FLR4537 - Module 4

DIPLOMA IN MARINE
SURVEYING
Module 4:
Laws and Conventions Relating to Marine
Surveying
Course Director
Allan Larsen
EurIng CEng CMarEng FRINA FIMarEST FCMS
Managing Director
Larsens Marine Surveyors & Consultants Ltd.
Original Author Marie Caillerie

Master Mariner
Contents
1. Introduction..................................................................................................................................... 8
2. The Relationship of the Surveyor with the Legal Profession......................................................... 10
2.1 Different Legal Systems ......................................................................................................... 11
2.1.1 Common Law ................................................................................................................. 11
2.1.2 Civil Law ......................................................................................................................... 12
2.1.3 Mixed System ................................................................................................................ 12
2.2 Choice of Law and Jurisdiction .............................................................................................. 12
3. The Law of Contract ...................................................................................................................... 15
3.1 Introduction to the Law of Contract...................................................................................... 15
3.2 Main Concepts....................................................................................................................... 15
3.2.1 Freedom of the Parties to Agree ................................................................................... 15
3.2.2 Overview of Terms Commonly Used ............................................................................. 16
3.2.3 Third Parties and Doctrine of Privity ............................................................................. 17
3.2.4 Choice of Law/Choice of Jurisdiction............................................................................. 17
3.2.5 Example of a Conflict of Law ......................................................................................... 18
3.2.6 Classification of Terms................................................................................................... 18
3.3 Implied Terms in a Contract .................................................................................................. 19
3.3.1 The Implied Duty to Exercise Reasonable Care and Skill............................................... 19
3.4 Failure to Perform the Contract – Breach and Remedy ........................................................ 20
3.4.1 Onus of Proof or Burden of Proof ................................................................................. 20
3.4.2 Frustration and Repudiation of Contract ...................................................................... 20
3.4.3 Time Limitation of Claims .............................................................................................. 20
3.4.4 Restrictions on the Use of Limitation Clauses, the Unfair Contract Terms Act............. 21
3.5 Arbitration ............................................................................................................................. 21
4. The Law of Tort (Negligence) ........................................................................................................ 23
4.1 Introduction........................................................................................................................... 23
4.2 Three Conditions for an Action in Tort .................................................................................. 23
4.2.1 A Duty of Care Exists...................................................................................................... 23
4.2.2 The Duty of Care was Breached .................................................................................... 23
4.2.3 Standards of Care and Reasonable Person ................................................................... 24
4.2.4 The Plaintiff Suffered Injuries or Damages as a Consequence of the Breach ............... 24
4.3 Remedies in Tort ................................................................................................................... 24
4.3.1 Remoteness of Damage................................................................................................. 24
4.3.2 Calculation of Remedies ................................................................................................ 25
4.3.3 Time Limitation.............................................................................................................. 25
4.4 Third Parties .......................................................................................................................... 25
Laws and Conventions Relating to Marine Surveying 2

4.5 Surveyors Negligence – Practical Elements........................................................................... 25
5. Liability and its Extent ................................................................................................................... 27
5.1 Introduction........................................................................................................................... 27
5.2 Extent of Liability ................................................................................................................... 27
5.2.1 Liability for Breach of Contract...................................................................................... 27
5.2.2 Proximate and Remote Causes – Illustrative Case ........................................................ 28
5.2.3 Liability for Duty of Care – as Implied under Contract Law or under Tort Law............. 28
5.2.4 Illustrative Case ............................................................................................................. 28
5.3 Liability to Third Parties......................................................................................................... 29
5.4 Limitation of Liability ............................................................................................................. 29
5.4.1 Contractual Limitations of Liability................................................................................ 30
5.4.2 Contractual Limitation of Negligence ............................................................................ 31
5.4.3 Example of an Exculpatory Clause ................................................................................. 31
5.4.4 Convention on Limitation of Liability for Maritime Claims 1976 (LLMC) ...................... 31
6. Responsibility for the Acts of Others............................................................................................. 32
6.1 Introduction........................................................................................................................... 32
6.2 Applicable Principles ............................................................................................................. 32
6.2.1 Existence of a Tort ......................................................................................................... 32
6.2.2 Relationship between Employer and Employee ........................................................... 32
6.2.3 Case of Contractors ....................................................................................................... 33
6.2.4 Course of the Employment............................................................................................ 33
7. Registration and Conveyance of Ships .......................................................................................... 36
7.1 What is a Ship? ...................................................................................................................... 36
7.2 Ownership, Registration and Flag ......................................................................................... 37
7.2.1 Ownership ..................................................................................................................... 37
7.2.2 Owner, Register and Flag .............................................................................................. 37
7.2.3 Registration and Requirement on Nationality .............................................................. 38
7.2.4 Benefits of an Open Registry or Flag of Convenience ................................................... 38
7.2.5 Registration Process in the United Kingdom ................................................................. 38
7.2.6 Other Information Stated on Registry ........................................................................... 39
7.3 Sale and Purchase of a Ship ................................................................................................... 39
7.3.1 Negotiations and Contract ............................................................................................ 39
7.3.2 Documents .................................................................................................................... 39
7.3.3 Process and Financial Aspects (Deposit and Payment) ................................................. 40
7.3.4 Buyer and Seller Obligations ......................................................................................... 41
7.3.5 Application of the Sale of Goods Act 1979 .................................................................... 41
7.3.6 Transfer of Property in the Case of New Buildings ....................................................... 42

8. Admiralty Court Jurisdiction .......................................................................................................... 43
8.1 Introduction........................................................................................................................... 43
8.2 Unique Features – Definitions ............................................................................................... 43
8.3 Actions in Rem / In Personam ............................................................................................... 43
8.3.1 Maritime Lien and Statutory Lien .................................................................................. 44
8.3.2 Establishment of a Maritime Lien ................................................................................. 44
8.3.3 Statutory Liens............................................................................................................... 45
8.4 Ship Arrest – Overview of the Procedure .............................................................................. 46
8.4.1 Applicable Regulations and Further Details .................................................................. 46
9. Collision and Salvage ..................................................................................................................... 48
9.1 Collisions................................................................................................................................ 48
9.1.1 Criminal and Civil Liabilities ........................................................................................... 48
9.1.2 Civil Liability ................................................................................................................... 48
9.1.3 Applicable Statutory Regulations .................................................................................. 48
9.1.4 Cases .............................................................................................................................. 49
9.1.5 1910 Brussels Convention on Collision.......................................................................... 50
9.1.6 Extent of Liability ........................................................................................................... 51
9.1.7 Principles Applied to Establish Negligence and Liability ............................................... 51
9.1.8 Illustrative Cases ............................................................................................................ 52
9.1.9 Defence Available .......................................................................................................... 52
9.1.10 The Inevitable Accident ................................................................................................. 52
9.1.11 Agony of the Moment ................................................................................................... 53
9.1.12 Apportionment of Fault in Case of Shared Liability ...................................................... 53
9.1.13 Measure of Damages..................................................................................................... 54
9.1.14 Time Limitation.............................................................................................................. 55
9.1.15 Use of Experts................................................................................................................ 55
9.2 Salvage................................................................................................................................... 56
9.2.1 Elementary Concepts of Salvage ................................................................................... 56
9.2.2 Conflicts with Other Types of Operations ..................................................................... 57
9.2.3 Duty to Render Assistance ............................................................................................ 58
9.2.4 The Salvage Convention – Overview ............................................................................. 58
9.2.5 Main Salvage Contracts in Use Nowadays .................................................................... 58
9.2.6 Comparative Table ........................................................................................................ 59
10. Towage and Pilotage ................................................................................................................. 61
10.1 Towage .................................................................................................................................. 61
10.1.1 Types of Contracts ......................................................................................................... 61
10.1.2 Definition of Towage ..................................................................................................... 62

10.1.3 Establishment of a Contract .......................................................................................... 62
10.1.4 Different Stages of Towage Operations ........................................................................ 62
10.1.5 Illustrative Case on Commencement ............................................................................ 62
10.1.6 Duties of Parties ............................................................................................................ 63
10.1.7 Tug-owner Duties .......................................................................................................... 63
10.1.8 Towed Vessel Duties...................................................................................................... 64
10.1.9 Illustrative Cases ............................................................................................................ 64
10.1.10 Issues of Liability........................................................................................................ 65
10.1.11 Liability to Third Parties ............................................................................................. 65
10.1.12 Limitation and Exclusion of Liability .......................................................................... 66
10.2 Pilotage .................................................................................................................................. 66
10.2.1 Legal Framework Applicable to Pilotage ....................................................................... 66
10.2.2 International Regulations .............................................................................................. 66
10.2.3 National Regulations ..................................................................................................... 66
10.2.4 Common Law ................................................................................................................. 66
10.2.5 General Structure of Pilotage ........................................................................................ 67
10.2.6 Authorisation of Pilots ................................................................................................... 67
10.2.7 Status of Pilots and Liability Issues ................................................................................ 67
10.2.8 Master and Pilot ............................................................................................................ 67
10.2.9 Mechanisms Restricting Pilot Liabilities ........................................................................ 68
11. Pollution .................................................................................................................................... 70
11.1 Introduction........................................................................................................................... 70
11.2 Prevention of Pollution ......................................................................................................... 71
11.2.1 The Law of the Sea Convention (UNCLOS) .................................................................... 71
11.2.2 IMO Conventions ........................................................................................................... 71
11.3 The Compensation Regimes .................................................................................................. 72
11.3.1 1992 Civil Liability Convention ...................................................................................... 73
11.3.2 1992 Fund Convention and IOPC Fund 92..................................................................... 73
11.3.3 IOPC Supplementary Fund, 2003 .................................................................................. 73
11.4 STOPIA 2006 and TOPIA 2006 ............................................................................................... 73
11.5 Other Instruments in the Context of Marine Pollution ......................................................... 73
11.5.1 HNS Convention ............................................................................................................ 73
11.5.2 Bunker Oil Pollution Damage Convention 2001 ............................................................ 74
11.6 Other Types of Pollution ....................................................................................................... 74
12. Shipping Law.............................................................................................................................. 76
12.1 Introduction........................................................................................................................... 76
12.2 Types of Contracts ................................................................................................................. 76

12.3 Claims and Disputes .............................................................................................................. 77
12.4 Choice of Jurisdiction and Choice of Law .............................................................................. 77
12.5 Nature of Contract Terms...................................................................................................... 78
12.6 Some Terms Common to all Types of Contracts ................................................................... 78
12.6.1 Seaworthiness ............................................................................................................... 79
12.6.2 Cargoworthiness............................................................................................................ 80
12.6.3 Duty to Take Reasonable Care of the Cargo.................................................................. 80
12.6.4 Duty to Perform the Voyage with Reasonable Despatch .............................................. 80
12.6.5 Loading and Unloading Operations ............................................................................... 80
12.6.6 Dangerous Cargoes........................................................................................................ 80
12.6.7 No Deviation to the Voyage .......................................................................................... 81
12.6.8 Exemption Clauses – Perils of the Sea and Act of God .................................................. 81
12.7 Insurance ............................................................................................................................... 82
12.8 Arbitration ............................................................................................................................. 82
12.8.1 Assessment of the Award for Cargo Claims .................................................................. 83
13. Bill of Lading, Bailment and International Conventions ............................................................ 85
13.1 Introduction........................................................................................................................... 85
13.2 FOB and CIF Contracts ........................................................................................................... 85
13.3 Freight on Board (FOB) Contract ........................................................................................... 86
13.4 Cost, Freight, Insurance (CIF) Contracts ................................................................................ 86
13.4.1 Obligations of Buyer/Seller under a CIF Contract ......................................................... 87
13.4.2 Nomination of Vessel .................................................................................................... 87
13.5 Bill of Lading .......................................................................................................................... 88
13.6 Types and Functions of the Bill of Lading .............................................................................. 88
13.6.1 Transfer of Property ...................................................................................................... 89
13.6.2 Charterer’s Bill of lading ................................................................................................ 90
13.6.3 Electronic Bill of Lading, Containerisation ..................................................................... 90
13.6.4 Bailment on terms ......................................................................................................... 90
13.7 International Conventions ..................................................................................................... 91
13.7.1 The Hague and Hague-Visby Rules ................................................................................ 91
13.7.2 Possible Incorporation of The Hague-Visby Rules in a Charterparty ............................ 93
13.7.3 The Hamburg Rules and the Rotterdam Rules .............................................................. 93
14. Charterparties ........................................................................................................................... 95
14.1 Introduction........................................................................................................................... 95
14.2 Different types of charterparties........................................................................................... 95
14.2.1 Example of Forms .......................................................................................................... 96
14.3 Some Concepts Common to Charterparties.......................................................................... 96

14.3.1 On the Charterer’s Side ................................................................................................. 96
14.3.2 On the Shipowner’ Side ................................................................................................. 97
14.4 Voyage Charterparty ............................................................................................................. 98
14.4.1 Payment of Freight ........................................................................................................ 98
14.4.2 Laytime and Demurrage ................................................................................................ 98
14.4.3 Notice of Readiness ....................................................................................................... 99
14.4.4 Demurrage................................................................................................................... 100
14.5 Time Charter ........................................................................................................................ 100
14.5.1 Payment of Hire ........................................................................................................... 100
14.5.2 Set-off .......................................................................................................................... 101
14.5.3 Off Hire ........................................................................................................................ 101
14.5.4 Other Specificities of a Time Charter .......................................................................... 102
14.6 Demise Charter.................................................................................................................... 103
15. The Law of Evidence ................................................................................................................ 104
15.1 Introduction......................................................................................................................... 104
15.2 Legal Framework ................................................................................................................. 104
15.2.1 Admiralty Court Guide................................................................................................. 105
15.3 Experts Witnesses ............................................................................................................... 105
15.3.1 Who Can be an Expert Witness? ................................................................................. 105
15.3.2 What is Expected from an Expert Witness? ................................................................ 106
15.3.3 Facts vs Opinion........................................................................................................... 106
15.4 Sanctions and Immunity ...................................................................................................... 106
15.5 Procedure and Report ......................................................................................................... 107
15.6 Use of Digital Evidence ........................................................................................................ 107
16. Conclusion ............................................................................................................................... 109
Bibliography......................................................................................................................................... 110

1. Introduction
Learning Outcomes
On successfully completing this module you will be able to:
• Discuss the legal aspects of the role of the surveyor.
• Demonstrate an understanding of the surveyors’ obligation to courts of law.
• Describe the relationship between surveyors and the legal profession.
The maritime industry is made up of a large variety of sub-sectors, with numerous stakeholders
acting at different levels and in different disciplines. Shipowners and “companies” (as referred to by
the International Management Code for the Safe Operation of Ships and for Pollution Prevention, the
ISM Code), responsible for their ship and its crew, shippers in charge of their cargo, buyers awaiting
their goods, authorities at port or state level, and parties providing related and essential services,
such as insurance, classification or surveys.
Despite the differences in their activities, all of them converge to achieve the same goals: to provide
a service and/or to carry cargo or passengers safely from one location to another, without incident or
damage.
The professional relationships between such parties involve a strong legal dimension, the extent of
which varies depending upon the circumstances and scope of the work performed together. And, of
course when things go wrong, whether the service was provided satisfactorily, the goods were
damaged, or the ship suffered a mechanical breakdown, claims will be raised with the intention to
recover damages from other parties.
The surveyors’ position in this context is pivotal and crucial. Services performed by marine surveyors
cover an extended scope and they are involved with most of the maritime community actors.
Consequently, they are frequently involved in legal claims, and for all sorts of parties, cargo owners
as much as shipowners or even insurers.
For this reason, it is essential for a surveyor to understand the fundamental principles of law,
including maritime law, and to know specifically the legal grounds on which claims are based and
treated, which is explored in this module.
This module is developed in three parts:
Part A
The first part covers two essential areas of law – the law of contract and the law of tort. The related
sections provide the basic general principles and some illustrative cases. The aim is to explain the key
elements, in order to facilitate the review of maritime law, and to discuss briefly the marine
surveyor’s professional liability.
Part B
The second part deals more specifically with maritime law, with admiralty law on one side, and
carriage of goods and commercial law on the other.
Part C

The third part discusses the commercial aspects of maritime law.
Throughout the module, cases are referred to mainly for illustrative purposes, but also because the
areas of law reviewed here are often “case law based”.
Law is not based on identical principles applied uniformly throughout the world; each country has its
specificities. However, maritime law, and specifically admiralty law, has been deeply influenced by
the English law system.
This module focuses on law as applied mainly in Anglo-Saxons countries, and more specifically in
England. It is important to note that the law systems in use within the ‘United Kingdom of Great
Britain and Northern Ireland’ vary between Scotland, Wales, Northern Ireland, and England. The
English Law system must not therefore be regarded as the British (United Kingdom) law system in
full. English Law is commonly used in the marine industry regardless of the country of registration of
the ship, the location of the parties involved or the involvement of flag state administrations.

