i-law

Time Charters

38

U.S. Law Commentary on Tanker Time Charters based on ExxonMobil Time 2005 Form

U.S. Law Commentary on Tanker Time Charters based on ExxonMobil Time 2005 Form

1 IT IS THIS [insert day] DAY of [insert month and year] MUTUALLY AGREED
2 between [Insert full-style name of the owner, or chartered owner], a company organized
3 under the laws of [insert Owne’s domicile] and having its head office at [insert address of
4 Owner’s head office], as owner (“Owner”) of the M.T. [Insert the name of the vessel
5 using all italics], as more fully described and warranted herein (“Vessel”), and [Insert the
6 full-style name of the Charterer], a company organized under the laws of [insert
7 Charterer’s domicile] and having its head office at [insert address of Charterer’s head
8 office], as charterer (“Charterer”), that Owner lets and Charterer hires the use and
9 services of the Vessel for the carriage of [Insert cargo description], in bulk, and such
10 other lawful merchandise as may be suitable for a vessel of her description, for the term
11 and on the terms and conditions hereinafter set forth in this time charter party
12 (“Charter”).
38A.1 The type of petroleum or other liquid products to be carried is customarily described by a general categorization, to which viscosity and other characteristics are sometimes added. Thus, the description may be “crude and/or dirty petroleum products” or “clean petroleum products.” The nature of the cargoes carried is, of course, highly important to the owner in so far as it relates to the condition of the vessel’s tanks, pumping capacity and safety gear. The loading of cargo not within the described category would be a breach and would expose the charterer to a claim for damages. See The Witfuel, SMA 1381 (Arb. at N.Y. 1979), where the loading of a distillate clean petroleum product was held to be a breach of the charter which restricted the charterer to crude and/or dirty petroleum products. On the other hand, the owner would be in breach if the chartered vessel was incapable of carrying the specified cargo safely (see paragraph ).

38A.2 Clause 1—Term

13 1 Term
14   a Firm Period
15   The term of the Charter shall be for a period of about [Insert the term of firm
16   period] (“Firm Period”) plus any extensions thereof as provided in Clause 1b
17   and Clause 1c. The Firm Period shall commence at the time when the Vessel is
18   placed at Charterer’s disposal as provided in Clause 5. The word “about,” as
19   used in Clause 1a, shall mean up to forty-five (45) days more or less, at
20   Charterer’s option, and shall apply to the term of the Charter consisting of the
21   Firm Period plus any optional periods or extensions as provided in Clause 1b
22   and/or Clause 1c. The term of the Charter, as stipulated in Clause 1a, shall
23   hereinafter be referred to as (“Charter Term”).
38A.3 The ExxonMobil form fixes at 45 days the amount of “underlap” or “overlap” permitted, i.e. redelivery may be made not more than 45 days before or after expiration of the flat period. In New York this would probably be considered a strict requirement, following the decisions in The Romandie, SMA 1092 (Arb. at N.Y. 1977), The Scaldia, SMA 905 (Arb. at N.Y. 1975) and The Elizabeth Entz, SMA 588 (Arb. at N.Y. 1971). In England, however, the principle of The Dione might entitle the charterer to redeliver beyond the 45-day leeway under circumstances beyond the charterer’s control. 38A.3
24 b Optional Period(s)
25   Charterer shall have the option of extending the term of the Charter for additional
26   period(s) (“Optional Period(s)“) by written notice to Owner as follows:
27   [Insert the description of the optional period(s), if any. For example:
28   “There are no Optional Periods under the Charter.”, or
29   (1) First Optional Period
30   One (1) year, to be declared not less than three (3) months prior to the
31   expiration of the Firm Period.
32   (2) Second Optional Period
33   One (1) year, to be declared not less than three (3) months prior to the
34   expiration of the first Optional Period.]
35   cOff-Hire Extensions
36   The term of the Charter may also be extended by Charterer for periods of all, or
37   any part, of the time the Vessel is off-hire during the Firm Period and/or Optional
38   Period(s) (“Off-Hire Extension(s)”) by giving written notice to Owner at least
39   thirty (30) days before the expiration of the Firm Period or the Optional Period, as
40   the case may be. If Charterer so elects, and gives a further written notice to
41   Owner at least fifteen (15) days before the expiration of any such Off-Hire
42   Extension, all or any part of the time the Vessel is off-hire following the previous
43   notice shall be added to the term of the Charter. The term “off-hire”, as used in
44   Clause 1c and elsewhere in the Charter, shall include any period(s) as specified
45   in Clause 11, as well as any other period(s) for which cesser or suspension of
46   hire is otherwise provided for in the Charter, or which are stipulated in the
47   Charter to be for Vessel’s or Owner’s time and/or account.
38A.4 This option grants the charterer the option of “tacking” all or any part of the aggregate “off-hire” time to the charter time. In the absence of such a provision, there would be no right to “tack” off-hire periods.

38A.5 Clause 2—Vessel Particulars

48 2 Vessel Particulars
49   Owner warrants that, as of the date and time of Vessel delivery hereunder and during
50   the Charter Term, the Vessel and its equipment will have the particulars, capabilities,
51   and capacities as shown in Schedule A hereto. Should there be any conflict between
52   the particulars, capabilities, and capacities shown in Schedule A and any other
53   provision within a Clause of the Charter, the particulars, capabilities, and capacities
54   as specified in the Clause of the Charter shall prevail to the extent of the conflict.
38A.6 The Schedule commonly provides a detailed description of the vessel’s particulars, capabilities and capacities and would no doubt be construed as “intermediate obligations” under English law, and as “warranties” under U.S. law. Thus, failure of the vessel to comply with the description in some particulars would represent a breach of charter, but would not justify termination of the charter unless the consequences were sufficiently serious (see et seq. and et seq.) 38A.7 Several points should be noted with respect to the particulars described. The capacity of each of the pumping systems (cargo, stripping, and segregated ballast) is the “design” capacity. In the case of older vessels, actual capacity may be substantially less. Yet under Clause 4 of the ExxonMobil form (below, paragraph 38.23) the owner warrants that the “description, particulars, and capabilities of the Vessel shall be maintained by Owner throughout the Charter Term, so far as is possible by the exercise of due diligence.” Pumping capacity is further modified by Clause 8(c) (below, paragraph 38.43), under which the owner warrants that the vessel is capable of discharging a given quantity of product per hour at specified temperatures. 38A.8 Where the time charter is for the carriage of a variety of petroleum products that do not all require heating, the ship’s heating warranty cannot be construed as an undertaking to heat indiscriminately all cargoes to the warranted temperature continuously and uniformly: The London Confidence, SMA 1257 (Arb. at N.Y. 1978).

38A.9 Clause 3—Hire

55 3 Hire
56 a Payment of Hire
57   Charterer shall pay hire for the use of the Vessel in United States dollars per day,
58   or pro rata for part of a day. Payments shall be made monthly. Owner shall
59   send invoices for hire to Charterer by the first (1st) day of the calendar month for
60   which hire is due and Charterer shall pay hire due by the tenth (10th) day of the
61   calendar month or five (5) working days after receipt of Owner’s invoice,
62   whichever is later. Payments shall be made to:
63   [Insert the full-style payment instructions]
64   Payments shall be made by electronic funds transfer, without discount or
65   adjustment except as specified in Clause 3 or elsewhere in the Charter,
66   commencing with the date and hour (UTC) the Vessel is placed at Charterer’s
67   disposal as specified in Clause 5 and continuing to the date and hour (UTC) the
68   Vessel is redelivered to Owner at the expiration or any termination of the Charter,
69   except as may otherwise be provided in the Charter. Any hire paid in advance
70   and not earned shall be returned to Charterer at once by Owner and/or by any
71   party to whom Owner may have permissively assigned the hire hereunder.
72   Owner, in any event, shall be jointly and separately responsible, along with any
73   such assignee, for such return of hire. In no event will initial payment of hire be
74   made until the Vessel is placed at Charterer’s disposal as provided in the
75   Charter. Charterer shall not be responsible for any delay or error by Owner’s
76   bank in crediting Owner’s account with hire, provided Charterer has made proper
77   payment of hire within the time permitted under Clause 3, including, without
78   limitation, the grace period specified in Clause 3f.
79   (1) Hire Rate for Firm Period
80   [Insert the appropriate rate(s) of hire.]
81   (2) Hire Rate for Optional Period(s)
82   [Insert “There are no Optional Periods under the Charter,” or the appropriate
83   hire rate(s) for the optional period(s), if any. For example:
84   (a) First Optional Period
85   [Insert hire rate.]
86   (b) Second Optional Period
87   [Insert hire rate.]
88   (3) Hire Rate for Off-Hire Extensions
89   The daily rate of hire for any extended period due to off-hire in accordance
90   with Clause 1c shall be the rate that was in effect at the time of the off-hire.
38A.10 Unlike older charter forms, hire under this clause is payable by “electronic funds transfer” rather than “cash” or “check,” a reflection of modern commercial practices.

38A.11 Clause 3(b)—Deductions from Hire

91 b Deductions
92   Charterer shall be entitled to deduct from hire payments any:
93   1) disbursements for Owner’s account, including commissions thereon;
94   2) lay-up savings calculated in accordance with Clause 17;
95   3) previous overpayments of hire, including the value of past off-hire;
96   4) amounts representing expenses incurred by Charterer relating to off-hire
97   periods (“Related Off-Hire Expense”);
98   5) amounts representing the value of off-hire periods and Related Off-Hire
99   Expense anticipated to occur during the month or other period for which a
100   payment of hire to be is made, it being understood and agreed that Charterer
101   shall not be required to make a monthly advance or other payment of hire if
102   Vessel is, on the due date for payment, off-hire;
103   6) any sums due pursuant to Clause 3e;
104   7) claims pursuant to Clause 9, and;
105   8) other sums to which Charterer is entitled under the Charter.
106   Charterer shall have the right of deduction under subparagraphs 1) through 8)
107   above, even where right of deduction is disputed, provided Charterer’s claim of
108   deduction is made in good faith. Any required adjustment for hire deduction shall
109   be made after all facts are established. Any difference between the amount(s)
110   withheld and the amount(s) due shall be refunded or credited, as the case may
111   be, in hire installment(s) due after any adjustment is determined.
38A.12 The ExxonMobil form approaches the troublesome issue of deductions from hire by giving the charterer fairly extensive liberty to deduct. Thus, the charterer may deduct an overpayment of hire resulting from the ship going off-hire, even if the off-hire is disputed. 38A.13 The same is true for off-hire and other allowances to the charterer for performance deficiencies measured by Clause 9. The above language permits a deduction for “claims pursuant to Clause 9.” This suggests that, so long as there is a bona fide “claim,” a deduction may be made even though the “claim” ultimately may be reduced or eliminated. Thus, the charterer need not fear a withdrawal for non-payment of hire in the case of disputed deductions made in good faith. In The Cigale, SMA 3229 (Arb at N.Y. 1995), the panel denied the owners’ claim for a balance of hire and a declaration that it was entitled to withdraw the ship for non-payment of hire. The panel noted that the charterer’s deductions appear to have been proper or estimates, which could have been substantiated but for the owners’ failure to produce logs and other ship records. The panel drew an adverse inference against the owner because of its failure to produce documents. 38A.14 Finally, there is a catch-all provision allowing deductions for “other sums to which charterer is entitled under this charter.” Since this is restricted to amounts to which the charterer is “entitled,” as opposed to mere “claims,” the charterer probably makes disputed deductions (other than for off-hire and Clause 9 claims) at his peril. If the charterer ultimately fails to substantiate its right to the sums involved, the deduction would constitute at least partial non-payment of hire and could therefore justify a withdrawal (see paragraph ).

38A.15 Clause 3(c)—Final Voyage

112 c Final Voyage
113 (1) Use of the Vessel
114   Notwithstanding Clause 1a, should the Vessel be on a final ballast/laden
115   voyage or on a ship-to-ship transfer (“Final Voyage“) at the expiry of the
116   Charter Term as calculated in accordance with Clauses 1a, 1b and 1c,
117   Charterer shall have the continued use of the Vessel under the same Charter
118   terms and rate of hire then prevailing under the Charter for such length of
119   time as is necessary to complete the voyage or ship-to-ship transfer, as the
120   case may be, and to thereafter effect redelivery of the Vessel to Owner at the
121   place of redelivery under the Charter. Any such period of continued use
122   shall be deemed to be part of the Charter Term.
123 (2) Hire payment
124   Should a payment of hire become due, when the Vessel is on the Final
125   Voyage, said payment shall be made for the time estimated by Charterer to
126   be necessary to complete the Final Voyage and effect redelivery of the
127   Vessel to Owner in accordance with the Charter, less all deductions provided
128   for in Clause 3b, which deductions shall be estimated by Charterer if the
129   actual amounts cannot then be reasonably ascertained, and also less the
130   amount estimated by Charterer to become payable by Owner for fuel on
131   redelivery as provided in Clause 19. Upon Vessel redelivery, any difference
132   between the estimated and actual amounts shall be refunded to or paid by
133   Charterer, as the case may require.
38A.16 This paragraph simply provides for the deduction of estimated disbursements, fuel on redelivery, etc., from the final month’s hire, a practice widely followed under all forms of time charter, whether or not expressly authorized.

38A.17 Clause 3(d)—Loss of Vessel

134 d Loss of Vessel
135   Should the Vessel be lost, or be missing and presumed lost, hire shall cease at
136   the time of the loss, or if such time is unknown, at the time when the Vessel was
137   last heard from. If the Vessel should become a Constructive Total Loss (“CTL”),
138   hire shall cease at the time of the casualty resulting in such loss. In either case,
139   any hire paid in advance and not earned shall be returned to Charterer and, in
140   addition, Owner shall reimburse Charterer for the value of the estimated bunkers
141   on board the Vessel at the time the Vessel went off-hire. If the Vessel should be
142   missing when a payment of hire would otherwise be due, such payment shall be
143   postponed until the safety of the Vessel is ascertained. If the Vessel should
144   become a CTL, Charterer shall have the option to cancel the Charter on written
145   notice to Owner. The Vessel shall be deemed a CTL under the Charter when the
146   cost of recovering and repairing the Vessel is reasonably estimated to exceed
147   either the Vessel’s then current insured value or the fair market value of the
148   Vessel when repaired, without in the latter case taking into consideration any
149   value of the Charter.
38A.18 As a general rule, a ship becomes a “constructive total loss” if the cost of recovery and repairs exceed her value. See discussion in on Frustration at paragraph . 38A.19 The clause provides that payment of hire is to be deferred if the ship is off-hire when a payment of hire would otherwise be due. This avoids the sometimes difficult task of the charterer forecasting how much off-hire may properly be deducted if the ship is, for example, under repair on the due date. By postponing payment until the off-hire has ceased, the charterer need pay in advance only for such part of a hire period for which he knows he will have the use of the ship.

38A.20 Clause 3(e) and (f)—Reduction in Hire and Default

150 e Reduction in Hire
151   Should the Vessel, for any reason during the Charter Term, fail to fulfill the
152   particulars, capabilities, capacities, and/or conditions stipulated in Clause 2,
153   Clause 4, or elsewhere in the Charter, Charterer shall be entitled, without
154   prejudice to any claim Charterer may otherwise have under the Charter, to a
155   reduction in the hire to compensate Charterer for such failure; and, where the
156   failure affects the time taken by the Vessel to perform any services under the
157   Charter or the availability of the Vessel for such services, hire shall be reduced
158   by an amount equal to the value of the time so lost, using the rate of hire
159   applicable at that time.
160 f Default
161   In default of punctual and regular payment of hire as specified in the Charter,
162   Owner will notify Charterer at:
163   [Insert full-style of Charterer’s payment contact]
164   (or such other address as Charterer may, subsequent to the date of the Charter,
165   advise Owner in writing) whereupon Charterer shall make payment of the
166   amount due within ten (10) working days of receipt of said notification from
167   Owner, failing which Owner shall have the right, on written notice to Charterer
168   given prior to any receipt of late payment by or on behalf of Owner, to withdraw
169   the Vessel from the service of Charterer without prejudice to any claim Owner
170   may otherwise have against Charterer under the Charter.
38A.21 This is a modification of the traditional “withdrawal” clause permitting termination for any delay in payment. By requiring notice of default and allowing a grace period, the provision averts the well-known hardships resulting from a withdrawal in a high market. A valid withdrawal by the owner is without prejudice to any existing claims it may have under the charter as well as its right to seek damages caused by the charterer’s default.

38A.22 Other hire clauses

171 g Extra Expenses and Advances
172   The hire rate(s) set forth in Clauses 3a(1) and 3a(2) cover in full any and all
173   expenses for extra victualling by the Master, communications charges, and all
174   overtime worked by the Vessel’s officers and crew at Charterer’s request.
175   Charterer shall be entitled to a two and one-half percent (2.5%) commission on
176   any sums advanced or disbursements made for Owner’s account. Charterer
177   shall make no cash advances to the Master. However, Owner shall have the
178   option of making advances to Charterer, or its designated agent, for
179   disbursement (provided such advances are deemed adequate and reasonable
180   by Charterer) and, in such event, no commission shall be paid to Charterer.
181   h Hourly Rate of Hire
182   The hourly rate of hire (“Hourly Rate of Hire”) for any period under the Charter
183   shall be one twenty-fourth (1/24th) of the then-prevailing daily rate of hire.
184   iTaxes  
185   All taxes, and dues in the nature of a tax, on Owner’s income (howsoever
186   described) shall be for Owner’s account. All taxes and dues on the Vessel
187   and/or cargo and/or on freights, arising out of cargoes carried or ports at which
188   the Vessel calls in accordance with Charterer’s orders under the Charter, shall
189   be for Charterer’s account if and to the extent that they are imposed because of
190   Charterer’s orders or in connection with the Vessel’s service to Charterer under
191   the Charter.
192   If Charterer is obliged to deduct withholding tax from any payment due Owner,
193   because of any action by or responsibility of Owner (whether in relation to
194   Owner’s business generally or to the Vessel), Charterer shall pay only the net
195   amount due Owner after such deduction. However, where a tax or dues is for
196   Charterer’s account but such tax or dues takes the form of a mandatory
197   withholding of part of a payment due to Owner from Charterer, then such
198   payment shall be increased such that the net amount received by Owner after
199   the mandatory withholding shall be amount contractually due from Charterer to
200   Owner.
201   Notwithstanding any other provision of the Charter, Charterer shall not be liable
202   for any taxes or dues:
203   1) if they are imposed at ports and/or places where the Vessel calls solely for
204   Owner’s purposes, or to the extent that they are imposed with reference to
205   periods when the Vessel has deviated from Charterer’s ordered voyage or is
206   off-hire, and/or
207   2) if they would not have been imposed but for some action or fact that is the
208   responsibility of Owner not related exclusively to the service of the Vessel
209   under the Charter, and/or
210   3) to the extent that they are subject to increase due to some action, fact or
211   reason that is the responsibility of Owner and is not related exclusively to the
212   service of the Vessel under the Charter.

