AFFREIGHTMENT (from "freight," q.v.). Contract of Affreightment is the expression usually employed to describe the contract between a shipowner and some other person called the freighter, by which the shipowner agrees to carry goods of the freighter in his ship, or to give to the freighter the use of the whole or part of the cargo-carrying space of the ship for the carriage of his goods on a specified voyage or voyages or for a specified time; the freighter on his part agreeing to pay a specified price, called "freight," for the carriage of the goods or the use of the ship. A ship may be let like a house to some person who takes possession and control of it for a specified term. The person who hires a ship in this way occupies during the currency of his term the position of shipowner. The contract by which a ship is so let may be called a charter-party; but it is not, properly speaking, a contract of affreightment, and is mentioned here only because it is necessary to remember the distinction between a charter-party of this kind, which is sometimes called a demise of the ship, and a charter-party which is a form of contract of affreightment, as will hereinafter appear.
Rules of law.
The law with regard to the contract of affreightment is, of course, a branch of the general law of contract. The rights and obligations of the shipowner and the freighter depend, as in the case of all parties to contracts, upon the terms of the agreement entered into between them. The law, however, interferes to some extent in regulating the effect to be given to contracts. Certain contracts are forbidden by the law, and being illegal are, therefore, incapable of enforcement. The most important example of illegality in the case of contracts of affreightment is when the contract involves trading with an enemy. The law interferes again with regard to the interpretation of the contract. The meaning to be given to the words of the contract, or, in other words, its construction, when a dispute arises about it, must be determined by the judge or court. The result is, that certain more or less common clauses in contracts of affreightment have come before the courts for construction, and the decisions in these cases are treated practically, though not perhaps quite logically, as rules of law determining the sense to be put upon certain forms of expression in common use in shipping contracts. A third way in which the law interferes is by laying down certain rules by which the rights of the parties are to be regulated in the absence of any express stipulation with regard to the matter dealt with by such rules. This is done either by statutory enactment, as by that part (Part VIII.) of the Merchant Shipping Act 1804 which deals with the liability of shipowners; or by established rules of the unwritten law, the "common law" as it is called, as, for instance, the rule that the common carrier is absolutely responsible for the safe delivery of the goods carried, unless it is prevented by the act of God or the king's enemies. These rules of law, whether common law or statute law, regulating the obligations of carriers of goods by sea, are of most importance in cases which are uncommon though not unknown at the present day, in which there is an affreightment without any written agreement of any kind. It will, therefore, be convenient to consider first cases of this kind where there is no express agreement, oral or written, except as to the freight and destination of the goods, and where, consequently, the rights and obligations of the parties as to all other terms of carriage depend wholly upon the rules of law, remembering always that these same rules apply when there is a written contract, except in so far as they are qualified or negatived by the terms of such contract.
In defaults of express contract.
