Voyage Charters

Page 911

Chapter 35


3. DEADFREIGHT. Should the Charterer fail to supply a full cargo, the Vessel may, at the Master’s option, and shall, upon request of the Charterer, proceed on her voyage, provided that the tanks in which cargo is loaded are sufficiently filled to put her in seaworthy condition. In that event, however, deadfreight shall be paid at the rate specified in Part I hereof on the difference between the intake quantity and the quantity the Vessel would have carried if loaded to her minimum permissible freeboard for the voyage.

Deadfreight in general

35.1 Deadfreight is the name given to the damages to which the owner is entitled if the charterer fails to load the full amount of cargo required under the terms of the charter.1 In many charters no provision is made for the calculation or payment of deadfreight, in which case the ordinary rules of damages will apply.2

Deadfreight under clause 3 of the Asbatankvoy charter

35.2 The effect of clause 3 is twofold:
  • (1) The first sentence gives to either party the right to have the vessel “proceed on her voyage” although a full cargo has not been loaded. The intention of this provision appears to be to allow either party to dispense with the ordinary rule whereby the owner may be obliged to seek a fill-up cargo by way of mitigation of his loss, and is entitled to deviate in order to do so.3 If either party exercises his rights under this clause the vessel must proceed “direct” to the destination, as she would be obliged to do under clause 1 if a full cargo had been loaded.
  • (2) The second sentence provides for deadfreight to be paid at a specified rate on a specified quantity. However, the opening words of the second sentence make it clear that its provisions only take effect if the master decides, or the charterer requests, that the ship should proceed direct on the voyage. In the absence of any request by the charterer, it is open to the owner to attempt to obtain a fill-up cargo, in which case the ordinary rule for assessing deadfreight will apply. However, the calculation of dead-freight under clause 3 is so generous to the owner that there will normally be no advantage in seeking fill-up cargo.

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“fail to supply”

35.3 A purely notional “tender” of performance which is not intended to be acted upon (e.g., because both parties know that it will not be possible for the vessel to load a full cargo due to draft restrictions) will not prevent a finding that charterers have failed to supply a full cargo.4

“a full cargo”

35.4 If the first sentence of the clause stood alone, it would be natural to interpret this expression as meaning “the full amount which the charterer has agreed to supply”, rather than “the amount required to fill the ship”. However, the drafting of the second sentence indicates that the latter interpretation is probably correct, in which case the clause will have no application where the charterer’s obligation is to supply less than a full cargo. This question is discussed in greater detail below.

“In that event”

35.5 Despite the use of the singular, the intention must be that deadfreight will only become due under the second sentence if both requirements of the first sentence are satisfied, namely: (1) a failure by the charterer to load a full cargo; and (2) the vessel proceeding on the voyage, without attempting to find a fill-up cargo.

“at the rate specified in Part I”

35.6 This is a reference to Part IF, which sets out the normal freight rate. Thus, unless some special reduced rate is agreed for deadfreight, deadfreight is payable at the full rate applicable to cargo carried on the voyage, without regard to any saving of expense in the carriage. Where there are several rates specified in Clause F, depending, for example, on the discharging port, the principle described at paragraphs 21.24–21.26 requires that the rate to be used in calculating the deadfreight is the lowest rate applicable to such extra cargo as would have fulfilled the charterer’s obligation under clause 1.

“the difference between the intake quantity and the quantity the vessel would have carried if loaded to her minimum permissible freeboard for the voyage”

35.7 These words define the quantity upon which deadfreight is payable. On the face of it this provision is surprising, because it makes no allowance for the fact that the ship may be unable to carry a full deadweight cargo of the type specified in the charter, something which is expressly allowed for in clause 1, the terms of which one would expect to see reflected in this clause. It would clearly be unjust if the owner were entitled to claim deadfreight on a quantity in excess of that which he would have been able to load and carry, and the reference in the clause to “the quantity which the vessel would have carried” seems to indicate that this may not have been the intention. 35.8 London arbitrators have held that a claim for deadfreight under the clause must take account of any relevant volumetric restrictions on the amount which could have been carried.5