Part A
2. The Relationship of the Surveyor with the Legal Profession

Surveyors interact with a wide array of professionals, as illustrated in Figure 1.
Figure 1: Professional relationships of a surveyor (Caillerie, 2016)
Surveyors may be involved in different types of surveys, needing specific skills, and may specialise in
one or more specific areas as shown in figure 2.
Figure 2: The different types of surveys (Caillerie, 2016)
The purpose of a survey is to assess a condition and to provide a statement of facts. It can be related
to the valuation of the ship, the repairs needed after an accident, the causes of cargo losses, for the
evaluation of a specific insurance risk, or to provide opinion in the context of arbitration cases.
A surveyor could provide his or her services in the context of claims, where parties need facts to
prove their case. Because of the wide array of parties which they deal with, marine surveyors are
frequently involved in disputes or claims requiring their skills and training.
Surveyors provide advice, monitoring and expert opinions and such services are “sensitive”. They
take the risk of finding themselves involved in a claim “a posteriori” [Subsequently. Using knowledge
gained by experience], even long after their services were provided. The maritime industry relies on
marine surveyors, and it is very fair to say that their profession is highly exposed to legal risks, and
more specifically to a “liability risk”.

It is essential to remain mindful that marine surveyors are liable for the services and tasks which they
perform.
The nature and effects of their liability depend on circumstances, but as a general principle, liability
has two sources:
• the law of contract; and
• the law of tort.
The sections below discuss these two areas of law.

As a foreword, clarifications must be given on the legal systems and their differences worldwide.
2.1 Different Legal Systems

Before getting into specifics of maritime law, it should be understood that law concepts might differ
from one country to another.
It could be said that the various legal systems in the world form three main groups:
• common law;
• civil law; and
• a mix of both systems.
2.1.1 Common Law
Also called case law, as opposed to statutory law, this is the traditional Anglo-American system,
tracing its origins to the Middle Ages in England. Several countries have based their legal system on
common law, such as the United States of America, India, Australia, Singapore, Cyprus, Liberia, and
Barbados to name but a few.
It could be described quite simply as a system supported solely by the decisions taken by judges in
courts, for all sorts of cases.
In order to make decisions and resolve a dispute, judges refer to previous “judicial decisions” on
similar cases and are expected to apply the same logic and reasoning to any similar subsequent case.
If an original type of dispute gives rise to a new decision, the judges create “precedent”.
Judges and courts have the authority to establish the law, in other words, they “make the law” or at
least decide what the law is in each case. Their decisions are based on:
“the body of those principles and rules of action…which derive their authority solely from usages and
customs of immemorial antiquity or from the judgements and decrees from the courts…”
(Black, Nolan and Connolly, 1990)
However, it does not mean that countries following the common law system avoided the
establishment and use of statutory instruments (SI), such as constitution, statutes, and other types of
regulations. Such instruments exist and are applied in conjunction with common law, although it may
sometimes give rise to conflict.

2.1.2 Civil Law
Civil law derives from Ancient Roman law and was further developed during the Napoleonic era.
Consequently, this legal system is used in most of the continental European countries, such as Spain,
France, Greece, Germany, as well as Russia, Vietnam, and many Latin America countries.
The civil law system may be described as:
“a body of law which every particular nation…has established peculiarly for itself.” It is based on the concept
of “codification.”
With civil law, the legal principles are written, and the court aims at applying what the law says.
Countries have established their own codes and statutes covering any possible subject. Judges do not
create the law; they must however apply it and interpret it when necessary.
2.1.3 Mixed System
The civil law system is more widespread than common law systems, but the mixed system is also
used. It is applied, for example, in Scotland, Malta, Quebec, South Africa, the Philippines and
Thailand.
Some branches of the law are then based on civil law, while others are based on common law. In the
Seychelles for example, a civil law system, based on the French civil code, is in force, but criminal law
is based on English common law. The difference between the two systems is then the source of the
law.
Common law gives paramount effect to the judges’ decisions. Judicial cases constitute the source of
the law. With civil law, there was an attempt to imagine and create codes, statutes, rules that would
cover any possible cases. Previous judgments on similar cases only serve as reference or guidance.
The differences between the two systems explain why some countries’ jurisdictions are favoured for
the resolution of claims. It is a shared belief that cases are more likely to be solved quickly under
common law, seen as a more pragmatic system, capable of adapting well to new circumstances.
It is also estimated that common law has participated in the commercial growth and wealth of
countries such as the United Kingdom of Great Britain & Northern Ireland and the United States of
America being a complete, detailed system, with less possibilities for numerous differing
interpretations. For all of these reasons, commercial contracts commonly include clauses in order to
choose the jurisdiction of a common law country, i.e., England.
2.2 Choice of Law and Jurisdiction

Jurisdiction and law refer to two different things:
• jurisdiction refers to a given legal authority covering a geographical area; and
• law refers to the legal system applicable.
Law is then applied by a jurisdiction.
An English court (jurisdiction) applies the English law (law), but there are cases where a court might
have to apply the law of a different country. The choice of jurisdiction is a crucial question when it

comes to settling claims, especially shipping claims, as many parties with different countries of
residence are involved. This will be discussed in detail in the relevant sections of this module.
In a contract, parties are free to agree on a clause for the choice of jurisdiction and the choice of law
(which does not prevent conflicts from happening). However, it should be briefly mentioned that
several rules govern the choice of jurisdiction, at different levels. It could be illustrated as shown in
figure 3:
Figure 3: Applicable jurisdiction is defined at different levels. (Caillerie, 2016)
In Europe, the “Judgements Regulation” has been integrated in each Member State’s domestic
regulations. Figure 4 provides a brief summary; it enunciates the following principles for the choice of
jurisdiction:
Figure 4: Very brief review of the “judgements regulation principles”.
One particular court traditionally has jurisdiction over maritime matters, the admiralty court, and
more specifically, the Admiralty Court of England.
It is a specialised court of the Queen’s Bench Division (of the High Court).
The admiralty court has jurisdiction over specific areas of law, such as collision, salvage, carriage of
cargo, mortgage disputes. And most importantly, it uses a very special and powerful tool, unique to
maritime law, the “in rem procedure”, which allows the arrest of a ship as a security for claimants.

The sections below focus on the law of contract and the law of tort, mainly in the context of a
common law system. The second part of the module will focus on the main elements of maritime
law, as distributed between admiralty law and shipping law.
Directed Learning
• Research the legal system used in your intended area of operation as a marine
surveyor.
• Note how this differs from the English / Common Law system and consider how this
may affect a marine legal case to be heard in your intended area of operation.

3. The Law of Contract
3.1 Introduction to the Law of Contract
The concept of contract is easy to describe, but the law applicable to contracts is much more
complicated. When a client requests services from a surveyor, the transaction is enacted by means of
a contract for services. When a cargo owner sells goods to a purchaser, a ‘contract of sale’ is signed.
When the goods are shipped by the shipowner, a ‘contract of carriage’ is established. When a vessel
needs to be towed, a ‘contract of towage’ is entered into with a tug company.
There is a very large variety of maritime contracts, and they obey on one side, the main principles of
law of contract, and on the other side, the specificities of the sector they refer to. Carriage contracts,
charterparties, salvage contracts, towage contract or marine survey contracts are supported by their
own principles.
This chapter focuses on the general principles of the law of contract. The main definitions, principles
and characteristics will be discussed.
3.2 Main Concepts

The Encyclopaedia Britannica gives a simple and explicit definition of a contract:
“Contract, in the simplest definition, a promise enforceable by law. […] The making of a contract requires the
mutual assent of two or more persons… […]If one of the parties fails to keep the promise, the other is
entitled to legal redress.”
(von Mehren, 2019)
So, what is the objective of the law of contract? Again, the answer is simple according to the
Encyclopaedia:
“The law of contracts considers such questions as whether a contract exists, what the meaning of it is,
whether a contract has been broken, and what compensation is due the injured party.”
(von Mehren, 2019)
3.2.1 Freedom of the Parties to Agree
The law of contract operates on the recognition that parties are contracting of their own free will and
that they are free to do so (Freedom of the Parties to Agree).
They voluntarily assume their contractual obligations and the law shouldn’t refrain them from
establishing commercial relationships. Parties have the freedom to contract, and the courts will
always have this in mind. It is, however, necessary to establish principles to determine remedies in
case a party breaches its obligation under a contract.
The content and meaning of a contract are ultimately defined and agreed by the parties, and not by
the law itself. Hence, what should be in a contract and what it means is not specifically detailed in
the common law. For this reason, contracts tend to be very detailed and include definitions of the
terms employed.
Parties do need to agree on the terms of a contract, accept them and accept the price for such
agreement. Once this is done, the contract becomes enforceable.

There must also be a clear intention of the parties to be bound by the contract. It is to be noted that
a contract can be oral (parole contract) and not necessarily a written agreement.
A contract is considered enforceable between parties if such parties were free to enter the
agreement and have equal knowledge and bargaining powers. A court can deem a contract
unenforceable if the terms are totally unfair to one party. (A matter which is covered in England by
the ‘Unfair Contract Terms Act (UCTA) 1977’).
The wording of the terms matters greatly in this context. If terms are badly worded, ambiguous or,
difficult to understand for any party, then this could be seen as being unfair.
A contract could be considered void if one party profits from the distress or incompetence of the
other. That would be the case, for example, of a person signing a contract while intoxicated.
Similarly, if the consent of one party is obtained by violence or fraud, the courts would consider the
contract to be unenforceable.
3.2.2 Overview of Terms Commonly Used
In more detailed terms, a contract is:
“An agreement between two or more persons which creates an obligation to do or not to do a particular
thing. It is a legal relationship consisting of the rights and duties of the contracting parties; or a promise
constituting an agreement between the parties that gives each a legal duty to the other and also the right to
seek a remedy for the breach of those duties.”
(Black, Nolan and Connolly, 1990.)
Figure 5: Illustration of the contractual logic (Caillerie, 2016)
The liability of a party derives from its obligations whilst rights and duties go together. If one party
has a right, the other party has a corresponding duty. More specifically, parties have the duty to
perform the contract as shown in figure 5.

3.2.3 Third Parties and Doctrine of Privity
Third parties are:
“All persons that are not parties to the contract by which their interest in the thing conveyed is sought to be
affected.”
(Black, Nolan and Connolly, 1990.)
Although a contract binds two parties only, third parties can also be affected by the performance or
non-performance of a contract. However, the title to sue under contract law is given only to the
contractual parties. This creates problems, in case of damages to a third party for example. Or it
could cover situations of stevedores employed to load a cargo, having no contractual link with the
owner of the cargo.
This is called the “privity of contract” and it is a very restrictive rule. Hence, means were found
recently to extend the right to sue to third parties under contract law. Many statutory instruments
related to contracts provide clauses dealing with the rights of third parties.
In the UK, the ‘Contracts (Right of Third Parties) Act 1999’, available at the UK Government website
and was established to bring a better balance to this situation. As a major change, it meant that a
third party can now enforce some terms of the contract in their own right, although not party to the
contract, but if they are identified.
For example, in a case in 2004 [Nisshin Shipping Co Ltd v Cleaves & Co Ltd [2004] 1 Lloyd’s Rep 38.]
involving time charterparties, shipbrokers were part of the negotiations with the owner and
charterers, for which a commission was agreed, but they were not party to such charterparties. It
was held that the brokers could enforce the terms of the charter in their own right, under the
provisions of the Act.
However, do note that it does not apply to the carriage of goods by sea (covered by their own
specific statute).
Express Terms in a Contract:

Although parties remain free to choose the content and extent of their contract, some elements are
expected to be found in a contract. For contractual claims, the court will base their decisions on the
terms of contract, and clear wording is essential for this reason.
3.2.4 Choice of Law/Choice of Jurisdiction
It is always necessary to determine the applicable legal “reference”. Parties to a commercial contract
like to agree on which jurisdiction and which law to apply in case of disputes. And this is only logical
because parties are likely to be based in different countries. To avoid uncertainties, complications
and delays, a contract usually includes a “governing law clause” or “choice of jurisdiction/law clause”.
It has been explained earlier that Anglo-Saxons jurisdictions are favoured in commercial contracts.
Common law jurisdictions are seen as more predictable, simpler and, in a word, more efficient.
It is usual to find a clause to designate English courts as the jurisdiction and English law as the
governing law. The law of New York is also a common choice, even when parties are not connected
whatsoever to the USA.

In the unlikely absence of an express governing law clause, or if such clause was improperly worded,
reference will be made to the appropriate statutory rules governing the choice of jurisdiction for
contractual disputes.
The European Union has adopted a Convention setting the rules in such cases, the “Rome
Convention on the Law applicable to Contractual obligations”, or Rome I (Regulation (EC) 593/2008
of 17 June 2008).
It has been integrated into each EU state’s national statutes, including the UK and, applies specifically
to conflict of laws related to contracts, including service contracts, in case of breaches to contractual
obligations (i.e., is not applicable to tort disputes).
As a general principle, under the provisions of Rome I, a contract shall be governed by:
“the law of the country where the party required to effect the characteristic performance of the contract has
his habitual reference” (Article 19).
Or, if this is not applicable:

“the contract should be governed by the law of the country with which it is most closely connected” (Article
21).
3.2.5 Example of a Conflict of Law
In an American case involving a classification society, [Carbotrade SpA v Bureau Veritas, 901 F Supp
737, 1996 – settled in 2000.] the courts could not agree on which law to apply. The case was related
to the sinking of a ship, owned by a Gibraltar based company, operated by a Greek company,
chartered to an Italian company and sub-chartered to an American company, owner of the cargo and
third party in this case.
The vessel was classed by Bureau Veritas (BV). The cargo owner sued BV in the USA, under the
District Court of New York. This court agreed that the law of the United Kingdom (law of the flag)
applied to the dispute and that under such law, classification societies do not owe a duty to third
parties, i.e., BV did not owe a duty to the sub-charterer/cargo owner, hence no claim could be raised
by him against BV. But on appeal, the US Court of Appeal decided that the law of Greece could be
applied, and under Greek law, a third party can request an action in tort against the class society.
3.2.6 Classification of Terms
Terms in a contract have a different legal weight and have different consequences in case of breach.
Three categories are established – condition, warranty, and innominate terms:
Condition:
Breach of a condition allows the other party to repudiate the contract and claim damages.
Warranty:
Breach of a warranty allows the other party to claim damages only, in order to compensate for the
loss.

Innominate (or Intermediate) Terms:
When uncertainty about the category of a term, the effect of the breach must be considered. Serious
breaches can allow repudiation of the contract (condition).
The seriousness of the breach will dictate the possible remedies for the claimant. If a breach is not
serious enough, the court may refuse the award.
For example, in a case related to a new ship built with deficiencies in the vehicle spaces, [Cenargo Ltd
v Empresa Nacional Bazan de Construcciones Navales Militares SA [2001] All ER (D).] the court did
allow the application of the contract clauses on damages in case of breach, as it required the breach
to be serious, and in this case, simple repairs could have solved the problem quickly.
3.3 Implied Terms in a Contract

Unfortunately, as detailed as the terms might be, contracts cannot cover every eventuality. It is
sometimes necessary for the courts to establish if some terms were implied by parties. Such terms
would commonly relate to the “best practices” of a trade or commonly accepted practices of
conduct.
One specific term is implied at common law, and as well defined by statutes in the UK.
3.3.1 The Implied Duty to Exercise Reasonable Care and Skill
There is a principle establishing that a contract with a professional person includes an implied term
on “reasonable skill and care”.
This principle has then been embedded in the Supply of Goods and Services Act 1982, worded as
such:
“Supply of Services
Section 13 – Implied Term about Care and Skill
In a relevant contract for the supply of a service where the supplier is acting in the course of a business,
there is an implied term that the supplier will carry out the service with reasonable care and skill.”
(UK, 1982)
What does the expression “standard of care and required skills” refer to? It will depend on the
profession involved and the circumstances.
In the case of marine surveyors, the care and skills expected are evaluated by comparison to other
members of this profession. For example, the International Institute of Marine Surveyors (IIMS) has
established a “Small Craft Code of Practice”, to define the rules of professional conduct to be
followed by surveyors of small craft (as defined by local laws). This would be taken as a reference of
the standard of care expected. This code is available to view at IIMS website.
The obligation to exercise reasonable care and skill is often opposed to an “absolute obligation”. An
absolution obligation is an unconditional duty which gives rise to strict liability.
For example, in shipbuilding contracts, if a term states that the ship is built to have a service life of 25
years, this term would be considered to be an absolute obligation for the shipbuilder to deliver a ship
complying with these criteria.