38A.23 Clause 4—Owner’s Warranties

213 4 Owner’s Warranties
214 a Vessel Condition
215   Owner warrants that, at the time the Vessel is placed at Charterer’s disposal, the
216   Vessel shall be tight, staunch, and strong; in thoroughly efficient order and
217   condition, and in every way fit, manned, equipped and supplied for the service
218   contemplated; with holds, cargo tanks, pipelines and valves clear, clean and
219   tight; and its machinery, pumps, boilers, inert gas system, crude oil washing
220   system, navigational equipment, heating coils, and all other equipment fully
221   functional and in good working order and condition, and in every way seaworthy
222   and fit to carry cargoes required under the Charter. Such description, particulars,
223   and capabilities of the Vessel shall be maintained by Owner throughout the
224   Charter Term, so far as is possible by the exercise of due diligence. In the event
225   of a conflict between Clause 4a and Clause 2, Clause 2 shall prevail to the extent
226   of the conflict.
227 b Vessel Management and Operation
228   Owner warrants that the Vessel will be managed and operated during the
229   Charter Term by the company or companies named in Schedule A. Owner shall
230   not change the management and/or operation of the Vessel during the Charter
231   Term without the prior written consent of Charterer. If Owner transfers the
232   operation and/or management of the Vessel to another entity without Charterer’s
233   prior written consent, in addition to its other rights Charterer may (in its absolute
234   discretion and upon written notice to Owner) terminate the Charter.
235 c Evaporator
236   Owner warrants that, during the Charter Term, the Vessel shall be equipped with
237   a fresh water evaporator, which shall be maintained in good operating condition.
238   Owner warrants that this evaporator is capable of making sufficient fresh water to
239   supply the Vessel’s needs.
240 d Stability and Structural Integrity
241   Owner warrants that, during the Charter Term, the Vessel shall be suitable to
242   carry cargoes in any size ranging from no cargo to a full cargo (up to the
243   appropriate Classification Society load line), with relative density ranging from
244   0.6 to 1.2, without incurring operational restrictions resulting from potential
245   stability or structural problems.
246 e Cargo Heating
247   If the Vessel is described in Schedule A as being fitted with cargo heating coils or
248   heat exchangers, Owner warrants that, during the Charter Term, the Vessel shall
249   be capable of maintaining the temperature of the cargo loaded and/or increasing
250   such temperature by 4.0°C per day during the voyage up to a maximum of 57° C
251   (in either case as instructed by Charterer) and maintaining same throughout the
252   voyage and during the entire discharge. Should the Vessel fail to heat cargo in
253   accordance with Charterer’s instructions, Charterer shall have the option to:
254   1) delay discharge of the cargo; and/or
255   2) delay berthing of the Vessel; and/or
256   3) discontinue discharge and remove the Vessel from the discharge berth or
257   place until cargo is heated in accordance with Charterer’s instructions.
258   Any time lost due to the Vessel’s failure to maintain the temperature of the cargo,
259   or to heat the cargo, in accordance with Charterer’s instructions shall be off-hire
260   time and for Owner’s account; including, without limitation, any delay in moving
261   the Vessel from and then back to a berth or place of discharging and any
262   intermediate waiting in a vessel queue. In addition, any expense incurred by
263   reason of such delay or otherwise shall be for Owner’s account.
264 f Cargo Manifolds
265   Owner warrants that, during the Charter Term, the Vessel shall be equipped with
266   pressure gauges fitted outboard of the valve at each discharge manifold
267   connection. Such gauges shall be maintained in proper working condition and
268   each gauge shall have a valid test certificate. The Vessel shall be equipped with
269   a sufficient number of cargo manifold reducing pieces, of steel or comparable
270   material (excluding aluminum and gray cast iron) and that meet the most recent
271   Oil Companies International Marine Forum (“OCIMF”) standards, to make
272   available appropriate flanges for cargo hoses or arms at all manifold connections
273   on one side of the Vessel as follows:
274   Vessels less than 16 kDWT shall be equipped to present flanges of 4”, 6” and 8”
275   (ASA) and
276   Vessels from 16 to 60 kDWT shall be equipped to present flanges of 8”, 10” and
277   12” (ASA) and
278   Vessels over 60 kDWT shall be equipped to present flanges of 10”, 12” 14”, 16”,
279   and 20” (ASA).
280 g Communications
281   Owner warrants that, during the Charter Term, the Vessel shall be equipped with
282   VHF radiotelephone, satellite communications earth station, facsimile machine,
283   radio teletypewriter, electronic mail capability, and such other radio
284   telecommunications equipment as may be required by international, flag state,
285   and port state regulations. The Vessel shall also be fitted with a computer
286   capable of sending and receiving electronic mail (including attachments) as well
287   as maintaining and transmitting Charterer’s logs via electronic mail to Charterer.
288 h Crew Complement
289   Owner warrants that, during the Charter Term, the Vessel shall have a full and
290   efficient complement of Master, officers and crew, with adequate training and
291   experience in operating all of the Vessel’s equipment, and that the Master and all
292   officers shall possess valid and current certificates and/or documents issued or
293   approved by the country of the Vessel’s registry. Owner shall provide and
294   maintain navigation and bridge organization manual(s) and procedures that
295   conform to the latest International Chamber of Shipping and International
296   Maritime Organization standards. The deck officer complement shall be not less
297   than the Master and three (3) deck officers, except when the Vessel is engaged
298   in discharging cargo to lighters when four (4) deck officers shall be provided.
299   Conversational English language proficiency is required for the Master and any
300   officer in charge of cargo or bunker oil handling, and is warranted under the
301   Charter.
302 i Drug and Alcohol Policy
303   Owner warrants that, during the Charter Term, it shall have a policy (“Policy”)
304   on drug and alcohol abuse applicable to the Vessel that meets or exceeds the
305   standards in the latest edition of OCIMF Guidelines for the Control of Drugs and
306   Alcohol Onboard Ship. Under the Policy, alcohol impairment shall be defined as
307   a blood alcohol content of 40 mg/100 ml or greater, the appropriate seafarers to
308   be tested shall be all the Vessel’s officers, and the drug/alcohol testing and
309   screening shall include unannounced testing in addition to routine medical
310   examinations. An objective of the Policy should be that the frequency of the
311   unannounced testing be adequate to act as an effective abuse deterrent, and
312   that all officers be tested at least once a year through a combined program of
313   unannounced testing and routine medical examinations. Owner further warrants
314   that the Policy will remain in effect during the Charter Term and that Owner shall
315   exercise due diligence to ensure that the Policy is complied with. It is understood
316   that an actual impairment, or any test finding of impairment, shall not in and of
317   itself mean Owner has failed to exercise due diligence. Persons who test
318   positive, refuse to test, or are unfit for duty (impaired because of drug or alcohol
319   use) shall be removed from the Vessel during the remaining Charter Term and
320   hall not be reassigned to service of Charterer or any of Charterer’s associated
321   or affiliated companies.
322 j Compliance
323   Owner warrants that the Vessel shall, at all times during the Charter Term, be in
324   full compliance with all applicable international conventions, all applicable laws,
325   regulations, and/or other requirements of the country of the Vessel’s registry and
326   of the countries of the port(s) and/or place(s) to which the Vessel may be ordered
327   hereunder, and all applicable regulations and/or requirements of any terminals or
328   facilities in such port(s) or place(s) where the Vessel may load or discharge.
329   Owner further warrants that the Vessel shall have on board, during the Charter
330   Term, all certificates, records, or other documents required by the aforesaid
331   conventions, laws, regulations, or requirements, including any required for
332   transiting of the Suez or Panama Canal, by day or night, if such transit is
333   possible. Without limitation, the conventions, laws, regulations, and
334   requirements referred to in Clause 4j mean conventions, laws, regulations, and
335   requirements concerning ship size, ship design, safety, operation of ship’s
336   equipment (including inert gas and crude oil washing systems, if the Vessel is so
337   equipped), navigation, pollution, and other like matters. At the time of delivery
338   and during the entire Charter Term, the Vessel shall have on board an
339   International Tonnage Certificate, or equivalent, and shall meet applicable
340   guidelines published by the OCIMF. In addition, Owner warrants that, if required
341   by Charterer or the Vessel’s trade, the Vessel will hold a valid International
342   Transport Workers’ Federation (“ITF”) certificate or an equivalent document
343   acceptable to Charterer throughout the Charter Term. The Vessel shall be off-
344   hire during any time lost as a consequence of ITF action and Owner shall
345   reimburse Charterer for any Related Off-Hire Expense.
346 k Charterer’s Representatives
347   Owner warrants that, during the Charter Term, Charterer shall have the right to
348   have its representatives visit the Vessel to observe operations as often and at
349   such intervals as Charterer elects. Such visits shall include, but not be limited to,
350   access to pump room(s), engine room(s), cargo control room(s), navigation
351   bridge, and deck areas. Owner shall allow Charterer’s representatives to survey
352   and take samples of all the Vessel’s bunker tanks and cofferdams at loading,
353   discharge and/or bunkering ports. Charterer’s representatives shall also have
354   the right to attend on board the Vessel to ascertain the circumstances of any
355   incident involving cargo carried hereunder. Neither the exercise nor non-
356   exercise by Charterer of any such right shall in any way absolve or reduce the
357   obligations of Master and/or Owner under the Charter.
358 l Quality Assurance
359   (1) The Vessel
360   If at any time during the Charter Term one or more of the below
361   circumstances occur:
362   • Owner is in breach of its obligations under Clause 2 and/or any of
363    Clauses 4a through 4k and Owner fails, to Charterer’s reasonable
364    satisfaction, to cure such breach within thirty (30) consecutive days after
365    Charterer sends written notice to Owner specifying the breach(s) and
366    demanding correction, and/or
367   • the Vessel is responsible for an incident that results in damage to the
368    Vessel, its equipment, or other property in excess of US$ 100,000, or
369    that results in a discharge of oil of 10,000 U.S. gallons or more, and/or
370   • the Vessel is off-hire for a total of two hundred forty (240) cumulative
371    unplanned hours during any one (1) year period during the Charter
372    Term,
373   upon each occurrence of any of the above circumstances, Charterer shall
374   have the option on written notice to Owner to terminate the Charter with
375   immediate effect if the Vessel is free of cargo or at a date and time as stated
376   in Charterer’s notice, such termination being without prejudice to any other
377   rights and remedies Charterer may have under the circumstances. Owner
378   warrants that Owner and the Vessel’s Master will comply with all orders
379   and/or instructions given by Charterer with respect to the reporting to
380   Charterer of any incidents affecting the Vessel and/or cargo. In all cases,
381   Owner shall ensure that Charterer is promptly advised of all accidents to
382   and/or pollution incidents involving the Vessel, and of any Vessel system
383   failure.
384 (2) The Operator
385   Charterer’s designated vetting affiliate has rated the Vessel Operator named
386   in item 2.2 of Schedule A as being eligible for time charters as indicated in
387   item 2.2.9 of Schedule A. Such rating is based in part upon an assessment
388   of the Vessel Operator’s OCIMF Tanker Management and Self Assessment
389   report (“TMSA”) provided by the Vessel Operator. Owner warrants that, as
390   of the date of the Charter and throughout the Charter Term, the TMSA does
391   and will continue to accurately reflect the status of the Vessel Operator’s
392   safety and quality-management systems. Owner further warrants that during
393   the Charter Term the Vessel Operator will maintain or improve the safety and
394   TMSA as of the date of the Charter and set forth in Schedule D. Owner shall
396   authorize or procure permission for Charterer’s representatives to audit the
397   status of the Vessel Operator’s safety and quality-management systems with
398   respect to the levels of achievement for each Element stated in the TMSA at
399   any time during the Charter Term; provided, however, that reasonable notice
400   of any such audit has been given to Owner and the date(s) of such audit
401   agreed with the Vessel Operator. If Charterer’s representatives find that the
402   Vessel Operator has failed to maintain the safety and quality-management
403   achievement levels identified in the TMSA as required by this Clause, and
404   corrective action acceptable to Charterer (which acceptance shall not be
405   unreasonably withheld) is not taken within three (3) months after notice of
406   such failure is given by Charterer to Owner, Charterer may, at its option and
407   upon written notice to Owner, require Owner to promptly change the Vessel
408   Operator to another operator of Owner’s choice that is then eligible for time
409   charters as specified in item 2.2.9 of Schedule A. If Owner does not
410   promptly change the Vessel Operator in accordance with this Clause 4l(2),
411   such failure shall be deemed a fundamental breach of the Charter and in
412   such event Charterer shall have the option to terminate the Charter upon
413   written notice to Owner and redeliver the Vessel to Owner when the Vessel
414   is free of cargo, without prejudice to any other rights and remedies Charterer
415   may have.
416   Clause 4 shall be without prejudice to Clause 13.

38A.24 Clause 5(a)—Place of Delivery

417 5 Delivery
418 a Place of Delivery
419   The use and services of the Vessel shall be placed at the disposal of Charterer
420   [Insert specific place of delivery, and any conditions on delivery; e.g. “all-fast
421   alongside the berth”] (“Place of Delivery”). Charter hire shall commence when
422   the Vessel is at the Place of Delivery and in all respects ready to load and
423   otherwise fully perform the Charter and ready for sea, and written notice thereof
424   has been given by the Master to Charterer or its Agents at the Place of Delivery
38A.25 The requirement that the ship be “ready for sea” on delivery, in addition to being ready to load, should avoid the result of those cases which hold that hire runs if a ship can load, even if some repairs are necessary before the ship can sail (see et seq.). The clause also reflects the fact that delivery is often done when the ship is at sea. After delivery, the temporary failure of equipment needed only for sea would probably not cause off-hire during loading, since there would be no “time lost.”

38A.26 Clause 5(b)—Laydays

425 b Laydays
426   Hire shall not commence before [Insert the first day of the delivery range], except
427   with Charterer’s written pre-consent, and the Vessel shall be placed at
428   Charterer’s disposal, in accordance with the provisions of Clause 5a, no later
429   than [Insert the last day of the delivery range] (“Canceling Date”), in default of
430   which Charterer shall have the option to cancel the Charter. Charterer’s option
431   to cancel the Charter is declarable not later than seventy-two (72) hours after
432   expiration of the Canceling Date, local time at the Place of Delivery. Cancellation
433   by Charterer, or acceptance of the use of the Vessel’s services, shall be without
434   prejudice to any claims for damages Charterer may have for late tender of the
435   Vessel’s services or other breach of Owner’s obligations under the Charter.
436   Owner shall give Charterer written notices of the Vessel’s estimated time of
437   arrival at the Place of Delivery [Insert notification requirements (e.g.; 180, 90, 60,
438   30, 20, 10, 5, 2, and 1)] days prior to Owner’s anticipated time of delivery. If,
439   prior to the Canceling Date, it appears to Charterer that the Vessel will not be
440   ready for delivery under the Charter by the Canceling Date, Charterer shall have
441   the option on written notice to Owner:
442   1) to cancel the Charter, or
443   2) to require Owner to promptly give in writing to Charterer a new canceling
444   date, with continuing right in Charterer to cancel the Charter, at any time
445   prior to the original Canceling Date, either before or after receipt of any new
446   canceling date that Owner may provide in accordance with Charterer’s
447   requirement.
448   If Charterer accepts a new canceling date in writing, the Vessel shall use utmost 38.A26
449   dispatch to meet such date and the terms of Clause 5b shall otherwise apply to
450   this new date as if it was the original Canceling Date
38A.27 The first sentence of this provision is quite similar to other standard “laydays/cancelling” clauses, such as Clause 14 of the New York Produce form. The third sentence is not found in most such clauses, but it probably does no more than avoid a finding of waiver of any claim on account of mere acceptance or cancellation. Ordinarily, the owner would not be liable for late delivery unless occasioned by his default in proceeding to the delivery port with the utmost despatch (e.g., by making an unwarranted intermediate voyage) or unless he had misrepresented the position or expected readiness of the vessel at the time of fixing (see et seq.)

38A.28 Clause 5(c) and (d)

451 c Fuel at Delivery
452   Charterer shall accept and pay for all fuel in the Vessel’s bunker tanks at the time
453   the Vessel is placed at Charterer’s disposal. Payment for such fuel shall be in
454   accordance with the last documented net price paid by Owner, excluding any
455   delivery charges.
456 d Space Available to Charterer
457   The whole reach and burthen of the Vessel (but not more than she can
458   reasonably stow and safely carry) shall be at the Charterer’s disposal, reserving
459   proper and sufficient space for the Vessel’s officers, crew, Master’s cabin, tackle,
460   apparel, furniture, fuel, provisions, and stores.

38A.29 Clause 6—Trading Limits

461 6 Trading Limits
462 a Trading Range
463   The Vessel may be employed in any part of the world trading between and at
464   ports, places, berths, docks, anchorages, and submarine pipelines in such lawful
465   trades as Charterer or its agents may direct, subject to the limits of the current
466   British Institute Warranties and any subsequent amendments thereto, but may be
467   sent to ports and places on the St. Lawrence River and tributaries between May
468   15 and November 15 and through the Straits of Magellan and around Cape Horn
469   and the Cape of Good Hope at any time of the year without payment of any extra
470   premium. Notwithstanding the foregoing restrictions, the Vessel may be sent to
471   Baltic Sea ports not north of Stockholm, and to Helsingfors and Abo, Finland,
472   and other ports and places as set forth in the British Institute Warranties and
473   Clauses, provided, however, that Charterer shall reimburse Owner for any
474   additional documented premium properly assessed by the Vessel’s underwriters
475   and paid by Owner for breach of such trade warranties. In the event that the
476   Vessel shall, for any reason, be unable to be employed in trade to any port or
477   place not excluded by Clause 6a, all time lost shall be for Owner’s account and
478   Charterer shall have the option to terminate the Charter upon written notice to
479   Owner and redeliver the Vessel to Owner when the Vessel is free of cargo,
480   without prejudice to any other rights and remedies Charterer may have.
38A.30 It has become an almost universal practice to limit a vessel’s trading under a time charter to “Institute Warranty limits,” which are the trading limits set by the Institute of London Underwriters, for sailing beyond which extra hull insurance premiums are charged. The above provision permits the charterer to order the vessel to certain specified areas which may be outside warranty limits without payment of any extra premiums required under the vessel’s hull insurance. The charterer can order the vessel outside other specified Institute Warranty limits only by paying the additional premiums which may be charged by underwriters.

