BAREBOAT CHARTERS L L P SECOND EDITION MARK DAVIS. Davis & Co.

Transcription

1 BAREBOAT CHARTERS SECOND EDITION BY MARK DAVIS Davis & Co. L L P LONDON 2005 SINGAPORE

2 Contents Acknowledgements Preface to the Second Edition Table of Cases Table of Legislation Table of Conventions vii ix xxiii xxxi xxxiii 1 THE NATURE OF A BAREBOAT CHARTER para nos Introduction 1.1 Operating charters 1.7 Finance charters and leases 1.8 The essential characteristics of a bareboat charter 1.9 The fundamental terms of a bareboat charter 1.13 The liability of the owners of a bareboat chartered vessel to third parties 1.14 Owners' liability for acts or omissions of the bareboat charterers 1.15 Owners' liability to third parties for their own negligence 1.16 Owners' rights where the vessel is simultaneously bareboat chartered and taken back on time charter THE FORMATION OF A BAREBOAT CHARTER Formal requirements 2.1 Fixture before formal charter signed 2.6 Construction of the contract 2.8 General principles 2.8 XI

3 Presumption against surplusage 2.10 Deletions 2.11 Printed/typed clauses 2.12 Conditions, warranties and "innominate" terms 2.13 Conditions 2.14 Warranties 2.15 Innominate terms 2.16 Terms implied by statute 2.18 The Supply of Goods and Services Act 1982 as amended by the Sale and Supply of Goods Act The right to transfer possession of the vessel and the right to quiet enjoyment 2.20 Correspondence with description 2.24 Satisfactory quality 2.29 Fitness for purpose 2.30 Repudiation 2.31 Unfair Contract Terms Act The Law Reform (Frustrated Contracts) Act THE BIMCO BARECON 2001 FORM CLAUSES 1, 2 AND 3 DEFINITIONS, CHARTER PERIOD AND DELIVERY Definitions 4.1 Charter period 4.2 Delivery 4.3 Introduction 4.4 Due diligence 4.5 Seaworthiness 4.8 Readiness for service 4.9 What constitutes delivery? 4.11 Breach of owners' obligations 4.12 Place of delivery 4.13 Properly documented 4.15 Survey cycles, trading and class certificates 4.16 Discharge of owners' obligations under Clause Latent defects 4.21 Damage existing at the time of delivery CLAUSE 4 TIME FOR DELIVERY Window for delivery 5.1 Notice 5.2 Change in vessel's position 5.4 xn

4 6 CLAUSE 5 CANCELLING CONTENTS The charterers' contractual right to cancel 6.2 Owners' notice of delay 6.4 Cancellation before the cancelling date 6.6 Claims against the owners 6.7 Measure of damages CLAUSE 6 TRADING RESTRICTIONS Purpose of trading limits 7.1 Breach measure of damages 7.3 Withdrawal of the vessel and termination of the charter CLAUSE 7 SURVEYS ON DELIVERY AND REDELIVERY Purpose of survey 8.1 Expenses of survey 8.2 Disputes as to vessel's condition 8.3 Drydock CLAUSE 8 INSPECTION Owners' right to inspection/survey 9.1 Cost of inspection/survey 9.3 Right to inspect the vessel's log books 9.6 Duty to keep owners advised of the intended employment of the vessel CLAUSE 9 INVENTORIES, OIL AND STORES Preparation of inventory '0-1 Payment 10-2 Property in bunkers 10.3 II CLAUSE 10 MAINTENANCE AND OPERATION Maintenance and operation 10(a) Maintenance and repairs, New class and other safety requirements and Financial security '' -2 10(a)(i) Maintenance and repairs H-3 10(a)(ii) New class and other safety requirements (a)(iii) Financial security H-8 Operation of the vessel '' -9 Intended employment xiii

5 Flag and name of vessel Structural changes Use of outfit, equipment and appliances Periodical drydocking/cleaning and painting of underwater parts Breach of charterers' obligations CLAUSE 11 HIRE Introduction 12.1 Time of the essence 12.2 Payment of first month's hire 12.4 Payment of subsequent instalments of hire 12.5 Payment of last month's hire 12.6 Payment in cash without discount 12.8 Set-off 12.9 Vessel lost or missing Part payment Interest Waiver and estoppel Waiver Estoppel Acceptance of late payment CLAUSE 12 MORTGAGE Introduction 13.1 Vessel not financed by a mortgage 13.2 Vessel financed by a mortgage 13.3 Rights of the mortgagee CLAUSES 13/14 INSURANCE AND REPAIRS Introduction 14.1 Clause 13 Hull and machinery, war and P&I risks 14.3 Hire/purchase 14.5 Additional insurances 14.6 Documentation 14.7 Actual, constructive, compromised or agreed total loss 14.8 Termination of the charter Abandonment Value of the vessel Clause 14 Marine and war risks Protection and indemnity risks Vitiation of the insurances Responsibility for insured repairs xiv