If the contract was to state “built according to the standards of care and skills required”, this would
be a duty to exercise reasonable care when building the ship, in compliance with standard industry
practice. Which leaves a bit of room or flexibility to accommodate possible errors from the
shipbuilder, or at least to reduce the amount of damages awarded.
3.4 Failure to Perform the Contract – Breach and Remedy

A failure to comply with duties, implied or expressed, is a breach of the contract. A breach is
compensated by a remedy, or damages.
The nature of the remedy (or sanctions) is defined by the courts, and it is likely to be a sum of money
awarded as damages to the claimant (plaintiff). The amount of this sum will depend upon the nature
of the breach and the cause of action. There is a general principle applied at common law to
determine the nature of remedy. It is defined as such in the Encyclopaedia Britannica:
“… the system must decide whether plaintiffs are to be put in the same position economically that they
would have been in had the contract been performed (expectancy damages) or simply reimbursed for the
actual losses, if any, flowing from his reliance on the contract (reliance damages).”
(von Mehran, 2019)
3.4.1 Onus of Proof or Burden of Proof
The basic principle is that the claimant has to prove the facts supporting its claim by providing formal
evidence.
In cases of contractual breach, the claimant has to prove the cause of action. Then the defendant
may disprove the facts. This is called the “shift of the burden of proof”. In case of strict liability
imposed to the defending party, the burden of proof is removed.
3.4.2 Frustration and Repudiation of Contract
The breach might allow for frustration or repudiation of the contract, on top of damages. These are
two different concepts. Repudiation “gets rid” of the contract, including the possible exemption
clauses.
Frustration of the contract means the contract cannot be performed for some specific reasons: an
outside or unforeseen event which makes it impossible to perform the contract, without any fault of
the parties. Parties are then discharged of their obligations.
3.4.3 Time Limitation of Claims
In English law, a contract claim has a limitation period of six years from the date of the breach of
contract (taken from the date on which the cause of action accrued), as provided in the Limitation
Act 1980. However, contracts may include clauses for a different (shorter) time limitation.
In the context of a carriage contract under the main international instruments (The Hague and
Hague- Visby Rules), time limitations are much shorter (one or two years).

3.4.4 Restrictions on the Use of Limitation Clauses, the Unfair Contract Terms Act
A statutory instrument in English law prevents, to a certain extent, the use of limitation or exclusion
clauses in professional contracts.
The Unfair Contract Terms Act 1977 (UCTA 77), is applicable to consumer or business contracts,
which cover a surveyor’s activities. It frames and controls contractual clauses which restrict or limit
professional liability.
Limitation clauses shall be “reasonable”, otherwise they will be deemed invalid. The concept of
“reasonableness” is defined in the Act, but courts may have their own interpretations, based on the
common law practice of “unreasonableness”.
Small prints may be found unreasonable, as the judge noticed in somewhat humorous terms in a
case related to a ship repair contract:
“I would have been tempted to hold that conditions are unfair and unreasonable for two reasons: first, they
are in such small print that one can barely read them; secondly, the draughtsmanship is so convoluted and
prolix that one almost needs an LLB to understand them.”
(STAG LINE LTD. v. TYNE SHIPREPAIR GROUP LTD. AND OTHERS (THE "ZINNIA"), 1984])
The bargaining power of each party is also considered. In a case related to a property surveyor, [
Smith v Wyre Forest DC [1990] 1 AC 831.] clauses exempting the surveyor, as well banks relying on
valuation surveys, for inaccuracies in the report left the other party (the house buyer) without much
power or possible recourse. Consequently, such terms excluding liability for an inaccurate report
were found unreasonable.
The Act does not apply to insurance contracts or maritime contracts (towage, shipping of goods etc.).
3.5 Arbitration
Disputes are not necessarily settled in court, and it is common for parties to prefer a settlement
through arbitration. An arbitration clause is then included in the contract, specifying which court of
arbitration will be used. The procedure is usually easier, quicker, and consequently cheaper.
Arbitration is a private procedure, hence providing for confidentiality, where alternatively a court
trial is a public proceeding.
Further details are given in the second part of this module.
We have now discussed the main elements forming the doctrine of the law of contract. It was
explained that a breach of contract occurs when contractual duties are not performed. But legal
actions for recovering damages can be based on another type of breach, namely negligence,
referring to a different branch of the legal system, i.e., the law of tort. The following chapter covers
this subject.

Directed Learning
• Answer the following questions for your own notes:

What are the key provisions that would be common to any contract?
Read the clauses related to the surveyor’s liability – is there a time bar and is it similar to
statutory time limits?
• What are the restrictions to a surveyor’s contractual liability?
Statutory instruments in the UK
List the main statutory instruments applicable, generally, to contracts in the UK.
Post your answers to the forum for discussion.

4. The Law of Tort (Negligence)
4.1 Introduction
The concept of the “law of tort” is common to both civil and common law systems. Let’s start with
basic definitions from Black’s Law Dictionary:
Tort:
A private or civil wrong or injury for which the court will provide a remedy in the form of an action
for damages. A legal wrong committed upon the person or property independent of contract.
Negligence:
The omission to do something which a reasonable man, guided by those ordinary considerations
which ordinarily regulate human affairs, would do, or the doing of something which a reasonable and
prudent man would not do.
Claims for negligence are based on non-contractual relationships, when a “moral” obligation to
adhere to good behaviour principles, or standards of conduct, exists. A tort is considered as a breach
of the “duty of care”.
The duty of care is a wide principle, with a definition adaptable to different situations. Depending on
the relationships between persons and the circumstances, the nature of the duty of care might be
different. A duty of care exists in simple, common, daily situations. For example, a bus driver has a
duty of care towards passengers on the bus.
4.2 Three Conditions for an Action in Tort

To base an action on negligence, some conditions must be met. The person who suffered the injury
or the loss is responsible for demonstrating that those conditions are met, i.e., the burden of proof is
on the claimant (plaintiff).
4.2.1 A Duty of Care Exists
The defendant owes a duty of care to the plaintiff and the existence of this duty must be proven.
Courts apply the principle of a “special relationship” between the parties that would evidence the
duty of care.
If the parties have also entered into a contract, such contractual relations would be an evidence of a
special relationship. So, it could be said that the duty of care is automatic in cases of contractual
relations.
Indeed, contractual duties are accompanied by duties in tort.
4.2.2 The Duty of Care was Breached
The duty is breached when the standards of care are not met. Negligence is committed when the
standards of care are not met, and the person didn’t act reasonably.

4.2.3 Standards of Care and Reasonable Person
For each specific case, the courts shall establish what the standards of care are and then decide
whether the defendant failed or not to meet those standards.
In a professional context, the standard of care may be established in comparison with the common
practices of the profession. Refer to the standards discussed in the previous section on contracts.
Courts apply the “reasonable person” test to evaluate the failure to exercise reasonable care. A
reasonable person is characterised as being prudent, which does not mean being perfect.
For example, the owner of a large pleasure yacht shall navigate his/her boat as a reasonable person
would do, i.e., by following the Collision Regulations (COLREGs), focusing on traffic when necessary,
adjusting the sails accordingly etc. If the owner decides to go out to sea alone, although two people
are needed to manoeuvre the boat safely, he/she will be considered negligent because a reasonable
person would not have sailed alone.
A reasonable person is expected to be aware of the possible risks involved in an activity. The level of
risk will also be taken into account by the judges when evaluating the standard of care required.
If a risk of injury is extremely low for a given activity, a reasonable person is not expected to take
special measures for this activity. If the standard of care, and the likelihood of an injury, are
considered as very “low”, the duty of care is not automatically breached if an injury does happen.
If the person involved has taken measures to reduce risks and prevent damages, it would be
considered as proof of a reasonable care, even if such measures were not efficient enough in the
end.
4.2.4 The Plaintiff Suffered Injuries or Damages as a Consequence of the Breach
Injuries mean any form of physical harm to a person. Damage is also considered as a form of physical
harm inflicted on a property, impairing its value or function. The breach of duty shall result in actual,
i.e., real damages, for a plaintiff to file a negligence claim.
4.3 Remedies in Tort

4.3.1 Remoteness of Damage
The relationship between the damage and the cause of the damage is taken into account when the
courts have to estimate the compensation awarded to the claimant.
If the damage is too remote, it might not be recoverable. A remote damage is an:
“unusual and unexpected result, not reasonably anticipated from an accidental or unusual combination of
circumstances – a result beyond which the negligent party has no control.”
More generally, remoteness of damage means that there is no close connection between the wrong
act itself and the injury suffered. The term “foreseeable” is sometime used as well to describe this
principle.

Remoteness of the cause can prevent full compensation of the plaintiff. It could be seen as a
limitation on liability.
But when several events lead to a damage, it might be difficult to apply the remoteness principle. In
“Marsden on Collisions at sea” [Gault et al, 2003], the authors give a good example:
“Suppose, for example, that a collision between Vessel A and Vessel B in the Channel, due to Vessel A’s
negligence, creates a latent defect in Vessel B’s steering gear. Three months later, Vessel B’s steering gear
jams and the resulting collision damages Vessel C in Singapore. It must be arguable that Vessel C would be
unable to sue Vessel A, on the basis that the damage was too remote from the original collision.” (p 550 15-
07)
In this case, the remote cause is the first collision in the Channel, but the proximate cause is the
second collision in Singapore.
4.3.2 Calculation of Remedies
The remedy is a compensation for the loss suffered by the plaintiff. This is usually achieved by paying
a specific amount of money. The principle applied is to restore the plaintiff “to the position that he
would have been in, had the tort not been committed, in so far as money could do so”.
The court will establish the lump sum that the defendant shall pay. The damages could consist in loss
of earnings, actual and prospective. Again, the court will aim at evaluating the damages suffered in
order to set the applicable lump sum.
4.3.3 Time Limitation
Under the law of tort, the time bar is usually set to six years.
4.4 Third Parties

This is an essential point of tort claims. The doctrine of tort allows third parties (see definition in the
section of contract) to claim for damages, as long as they suffered a loss related to the negligence.
For example, a surveyor provides services under a contract to one specific party.
But other parties, such as insurers, bankers, and buyers, may also use the information contained in
the survey report. Consequently, there is a relationship, specifically a duty of care, between the third
parties and the surveyor, although they are not in contact whatsoever. The surveyor is liable to third
parties in case of breach of this duty of care.
However, it should be noted that under English common law, the courts have been willing to restrict
the situations where a surveyor is liable to a third party, i.e., to restrict the duty of care. One of the
explanations for such a “protection” is that individuals providing expert advice usually don’t have the
financial strength to support heavy financial remedies to claimants.
4.5 Surveyors Negligence – Practical Elements

Since the main task of a surveyor is to provide an opinion, by means of a survey report, the
negligence of a surveyor is likely to be specifically a “negligent statement”.
The negligent statement may have different forms:

• an incomplete or inaccurate description of the ship’s condition or the cargo;
• inappropriate wording or insufficient reporting; or
• inappropriate advice with detrimental effects.
A false statement is also called a “misrepresentation”, when the facts given, but not the opinion, are
wrong.
Below is an example of surveyor negligence:
In a Canadian case, the Pacific Crown [Campbell v Image et al (Pacific Crown) [1978] 2 WWR 663 (BC
Co Ct).], cited in Caldwell (1999), a surveyor performed a survey for a buyer, related to a wooden
fishing-boat converted into a pleasure boat. On completion of the survey, found satisfactory, the
buyer agreed to purchase the boat. Later, during refurbishing work, extensive dry rot was found. The
survey report did not mention any dry rot. It was understood later that the surveyor was not
specialised in wooden construction. The court, however, decided that not finding the rot was due to
the negligence of the surveyor.
Directed Learning
Read the following article on negligence and cargo surveyors, available here at the ITIC insure website
• What are the specificities of a claim in tort, compared to contractual claims?
• Define what misrepresentation is, what are the criteria and the differences with fraud? Discuss
this on the forum.

5. Liability and its Extent
5.1 Introduction
This section deals with the mechanisms supporting the limitation of liability, whether the claim is
raised in tort or in contractual law.
Figure 6 summarises the main sources of liability, as detailed in the two previous chapters.
Figure 6: Sources of liability (Caillerie,2016).
It does not matter whether the duty of care is owed under contract law or under tort law, as it refers
to the same standard of care and reasonable skills expected from the party.
The only difference would be that under tort law, the duty of care may extend to any party, i.e., to
third parties, whereas in contract law, this is restricted to the other contractual party.
It should also be noted that a claim against, let’s say a marine surveyor, can be raised both for
negligence under tort law and breach of contract under contract law.
Time limitations play a great role in this choice, as a contractual claim might have a shorter time bar
than a claim in tort.
5.2 Extent of Liability

This section details the extent of liability, mainly in the context of surveyors’ liability when
performing various types of marine surveys for clients. By narrowing down the subject to this specific
field, it should be easier to understand the key principles and it’s also easier to provide explicit and
practical examples.
However, the generic principles of liability apply also in other circumstances, and the second part of
this module will review liabilities in the context of other marine contracts.
5.2.1 Liability for Breach of Contract
Contractual duties are based on the terms and conditions of a contract. One party becomes liable in
case of non-performance of those duties.

As was explained before, the link between the breach and the loss or damage should be established
and will be reviewed by the court. If a cause is too remote, the claim may fail.
5.2.2 Proximate and Remote Causes – Illustrative Case
An illustrative case is provided below:
American case – the Gyda, 1971 [Skibs A/S Gylfe v Hymans Michaels Co 304 F Supp 1204, 1971, AMC
2041 (ED Mich 19690, as detailed in Stuart and Caffrey (1997) in the Tulane Maritime Law Journal - a
cargo owner requested a surveyor to perform an on-hire survey and to oversee the loading of a
cargo. After the voyage, during unloading, a fire broke out in the cargo holds containing steel
turnings. The cargo and vessel interests sued the cargo surveyor. It was found that the surveyor did
note high temperatures in the holds, but the ship sailed as scheduled.
The court found that the surveyor had breached his contractual duties to the cargo owner (including
the implied duty of care) but added that such duties towards the cargo owner or the ship did not
apply once the ship left the port. The court found no: “proximate causal link between the surveyor’s
breach of duty during loading and the ultimate damage that occurred on unloading.”
5.2.3 Liability for Duty of Care – as Implied under Contract Law or under Tort Law
A surveyor owes a duty of care to his or her client under tort law, but also under contract law as a
contract gives rise to an implied duty of care.
It has been explained in the previous sections that the duty of care is a legal obligation to perform
with reasonable skills and care, or in other words to comply with the expected standards of care.
Note: The term “in a good and workmanlike manner” is also used to refer to the skill and care
required in order to perform the work, especially in the USA.
In the context of marine surveys, the duty of care would apply specifically to the following tasks:
• Survey the vessel in accordance with applicable rules and standards.
• Detection of defects in the ship and notification to the owner.
It was also explained previously that the standards of care would depend on the circumstances.
Consequently, the courts will examine what the surveyor was requested to do in order to determine
if he or she acted in a reasonable manner.
This is one of the primary reasons why it is always recommended to define explicitly the content and
scope of the work to be performed during a marine survey.
5.2.4 Illustrative Case
An illustrative case is provided by the American case of SS Ioannis Martinos [Royal Embassy of Saudi
Arabia and Ins Co of N Am v SS Ionannis Martinos, 1986, AMC 772 (ED NC 1984).] cited in Raia (2010).
A cargo insurer required the Salvage Association to survey and approve the loading and stowage of a
cargo on a vessel chartered by Transamerican Steamship Corporation, for a voyage to Saudi Arabia.
Consequently, a surveyor from the Salvage Association witnessed the loading, made some
recommendations on cargo securing and produced a report stating: “the proposed voyage did not
present any circumstances beyond those which might normally be accepted by underwriters.”