38A.31 Clause 6(b)—Berthing and Lightering

481 b Berths and Lightering
482   The Vessel shall be loaded, discharged, or lightened at any suitable port, place,
483   berth, dock, anchorage, submarine pipeline, or alongside other vessels or
484   lighters, whether in port or not and while at anchorage or underway, as Charterer
485   may direct. Notwithstanding anything contained in Clause 6 or any other
486   provisions of the Charter, Charterer shall not be deemed to warrant the safety of
487   any port, place, berth, dock, anchorage, submarine pipeline, vessel, or lighter,
488   and shall not be liable for any loss, damage, injury, or delay resulting from
489   conditions of, or at, ports, places, berths, docks, anchorages, submarine
490   pipelines, vessels, or lighters not caused by Charterer’s fault or neglect when
491   directing the Vessel to such ports or places or which could have been avoided by
492   the exercise of reasonable care on the part of the Master or Owner.
493   When the Vessel is employed as a lightering vessel, in order to assist the Vessel,
494   Master, and Owner in the lightering operation, whether at anchorage or
495   underway, Charterer may, at its option, provide and pay for lightering advisor(s)
496   and lightering gang to be employed under the exclusive direction, supervision,
497   and control of the Vessel’s Master, who shall continue to be fully responsible for
498   the operation, management, and navigation of the Vessel during the entire
499   lightering operation. In the event it is necessary for Owner to incur additional hull
500   insurance premium directly related to the employment of the Vessel as a
501   lightering vessel, Charterer agrees that such provable and necessary additional
502   premium shall be for Charterer’s account.
503   Lightering and ship-to-ship transfer operations shall be performed in accordance
504   with, and meet or exceed, the standards in the latest OCIMF guidelines for ship-
505   to-ship transfers.
38A.32 This is a modification of the usual “safe port” and “safe berth” warranties. The ExxonMobil form expressly disclaims a warranty of safety and, instead, limits the charterers’ liability to loss caused by his “fault or neglect.” Additionally, the provision makes it explicit that the owner must bear the loss if it could have been avoided by reasonable care on his part or that of the master. See, for example, The Athenoula, SMA 1410 (Arb. at N.Y. 1980), in which the panel pointed out that Clause 16 of the Mobiltime form did not warrant the safety of a berth but rather obligated the charterer to exercise due diligence in ensuring that the ship be employed between safe berths. The provision leaves open the possibility of a “divided damages” result if the fault of both the charterer and the owner contributed to a casualty. Thus, the trend in admiralty to allocate damages on a proportionate fault theory is not negated, although the basis of the charterers’ responsibility has been changed from strict liability to actual fault. But see The Halekulani, SMA 1633 (Arb. at N.Y. 1981). 38A.33 The problem of safety in loading is particularly acute for tanker owners today, since many of the “ports” and “berths” to which their ships may be ordered consist of nothing more than mooring buoys, with little or no protection from weather and seas heretofore associated with the notion of a “harbor.” Moreover, much of the crude originates in areas where there is need for concern over the “political” safety of the port. Under the ExxonMobil form these additional risks appear to have been shifted to the owner.

38A.34 Clause 6—Remaining clauses

506 c Vessel Speed Orders
507   Charterer may issue orders directly to the Master to slow down or speed up the
508   Vessel, consistent with the safe operation of the Vessel and its machinery, on
509   ballast and/or laden passages. A copy of any such orders shall also be sent to
510   Owner.
511 d Controlled Passages
512   The following passages shall not be navigated by the Vessel while performing
513   under the Charter without Charterer’s prior written agreement:
514   1) The Strait of Messina
515   2) The Strait of Bonifacio
516   3) Between the Scilly Islands and Land’s End
517   4) The Minches, if the Vessel is over 10,000 Gross Tons
518   5) If bound to port(s) on the East Coast of the U.K., north of the River Thames,
519   the in-shore traffic zones in the English Channel
520   6) The Old Bahama Channel
521   When transiting the Florida Straits, from Key Biscayne south to the Dry Tortugas,
522   the Vessel shall maintain a distance of not less than ten (10) miles off the outer
523   navigational aids marking the reefs off the Florida Keys. When transiting the
524   Windward Passage or the Yucatan Channel, the Vessel shall give the coast of
525   Cuba a wide berth. It is understood and agreed that the daily rate of hire
526   includes all compensation for the restrictions in Clause 6d.
527 e Ship Inspection Report (SIRE) Program
528   Owner shall ensure that during the Charter Term there is on file with OCIMF a
529   complete and correct SIRE Vessel Particulars Questionnaire. Further, Owner
530   shall make its best efforts to ensure that, throughout the Charter Term, there
531   shall be on file with OCIMF a SIRE report submitted within the past six (6)
532   months by a major international oil company that is a member of OCIMF and not
533   an associated or affiliated company of Charterer. Any cost of complying with this
534   Clause 6e, and any time lost by reason of Owner’s failure to so comply, shall be
535   for Owner’s account.

38A.35 Clause 7—Dry Cargoes

536 7 Dry Cargoes
537   Charterer shall have the option of shipping any lawful dry cargo in bulk, for which the
538   Vessel and her tanks are suitable, and any lawful merchandise in cases and/or cans
539   and/or other packages in the Vessel’s forehold, between decks, and/or other suitable
540   space available, subject, however, to the Master’s approval as to kind and character,
541   amount and stowage. All charges for dunnage, loading, stowing, and discharging so
542   incurred shall be paid by Charterer.

38A.36 Clause 8—Speed and Performance Warranties

543 8 Speed, Fuel and Pumping Warranties
544   Owner warrants that, during the Charter Term, the Vessel shall fully meet the speed,
545   fuel, and pumping warranties stipulated in Clause 8.
546 a Speed Performance Warranty
547   Owner warrants that the Vessel is capable of maintaining, and shall maintain, on
548   all sea passages from sea buoy to sea buoy, a guaranteed average speed of not
549   less than [Insert the proper warranty speed] knots in a laden condition and not
550   less than [Insert the proper warranty speed] knots in a ballast condition
551   (“Warranty Speed”). Speed warranty performance to be excluded for periods of
552   wind conditions exceeding force six (6) on the Beaufort Scale persisting for more
553   than twelve (12) consecutive hours. The Master shall promptly advise Charterer
554   in writing whenever the Vessel encounters wind conditions exceeding Beaufort
555   Force Six (6), and again when the wind conditions moderate to Beaufort Force
556   Six (6) or less.
557 b Fuel Consumption Warranty
558   (1) Propulsion and Auxiliary Fuel
559   Owner warrants a maximum daily fuel consumption on all sea passages from
560   sea buoy to sea buoy of high viscosity fuel oil meeting the latest quality
561   standards of ISO 8217 RMG 380 if reasonably available, or RMH 380 if RMG
562   380 is not reasonably available (“HFO”) and marine diesel fuel meeting the
563   latest quality standards of ISO 8217 DMB or better (“DMB”) for all purposes
564   excluding heating and tank cleaning (“Warranty Consumption”) as listed
565   below. Fuel consumption warranty performance to be excluded for periods
566   of wind conditions exceeding force six (6) on the Beaufort Scale persisting
567   for more than twelve (12) consecutive hours.
[Insert the appropriate speed and consumption figures in the following table and paragraphs]
Speed (knots) HFO Laden (MT) HFO Ballast (MT) DMB (MT)
10.0 – – –
10.5 – – –
11.0 – – –
11.5 – – –
12.0 – – –
12.5 – – –
13.0 – – –
13.5 – – –
14.0 – – –
14.5 – – –
15.0 – – –
15.5 – – –
16.0 – – –
16.5 – – –
17.0 – – –
38A.37 Here we have one of the salient differences between a typical tanker time charter form and the New York Produce and Baltime forms. Under the usual dry cargo charters speed performance is measured under “good” or “ordinary” weather conditions. Tanker time charters such as the STB form utilize the “guaranteed” or “all weather” speed concept, under which such external factors as wind, seas, currents and fog are all ignored. This approach has the virtue of simplicity, and if a ship is engaged over a long period of time in standard trades, these factors should average out fairly well. However, the provision has not been applied literally in a number of New York arbitrations. Thus, in The Golar Kansai, SMA 1263 (Arb. at N.Y. 1978), the speed warranty and hire adjustment provisions of the Mobiltime form were held geared to “moderate (Beaufort 1–5)” weather. See also The Athenoula, SMA 1410 (Arb. at N.Y. 1980) and The Efplia, SMA 1359 (Arb. at N.Y. 1979), where speed performance under the Mobiltime and Texacotime forms was measured under “moderate” weather also. 38A.38 The ExxonMobil form seems to acknowledge this issue by providing that “Speed warranty performance to be excluded for periods of wind conditions exceeding force six (6) on the Beaufort Scale persisting for more than twelve (12) consecutive hours.” 38A.39 In The Ionic, SMA 2519 (Arb. at N.Y. 1988), a dispute arose under a Texacotime charter concerning responsibility for reduced speed in various circumstances. The panel majority ruled that it is not proper to exclude from the performance calculation time lost as a result of restricted visibility caused by weather conditions unless speed was reduced to comply with the International Collision regulations. The panel was unanimous in ruling that periods of reduced engine speed are to be excluded from performance calculations where the ship has to transit restricted sea lanes and engine speed was reduced to comply with either international or local laws. The panel noted, however, that it was a prerequisite to the owners’ rights under the performance clause that it demonstrate the ability of the ship to meet and maintain its guaranteed speed and consumption under all weather conditions. As stated by the panel: “Specifically, the vessel must have been capable of meeting the performance requirements throughout the period of the charter on a seabuoy-to-seabuoy basis.” 38A.39 38A.40 An unresolved issue is the extent to which the performance guarantees of speed and consumption apply to periods of deliberately slow steaming. One possible solution to the problem of claims for excess consumption is to stipulate in advance a “curve” or scale of consumption at various speeds. 38A.41 Still another issue may be generated by the use of VLCC’s virtually as storage facilities by keeping them at loading or discharge ports for weeks or months. If this results in bottom fouling there may be a dispute as to whether any loss of speed is the owner’s sole responsibility. 38A.42 In The Stolt Capricorn, SMA 2359 (Arb. at N.Y. 1987), the owners’ failure to show that the ship’s cargo pumps were in good working condition and complied with the provisions of Clause 8 led to its being found liable for the charterers’ damages. The arbitrators stated that, had the owner shown that the ship complied with the provisions of Clause 8, it would have been absolved from any performance claims. One of the issues raised in the case related to back pressure from the shore. The panel ruled that “the Master had a duty to the court and/or protest any delays which might have been caused from shoreside to the performance of his vessel.” In the absence of such protest or records, the panel concluded that the owner could not show that prevailing shore conditions were such that they had adversely affected the discharge.

38A.43 Clause 8—Remaining clauses

568 (2) Heating and Tank Cleaning Fuel
569   For each day heat is applied to the cargo or slop tanks, Owner warrants that
570   the fuel consumption will not exceed [Insert the appropriate quantity] metric
571   tons of HFO per day for maintaining heat, or [Insert the appropriate quantity]
572   metric tons per day for increasing heat, of all tanks and pro rata for part of
573   the tanks. For tank cleaning, other than crude oil washing, Owner warrants
574   that the fuel consumption will not exceed [Insert the appropriate quantity]
575   metric tons of HFO for washing all tanks, and pro rata for washing part of the
576   tanks, which also includes shifting ballast and other tank cleaning functions.
577 (3) Fuel Consumption in Port
578   Owner warrants that the maximum fuel consumption in port shall be as
579   follows:
580   Idle (at anchor or on berth): [Insert the appropriate quantity] MT of HFO per
581   day (with boiler secured).
582   [Insert the appropriate quantity] MT of HFO per
583   day (on standby with boiler on).
584   Loading: The Idle consumption warranted above for
585   standby with boiler on plus an additional [Insert
586   the appropriate quantity] MT of HFO for loading
587   a full cargo, or pro rata for part cargo.
588   Discharging: The Idle consumption warranted above for
589   standby with boiler on plus an additional [Insert
590   the appropriate quantity] MT of HFO for
591   discharging a full cargo, or pro rata for part
592   cargo.
593 c Pumping Performance Warranty
594   Owner warrants that the Vessel will discharge cargo at the following minimum
595   rates:
596   Light petroleum (viscosity less than 69 cSt at 50° C) [Insert the appropriate quantity] m3/hr.;
598   Medium petroleum (viscosity of 69 to 690 cSt at 50° C) [Insert the appropriate quantity] m3/hr.;
600   Heavy petroleum (viscosity above 690 cSt at 50° C) [Insert the appropriate quantity] m3/hr.;
602   or that the Vessel will maintain throughout the entire period of discharge,
603   including crude oil washing and stripping, an average pressure of 100 pounds
604   per square inch gauge (PSIG) at the ship’s manifold should the foregoing
605   minimum rates not be met. Charterer shall have the option to Crude Oil Wash all
606   or part of the Vessel’s cargo tanks. In the event the Vessel uses crude oil cargo
607   to wash cargo tanks during discharge, the Vessel shall be allowed an additional
608   eight (8) hours for crude washing of all tanks or pro rata for crude washing part of
609   the tanks.

