resident in
enemy occupied territory.196 In such circumstances the supervening illegality has the effect of
automatically discharging the contract irrespective of its terms or the presumed intentions
of the parties.
(III) Delay
Where performance of the contract is delayed due to the occurrence of some event or change
of circumstances, the contract may be frustrated if the resulting delay is likely to be so pro-
longed as to defeat the object of the parties in entering the contract of affreightment. Whether
or not this test is satisfied will depend upon the facts of the particular case, but in general it
is likely that a shorter delay will be sufficient to frustrate a voyage charterparty than would be
required to discharge a time charter. In Jackson v Union Marine Ins197 the shipowner contracted
to pick up a cargo at Newport with all possible dispatch, ‘dangers and accidents of navigation
excepted’. When the ship ran aground in Caernarvon Bay en route for Newport, and suffered
damage which would take six months to repair, all further liability under the contract was
discharged despite the exception clause. In the opinion of the court the parties had not
intended this clause to cover such a fundamental alteration in the nature of the contract.198
It would appear to be immaterial whether the relevant event occurs before performance
has commenced or after the contract has been partly executed, providing that its effect is to
frustrate the intention of the parties in entering the contract.199 The frustrating event may
take a variety of forms as, for example, the length of time required to complete repairs after a
collision,200 detention by a foreign government,201 or persistent strikes.202
From a survey of the decided cases the most frequent cause of delay results from the
requisitioning of ships during an emergency or the trapping of vessels on the outbreak of
hostilities. In the former case the decision as to whether to claim frustration may well hinge
on the compensation being offered by the Government during the period of requisition.
Should the amount of compensation exceed the hire rate under a time charter, then it is likely
that the owner will allege frustration, whereas the position will be reversed should a lower
rate be offered.203 In Tamplin SS Co v Anglo-Mexican Petroleum Products Co204 a tanker had
been chartered for a period of five years to carry oil as the charterers should direct. When the
195
Ralli v Compania Naviera Sota y Aznar [1920] 2 KB 287; Société Co-opérative Suisse v La Plata (1947) 80
LlLR 530.
196
See Fibrosa v Fairbairn Lawson [1943] AC 32.
197
(1874) LR 10 CP 125.
198
See Bramwell B at p 141.
199
Embiricos v Reid [1914] 3 KB 45.
200
The Hermosa [1980] 1 Lloyd’s Rep 638.
201
Scottish Navigation v Souter [1917] 1 KB 222; Tatem v Gamboa [1939] 1 KB 132.
202
The Nema [1981] 2 Lloyd’s Rep 239; The Penelope [1928] P 180. These cases appear somewhat exceptional
in that, as strikes are potentially capable of being settled overnight, courts are reluctant to hold contracts
frustrated in such circumstances.
203
As to whether the charterer is, in any event, entitled to such compensation, see Scrutton p 23.
204
[1916] 2 AC 397.
40
2.6 THE EFFECT OF FRUSTRATION
charterparty had still three years to run the tanker was requisitioned by the Admiralty, where-
upon the owners claimed that the contract was discharged. The charterers, however, were still
willing to pay freight and they argued that the basis of the contract had not disappeared since
no definite commercial adventure had been contemplated. This view was upheld on appeal
by a majority of the Lords, who were possibly influenced by the fact that the owners were no
doubt attempting to avoid the contract in order to obtain a higher degree of compensation
from the Admiralty. As was later pointed out by Lord Finlay,205 the principles of law enunci-
ated by the majority and the dissentients were identical, the only divergence appearing in
their respective application of those principles to the facts of the particular case.206 A contrast
is to be found in the case of Bank Line v Capel207 where the claimants had chartered a vessel
for 12 months from the time when she should have been delivered to them, but, before that
time arrived, the steamer was requisitioned by the Government. On these facts, the Lords held
that the charter had been frustrated, even though the steamer had been released after only
three months, for otherwise ‘the whole character of the adventure would be changed’.208 Lord
Sumner pointed out that the early release of the ship was immaterial since, at the time when
the requisitioning took place, it was envisaged that its duration would be indefinite.
Other examples of delay resulting in frustration are to be found in the numerous cases
where, through no fault on the part of owner or charterer, vessels have been trapped on an
unexpected outbreak of hostilities.209 A spate of such litigation resulted from the closure of
the Shatt al Arab in 1980 on the outbreak of war between Iran and Iraq.210
Whether an intervening event involves such delay as to frustrate the commercial object of
the venture must obviously be decided on the facts of each individual case. As regards time
charters, the decision will invariably be reached on the basis of a comparison between the
period of interruption or delay and the overall length of the charterparty. The test is an objec-
tive one and must be applied without the benefit of hindsight. In the words of Bailhache J,
‘the parties must have the right to claim that the charterparty is determined by frustration as
soon as the event upon which the claim is based happens. The question will then be what
estimate would a reasonable man of business take of the probable length of withdrawal of
the vessel from such service with such materials as are before him, including, of course, the
cause of the withdrawal and it will be immaterial whether his anticipation is justified or
falsified by the event.’211 Thus in Bank Line v Capel212 it was immaterial that by the time the
issue came for trial, it was clear that the requisition had lasted for a mere three months. The
decision as to frustration had to be taken on the basis of information available at the time
the requisition commenced. ‘Rights ought not to be left in suspense or to hang on the chances
of subsequent events. The contract binds or it does not bind, and the law ought to be that the
parties can gather their fate then and there. What happens afterwards may assist in showing
205
In Bank Line v Capel [1919] AC 435 at p 443.