The rules of the common or ancient customary law of England with regard to the carriage of goods were no doubt first considered by the courts and established with regard to the carriage of goods by common carriers on land. These rules were applied to common carriers by water, and it may now be taken to be the general rule that shipowners who carry goods by sea are by the English law subject to the liabilities of common carriers. (See, as to the grounds and precise extent of this doctrine, the judgments in Liver Alkali Company v. Johnson (1874), L.R., 9 Ex. 338, and Nugent v. Smith (1876) 1 C.P.D. 423.) In practice goods are not often shipped without a written contract or acknowledgment of the terms upon which they are to be carried. For each separate consignment or parcel of goods shipped a bill of lading is almost invariably given, and when a whole cargo is agreed to be carried the terms are set out in a document called a charter-party, signed by or on behalf of the shipowner on the one part, and the shipper, who is called the charterer, on the other part. But at present we are considering the relations of shipowner and shipper independently of any express contract, as in a case when goods are shipped and received to be carried to the place to which the ship is bound for a certain freight, but without any further agreement as to the terms of carriage. In such a case the rights of the parties depend on the rules of law, or, which is much the same thing, upon the warranties or promises which though not expressed must, as the courts have held, be implied as arising from the relation between the parties as shipper and carrier. The obligations on the one side and the other may be defined shortly to be as follows:-The shipper must not ship goods of a nature or in a condition which he knows, or ought, if he used reasonable care, to know to be dangerous to the ship, or to other goods, unless the shipowner has notice of or has sufficient opportunity to observe their dangerous character. The shipper must be prepared, without notice from the shipowner, to take delivery of his goods with reasonable despatch on the arrival of the ship at the place of destination, being ready there to discharge in some usual discharging place. The shipper must pay the agreed freight, and will not be entitled to claim delivery until the freight has been paid. In other words, the shipowner has a lien on the goods carried for the freight payable in respect of the carriage. On the other hand, the obligation upon the shipowner is first and foremost to deliver safely at their destination the goods shipped, and this obligation is, by the common law, subject to this exception only that the shipowner is not liable for loss or damage caused by the act of God or the king's enemies; but by statute (Merchant Shipping Act 1894, Part VIII.) it is further qualified to this extent that the shipowner is not liable for loss, happening without his actual fault or privity, by fire on board the ship, or by the robbery or embezzlement of or making away with gold or silver or jewellery, the true nature and value of which have not been declared in writing at the time of shipment; and, further, the shipowner is not laable for damage to or loss of goods or merchandise beyond an aggregate amount, not exceeding eight pounds per ton for each ton of the ship's tonnage. The shipowner is bound by an implied undertaking, or, in other words, is made responsible by the law as if he had entered into an express undertaking: (1) that the ship is seaworthy; (2) that she shall proceed upon the voyage with reasonable despatch, and shall not deviate without necessity from the usual course of the voyage.
It is not our purpose in this article to discuss minute or doubtful questions; but in their general outline the obligations of shipper and shipowner, where no terms of carriage have been agreed, except as to the freight and destination of the goods, are such as have been described above. The importance of appreciating clearly this view of the relations of shipper and shipowner arises from the fact that these fundamental rules apply to all contracts of affreightment, whether by bill of lading, charter-party or otherwise, except in so far as they are modified or negatived by the express terms of the contract.
Bills of Lading. The document signed by the master or agent for the shipowner, by which are acknowledged the shipment of a parcel of goods and the terms upon which it is to be carried, is called a Bill of Lading. Very many different forms of bills of lading are used. For the purpose of illustration the following form (from Mr Scrutton's book on Charter-parties and Bills of Lading) has been selected as a sample:-
Shipped, in apparent good order and condition by in and upon the good Vessel called the now lying in the port of and bound for , with liberty to call at any ports in any order, to sail without Pilots, and to tow and assist Vessels in distress, and to deviate for the purpose of saving life or property; and to be delivered in the like good order and condition at the aforesaid port of unto or to his or their assigns, freight and all other conditions as per Charter Party. The act of God, perils of the sea, fire, barratry of the Master and Crew, enemies, pirates, and thieves, arrests, and restraints of princes, rulers, and people, collisions, stranding, and other accidents of navigation excepted, even when occasioned by negligence, default, or error in judgment of the Pilot, Master, Mariners, or other servanis of the Shipowners.
Ship not answerable for losses through explosion, bursting of boilers, breakage of shafts, or any latent defect in the machinery or hull, not resulting from want of due diligence by the Owners of the Ship, or any of them, or by the Ship's Husband or Manager.
General Average payable according to York-Antwerp Rules.
In Witness whereof, the Master or Agent of the said Ship hath affirmed to three Bills of Lading, all of this tenor and date, drawn as first, second and third, one of which Bills being accomplished, the others to stand void.
Dated in this day of 188 .