38A.44 Clause 9—Performance Reviews

610 9 Performance Reviews
611 a Performance Review Frequency and Compensation
612   The speed, fuel consumption, and pumping performance guaranteed by Owner
613   under Clause 8 will be reviewed by Charterer at the end of approximately six (6)
614   months, counting from the time of delivery of the Vessel to Charterer in
615   accordance with the Charter, and thereafter at approximately six (6) month
616   intervals. The Vessel’s performance will be reviewed on a voyage-by-voyage
617   basis in accordance with Clause 9b. If it is found that the Vessel has failed to
618   maintain the speed, fuel consumption, or pumping performance warranted during
619   the preceding performance review period (or at any time during the Charter
620   Term), Charterer shall be retroactively compensated in respect of such failings
621   as follows:
622   (1) Speed Warranty Compensation
623   Payment to Charterer of the Hourly Rate of Hire for each hour, or pro rata for
624   each part of an hour, that the Vessel steams in excess of the time the Vessel
625   would have taken at the Warranty Speed under Clause 8a. Owner will
626   receive no credit or compensation if Vessel performance with respect to
627   speed is greater than the Warranty Speed.
628   (2) Fuel Performance Warranty Compensation
629   Payment to Charterer for each metric ton, or pro rata for part of a ton, in
630   excess of the guaranteed daily consumption under Clause 8b for all
631   purposes at sea for main engine and/or auxiliaries and/or heating and/or tank
632   cleaning and while at anchor, loading, or discharging, including any excess
633   not borne by Owner in accordance with Clause 11 of the Charter, at the
634   average actual price paid for the particular grade of fuel oil purchased by
635   Charterer for the total period under review. Charterer shall provide
636   supporting price vouchers or invoices for such purchased fuel oil as soon as
637   possible after completion of the review for the specified performance period.
638   Subject to Clause 9b(2), Owner will receive no credit or compensation if the
639   vessel’s fuel consumption is less than the Warranty Consumption.
640   (3) Pumping Performance Warranty Compensation
641   Charterer is to be compensated at the Hourly Rate of Hire for each hour, or
642   pro rata for each part of an hour, that the Vessel takes in excess of the
643   pumping time allowed per the rates warranted in Clause 8c. Owner will
644   receive no credit or compensation if the Vessel is able to discharge at a rate
645   greater than warranted in Clause 8c. If the terminal or place of discharging
646   does not allow or permit the Vessel to meet the warranty specified in Clause
647   8c, the Master shall forthwith issue a Letter of Protest (which shall, if
648   possible, be acknowledged) to such terminal or place and shall immediately
649   advise Charterer in writing by electronic mail, telex, or facsimile. If the
650   Master fails to issue the Letter of Protest, Owner shall be deemed to waive
651   any rights to contest that time was lost as a result of the Vessel’s failure to
652   comply with the pumping warranties in Clause 8c. Any delay to Vessel’s
653   discharge caused by shore conditions identified in Master’s Letter of Protest
654   shall be taken into account in the assessment of pumping and loading
655   performance.
656   (4) Performance Review Basis
657   The basis for determining the Vessel’s performance in Clauses 9a(1) through
658   9a(3) shall be the statistical data supplied by the Master in the Sea Logs,
659   Port Logs, and Pump Logs provided by Charterer.
660   (5) Performance Claims Review
661   Charterer shall provide Owner with an opportunity to review any claim
662   submitted by Charterer under Clause 9a and Owner shall complete such
663   review and provide Charterer with the results thereof within fifteen (15) days
664   from the date such claim was sent by electronic mail or facsimile from
665   Charterer to Owner. Charterer may deduct from hire any amount to which it
666   claims it is entitled under Clause 9a after the expiration of twenty-five (25)
667   days from the date of Charterer’s sending of a claim relating thereto to
668   Owner. Such deduction shall be without prejudice to Owner defending such
669   claim.
670   (6) Claim for Final Period
671   In the event of Charterer having a claim in respect of Vessel’s performance
672   during the final performance review period, the amount of such claim shall be
673   withheld from hire in accordance with Charterer’s estimate made not earlier
674   than three (3) months before the end of the Charter Term and any necessary
675   adjustment after the termination of the Charter shall be made by Owner to
676   Charterer or Charterer to Owner, as the case may require.
677 b Performance Review Calculations
678   (1) Speed Warranty Calculations
679   Speed performance will be determined by taking the shortest safe distance
680   for the sea passage from the BP Shipping Marine Distance Tables (“BP
681   Distance”), less the distance reported in the Vessel’s Sea Log for steaming
682   from the sea buoy to the loading/discharge berth or place inbound and from
683   the loading/discharge berth or place to the sea buoy outbound, divided by
684   the Warranty Speed to determine charter party hours at sea. Total actual
685   hours at sea, as reported in the Vessel’s Sea Log, will be compared to the
686   charter party hours at sea to determine lost or saved hours. Each laden and
687   ballast sea passage shall be calculated independently and the results of
688   different sea passages shall not be averaged over time. For the avoidance
689   of doubt, Vessel over-performance with respect to speed on any voyage(s)
690   shall not be deemed to offset Vessel under-performance on any other
691   voyage(s).
692   (a) Speed Warranty Adjustments
693   All stops at sea and any sea passage covered by an off-hire calculation
694   will be excluded from speed warranty calculations.
695   In the event the Vessel is ordered by Charterer to deviate during a sea
696   passage, such actual deviation miles and actual hours shall be recorded
697   in the Vessel’s Sea Log. For the purpose of Clause 9b, deviation shall
698   mean a change in course caused by a change in destination ordered by
699   Charterer after the Vessel has commenced its voyage to the initial port
700   or place ordered by Charterer. The actual deviation miles reported in the
701   Vessel’s Sea Log will be added to the BP Distance for the sea passage
702   performed up to the point of deviation to determine the charter party
703   hours for the passage.
704   In the event Charterer orders the Vessel to proceed at speed(s) greater
705   than the Warranty Speed on any sea passage, and the Vessel is able to
706   achieve speed(s) greater than the Warranty Speed, such sea passage
707   will be excluded from speed and fuel warranty calculations. In such
708   cases, if the Vessel is unable to achieve speed(s) greater than the
709   Warranty Speed, then the speed and fuel warranty calculations for that
710   sea passage shall be based on the Warranty Speed.
711   In the event Charterer orders the Vessel to proceed at speed(s) equal to
712   or less than the Warranty Speed on any sea passage, such sea passage
713   will not be excluded from speed and fuel warranty calculations which
714   shall be based on Charterer’s ordered speed.
715   In the event Charterer orders the Vessel to adjust speed on any sea
716   passage to arrive at a port or place at a specified time, such sea
717   passage shall be excluded from speed and fuel warranty calculations,
718   Actual hours at sea recorded in the Vessel’s Sea Log and corresponding
719   BP Distance(s) for passage in the following restricted waters will be
720   excluded from speed warranty calculations:
721   English Channel — Between NW/SE line through Bassurelle Light and
722   NW/SE line through Noord Hinder Light Vessel.
723   Malacca/Singapore Straits, Eastbound through Passage — Between
724   NE/SW line through 03–00 N, 100–40 E and Latitude 01–35 N.
725   Malacca/Singapore Straits, Westbound through Passage — Between
726   Horsbourgh Lighthouse and the Brothers Lighthouse.
727   Malacca/Singapore Straits, Eastbound to Singapore Only — Between
728   NE/SW line through 03–00 N, 100–40 E and 1 mile SW of Sultan Shoal
729   Light.
730   Malacca/Singapore Straits, From Singapore to Westbound Only —
731   Between 1 mile SW of Sultan Shoal Light and the Brothers Lighthouse.
732   (b) Speed Warranty Calculation Method
733   Each sea passage not excluded from the speed performance review
734   process as detailed above will be calculated as follows:
735   (i) The BP Distance for the sea passage, minus the sum of the distance
736   reported in the Vessel’s Sea Log for steaming from the sea buoy to
737   the loading/discharge berth or place inbound and from the
738   loading/discharge berth or place to the sea buoy outbound and the
739   distance reported for passages in restricted waters, divided by the
740   Warranty Speed equals charter party hours.
741   (ii) Total actual hours at sea, minus the sum of time stopped at sea and
742   time reported for passage of restricted waters, minus charter party
743   hours as determined in (i) above equals hours saved or lost.
744   (iii) Hours lost, times the Hourly Rate of Hire, equals the amount due
745   Charterer.
746   (2) Fuel Warranty Calculations
747   For each grade of fuel the following calculation is performed for each sea
748   passage. Each laden and ballast sea passage shall be calculated
749   independently. Within each performance review period, fuel saved on any
750   voyage (including in-port consumption determined in accordance with Clause
751   9b(4)) shall be credited against any excess consumption on other voyages
752   performed during the same performance review period. However, any net
753   savings of fuel during one performance review period shall not be credited
754   against excess consumption in any other performance review period and
755   Owner shall receive no credit or compensation for any net fuel savings
756   during a performance review period.
757   (a) Average Speed
758   The BP Distance for the sea passage minus the sum of the distance
759   reported in the Vessel’s Sea Log for steaming from the sea buoy to the
760   loading/discharge berth or place inbound and from the loading/discharge
761   berth or place to the sea buoy outbound divided by the actual hours at
762   sea minus stops at sea reported in the Vessel’s sea log equals the
763   average speed for fuel consumption purposes. The distance steamed in
764   restricted waters is not excluded from the BP Distance included in this
765   calculation.
766   (b) Days at Sea
767   Total actual hours at sea, minus the sum of stops at sea, divided by 24
768   equals the total days at sea.
769   (c) Warranted Consumption
770   Average speed as calculated in Clause 9b(2)(a) and rounded to the
771   nearest tenth (1/10) of a knot is compared to the fuel consumption table
772   of guaranteed consumption and the appropriate value(s), tons per day, is
773   chosen. The appropriate value is chosen as follows:
774   (i) If the average speed equals a value in the table, the corresponding
775   fuel value is selected.
776   (ii) If the average speed falls between any two values in the table, the
777   appropriate value is determined by linear interpolation using the next
778   lowest and the next highest values in the table.
779   (iii) If the average speed falls below the lowest or above the highest
780   value in the table, the appropriate value is determined by linear
781   extrapolation using the lowest two values in the table when the
782   speed is below the lowest value, or using the highest two values in
783   the table when the speed is above the highest value in the table.
784   Example of linear extrapolation:
785   Actual speed above the highest value in the table; e.g., 14.3 knots.
Speed MT/Day
14.3 (Actual) ?
14.0 38.0
13.5 35.0
[(14.3k–14k) × (38MT – 35MT) / (14k – 13.5k)] + 38MT = 39.8MT
Actual speed below the lowest value in the table; e.g., 11.8 knots.
Speed MT/Day
12.5 31.0
12.0 29.0
11.8 (Actual) ?
29MT – [(12k-11.8k) × (31MT – 29MT) / (12.5k – 12k)] = 28.2MT
  (d) Allowed Consumption
798 The total days at sea from Clause 9b(2)(b) times the appropriate value,
799 in tons per day, from the fuel table as detailed in Clause 9b(2)(c) equals
800 Charter Party Allowed Consumption.
801 (e) Amount Due Charterer
802 Charter Party Allowed Consumption minus actual consumption as
803 reported in the Vessel’s Sea Log equals tons saved or excess tons
804 consumed.
805 Excess tons consumed, times the appropriate price as determined in
806 accordance with Clause 9a(2) equals amount due Charter.
807 (3) Pumping Warranty Calculations
808 For each discharge, the following calculations will be performed to determine
809 any time lost during pumping, and any compensation due to Charterer.
810 (a) Warranty Pumping Time
811 The gross volume discharged, divided by the appropriate warranted
812 pumping rate from Clause 8c, equals the Warranty Pumping Time.
813 (b) Crude Oil Washing (“COW”) Allowance
814 The number of tanks crude oil washed, divided by the total number of
815 cargo tanks, times the total time allowed for crude oil washing all tanks
816 from Clause 8c equals the COW Allowance.
817 (c) Charter Party Pumping Hours
818 The sum of the Warranty Pumping Time, plus the COW Allowance,
819 equals the Charter Party Pumping Hours.
820 (d) Actual Pumping Hours
821 The actual hours spent discharging cargo, including COW and stripping,
822 equal the Actual Pumping Hours.
823 (e) Hours Lost
824 If the Actual Pumping Hours exceeds the Charter Party Pumping Hours,
825 the difference equals Hours Lost.
826 (f) Compensation Due Charterer
827 Hours Lost, times the Hourly Rate of Hire, equals the amount of
828 Compensation Due Charterer.
829 (g) Waiver of Compensation Due Charterer
830 If the minimum discharge pressure specified in Clause 8c is maintained
831 throughout the discharge, including COW and stripping, there shall be no
832 Compensation Due Charterer for that discharge.
833 (4) In-Port Fuel Warranty Calculations
834 For each grade of fuel the following calculation is performed for each port
835 call. Each port call shall be calculated independently and the results of
836 different port calls shall be included in the voyage calculations in accordance
837 with Clause 9b(2).
838 (a) Warranty In-Port Time
839 The gross elapsed time from sea buoy inbound to sea buoy outbound
840 less the time elapsed during passage inbound, passage outbound, and
841 shifting between berths is the Warranty In-Port Time.
842 (b) Idle Consumption Allowance
843 The Warranty In-Port Time from Clause 9b(4)(a) times the appropriate
844 value, in tons per day, from the idle allowance as detailed in Clause
845 8b(3) equals the Idle Consumption Allowance.
846 (c) Loading Allowance
847 The metric tons of cargo loading at the port, divided by the total metric
848 tons loaded on the voyage, multiplied by the Loading warranty in Clause
849 8b(3) equals the Loading Allowance.
850 (d) Discharging Allowance
851 The metric tons of cargo discharged at the port, divided by the total
852 metric tons discharged on the voyage, multiplied by the Discharging
853 warranty in Clause 8b(3) equals Discharging Allowance.
854 (e) Allowed Consumption
855 (i) Port Calls without Loading or Discharge
856 If no cargo is loaded or discharged during a port call, the Allowed
857 Consumption is the Idle Consumption Allowance.
858 (ii) Loading Port Calls
859 If cargo is loaded during a port call, the Allowed Consumption is the
860 Idle Consumption Allowance plus the Loading Allowance.
861 (iii) Discharging Port Calls
862 If the cargo is discharged during a port call, the Allowed
863 Consumption is the Idle Consumption Allowance plus the
864 Discharging Allowance.
865 (iv) Loading and Discharging Port Calls
866 If cargo is discharged and loaded during a port call, the Allowed
867 Consumption is the Idle Consumption Allowance plus the
868 Discharging Allowance plus the Loading Allowance.
869 (f) Amount Due Charterer
870 Allowed Consumption minus actual consumption as reported in the
871 Vessel’s Sea Log equals tons saved or excess tons consumed.
872 Excess tons consumed, multiplied by the appropriate price as
873 determined in accordance with Clause 9a(2) equals amount due Charter.
38A.45 This clause is one of the more sophisticated attempts to provide a method for adjusting hire in the event of underperformance. It should be noted that in the case of speed and consumption, the owner is not entitled to extra compensation if performance of the ship exceeds the guaranteed rates. Compare The Golar Kansai, SMA 1263 (Arb. at N.Y. 1978); The Northern Star, SMA 1494 (Arb. at N.Y. 1980). In The Golar Kansai, however, a case involving the Mobiltime form, the owner was held not entitled to credit for underconsumption of fuel which resulted from the ship’s failure to maintain her minimum speed. 38A.46 The Northern Star decision illustrates the difficulty of applying the hire adjustment clause in certain circumstances. The ship demonstrated superior speed performance and lower fuel consumption capability during the first two years of the charter, and the issue arose in subsequent years during periods of “slow steaming” ordered by the charterer. In an interim ruling, the panel decided that:
… any periods of slow steaming or lay up should be evaluated for hire purposes on the basis of actual daily hire rate established during the last preceding quarter year in which the vessel performed at speeds unimpeded by Charterer’s orders. Daily allowances to Owner for proven underconsumption of fuel and diesel oils at full speed should also be due to Owner, during slow steaming and/or lay up periods on the same basis as was allowed during the last preceding quarter in which the vessel performed at speeds unimpeded by Charterer’s orders. In so holding, the panel pointed out that the hire adjustment clause compensated either the owner or charterer for proven speed capability and consumption characteristics of the ship, and to construe it otherwise would be to allow the clause to work only in favor of one party. Thus, once the ship had established a speed capacity in excess of that warranted, then the charterer could simply order the ship not to steam at greater than the warranted speed and effectively prevent the owner from earning any additional hire. See also The Columbia Liberty, SMA 2220 (Arb. at N.Y. 1986).
38A.47 Finally, it might be noted that hire adjustment under such a clause does not involve ordinary contract law concepts of damages and mitigation. Therefore, a refusal by the charterer to accept a substitute ship in mitigation of damages for speed deficiency, in the absence of a substitution provision, is a proper exercise of his rights and does not affect the adjustment of hire: The Golar Kansai, above.

38A.48 Clause 10—Liens

874 10 Liens
875   Owner shall have a lien on all cargoes for all amounts due Owner under the Charter,
876   and Charterer shall have a lien on the Vessel for all monies paid in advance and not
877   earned, all disbursements and advances for Owner’s account, all amounts due to
878   Charterer under Clause 9 and other provisions of the Charter, including, without
879   limitation, the value of fuel in the Vessel’s bunker tanks supplied or paid for by
880   Charterer, and for any damages sustained by Charterer as a result of the breach of
881   the Charter by Owner
38A.49 This language is similar to Clause 18 of the New York Produce form. Ordinarily, the lien will not extend to cargo owned by third parties: see et seq.) Unlike Clause 18 of the New York Produce form, however, there is no express grant of a lien on “subfreights” so that the owners’ position regarding security is uncertain if the cargo has been sold to a third party. Of course, if the bill of lading incorporated the terms of the time charter by reference, the consignee could well be said to have purchased cargo subject to a lien. However, this is not a common practice in the tanker trade. 38A.50 The charterer’s lien on the ship is express and quite broad. Under U.S. law, this would be clearly enforceable and subject the ship to in rem proceedings in the United States District Court.

38A.51 Clause 11—Off-hire

882 11 Off-Hire
883 a General Provisions
884   (i) In the event of loss of time from repairs; breakdown of machinery (whether
885   partial or otherwise) including, without limitation, tank coatings; interference
886   by authorities; collision, stranding, fire, or other accident or damage to the
887   Vessel or cargo (not caused by the fault of Charterer) preventing, or which
888   would prevent, the full and efficient working of the Vessel for more than three
889   (3) consecutive hours, or
890   (ii)In the event of loss of time (whether or not continuing for any length of time)
891   from deficiency of men or stores; breach of orders or neglect of duty by the
892   Master, officers or crew; or from the consequences of illness or injury to, or
893   strikes by, or refusal, inability or unwillingness to sail or otherwise do work on
894   the part of the Master, officers or crew; or from labor-related picketing or
895   boycott due to the Vessel or crew union affiliation or lack thereof, at places of
896   loading, discharge, bunkering, or elsewhere by persons or organizations
897   other than the Master, officers or crew of the Vessel; or from deviation (which
898   expression includes, without limitation, putting back or putting into any port or
899   place other than that to which the Vessel was bound under orders from
900   Charterer) for the purpose of obtaining medical advice or treatment, or
901   landing any injured, ill or other person, or the body of a deceased person on
902   board (other than any person who may be carried at Charterer’s request);
903   while saving or attempting to save life or property or going to the aid of a ship
904   in distress (whether voluntary or not), or
905   (iii) In the event of loss of time (taking into account, where appropriate, the three-
906   hour franchise in sub-paragraph (i) above) from failure of the Vessel for any
907   reason to fulfill the requirements of Clause 2 and/or Clause 4; then,
908   payment of hire shall cease for all time lost until the Vessel is again in an efficient
909   state to resume her service and has regained a point of progress equivalent to
910   that when the hire ceased hereunder, including, without limitation, return to the
911   berth, queue position, or place occupied by the Vessel when the Vessel went off-
912   hire. The cost of fuel consumed while the Vessel is off-hire hereunder, as well as
913   all port charges, pilotage, and other expenses incurred during such period or
914   consequent to the putting-in to any port or place other than that to which the
915   Vessel is bound, shall be borne by Owner; but should the Vessel be driven into
916   port or to anchorage by stress of weather or on account of accident to her cargo,
917   such loss of time shall be for Charterer’s account. If, upon the voyage, the speed
918   of the Vessel is reduced or her fuel consumption is increased by breakdown,
919   casualty, or inefficiency of Master, officers, or crew, so as to cause a delay of
920   more than eight hours in arriving at the Vessel’s next port or an excess
921   consumption of more than one day’s fuel, hire for the time lost and cost of extra
922   fuel consumed, if any, shall be borne by Owner. Any delay by ice or time spent
923   in quarantine shall be for Charterer’s account, except delay in quarantine
924   resulting from the Master, officers, or crew having communications with the shore
925   at an infected port where Charterer has given the Master adequate written notice
926   of infection, which shall be for Owner’s account, as shall also be any loss of time
927   through detention by authorities as a result of charges of smuggling or of other
928   infraction of law by the Master, officers, or crew. 38A.51
929 b Cumulative Off-Hire
930   If the periods of time lost, for which hire does not cease to be payable under the
931   provisions of Clause 11a because each such period or delay is not of more than
932   three (3) consecutive hours duration, exceed in the aggregate twenty-four (24)
933   hours in any charter party year (and pro rata for part of a year), hire shall not be
934   payable for all time lost during such twenty-four (24) hour franchise period as
935   well as the excess beyond such period and any hire overpaid by Charterer shall
936   be repaid by Owner. The term “charter party year” means consecutive periods of
937   one year, with the first commencing on the date of delivery under the Charter.
938 c Detention of the Vessel
939   In the event of loss of time by detention of the Vessel by authorities at any place
940   in consequence of legal proceeding against the Vessel, Owner, Vessel operator,
941   Master and/or crew, or by reason of any strike or boycott against the Vessel,
942   payment of charter hire shall cease for all time so lost. The cost of fuel
943   consumed as well as all additional port charges, pilotage, and other expenses
944   incurred during the time so lost shall be borne by Owner. If any such loss of time
945   shall exceed thirty (30) consecutive days, Charterer shall have the option to
946   cancel the Charter by written notice given to Owner while the Vessel remains so
947   detained, without prejudice to any other right Charterer may have in the
948   premises.
949 d Owner’s Due Diligence
950   The provisions of the Charter providing for Vessel off-hire and Related Off-Hire
951   Expense, including, without limitation, Clause 3 and Clause 11, shall be fully
952   operative regardless of any due diligence Owner may have exercised.
953 e Trading While Off-Hire
954   Owner may not, under any circumstances, trade the Vessel for its own account
955   during any period of off-hire.
956 f Reservation
957   Nothing in Clause 11 shall affect any other provisions of the Charter stipulating
958   loss of time for Vessel’s or Owner’s account or otherwise providing for
959   suspension or cessation of hire or other rights and remedies for loss or
960   diminution of Vessel services under the Charter.
38A.52 There are several important differences between the ExxonMobil off-hire provisions and those of dry cargo forms, such as the New York Produce form. Thus, under the ExxonMobil form the ship will go off-hire for delays caused by “interference by authorities.” This is not the case under the New York Produce off-hire clause, although it does cover time lost due to “restraint of Princes.” 38A.53 In order for off-hire to accrue under the first part of the clause (i.e., for breakdowns of machinery, collision, etc.) the delay must be for at least three hours. Once the three-hour minimum is met, however, the ship will be off-hire for the entire period of the delay, including the three-hour “franchise” period. Furthermore, paragraph (b) requires the addition of all periods of delay under three hours, and if they aggregate more than 24 hours in a year (or pro rata for part of a year) the ship will be off-hire for the excess. 38A.54 The clause also provides that the ship is off-hire for any deviation to land sick or injured “persons,” except those carried at the charterers’ request. This would usually mean deviating to land disabled crewmen. Again, this is a category of off-hire not within Clause 15 of the New York Produce form. Moreover, for the second group of delays subject to off-hire (i.e., deficiency of men, deviation, etc.) there is no minimum “franchise” period. 38A.55 The off-hire is measured not by the period of the ship’s incapacity, but rather by the time the use of the ship has been effectively lost to the charterer, i.e. from the commencement of the breakdown or deviation until the ship is again in a position equivalent to that she was in when the breakdown occurred or the deviation began. This contrasts with the line of cases interpreting Clause 15 of the New York Produce form, treating the ship as off-hire only for the period of actual incapacity: see et seq. 38A.56 All the off-hire provisions must be read in conjunction with Clause 8. Thus, even if there is no off-hire because the applicable minimums have not been met, the loss of time will of course “count” in so far as computation of the ship’s average speed is concerned. By the same token, actual off-hire periods are excluded from the calculations of speed and consumption under Clause 8. 38A.57 The final sentence of paragraph (a) allocates off-hire for quarantine delays. Under the corresponding New York Produce form, there is no specific mention of quarantine, and numerous disputes have arisen as to whether the circumstances of the quarantine gave rise to a “deficiency of men” or “restraint of Princes” for which the ship was off-hire. 38A.58 Paragraph (c) settles in the charterers’ favor the issue of whether the ship is off-hire if she is arrested or attached (although it is silent with respect to the situation where the ship is arrested or attached in connection with claims for which the charterer bears ultimate responsibility). It also grants the charterer the option to cancel if the arrest continues for 30 consecutive days. Thus, an owner who lacks the resources to post the required security risks losing a valuable charter if the ship is subjected to prolonged legal restraint: see discussion at et seq.