Some cargo stowed on deck was then lost during the voyage, due to weather conditions. Amongst
several complaints raised, insurers filed a claim against the Salvage Association.
The court found that the Salvage Association not only witnessed and commented on the loading, it
actually participated to the stowage. Consequently, the Salvage Association had a duty of care, or
duty of workmanlike service. By breaching this duty, the court found that an unseaworthy condition
was created. It should also be noted that the court determined that the Salvage Association was also
liable to the charterer, i.e., a duty of care was owed to a third party.
5.3 Liability to Third Parties

As was mentioned in the previous example, liability can extend to third parties, i.e., parties not
engaged in a “contractual relationship”, under the law of tort.
For example, a surveyor performing a condition survey for a buyer willing to purchase a ship would
owe a duty of care to other implied parties, such as insurers, class societies and bankers for example.
Indeed, the survey report produced by the surveyor might be used for different reasons by those
parties, and they might actually rely on the information given by the surveyor.
Having said that, it should be mentioned that English law courts have introduced the notion of a
“special relationship” as a criterion to determine if liability is owed to a third party, in the context of
claims for negligent statements. Under this principle, the liability arises only if the “offender” is
aware that another party would rely on the statement made.
In the case of a surveyor and his or her survey reports, it would be hard for a surveyor to ignore that
third parties may use the statements produced, i.e., the liability towards those “marine” parties is
very likely to exist. But it could also be restricted to those parties and, not extend to parties not
engaged in a “special relationship” with the surveyor.
It could be said that the English courts have always been careful in the context of liability for financial
loss due to a negligent statement and are willing to restrict the liability of professionals performing
advisory tasks.
For example, in the Morning Watch (1990), [Mariola Marine Corporation v Lloyd’s Register of
Shipping (Morning Watch), 1990.] a Lloyd’s Register of Shipping surveyor performed a periodical
survey of a motor yacht, the Morning Watch and confirmed the yacht’s good condition at that time.
A purchaser decided to rely on the class certificate to finalise its purchase (the surveyor knew about
the purchase). After delivery, important defects were found.
As Lloyd’s declined to reimburse the purchaser, the case went to court. It was argued that the
necessary “special relationship” existed, the court accepted that the surveyor had been negligent but
decided that Lloyd’s did not owe a duty of care to the purchaser. This case produced an important
precedent greatly limiting the possible liability of a surveyor whose reports may be relied upon by
those other than his client.
5.4 Limitation of Liability

Limitation of liability is seen as necessary when the financial capabilities of the parties involved, and
the cost of services provided, are disproportionate. For example, in the context of oil pollution, it is
accepted that the liability of a tanker owner should be strictly limited as such a company would not

have the financial capability to cover the full extent of loss and damages in the case of a major oil
pollution incident.
In the case of surveyors or inspectors, it is also obvious that there is a large distortion between the
cost of their services and the global value of the operation they participate in (i.e., sale of a yacht,
chartering of a bulk-carrier, classification of a vessel, contract for repairs).
This broad principle applies in most areas of law and maritime law, and some actors of the shipping
industry benefit from a strong legal structure intended to protect their liability. Pilots and pilotage
authorities are often cited as beneficiaries of such a system. The second part of this module will focus
on specific limitation regimes in the maritime industry. An International Maritime Organization (IMO)
convention is also dedicated to the limitation of maritime claims.
5.4.1 Contractual Limitations of Liability
Contracts usually include provisions in order to restrict liability for the services performed. The mere
existence of a limitation clause in a contract does not mean that it will be effective, as the court will
determine if such clause is indeed enforceable.
There are numerous examples of courts refusing to give effect to a limitation clause. Depending on
jurisdictions, the court’s attitude towards limitation clauses may vary, and conflicting decisions do
exist. A court may decide that the clause is neither valid nor enforceable.
The following main principles can be established to guarantee the validity of such clause:
• Provisions must be clearly worded, explicit and must correspond to the intent of parties. The
clause shall be as explicit as possible, leaving no room for doubts or interpretations. In case
of ambiguity, courts are likely to be in favour of the claimant.
• The scope of the limitation is important. ITIC sums up this way:
“It should extend to any services beyond the original scope of work whether or not contemplated at
the time the contract is made. Otherwise, it may be said that the limitation applies only to the
original scope of work and that any new or extra work performed has been undertaken without any
such limitation applying.”
(Garrard and Calnan, 2005)
• The amount of limitation is usually specified, as an agreed sum, as a percentage of the fees
for example.
• Limitation’s clauses should aim not only at limiting liability for direct losses, but as well for
consequential or indirect losses. It might require drafting of a separate clause.
A limitation clause does allow the party to raise a claim, since its purpose is mainly to draw limits on
the amount of damages, not to prevent the claim. It aims at limiting the exposure of the party, and
courts usually recognise their value, especially in the case of experts providing advice.

5.4.2 Contractual Limitation of Negligence
The exemption clause (or waiver, or exculpatory provision) may have the specific purpose of
providing a protection for a negligent act. Courts are much less inclined to enforce this type of clause,
which is often found invalid.
5.4.3 Example of an Exculpatory Clause
An example of an exculpatory clause is in a claim related to a yacht in Hawaii, [Krohnert v Yacht

Systems Hawaii Inc, 664 P 2d 738 (Haw Ct App, 1983).], the survey report contained in a small font at
the end of the survey report, the following note:
“This report is issued subject to the condition that…neither this office nor any surveyor…is under any
circumstances whatsoever to be held responsible in any way for any error in judgment, default or negligence
nor for any inaccuracy, omission, misrepresentation or misstatement in this report…”
(USA, 1983)
The Court of Appeal agreed that the exculpatory provision was clear and unambiguous, hence
permissible. But despite this conclusion, it also found that it was not enforceable, because the
surveyor relying on such clause could not show that the other party clearly and unequivocally agreed
to this clause, with knowledge of its content.
By the end of these two sections, it should be clear that liability arises from two distinct sources, the
law of contract and the law of tort, and the applicable principles should be clear as well. Section 4.4.4
below focuses on another mechanism, which further extends the scope of duties and liabilities.
5.4.4 Convention on Limitation of Liability for Maritime Claims 1976 (LLMC)
This convention was created to provide a uniform, international regime applicable to maritime
claims, as a solution to differences in national regimes.
Shipowners are entitled to limit their liability in specific cases, with a financial cap set depending on
the ship tonnage. Note that “specialist” instruments (Carriage of Goods at Sea, Oil Pollution Claims)
provide their own limits. It covers claims for loss of life or personal injury and property claims
(damage to ships, property, pollution damages). It was modified several times in order to raise the
liability limits. The grounding of the Pacific Adventurer prompted the latest increase of limits, where
figures have been nearly doubled.
Please refer to the article from law firm Ince Gordon Dadds (previously Ince & Co) on the history of
the LLMC and its new limits, entitled “Pushing the limits – IMO announces increase in the limits of
liability for shipowners, 17.08.2012” at the INCE website.
Directed Learning
More detailed information on marine surveyors’ liabilities and a review of their duties in tort, such as
example of cases, can be found at the ITIC website
More detailed information on the limitation of liability for marine surveyors can be found at the ITIC
website

6. Responsibility for the Acts of Others
6.1 Introduction
The responsibility for the acts of others, also referred to as “vicarious liability”, arises in various and
numerous situations. It covers any case where one-person X is liable for the actions of another Y,
although X has not taken part to such actions.
Vicarious liability exists between persons with a special legal relationship, as between parents and
children, or the owner of a car and a friend driving the car, for example.
This chapter will focus mainly on vicarious liability in the context of professional relationships, i.e.,
cases of employers found responsible for the negligence of their employees.
In a maritime context, this could correspond again to a wide array of situations, such as a
classification society found liable for the negligence of its surveyor, or a ship berthing with tugs found
vicariously liable for an accident and damages due to one of the tugs.
6.2 Applicable Principles

Vicarious liability is part of tort law, and it is characterised by a strange feature: it consists in
incriminating an innocent party. The justification for this principle, in a professional context, could be
worded as such: it might not be worth suing the employee, as the employer is more likely to have a
stronger financial position.
Vicarious liability will arise only if certain conditions are met. The courts will have to agree that each
of them was indeed satisfied, and sometimes it might be tricky to pass the test.
6.2.1 Existence of a Tort
A tort was committed by the employee. This is a relatively straightforward test to pass.
The tort giving rise to vicarious liability can be any wrongful act, or omission to act, whether
negligent or fraudulent, such as: negligent statements by a surveyor, fraudulent conduct of
employees or, theft by employees. It should also be reinforced that an employer can be held
vicariously liable even if he or she had not contributed whatsoever to the wrongful act of the
employee.
This would be the case of liability for theft by the employees. In a maritime case involving some cargo
being stolen, the employer of the thief was found vicariously liable: [Brink’s Global Services Inc v
Ingrox Ltd [2010] EWCA Civ 1207.] when a company was hired for the fumigation of silver bars,
carried in a container, to be shipped to India.
After performing the fumigation, one of the employees returned to the sealed container and stole
silver bars. The High Court, and later the Court of Appeal, found that the employer was vicariously
liable for the theft, as it was an act that occurred during the course of employment.
6.2.2 Relationship between Employer and Employee
There is an employer/employee relationship, and the liability arises from that relationship.

The employment relationship is characterised by a close connection between the two persons, based
on the ground that the employer has chosen the employee to perform the tasks.
6.2.3 Case of Contractors
The existence of this “employment link” is crucial, as it means contractors will not benefit from
vicarious liability. Several cases have established this clear distinction between an employee and a
contractor.
For example, Lord Justice Widgery gave the following statement in Salsbury v Woodland [1970] 1 QB
324, p 336:
“It is trite law that an employer who employs an independent contractor is not vicariously responsible for
the negligence of that contractor. He is not able to control the way in which the independent contractor does
the work, and the vicarious obligation of a master for the negligence of his servant does not arise under the
relationship of employer and independent contractor.”
(Mandaraka-Sheppard, 2013)
However, an employer would be held liable for injuries due to contractor negligence, but this liability
arises from the “non-delegable duties” of the employer, when the employer owes a direct duty to
the person injured.
6.2.4 Course of the Employment
The employee must have acted in the course of his or her employment. It is, however, complex to
define the course of the employment, as it might extend further than expected.
A first and simplistic way to define the “course of employment” is to refer to any actions that were,
expressly or impliedly, agreed by the employer, or actions that were authorised but performed in a
wrongful way. However, the employer would be liable only if the wrongful actions of his or her
employee took place during the employment contract.
This is simplistic because the employer is actually also liable for acts that he didn’t authorise, as long
as such acts are in close connection with the nature of the work. The courts actually rely on the
“close connection” test, between the act itself and the circumstances, or the work to be performed
by the employee.
The case of Mattis v Pollock [Mattis v Pollock, Court of Appeal [2003] 1 WLR 2158.] is usually cited as
a recent example of the employee’s liability extending to remote areas. The employer of a night club
door man (bouncer) was found vicariously liable when the bouncer stabbed a client outside the club.
It was established that the bouncer was employed and expected to be intimidating towards the
client, hence the close connection between his act and the work he was hired for.
Part A of this module focused on aspects related to general law, specifically law of contract and law
of tort, and highlighted as well the principle of vicarious liability. Surveyors should feel comfortable
with notions related to:
• contractual duties;
• negligence;
• third parties;
• the limitation of liability; and
• the different legal statutes applicable.

It is important to have clear views on such notions, as they are always implied when it comes to more
complicated or technical cases, like in the context of maritime law.
Part B will provide an overview of the main areas of maritime law. Maritime law encompasses
several distinctive subjects, as illustrated by figure 7, and the most relevant to a marine surveyor will
be reviewed in detail, accompanied by illustrative case studies to help students build their own
understanding and remember the key aspects.
Part B covers ship registration, admiralty jurisdiction and the main subjects treated in admiralty
courts, and it ends with a brief review of the law of evidence. Figure 8 and figure 9 refer.
Figure 7: Areas of maritime law (Caillerie, 2016)
Figure 8: Main subjects of maritime law (Caillerie, 2016)

Figure 9: The main areas covered by maritime law and the legal framework (Caillerie, 2016)
Directed Learning
Read the article at the following link about a Negligence case Court o-f Appeal
• Specify the legal framework and main legal parties.
• Discuss on the forum why the Court of Appeal overturned the High Court judgement?

Part B
7. Registration and Conveyance of Ships

7.1 What is a Ship?
Before reviewing complex issues, one fundamental element of maritime law should be discussed.
It might be obvious to most of us, but the definition of “a ship” is not an easy one for a legal mind. It
actually differs according to the source of the law, which creates problems of application.
For example, under the UK Merchant Shipping Act 1995, Section 313, the definition is very broad - a
“ship” includes every description of vessel used in navigation.
And, indeed, in the case related to a jet-ski, [Note that there are conflicting cases on the jet-ski
definitions, Steedman v Scofield in 1992 and R v Goodwin in 2005.] the question was asked if such a
unit could be considered to be a ship. The answer was no, neither is a dinghy used on a lake, nor a
flying boat! However, a vessel without propulsion or a barge fitted with a rudder only, are considered
to be ships.
Different definitions of a “ship” can be found in international instruments. For example, in the
MARPOL Convention on pollution, a ship:
“means a vessel of any type whatsoever operating in the marine environment and includes hydrofoil boats,
air-cushion vehicles, submersibles, floating craft and fixed or floating platforms.”
(IMO, 2001)
Whereas in the COLREG rules (rule 3(a)), a vessel:
“includes every description of watercraft, including non-displacement craft, WIG craft and seaplanes, used or
capable of being used as a means of transportation on water.”
(IMO, 2003)
Why is this issue so important? Because the application of the laws and statutes differ depending on
what the object is, i.e., a ship or not.
For example, let’s imagine a collision between a seaplane and a cargo-ship. The seaplane would not
be considered to be a vessel for the purpose of admiralty law, as it does not comply with the
definition of a craft used for navigation. It prevents the claim from being “maritime” (giving the right
to arrest a ship), although the seaplane would be considered to be a vessel required to comply with
COLREG rules.
Platforms are a well-known issue in this context of interpreting what a ship is. Floating platforms do
bear most of the characteristics of a ship, especially in the case of Floating Storage and Offloading
Units (FSOs), which are commonly ex-tankers converted into floating platforms. Although they
navigate for their transit, it is understood that once attached to the seabed, they are not considered
to be ships anymore.
In a Scottish case, [Global Marine Drilling and Co v Triton Holdings Ltd (Sovereign Explorer) [2001] 1
Lloyd’s Rep 60.] a maritime claim was raised due to sub-charter disputes. A Mobile Offshore Drilling
Unit (MODU) belonging to the defendant was arrested on the grounds that it was a ship. The
defendant opposed this arrest, but its motion for recall was refused both by the court and the Court
of Appeal. So, it concurs that a MODU is in fact a ship…

7.2 Ownership, Registration and Flag
Rules related to ownership vary largely from one country to another; this section will focus on the
British version of facts, but the general principles are drawn as well.
There used to be a clear and logical connection between ownership, registration, and flag of the
vessel. A ship had one owner, the owner had one nationality, corresponding to its country of
residence and the ship flew the colours of that country.
Nowadays, any combination of flag/owner nationality/registry is possible, as nationality of owner

and nationality of ship are two different aspects.
7.2.1 Ownership
A ship is considered as a “chattel”, i.e., a personal property that is movable, and has an owner, just
like a bike or a computer. But the similarities stop there. Ownership of a ship is a very specific
concept, and the sale or purchase of a vessel bears no resemblance with any other act.
Traditionally, in England, a ship can be divided in “parts” (64 of them) and can be owned by up to 64
persons, taking shares in the ship. It is not the case everywhere, as in France for example, the shares
in a ship can amount only to 24. A shipowner can be an individual or, more likely, a corporation.
One share of a ship can also be owned by several persons, owners are then called “shared owners”.
Ownership is linked to registration, as the registration process is one of the pieces of evidence to
prove ownership of the vessel. Registration is also the process that gives a nationality, or flag, to a
ship, and hence defines which “law of the state” is applicable to the ship.
7.2.2 Owner, Register and Flag
Put in very simple words, figure 10 illustrates how it works:
Figure 10: Owner and ship nationalities (Caillerie, 2016)
A ship must be registered in order to provide:

• An evidence of ownership.
• A nationality to the ship and an applicable flag state.
• The right to sail on international waters: remember that “freedom of the seas and the right
of innocent passage”, as defined in the United Nations Convention on the Law of the Sea
(UNCLOS), is granted only for ships flying a flag. A ship sailing without a flag is actually the
definition of a pirate ship.
• A title used for sale/purchase purposes.

