Voyage Charterparty
Dead freight
Introduction
Freight is primary payment obligation arising under a voyage charter which represents a fixed price for carriage of a certain quantity of particular cargo on a particular voyage.
The monetary value of freight directly depends on the quantity of the goods loaded by the charterer, and then delivered in undamaged state by the shipowner to the consignee or receiver. It follows therefore that, when the charterer, without lawful excuse, ships a quantity of goods less than that required by the charterparty, or if the goods shipped are not in accordance with the charterparty, then the charterer is liable to the shipowner for the difference between the freight actually earned, being calculated on actually supplied quantity of goods, and the freight which would have been earned if the charterer had fulfilled his obligation to load the cargo in full. Such measure of damages claimed for breach of contract by a charterer to furnish a full cargo to a ship is known as deadfreight.
The charterers are ultimately liable for deadfreight resulted from bad stowing, if under the charterparty they undertake the duty of stowing the cargo, notwithstanding the master’s duty to supervise stowage, because it is not a question of whose servant the stevedore was, but who under the charterparty undertook the duty of stowing the cargo. Read also Voyage Charterparty. Charterer’s Duties: Obligation to load and later to discharge the goods.
Full cargo and full loading capacity
Dead freight means the damage caused by the failure to furnish a full cargo in accordance with the contract, not merely the damage that caused by the ship not being in fact fully loaded. In other words deadfreight accrues only when quantity stated in contract was not supplied, which signifies a breach of contract, and not when the vessel loaded cargo as per contract but less than her full capacity.
The obligation … to pay deadfreight is only triggered in the event that the Charterer fails to supply a full cargo. Deadfreight is traditionally described as the name given to liquidated damages claimed for a charterer’s breach of contract to furnish a full cargo to a ship in accordance with the charter; … Accordingly, where, as here, there was a tender of full contractual performance by the Charterer, there can have been no failure to supply and therefore no obligation to pay deadfreight.
Per Gloster J. in AIC Ltd v Marine Pilot Ltd (The Archimidis) [2007] EWHC 1182 (Comm)
In some instances it can happen that the vessel’s full capacity is utilised but not full cargo loaded. For example in Akties Steam v Arcos Ltd (1933) 47 Ll.L Rep 159, 18 Asp MLC 409, CA case the cargo loaded was covered with ice and snow, so that its bulk has been increased and the quantity which the ship could carry should be accordingly reduced. It was held that the shipowner is was entitled to dead freight in respect of the reduction in her carrying capacity so caused.
Implied liberty
The owner by implication is at liberty, if acting reasonably, not only to fill up the space left vacant due to the charterer’s failure to provide full cargo, but also to delay the charter voyage by the period of time reasonably and necessarily occupied in taking in that substituted cargo. Basis for this implication is an assumption that the carrying out of such an action is for the benefit of the charterer, because it goes to diminish the damages that the charterer will be liable for.
Deadfreight and demurrage
If the charterer is unable to load a full contracted cargo during agreed laydays then he is liable to pay damages in the nature of deadfreight as well as demurrage for delays sustained. Atkin J. in Aktieselskabet Reidar v Arcos Ltd [1927] 1 KB 352; [1926] All ER Rep 140 at p.145 stated to this effect that:
The provisions as to demurrage quantify the damages not for the complete breach, but only such damages as arise from the detention of the vessel. For correlative to the ship’s right to receive the agreed damage is the charterer’s right to detain the ship for the purpose of enabling him, if possible, to perform, his broken contract and so mitigate any further damage. If, however, for reasons other than the shipowner’s default, the charterer becomes unable to do that which he contracted to do, namely, put a full and complete cargo on board during the fixed lay days, the breach is never repaired, the damages are not completely mitigated, and the shipowner may recover the loss that he has incurred in addition to his liquidated damages or his unliquidated damages for detention.
Also in Total Transport Corpn v Amoco Trading Co (The Altus) [1985] 1 Lloyd’s Rep 423 Webster J. held at 435-436 that where:
…a charterer commits any breach, even if it is only one breach, of his obligation either to provide the minimum contractual load or to detain the vessel for no longer than the stipulated period, the owner is entitled not only to the liquidated damages directly recoverable for the breach of the obligation with regard to detention (demurrage), but also for, in the first case, to the damages flowing indirectly or consequentially from any detention of the vessel (if it occurs) and, in the second case, to damages flowing indirectly or consequentially from any failure to load a complete cargo if there is such failure … it follows that the plaintiffs are entitled, in addition to the dead freight which they have already received, to the difference between the demurrage rates as damages for the loss of demurrage consequent upon the defendants’ failure to load the minimum agreed cargo.
Thus, both claims for deadfreight and demurrage exist independently, moreover, the owners can recover damages sustained indirectly or consequentially from both detention of the vessel in excess of laydays and from failure to load a complete cargo.
Thus, both claims for deadfreight and demurrage exist independently and moreover the owners can recover damages sustained indirectly or consequentially from both detention of the vessel in excess of laydays and from failure to load a complete cargo.
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