38A.59 Clause 12—Dry-docking and Repairs

961 12 Dry-docking and Repairs
962 a General Provisions
963   Owner, at its expense, shall dry-dock the Vessel, clean and paint the Vessel’s
964   bottom, and make all overhaul and other necessary repairs at reasonable
965   intervals. Such overhaul or repair intervals shall not be less than thirty (30)
966   months and such dry-docking intervals shall not be less than sixty (60) months
967   unless the Vessel’s flag state or classification society requires shorter intervals.
968   For the purpose of dry-docking or repair, Charterer shall allow the Vessel to
969   proceed to an appropriate port. Owner shall be solely responsible for such dry-
970   docking and repairs, and also for gas-freeing the Vessel upon each occasion. All
971   towing, pilotage, fuel, and other expenses incurred while proceeding to and from
972   and while in and waiting for dry dock or repair shall also be for Owner’s account.
973   Fuel used during such dry-docking or repair periods, as provided in Clause 12 or
974   Clause 15, or used in proceeding to or from the port of dry-docking or repair, will
975   be charged to Owner by Charterer at the price charged to Charterer by its bunker
976   supplier at such port if bunkers are obtained there, or at the next replenishment
977   port.
978 b Adjustment of Hire
979   In case of dry-docking or repair pursuant to Clause 12 at a port where the Vessel
980   is to load, discharge or bunker under Charterer’s orders, hire shall be suspended
981   from the time the Vessel receives free pratique on arrival, if in ballast, or upon
982   completion of discharge of cargo, if loaded, until the Vessel is again in all
983   respects ready for service. In case of dry-docking or repair at a port other than
984   where the Vessel loads, discharges or bunkers under Charterer’s orders, the
985   following time and bunkers shall be deducted from hire: The total time and
986   bunkers, including dry-dock or repair port call, for the actual voyage from the last
987   port of call under Charterer’s orders to the next port of call under Charterer’s
988   orders, less the theoretical voyage time and bunkers for the direct voyage from
989   said last port of call to said next port of call. The theoretical voyage will be
990   calculated on the basis of the sea buoy to sea buoy distance at the warranted
991   speed and consumption stipulated in Clauses 8a and 8b.
992 c Accumulation of Off-Hire Time
993   The period during which hire is suspended, including time in and waiting for dry
994   dock and repairs, until the Vessel again comes on-hire under the terms of Clause
995   12b shall count as off-hire time under the terms of the Charter.
996 d Dry-docking Area
997   When dry-docking or repair is required, the Vessel may only be dry-docked or
998   repaired within the Vessel’s then-current trading pattern or area unless Charterer
999   pre-agrees otherwise in writing. Owner may not, under any circumstances, trade
1000   the Vessel for its own account on the voyage to or from the dry dock or repair
1001   location.
1002 e Notices
1003   Except in case of emergency, Owner shall give Charterer no less than three
1004   months written notice of its intention to dry-dock or repair the Vessel, which
1005   notice shall include Owner’s estimate of the time required to complete the
1006   planned dry-docking or repair. Owner shall also promptly give Charterer written
1007   notice if Owner’s original estimate of the duration of the dry-docking or repair
1008   period changes by more than three days. In any case, Owner shall give no less
1009   than ten days written notice of the date for completion of any planned dry-dock or
1010   repair, failing which any time thereby lost to Charterer shall be off-hire time.
38A.60 Clause 12 is a fairly straightforward provision requiring the ship “dry-docking intervals shall not be less than sixty (60) months unless the Vessel’s flag state or classification society requires shorter intervals.” As indicated in the comment under Clause 8, however, disputes may arise if the charterer’s use of the ship requires exceptional bottom cleaning to avoid loss of speed. 38A.61 Paragraph (b) represents an effort to make off-hire for drydocking concomitant with the charterers’ loss of trading time. It may not always be apparent just what “theoretical voyage” should be deducted from the time spent in deviating to the drydock, since the location of the drydock may cause a change in orders. However, in practice the owner and the charterer usually co-operate in arranging a drydocking so as to minimize the charterers’ loss of use of the ship and the period of off-hire.

38A.62 Clause 13—Owner Provides

1011 13 Owner Provides
1012 a Owner’s Responsibility
1013   Owner shall provide and pay for all provisions, deck and engine room stores,
1014   galley and cabin stores, P&I, hull, and other insurance on the Vessel (except as
1015   provided for in Clause 6a and Clause 21d), wages of the Master, officers, and
1016   crew, all certificates and other requirements necessary to enable the Vessel to
1017   be employed throughout the trading limits herein provided, consular fees
1018   pertaining to the Master, officers, and crew, all fresh water used by the Vessel,
1019   and all other expenses connected with the operation, maintenance, and
1020   navigation of the Vessel, and customs or import duties arising in connection with
1021   any of the foregoing.
1022 b Wages, Provisions and Stores
1023   Any amounts expended for wages, provisions, and stores (insofar as such
1024   amounts are in respect of a period when the Vessel is on-hire) shall not be
1025   deemed a general average expenditure.
1026 c Lubricants
1027   When, during the Charter Term, Owner plans to purchase lubricants for the
1028   Vessel, Owner shall purchase such lubricants from one of Charterer’s associated
1029   or affiliated companies whenever they are available at competitive prices. In the
1030   event lower prices are quoted to Owner by any supplier at the relevant port(s),
1031   Owner shall give one of Charterer’s associated or affiliated companies the
1032   opportunity to meet such quotation
38A.63 This section is similar to Clause 1 of the New York Produce form. It should be noted, however, that under the above wording the owner undertakes to provide all “certificates” necessary to employ the ship within the permissible trading limits. This would no doubt include the “certificates of financial responsibility” required under United States oil pollution regulations and similar documents which may now or hereafter be required in other jurisdictions.

38A.64 Clause 14—Officers’ Duties

1033 14 Officers’ Duties
1034 a Master’s Duties
1035   The Master, although appointed by and in the employ of Owner and subject to
1036   Owner’s direction and control, shall observe the orders of Charterer in
1037   connection with Charterer’s agencies, arrangements, and employment of the
1038   Vessel’s services hereunder. The Master shall prosecute all voyages with the
1039   utmost dispatch and render all reasonable assistance with the Vessel’s crew and
1040   equipment, including, without limitation, hoisting, connecting and disconnecting
1041   hoses at ports or sea-berths when requested or when such assistance is the
1042   normal practice. If a conflict arises between loading or discharge terminal orders
1043   and Charterer’s orders, Master shall stop cargo operations and promptly request
1044   instructions from Charterer by the fastest available means. Nothing in Clause
1045   14, or elsewhere in the Charter, shall be construed as creating a demise of the
1046   Vessel to Charterer, nor as vesting Charterer with any control over, or
1047   responsibility for, the management, operation, and/or navigation of the Vessel.
1048 b Logs
1049   The Master and the engineers shall timely keep and sign full and correct logs of
1050   the voyages, which are to be patent to Charterer and its agents, and true log
1051   abstracts or such other paper or electronic forms as Charterer may require are to
1052   be sent, as instructed, directly to Charterer from each port of call.
1053 c Conduct
1054   If Charterer shall have reason to be dissatisfied with the conduct of the Master,
1055   officers or crew, Owner shall, on receiving particulars of the complaint,
1056   investigate it and, if reasonably required, make a change in the appointments.  
38A.65 These provisions are quite similar to the comparable ones of the New York Produce form. See discussion at et seq. 38A.66 In The Zacharia T, SMA 2224 (Arb. at N.Y. 1986), the vessel was chartered to carry a cargo of crude oil from Esmeraldas, Ecuador to Corpus Christi, Texas. The charter provided that the vessel was to load a full cargo of crude oil, “consistent with safe transit draft for the Panama Canal of 39’ 6” tropical fresh water.” The safe draft instruction was later amended by charterer to a maximum transit draft of 38’ 11” TFW. The vessel loaded at a single-point mooring buoy and because prevailing swell conditions made it virtually impossible to obtain an accurate draft reading, the master requested that the loading master advise him when 51,000 long tons had been pumped aboard. When loading was finished, it was established by surveyors that the quantity loaded was 53,435 long tons. Because the excess tonnage put the ship at a draft which would have prevented her from transiting the Panama Canal, the master registered a protest. It was not feasible to off-load any of the cargo at Esmeraldas and, instead, the vessel lightered at Balboa and reloaded the excess cargo after the ship and the lightering vessel had passed through the Panama Canal. A dispute arose between the owner and charterer as to liability for the lightering expenses and off-hire. The panel held that the owner was liable because it was the master’s responsibility to ensure that the vessel was not overloaded. According to the panel:
[I]t always remains the Master’s duty to see to it that the vessel is loaded and trimmed in such a manner as to safely prosecute the intended voyage. If the intended passage involves transit through a draft limiting channel or canal, as here, it is incumbent on the Master to take this into account and load the vessel in such a manner as to accomplish the voyage without delay or extra expense.

38A.67 Clause 15—Fuel, Port Charges, etc

1057 15 Fuel, Port Charges, Etc.
1058 a Fuel, Port Charges, Dues and Fees
1059   Charterer shall provide and pay for all fuel. Owner, at each fueling, shall arrange
1060   for and retain properly sealed and identified samples of each grade of fuel
1061   received and shall hold same subject to Charterer’s written instructions.
1062   Charterer shall also pay for all port charges (including the cost of obtaining a
1063   certificate of arrangements for oil recovery boats or devices at Japanese ports),
1064   light dues, dock dues, canal dues, pilotage, consular fees (except those
1065   pertaining to Master, officers and crew), tugs necessary for assisting the Vessel
1066   in, about, and out of port for the purpose of carrying out the Charter, and
1067   Charterer’s agencies and commissions incurred for Charterer’s account. Owner
1068   shall, however, reimburse Charterer for any fuel used or any expenses incurred
1069   in making a general average sacrifice or expenditure, and for any fuel consumed
1070   during, or related to, dry-docking, repair of the Vessel, or other periods of off-hire
1071   and said reimbursement(s) shall in no event be deemed a General Average
1072   expenditure. Charterer shall nominate and appoint Vessel’s agents at all port(s)
1073   and place(s). Such agents shall be paid for by Charterer; however, when such
1074   agents are providing assistance or services to the Vessel, Master, crew or
1075   Owner, Owner shall instruct such agents who shall represent solely the Owner
1076   and Vessel.  
38A.68 This provision is consistent with the usual allocation of fuel costs to the charterer. It may be noted that fuel consumed as part of a general average sacrifice is for the owners’ account, which is logical since the ship and cargo will then share this cost in accordance with established rules governing apportionment of general average expenses.

38A.69 Clause 15(b)—Tugs and Pilots

1077 b Tugs and Pilots
1078   In engaging pilotage and tug assistance, Charterer is authorized by Owner to
1079   engage them on behalf of Owner on the usual terms and conditions for such
1080   services then prevailing at the ports or places where such services are engaged,
1081   including provisions there prevailing, if any, making pilots, tug captains, or other
1082   personnel of any tug the borrowed servants of Owner.  
38A.70 Paragraph (b) of Clause 15 is obviously aimed at towage and pilotage conditions such as the so-called “U.K. Towing Conditions.” These are standard contract terms that make the shipowner responsible not only for damage caused by errors on the part of the ship, but also for errors on the part of the tug. Such contracts are void in the United States as against public policy. However, they are valid in England and elsewhere. By this clause the charterer is authorized to bind the owner to these terms, if they are customary or required at the particular port or terminal where the services are needed.

38A.71 Clause 15(c)—Charterer’s Responsibility

1083 c Charterer’s Responsibility
1084   Neither Charterer, nor its agents, nor any associated or affiliated company of
1085   Charterer, nor any of their agents, directors, officers, or employees shall be
1086   under any responsibility for any loss, damage, or liability arising from any
1087   negligence, incompetence, or incapacity of any pilot, tug captain, or other
1088   personnel of any tug, or arising from the terms of the contract of employment
1089   thereof, or for any unseaworthiness or insufficiency of any tug or tugs, the
1090   services of which are arranged by Charterer on behalf of Owner, and Owner
1091   agrees to indemnify and hold Charterer, its agents, its associated and affiliated
1092   companies, and their agents, directors, officers and employees harmless from
1093   and against any and all such consequences.
38A.72 Paragraph (c) expresses what is in all probability the general rule in any event, i.e., the charterer engages the tug or pilot on behalf of the owner and assumes no responsibility for the safe navigation of the ship. However, this provision should be read in conjunction with the limited “safe port” and “safe berth” obligations of Clause 6. These would seem to preclude the charterer from directing the ship to a port or berth which he knows or should know lacks adequate towage facilities. See The Agia Erini II, SMA 1602 (Arb. at N.Y. 1981).
In Scholl v. Chuang Hui Marine Co. Ltd., 646 F.Supp. 137, 1987 AMC 1162 (D.Conn. 1986), the charter contained a clause similar to ExxonMobil Clause 15(c). The charterer and owner were sued by a petroleum inspector who claimed that he was injured when he slipped on an oily substance on the deck of the tanker. The court granted summary judgment in favor of charterer and dismissed the petroleum inspector’s claim, holding that the charterer had no duty to the inspector to maintain the deck in a safe condition.

38A.73 Clause 15(d)—Charterer’s Tugs or Pilots

1094 Charterer’s Tugs or Pilots
1095 Charterer shall have the option of using its own tugs or pilots, or tugs or pilots
1096 made available or employed by any associated or affiliated company, to render
1097 towage or pilotage services to the Vessel. In this event, the terms and conditions
1098 relating to such services prevailing in the port where such services are rendered
1099 and applied by independent tugboat owners or pilots shall be applicable, and
1100 Charterer, its associated or affiliated company and its pilots shall be entitled to all
1101 exemptions from, and limitations of, liability applicable to said independent
1102 tugboat owners or pilots and their published tariff terms and conditions.
38A.74 Clause 15(d) is an effort to have the charterers’ affiliated towing companies treated as separate and independent entities for purposes of determining liability in the event of a casualty. It is conceivable that claims involving such tugs would be held subject to New York arbitration under the charter, in which case the owner could urge that the towing conditions could not be enforced. Since such conditions would presumably be valid where they were promulgated, some rather difficult conflict of laws issues would be raised.

38A.75 Clause 15(e)—Exceptions

1103 e Exception
1104   Any and all requirements of the Vessel, whatsoever, during or in connection with
1105   periods of off-hire and during loss of time for Owner’s account, whether or not
1106   Vessel is off-hire, shall be provided and/or paid for by Owner, notwithstanding
1107   that such requirements would otherwise be provided for and/or paid for by
1108   Charterer under Clause 15.  

38A.76 Clause 16—Additional Equipment

1109 16 Additional Equipment
1110   Charterer, subject to Owner’s approval not to be unreasonably withheld, shall be at
1111   liberty to fit any additional pumps and/or gear for loading or discharging cargo or
1112   other purposes it may require beyond that which is on board at the commencement
1113   of the Charter, and to make the necessary connections with steam or water pipes or
1114   other systems, such work to be done at its expense and time, and such pumps
1115   and/or gear so fitted to be considered its property, and Charterer shall be at liberty to
1116   remove same at its expense and time during or at the expiry of the Charter; the
1117   Vessel to be left in her original condition to Owner’s satisfaction, ordinary wear and
1118   tear excepted. Owner shall, at its expense, provide appropriate maintenance for any
1119   equipment installed by Charterer.
38A.77 The addition of equipment such as pumps may complicate the evaluation of the vessel’s performance under Clause 8. Moreover, notwithstanding the assertion that the equipment remains the charterers’ property, it may be subject to maritime liens against the ship: see Payne v. The Tropic Breeze, 412 F.2d 707 (1st Cir. 1969).

38A.78 Clause 17—Lay-up

1120 17 Lay-up
1121   Charterer shall have the option of laying-up the Vessel for all or any portion of the
1122   Charter Term, in which case hire hereunder shall continue to be paid, but there shall
1123   be credited against such hire the whole amount which Owner shall save (or
1124   reasonably should save) during such period of lay-up through reduction in expenses,
1125   less any extra expenses to which Owner is put as a result of such lay-up. The place
1126   of such lay-up shall be subject to Owner’s approval, not to be unreasonably withheld.
1127   Should Charterer, having exercised the option granted hereunder, desire the Vessel
1128   to again be put into service, Owner will, upon receipt of written notice from Charterer
1129   to such effect, immediately take steps to restore the Vessel to service as promptly as
1130   possible. The option granted to Charterer hereunder may be exercised one or more
1131   times during the currency of the Charter or any extension thereof.  
38A.79 Lay-up is a frequently utilized privilege when the tanker market is depressed. The basic formula for apportioning savings and expenses is simple and fair, although it may prove quite complicated in practice. For example, calculating “savings” in insurance and maintenance may be difficult if the ship is part of a large fleet. Similarly, the effects of long term lay-ups on a ship’s subsequent performance are difficult to gauge, and there no doubt will be disputes as to just what degree of “restoration” the charterer is responsible for.