6 Responsibility for uninsured repairs Time for repairs Additional insurances Agreed, constructive, compromised or agreed total loss Termination Abandonment Value of the vessel Classification certificates CLAUSE 15 REDELIVERY Introduction 15.1 Place of redelivery 15.2 Time and notice for redelivery 15.3 Early redelivery 15.4 Late redelivery 15.7 Condition of the vessel upon redelivery 15.9 Measure of damages Survey cycles and class certificates CLAUSE 16 NON-LIEN Introduction 16.1 Common law and liens 16.2 Introduction 16.2 Ostensible authority 16.3 Notice 16-6 Arrest CLAUSE 17 INDEMNITY Introduction ' 7.1 Indemnity by the charterers '7-2 Indemnity by the owners CLAUSE 18 LIEN Introduction '8.1 The owners' lien upon all cargoes belonging to the charterers 18.2 The owners' lien upon sub-hires and all sub-freights belonging to the charterers 18.3 The owners' lien upon any bill of lading freight 18.5 The charterers' lien on the vessel for all moneys paid in advance and not earned 18.6 Priority 18.7 Registration ' 8-8 xv

7 19 CLAUSE 19 SALVAGE Introduction CLAUSE 20 WRECK REMOVAL CLAUSE 21 GENERAL AVERAGE Introduction 21.1 English law of general average CLAUSE 22 ASSIGNMENT, SUB-CHARTER AND SALE Introduction 22.1 Assignment of benefits 22.3 Assignment of burdens 22.4 Vicarious performance 22.6 Legal and equitable assignments 22.7 Novation 22.8 Consent not to be unreasonably withheld 22.9 Effect of assignment in breach of contractual prohibition Sub-bareboat charter Time or voyage charter Sale of the vessel by the owners Discharge of guarantee CLAUSE 23 CONTRACTS OF CARRIAGE Paramount Clause 23.2 New Jason Clause 23.4 Both-to-blame collision clause 23.5 Claims by cargo owners 23.6 Passengeer tickets CLAUSE 24 BANK GUARANTEE Introduction 24.1 The nature of a bank guarantee 24.3 The nature of a performance bond 24.6 "First class" bank guarantee or bond 24.8 Discharge of the surety under a bank guarantee 24.9 General 24.9 Extension of the charterparty Assignment by the owners of the benefit of the charterparty Charterers ordering the vessel outside trading limits xvi

8 Enforceability of the guarantee CLAUSE 25 REQUISITION/ACQUISITION Introduction 25.1 Requisition for hire 25.2 Compulsory acquisition or requisition for title 25.4 Requisition for hire and frustration CLAUSE 26 WAR War risks definition 26.1 The scope of Clause CLAUSE 27 COMMISSION Introduction 27.1 Broker's commission who is responsible? 27.2 Brokers' ability to recover commission 27.5 Contracts (Rights of Third Parties) Act At common law Common law and the Contracts (Rights of Third Parties) Act CLAUSE 28 TERMINATION Introduction 28.1 Charterers' default 28.2 Failure to pay hire 28.3 Failure to comply with Trading Restrictions (Clause 6) or the Insurance and Repair provisions of Clause 13(a) 28.5 Failure to comply with the Maintenance and Repair provisions of Clause 10(a)(i) 28.7 Owners' default 28.8 Loss of the vessel 28.9 Insolvency Reservation of rights Practical consequences of termination Effect of withdrawal of the vessel CLAUSE 29 REPOSSESSION Introduction 29.1 Repossession 29.2 The position pending repossession Disembarkation and repatriation expenses 29.4 xvii

