Time Charters. Speed & bunker consumption warranty Last updated 09-Dec-2015

A vessel which cannot comply with her contract speed or consumption in good weather, is unlikely to be able to comply with the contract when the weather is bad.
Per Lloyd LJ in The Gas Enterprise [1993] 2 Lloyd’s Rep. 352.

General Principles

Among parameters which owner guarantee when he delivers vessel into timecharter, very important one is speed and bunker consumption warranty. Usually such warranty estimates performance of the vessel during good weather condition. Generally good weather means Beaufort scale force less than 4 (16 knots). Sometimes above formula amended with sea state no more than Douglas sea state 3 (maximum 1.25 metres).

Owners guaranty is twofold: first it warrants that during good weather period vessel will proceed with contracted speed and, secondly, for steaming at this speed she will consume certain amount of bunker. Vessel is considering underperforming when any of these parameters, either speed or consumption is not met during good weather period.

. . . the vessel shall be capable of achieving, on sea passages, the average speeds and average bunker consumptions set out in the table hereunder.

In The Didymi [1988] 2 Lloyd’s Rep. 108 the Court of Appeal formulated principles of assessment of under or over performance and how these principles apply to the whole duration of time charter. Bingham LJ said at p.117:

If the vessel had under-performed, the basis for which the charterers contend would lead to the charterers being very inadequately compensated. The purpose of the stipulated conditions was to provide a yardstick which was then to be used to assess the loss or gain in other conditions more usually encountered. So in my judgment the procedure envisaged was clear and involved these stages: first, assess the vessel’s performance in good conditions as defined on all sea passages from seabuoy to seabuoy, excluding altogether any period of slow steaming at the charterers’ request; secondly, if a variation of speed from the stipulated norm is shown, that variation should be applied with the necessary adjustments and extrapolations to all sea passages from seabuoy to seabuoy in all weather conditions, but excluding periods of slow steaming at the charterers’ request; thirdly, if there is a variation of consumption from the stipulated norm, that variation should be applied, with the necessary adjustments and extrapolations, to all sea passages from seabuoy to seabuoy in all weather conditions, including periods of slow steaming at the charterers’ request.

In The Gas Enterprise [1993] 2 Lloyd’s Rep. 352 charterparty was based on BEEPEETIME 2 form.

Clause 5.

1) Owners undertake that at the date of delivery under this Charter the vessel shall be of the description set out in the Gas Form "C" October 1983 attached hereto and undertake so to maintain the vessel during the period of service under this Charter. Owners similarly undertake that the date of delivery under this Charter the vessel . . . shall be capable of performing in accordance with the provisions below and undertake so to maintain the vessel during the period of service under this Charter.

2) Owners undertake that: The maximum average speed of the vessel during the period of this Charter shall be 16.0 knots in respect of laden and ballast passages and at such speed the maximum average bunker consumption shall be 62 tonnes of fuel oil/8 tonnes of diesel oil.

4) For the purpose of assessing the performance of the vessel, the average speed and bunker consumption of the vessel shall be calculated upon the distance made, the time taken and the quantity of bunkers consumed by the vessel on each sea passage as ordered to be performed by Charterers, but inclusive of any deviation from, or change in, the passage as actually carried out by the vessel, from Pilot Station to Pilot Station upto and including Beaufort Force 4 wind and wave. These shall be excluded from such assessment any period (and any distance made or bunkers consumed by the vessel during such period) in respect of which the vessel is off-hire under Clause 23 or during which the vessel is delayed by a reduction in engine speed and necessary for the safe navigation of the vessel in poor visibility or in congested waters.

Lloyd LJ at p. 366 further developed the above principles in relation to excess bunker consumption:

Once the average speed and the average bunker consumption have been calculated, the figures are to be used for the purpose of seeing whether and to what extent there has been a resulting loss in time or saving in time and a resulting excess bunker consumption or saving in bunker consumption.