38A.80 Clause 18—Requisition of Vessel

1132 18 Requisition of Vessel
1133 a Requisition of Title
1134   In the event that title to the Vessel shall be requisitioned or seized by any
1135   government authority (or the Vessel shall be seized by any person, entity, or
1136   government under circumstances that are equivalent to requisition of title), the
1137   Charter shall terminate automatically as of the effective date of such requisition
1138   or seizure.
1139 b Other Requisition
1140   In the event that the Vessel should be requisitioned for use or seized by any
1141   government authority or by any person or entity on any basis not involving or not
1142   equivalent to requisition of title, it shall be off-hire hereunder during the period of
1143   such requisition, and any hire or any other compensation paid in respect of such
1144   requisition shall be for Owner’s account; provided, however, that if such
1145   requisition continues for a period in excess of sixty (60) days, Charterer shall
1146   have the option to terminate the Charter upon written notice to Owner. Any
1147   periods of off-hire under Clause 18b shall be subject to Charterer’s option for off-
1148   hire extension set forth in Clause 1c.  
38A.81 Even without a provision such as this clause, requisition of title to a ship has traditionally been held to “frustrate” a charter.(see above, paragraph ). 38A.82 In so far as requisition of use is concerned, the application of the doctrine of frustration is less certain. Paragraph (b) is framed in terms of an option given to the charterer to terminate if the requisition lasts in excess of 60 days. There is no provision as to when the option must be exercised, so that the clause would probably be read as continuing the option for the duration of the requisition. No comparable option is given to the owner, although in the case of a sufficiently lengthy requisition he could presumably declare the charter “frustrated” under general legal principles (assuming, of course, that the charterer had elected not to exercise his option). 38A.83 It should be noted that all off-hire during a period of requisition of use may be added to the term of the charter at the charterer’s option.

38A.84 Clause 19—Redelivery

1149 19 Redelivery
1150 a Redelivery Conditions
1151   Unless the Charter shall previously have been terminated by loss of the Vessel
1152   or as otherwise provided in the Charter or by law, Charterer shall redeliver the
1153   Vessel to Owner, free of cargo, at the expiration of the Charter Term upon
1154   completion of discharge at a port or place, worldwide, in Charterer’s option, and
1155   shall give written notice of the date and hour of such redelivery. In addition,
1156   Charterer shall give Owner written notice of the estimated date of such redelivery
1157   30, 20, 10 and 5 days in advance of same. At Charterer’s option, the Vessel may
1158   be redelivered to Owner with tanks in a clean or dirty condition and in no event
1159   shall Charterer be required to redeliver the Vessel gas-free.
1160 b Fuel at Redelivery
1161   Owner shall accept and pay for all fuel in the Vessel’s bunker tanks when the
1162   Charter terminates. Payment for such fuel shall be in accordance with the last
1163   documented net price paid by Charterer, excluding any delivery charges.
1164 c Early Redelivery
1165   If the Charter is terminated prior to the expiration of the Charter Term in
1166   accordance with any provision of the Charter or by reason of law, Owner shall
1167   reimburse Charterer for the value of any hire paid but not earned, the value of
1168   fuel in the Vessel’s bunker tanks at termination in accordance with Clause 19b,
1169   any other sums Charterer is entitled to under the Charter, as well as any
1170   damages Charterer may sustain if termination is due to Owner fault or breach of
1171   the Charter.
38A.85 It is customary to provide for redelivery within a range of ports rather than at a particular port, thereby giving the charterer flexibility during the final period of trading under the charter.

38A.86 Clause 20—Bills of Lading

1149 19 Redelivery
1150 a Redelivery Conditions
1151   Unless the Charter shall previously have been terminated by loss of the Vessel
1152   or as otherwise provided in the Charter or by law, Charterer shall redeliver the
1153   Vessel to Owner, free of cargo, at the expiration of the Charter Term upon
1154   completion of discharge at a port or place, worldwide, in Charterer’s option, and
1155   shall give written notice of the date and hour of such redelivery. In addition,
1156   Charterer shall give Owner written notice of the estimated date of such redelivery
1157   30, 20, 10 and 5 days in advance of same. At Charterer’s option, the Vessel may
1158   be redelivered to Owner with tanks in a clean or dirty condition and in no event
1159   shall Charterer be required to redeliver the Vessel gas-free.
1160 b Fuel at Redelivery
1161   Owner shall accept and pay for all fuel in the Vessel’s bunker tanks when the
1162   Charter terminates. Payment for such fuel shall be in accordance with the last
1163   documented net price paid by Charterer, excluding any delivery charges.
1164 c Early Redelivery
1165   If the Charter is terminated prior to the expiration of the Charter Term in
1166   accordance with any provision of the Charter or by reason of law, Owner shall
1167   reimburse Charterer for the value of any hire paid but not earned, the value of
1168   fuel in the Vessel’s bunker tanks at termination in accordance with Clause 19b,
1169   any other sums Charterer is entitled to under the Charter, as well as any
1170   damages Charterer may sustain if termination is due to Owner fault or breach of
1171   the Charter.  
1172 20 Bills of Lading
1173 a Signatures
1174   Bills of Lading shall be signed by the Master as presented, the Master attending
1175   daily, if required, at the offices of Charterer or its agents. However, at
1176   Charterer’s option, Charterer or its agents may sign Bills of Lading on behalf of
1177   the Master. All Bills of Lading shall be without prejudice to the Charter, and
1178   Charterer shall indemnify Owner against all consequences or liabilities which
1179   may arise from any inconsistency between the Charter and any Bills of Lading or
1180   other documents signed by Charterer or its agents, or by the Master at their
1181   request, or which may arise from an irregularity in papers supplied by Charterer
1182   or its agents
1183 b Carriage of Cargo
1184   Notwithstanding anything in the Charter to the contrary, the carriage of cargo
1185   under the Charter and under all Bills of Lading issued for the cargo shall be
1186   subject to the statutory provisions and other terms set forth or specified in
1187   Clauses 20b(1) through 20b(6) and such terms shall be incorporated verbatim, or
1188   be deemed incorporated by reference, in any such Bill of Lading. In such
1189   Clauses and in any Act referred to therein, the word “Carrier” shall include Owner
1190   and any chartered owner of the Vessel.
1191   (1) Clause Paramount
1192   This Bill of Lading shall have effect subject to the provisions of the Carriage
1193   of Goods by Sea Act of the United States, approved April 16, 1936, except
1194   that if this Bill of Lading is issued at a place where any other act, ordinance,
1195   or legislation gives statutory effect to:
1196   1) the International Convention for the Unification of Certain Rules relating to Bills of Lading at Brussels, 15th 1197 August 1924 (“Hague Rules”), or
    2) the Hague Rules as amended by the Protocol signed at Brussels on 23rd 1198
1199   February 1968 (“Hague/Visby Rules”), or
1200   3) the United Nations Convention on the Carriage of Goods by Sea 1978
1201   (“Hamburg Rules”),
1202   then this Bill of Lading shall have effect subject to the provisions of such act,
1203   ordinance, or legislation. The applicable act, ordinance, or legislation
1204   (“Act”) shall be deemed to be incorporated herein and nothing herein
1205   contained shall be deemed a surrender by the Carrier of any of its rights or
1206   immunities or an increase of any of its responsibilities or liabilities under the
1207   Act. If any term of this Bill of Lading be repugnant to the Act to any extent,
1208   such term shall be void to that extent but no further.
1209   (2) Jason Clause
1210   In the event of accident, danger, damage or disaster before or after the
1211   commencement of the voyage, resulting from any cause whatsoever,
1212   whether due to negligence or not, for which, or for the consequences of
1213   which, the Carrier is not responsible, by statute, contract or otherwise, the
1214   cargo shippers, consignees, or owners of the cargo shall contribute with the
1215   Carrier in General Average to the payment of any sacrifices, losses, or
1216   expenses of a General Average nature that may be made or incurred and
1217   shall pay salvage and special charges incurred in respect of the cargo. If a
1218   salving ship is owned or operated by the Carrier, salvage shall be paid for as
1219   fully as if the said salving ship or ships belonged to strangers. Such deposit
1220   as the Carrier or its agents may deem sufficient to cover the estimated
1221   contribution of the cargo and any salvage and special charges thereon shall,
1222   if required, be made by the cargo shippers, consignees or owners of the
1223   cargo to the Carrier before delivery.
1224   (3) General Average
1225   General Average shall be adjusted, stated, and settled according to York-
1226   Antwerp Rules 2004 (“Rules”) and, as to matters not provided for by those
1227   Rules, according to the laws and usage at the port of New York; provided
1228   that, when there is an actual escape or release of oil or pollutant substances
1229   from the Vessel (irrespective of Vessel location), the cost of any measures,
1230   continued or undertaken on that account, to prevent or minimize pollution or
1231   environmental damage shall not be allowable in General Average; and,
1232   Provided further, that any payment for pollution damage (as defined in Article
1233   I 6.(a) of the 1992 Protocol to the International Convention on Civil Liability
1234   for Oil Pollution Damage) shall also not be allowable in General Average. It
1235   is understood and agreed, however, that the cost of measures to prevent
1236   pollution or environmental damage, undertaken in respect of oil or pollutant
1237   substances which have not escaped or been released from the Vessel, shall
1238   be included in General Average to the extent permitted by the Rules. If a
1239   General Average statement is required, it shall be prepared at such port by
1240   an Adjuster from the port of New York appointed by the Carrier and approved
1241   by Charterer of the Vessel. Such Adjuster shall attend to the settlement and
1242   the collection of the General Average, subject to customary charges.
1243   General Average Agreements and/or security shall be furnished by Carrier,
1244   and/or Charterer, and/or Owner, and/or Consignee of the cargo, if requested.
1245   Any cash deposit being made as security to pay General Average and/or
1246   salvage shall be remitted to the Average Adjuster and shall be held by the
1247   Adjuster at the Adjuster’s risk in a special account in a duly authorized and
1248   licensed bank at the place where the General Average statement is
1249   prepared.
1250   (4) Both to Blame
1251   If the Vessel comes into collision with another ship as a result of the
1252   negligence of the other ship and any act, neglect or default of the Master,
1253   mariner, pilot, or the servants of the Carrier in the navigation or in the
1254   management of the Vessel, the owners of the cargo carried hereunder shall
1255   indemnify the Carrier against all loss or liability to the other or non-carrying
1256   ship or its owners insofar as such loss or liability represents loss of, or
1257   damage to, or any claim whatsoever of the owners of said cargo, paid or
1258   payable by the other or recovered by the other or non-carrying ship or its
1259   owners as part of their claim against the carrying ship or Carrier. The
1260   foregoing provisions shall also apply where the owners, operators, or those
1261   in charge of any ships or objects other than, or in addition to, the colliding
1262   ships or objects are at fault in respect of a collision or contact. The
1263   provisions in this Clause 20b(4) shall only apply if Owner has exercised due
1264   diligence to make the Vessel seaworthy and properly manned, equipped,
1265   and supplied, with the burden of proof in this regard resting solely on Owner.
1266   (5) Limitation of Liability
1267   Any provision of the Charter to the contrary notwithstanding, the Carrier shall
1268   have the benefits of all limitations of, and exemptions from, liability accorded
1269   to the owner or chartered owner of vessels by any statute or rule of law for
1270   he time being in effect.
1271   (6) Deviation Clause
1272   Subject to Clause 11, the Vessel shall have liberty to sail with or without
1273   pilots, to tow or be towed, to go to the assistance of vessels in distress, to
1274   deviate for the purpose of saving life or property or of landing any ill or
1275   injured person on board, and to call for fuel at any port or ports in or out of
1276   the regular course of the voyage.
1277 c Bill of Lading Indemnity
1278   If Charterer requests Owner to deliver cargo at a discharge port or place either:
1279   1) Without prior presentation to the Vessel at the discharge port or place of one
1280   of the original Bills of Lading issued for the cargo, duly endorsed, and/or
1281   2) At a discharge port or place other than that specifically named in said Bills of
1282   Lading,
1283   Owner shall deliver the cargo in accordance with Charterer’s request if Charterer
1284   first executes and delivers a written indemnity in connection with such delivery in
1285   favor of Owner, Vessel, any chartered owner(s) of Vessel, Master, Vessel
1286   operators, agents and underwriters and delivers such indemnity to Owner or
1287   Owner’s designee. The subject indemnity shall meet the requirements of Clause
1288   20d and shall be limited in value to two hundred percent (200%) of the CIF value
1289   of the cargo.
1290 d Form of Indemnity
1291   The indemnity referred to in Clause 20c shall be a short form indemnity
1292   document incorporating the terms and conditions set forth in Clause 20e. This
1293   document (which must be properly filled-in) shall be given to Owner by electronic
1294   mail, telex, letter, or facsimile as requested by Owner and be in the exact form
1295   quoted below, which document, when transmitted, shall be deemed to have been
1296   signed by person acting on behalf of Charterer:
1297   QUOTE
1298   Time Charter of M.T. [Insert the vessel name] dated [Insert the date of the
1299   charter party] between [Insert the name of Owner], as Owner (“Owner”) and
1300   [Insert the name of Charterer], as Charterer (“Charterer”).
1301   Reference is made to the cargo (“Cargo”) now laden aboard the above Vessel
1302   “Vessel”). Pursuant to Clause 20c of the above-captioned charter party
1303   (“Charter”), the undersigned requests that Owner(s) of the Vessel deliver the
1304   Cargo at ____ unto ____ without prior discharge site
1305   presentation to the Vessel of all original Bills of Lading issued for the Cargo
1306   appropriately endorsed for such delivery and/or at a discharge port or site other
1307   than one specifically named in said Bills of Lading.
1308   In consideration of such delivery, the undersigned hereby gives an indemnity
1309   containing the terms set forth in Clause 20e of the Charter (“Indemnity Terms
1310   and Conditions”). The Indemnity Terms and Conditions are deemed
1311   incorporated in and made a part of this document. The term “Indemnifier” in the
1312   Indemnity Terms and Conditions shall be deemed to refer to the undersigned.
1313   The term “Cargo” and the phrase “Requested Delivery” in the Indemnity Terms
1314   and Conditions shall be deemed, respectively, to mean the Cargo and the
1315   delivery request set forth in the preceding paragraph of this document. The term
1316   “Ship” as used in the Indemnity Terms and Conditions shall be deemed to refer
1317   to the Vessel. The following information must be provided:
1318   Name of Charterer: _________________________________
1319   Name of Person Acting on Behalf of Charterer: _________________
1320   Authority/Title of Above Person: ______________________________
1321   Date Indemnity Given: _________________________________
1322   UNQUOTE
1323 e Indemnity Terms and Conditions
1324   (1) Nature of Indemnity
1325   Indemnifier shall indemnify and hold harmless the Owner of the Ship, any
1326   chartered Owner of the Ship, the Ship operator, the Ship Master, the Ship
1327   underwriters and the Ship agents (hereinafter jointly and individually called
1328   “Indemnitees”) in respect of any liability, loss, damage, costs (including, but
1329   not limited to attorney/client costs) and other expense of whatever nature
1330   which Indemnitees may sustain or incur by reason of the Requested
1331   Delivery.
1332   (2) Funds for Defense
1333   In the event of any legal action or proceedings being commenced against the
1334   Indemnitees in connection with the Requested Delivery, Indemnifier shall
1335   provide Indemnitees from time to time, on Indemnitees’ demand, with
1336   sufficient funds to defend the same.
1337   (3) Arrest or Detention
1338   If the Ship or any other vessel or other property belonging to the Indemnitees
1339   should be arrested or detained or if the arrest or detention thereof should be
1340   threatened for any claim in connection with the Requested Delivery, the
1341   Indemnifier shall provide, upon demand of the Indemnitees, such bail or
1342   other security as may be required to prevent such arrest(s) or detention(s) or
1343   to secure the release of the Ship or such vessel or other property from arrest
1344   or detention, and shall indemnify the Indemnitees in respect of any loss,
1345   damage, costs (including but not limited to attorney/client costs), and other
1346   expense resulting from such arrest or detention or threatened arrest or
1347   detention, whether or not the same may be justified, and to pay to the
1348   Indemnities, on the Indemnitees’ demand, the amount of such loss,
1349   damages, costs and/or expense.
1350   (4) Termination of Indemnity
1351   This Indemnity shall automatically become null and void, and Charterer’s
1352   liability hereunder shall cease, upon presentation of all original Bills of Lading
1353   duly endorsed to reflect delivery of Cargo in accordance with the Requested
1354   Delivery, or upon the expiration of thirty-six (36) months after completion of
1355   discharge, whichever occurs first; provided that no legal proceedings arising
1356   from delivery of the Cargo in accordance with the Requested Delivery have
1357   been instituted against the Indemnitees and/or Vessel within such thirty-six
1358   (36) month period. Owner shall advise Charterer with reasonable dispatch in
1359   writing if any proceedings are instituted.
1360   (5) Governing Law
1361   The within Indemnity shall be governed and construed in accordance with
1362   the internal substantive laws of the State of New York, U.S.A. The
1363   Indemnitees may, but shall not be obligated to, bring any legal action or
1364   proceeding with respect to such Indemnity in the Courts of the State of New
1365   York, U.S.A. or in the U.S. Federal Court situated therein and the Indemnifier
1366   unconditionally and generally accepts in regard to such legal action or
1367   proceeding, for itself and its property, the jurisdiction and venue of the
1368   aforesaid courts.
1369 f Arbitration of Bill of Lading Claims
1370   Any claim for loss, damage and/or non delivery of cargo carried pursuant to the
1371   Charter, made by any associated or affiliated company of Charterer and asserted
1372   to arise under Bill(s) of Lading issued for such cargo, shall be subject to Clause
1373   29 of the Charter, said associated or affiliated company having authorized
1374   Charterer to so agree on its behalf. If Clause 20f applies, the terms “Charterer”
1375   and “Charter” in Clause 29 shall be taken to mean, respectively, the
1376   aforementioned associated or affiliated company and Bill(s) of Lading.
38A.87 The ExxonMobil form follows the usual practice by providing that the master is to sign bills of lading “as presented,” but that such bills are to be “without prejudice” to the charter. In essence, this means that the form and provisions of the bill should create no obligation on the part of the owner, as a “carrier,” greater than the obligations created by the terms of the charter itself. Of course, paragraph (b) goes on to provide for the application of the Carriage of Goods by Sea Act (COGSA) to all carriage under the charter, thus effectively making the owner liable to cargo to the same extent as he would be if COGSA governed ex proprio vigore. Hence, only in the event of the charterer issuing a bill of lading increasing the carrier’s obligation to cargo would paragraph (a) come into play. 38A.88 Paragraph (b) provides for a far clearer incorporation of COGSA by reference than does the New York Produce form: see discussion at et seq. Thus, in cases where the charterer is the shipper, COGSA nevertheless governs the parties’ rights and immunities by agreement. This provision also requires the inclusion of a “Clause Paramount” in all bills of lading issued under the charter, together with the clauses enumerated as subparagraphs (2) through (6). 38A.89 The meaning of the statement that such clauses shall be “deemed” incorporated by reference in all bills of lading is not clear, since any third-party holder of a bill would not be bound to the terms of the charter unless they were incorporated in the bill by reference. As far as cargo owned by the charterer at all stages is concerned, the bill would be a mere receipt and document of title, and the charter itself would evidence the terms of the contract of carriage. 38A.90 The “New Jason Clause” is, of course, the traditional means of eliminating the carrier’s fault as a bar to recovery in general average. In accordance with the decision of the United States Supreme Court in The Jason, 225 U.S. 32 (1912), carriers are permitted to eliminate fault as a bar to recovery in general average, but only to the extent that they may validly exonerate themselves by contract from liability for cargo loss or damage. Thus, in practice, cargo will be liable for its proportion of general average expenses occasioned by “errors in navigation,” but not for general average expenses occasioned by the carrier’s lack of “due diligence” to make the vessel seaworthy. See, e.g., The Argo Merchant, SMA 2101 (Arb. at N.Y. 1985), wherein the charterer was held liable to make a general average payment. 38A.91 Under the ExxonMobil form general average is to be adjusted, stated and settled according to the York-Antwerp Rules of 2004 and the laws and usage at the port of New York. By its terms, the charter expressly excludes from General Average the cost of any measures to prevent or minimize pollution damage where there has been an actual escape of oil or pollutant, and excludes any payment for pollution damage as defined in the 1992 Protocol to the International Convention on Civil Liability for Oil Pollution Damage. The charter does, however, allow a General Average claim for the cost of preventing oil pollution where the oil or pollutant has not escaped from the ship. 38A.92 The “Both-to-Blame Collision Clause” is designed to require cargo on the carrying ship to indemnify her owner against the consequences of cargo’s right to recover in full from the non-carrying ship in a mutual fault collision case. Thus, if ship A collides with ship B, and both ships are at fault, cargo on A may recover its loss from B on a straight tort theory. (Cargo on A of course may not recover from A in the usual both-to-blame case, where A’s fault is negligent navigation, since “errors in navigation” is a defense under COGSA.) However, cargo’s recovery against B becomes part of B’s damages, part of which are then recoverable from A in proportion to A’s fault. The net result is that A will be indirectly liable for part of the cargo loss on A, even though A is under no direct liability for such loss. It is the avoidance of this indirect liability at which the clause is directed. 38A.93 The both-to-blame clause has long been held invalid under COGSA: see discussion at et seq. However, in American Union Transport Inc. v. United States, 1976 AMC 1480 (N.D.Cal. 1976), the court upheld its validity in private carriage. The question remains whether the both-to-blame clause would be considered valid when used in conjunction with a “Clause Paramount,” since the latter by its own terms would render invalid any clause inconsistent with COGSA, which would include the both-to-blame clause. The ExxonMobil incorporation of COGSA does not, however, expressly purport to make invalid all clauses inconsistent with COGSA, but only those clauses which reduce the carrier’s rights or immunities. Hence, it is arguable that the both-to-blame clause in the ExxonMobil form is valid for carriage of cargoes owned by the charterer. 38A.93 38A.94 Under United States law, the right of limitation of liability is available only to owners and bareboat charterers, and not to time or voyage charterers: 46 U.S.C. § 30501, 30505. Even an owner or bareboat chartered owner may not be entitled to limitation in respect of a liability arising under a “personal” contract, such as a charterparty: Pendleton Benner Line, 246 U.S. 353 (1918). Thus, since no United States statute or rule of law gives the owner the right to limit his liability under the charter, paragraph (b)(v) would appear to be ineffectual in a case where the owner is the “carrier” and the charterer is the cargo owner; in such a case the owner would be liable to the charterer without the benefit of a right of limitation for any cargo loss or damage resulting from a cause not excepted under the terms of the charter. 38A.95 Where, however, the governing contract of carriage is evidenced by a bill of lading which has been negotiated to a holder in due course, the owner will be entitled to limit his liability to the holder for cargo loss or damage not caused with his “privity or knowledge.” But if the bill of lading is issued by the charterer, the holder will be entitled to recover in full for cargo loss or damage resulting from a cause not excepted under COGSA, which would govern the bill of lading evidencing the contract of carriage between the charterer, as a “carrier,” and the holder of the bill. If the cause of the loss is a failure to exercise due diligence to make the vessel seaworthy, or some other cause for which ultimate liability rests on the owner under the terms of the charter, the charterer will of course be entitled to indemnity, and since the right to indemnity arises out of a “personal” contract (the charter), the owner will not be entitled to limit his liability vis-à-vis the charterer. The end result will be that the owner will, indirectly, be liable in full for the loss or damage. Paragraph (b)(5) of Clause 20 therefore appears to have no effect other than to make it clear that nothing in the charter is to be construed as depriving the owner of any legal right he would otherwise have to limit his liability to third parties. 38A.96 As with the both-to-blame clause, there may be some inconsistency between COGSA’s restrictions on deviation and a “liberties” clause such as 20(b)(6) of the ExxonMobil form, when the cargo is being carried for a third party under a bill of lading. However, when the carriage is performed for the charterer pursuant to the terms of the charter there would appear to be no reason why the provisions of the liberties clause should not be given full force.