9 Arrest Relief against forfeiture CLAUSE 30 DISPUTE RESOLUTION Introduction 30.1 Arbitration London/New York 30.2 English law and London arbitration 30.4 Scope of the disputes 30.4 Procedure under the LMAA rules 30.5 Small claims 30.8 Commencement of arbitration proceedings 30.9 Rights of challenge/appeal Back-to-back contracts Enforceability of the award Arbitration by third parties Mediation CLAUSE 31 NOTICES Introduction 31.1 Time of service 31.2 The general rule 31.2 The postal rule 31.3 Service by Service by telex and/or fax 31.5 Failure to comply with the notices provision PART III: PROVISIONS TO APPLY FOR NEWBUILDING VESSELS ONLY Introduction 32.1 Specifications and building contract 32.3 Time and place of delivery 32.7 Guarantee works Name of vessel Survey on redelivery PART IV: HIRE/PURCHASE AGREEMENT Introduction 33.1 Provided the charterers have fulfilled their obligations 33.2 Delay in payment of the final instalment 33.3 Guarantee and indemnity 33.4 Miscellaneous provisions 33.5 xviii

10 Purchase and registration expenses 33.5 Bill of sale and deletion from Register 33.6 Wireless installation and nautical instruments 33.7 Sellers' risk 33.8 Repatriation PART V: PROVISION TO APPLY FOR VESSELS REGISTERED IN A BAREBOAT CHARTER REGISTRY Introduction 34.1 Bareboat charter registration under British flag 34.2 Governing law 34.2 Qualification for registration 34.3 Period of registration 34.4 The effect of registration 34.5 Application for registration 34.6 Changes in circumstances 34.7 Notification of primary registry 34.8 Regulation Registrar's power to refuse registration FINANCE CHARTERS AND LEASES Introduction 35.1 Loans and leases 35.1 Main differences 35.2 Tax/accounting treatment 35.3 Re-characterisation risk 35.4 Financing bareboat charters 35.5 Typical financing charter terms 35.7 Introduction 35.7 Definitions 35.8 Transfer of risk provisions 35.9 "Hell or high water" payment terms 35.9 Hire Owners'liability Charterers' indemnity Owners' rights Right to mortgage or sell the ship Rights on termination Other common provisions Conditions precedent to the grant of the lease Charterers' representations and warranties Charterers' covenants and undertakings Termination events Owners' liability issues Introduction Oil pollution xix

11 Third party liabilities Flag liabilities Other civil liabilities Insurance cover Insolvency issues Repossession Liquidation Administrative receivership Administration Recovering hire Liquidation Administrative receivership Administration Disclaimer of charter Disposal of ship Automatic termination on liquidation or administration IN REM CLAIMS AND ADMIRALTY JURISDICTION Introduction 36.1 Claims in personam and in rem 36.2 Claims in personam 36.2 Claims in rem 36.3 Advantages of an action in rem 36.4 Procedural issues 36.5 Statutory liens 36.6 Maritime liens 36.7 Introduction 36.7 Main features of a maritime lien 36.8 Discharge of a maritime lien 36.9 Maritime liens and actions in rem The distinction between in rem and arrest jurisdiction Priority Claims against the bareboat chartered ship Introduction When can a third party arrest or proceed in rem against a bareboat chartered ship? When can a third party arrest or proceed in rem against a sister ship of the owner and/or bareboat charterer of the bareboat chartered ship? Summary POLLUTION Introduction 37.1 OPA Introduction 37.2 Strict liability 37.3 Who can be held liable? 37.4 xx

12 Type of damage covered 37.5 Exceptions to liability 37.6 Limitation of liability 37.7 Certificates of financial responsibility 37.8 Oil Spill Liability Trust Fund 37.9 ''The International Convention on Civil Liability for Oil Pollution Damage 1992 and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage Introduction Strict liability Who can be held liable? Type of damage covered Exceptions to liability Limitation of liability Compulsory insurance and certification The International Convention on the Establishment of a Fund for Compensation for Oil Pollution 1992 and the IOPC Fund Supplementary Fund The Hazardous and Noxious Substances Convention The HNS Fund FRUSTRATION The doctrine of frustration Applicability of the doctrine of frustration to bareboat charters Foreseen events provided for in the charter The effect of frustration at common law The Law Reform (Frustrated Contracts Act) 1943 Background Applicability of the Act Recovery of advance payments Obligations other than to pay money Identification of the benefit Valuation of the benefit Award of a just sum Loss of the ship Frustration by delay or strike Frustration by illegality Frustration by war Frustration by requisitioning Arbitration APPENDIX 1: BARECON 2001 APPENDIX 2: BARECON 89 Index page nos xxi