For those reasons, commercial ships do not have any choice and must be registered. Generally
speaking, ships under 24m, pleasure craft or even fishing vessels might not need registration, or a
specific registry could exist for their category (as is the case in the UK).
7.2.3 Registration and Requirement on Nationality
Some registries impose requirements on the nationality of owners. For example, in Australia or in
Singapore, the majority interest in the ship must be owned by a citizen or company established in the
said country. The opposite is usually not true as, for example, a British company is NOT required to
flag its ship under the British flag. This is the concept of “open registry”.
Although “flagging-out” used to be prevented by domestic laws, since the 1990s, it is accepted by
most maritime nations that companies based on their grounds should not be forced to fly their flags.
Several maritime countries have either allowed flagging-out for their national companies, or created
a “second registry”, or “international registry” as opposed to domestic ones (as is the case of
Norway, Denmark, France, and Germany).
7.2.4 Benefits of an Open Registry or Flag of Convenience
There is nothing new in the concept of a flag of convenience, as it just corresponds to the idea of
using a foreign flag in order to avoid possible national restrictions.
A distinction should be made between “open registry” and “flag of convenience”. An open registry
has no nationality requirements, it is likely to operate a more favourable tax system on income, and
there are no national requirements for the crew members. Bahamas, Panama, Jamaica, The
Netherlands, and Antilles would comply with the definition of open registry.
A flag of convenience would have the above characterristics, but less dedication to their maritime
fleet. Their maritime administration is of less importance, they produce fewer national rules to
complement international standards, and possibly have sub-standards ships in their fleet. In addition
to this, labour laws might not be as well developed.
7.2.5 Registration Process in the United Kingdom
Over 33,000 ships fly the British Flag and the UK Register has four categories: fishing vessels; small
ships, less than 24 m; bareboat chartered ships and other vessels (i.e. any vessel over 24m).
Applicable regulations are:

• The UK Merchant Shipping Act 1995
• The Merchant Shipping (Registration of Ships) Regulations 1993, as amended in 1994, 1998
and 2017.
Please refer to the UK government website for full and updated details on the procedure at the UK
Government website and select “guide to registration” to download the pdf.
Like most registries, registration is subject to an initial survey, and then the usual five-year cycle of
statutory surveys. The registration has a validity of five years. The ship will then be marked
accordingly, with its name, official number and port of choice.

7.2.6 Other Information Stated on Registry
The following information usually appears in the registry:

• Ownership details.
• Mortgage details.
• Ship tonnage and particulars.
A registry has the possibility to refuse or later cancel the registration of a ship. This would be based
on the condition of a ship, the risks it causes or an unsatisfactory survey.
To sum up, it could be said that a certificate of registration is evidence of ownership, nationality, and
tonnage of the ship.
7.3 Sale and Purchase of a Ship

The sale and purchase of a ship is a long and complex process, with very large sums of money at
stake. For example, a super tanker may cost over $100 million. A transaction usually involves several
parties, the seller (shipowner), the buyer and its brokers, but also the banks, insurance, surveyors,
classification societies and the like. Consequently, it is the source of numerous disputes and claims.
The process could be briefly presented as shown in figure 11:
Figure 11: Phases of a ship sale transaction (Caillerie, 2016)
7.3.1 Negotiations and Contract
The first step is usually for the buyer to check and verify that the ship is clear of any mortgages. In
the UK, a specific request for a “transcript of registry” would show the ongoing mortgages.
After the usual negotiations and bargaining of the price, mostly the job of the ship broker, a contract
for sale or purchase will be established.
It should be noted that an oral agreement is considered to be a valid contract, and that the content
of those previous communications might be scrutinised, should a claim be raised.
7.3.2 Documents
Sales and purchases of ships are documented, and evidenced, by a “bill of sale”. Although it would be
legal to use any type of form, it is recommended to use a standard version of a bill of sale.
The bill of sale plays the role of an evidence of the transfer of property, and it is complemented by a
Memorandum of Agreement (MOA), in order to provide the terms and clauses applicable to the
transaction.
The most common form of MOA is the Norwegian Sale form, or “SALEFORM 2012”. It was originally
established by the Norwegian Shipbrokers Association and is currently available on the Baltic and

International Maritime Council (BIMCO) website (Documentary section, Chartering, Sale and
Purchase). BIMCO is an international shipping association, providing a wide range of services in
favour of harmonisation of practices. It provides standard contracts for any area of the shipping
industry.
BIMCO also offers its own contract model and another one dedicated to new constructions. The
Nippon Sale standard form is also commonly used. Recently, Singapore has launched a Singapore
Ship Sale Form (SSF), aimed at the Asian market.
The contract specifies the date and place of delivery and the payment schedule. The seller agrees to
issue a Notice of Readiness (NOR) once the vessel, and all its relevant documents, are ready to be
delivered.
7.3.3 Process and Financial Aspects (Deposit and Payment)
Although the financial question will depend on the specific terms of the contract, a 10% deposit is
usually required once the contract is signed. Once paid (usually to a joint account in a bank specified
in the contract), the inspection of the ship may start, involving surveyors, classification societies etc.
The inspection is usually based on two aspects, the document review, and the physical survey of the
ship. Scope and extent will vary depending on the circumstances. The seller is required to pass all
documents relevant to the ship, including:
• Plans;
• class; and
• statutory certificates.
On satisfactory completion of the inspection process, the buyer should initiate the registration,
change of classification society, arrange for the crew etc. Once the vessel is ready to change owners,
the seller will issue the NOR, and the buyer shall then pay the remaining 90% of the price.
On delivery, more documents will be passed to the buyer, such as the records and logbooks,
instruction, and maintenance manuals etc. The title in the vessel will pass to the buyer during the
“protocol of delivery and acceptance” of the ship.

7.3.4 Buyer and Seller Obligations
The obligations applicable to each party will depend on the clauses and terms of the signed contract,
but figure 12 shows the more common features:
Figure 12: Buyer and seller obligations (Caillerie, 2016)
The “vessel shall be free of encumbrances” means that no legal claims should be attached to the
vessel, such as port state detentions, stowaways, commercial claims, mortgages etc.
Any breach of the clauses will give rise to a claim, especially payment clauses.
In the Aktor [PT Berlian Laju Tanker TBK and Another v Nuse Shipping Ltd (Aktor) [2008] EWHC 1330
(Comm).] case, related to a purchase contract based on the Norwegian Saleform, the 10% deposit
was paid by the buyer to a bank in Singapore. Upon delivery, the buyer then paid the remaining 90%
to a bank account based in Greece, as required in the contract.
However, the clause of the contract required that 100%, and not 90%, of the price was to be paid to
the Greek bank. Based on this, the court judgement was in favour of the seller.
7.3.5 Application of the Sale of Goods Act 1979
A distinction should actually be made between the purchase of second-hand vessels and the
purchase of new buildings.
The contracts used for transactions related to second-hand vessels are based on the idea that the
ship is sold “as it is”, in its used condition providing, of course, it does not bear any severe physical
defects or invalid certificates.
In the UK, the sale of a new ship comes under the application of the Sale of Goods Act 1979, as
amended, as the contract relates to the sale of “future goods”.
This makes a huge difference, because Section 14 of the Act provides for “implied conditions as to
quality or fitness”, meaning that in a new building contract, there is an implied term “that the goods
shall be of merchantable quality”.
Consequently, a buyer has the right to reject the ship if considered unsatisfactory.

7.3.6 Transfer of Property in the Case of New Buildings
The transfer of property in the case of a new ship is a bit more complicated, as the seller is actually
the shipyard. Generally, the ship builder retains the title of the vessel till the delivery.
The buyer, however, starts paying from the ordering of the ship, as instalments are generally agreed.
Which means the buyer is exposed to a high credit risk.
To lower this risk, the contract usually includes a provision on bank guarantee, or other type of
security, that the shipyard shall provide for the buyer. By doing so, the shipyard has the obligation to
refund the buyer in case of problems.
In this chapter, only the main principles related to ship registration and purchase were reviewed. It is
difficult to cover the subject extensively, as lots of differences exist from one country to another.
Furthermore, the sale of ships is an area closely connected with finance, in which surveyors are less
likely to be involved.
Directed Learning
More detailed information and a comparison of the different registers available worldwide can be
found on the Hill Dickinson website.
Due to a case in the UK in 2013, the situation is not as clear. Contracts for the sale of second-hand
ships may also come under the Sale of Goods Act and imply a term on satisfactory quality.
Read the article on the Ince website.
Consider what is found in a traditional sales contract form in order to avoid the application of implied
terms. Post your thoughts on the forum for discussion.

8. Admiralty Court Jurisdiction
8.1 Introduction
As explained earlier, one division of the English court is specialised in maritime questions – the
admiralty court.
It is a long-established court in England, as its origins date back to the 13th century. The admiralty
jurisdiction, mainly dealing with piracy and other crimes or offences at sea, was already distinct from
the common law courts.
It should be noted that most maritime countries also have an admiralty court, or at least have
established an admiralty jurisdiction. The systems operated in Australia, New Zealand, Hong Kong
and Singapore derive directly from the English admiralty jurisdiction, so does the USA system
although differences are more distinctive.
Proceedings under the admiralty jurisdiction in the UK have very distinctive features and are
supported by a powerful tool – the possibility to arrest a ship, following an action in rem.
Section 8.2 below covers the main principles and reviews the procedural aspects of proceedings
under the admiralty court jurisdiction in Great Britain.
8.2 Unique Features – Definitions

The reasoning behind the principles of the “in rem action”, or the ship arrest, is quite simple.
Again, we should bear in mind the specific feature of the maritime industry itself: the global nature of
shipping, its lack of geographical limits, the mobile nature of the object related to the claim, the
versatility of the link with the ship – i.e., the shipowner.
Consequently, it was found very convenient and efficient to direct the legal actions against a ship
itself, rather than its owner (or against both in some cases.). And to make sure that the claim would
“travel” and stay with the ship (maritime lien), even if it was sold, or then to guarantee that the ship
could not sail anymore (arrest of the ship).
8.3 Actions in Rem / In Personam

Under the admiralty jurisdiction, the court may proceed by an action in personam, i.e., against a
person, the shipowner for example, or by an action against an object (res in Latin), i.e., the ship itself
(action in rem).
The ship then becomes the defendant, and this procedure is also referred to as “personification”.
An action in rem could then translate into the arrest of the ship (or in some cases, of a sister ship) or
the arrest of the cargo, but only if there is a specific lien over the vessel (maritime lien or statutory
lien, as described later).
It should be made clear that the claim is against the property itself and only the property (i.e., ship or
cargo), and not a specific person having interest or connection with the ship. This means that the

judgement has a far-reaching scope, as it will be executed against any of the parties interested in the
property and wherever those parties are.
It could be said that the admiralty jurisdiction, with an action in rem, has no limits, as it can apply to
anyone anywhere in the world. With a proceeding in rem, the admiralty jurisdiction applies,
wherever the claim rose, but the ship can only be arrested in the jurisdiction of the relevant court.
An action in rem is the perfect way for a claimant to obtain the strongest security ever. The ultimate
purpose of the arrest would be the sale of the ship, as ordered by the court, in order to provide the
funding required.
Action in rem is a distinctive and unique feature of admiralty law under the common law system, and
there are some differences between countries. However, the arrest of a ship commonly exists in civil
law systems, but it is an action in personam. It is used as security for the claimant as well, and in
some places (France for example), a ship can be arrested even for the sake of non-maritime claims.
8.3.1 Maritime Lien and Statutory Lien
The categories of maritime disputes that can be settled by an action in rem are well defined and
specific criteria must be met to obtain the arrest of the ship. Claims are not all the same, and only
some of them give the right to proceed in rem and trigger the arrest of the ship claims with a
maritime lien or claims with a statutory lien.
A lien is basically:
“A right to keep possession of property belonging to another person until a debt owed by that person is
discharged”.
(Oxford Dictionary Press. 2019)
In our context, a distinction should be made between a maritime lien, statutory lien or possessory
lien. Claims rank differently depending on the nature of the lien, and this is essential when it comes
to distributing the damages/funds to claimants.
8.3.2 Establishment of a Maritime Lien
A maritime lien does not depend on possession. It arises over a ship when some specific services are
provided or some transactions involving the ship are performed.
It is important to understand that:

• The “lien travels with the ship”; it is attached to the ship, and it does not depend on
possession. It will stay with the ship should it be sold to a different owner. However, it would
extinguish if the ship is destroyed.
• Maritime liens are “silent”, they might not be recorded anywhere (except in the case of
mortgages, as an entry should appear on the registry).
A maritime lien itself does not have a statutory definition but claims giving rise to a maritime lien do.
In the UK, claims that constitute a maritime lien are limited to three cases (as defined in the Supreme
Court Act 1981):
• Damages caused by a ship (i.e., collision);
• salvage; and
• seamen’s wages.

Two other types of claims, much less common or even obsolete, constitute a maritime lien:
• master’s wages and disbursements; and
• “bottomry and respondentia” (bonds used by a master as a security when he needed to
borrow money for the ship, in a foreign or remote place of the world).
For example, in a Canadian case related to a yacht and a cargo ship, [Owner of the Yacht
“Carbonnade” & Anr v Owners of the ship “Ruta”, QBD, 11 February 2000.] a collision occurred
between a cargo ship, the Ruta, and several yachts, and the yacht owners claimed for damages. The
Ruta was arrested several times at the instance of the yacht owners. After bankruptcy of the parties
involved, the ship was sold.
Seamen’s wages had been not paid, and they were able to recover their wages. Their claim was also
granted a priority status over other damage claimants. Note, in the USA, any type of maritime claim
gives rise to a maritime lien.
More specifically, under the American system, it is considered that the supply of “necessaries”
(goods, food supplies, supply of some services, like repairs, bunkering to a vessel) gives rise to a
maritime lien.
8.3.3 Statutory Liens
In a dispute related to the ship, the claimant might not be able to rely on the existence of a maritime
lien, but there are good chances that a “statutory lien” exists, which still gives the right to arrest the
ship.
In the UK, statutory rights of arrest in rem are currently defined and enumerated as a list of claims in
the Supreme Court Act 1981, and partly reproduced above, several cases are covered, from this
(long) list of claims actually corresponds to the definition of the admiralty jurisdiction:
• claims as to the possession or ownership of a ship or share therein;
• questions arising between co-owners of a ship (related to possession, employment or
earning of the ship);
• claims related to a mortgage or charge on a ship or share therein;
• claims for damage done by a ship;
• claims for loss of life or personal injury sustained in consequence of any defect in a ship or
her apparel or equipment;
• claims for the loss or damage to goods carried in a ship;
• claims arising from any agreement relating to the carriage of goods or the use or the hire of a
ship;
• claims related to salvage, pilotage and towage;
• claims related to the construction, repair, or equipment of a ship; and
• claims by a master or crew member for wages See Article 20(2), sub-headings (a) to (s).
It should be noted that under the Arrest Convention, the types of claims that can be brought in rem
and hence result in the arrest of the ship, are much more various (see Section 7.4 below).
A claim under a statutory lien has one clear advantage: it allows the arrest of another ship of the
same owner. But with a maritime lien, the claim stays with the ship, wherever it goes, whoever it
belongs to, and it ranks higher for the allocation of funds.

Ranking of claims when it comes to sharing the money awarded by the court or raised after sale of
the ship – the money will be shared and allocated to different claimants, depending on the type of
claim they had raised:
• Special legislative rights.
• Admiralty Marshall’s expenses.
• Costs of the arresting plaintiff.
• Possessory liens have precedence over claims subsequent to possession.
• Salvage claims have precedence over prior damage claims.
• Damage claims; but damage claimants have priority over earlier salvage.
• Crew’s and master’s wages.
• Master’s disbursements.
• Bottomry.
• Mortgages.
• Statutory rights in rem.
8.4 Ship Arrest – Overview of the Procedure

Figure 13 below is a brief review of the procedure as applicable in the UK, but similar principles apply
in other maritime jurisdictions.
Figure 13: Process of a claim in rem (Caillerie, 2016)
8.4.1 Applicable Regulations and Further Details

The principles of ship arrest are actually governed by different sources:
• In the UK, by the Supreme Act Court 1981.
• By the International Convention on Arrest of Ships (1999 Arrest Convention), which entered
into force recently in 2011 – applicable by countries which became Parties to the Convention
– currently ten.
• The previous version the convention, the Arrest Convention 1952. Still in force in over 70
countries.
There are some important differences between those instruments, as the Arrest Convention defines
a list of events that may give rise to a maritime claim, when under the English Supreme Law Act, only
claims supported by a maritime lien, or a statutory lien allow for the arrest of the ship.
Consequently, conflicts of law and challenge of jurisdictions are very likely to emerge for cases where
an action in rem is sought.
For further details and a comparison of the different regimes, you may refer to a guide published by
the law firm, Hill Dickinson, entitled “Arrest Regimes, Comparing English law, and the position under
the Arrest Convention 1952 and the Arrest Convention 1999”, Shipping Guide 10. Copy those terms
in a search engine and the download page should appear.
There are several ways to deal with the wide subject of marine casualties. In the context of this
module, we shall adopt the “admiralty law” point of view and review the main principles governing
maritime claims related to:
• collisions;
• salvage;
• towage;
• pilotage; and
• pollution.
Emphasis will be on the English law system.