The bill of lading is an acknowledgment of the shipment of goods in a named vessel for carriage to a specified destination on terms set forth in the document. It is usually signed by the master of the vessel, but very commonly by the agents of the shipowner or sometimes of the charterers of the vessel. A vessel may be employed by its owners to earn freight in various ways: (1) It may be placed, as it is said, on the berth as a general ship, to receive cargo from any shippers who may desire to send goods to the port, or one of the ports, to which the vessel is bound. The mate or chief officer usually superintends the loading, and, as goods are shipped, a mate's receipt is given as an acknowledgment of the shipment. The mate's receipt is afterwards exchanged for the bill of lading. In the case of a shipment by a general ship the bill of lading is the evidence and memorandum of the contract between the shipowner and the shipper. (2) A shipper may, however, require the whole cargo space of the vessel to carry, for example, a full cargo of grain. In such a case the vessel will be chartered by the shipowner to the shipper. and the contract will be the charter-party. Even in such a case a bill or bills of lading will usually be given to enable the shipper to deal more conveniently with the goods by way of sale or otherwise. By the ancient custom of merchants recognized and incorporated in the law, the bill of lading is a document of title, representing the goods themselves, by the transfer of which symbolical delivery of the goods may be made. But when a cargo is shipped under a charter party, although bills of lading may be given to the charterer, it is the charter-party, and not the bills of lading, which constitutes the record of the contract between the parties--of charter-parties we shall treat below. (3) There is a third class of case which is a combination of the two with which we have dealt above. A vessel is very commonly chartered by her owner to a charterer who has no intention to ship and does not ship any cargo on his own account, but places the vessel on the berth to receive cargo from shippers who ship under bills of lading. The charterer receives the bill of lading freight and pays the charter-party freight, his object being of course to obtain a total bill of lading freight in excess of the chartered freight, and so make a profit. The master, although he usually remains the servant of the shipowner during the term of the charter-party, acts nevertheless under the directions and on behalf of the charterer in signing bills of lading. The legal effect of this situation is that shippers who ship goods under bills of lading without knowledge of the terms of the charter-party are entitled to look to the shipowner as the person responsible to them for the safe carriage of their goods. This right depends essentially on the fact that the master who signs the bills of lading, although in doing so he is acting for the charterer, remains nevertheless the servant of the shipowner, who is not allowed to deny as against third persons, who do not know the relations between the charterer and the shipowner, that his servant, the master of the ship, has the ordinary authority of a master to bind his owner by signing bills of lading.
The forms of bills of lading vary very much, and their clauses have been the subject of judicial consideration and decision in a vast number of reported cases. The essential particulars, or at all events those common to all bihs of lading, may be stated as follows:
1. The name of the shipper. 2. The name of the ship. 3. The place of loading and destination of the ship. 4. A description of the goods shipped. 5. The place of delivery. 6. The persons to whom delivery is to be made. 7. The freight to be paid.' 8. The excepted perils. 9. The shipowner's lien. The description of (1) the shipper and (2) the ship calls for no remark. The (3) description of the voyage is important, because there is, as we have already explained, an implied undertaking by the shipowner in every contract of carriage not unnecessarily to deviate from the ordinary route of the voyage upon which the goods are received to be carried. The consequences of a deviation are serious, inasmuch as the shipowner is liable, not only for any loss or damage which the shipper suffers in consequence of the deviation, but for any loss of goods which occurs after the deviation, even though such loss is caused by one of the excepted perils. The only exception to this rule is that a deviation may be made to save life, but not to save property. It is, however, very usual to qualify the strictness of this implied undertaking by introducing in the bill of lading certain "liberties" to deviate, as, for example, in the form given above, "liberty to call at any ports in any order, to tow and assist vessels in distress, and to deviate for the purpose of saving life and property." The nature and extent of the liberty will depend on the words of the contract. The inclination of English courts has been to construe clauses giving a liberty to deviate somewhat strictly against the shipowner.
The (4) importance of the description of the goods shipped and their condition is obvious, as the contract is to deliver them as described and in the like good condition, subject, of course, to the exceptions. It must, moreover, be noted that, as against the master or person who has himself signed the bill of lading, the statement therein of the goods shipped is absolutely conclusive. But as against the shipowner, unless he has himself signed the bill of lading, the statement of the goods shipped is not conclusive. It is evidence as against him that the goods described were shipped, but he is allowed to rebut this evidence by proving, if he can, that the goods mentioned, or some of them, were not in fact shipped.
