Affreightment

The law with regard to the contract of affreightment is a branch of the general law of contract. The rights and obligations of the ship-owner and the freighter depend, as in the case of all parties to contracts, upon the terms of the agreement entered into between them.[3]

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.[3]

The law interferes again with regard to the interpretation of the contract. The meaning of words in the contract, or—in other words—its construction, when a dispute arises about it, are determined by a judge or court. The result is that certain more-or-less common clauses in affreightment contracts have come before the courts, and decisions in these cases are treated practically[3]—though perhaps not logically—as rules of law that determine the meaning of certain common expressions in shipping contracts.

The law acts in a third way—by laying down rules that regulate rights of the parties in the absence of an express contractual stipulation that such rules cover. This is done either by statutory enactment, as by Part VIII of the Merchant Shipping Act 1804, which deals with the liability of ship-owners—or by established rules of common law, as, for instance, the rule that the common carrier is absolutely responsible for the safe delivery of the goods carried,[3] unless prevented by an act of God or enemies of the Queen.

These rules of law, whether common law or statute law, that regulate the obligations of carriers of goods by sea, are of most importance in cases in which there is an affreightment without any written agreement. It is, therefore, 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 insofar as they are qualified or negated by the terms of such contract.[3]

The rules of the common or ancient customary English law 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 ship-owners 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.)[3]

In practice. goods are not often shipped without a written contract or acknowledgment of terms. For each separate consignment or parcel of goods shipped, a bill of lading is almost invariably given. When a whole cargo is 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.[3]

When there is no written contractual agreement, the rights of the parties depend on the rules of law, or on the warranties or promises that, though not expressed, are implied as part of the relationship between the shipper and carrier.[3]

The obligations on the one side and the other are:

• The shipper must not ship goods of a nature or in a condition he knows, or ought to know if he used reasonable care, to be dangerous to the ship, or to other goods—unless the shipowner is informed or has sufficient opportunity to observe the dangerous character. The shipper must be prepared, without notice from the shipowner, to take delivery of his goods with reasonable despatch on arrival of the ship at its destination. The shipper must pay the agreed freight, and is not entitled to claim delivery until the freight is paid.[3]

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 shipowner is obligated to deliver the goods safely, and this obligation is, by common law, subject to this exception only that the shipowner is not liable for loss or damage caused by an act of God or the Kings' enemies. The statutes (Merchant Shipping Act 1894, Part Viii.), however, specify that the shipowner is not liable for loss that happens 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 of a nature and value not declared in writing at the time of shipment. Further, the shipowner is not liable for damage to or loss of goods or merchandise beyond an aggregate amount that does not exceeding eight pounds per ton for each ton of the ship's tonnage.[3]

The shipowner is bound by an implied undertaking—in other words, is responsible under 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.[3]

This article outlines the important 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.[3]

A bill of lading (1886)

A bill of lading is a document the master or agent for the shipowner signs (on behalf of the master) to acknowledge the shipment of a parcel of goods, and the terms under which it is carried.[4] The document used today first appeared centuries ago as a bill (account) presented to shippers for all charges incurred by the cargo until properly secured on board.

In the age of sail, cargo and ships became lost more often than today. This bill proved that cargo expenses were paid, but became mainly a proof that the cargo was really on board and thus become a negotiable property title. Under this type of carriage, the bill of lading assumes two main tasks, as cargo receipt and property title. In liner shipping it assumes a triple identity: property title, cargo receipt and carriage contract. In tramp shipping, object of this wiki entry, the carriage contract is the charter party.

• 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.[5]
• 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.[5]
• 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.[5]
• No rule of English law 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.[5]
• In such a case the goods are carried at their owner's risk, and if he desires protection he must obtain it by insurance.[5]
• In this respect the law of England permits greater freedom of contract than is allowed by the law of some other states.[5]
• 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 same 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.[5]
• 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.[5]

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 debate arises as to the true and natural meaning of the language used by the parties. The words of the contract must always be considered with reference to these rules, which are founded on the well-established customs of merchants recognized and formulated by law.[5]

The bill of lading sometimes contains a clause as to the shipowner's lien. Without any express provision for it, the shipowner has by common law a lien for freight. If it is desired to give the shipowner a lien for demurrage or other charges, it must be expressly provided for. The lien is the right of the shipowner to retain the goods carried until paid the freight charges, demurrage, or other charge for which a lien has been given. The lien may be waived, and ends with delivery of the goods, or by any dealing with the consignee 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).[5]

Charter-parties are mostly - as stated earlier in this article - for either a voyage or a period of time.

Certain rights and obligations arise out of the relationship between shipowner and cargo-owner in cases of extraordinary peril or urgency during a voyage. Though not strictly contractual, these are well established by the customs of merchants, and recognized by law.[7]

When a ship carries a cargo on a voyage, the master—to some extent—represents the owners of both ship and cargo. An emergency may require that the master, without waiting for authority or instructions, incur expense or make sacrifices as agent—not just for his employer, the shipowner, but also for 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.[7]

For these purposes the master is obliged to incur expense, of which some, such as the cost of ship repairs, is for the benefit of the shipowner. Other expenses, such as warehousing fees, are for the benefit of the cargo-owner. Yet other expenses, such as port charges incurred to enter the port of refuge, are for the benefit and safety of both ship and cargo.[7]

In a storm at sea, it may be necessary for the safety of ship and cargo to cut away a mast or to jettison (throw overboard) part of the cargo. In such a case the master, acting for the shipowner or cargo-owner, as the case may be, sacrifices part of the ship or part of the cargo to save the rest of the ship and cargo from a common danger.[7]

Voluntary sacrifices and extraordinary expenses incurred for the common safety are called general average sacrifices and expenses. These are made good to the party 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. In other words, each contributes according to the benefit received. The law that regulates the rights of the parties in regard to such contribution is called the law of general average.[7]

However, 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 voyage. He must also bear all losses that arise from accidental damage to the ship. However, when the shipowner incurs extraordinary expense for the safety of the cargo, he can recover the expense from the cargo's owner as a special charge on cargo. Also, when the shipowner incurs an extraordinary expense or makes a voluntary sacrifice to save the ship and cargo from a common peril, he may require the cargo owner to contribute in general average.[7]

• Contract of carriage
• Glossary of nautical terms
• Cargo ship

• This article incorporates text from a publication now in the public domain: Walton, Joseph (1911). "Affreightment". In Chisholm, Hugh (ed.). Encyclopædia Britannica. Vol. 1 (11th ed.). Cambridge University Press. pp. 302–306.
• Carver, Carriage by Sea (London, 1905); Scrutton, Charter-parties and Bills of Lading (London, 1904). (W.)
• Huber, Mark (2001). "Ch. 9: Chartering and Operations". Tanker operations: a handbook for the person-in-charge (PIC). Cambridge, Maryland: Cornell Maritime Press. ISBN 0-87033-528-6.
• Turpin, Edward A.; McEwen, William A. (1980). "Ch. 18:United States Navigation Laws and Ship's Business". Merchant Marine Officers' Handbook. Centreville, Maryland: Cornell Maritime Press. ISBN 0-87033-056-X.