As an introduction to marine accidents, the following could be noted:
• Categories of ships most involved in incidents – general cargo ships and passenger ships.
• Loss of control is the most frequent event, followed by collisions, contacts and groundings.
• However, flooding/foundering was the event that led to the highest number of very serious
casualties recently, followed by collision and fire/explosion.
These are based on the reviews of marine incidents performed by the European Maritime Safety
Agency and available at the EMSA website.
Directed Learning
• Discuss on the forum the reasons why a ship may be arrested and who is authorised to detain
a ship.

9. Collision and Salvage
9.1 Collisions
Collision is defined as such in the “IMO Code Investigation Casualty”:
“Collision – striking or being struck by another ship (regardless of whether the ships are underway, anchored
or moored).
(IMO, 2008)
This type of casualty event does not include ships striking underwater wrecks. The collision can be with other
ship or with multiple ships or ship not underway.”
A collision is a breach of statutes, regulations but also a breach of the duty of care (tort).
Consequently, both criminal and civil liabilities can arise from a collision at sea.
9.1.1 Criminal and Civil Liabilities
In the UK, criminal liability covers the following types of “maritime” offences, which include
collisions:
• Intentional damage to property (covered by Criminal Damage Act): a vessel striking
voluntarily another vessel or a buoy.
• Loss of life, by criminal gross negligence, or involuntary manslaughter: a ferry refusing to give
way to a fishing vessel involved in fishing operations (breach of COLREG), leading to a
collision and subsequent death of a fisherman.
• Other maritime offences as defined in different sections of the Merchant Shipping Act 1995
(dangerously unsafe ships or operation of ships, conduct endangering ships or individuals,
criminal damage to lighthouses, sailing without charts, oil pollution events).
• Breach of certain maritime conventions on safety (including provisions on duty to render
assistance) and, of course, breach of COLREG Rules (already covered by MSA 1995).
9.1.2 Civil Liability
In the absence of criminal liability, civil liability will still arise from the event. As per the principle of
the onus of proof, the claimant has the duty to establish the liability and prove the facts. This also
applies to collisions and breach of COLREG.
In a collision case, the claimant shall prove that there was not only a breach of COLREG, but that this
breach is causative of the collision, and that the defendant ship is to be blamed (notion of
“blameworthiness”). In other words, there is no “strict liability” for a breach of COLREG. Indeed,
claims for collision damages are based on the law of tort, i.e., the negligence of persons.
9.1.3 Applicable Statutory Regulations
First, an overview of COLREG should be given to understand the principles underlying collision
accidents. COLREG contains several parts (IMO, 2003):

Part B
This sets the rules of navigation (“steering and sailing rules”) in different conditions (crossing
situations, reduced visibility etc) and based on types of ship and their operating condition (large
draft, vessel in fishing operations etc). Their aim is to prevent collisions.
Parts C and D
These deal with the lights and shapes to be carried by a ship and Part D with the signals (light and
sound) used to “communicate” between ships.
9.1.4 Cases
Examples of cases are given below, with the text of the COLREG rule, for illustration purposes. It is
important to note that a specific behaviour is expected from ships, depending on circumstances, and
that the interpretation of COLREG terms is crucial.
Rule 5 – Look-out:
Every vessel shall at all times maintain a proper look-out by sight and hearing as well as by all
available means appropriate in the prevailing circumstances and conditions so as to make a full
appraisal of the situation and of the risk of collision.
Although a navigator would know that having a radar on and binoculars out is not enough to be
qualified as “a proper look-out” (because those tools shall also be used at the appropriate range,
frequency etc), it’s not so easy to define what an inappropriate look-out is. It also clearly depends on
(weather) circumstances.
In the Maritime Harmony, [Maritime Harmony, [1982] 2 Lloyd’s Rep 400.] a collision occurred
between two vessels, in fog conditions. On board the Anna Bibolini, only one radar was operative,
out of the two radars on the bridge, and the second vessel, the Maritime Harmony, had its two
radars working but the pilot on board was not using them appropriately.
It was found that both vessels failed to maintain a proper look-out, with the Anna Bibolini, which was
also in the incorrect part of the lane, bearing 75% of the responsibility for the collision.
Rule 6 – Safe Speed:

Every vessel shall at all times proceed at a safe speed so that she can take proper and effective action
to avoid collision and be stopped within a distance appropriate to the prevailing circumstances and
conditions.
In the Roseline [Roseline, [1981] 2 Lloyd’s Rep 410.] two vessels moving in opposite directions
collided, when visibility was reduced by fog. The Roseline was sailing at 14 knots and the Eleni V, 13
knots. Although they both noticed each other, thanks to their radars, neither of them reduced their
speed and the Eleni V altered course when approaching the Roseline, hence creating a crossing
situation instead and finally a collision.
It was found that both ships were at fault, mainly of proceeding at unsafe speed. The judge
estimated that 6 and 8 knots would have been the safe speeds.
Rule 15 – Crossing Situations:

When two power-driven vessels are crossing so as to involve risk of collision, the vessel which has the
other on her own starboard side shall keep out of the way and shall, if the circumstances of the case
admit, avoid crossing ahead of the other vessel.

COLREG describes the main types of “encounters” between ships, as overtaking, head-on situation,
or crossing situation. The actions expected from the vessels depend on the situation, and whether
the vessel becomes the “give-way” vessel or the “stand-on” vessel.
Consequently, it is very important for navigators to understand in which situation they stand, as it
will dictate their behaviour and establish their manoeuvring options.
In the Nowy Sacz, [ Nowy Sacz [1977] 2 Lloyd’s Rep 91.] two vessels were sailing on parallel tracks. It
was nighttime, visibility was good, and the vessels were in sight, The Nowy Sacz being on the right
and the Olympian being on the left (the Nowy Sacz was on the port side of the Olympia). Still a
collision occurred.
The Nowy Sacz interpreted the situation as “overtaking” and expected the Olympian to keep clear as
she was the faster vessel. However, the judge ruled that it was a crossing situation, and the Olympian
was then the vessel “with priority”. The Nowy Sacs should have taken early action and reduce its
speed to let the Olympian pass safely.
9.1.5 1910 Brussels Convention on Collision
Collision claims are also regulated by the Convention for the Unification of Certain Rules of Law with
Respect to Collision between Vessels, known as the 1910 Brussels Convention, developed under the
auspices of the International Maritime Committee.
It was deemed necessary to harmonise, on an international level, the rules applicable to the
attribution of liabilities and compensation in case of collision damage. A century later, not much has
changed, and the Convention is still fully applicable. Mention should be made of another instrument
developed by the CMI, The Lisbon Rules 1997, which help to determine the scope of the liability for
the purpose of compensation.
The Brussels Convention has been ratified by most maritime countries (the USA has not) and states
have integrated the articles into their domestic regulations. In the UK, it is incorporated in the MCA
1995.
It contains only 17 articles. An overview of the most relevant articles in our context is given in the
table below.
Table 1: An overview of the most relevant articles

Article Subject
1 Compensation due for damages caused to the vessels, or to any things or persons on
board thereof, shall be settled in accordance with the Convention, in whatever waters the
collision takes place.
2 If the collision is accidental, if it is caused by force majeure, or if the cause of the collision
is left in doubt, the damages are borne by those who have suffered them. Applicable even
if the vessel is at anchor.
3 If the collision is caused by the fault of one of the vessels, liability to make good the
damages attaches to the one which has committed the fault.
4 Apportionment of liability: If two or more vessels are in fault the liability of each vessel is
in proportion to the degree of the faults respectively committed.

5 Applicable to pilots as well.
7 Time bar of two years from the date of the casualty.
8 After a collision, the master of each of the vessels in collision is bound, so far as he can do
so without serious danger to his vessel, her crew and her passengers, to render assistance
to the other vessel.
10 The provisions of this convention do not affect in any way the law in force in each country
with regard to the limitation of shipowners’ liability, nor do they affect the legal
obligations arising from contracts of carriage or from any other contracts.
11 Does not apply to ships of war or to government ships appropriated exclusively to a public
service.
9.1.6 Extent of Liability
Anyone involved in the collision incident is likely to be found liable, but liability could even extend
further, on the ground of vicarious liability.
The principles could be illustrated as per figure 14:
Figure 14: Parties involved in a collision (Caillerie, 2016)
It should be noted that the parties involved in the safety of the ship, such as shipowners, ship
managers, would be liable in case of negligence if their management or operation of the ship has
contributed to the collision (could be the case of inoperative radars not replaced on time, hence
preventing a proper look- out). This is different from vicarious liability.
Port authorities may also be liable if found negligent in guaranteeing the safety of the facilities or
areas. It could cover, for example, insufficient dredging of an access channel, the failure to repair a
faulty navigation buoy etc.
Similarly, shipyards or companies providing repair services could incur liability in case of defects or
defaults that contributed to the collision.
9.1.7 Principles Applied to Establish Negligence and Liability
The principles or tests applied by the court derived from the common law of tort, and as applied to a
maritime case, could be summed up as such:
1. Does the duty of care exist?
• Were the consequences of the act foreseeable?
• Was the collision foreseeable?
• Principles of the remoteness of the cause?

• Is there a close relationship between the parties?
• Is it fair, just and reasonable that the law imposes a duty of care in this case?
2. Was the duty of care breached and has the breach contributed to the collision?
3. Has the breach (i.e., the collision) caused damages?
• Principle of causation, especially to determine the damage award.
9.1.8 Illustrative Cases
Causation
The claimant shall prove that the loss would not have occurred if the defendant had not committed a
breach. In a collision, there can be a long series of events, that all together, or one after the other,
produce the collision. The “chain of causation” shall not be broken, or the defendant might claim that
another event (an intervening event) is responsible for the final damage.
“The chain of causation may even survive the negligence of the defendant. In the Calliope, two ships collided
in the Seine. One of them grounded and refloated. The following day, while under a salvage tug, she re-
grounded due to the negligence of her crew. The effect of the initial negligence of the colliding ship was held
to be still continuing at the time of the second grounding, because it had put the defendant in a situation in
which its ship would have to attempt a difficult manoeuvre it would not otherwise have attempted.”
(Baughen, 2012)
Foreseeable Event:
In a case related to the collision of two tankers, [Miraflores and Abadesa [1967] 1 AC 826.] a large oil
spill occurred, which was then followed by a fire around the two ships. The court found that the
damage due to the consequent fire were foreseeable.
Collision events share common features and consequences, as such, which are all likely to be
considered as foreseeable. See figure 15.
Figure 15: Foreseeable types of damage (Gault [Ed] et al, 2003, p 552)
9.1.9 Defence Available
Several mechanisms are available to support the defendant and the two theories specific to collision
cases are detailed in Sections 8.8.10 and 8.8.11 below.
9.1.10 The Inevitable Accident
This would apply in situations where an event could not be avoided. The defendant shall show that
the cause of the collision is due to a specific event, over which he had no control, and that he took

sufficient precautions (as exercising care, good seamanship etc) but it didn’t suffice to avoid the
collision.
It would be, for example, the case of a ship washed away by the swell of another passing ship, and
then colliding with something; or a sudden alteration of the ships course, to avoid a danger or a ship,
which would in turn result in a collision with another ship.
9.1.11 Agony of the Moment
This principle is based on the recognition that in an emergency or perilous situation, it is possible to
depart from prudence and care, and actions committed in this context will not be construed as
negligent.
This was established as early as 1879, when Lord Brett gave the following definition in [The Bywell
Castle]:
“I am of the opinion that when one ship by her wrongful act suddenly puts another ship into the position of
difficulty of this kind, we cannot expect the same amount of skill as we should under other circumstances.
The captains of ships are bound to show such skills, as persons of their position with ordinary nerve ought to
show under the circumstances. But any court ought to make the very greatest allowance for a captain or
pilot suddenly put into such difficult circumstances and the court ought not, in fairness and justice to him,
require perfect nerve and presence of mind enabling him to do the best possible.”
(cited in Mandaraka-Sheppard, A. (2013)
This would cover the case of a collision between A and B, as a result of an unexpected alteration, of
course, by B, when A and B were in a close situation, followed by an inappropriate manoeuvre from B
to avoid, unsuccessfully, the collision.
9.1.12 Apportionment of Fault in Case of Shared Liability
A collision event is very likely to be the result of faults committed by all the ships involved. When
several parties are to be blamed, liability shall be apportioned between the ships, according to some
specific principles.
The principles for apportionment of liability derive from the 1910 Brussels Convention on Collision
and, in the UK, have been included in the MSA 1995. It should be noted that the court follows those
principles as guidelines and could depart from them depending on circumstances.
A summary is given in Figure 16.

Figure 16: Apportionment of liability (Caillerie, 2016)
Courts tend to apply the following apportionment figures: 60/40, 70/30, 80/20 or 50/50 (but not
100). Illustrative cases are detailed below (extracts from Mandaraka-Sheppard, A. (2013):
The Hagieni and Barbarossa [2000] 20292

The fault of the Hagieni ordering half-ahead had minimal causative significance. She failed to cope
with the embarrassment of the Barbarossa’s approach, which created a situation of danger and
instilled confusion as to her intention.
The apportionment was 80/20 in favour of the Hagieni.
The Statue of Liberty [1971]2 LR 277:

A collision occurred between the Statute of Liberty and the Andulo, while both vessels were on
crossing courses.
There were breaches of duty on the part of both vessels. It was the duty of the Andulo to maintain
her course and speed, and the Statute of Liberty was guilty of gross negligence for amongst other
things not giving way to the Andulo.
The trial judge had apportioned 70% of the blame to the Statute and 30% to the Andulo. Then the
Court of Appeal varied the proportions to 85% and 15%. On appeal, the House of Lords maintained
this percentage, which is quite unusual.
9.1.13 Measure of Damages
The basic principle was worded in 1850, and is still valid, in the Clarence: [(1850) 3 W Rob 283.]
“The party who has sustained a damage by collision is entitled to be put, as far as practicable, in the same
condition as if the injury had not been suffered.”
Which is actually a tort principle.
Distinction is made between cases involving a total loss of the ship, and cases of partial loss of the
ship. A partial loss implies that the vessel can be repaired. Figure 17 shows the principles that apply
to the measure of damages.
Figure 17: Total loss vs partial loss (Caillerie, 2016)
Financial recovery applies only to physical damage and financial loss as a consequence of the
collision.

In both partial and total losses, if the vessel was chartered, a sum will be awarded to the owner in
order to compensate for the loss of freight or profits that the ship would have earned.
Expenses and “wear and tear” will be deducted from this sum. The court has to estimate, by means
of a complicated calculation, how much the ship could have earned, and it is complicated because
markets fluctuate quickly.
9.1.14 Time Limitation
The MSA 1995 (and the Brussels Convention) states a two-year time bar for claims against a ship or
its owner for:
• Damage (or loss) to a ship or its cargo due to the fault of another ship.
• Injuries or loss of life on a ship due to the fault of another ship.
However, it should be noted that the two-year time bar applies only for claims made against the
other ship involved. For damage to the cargo carried, claims against the ship carrying the said cargo
(“the carrying vessel”) as well as personal injury claims, have a three-year time limitation.
Furthermore, a recent case settled in 2013, related to a collision in 2011 in the South China Sea,
highlighted the need to be careful with the statutory time bar, as it could be superseded by
agreements made between parties.
You may find the analysis of the case, made by the P&I “Steamship Mutual”, at the Steamship Mutual
website
9.1.15 Use of Experts
Obviously, cases of collisions require some form of nautical understanding or experience. In the UK,
the admiralty court may require the assistance of advisors. Traditionally, the Trinity House Authority
provides assessors, or nautical experts, named “Elder Brethen” (older brother).
There can be up to two advisors to provide assistance to the judge on nautical and technical matters,
but it is up to the judge to decide to use or not their advice.