As to (5) the place of delivery, very serious questions frequently arise. Primarily, of course, the shipowner is bound to deliver at the place named. Should he be prevented by some obstacle or difficulty which is of a temporary nature, the vessel must wait, and delivery must be made as soon as possible. Where, however, the obstacle is permanent, or at all events such as must cause unreasonable delay, having regard to the nature of the adventure, the shipowner is excused from delivery at the place named in the bill of lading, provided the difficulty arises from an excepted peril, or in consequence of delivery at the place named being forbidden by the law of England, as may happen, for example, in the case of a declaration of war between Great Britain and the state in which the port named in the bill of lading is situate. A party to a contract cannot be held liable for breaking his contract if its performance has become illegal. There may be other cases in which, from the circumstances of the voyage and adventure, it must be inferred that the parties intended the performance of the contract to be conditional on the existence at the time of performance of a certain state of things, the non-existence of which would render performance impossible. For instance, if the port named in the bill of lading became permanently closed and inaccessible to shipping in consequence of an earthquake, it would probably be held that the continued existence of the place named as a port was an implied condition of the contract, and that the shipowner was excused. Where, however, the performance of the contract remains lawful, and is not excused by the express terms of the contract, or by some implied condition, the shipowner is liable for any loss or damage suffered by the shipper by reason of his goods not being delivered at the named place, even though such delivery has become impossible. There is another reason why the precise description of the place of delivery often becomes important. It is only on the arrival of the ship at the place described as the place of delivery that the obligation of the consignee of the goods to take delivery commences. Delay involves considerable loss and expense to the shipowner. The shipper or consignee is not responsible for any delay which occurs before the ship has arrived at the place of delivery described in the bill of lading.
(6) The goods may be deliverable by the terms of the bill of lading to a named consignee, and to him only, but more usually they are made deliverable to the "order or assigns" of the named consignee or of the shipper. If the goods are made deliverable to order or assigns the bill of lading is a negotiable instrument, or, in other words, the right to the goods, and the rights and liabilities under the contract contained in the bill of lading, may be transferred by indorsement and delivery of the document. When an indorsement has once been made by the shipper or consignee writing his name and nothing more on the back of the bill of lading, the rights in and under it may be transferred from hand to hand by mere delivery. A bill of lading so indorsed is said to be indorsed "in blank." But the shipper or consignee may restrict the negotiability of the bill of lading by indorsing it not "in blank," but with a direction requiring delivery to be made to a particular person or indorsee, or to his order. This is called an indorsement "in full." When an indorsement has been made "in full" to a named indorsee or order, such indorsee must again indorse "in blank" or "in full" to effect a new transfer of the rights in the bill of lading.
(7) The amount or rate of freight payable is stated in the bill of lading, either expressly, or, not uncommonly when the freight under the bill of lading is the same as under the charter-party, by reference to the charter-party. A common form of such reference is "freight and other conditions, as per charter-party." It may here be mentioned that this form of words does not incorporate in the contract under the bill of lading all the terms and conditions of the charter-party, but only those which apply to the person who is to take delivery, and relate to matters ejusdem generis, or similar to the payment of freight, such as demurrage and the like. The conditions of the charter-party thus incorporated do not include, for instance, the exceptions in the charter-party so as to add them to the exceptions in the bill of lading. Freight, unless it is otherwise provided by the contract, is payable only on delivery of the goods at their destination. If the voyage is interrupted and its completion becomes impossible, the shipowner cannot claim payment of freight even pro rata itineris. He loses his freight altogether. This is so even when the completion of the voyage is prevented by causes for which the shipowner is not responsible, such as the act of God or the king's enemies, or perils which are within the express exceptions in the bill of lading. When the voyage is interrupted by accident, and indeed in any case, the goods may, by agreement between the shipowner and the consignee, be delivered at some place short of their destination upon payment of a freight pro rata; that is to say, proportional to the length of voyage accomplished, and such an agreement may be implied in certain circumstances from the conduct of the consignee in taking delivery before they arrive at their destination. In all such cases it will be a question of fact whether the goods were in fact delivered upon the terms, express or implied, that freight pro rata should be paid. As a rule such an agreement would not be implied where the shipowner is unable or unwilling to forward the goods to their destination, and the owner of the goods, therefore, has no option but to take delivery where offered.