38A.97 Clause 21—War Risks

1377 21 War Risks
1378 a Contraband
1379   No contraband of war shall be shipped, but petroleum and/or it products shall not
1380   be deemed contraband of war for the purposes of Clause 21.
1381 b War Zones
1382   The Vessel shall not, however, be required, without the consent of Owner, which
1383   shall not be unreasonably withheld, to enter any port, place, or zone that is
1384   involved in a state of war, warlike operations or hostilities, civil strife, terrorism
1385   and other politically motivated activities, or piracy, whether there be a declaration
1386   of war or not, where it might reasonably be expected to be subject to capture,
1387   seizure or arrest, or to a hostile act by a belligerent power (the term “power”
1388   meaning any de jure or de facto authority or any other purported governmental
1389   organization maintaining naval, military or air forces or any terrorist group or
1390   organization).
1391 c War Risks Insurance
1392   For purposes of Clause 21, it shall be unreasonable for Owner to withhold
1393   consent to any voyage, route, or port or place of loading or discharge if insurance
1394   against all risks defined in Clause 21b is then available commercially or under a
1395   government program in respect to such voyage, route, or port or place of loading
1396   or discharge. If such consent is given by Owner, Charterer shall pay any
1397   provable additional cost of insuring the Vessel against hull war risks over and
1398   above such costs in effect on the date of the Charter, as shown in Schedule B, in
1399   an amount equal to the insured value under its ordinary hull policy but not
1400   exceeding [Insert the insured value under the Vessel’s hull policy] U.S. dollars.
1401   In addition, Owner may purchase war risk insurance on ancillary risks such as
1402   loss of hire, freight disbursements, total loss, etc., if it carries such insurance for
1403   ordinary marine hazards. Subject to the just-mentioned total insurance limitation
1404   of [Insert the insured value under the Vessel’s hull policy] U.S. dollars, the
1405   provable additional costs of such ancillary insurance over and above the costs in
1406   effect on the date of the Charter shall be for Charterer’s account. If such
1407   insurance is not obtainable commercially or through a government program, the
1408   Vessel shall not be required to enter or remain at any such port, place, or zone.
1409   Owner shall obtain from insurers a waiver of any subrogated rights against
1410   Charterer and its associated and affiliated companies and their agents, directors,
1411   officers and employees in respect of any claims under the war risks insurance
1412   arising out of Owner’s compliance with Charterer’s orders.
1413 d Additional Costs
1414   In the event of the existence of the conditions described in Clause 21b
1415   subsequent to the date of the Charter, or while Vessel is on hire under the
1416   Charter, Charterer shall, in respect of voyages to any such port, place or zone,
1417   assume any provable additional cost of wages and crew war bonus and
1418   insurance properly incurred in connection with Master, officers and crew as a
1419   consequence of such war, warlike operations or hostilities over and above such
1420   costs in effect on the date of the Charter.
1421 e Hostile Areas
1422   Owner shall have the option of adjusting the timing, speed, and routing of the
1423   inward and outward passage through areas of hostility depending on the
1424   prevailing pattern of hostilities. Owner shall keep Charterer advised of its plans
1425   to transit areas of hostilities including any changes while in transit. The voyage
1426   instruction procedures for the Vessel to transit a hostile area(s) shall be as
1427   follows:
1428   Charterer issues voyage instructions directly to the Vessel, with a copy to Owner.
1429   Charterer’s voyage instructions should include:
1430   1) specific ports to load/discharge and sequence of port calls
1431   2) required load/discharge dates
1432   3) cargo grades and quantities
1433   4) bunkering details
1434   5) cargo measurement and documentation requirements, etc.
1435   Charterer’s voyage instructions to include advice to the Master that the specific
1436   sailing instructions for the passage in and out and through the area of hostilities
1437   will be issued by Owner.
1438   Owner, upon receipt of Charterer’s voyage instructions, shall determine the level
1439   and nature of risk in the hostile area(s) and issue specific cautionary sailing
1440   instructions directly to the Vessel with copy to Charterer’s office on an urgent
1441   basis.
1442   Owner’s specific cautionary sailing instructions shall include passage timing,
1443   recommended routing, speed in and out and through the area(s) of hostilities,
1444   and other specific cautionary instructions.  
38A.98 Under the New York Produce and other time charter forms the owner usually has a right to refuse to proceed to a port where hostilities are under way which might threaten the ship or her cargo. The owners’ right in such cases derives not from an express “war risks” provision but rather from the charterers’ obligation to nominate “safe ports.” To be “safe,” a port must be “politically” safe as well as safe for navigation, and a port where a substantial risk of capture or damage from war-like operations exists does not satisfy the obligation. However, as noted, Clause 6(b) of the ExxonMobil form disclaims any warranty of “safe port” and limits the charterer’s obligation to the exercise of reasonable care. Clause 21 goes even further, and in effect obligates the owner to send the ship even to a war zone, provided war risk insurance is available. 38A.98 38A.99 Paragraph (b) is broadly worded, covering as it does not only hostile acts of de jure and de facto governments, but also those of any “purported governmental organization maintaining naval, military, or air forces or any terrorist group or organization.” On the other hand, acts of saboteurs and rioters not engaged by such an organization would not be covered. 38A.100 Under paragraph (c) the charterer is obligated to pay the additional cost of war risk hull insurance, if it is available, in which case the owner is required to permit the ship to undertake a voyage or enter loading or discharging ports where hostilities are in progress. The owner is also permitted to purchase war risk insurance against “ancillary risks,” including loss of hire, freight, disbursements, and total loss. If he carries marine risk insurance against such risks, and while the paragraph does not expressly so state, the plain inference is that the additional cost of such war risk insurance, like the additional cost of war risk hull insurance resulting from the charterer ordering the ship to a zone where hostilities are in progress, will be for the charterer’s account: see et seq.

38A.101 Clause 22—Exceptions

1445 22 Exceptions
1446 a Loss, Damage, Delay
1447   The Vessel, Master and Owner shall not, unless otherwise expressly provided in
1448   the Charter, be responsible for any loss or damage to cargo arising or resulting
1449   from: any act, neglect, default or barratry of the Master, pilots, mariners or other
1450   servants of the Owner in the navigation or management of the Vessel; fire,
1451   unless caused by the personal design or neglect of Owner; collision, stranding,
1452   or peril, danger or accident of the sea or other navigable waters; or from
1453   explosion, bursting of boilers, breakage of shafts, or any latent defect in hull,
1454   equipment or machinery.
1455   Neither the Vessel, the Master or Owner, nor Charterer, shall, unless otherwise
1456   expressly provided in the Charter, be responsible for any loss or damage or
1457   delay or failure in performing hereunder arising or resulting from: act of God; act
1458   of war; perils of the sea; act of public enemies, pirates or assailing thieves; arrest
1459   or restraint of princes, rulers or people, or seizure under legal process provided
1460   bond is promptly furnished to release the Vessel or cargo; strike or lockout or
1461   stoppage or restraint of labor from whatever cause, either partial or general; or
1462   riot or civil commotion.
38A.102 Under the first sentence of Clause 22(a) the owner and her master, in personam, and the ship, in rem, are exonerated from liability for cargo loss or damage resulting from certain specified causes, including errors in navigation or management, fire not caused by the owners’ personal design or neglect, perils of the sea, and latent defects. 38A.103 The second sentence is a “mutual” exceptions clause shielding both the owner and the charterer against liability for “any loss or damage or delay or failure in performing” under the charter, resulting from a list of causes considerably broader than the list contained in the corresponding provision of the New York Produce form (Clause 16, second sentence). As interpreted by the American courts, a “mutual” exceptions clause excuses only the party whose performance is affected by the occurrence of one of the excepted causes. Thus, if the owner is unable to follow the charterer’s sailing instructions because of a tugboat strike, the owner will not be liable in damages. But as the strike does not affect the charterers’ ability to pay hire, and as nothing in the off-hire clause (Clause 11) provides for off-hire for time lost on account of a tugboat strike, the charterer will not be relieved of the obligation to pay hire during the delay: see Clyde Commercial S.S. Co. v. West India S.S. Co., 169 Fed. 275 (2d Cir. 1909). 38A.104 Conversely, if a bank strike makes it impossible for the charterer to pay hire when due, the charterer will be excused so long as the strike continues to have that effect, but the owner will remain obligated to follow the charterer’s orders with respect to sailing, loading, discharging, etc.

38A.105 Clause 22(b)—Number of Grades

1463 b Number of Grades
1464   The Owner warrants the Vessel is constructed and equipped to carry [Insert
1465   number of grades of cargo] within the Vessel’s natural segregations. If for any
1466   reason the Vessel, upon arrival at a loading port or place, is unable to load the
1467   required number of grades, Charterer will do its utmost to provide a suitable
1468   cargo consistent with the Vessel’s capabilities, with any delay being for Owner’s
1469   account. However, if such cargo cannot be provided within a reasonable time
1470   the Vessel is to proceed to the nearest repair port in ballast and there make all
1471   necessary repairs, any time and expense being for Owner’s account.  
38A.106 The first sentence of paragraph (b) is a warranty that the ship is capable of carrying a specified number of grades of oil. The second sentence, however, is in effect a modification of the off-hire provisions of Clause 11; if the ship cannot, “for any reason,” comply with the warranty, she will not necessarily go off-hire, since the charterer will then be obligated to “do its utmost” to provide a cargo which the vessel will be able to load. Only if this proves impossible will the owner be obligated to send the ship to the nearest repair port in ballast, and there effect the necessary repairs. In that case the time lost and the expenses will be for the owners’ account.

38A.107 Clause 22(c)—Limitation of Exceptions

1472 c Limitation of Exceptions
1473   The exceptions stated in Clause 22a shall not affect Owner’s undertakings with
1474   respect to the condition, particulars and capabilities of the Vessel, the provisions
1475   for payment and cessation of hire, the obligations of the Owner under Clause 20
1476   in respect of the loading, handling, stowage, carriage, custody, care, and
1477   discharge of cargo in the Charter, and/or Charterer’s option(s) to terminate the
1478   Charter in accordance with the Charter terms.

38A.108 Clause 23—Salvage

1479 23 Salvage
1480   All salvage moneys earned by the Vessel shall belong to Owner.

38A.109 Clause 24—ITOPF

1481 24M ITOPF
1482   Owner warrants that it is a member of the International Tanker Owners’ Pollution
1483   Federation (“ITOPF”) and that Owner will retain such membership during the Charter
1484   Term.

38A.110 Clause 25—Clean Seas

1485 25 Clean Seas
1486   Owner agrees to participate in Charterer’s program covering oil pollution avoidance
1487   (“Program”). Such Program requires compliance with latest International Maritime
1488   Organization (“IMO”) and Port State regulations. The Program prohibits discharge
1489   overboard of all oil and all oily water, oily ballast or oil in any form unless in
1490   compliance with IMO and Port State local regulations or under extreme
1491   circumstances whereby the safety of the Vessel, cargo, or life at sea would be
1492   imperiled. Owner shall ensure that the Vessel’s personnel comply with the following:
1493 a Retention of Residues
1494   Subsequent to the date of delivery, and in the course of the ballast passage
1495   before presenting for delivery hereunder, any oily residues remaining in the
1496   Vessel from its previous cargoes shall be retained on board and shall be handled
1497   according to Charterer’s instructions.
1498 b Tank Washings
1499   During tank washing, the tank washings shall be collected into one cargo
1500   compartment and, after maximum separation of free water, such free water shall
1501   be discharged overboard to the extent permitted by applicable regulations.
1502   Thereafter, Charterer shall be notified promptly by electronic mail, facsimile, or
1503   telex of the estimated quantity of the segregated tank washings and the type and
1504   source of such washings. If Charterer requires that demulsifiers shall be used for
1505   the separation of oil and water, such demulsifiers shall be obtained by Owner
1506   and paid for by Charterer. When specifically requested by Charterer (e.g., for
1507   third-party re-lets), Owner shall ensure that the Master, on the Vessel’s arrival at
1508   the loading port(s) or place(s) during the Charter does the following:
1509   1) Arranges for the measurement of the segregated tank washings in
1510   conjunction with the cargo supplier(s).
1511   2) Records the quantity of tank washings so measured in the Vessel’s ullage
1512    record.
1513   3) Issues a Slop Certificate.
1514   4) Arranges that the Slop Certificate and/or Vessel’s ullage record be duly
1515    signed by the cargo supplier(s) and promptly sent to Charterer.
1516 c Disposition of Residues
1517   The segregated tank washings and any other oily cargo residues on board
1518   (“Residues”) shall, at Charterer’s option, be pumped ashore into slop facilities at
1519   the loading port(s) or place(s), commingled with the cargo to be loaded, or
1520   segregated from the cargo to be loaded. If Charterer requires the Master to
1521   discharge the Residues at facilities at loading port(s) or place(s), the cost of such
1522   facilities and the ultimate disposal of the Residues shall be for Charterer’s sole
1523   account. If Charterer requires Residues to be kept separate from the cargo to be
1524   loaded, such Residues shall, at Charterer’s option, be discharged at the
1525   discharging port(s) or place(s) in accordance with Charterer’s instructions.
1526 d Additional Pollution Prevention Measures
1527   1) Owner will also arrange for the Vessel to adhere to Charterer’s Program
1528    covering oil pollution avoidance during off-hire periods within the Charter
1529    Term, including the preparation of cargo tanks for dry-docking and repairs.
1530   2) The Vessel will take all necessary precautions while loading and discharging
1531    cargo or bunkers, as well as ballast, to ensure that no oil will escape
1532    overboard.
1533   3) Nothing in Charterer’s instructions shall be construed as permission to
1534    pollute the sea by the discharge of oil or oily water, etc.
1535   4) The Vessel shall have a safe and efficient means of transferring engine room
1536    and pump room bilge liquids to designated holding tanks onboard, for
1537    disposal in accordance with international, flag state, and port state
1538    regulations.
1539   5) Pump room stripping line overboard discharges shall be suitably blanked off
1540    before arriving in port. Such blanks are to be installed and retained in the
1541    lines throughout the entire period that the Vessel is in coastal waters.