9.2 Salvage
When a ship requires assistance at sea, because the ship or its crew are in danger, or because there is
a risk of marine pollution, salvage is needed.
A salvage operation may be performed by any ship in the vicinity, willing to help, or by more
specialised vessels, such as high-sea tugs, in the context of a salvage contract.
In Rose, F. and Kennedy, W. (2001), the authors give the following definition:
“Salvage is a service which confers a benefit by saving or helping to save a recognised subject of salvage
when in danger from which it cannot be extricated unaided, if and so far as the rendering of such service is
voluntary in the sense of being attributable neither to a pre-existing obligation nor solely for the interests of
the salvor.”
The principles of salvage also establish that the salvor is entitled to a reward, depending on the
success of the operation. The rationale behind this is simple, a reward is a fair way to encourage
assistance between vessels and secure some sort of recovery for the time lost by the assisting vessel.
Note that assistance for the sake of lifesaving is not considered to be salvage.
Salvage law has been developed, in parallel with the technical evolutions of shipping in the 19th
century, in order to refine the criteria and principles applicable to salvage claims.
9.2.1 Elementary Concepts of Salvage
Figure 18 illustrates the traditional notions of what salvage is.
Figure 18: Key aspects of the salvage principle (Caillerie, 2016)
Those concepts were fully valid a few decades ago, when salvage operations were commonly
performed by commercial vessels which just happened to be in the vicinity of a distress and then
volunteered to help. With the emergence of a salvage industry and its highly specialised fleet, aimed
at providing professional salvage services under contracts, some of those principles are not true
anymore.
Salvage contracts are now commonly used. They generally integrate the “old” principles of salvage
law, but they tend to be more “precursor” than follower of the law, as their aim is to reflect current
practices of the industry and to provide solutions to potential issues. The traditional law of salvage
was furthermore reshaped with the entry into force of 8.8.101989 Salvage Convention, in 1996
(integrated into English law in 1995).

An assistance operation is granted the status of salvage only if the criteria shown in table 2 and table
3 are met. Only maritime property can be the subject of salvage, and not persons. Remember that
salvage gives rise to a maritime lien on the ship.
Table 2: Element of salvage
Element of Salvage
The property shall be exposed to destruction or damage.
The situation must be characterised by “difficulty”. The master is the one
assessing the existence of a danger.
The danger must be real, immediate, but can also be a future danger.
Danger The extent of danger is relevant to determine the extent of the award.
There is a threat of damage to the environment.
No pre-existing agreement or obligation (master and crew, as obliged to

ensure the safety of the vessel, could not engage in a salvage operation of
Voluntary action their own vessel).
Table 3: Element of salvage

Element of Salvage
Success Unless actual benefit conferred on the salved property, no remuneration.

If the ship is still in danger after the operation, no success.
The success can be partial, as long as some property was salved.
Reward Traditional principle of “no cure, no pay”, not valid anymore as such in the
context of pollution threats
Amount based on the merit of the salvor (effort and skill needed), the risks
taken (the riskier the operation, the larger the reward) and the final result for
the owner.
9.2.2 Conflicts with Other Types of Operations
Pilotage or Towage Operations Turning into Salvage
Towage and pilotage are usually performed through a contract, which would be considered to be a
“pre- agreement”, hence preventing an assistance operation to be a salvage. However, sometimes a
towage or a pilotage operation converts into a salvage. This would require exceptional
circumstances.
It was the case in the Aldora, [Aldora [1975] 1 Lloyd’s Rep 617.], cited in Mandaraka-Sheppard, A.
(2013), where a ship arriving in the vicinity of the harbour, proceeded out to sea again as the pilot
and tug were not ready at the buoy, and ran aground on a sandbank of the channel. The judge
established that:
“pilots are only entitled to claim salvage if, first, the ship is in danger by reason of circumstances which could
not reasonably have been contemplated by the parties when the engagement to pilot or tow was made, and

secondly, risks are run, or responsibilities undertaken, or duties performed, which could not reasonably be
regarded as being within the scope of such engagements.”
9.2.3 Duty to Render Assistance
In a distress situation, as a collision for example, ships have the statutory duty to assist vessels and
crew (it’s a criminal offence if they don’t) and the assistance they give should not be seen as salvage.
However, again, there have been cases where the situations “mingled” and the right to salvage was
deemed.
In the Tower Bridge, [Tower Bridge [1936] P 30] a vessel stuck in ice sent a distress message and
another vessel proceeded to its assistance. The situation was under relative control and the assisting
vessel gave advice for the Tower Bridge to proceed safely out of the infested waters. On trial, the
Tower Bridge owner claimed that the other vessel, by giving useful and successful advice, was simply
complying with its assistance duty, but it was held that compliance to this duty did not affect the
right to salvage, and the helping vessel was awarded salvage.
9.2.4 The Salvage Convention – Overview
The first Convention on Salvage was the Brussels Convention 1910, which was largely revised, under
the auspices of IMO, to produce the current applicable treaty, the 1989 Salvage Convention (entered
into force in 1996).
The main new feature of the updated text is the principle of “special compensation”. It was actually
introduced following the Amoco Cadiz pollution, to recognise that a threat to the environment needs
to be treated as seriously as a “proper” salvage operation on damaged property.
It is also necessary to guarantee that salvors would still respond to an event characterised by a high
risk of pollution but a very low value of the property to be salved. In a sense, it signalled the
theoretical end of the “no cure, no pay” principle.
You may find further details on the IMO website at the IMO website.
9.2.5 Main Salvage Contracts in Use Nowadays
The main forms of contracts are all derived from the traditional and historical Lloyd’s agreement
(LOF), based on the “no cure, no pay” principle. The Lloyd’s office in charge of the LOF contract has
produced a short video on the history of the LOF agreement, available at the Lloyds website.
In an emergency situation, salvors are likely to require the signature on an agreement before
commencing any operation. In this case, the salvage is still considered to be a voluntary service.
The International Salvage Union (ISU) is the global trade association representing professional marine
salvors which recommends the use of Lloyds Open Form (LOF). Remuneration under a LOF
agreement is set by arbitration.
Practical information on the LOF Forms can be found on their specialised website, for example at the
Lloyds website.

There are several versions of the LOF, as it has been modified throughout the years to accommodate
the evolution of the shipping industry (more efficient tugs, communication means, more salvage
professionals etc) and of the Salvage Convention:
• LOF 1980, 1990, 1995, 2000, 2011; and
• the current version, 2020.
All those versions are in force, the two most recent ones are much more simple and shorter (two
pages for the LOF 2000).
LOF forms cover the basic terms of the agreement, the obligations of the parties, and the procedural
provisions for arbitration and the payment terms.
9.2.6 Comparative Table
Table 5 aims at giving a global picture of the key elements of salvage law, based on its two main
elements:
• the LOF Agreements; and
• the Salvage Convention (as integrated into domestic legislation, in the MSA 1995 in the case
of the UK).
Table 5: Global key elements of salvage law.
Subject 1989 Salvage Convention LOF Contracts
Geographical limits Navigable waters or in any other Definition of the “place of safety” to be
waters whatsoever = any water. reached for redelivery of property.
Subject of salvage A vessel or any other property in A detailed description of the property
danger (craft or any structure capable is required.
of navigation) and property includes
any goods carried and freight at risk.
BUT Convention does not apply to
fixed or floating platforms or to MODU
when engaged in exploration,
exploitation of sea-bed.
Salvage of persons No remuneration for saving of lives but

it shall not affect national law on this
subject.
Threat to the A reward is granted for the skill and

environment efforts of the salvors in preventing or
minimising damage to the
environment.
Master authority The master has the authority to

contract on behalf of the owner of the
vessel.
The master/owner has the authority to
contract on behalf of the owner of the
property on the vessel.

Duties of Salvor To carry out the salvage operations Some “success criteria” are defined, in
with due care to the property AND the terms of place to reach, for example.
environment Possible termination of agreement if no
= so, no success required strictly successful results are obtained.
speaking.
Duties of property owner Co-operate fully with salvor; exercise Must provide all details about the
due care towards the environment; property and shall not mislead the
accept redelivery once brought to a salvor.
place of safety.
Assessment of award List the criteria to assess the award. According to the “Lloyd’s Standard
Salvage Arbitration Clauses”.
Subject 1989 Salvage Convention LOF Contracts
Special compensation If the salvor has prevented or SCOPIC Clause, integrated since LOF
minimised damage to the environment, 2000, but must be “ticked” in contract.
special compensation is payable. The SCOPIC is used “instead” of Art. 14, as
tribunal, if it deems it fair and just to do once incorporated, salvor cannot claim
so, may increase the compensation up under Art.14.
to maximum of 100% of the expenses Can be invoked anytime.
incurred by the salvor (Article 14). Value of SCOPIC remuneration is
agreed.
Some actors of the shipping industry are calling for a revision of the Salvage Convention, in order to
include a specific and explicit “environmental award”, in light of recent and more frequent salvage
operations aimed essentially at preventing damage to the marine environment.
Directed Learning
The case of the Global Mariner highlights the role of counsellors, the importance of their advice and
how their opinion can make a difference in a case.
Read the following article Steamship Mutual website.
Read the following article on the case of the Voutakos: Gard website.
Answer the following questions:

• What was the risk incurred by the ship and what impact did it have?
• What is the disparity principle?
• What conclusion is given?

10. Towage and Pilotage
10.1 Towage
Towage can simply be seen as an assistance given by one vessel to another which has difficulties in
progressing. Such a service is usually offered by tugs, but there are several types of tugs and
circumstances where towage is required. A general distinction is usually made between:
• harbour tugs, designed to help a ship manoeuvring in port; and
• deep-sea tugs designed to operate at sea and involved as well in salvage operations.
Tugs have the following features in common:

• very powerful engines;
• fine manoeuvring capabilities; and
• “bollard-pull” power, i.e. winches designed to tow other vessels or units.
Tugs may also be used as “pushers”.

Towage operations are commonly performed on the basis of a contract. Towage is then considered
to be a contract for services and comes under the general principles of contract law.
Being a very specific technical and maritime subject it is, however, part of admiralty law.
10.1.1 Types of Contracts
Several professional bodies have designed formats to suit the industry. They should be seen as a
“canvas”, as parties are free to make amendments or additions.
The British Tug owners Association has developed the most common form of contract, used
throughout the world – the United Kingdom Standard Towage Conditions 1986 (UKSTC). Being
developed by the tug owners’ professional body, it is logically seen as more favourable to shipowners
(or “tug-friendly contract”).
BIMCO has also created the following forms:

• TOWCON 2008 - for international ocean towage, over a long distance, and daily payments.
• TOWHIRE 2008 - Idem with payment at specific steps of the towing operation.
• SUPPLYTIME 2005 - Similar to a time charterparty.
BIMCO forms are seen as bringing more balance to the sharing of liabilities between parties.
The following sections give an insight into the law of salvage, mainly based on the terms of the
UKSTC 1986.

10.1.2 Definition of Towage
The best definition of towage is given in the UKSTC 1986. An extract of Clause 1 is given below from
Baatz (Ed) (2014).
Towing means:
“any operation in connection with the holding, pushing, moving, escorting or guiding of or standing by the
hirer’s vessel”.
And a specific definition of vessel is provided:

“vessel shall include any vessel, craft, or object of whatsoever nature (whether or not coming within the
usual meaning of the word vessel) which the tugowner agrees to tow”.
The fine line between salvage and towage operation was covered earlier but it should be noted that
the UKSTC includes a provision so that:
“nothing in these conditions shall limit, prejudice or preclude in any way any legal rights which the tugowner
may have…including any rights…to claim salvage remunerations or special compensation for any
extraordinary services”.
10.1.3 Establishment of a Contract
A contract is usually agreed between the shipowner requiring tug services, and the company
providing such services. However, a master also has the authority to enter a towage contract, acting
then as an agent of the shipowner or the cargo owner. A party bound to a salvage contract is
expected to participate in the towage fees.
10.1.4 Different Stages of Towage Operations
The stages highlighted in figure 19 are usually recognised – commencement / termination /

interruption of the towing. Their definitions have been given in admiralty law cases (common law)
but they are also defined in the towage contracts. And variations exist between the two.
Figure 19: The four phases of a towage operation (Caillerie, 2016)
10.1.5 Illustrative Case on Commencement
The terms “when ready to receive orders” have been clarified in this case.
The Apollon [Apollon [1971] 1 Lloyd’s Rep 476.] hired two tugs. As the first tug was already towing,
the second one collided with a dock gate as it was approaching the Apollon. The tug owner claimed
damages from the shipowner, as being liable to damages whilst towing.

The judge then clarified that three conditions must be fulfilled:
• The situation is such that those on board the tug can reasonably expect the ship to give the
tug an order to pick up ropes or lines.
• The tug is ready to respond to such orders if given.
• The tug should be close enough to the ship for the order to be passed directly: in other
words, the tug should be within hailing distance.
Although the second tug still had to manoeuvre, the criteria were deemed satisfied.
10.1.6 Duties of Parties
The sources of duties for the parties are multiple:

• Contractual duties, as per the terms of the contract signed.
• Implied duties, as per traditional contract law.
• Statutory duties, as defined in the UK under the Supply of Goods and Services Act 1982 (UK
SGA 1982).
• Statutory duties, as defined in the UK under the Consumer Rights Act 2015
Only the main elements are reviewed in this module.
10.1.7 Tug-owner Duties
These are detailed in Figure 20.
Figure 20: Summary of tug-owner duties
The “fitness for purpose” duty is a tricky one, as the nature of this term is not fully clear (remember
the section in contract law on conditions and warranties, having a different legal weight and different
consequences).
It could refer to an “absolute obligation”, or warranty, similar to the “seaworthiness” obligation, and
giving rise to strict liability. The terms of the contracts providing for an exception from liability would
not apply.
If “fitness for purpose” is seen as a simple duty to exercise reasonable care, then it is to the owner of
the damaged tow to prove negligence or breach of duty. Exceptions from liability would apply under
the terms of the contract, in favour of the tug-owner.

10.1.8 Towed Vessel Duties
These are detailed in Figure 21.
Figure 21: Summary of towed vessel duties
10.1.9 Illustrative Cases
These are as follows:

“Fitness to Tow” and “Toworthiness”
An oil rig [A Turtle Offshore SA v Superior Trading Inc [2008] EWHC 3034 (Admlty)] was being towed
to Singapore but the tug ran out of fuel, forcing it to cast off the tow. The rig was then lost after
several weeks of drifting. The rig owner had an obligation of tow-worthiness under Clause 12 of the
TOWCON contract.
The tow owner also required a certificate of fitness to tow for the tug. The owners of the tug were
found in breach of the “fitness to tow” obligation as they didn’t calculate properly the amount of fuel
necessary for the voyage. But it was held further that the specific terms of TOWCON protected the
tugowner, although he breached his obligations. The risks are apportioned, and it is the tow’s
responsibility to insure such risks appropriately.
Certificate of Toworthiness
This is required specifically in TOWCON contracts, as such:
“the hirer shall supply to the tugowner or the tugmaster, on the arrival of the tug at the place of departure
an unconditional certificate of toworthiness for the tow issued by a recognised firm of marine surveyors or
survey organisation.” (Clause 12)
(BIMCO)
Note that another part of the clause provides that:

“(d) no inspection of the tow by the tugowner shall constitute approval of the tow’s condition or be
deemed a waiver of the foregoing undertakings (certificate) given by the hirer.”
(BIMCO)
Which reinforces the importance of the tugworthiness certificate and shows that the tugowner’s
opinion would not supersede the certificate.

The tugowner may refuse the operation based on his interpretation of the facts, if not satisfied with
the state of fitness of the tow. Refusals might become problematic, because it all depends on which
ground they are based, and if they are deemed reasonable. Rainey (2011) comments on this issue:
“It is when such refusal is made that difficulties commonly arise, and lawyers become involved. Often the
problem can be resolved by sending out a reputable surveyor or a team of joint surveyors acceptable to both
parties to address the technical issues in dispute.”
Rainey (2011)
The certificate will be used not only by the tug owner, but it might also be required by the insurers or
P&I.
10.1.10 Issues of Liability
The UKSTC states clearly that the master and crew of the tug are, whilst towing, the servants of the
hirer. Consequently, vicarious liability exists between the towed vessel, considered as the employer
of the tug’s crew.
The towed vessel will be vicariously liable for negligence of the tug. In other words, the risks are fully
transferred to the towed vessel. Note that it applies only to the parties of the contract (not to third
parties).
It should be noted that the terms of TOWCON provide for a better balance of liabilities in some cases
(injuries or death and damage to tug/towed and third parties’ properties).
10.1.11 Liability to Third Parties
In case of damages to third parties, the basic principles of liability for negligence apply. The previous
clause has no effect on the rights of third parties. The problem is to decide whether the tug or the
tow is liable, or both.
To answer such a question, it should be determined which of the two was in control of the situation,
or more precisely, of the navigation or of the towage (the “control theory”).
There is, however, another theory equally applied by court to answer this question, the “unit
theory”, which implies that the tug and its tow should be considered as one single unit. In applying
this theory, the tow might be found liable as well for a negligence of the tug.
The control theory was originally examined in 1912 [Devonshire [1912] AC 634].
Read below a summary of the case, from Mandaraka-Sheppard (2013):
“The tug was towing a dumb barge, the Leslie, which had no propelling apparatus, the control and
management of the navigation being entrusted to the tug. The Leslie sank after coming into collision with
another ship, the Devonshire. The owners of the Leslie sued the owners of the Devonshire claiming damages.
It was found that the collision was caused by the faulty navigation of both the tug and the Devonshire.
The owners of the barge were neither actually nor constructively to blame. The tug was in sole control of
navigation and her crew were not in the position of servants to the owner of the barge.”
In this situation, it would be indeed very hard to apply the “unit” theory.

