bareboat charters - GBV

bareboat charters - GBV

BAREBOAT CHARTERS SECOND EDITION BY MARK DAVIS Davis & Co. |L|L|P| LONDON SINGAPORE 2005 Contents Acknowledgements Preface to the Second Editio...

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MARK DAVIS Davis & Co.




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 Introduction Operating charters Finance charters and leases The essential characteristics of a bareboat charter The fundamental terms of a bareboat charter The liability of the owners of a bareboat chartered vessel to third parties Owners' liability for acts or omissions of the bareboat charterers Owners' liability to third parties for their own negligence Owners' rights where the vessel is simultaneously bareboat chartered and taken back on time charter

para nos 1.1 1.7 1.8 1.9 1.13 1.14 1.15 1.16 1.17

2 THE FORMATION OF A BAREBOAT CHARTER Formal requirements Fixture before formal charter signed Construction of the contract General principles

2.1 2.6 2.8 2.8



Presumption against surplusage Deletions Printed/typed clauses Conditions, warranties and "innominate" terms Conditions Warranties Innominate terms Terms implied by statute The Supply of Goods and Services Act 1982 as amended by the Sale and Supply of Goods Act 1994 The right to transfer possession of the vessel and the right to quiet enjoyment Correspondence with description Satisfactory quality Fitness for purpose Repudiation Unfair Contract Terms Act 1977 The Law Reform (Frustrated Contracts) Act 1943


2.10 2.11 2.12 2.13 2.14 2.15 2.16 2.18 2.18 2.20 2.24 2.29 2.30 2.31 2.32 2.34


4 CLAUSES 1, 2 AND 3—DEFINITIONS, CHARTER PERIOD AND DELIVERY Definitions Charter period Delivery Introduction Due diligence Seaworthiness Readiness for service What constitutes delivery? Breach of owners' obligations Place of delivery Properly documented Survey cycles, trading and class certificates Discharge of owners' obligations under Clause 3 Latent defects Damage existing at the time of delivery

4.1 4.2 4.3 4.4 4.5 4.8 4.9 4.11 4.12 4.13 4.15 4.16 4.17 4.21 4.24

5 CLAUSE 4—TIME FOR DELIVERY Window for delivery Notice Change in vessel's position

5.1 5.2 5.4



6 CLAUSE 5—CANCELLING The charterers' contractual right to cancel Owners' notice of delay Cancellation before the cancelling date Claims against the owners Measure of damages


6.2 6.4 6.6 6.7 6.8


Purpose of trading limits Breach—measure of damages Withdrawal of the vessel and termination of the charter

7.1 7.3 7.6

8 CLAUSE 7—SURVEYS ON DELIVERY AND REDELIVERY Purpose of survey Expenses of survey Disputes as to vessel's condition Drydock

8.1 8.2 8.3 8.5

9 CLAUSE 8—INSPECTION Owners' right to inspection/survey Cost of inspection/survey Right to inspect the vessel's log books Duty to keep owners advised of the intended employment of the vessel

9.1 9.3 9.6 9.7

10 CLAUSE 9—INVENTORIES, OIL AND STORES Preparation of inventory Payment Property in bunkers

'0-1 10-2 10.3

II C L A U S E 1 0 — M A I N T E N A N C E A N D O P E R A T I O N Maintenance and operation 10(a) Maintenance and repairs, New class and other safety requirements and Financial security 10(a)(i) Maintenance and repairs 10(a)(ii) New class and other safety requirements 10(a)(iii) Financial security Operation of the vessel Intended employment xiii

' ' -2 H-3 11.6 H-8 ' ' -9 11.10


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

11.11 11.12 11.13 11.14 11.15

12 CLAUSE 11—HIRE Introduction Time of the essence Payment of first month's hire Payment of subsequent instalments of hire Payment of last month's hire Payment in cash without discount Set-off Vessel lost or missing Part payment Interest Waiver and estoppel Waiver Estoppel Acceptance of late payment

