Watch out for Inserted Charterparty Clauses

The responsibilities of the shipowner and the charterer in an unamended time charterparty such as the NYPE form are clearly stated and understood.

From time to time, however, charterers try to slip words into the charterparty (sometimes in clauses which might not deal primarily or exclusively with cargo operations) to transfer responsibility for cargo operations onto the shipowner.

Supervisions and Responsibility

An unamended NYPE form provides that cargo handling (loading, stowage, lashing, discharge and storage) is the charterer’s sole responsibility. The Master supervises the cargo operations but only to the extent of ensuring the safety of the vessel and its crew. Sometimes the charterer seeks greater involvement of the Master in cargo operations and will ask that the charterparty is amended so that the operations are under the supervision “and responsibility” of the Master. The Master then shares responsibility for the safety of the cargo during cargo operations as well as retaining the right to object if the vessel is endangered by the charterer.

ICA Apportionment of Liability

To avoid expensive legal arguments between shipowners and charterers, many charterparties incorporate the Inter-Club Agreement (ICA) which provides a ‘quick and easy’ apportionment of liability for cargo damage. Where the charterparty is unamended, the ICA apportions all liability arising out of cargo operations to the charterer but where the words “and responsibility” are added to the charterparty, liability is apportioned 50:50 between the shipowner and the charterer.

Sneaking in a Clause

The ICA also states that liability will be apportioned 50:50 if there is “a similar amendment making the Master responsible for cargo handling”. Amendment of the cargo responsibility clauses can be made by wording anywhere in the charterparty and some charterers try to insert words into other parts of the charterparty, hoping the shipowner or his broker do not notice. The charterer’s aim is to make the Master responsible for cargo handling so that the 50:50 apportionment will apply. A recent judgment has indicated that these attempts are likely to fail unless the words used are clear and make the Master fully responsible all for cargo operations. In the case, the main clause referred only to the Master’s supervision but one of the rider clauses provided in part that the Master “will be responsible for proper stowage and unseaworthiness and safety of the vessel“.

The court held that this attempt to make the Master responsible for part of the cargo operations was not in keeping with the intention of the ICA. In order to be a “similar amendment”, the whole of the responsibility for cargo operations had to be clearly transferred to the Master.

This defeat is unlikely to stop charterers trying to introduce terms into charterparties to attempt to shift more responsibility for cargo operations onto the Master and shipowner. The recent judgment does provide some protection for shipowners, but they should always remain aware of the risks.

Author: Peter Scott