When the ship is disabled and cannot proceed, or she is prevented by some obstacle from proceeding to the place of delivery named in the bill of lading, and the shipowner is unwilling or unable to forward the goods by another ship, even though he may be excused for his failure to carry the goods to their destination, he is not entitled to be paid any part of the freight; and the consignee is entitled to have the goods delivered to him either at the place where the vessel has taken refuge in her disabled condition, or, if the obstacle arises without disablement of the vessel, at the place which is nearest and most reasonably convenient at the time and in the circumstances when the further prosecution of the voyage has to be abandoned. On the other hand, after the goods have been shipped, so long as the shipowner is ready and willing to carry the goods to their destination, or, if the ship is disabled, to forward them to their destination by some other ship without unreasonable delay, the owner of the goods cannot require the goods to be delivered to him at any place short of their destination without payment of the full freight. Sometimes the freight, either wholly or in part, is made payable in advance. If freight payable in advance has become due, even though the ship is lost before it is paid, it must, in the absence of some special provision to the contrary, still be paid, and freight already paid in advance does not become repayable because the goods do not reach their destination. If, however, goods upon which freight has been paid in advance are lost, and the shipowner is liable for their loss, the amount of freight paid in advance must be taken into account in assessing the damage recoverable from the shipowner.
(8) There is no part of the bill of lading which is of greater practical importance or which demands more careful consideration by shipowner and shipper alike than that which sets forth the excepted perils: those perils, or in other words causes of loss, for which the shipowner is to be exempt from liability. By the common law, as we have seen, the exemption of the carrier, apart from express contract, extended only to loss by the act of God or the king's enemies. The expression "act of God" requires a word of explanation. It will be sufficient to say that it is not synonymous with force majeure; but it includes every loss by force majeure in which human agency, by act or negligence, has had no part. The list of excepted perils varies much in different forms of bills of lading. In the older forms it usually included perils of the seas, robbers and pirates, restraint of princes and rulers, fire and barratry (that is, wilful wrongdoing) of the master and crew. The list, however, has grown in modern times, and is still growing; the tendency being to exempt the shipowner from liability for all loss which does not arise from his own personal default, or from the negligence of his managers or agents in failing to provide a vessel seaworthy and fit for the voyage at its commencement. It is important to point out in this connexion that there are two duties which the shipowner is always presumed to undertake, and which are assumed to be unaffected and unqualified by the exceptions, unless a contrary intention is very clearly expressed by the terms of the contract. In the first place, he undertakes absolutely that the ship in which the goods are shipped is fit at the commencement of the voyage for the service to be performed. If during the voyage loss arises even from dangers of the seas or other excepted peril which would not have occurred if the vessel had been seaworthy and fit for the voyage at its commencement, the shipowner is not protected by the exceptions, and is liable for the loss. In the second place, there is an implied undertaking by the shipowner that all reasonable care will be taken by himself, his servants and agents, safely to carry and deliver at their destination the goods received by him for carriage. Should loss or damage occur during the voyage, though the direct cause of such loss or damage be perils of the seas or other excepted peril, still the shipowner cannot claim exemption under the exceptions, if the shipper can prove that the loss or damage would not have occurred but for the negligence of the master or crew, or other servants of the shipowner. The shipowner, in other words, is bound, with his servants, to use all reasonable care to prevent loss by excepted perils and by any other cause.