13 C L A U S E

12.1 12.2 12.4 12.5 12.6 12.8 12.9 12.11 12.12 12.13 12.14 12.15 12.17 12.18


Introduction Vessel not financed by a mortgage Vessel financed by a mortgage Rights of the mortgagee

13.1 13.2 13.3 13.4

14 C L A U S E S 1 3 / 1 4 — I N S U R A N C E A N D R E P A I R S Introduction Clause 13 Hull and machinery, war and P&I risks Hire/purchase Additional insurances Documentation Actual, constructive, compromised or agreed total loss 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


14.1 14.3 14.5 14.6 14.7 14.8 14.10 14.11 14.12 14.14 14.15 14.16 14.17


Responsibility for uninsured repairs Time for repairs Additional insurances Agreed, constructive, compromised or agreed total loss Termination Abandonment Value of the vessel Classification certificates

14.18 14.19 14.20 14.21 14.22 14.23 14.24 14.25

15 CLAUSE 15—REDELIVERY Introduction Place of redelivery Time and notice for redelivery Early redelivery Late redelivery Condition of the vessel upon redelivery Measure of damages Survey cycles and class certificates

15.1 15.2 15.3 15.4 15.7 15.9 15.12 15.16

16 CLAUSE 16—NON-LIEN Introduction Common law and liens Introduction Ostensible authority Notice Arrest

16.1 16.2 16.2 16.3 16-6 16-7

17 CLAUSE 17—INDEMNITY Introduction Indemnity by the charterers Indemnity by the owners

' 7.1 '7-2 17.4

18 CLAUSE 18—LIEN Introduction The owners' lien upon all cargoes belonging to the charterers The owners' lien upon sub-hires and all sub-freights belonging to the charterers The owners' lien upon any bill of lading freight The charterers' lien on the vessel for all moneys paid in advance and not earned Priority Registration


'8.1 18.2 18.3 18.5 18.6 18.7 ' 8-8


19 CLAUSE 19—SALVAGE Introduction




21 CLAUSE 21—GENERAL AVERAGE Introduction English law of general average

21.1 21.4

22 CLAUSE 22—ASSIGNMENT, SUB-CHARTER AND SALE Introduction Assignment of benefits Assignment of burdens Vicarious performance Legal and equitable assignments Novation Consent not to be unreasonably withheld 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

22.1 22.3 22.4 22.6 22.7 22.8 22.9 22.12 22.17 22.18 22.19 22.20

23 CLAUSE 23—CONTRACTS OF CARRIAGE Paramount Clause New Jason Clause Both-to-blame collision clause Claims by cargo owners Passengeer tickets

23.2 23.4 23.5 23.6 23.11

24 CLAUSE 24—BANK GUARANTEE Introduction The nature of a bank guarantee The nature of a performance bond "First class" bank guarantee or bond Discharge of the surety under a bank guarantee General Extension of the charterparty Assignment by the owners of the benefit of the charterparty Charterers ordering the vessel outside trading limits


24.1 24.3 24.6 24.8 24.9 24.9 24.12 24.18 24.20


Enforceability of the guarantee


25 CLAUSE 25—REQUISITION/ACQUISITION Introduction Requisition for hire Compulsory acquisition or requisition for title Requisition for hire and frustration

25.1 25.2 25.4 25.5

26 C L A U S E 2 6 — W A R War risks definition The scope of Clause 26

26.1 26.3

27 C L A U S E 2 7 — C O M M I S S I O N Introduction Broker's commission—who is responsible? Brokers' ability to recover commission Contracts (Rights of Third Parties) Act 1999 At common law Common law and the Contracts (Rights of Third Parties) Act 1999

27.1 27.2 27.5 27.5 27.10 27.12

28 CLAUSE 28—TERMINATION Introduction Charterers' default Failure to pay hire Failure to comply with Trading Restrictions (Clause 6) or the Insurance and Repair provisions of Clause 13(a) Failure to comply with the Maintenance and Repair provisions of Clause 10(a)(i) Owners' default Loss of the vessel Insolvency Reservation of rights Practical consequences of termination Effect of withdrawal of the vessel