206
For a similar decision see Port Line v Ben Line [1958] 1 Lloyd’s Rep 290, where a vessel under a 30-month
charter was requisitioned with 10 months of the charter still to run. The court refused to hold the charter
frustrated in view of the fact that it was estimated that the requisition might last for not more than three to
four months.
207
[1919] AC 435.
208
Lord Finlay at ibid p 442.
209
See Court Line v Dant (1939) 44 Com Cas 345.
210
See The Evia (No 2) [1982] 2 Lloyd’s Rep 307; The Wenjiang [1982] 1 Lloyd’s Rep 128.
211
Anglo-Northern Trading Co v Emlyn Jones [1917] 2 KB 78 at p 84.
212
[1919] AC 435.
41
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
what the probabilities really were if they had been reasonably forecasted, but when the causes
of frustration have operated so long or under such circumstances, as to raise a presumption
of inordinate delay, the time has arrived at which the fate of the contract falls to be decided.’213
213
Lord Sumner at ibid p 454.
214
Per Lord Denning MR in The Eugenia [1963] 2 Lloyd’s Rep 381 at p 390.
215
Lord Radcliffe in Davis Contractors v Fareham UDC [1956] AC 696 at p 729. Frustration will accordingly
not result from unexpected fluctuations in market rates of hire or the cost of bunkers: Occidental v Skibs A/S
Avanti [1976] 1 Lloyd’s Rep 293 at p 325; nor from an unexpected and unjustified temporary detention of a
chartered vessel by port authorities: Edwinton v Tsavliriss Russ: The Sea Angel [2007] 2 Lloyd’s Rep 517.
216
[1962] AC 93.
217
The Captain George K [1970] 2 Lloyd’s Rep 21.
218
The Eugenia [1963] 2 Lloyd’s Rep 381.
219
Cf. The Massalia [1960] 1 Lloyd’s Rep 594 overruled in The Eugenia.
42
2.6 THE EFFECT OF FRUSTRATION
where provision is made to cover the event in the express terms of the contract.220 So in Tatem
v Gamboa,221 where a vessel which had been chartered to evacuate refugees from Spain during
the Civil War was seized by the Nationalists, the contract was held frustrated even though
such an outcome must have been foreseeable from the outset.222
Even where express provision is made in the contract to cover a particular event, such a
term is normally subjected to strict interpretation by the courts. The attitude adopted is not
dissimilar to the contra proferentem approach applied when construing clauses seeking to
exclude liability for fundamental breach.223 Thus in Jackson v Union Marine Ins224 the contract
was held frustrated when the vessel ran aground even though the charter included a provision
excepting ‘dangers and accidents of navigation’. In the opinion of the court the parties had
not intended this clause to cover such a fundamental alteration in the nature of the contract.
Again, in Bank Line v Capel225 the House of Lords was prepared to hold that an express
provision in the charter granting the charterer, but not the owner, the option of cancelling
should the ship ‘be commandeered by Government during this charter’ did not prevent the
shipowner from successfully pleading frustration when the vessel was subsequently requisi-
tioned in wartime. In the view of Lord Haldane, ‘what is clear is that, where people enter into
a contract which is dependent for the possibility of its performance on the continued avail-
ability of the subject matter, and that availability comes to an unforeseen end by reason of
circumstances over which its owner had no control, the owner is not bound unless it is quite
plain that he has contracted to be so’.226 In his Lordship’s opinion no such contractual inten-
tion existed in this case.
220
See Bangladesh Export Import Co v Sucden Kerry [1995] 2 Lloyd’s Rep 1; The Safeer [1994] 1 Lloyd’s Rep 637.
221
(1938) 61 LlLR 149.
222
See also The Eugenia [1963] 2 Lloyd’s Rep 381.
223
See Suisse Atlantique v Rotterdamsche [1967] 1 AC 361.
224
(1874) LR 10 CP 125.
225
[1919] AC 435.
226
Ibid at p 445. See also Viscount Simon in Fibrosa v Fairbairn Lawson [1943] AC 32 at p 40.
227
[1935] AC 524. See also The Super Servant Two [1990] 1 Lloyd’s Rep 1.
228
Constantine v Imperial Smelting Corp [1942] AC 154.