It must not be supposed that even these primary obligations, which are introduced into every contract of affreightment not by express terms of the contract. It has now become common form to stipulate that the shipowner shall not be liable for any loss arising from the negligence of his servants, or that he shall not be liable for loss by the excepted perils even when brought about by the negligence of his servants. And with regard to seaworthiness, it is not uncommon for the shipowner to stipulate that he shall not be responsible for loss arising even from the unseaworthiness of the ship on sailing, provided that due care has Been taken by the owner and his agents and servants to make the ship seaworthy at the commencement of the voyage. There is indeed no rule of English law which prevents a shipowner from exempting himself by the terms of the bill of lading from liability for damage and loss of every kind, whether arising from unseaworthiness or any other cause whatsoever. In such a case the goods are carried at their owner's risk, and if he desires protection he must obtain it by insurance. In this respect the law of England permits greater freedom of contract than is allowed by the law of some other states. The owners, agents and masters of vessels loading in the United States of America are forbidden by an act of Congress, commonly called the Harter Act, passed in the year 1893, to insert in their contracts of affreightment any clause exempting the shipowner from liability for the negligence of his servants; but it is at the rame time enacted that, provided all reasonable skill and care has been exercised by the shipowner to make the vessel seaworthy and fit for the voyage at its commencement, the shipowner shall not be liable for any loss caused by the negligence of the master or crew in the navigation of the vessel, or by perils of the sea or certain other causes set forth in the act. It is now very usual to insert in the bills of lading of British vessels loading in the United States a reference to the Harter Act, incorporating its provisions so as to make them terms and conditions of the bill of lading.
The difficulty of construing the terms of bills of lading with regard to the excepted perils, often expressed in obscure and inexact language, has given rise to much litigation, the results of which are recorded in the law reports. Where such difficulties arise the question must be, What is the true and natural meaning of the language used by the parties? This question is not governed by the general rules which we have endeavouted to explain: but the words of the contract must always be considered with reference to these rules, which are founded upon the well-established customs of merchants recognized and formulated by the courts of law.
(9) The bill of lading sometimes contains a clause as to the shipowner's lien. Without any express provision for it the shipowner has by the common law a lien for freight. If it is desired to give the shipowner a lien for demurrage (see below) or other charges, it must be expressly provided for. The lien is the right of the shipowner to retain the goods carried until payment has been made of the freight or the demurrage, or other charge for which a lien has been given. The lien may be waived, and is lost by delivery of the goods, or by any dealing with the consignee which is inconsistent with a right of the shipowner to retain possession of the goods until payment has been made. The shipowner may preserve his lien by landing the goods and retaining them in his own warehouse, or by storing them in a public warehouse, subject to the conditions required by the Merchant Shipping Act 1894.
Charter-parties are, as we have already explained, either for a voyage or for a period of time. (1) A charter-party for a voyage is a formal agreement made between the owner of the vessel and the charterers by which it is agreed that the vessel "being tight, staunch and strong, and every way fitted for the voyage," shall load at a certain named place a full cargo either of goods of a specified description or of general merchandise, and being so loaded shall proceed with all possible despatch either to a specified place or to a place to be named at a specified port of call, and there deliver the cargo to the charterers or their assigns. There are clauses which provide for the amount of freight to be paid and the manner and time of payment; for the time, usually described as lay days, to be allowed for loading and discharging, and for the demurrage to be paid if the vessel is detained beyond the lay days; usually also a clause requiring "the cargo to be brought to and taken from alongside at merchant's risk and expense"; a clause that the master shall sign bills of lading for the cargo shipped either at the same rate of freight as is payable under the charter-party or very commonly at any rate of freight (but in this case with a stipulation that, if the total bill of lading freight is less than the total freight payable under the charter-party, the difference is to be paid by the charterers to the master before the sailing of the vessel); and there is usually vhat is called the cesser clause, by which the charterer's liability under the charter-party is to cease on shipment of the cargo, the shipowner taking a lien on the cargo for freight, dead freight and demurrage. The charter-party is made subject to exceptions similar to those which are found in bills of lading. There are also usually clauses providing for the commissions to be paid to the brokers on signing the charter-party, the "address" commission to be paid to the agents for the Vessel at the port of discharge, and other matters of detail. The clauses in charter-parties vary, of course, indefinitely, but the above is probably a sufficient outline of the ordinary form of a charter-party for a voyage.
