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Shipping – Judges Will Not Rewrite Bargains Freely Entered Into

shipCommodity prices go up and down and it sometimes makes financial sense for fully laden vessels to remain at sea for extended periods before discharging their cargos. In considering the financial consequences of one such situation, the High Court emphasised that judges are not in the business of rewriting bargains that have been freely entered into by sophisticated charterers and ship owners.

The owners of a vessel carrying crude oil to Rotterdam had notified the charterers of her arrival at port. The latter, however, gave no instructions to discharge the cargo and the ship remained offshore for more than 60 days before she berthed and offloaded her cargo. The charterers accepted that that delay was caused by them for their own commercial purposes.

The owners argued that their vessel had, in effect, been used as floating storage. Under the terms of the relevant charter party, they argued that the charterers were obliged to pay demurrage – a charge levied on failure to load or discharge a vessel within the time agreed – at an escalated rate. Together with the cost of additional fuel consumed, the owners valued their claim at over $970,000.

In ruling in the charterers’ favour, however, the Court found that, on a true interpretation of the charter party, the requirement to pay escalating demurrage would only have arisen had the charterers instructed the vessel to stop outside port and wait for orders. The delay in directing discharge of the cargo did not amount to such an instruction.

The owners argued that such a reading of the charter party made no commercial sense. However, the Court found that the relevant wording was clear and that it would be wrong to disturb the bargain reached by the parties by implying a term into the charter party that would have entitled the owners to escalating demurrage. The charterers had discharged their liabilities by paying demurrage at the standard rate in respect of the waiting time at Rotterdam.