28.1 28.2 28.3 28.5 28.7 28.8 28.9 28.10 28.11 28.12 28.13

29 C L A U S E 2 9 — R E P O S S E S S I O N Introduction Repossession The position pending repossession Disembarkation and repatriation expenses



29.1 29.2 29.3 29.4


Arrest Relief against forfeiture


30 C L A U S E 3 0 — D I S P U T E R E S O L U T I O N Introduction Arbitration—London/New York English law and London arbitration Scope of the disputes Procedure under the LMAA rules Small claims Commencement of arbitration proceedings Rights of challenge/appeal Back-to-back contracts Enforceability of the award Arbitration by third parties Mediation

30.1 30.2 30.4 30.4 30.5 30.8 30.9 30.11 30.14 30.15 30.16 30.17

31 C L A U S E 3 1 — N O T I C E S Introduction Time of service The general rule The postal rule Service by email Service by telex and/or fax Failure to comply with the notices provision

31.1 31.2 31.2 31.3 31.4 31.5 31.7

32 PART III: PROVISIONS TO APPLY FOR NEWBUILDING VESSELS ONLY Introduction Specifications and building contract Time and place of delivery Guarantee works Name of vessel Survey on redelivery

32.1 32.3 32.7 32.10 32.11 32.12

33 PART IV: HIRE/PURCHASE AGREEMENT Introduction Provided the charterers have fulfilled their obligations Delay in payment of the final instalment Guarantee and indemnity Miscellaneous provisions xviii

33.1 33.2 33.3 33.4 33.5


Purchase and registration expenses Bill of sale and deletion from Register Wireless installation and nautical instruments Sellers' risk Repatriation

33.5 33.6 33.7 33.8 33.9

34 PART V: PROVISION TO APPLY FOR VESSELS REGISTERED IN A BAREBOAT CHARTER REGISTRY Introduction Bareboat charter registration under British Governing law Qualification for registration Period of registration The effect of registration Application for registration Changes in circumstances Notification of primary registry Regulation 87 Registrar's power to refuse registration


34.1 34.2 34.2 34.3 34.4 34.5 34.6 34.7 34.8 34.9 34.10

35 F I N A N C E C H A R T E R S A N D L E A S E S Introduction Loans and leases Main differences Tax/accounting treatment Re-characterisation risk Financing bareboat charters Typical financing charter terms Introduction Definitions Transfer of risk provisions "Hell or high water" payment terms 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

35.1 35.1 35.2 35.3 35.4 35.5 35.7 35.7 35.8 35.9 35.9 35.10 35.11 35.13 35.14 35.15 35.16 35.17 35.18 35.19 35.20 35.21 35.22 35.22 35.23


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

35.24 35.25 35.26 35.27 35.28 35.29 35.30 35.31 35.32 35.33 35.33 35.34 35.35 35.36 35.37 35.38

36 IN REM CLAIMS AND ADMIRALTY JURISDICTION Introduction Claims in personam and in rem Claims in personam Claims in rem Advantages of an action in rem Procedural issues Statutory liens Maritime liens Introduction Main features of a maritime lien Discharge of a maritime lien 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

36.1 36.2 36.2 36.3 36.4 36.5 36.6 36.7 36.7 36.8 36.9 36.10 36.11 36.13 36.14 36.14 36.15 36.18 36.20

37 POLLUTION Introduction OPA 90 Introduction Strict liability Who can be held liable?

37.1 37.2 37.2 37.3 37.4 xx


Type of damage covered Exceptions to liability Limitation of liability Certificates of financial responsibility Oil Spill Liability Trust Fund ''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 1992 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 1996 The HNS Fund

37.5 37.6 37.7 37.8 37.9

37.10 37.10 37.12 37.13 37.14 37.15 37.16 37.18 37.19 37.20 37.21 37.22

38 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

38.1 38.3 38.4 38.5 38.6 38.6 38.7 38.8 38.11 38.12 38.13

38.14 38.15 38.17 38.18 38.19 38.20 38.21 page nos 251