What has been said with regard to bills of lading as to the voyage, the place of delivery, the exceptions and excepted perils, and the liability of the shioowner and his lien applies equally to charter-parties. lt may be desirable to add a few words on demurrage, dead Freight, and on the cesser clause.
Demurrage is, properly speaking, a fixed sum per day or per hour agreed to be paid by the charterer for any time during which the vessel is detained in loading or discharging over and above the time allowed, which is, as we have said, usually described as the lay days. Sometimes the number of days during which the vessel may be kept on demurrage at the agreed rate is fixed by the charter-party. If no demurrage is provided for by the charter-party, and the vessel is not loading or discharging beyond the lay days, the shipowner is entitled to claim damages in respect of the loss which he has suffered by the detention of his ship; or, if the vessel is detained beyond the fixed number of demurrage days, damages for detention will be recoverable. Sometimes there is no time fixed by the charter-party for loading or discharging. The obligation in such cases is to load or discharge with all despatch that is possible and reasonable in the circumstances; and if the loading or discharging is not done with such reasonable despatch, the shipowner will be entitled to claim damages for detention of his ship. The rate of demurrage (if any) will generally be accepted as the measure of the damages for detention, but is not necessarily the true measure. When the claim is for detention and not demurrage the actual loss is recoverable, which may be more or may be less than the agreed rate of demurrage. The contract usually provides that Sundays and holidays shall be excepted in counting the lay days, but unless expressly stipulated this exception does not apply to the computation of the period of detention after the lay days have expired.
Dead freight is the name gaven to the amount of freight lost, and therefore recoverable by the shipowner from the charterer as damages if a full and complete cargo is not loaded in accordance with the terms of the charter-party.
The cesser clause has come into common use because very frequently the charterers are not personally interested in the cargo shipped. They may be agents merely, or they may have chartered the vessel as a speculation to make a profit upon the bill of lading freight. The effect of the clause is that when the charterers have shipped a full cargo they have fulfilled all their obligations, the shipowner discharging them from all further liability and taking instead a lien on the cargo for payment of all freight, demurrage or dead freight that may be payable to him. It has become an established rule for the construction of the cesser clause that, if the language used will permit it, the cesser of liability is assumed to be co-extensive only with the lien given to the shipowner; or, in other words, the charterers are released from those liabilities only for which a lien is given to the shipowner. The shipowner is further secured by the stipulation already referred to, that if the total freight payable under the bills of lading is less than the full chartered freight the difference shall be paid to the shipowner before the vessel sails. A difficulty which sometimes arises, notwithstanding these precautions, is that although an ample lien is given by the charter-party, the terms of the bills of lading may be insufficient to preserve the same extensive lien as against the holder of the bills of lading. The shippers under the bills of lading, if they are not the charterers, are not liable for the chartered freight, but only for the bill of lading freight; and unless the bill of lading expressly reserves it, they are not subject to a lien for the chartered freight. The master may guard against this difficulty by refusing to sign bills of lading which do not preserve the shipowner's lien for his full chartered freight. But he is often put into a difficulty by a somewhat improvident clause in the charter-party requiring him to sign bills of lading as presented. See Kruger v. Moel Tryvan, 1907 A. C. 272.
(2) A time charter-party is a contract between the shipowner and charterers, by which the shipowner agrees to let and the charterers to hire the vessel for a specified term for employment, either generally in any lawful trade or upon voyages within certain limits. A place is usually named at which the vessel is to be re-delivered to the owners at the end of the term, and the freight is payable until such re-delivery; the owner almost always pays the wages of the master and crew, and the charterers provide coals and pay port charges; the freight is usually fixed at a certain rate per gross register ton per month and made payable monthly in advance, and provision is made for suspension of hire in certain cases if the vessel is disabled; the master, though he usually is and remains the servant of the owner, is required to obey the orders of the charterers as regards the employment of the vessel, they agreeing to indemnify the owners from all liability to which they may be exposed by the master signing bills of lading or otherwise complying with the orders of the charterers; and the contract is made subject to exceptions similar to those in bills of lading and voyage charter-parties. This is the general outline of the ordinary form of a time charter-party, but the forms and their clauses vary, of course, very much, according to the circumstances of each case.
