- December 23, 2016
- Posted by: Josiah Hincks Solicitors
- Category: Business Law Updates
Standard form shipping contracts are the lifeblood of international trade and have often been in common use for many years. However, one High Court case – in which the meaning of a single three-letter word came under close analysis – showed that even their time-hallowed provisions can be the subject of disagreement.
The case concerned the charter of a merchant vessel to transport soya bean meal to Iran. The ship was anchored off an Iranian port for over four months before the cargo was landed in a damaged condition. That gave rise to seven-figure liabilities and the issue of how that loss should be apportioned between the charterer and the vessel’s owner was submitted to arbitration.
The charter contract was in a standard form that had been in widespread use since the 1970s. It provided that cargo losses should be split equally between charterers and ship owners, save where there was irrefutable evidence that a loss arose through the ‘act or neglect’ of one or the other.
The arbitration panel found that no blame attached to either the ship owner or the charterer in respect of the cargo damage. However, it ruled that the damage had arisen due to the ‘act’ of the charterer in directing the vessel’s prolonged wait outside the port. On that basis the charterer was found 100 per cent liable for the loss.
In challenging the panel’s decision, the charterer argued that the word ‘act’ had to be interpreted as meaning a ‘culpable act’. In dismissing that argument, however, the Court noted that the contract was designed to apportion cargo losses on a more or less mechanical basis. Taken in context, the word ‘act’ was intended to bear its natural and ordinary meaning and did not import any element of fault.