43
CHAPTER 2 IMPLIED OBLIGATIONS IN A CONTRACT OF AFFREIGHTMENT
has been created by a breach of contract on his part. Thus where further performance of a
charterparty has been rendered impossible as the result of breach of the safe port warranty,229
or the seaworthiness obligation,230 the defence is not available to the defaulter. The same may
be true where the supervening event results from negligent conduct, as, for example, where
the vessel is seriously damaged as the result of a negligent act on the part of the owner or
a member of the crew.231 It has been pointed out, however, that self-induced frustration
involves deliberate choice and that in the majority of cases mere negligence may not suffice.
Lord Russell noted that such cases ‘can range from the criminality of the scuttler who opens
the sea-cocks and sinks his ship, to the thoughtlessness of a prima donna who sits in a
draught and loses her voice. I wish to guard against the supposition that every destruction of
corpus for which a contractor can be said, to some extent or in some sense, to be responsible,
necessarily involves that the resultant frustration is self-induced within the meaning of the
phrase.’232
229
The Lucille [1983] 1 Lloyd’s Rep 387.
230
Monarch SS Co v Karlshamns [1949] AC 196; see also The Eugenia [1963] 2 Lloyd’s Rep 381.
231
See Constantine v Imperial Smelting Corp [1942] AC 154. But presumably not where the alleged breach of con-
tract or negligent act is covered by an exception, e.g. negligence in the navigation or management of the ship
under Art IV rule 2(a) of the Hague/Visby Rules.
232
Constantine v Imperial Smelting Corp [1942] AC at p 179. ‘Mere negligence seems never to have been suggested
as sufficient to constitute “fault” in this connection’, per Lord Wright at p 195. Cf. Bingham LJ in The Super
Servant Two [1990] 1 Lloyd’s Rep 1 at p 10.
233
Lord Sumner in Hirji Mulji v Cheong Yue SS Co [1926] AC 497 at p 505.
234
Some doubt exists as to whether an arbitration clause in a charterparty will survive its frustration. See Heyman
v Darwins [1942] AC 356 at pp 366, 383; Kruse v Questier [1953] 1 QB 669. Cf. Hirji Mulji v Cheong Yue SS
Co [1926] AC 497.
235
See French Marine v Compagnie Napolitaine [1921] 2 AC 494; Civil Service Co-operative Soc v General SN Co
[1903] 2 KB 756.
236
[1943] AC 32.
44
2.6 THE EFFECT OF FRUSTRATION
affected the well-established mercantile usage that freight payable in advance is irrecover-
able,237 although in such circumstances it would rarely be the case that there had been a total
failure of consideration.
The legislature finally intervened in an attempt to remove the remaining anomalies. The
Frustrated Contracts Act of 1943 provides no definition of a frustrating event but merely seeks
to secure a reasonable apportionment of the loss resulting from frustration. Its provisions are
applicable only to contracts governed by English law and, in the maritime sphere, only to
time charters and charterparties by demise. Contracts for the carriage of goods by sea and voy-
age charterparties are still governed by the old common law rules although the risks involved
are invariably covered by insurance. The distinction between time and voyage charters accord-
ingly becomes increasingly important.
Two fundamental changes were introduced by the Act. Section 1(2) provides that all sums
paid or payable before the frustrating event shall, if paid, be recoverable and, if not paid, shall
cease to be payable. This provision confirms the Fibrosa decision, but extends its operation by
allowing a party to recover sums paid even though there has been only a partial failure of con-
sideration. The section is, however, subject to a proviso giving the court a discretionary power
to grant compensation, out of the money so paid or payable, for expenses incurred before the
frustrating event. Thus, where a time charter has been frustrated after the payment in advance
of a monthly instalment of hire, such sum is recoverable by the charterer subject to the court’s
discretionary power to deduct an appropriate amount to cover the owner’s running costs
prior to frustration. In no circumstances may the amount recoverable by the owner exceed the
actual expenses incurred, nor may it exceed the amount paid or payable under the contract
before the frustrating event.
Section 1(3) further provides that where, prior to frustration, a valuable benefit has been
conferred on one party by partial performance of the contract, the party conferring the benefit
may recover as compensation such sum as the court considers just in the circumstances. The
amount recoverable must not exceed the value of the benefit conferred, taking into account
any expenses which the benefited party may himself have incurred in performing his side of
the contract and any circumstances connected with the frustration which may have affected
the value of the benefit.238 In the case of frustration of a time charter this provision may
enable the court, in an appropriate case, to order the payment of a sum equivalent to the full
amount of the hire for the actual days on which the charterer had use of the vessel prior to
the frustrating event. Such remedy would, of course, be an alternative to the recovery by the
owner of running costs under s 1(2).
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237
See [1943] AC 32, per Lord Wright at p 67, Lord Porter at p 79.
238
For an illustration of the operation of this section, see BP Exploration Co v Hunt [1982] 1 All ER 925.
45