It is apparent that under a time charter-party the shipowner to a large extent parts with the control of his ship, which is employed within certain limits according to the wish and directions, and for the purposes and profit of, the charterers. But, as we have already explained at the beginning of this article, the shipowner continues in possession of his vessel by his servant the master, who remains responsible to his owner for the safety and proper navigation of the ship. The result of this, as has been already pointed out, is that the holder of a bill of lading signed by the master, if he has taken the bill of lading without knowledge of the terms of the time charter-party, may hold the owner responsible for the due performance of the contract signed by the master in the ordinary course of his duties, and within his ostensible authority as servant of the shipowner, although in fact in signing the bill of lading the master was acting as agent for and at the direction of the time charterer, and not the shipowner. In the language of the ordinary time charter-party the ship is let to the charterers; but there is no true demise, because, as we have pointed out, the vessel remains in the possession of the shipowner, the charterer enjoying the advantages and control of its employment. Where the possession of a ship is given up to a hirer, who appoints his own master and crew, different considerations apply; but though the instrument by which the ship is let may be called a charter-party, it is not truly a contract of affreightment.
There are certain rights and obligations arising out of the relationship of shipowner and cargo-owner in circumstances of extraordinary peril or urgency in the course of a voyage, which, though not strictly contractual, are well established by the customs of merchants and recognized by the law. It is obvious that, when a ship carrying a cargo is in the course of a voyage, the master to some extent represents the owners of both ship and cargo. In cases of emergency it may be necessary that the master should, without waiting for authority or instructions, incur expense or make sacrifices as agent not only of his employer, the shipowner, but also of the cargo-owner. Ship and cargo may be in peril, and it may be necessary for the safety of both to put into a port of refuge. There it may be necessary to repair the ship, and to land and warehouse, and afterwards re-ship the cargo. For these purposes the master will be obliged to incur expense, of which some part, such as the cost of repairing the ship, will be for the benefit of the shipowner; part, such as the warehousing expenses, will be for the benefit of the cargo-owner; and part, such as the port charges incurred in order to enter the port of refuge, are for the common benefit and safety of ship and cargo. Again, in a storm at sea, it may be necessary for the safety of ship and cargo to cut away a mast or to jettison, that is to say, throw overboard part of the cargo. In such a case the master, acting for the shipowner or cargo-owner, as the case may be, makes a sacrifice of part of the ship or part of the cargo, in either case for the purpose of saving ship and cargo from a danger common to both. Voluntary sacrifices so made and extraordinary expenses incurred for the common safety are called general average (see AVERAGE) sacrifices and expenses, and are made good to the person who has made the sacrifice or incurred the expense by a general average contribution, which is recoverable from the owners of the property saved in proportion to its value, or, in other words, each contributes rateably according to the benefit received. The law regulating the rights of the parties with regard to such contribution is called the law of General Average. It must, however, be remembered that the owner of the cargo is entitled under the contract of affreightment to the ordinary service of the ship and crew for the safe carriage of the cargo to its destination, and the shipowner is bound to pay all ordinary expenses incurred for the purpose of the voyage. He must also bear all losses arising from damage to the ship by accidents. But when extraordinary expense has been incurred by the shipowner for the safety of the cargo, he can recover such expense from the owner of the cargo as a special charge on cargo; or when an extraordinary expense has been incurred or a voluntary sacrifice made by the shipowner to save the ship and cargo from a peril common to both, he may require the owner of cargo to contribute in general average to make good the loss.
See Carver, Carriage by Sea (London, 1905); Scrutton,
Charter-parties and Bills of Lading (London, 1904). (W.)
Note - this article incorporates content from Encyclopaedia Britannica, Eleventh Edition, (1910-1911)