Paragraph 4 of the clause provides a yardstick which is to be used to measure the extent of the vessel's under-performance or over-performance throughout the course of the time charter in respect of both speed and bunker consumption. Once the vessel's under-or over-performance has been measured using the contractual yardstick, it is then necessary to calculate, in the case of speed, the resulting loss in time or saving in time and, in the case of consumption, the resulting excess bunker consumption or the resulting saving in bunker consumption.

Once it is accepted that in all cases involving a claim by charterers for loss of time or for a loss resulting from excess bunker consumption, par 5 of the clause applies, it makes no sense to construe that paragraph restrictively so as only to confer a remedy on either party for those parts of the chartered service where the weather conditions are of force 4 or less. The obligation imposed on the owners by pars 1 and 2 is one which relates to "the period of service under this charter", and is not limited to fine weather periods only.

In Hyundai Merchant Marine Company Ltd v Trafigura Beheer BV [2011] EWHC 3108 (Comm) charter on amended Shelltime 3 form contained the following provisions:

Clause 24. Detailed Description and Performance

Owners warrant that at the date of delivery under this charter the vessel shall be of the description set out in Gas Form C attached hereto and signed by them and undertake to use their best endeavours so to maintain the vessel during the period of her service hereunder. Further but otherwise [without] prejudice to the generality of this clause Owners guarantee that the average speed of the vessel will be not less than knots in ballast and knots fully laden, with a maximum bunker consumption of tons diesel oil/ tons fuel oil per day for all purposes excluding cargo heating and tank cleaning. See Additional Clause 42 attached which also overrides any references to over performance herein. [lines 201-216] The aforesaid average speeds shall be calculated in each yearly or other less period, as defined hereinafter by reference to the observed distance from pilot station to pilot station on all sea passages and over the whole of the time the vessel is on hire during such period [lines 217-219]…



In the event of any conflict between the particulars set out in the aforesaid Form and any other provision (including this clause) of this charter, such other provision shall prevail. [lines 241-242]

Clause 42: Speed/Consumption.
Speed about 15 knots average consumption about 40 mts IFO 380 CST at sea plus about 0.2 mts GO and about 10 mt IFO 380CST at port plus about 0.2 mt GO. Otherwise as per Gas Form C.

Gas Form C A.1 General Description Owners Sure Gas Shipping SA, Panama A.5 Speed Guaranteed average speed on a year’s period and max wind force 4 in Beaufort scale: Loaded about 14.5 knots, Ballast about 15.5 knots.

Charterers claimed that the vessel had failed to perform in accordance with the speed and consumption provisions. Their main contention was that cl.24 is an "all weather warranty" and guarantees an average speed and maximum daily bunker consumption measured over the whole period that the vessel is on hire under the charter, regardless of weather conditions. They based this argument on analysis of the words in lines 217-8: "on all sea passages and over the whole of the time the vessel is on hire during such period" which lead them to conclusion that the average speed, as refered to in cl 42, and consumption under clause 24 is calculated in all weather conditions.

The learned judge agreed with the charterers that provision stated in lines 217 to 220, namelty that "The aforesaid average speeds [i.e. those incorporated by reference from Clause 42] shall be calculated in each yearly or other less period … on all sea passages and over the whole of the time the vessel is on hire during such period" is an all weather warranty.

This conclusion defeated further owners’ argument that the charterers’ contention is uncommercial because it would involve the owners having chosen to warrant an all weather average speed more onerous than that contained in Gas Form C. The judge held that if provision of cl 42 to be qualified by "weather conditions of maximum Beaufort Force 4" as imported from Gas Form C, such construction will be inconsistent with the words of lines 217-220 in clause 24 and therefore all weathers performance calculation, as stipulated in cl 24, must prevail.

Period of good weather shall be long enough to represent a good sample but not necessarily 24 hours from noon to noon, see Polaris Shipping Co Ltd v Sinoriches Enterprises Co Ltd [2015] EWHC 3405 (Comm).

Speed and bunker consumption warranty should be construed contra proferentum, because the issue being the scope of the absolute warranties given and not the construction of a clause purporting to exclude liability altogether.

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