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This may well go rather beyond the permissible limits of imaginative construction,6 but it is undoubtedly a common-sense solution, since if the clause were to confer on the owner a right to deadfreight calculated on a quantity in excess of the actual shortfall it could well be unenforceable as a penalty. The other approach is to interpret the clause as being wholly inapplicable (with the result that damages would be computed on normal principles) except in the case where the charterer’s obligation is to load a full deadweight cargo. On balance it is submitted that this approach, which derives some support from the reference to “a full cargo” in the first sentence, is correct. In any event, the combined effect of those words and the method of calculation laid down by the second sentence seems to make it clear that the clause, unless amended, will not apply where the charterer has no obligation to load a full cargo either by weight or by volume.7

Effect of demurrage or despatch on calculation of deadfreight

35.9 The charterer’s failure to load as much cargo as agreed will often have other effects in addition to a loss of freight. In particular it may result in a saving of voyage expenses by the owner, or cause either a reduction in the amount of demurrage earned, as in The Altus,8 where the agreed demurrage rate rose with the amount of cargo loaded, or an increase, as in The Ionian Skipper,9 where the laydays were proportional to the amount of cargo loaded. Where the charter contains no applicable deadfreight clause, with the result that the claim is to be quantified on ordinary principles, all these matters, unless purely collateral, are to be taken into account in calculating the net claim. Thus, in The Ionian Skipper it was held that the owner had to give credit for the increase in demurrage resulting from the laydays being shorter than they would have been if a full cargo had been loaded. It was also held, more questionably, that the owner was entitled to add to his claim any demurrage lost by reason of the fact that short-shipment resulted in loading and discharging being completed in a shorter time.10 35.10 It is uncertain to what extent these principles remain applicable where the deadfreight falls to be calculated in accordance with clause 3. On the face of it, the second sentence of the clause appears to liquidate the damages payable for breach of the obligation to load a full cargo as contracted,11 and it is otherwise difficult to see that it fulfils any useful function. If that is correct it would appear to follow that it is not open to either party to contend that other factors, which would have been relevant in the absence of the clause, should be taken into account. However, in The Altus, the court expressly left it open whether clause 3 was a liquidated damages clause, and held that even if it was, it did not disentitle the owner from claiming, in addition to the deadfreight calculated in accordance with the clause, the loss of demurrage caused by the short-shipment.12

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Where no cargo is loaded

35.11 The wording of the clause envisages that some cargo must be loaded and carried if the clause is to apply. Accordingly, if no cargo is loaded the owner cannot perform the charter voyage without cargo in order to earn deadfreight under the clause, and the damages in such a case must be calculated in the usual way.

Where freight not earned

35.12 If the vessel is lost or the voyage abandoned, in circumstances such that freight is not earned on the cargo loaded, the question arises whether deadfreight remains payable upon the cargo short-shipped. In the absence of a special clause, the owner would be unable to prove any loss, and would be entitled to only nominal damages. However, this conclusion seems difficult to reconcile with the words of the clause, unless the phrase “the quantity the vessel would have carried” imparts the requirement that the short-shipped cargo, if loaded, would have been carried to its destination so as to earn the freight.

U.S. Law

Deadfreight – general

35A.1 Although clause 3 does not provide that an owner must make a formal protest if the charterer fails to load a “full cargo,” it is generally held that the owner has the burden of proving that a demand was made to the charterer or its representative within a reasonable time for additional cargo to be loaded, unless circumstances were such that to do so would have had no consequence. The charterer’s obligation to load a “full cargo” is expressed and measured in weight, not volume, and the charterer does not meet its responsibility by simply filling the vessel’s available cubic capacity, absent specific wording to that effect. Deadfreight claims require detailed consideration of the parties’ familiarity with the particular characteristics of the port(s) involved, as well as all prevailing factual conditions and circumstances, weighed against their contractual undertakings.13

Protest of short-loading

35A.2 In The Athenian,14 the sole arbitrator held that the owner failed to carry its burden of providing the charterer with a proper protest, stating:

It is my opinion that the Owners failed to prove their case by the preponderance of the evidence in that the evidence is insufficient to demonstrate that a demand for additional cargo was made upon the suppliers in a timely fashion. The fact is clear that the protest, if made, was made after loading had been completed. Owners have presented no testimony or evidence indicative that any demand was made prior to the completion of loading and in a sufficiently reasonable time for additional cargo of a relatively small amount to be loaded.

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