Voyage Charters. Freight, Cesser Clause. Last updated 07-Oct-2014

The Owners or Master shall have an absolute lien on the cargo for the recovery of all Bill of Lading freight, deadfreight and demurrage, but the Charterers’ liability shall cease upon the shipment of the cargo, and payment of deadfreight, difference in freight and demurrage provided such cargo be worth the Bill of Lading freight at the port of shipment
Centrocon Charter.

Cesser clause and "lien and exemption clauses"

For various reasons the charterer may be inclined to terminate his responsibility for payment of freight once the goods are loaded. Incorporation of so-called ‘cesser clauses’ into charterparty has an effect of discharging the charterer from liability to pay freight and other charges incidental to transportation of the goods when the cargo has been shipped. Such provision is usually inserted in consideration of the granting to the shipowner of a lien on the cargo for demurrage and dead freight. Accordingly, the lien is given as a commensurable equivalent for the release of responsibility which the cesser clause in its earlier part creates, because it cannot be assumed that the shipowner without any mercantile reason would give up by the cesser clause rights which he had stipulated for in another part of the contract. In Jenneson, Taylor & Co v Secretary of State for India in Council [1916] 2 KB 702 it was held, that even when cesser clause is not expressly related to the provision of a lien it did not exempt the charterer from liability, since it was enough that the charterparty contains provisions for the grant of a lien, to treat the cesser and lien provisions as co-extensive. In Milvain and Another against Perez and Others [1861] EngR 197; (1861) 3 El & El 495 parties agreed that all liability of charterers "in every respect, and as to all matters and things, as well before and during as after the slipping of the said cargo," should "cease as soon as they" had "shipped the cargo". There, however, was no provision for lien at all. The court held that the cesser of liability will take effect and limit Charterers’ liability to the actual shipment of the cargo, thus protecting them from responsibility for any irregularity or delay in the shipment notwithstanding the absence of a lien.

Similarly, where the words of charter make it clear that such was the intention of the parties, the charterers were held to be relieved, see Oglesby v Yglesias (1858) E.B. & E. 930, even though the effect of such a decision was to leave the shipowner without remedy.

One the other hand, when due to the Charterers’ fault, the bill of lading does not confer a lien, the owners have an independent cause of action against them for failing to include an appropriate provision in the bill of lading.

When charterer is a consignee under a bill of lading incorporating and so reviving the liabilities of the charter, he (although relieved by cesser clause in port of loading) becomes liable before the owner at the port of discharge as a consignee under bill of lading contract to pay freight and other conditions as incorporated from governing charterparty. Brett MR described this situation in Gullischen v Stewart (1884) 13 Q.B.D. 317 at pp.319-20 in the following words:

In all probability the defendants would be liable for demurrage upon the charterparty, if it contained no clause for cesser of liability; but that clause is inserted, and their liability would have ceased, if they had done nothing but load the ship. They took, however, two sets of bills of lading. The contract by a bill of lading is different from a contract by a charterparty, and the defendants are sued upon the contract contained in the bill of lading. It would be absurd to suppose that their liability upon the bills of lading would cease upon the loading of the cargo. What is their liability upon the bills of lading? It is to pay freight and other conditions "as per charterparty." Upon the terms of the charterparty the consignees were to pay demurrage at a certain rate: that is a condition which is incorporated in the bill of lading. But the clause as to the cesser of the Charterers’ liability is not incorporated.

As a short conclusion it would be appropriate to say that cesser clauses are rather outdated legal tools or "curious animals" as Donaldson J. noticed in The Sinoe, which mean not what they say:

… namely, that the charterer’s liability shall cease as soon as the cargo is on board. Instead, in the absence of special wording … , they mean that the charterer’s liability shall cease if, and to the extent that, the owners have an alternative remedy by way of lien on the cargo.

Being a legal legacy of the nineteenth century shipping law they do not fit easily in modern surroundings. On the one hand, the shipowner left with expensive and time-consuming way of action against the cargo interests instead of direct claim against the charterer. On the other hand, the holder of bill of lading at the destination can find himself exposed to liabilities of unknown value accrued to the goods in the process of transportation. Finally, cesser clauses are not generally acceptable in transactions where commercial credits are involved.

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