38A.111 Clause 26—Cargo Management

1542 26 Cargo Measurement
1543 a Measurement and Sampling Requirements
1544   All measurement and sampling procedures shall be performed in accordance
1545   with the latest published Manual of Petroleum Measurement Standards issued by
1546   the American Petroleum Institute or similar standards issued by the American
1547   Society of Testing and Materials.
1548 b Loading Requirements
1549   Prior to loading, the Master shall measure the on board quantities of oil, water
1550   and sediment residues that are segregated in all holding tanks and slop tanks
1551   and those that remain in cargo tanks and, if requested, shall advise supplier(s)
1552   and Charterer of such quantities. After loading, the Master shall determine the
1553   cargo quantities loaded, expressing these cargo quantities in barrels at standard
1554   temperature (60° F) and performing such calculations in accordance with Clause
1555   26a. A written tank-by-tank ullage report containing all measurements of oil,
1556   water and sediment residues on board prior to loading and quantities of cargo
1557   loaded shall be prepared and promptly submitted by the Master to Charterer.
1558 c Letter of Protest
1559   If the Master’s calculations of cargo loaded (oil, water and sediment residues on
1560   board excluded), after applying the Vessel’s Experience Factor (“VEF”), show
1561   any deficiency from the Bill of Lading figures, the Master shall, if investigation
1562   and recalculation verify such deficiency, issue a Letter of Protest to supplier(s)
1563   (which should, if practicable, be acknowledged) and shall immediately advise
1564   Charterer of such deficiency by electronic mail, telex or radio and thereafter shall
1565   send a copy of the Letter of Protest to Charterer. The Vessel shall have on
1566   board sufficient historical information for the calculation of a VEF using the latest
1567   edition of the API MPMS. The Master shall calculate and apply the VEF, as so
1568   determined, during all loadings.
1569 d Discharging Requirements
1570   Prior to discharging, the Master shall measure the quantity of each grade of
1571   cargo on board, expressing these quantities in barrels at standard temperature
1572   (60°F), using the same calculation procedures specified in Clause 26a. Before
1573   and after discharging, the Master shall cooperate with shore staff to ascertain
1574   discharged quantities. The Vessel shall be obliged to discharge all liquid oil and,
1575   if ordered by Charterer, any residues of oil, water and sediment. The Vessel’s
1576   just-mentioned obligation shall not in any way be qualified or limited by any
1577   purported “custom of the trade” that is based on a deemed in-transit loss and
1578   that, otherwise, could excuse the Vessel from failure to discharge all liquid cargo
1579   and residues.
1580 e Inspection
1581   Charterer may employ an inspector, at its expense, to verify the quantities and
1582   qualities of cargo and residues on board the Vessel at both loading and
1583   discharging port(s) and/or place(s). If the Vessel is equipped with an Inert Gas
1584   System, depressurization of tanks to permit ullage measurements shall be
1585   allowed in accordance with the provisions of the most recent Inert Gas Systems
1586   of Oil Tankers publication issued by the IMO.

38A.112 Clause 27—Insurance Costs and Liability Levels

1587 27 Insurance Costs and Liability Levels
1588 a Insurance Required
1589   Owner warrants that, throughout Vessel’s service under the Charter, Owner shall
1590   have full and valid Protection and Indemnity Insurance (“P&I Insurance”) for the
1591   Vessel, as described in Clause 27b, with the P&I Insurance placed with a
1592   Protection and Indemnity Club (“P&I Club”) that is a Member of the International
1593   Group of P&I Clubs (“International Group”). This P&I Insurance shall be at no
1594   cost to Charterer except as otherwise provided in Clause 27c and Clause 27e.
1595 b Liability Coverage
1596   The P&I Insurance must include coverage against liability for cargo loss/damage
1597   and against liability for pollution (“Pollution Liability”) in the maximum coverage
1598   amount(s) per incident for each of the foregoing categories of liability as made
1599   available by any P&I Club in the International Group at the commencement of
1600   each policy year or other applicable period of coverage during the Charter Term
1601   (but only US$ 1,000 million (one billion dollars) per incident cover for Pollution
1602   Liability is required if such cover is available from a P&I Club). All administrative
1603   expenses incurred by Owner in placing and/or changing P&I Insurance
1604   coverages in order to comply with Clause 27 shall be for Owner’s sole account.
1605 c Surcharge Costs
1606   Charterer shall, except as otherwise provided in Clause 27, reimburse Owner for
1607   any documented net surcharges properly due and paid by Owner under the P&I
1608   Insurance for U.S. voyages directed under the Charter by Charterer; provided,
1609   however, that any reimbursement obligation of Charterer shall be conditioned
1610   upon Owner fully meeting the requirements of Clause 4j. Any request by Owner
1611   for reimbursement under Clause 27c shall be submitted to Charterer, along with
1612   appropriate supporting documentation, on a quarterly basis. The phrase “net
1613   surcharges” as used in Clause 27c shall mean the surcharges, as described
1614   above, paid by Owner after taking into consideration any and all discounts and/or
1615   rebates received or receivable by Owner, or to Owner’s credit under the P&I
1616   Insurance (“Net Surcharges”).
1617 d Increased Costs
1618   US$ 1,000 million (one billion dollars) per incident coverage for Pollution Liability
1619   under P&I Insurance (“Insurance Coverage”) is currently available in
1620   accordance with Clause 27b. Notwithstanding anything to the contrary in the
1621   Charter, Charterer’s maximum liability for Net Surcharges shall be limited in
1622   amount to the highest Net Surcharges cost (“Maximum Surcharge Cost”)
1623   under the Insurance Coverage paid by Owner in the Charter term during the last
1624   availability of such Insurance Coverage to Owner in accordance with Clause 27b.
1625   If the amount of the Net Surcharges increases above the Maximum Surcharge
1626   Cost, the amount of such increase (“Increased Surcharge Cost”) shall be for
1627   Owner’s sole account, subject, however, to Clause 27e. If Owner is required,
1628   under Clause 27b, to obtain coverage for Pollution Liability under P&I Insurance
1629   in excess of US$ 1,000 million (one billion dollars) per incident and the net cost
1630   to Owner of such coverage — aside from any surcharge cost — is greater than
1631   the net cost to Owner that was applicable under the Insurance Coverage in the
1632   Charter Term during the last availability of such Insurance Coverage to Owner in
1633   accordance with Clause 27b, this additional net cost (“Additional Non-
1634   surcharge Cost”) shall be borne solely by Owner, subject, however, to Clause
1635   27e.
1636 e Negotiation of Increased Costs
1637   If Owner incurs Increased Surcharge Cost and/or Additional Non surcharge Cost
1638   (“Cost(s)”) and finds payment thereof burdensome, then Owner may call in
1639   writing for negotiations with Charterer with respect to Owner’s payment of such
1640   Cost(s). In the event Owner so calls for negotiations and there is no agreement
1641   reached with respect to such Cost(s) in writing between Owner and Charterer
1642   within sixty (60) days after Owner calls for such negotiations, Owner may, upon
1643   written notice to Charterer, terminate the Charter effective when the Vessel is
1644   cargo free, without liability on either party except for sums, if any, owed by either
1645   party under the Charter as of the date of Vessel redelivery; provided, however,
1646   that if negotiations are so called for by Owner and agreement is not reached as
1647   aforesaid, Charterer shall have the option, at its sole discretion, to either pay the
1648   subject Cost(s) or provide a reasonable alternative thereto, in which case Owner
1649   shall have no right to terminate the Charter under Clause 27e. Any payment by
1650   Charterer, or provision of an alternative to payment with respect to specific
1651   Cost(s), shall not be deemed an agreement by Charterer to pay any other, or
1652   future, Increased Surcharge Cost and/or Additional Non surcharge Cost.
1653 f Notice to Charterer
1654   Owner shall give Charterer timely written notice of all pertinent details in
1655   connection with any renewal or new placement of P&I Insurance required by
1656   Clause 27, failing which any reimbursement obligation of Charterer under Clause
1657   27 shall cease.
1658 g Lapse of Coverage(s)
1659   If required by Charterer, Owner shall, as soon as is reasonably possible, furnish
1660   to Charterer such evidence of the insurance(s) required under Clause 27 as
1661   Charterer may reasonably request. If there is a failure or lapse of such
1662   insurance(s) for any reason (“Non Coverage”) at any time during the Charter
1663   term, Charterer shall have the option on written notice to Owner to terminate the
1664   Charter when the Vessel is cargo-free, or to procure replacement insurance(s)
1665   with the same or different underwriters and/or P&I Club chosen by Charterer,
1666   with all cost to be borne by Owner, which cost may, at Charterer’s option, be
1667   invoiced to Owner for payment or be deducted from hire or other sums due
1668   Owner under the Charter. The Vessel shall be off-hire from the time of the Non
1669   Coverage until full reinstatement of the insurance(s) or termination of the Charter
1670   by Charterer. A termination or failure to terminate the Charter in accordance with
1671   Clause 27g shall be without prejudice to any claims for damages that Charterer
1672   may have by reason of Owner’s fault for Non Coverage.
1673 h TOPIA / STOPIA 2006
1674   Owner warrants that it is a Participating Owner and that the Vessel is entered in
1675   the Tanker Oil Pollution Indemnification Agreement 2006 (TOPIA 2006) and shall
1676   so remain during the Charter Term, provided always that: i) the Vessel meets the
1677   definition of a “ship” under the 1992 International Convention on Civil Liability for
1678   Oil Pollution Damage (1992 CLC) or any amendment thereto and ii) TOPIA 2006
1679   is not terminated in accordance with cl. IX of that agreement. Additionally, if the
1680   Vessel has a gross tonnage of 29,548 or less, Owner warrants that it is a
1681   Participating Owner and that the Vessel is entered in the Small Tanker Oil
1682   Pollution Indemnification Agreement 2006 (STOPIA 2006) and shall so remain
1683   during the Charter Term, provided always that: i) the Vessel meets the definition
1684   of a “ship” under the 1992 International Convention on Civil Liability for Oil
1685   Pollution Damage (1992 CLC) or any amendment thereto and ii) STOPIA 2006 is
1686   not terminated in accordance with cl. IX of that agreement. As used in this
1687   Clause 27h, the term “Participating Owner” has the definition ascribed to it in
1688   TOPIA 2006 and/or STOPIA 2006, as the case may require.

38A.113 Clause 28—Parent Guaranty and Change of Ownership

1689 28 Parent Guaranty and Change of Ownership
1690 a Parent Guaranty
1691   If required by Charterer, Owner shall cause its parent company (or companies) to
1692   execute and deliver to Charterer a written Guaranty in the form shown at
1693   Schedule C. Such executed written Guaranty shall be delivered to Charterer
1694   concurrent with Owner’s signing of the Charter.
1695 b Restrictions on Transfer
1696   Owner’s rights and obligations under the Charter are not transferable by sale or
1697   assignment without Charterer’s written pre-consent. During the Charter Term,
1698   Owner shall not offer the Vessel for sale to a non-affiliated buyer without
1699   Charterer’s pre-consent. In the event of the Vessel being sold, the Charter being
1700   assigned, or the Vessel being offered for sale to a non-affiliated company without
1701   such consent, then in addition to its other rights, including, without limitation the
1702   right to claim damages, Charterer may, at its absolute discretion, terminate the
1703   Charter.
38A.114 By this clause the ExxonMobil form sharply limits the owners’ ability to profit from a high rate charter by selling the ship “with charter.” Although it may be argued that the charterer would not be entitled to withhold consent to a sale to a reputable purchaser unreasonably, nevertheless the severe penalty of termination in the event of a transfer without its consent would make any prudent owner hesitate before attempting such a sale without first obtaining the charterer’s express approval. 38A.115 Nothing in the clause would appear to prohibit the beneficial owner of a ship registered in the name of a corporation from disposing of his interest indirectly by a sale of his shares of corporate stock.

38A.116 Clause 29—Arbitration

1704 2 Arbitration
1705   Any and all differences and disputes of whatsoever nature arising out of the Charter
1706   shall be put to arbitration in the city of New York, pursuant to the laws relating to
1707   arbitration there in force, before a board of three persons, consisting of one arbitrator
1708   to be appointed by Owner, one by Charterer, and one by the two so chosen. The
1709   decision of any two of the three on any point or points shall be final. Until such time
1710   as the arbitrators finally close the hearing, either party shall have the right by written
1711   notice served on the arbitrators and on the other party to specify further disputes of
1712   differences under the Charter for hearing and determination. The arbitrators may
1713   grant any relief which they, or a majority of them, deem just and equitable and within
1714   the scope of the agreement of the parties, including, but not limited to, specific
1715   performance. Awards, made pursuant to Clause 29 may include costs, including a
1716   reasonable allowance for attorney’s fees, and judgment may be entered upon any
1717   award made hereunder in any court having jurisdiction in the premises.
38A.117 There are several important differences between the arbitration clause of the ExxonMobil form and that of the New York Produce form. Under the latter the arbitrators must be “commercial men,” a term which in New York is understood to exclude practising lawyers. Under the ExxonMobil form, however, the parties may choose either lawyers or commercial men, and frequently the panel will be comprised of a mixture of lawyers and non-lawyers. 38A.118 The ExxonMobil arbitration clause gives the arbitrators wide powers, including the right to order specific performance. Absent express authorization, it is doubtful that such an award would be valid and enforceable. United States courts have held that arbitrators may grant equitable relief, however, if the arbitration clause is sufficiently broad to give them express authority to do so. 38A.119 Finally, the ExxonMobil arbitration clause expressly authorizes the awarding of attorneys’ fees, a point on which the New York Produce form is silent. See discussion at et seq.

38A.120 Clause 30—Assignment and Sublet

1718 30 Assignment and Sublet
1719   Notwithstanding any other provisions of the Charter, Charterer may assign all of its
1720   rights and obligations under the Charter to any of Charterer’s associated or affiliated
1721   companies. Charterer shall also have the right to sublet the vessel but, in the event
1722   of a sublet, Charterer shall always remain responsible for the fulfillment of the
1723   Charter in all its terms and conditions.
38A.121 These provisions expressly give the charterer the right to assign the charter and to “sublet” the ship, rights it would have under United States law, even without such express provisions, unless the charter clearly provided otherwise.

38A.122 Clause 31—Business Policy

1724 31 Business Policy
1725   Owner agrees to comply with all laws and lawful regulations applicable to any
1726   activities carried out in the name, or otherwise on behalf, of Charterer under the
1727   provisions of the Charter. Owner agrees that all financial statements, billings and
1728   reports rendered by Owner to Charterer, as provided for in the Charter, shall, in
1729   reasonable detail, accurately and fairly reflect the facts about all activities and
1730   transactions handled for the account of Charterer.

38A.123 Clause 32—Interpretation and Law

1731 32 Interpretation and Law
1732   The interpretation of the Charter and the rights and obligations of the parties hereto
1733   shall be governed by the Federal Maritime Law of the United States and, where
1734   applicable, by the Law of the State of New York. The headings of Clauses and
1735   paragraphs are for convenience of reference only and shall not affect the
1736   interpretation of the Charter. No modification, waiver or discharge of any term of the
1737   Charter shall be valid unless in writing and signed by the party to be charged
1738   therewith. No provision of the Charter shall be interpreted or construed against a
1739   party because that party or its legal representative drafted the provision.
1740   Notwithstanding anything in the Charter to the contrary, the Charter shall not be
1741   interpreted or applied so as to require Owner or Charterer to do, or to refrain from
1742   doing, anything which would constitute a violation of, or result in a loss of economic
1743   benefit under, United States anti-boycott or export control laws and regulations.
1744   When used in the Charter in relation to Charterer, the terms “associated or affiliated
1745   company” or “associated or affiliated companies” shall include Exxon Mobil
1746   Corporation, or any division of Exxon Mobil Corporation, or any company (other than
1747   Charterer) that is directly or indirectly owned, in whole or in part, by Exxon Mobil
1748   Corporation. The term “Clause,” when used in the Charter, shall mean a clause of
1749   the Charter. The options granted to Charterer to cancel or otherwise terminate the
1750   Charter are both individual and cumulative. Charterer’s exercise, or failure to
1751   exercise, any option to cancel or terminate the Charter shall not affect any other
1752   option granted to Charterer to terminate or cancel the Charter; any such cancellation
1753   or termination being without prejudice to any other rights and remedies Charterer
1754   may have under the circumstances including, without limitation, the right to damages
1755   for any breach of the Charter.
38A.124 Charters, being maritime contracts, are not subject to State or local law, as such, but are governed by the “general maritime law” of the United States, which is a set of judicially fashioned rules with antecedents in English admiralty law and operating uniformly throughout the country (see et seq.). To a large extent the substantive law of carriage of goods under ocean bills of lading has been modified by federal statutes (e.g., the Harter Act and COGSA) but carriage under charterparties remains relatively free of statutory regulation. Thus, in the main, by Clause 30 the parties merely accept the applicability of the general maritime law of the United States, rather than the law of any other country. IN WITNESS WHEREOF, THE PARTIES HAVE CAUSED THIS CHARTER PARTY TO BE EXECUTED IN DUPLICATE THE DAY AND YEAR HEREIN FIRST ABOVE WRITTEN . WITNESS FOR OWNER _______________________ BY: ____________________________ NAME: ____________________________ TITLE: ____________________________ DATE SIGNED: ____________________________ WITNESS FOR CHARTERER _______________________BY: ____________________________ NAME: ____________________________ TITLE: ____________________________ DATE SIGNED: ____________________________

The rest of this document is only available to i-law.com online subscribers.

If you are already a subscriber, click Log In button.

Copyright © 2024 Maritime Insights & Intelligence Limited. Maritime Insights & Intelligence Limited is registered in England and Wales with company number 13831625 and address 5th Floor, 10 St Bride Street, London, EC4A 4AD, United Kingdom. Lloyd's List Intelligence is a trading name of Maritime Insights & Intelligence Limited.

Lloyd's is the registered trademark of the Society Incorporated by the Lloyd's Act 1871 by the name of Lloyd's.