10.1.12 Limitation and Exclusion of Liability
The limitation of liability will depend on the type of contract. UKSTC 1986 provides exemption
clauses to protect the tugowner, whereas TOWCON follows the principle that each party is
responsible for any damage to their own property.
Parties will make sure they are insured to cover such liabilities, which is why P&I clubs usually need
to give their approval to towage contracts in order to cover risks appropriately.
10.2 Pilotage
Pilots are an essential link in the safe completion of the ship’s voyage. They are key stakeholders of
the shipping industry, as they hold very specialised knowledge of ports and skills to help in
manoeuvring ships in and out of ports.
If you are not conversant with the activities and working life of pilots, you may watch the video
created by the International Maritime Pilots’ Association, on their website at the IMPA HQ website .
10.2.1 Legal Framework Applicable to Pilotage
Several elements shall be taken into account to draw a general picture of pilotage law, as pilotage
activities are regulated at different levels.
10.2.2 International Regulations
The IMO has produced several guidelines or recommendations to guarantee the safety of pilots and
pilotage activities, and to their training and certification. A chapter of the Safety if Life at Sea (SOLAS)
convention, is also dedicated to the safe access of pilots on board ships, as it is a perilous operation.
Further details can be obtained on the IMO webpage at the IMO website.
Europe has also produced directives related to pilotage, such as the EU Directive 1999/42/EC (mutual
recognition of qualifications of pilots by Member States).
10.2.3 National Regulations
The organisation of pilotage activities is specific to each country. For example, in the UK, the Trinity
Lighthouse was the original authority providing pilots, and in the 20th century, a specific pilotage
authority emerged. Nowadays, harbour authorities are responsible for the provision of pilotage
services.
Each country implements its own regulations to frame pilotage activities. In the UK, pilotage is
regulated by the MSC 1995 and the Pilotage Act 1987, complemented by the Guide to Good Practice
on Port Marine Operation.
10.2.4 Common Law
The usual principles of law of tort will apply in case of claims related to pilotage. However, pilots are
the beneficiaries of a strong system of limitation of their liability.

10.2.5 General Structure of Pilotage
Generally, there is a global tendency for pilots to own and operate their own business (as is the case
in France, Australia) but they may also be employed by a state authority. While it was not always the
case, there is nowadays a trend towards the privatisation of pilotage services.
Consequently, pilots may work either for their own company (Australian Reef pilots, or self-
employed like in Spain) or as a collective corporation (France, Italy), for a private company (a private
group providing services for a port), or for a government unit (Belgian pilots) or for the port authority
(UK).
It derives from this that the employment status of pilot might be a complicated issue.
10.2.6 Authorisation of Pilots
A given authority is in charge of delivering authorisation to pilots, by ensuring they have the
appropriate qualifications. The training content and process might also be regulated by national
authorities. The pilots are qualified and authorised for a given port or given area.
Some ports operate an exemption scheme, which allows masters of specific ships to obtain an
exemption certificate. This is the case of ferries operating exclusively between given ports.
10.2.7 Status of Pilots and Liability Issues
Pilotage is a mandatory service in most ports of the world, or areas characterised by difficult
navigation conditions, requiring specific skills.
The relationships between the pilot and the master, his or her employer, the port authorities and
other parties are characterised by one element: the pilot’s liability is limited and restricted, thanks to
a system relying on different sources of pilotage law. The main principles are reviewed below.
10.2.8 Master and Pilot
Although the presence of a pilot on the bridge is often mandatory to enter a port, although the pilot
is giving orders to the helmsman, the master remains in command of the vessel, as far as navigation
is concerned.
Not only does the pilot authority not supersede the master’s position, but the master is not meant
either to interfere with the pilot’s orders (except in case of danger).
This principle has long been established, a good summary was given in the case of the Esso Bernicia,
[Esso Petroleum Co Ltd v Hall Russel and Co Ltd (Esso Bernicia) [1989] AC 743 HL] when the judge
described the principles of negligence by a pilot:
“it had long been established that a shipowner was liable to third parties for the negligent navigation of a
voluntary pilot since 1918 (the Pilotage Act 1913) he had been similarly liable for the negligent acts of
compulsory pilots…as a general rule the employer of a qualified licensed pilot was not vicariously liable to
the owner of a ship damaged by his negligence while under pilotage; the basis of the rule was that a pilot
was an independent person who navigated the ship as a principal and not as a servant of his general
employer and Section 15(1) of the Pilotage Act 1913 made him the servant of the shipowner for all purposes
connected with navigation.”

Consequently, a pilot in the UK is not the servant of the port authority, but the servant of the ship’s
master and this principle has stood mostly undisputed, whatever attempts have been made to indent
the liability of the pilot. Or at least this was so until the case of the Sea Empress in 1996.
More generally, it also means that if the pilot becomes the employee of the shipowner, the
shipowner becomes liable to third parties for the negligence of the pilot, even if the negligence
resulted in damages to its own ship.
10.2.9 Mechanisms Restricting Pilot Liabilities
Figure 22, 23 and 24 provide an overview of the main principles applicable in the UK, derived from
the Pilotage Act 1987 and other instruments. Figure 24 is an overview of the possible recourse
against pilots, as available in the UK.
Figure 22 - Limitation of liabilities for pilots
Figure 23 - Limitation of liabilities for pilots
Figure 24: Limitation of liabilities for pilots
The Sea Empress [Environment Agency v Milford Haven Port Authority (Sea Empress), [1999] 1
Lloyd’s Rep 673.] case is usually given as a “counter-example” to liability limitation of pilots.
In this case, an oil-tanker ran aground in the entrance to Milford Haven, Wales in 1996. The oil spill
was very large. The pilot was responsible for the navigation error that led to the grounding. He was
found guilty of negligent navigation, incompetence and was dismissed (and won his appeal, allowing
him to work again).
The Port Authorities of Milford Haven were prosecuted (by the Environment Agency), pleaded guilty
and were found guilty.

Directed Learning
• On the forum, discuss the role of the pilot and their relationship with the Master of a vessel.
• Discuss who has overriding authority for the safe navigation of the vessel.

11. Pollution
11.1 Introduction
Pollution by ships is a broad subject, which would require a module of its own. In this chapter, we
will narrow down the study mainly to pollution by oil, give an overview of the legal framework
regulating the prevention of pollution, and the different liability regimes applicable to oil pollution
claims.
As is often the case with maritime regulations, the evolution of legal regimes is closely linked to the
occurrence of maritime catastrophes and pollution incidents.
In the history of oil pollution, the first landmark is the grounding of the Torrey Canyon on the coast of
Cornwall in 1967. Other fundamental accidents, which impacted deeply the law on pollution, are the
Amoco Cadiz in France 1978, the Exxon Valdez in Alaska 1989 and finally the Erika in 1999 and the
Prestige in 2002 in the Bay of Biscay.
Figure 25 shows the positive trend of the number of spills (but only those originating from oil
tankers), as recorded by the International Tanker Owners Pollution Federation (ITOPF).
Figure 25: Number of large spills (>700 tonnes) from 1970 to 2014 (ITOPF, 2019)
In the 1970s, the large increase of tanker dimensions, and the possible extent of oil spills due to such
tankers prompted the establishment of new regulations and liability regimes. It was clear that the
principles of classic law and liability would not deal appropriately with such events, considering the
financial amounts at stake.

Today, the law applicable to oil pollution covers operational requirements for pollution prevention
and liability and compensation, and regimes to deal with pollution claims.
11.2 Prevention of Pollution

11.2.1 The Law of the Sea Convention (UNCLOS)
The United Nations Convention on the Law of the Sea (UNCLOS) indicates very clearly, and through
different articles, that states have the obligation to protect the marine environment from all types of
pollution.
For that purpose, states rely on the work and measures taken by the International Maritime
Organisation. The IMO establishes the rules applicable to ships and states are liable for their
implementation.
Under UNCLOS, states are also allowed to adopt laws for the sake of pollution prevention in their
territorial seas (12 nm) and to enforce recommendatory measures in the Exclusive Economic Zone
(EEZ, 200 nm). States are also required to have a relevant legal system in place and are expected to
implement all regulations as created by IMO.
11.2.2 IMO Conventions
Operational Standards: MARPOL:

The Convention for the Prevention of Pollution covers different types of ship pollution via its six
annexes:
• oil;
• pollution;
• chemical products;
• waste waters;
• garbage; and
• air emissions.
Oil pollution is covered by the “oldest” Annex I and deals with pollution specifically from tankers and
pollution from the engine room bilge of any type of ship.
MARPOL Annex I also include shipbuilding requirements (double hull, safety of the tanks etc), such as
operational requirements (oil record Book, Ships Oil Pollution Emergency Plans (SOPEP) and Ships
Marine Pollution Emergency Plans (SMPEP) etc). Under MARPOL, states are required to put in place a
“police” mechanism to prevent and punish violations to pollution prevention requirements.
Such measures being established on a national basis, they do vary from one country to another. For
example, the penalties incurred in case of deliberate oil pollution, or illegal dumping of oil (i.e.,
discharge of oily water from the engine room bilge) will differ greatly. However, the principle is to
apply effective, proportionate, and dissuasive penalties. Deliberate pollution by oil is, throughout the
world, considered a criminal offence.

The USA is known for applying heavy sentences for this type of offence. As an example, MSC was
fined $10 million in 2005 for illegal discharge of oily waste. Recently, crew members have been
sentenced to jail for such violations.
Other countries have also strengthened their regimes, such as France, where the liability limit was
raised to €15 million in 2008.
11.3 The Compensation Regimes

Originally, the principles applicable to pollution claims were based on tort law, but toward the middle
of the 19th century (as a direct consequence of the Torrey Canyon accident), an international regime
on liability and compensation has “taken over”.
Because of the considerable financial cost of oil pollution events, it was deemed necessary to provide
a strong liability protection to parties involved in the transport of oil, to safeguard their activity.
Compensation regimes and funds were established in parallel for the efficient compensation of
victims. Consequently, shipowners or charterers involved in oil shipment are not facing direct
financial risks.
Recently, the “wind has turned” and the concept of limited liability is questioned, as the alternative
concept of “the polluter pays” is gaining public support. The Prestige and the Erika accidents
participated in this shift of attitude (at least from the public) towards the oil industry.
Victim of Pollution
Figure 26: Structure of the compensation regime under IOPC (Caillerie, 2016)
The original instruments were the 1969 CLC Convention and the 1971 Fund Convention, replaced by
the 1992 versions.
The International Oil Pollution Compensation (IOPC) has produced a comparative table to provide an
overview of the main features of each regime. The paragraphs below are extracts from the IOPC
Explanatory Note (December 2019), available at the IOPC Funds website on the right “Related
Documents”, “General Explanatory Notes” click to download.

11.3.1 1992 Civil Liability Convention
Establishes the principle of strict liability for shipowners and creates a system of compulsory liability
insurance (via the P&I clubs). But the shipowner is entitled to limit his liability, to an amount
depending on the ship’s tonnage.
11.3.2 1992 Fund Convention and IOPC Fund 92
Supplementary to the 1992 CLC and enhances the compensation regime for victims, when the
compensation under the CLC is inadequate.
The IOPC Fund 1992 was set up under the Convention, for the purpose of administrating the regime
under the said Convention (it is an intergovernmental organisation, based in London).
11.3.3 IOPC Supplementary Fund, 2003
Third tier of compensation, established by means of a protocol, ratified so far by 31 states. It

provides additional compensation over and above the two other regimes, for pollution damage in
states that are parties to the protocol.
The total amount for compensation for a pollution damage incident is then above $1,000 million, but
it includes the amounts payable under the two previous tiers. It is available only for incidents which
occurred in a state party to the protocol.
11.4 STOPIA 2006 and TOPIA 2006

The establishment of the IOPC regime is mainly financed by the oil industry. In the late 1990s, it was
found that the system was slightly unbalanced, and more could be asked from the ships and their
insurers, or P&I clubs.
Shipowners and their P&I clubs agreed to indemnify the IOPC Fund for compensation paid above the
shipowner’s limit of liability under the 1992 CLC, by means of two voluntary agreements:
• the Small Tanker Oil Pollution Indemnification Agreement 2006 (STOPIA 2006), and
• the Tanker Oil Pollution Indemnification Agreement 2006 (TOPIA 2006).
Those agreements do not affect the rights of victims under the CLC and the Fund. You may find
further information on this topic on the IOPC Fund website, at the IOPC Funds website.
11.5 Other Instruments in the Context of Marine Pollution

11.5.1 HNS Convention
The International Convention on Liability and Compensation for Damage in Connection with the
Carriage of Hazardous and Noxious Substances by Sea 1996 (HNS Convention) reproduces the
principles and mechanism of the CLC but applies to pollution by chemicals.
Unfortunately, 20 years after it was drafted, it is still not in force. When adopted, it will also provide
an HNS Fund for the sake of compensation, and IOPC Fund will be in charge of the administration.

11.5.2 Bunker Oil Pollution Damage Convention 2001
Oil spills can also be generated by any kind of ship with bunker tanks. In the case of “giant” container
ships, a spill originating from bunker tanks could be as catastrophic as a spill from a small oil tanker.
This convention was designed for that purpose and is modelled on the CLC 1969. It is not
accompanied by a collective fund.
11.6 Other Types of Pollution

Historically, the focus has been on pollution by oil, being a very visible sort of pollution. However,
there are other forms of pollution originating from ships: grey and black water and garbage.
Operational requirements applicable to ships are covered by MARPOL.
Each state has established a legal regime to deal with infringements to various pollution regulations
and to define the sanctions applicable. A regime of ship inspection allows for the detection of
violations (Port State Control). Countries which are more prone to strict environmental control are
more likely to establish strong control and heavy sanctions.
There is also a trend for countries to establish regional requirements, applicable to all ships reaching
territorial waters. This is the case, for example, in:
• the USA, where several local rules on discharge of ballast water have been implemented.
• Europe, with special requirements on ships’ air emissions.
For all those reasons, the understanding of the legal framework for pollution requires knowledge of
local and national regulations.
Recently, under the impulse of the UN and the Climate Change Conference, the focus has shifted to
air pollution. It covers emissions of Greenhouse Gases (GHG) but other pollutants emitted by ships
(NOx, SOx, particulate matters) are already covered by international regulations (MARPOL and
regional regulations). Shipowners are likely to find themselves exposed to new forms of liability
under such new pollution prevention regulations.
The main areas of admiralty law were covered in this second part of the module. Surveyors are
expected to be comfortable with all the main notions reviewed but it is, of course, difficult to keep all
the details in mind for all the fields covered by admiralty law.
When facing a specific issue of law, it is advised to refer to authoritative reference documents, such
as those mentioned in the reference list provided at the end of this module.
The last part of this module focuses on contracts for the carriage of goods and the hire of ships.

Directed Learning
• Discuss the issue of ocean pollution by plastic on the course forum. How does this pollution
affect ships and how do ships contribute to this pollution? What current regulations are in
force to with regards to pollution from ships?

PART C
12. Shipping Law

12.1 Introduction
In Part C of this module, we look at the commercial side of maritime law. The trading aspect of the
shipping industry is actually its key aspect, the main purpose of a ship being to carry cargoes or
passengers from A to B, or to carry passengers for leisure purposes as well.
Commercial maritime law is made up of several overlapping areas, covering different themes. The
carriage of goods covers the different types of commercial contracts for the purpose of carriage, such
as bills of lading, whereas charterparties are contracts for the hire of a ship. The carriage of goods is
influenced by the international sales of goods, or international trade law.
Surveyors, and specifically cargo surveyors, will be involved in claims related to the carriage of goods,
at different levels, since they may represent different interests:
• the charterers, when they are hired to check the condition of a ship and its holds, before a
voyage;
• the cargo interests, when they witness cargo loading or unloading operations and survey
cargo condition (or quantity, i.e., draft survey).
They will also be called in case of cargo damage claims by any party, including insurance, needing
survey or advice.
Part C contains an introduction to shipping law and an overview of the different types of carriage
contracts, with a presentation of the applicable regulations.
12.2 Types of Contracts

There are two main types of contracts, as such shown in Figure 27.
Figure 27: Two main types of contracts – charterparty vs sale of goods (Caillerie, 2016)
And the applicable legal framework could be illustrated as that shown in Figure 28.

Figure 28: Legal framework applicable to shipping law. (Caillerie, 2016)
Note that the COSGA and The Hague and Hague-Visby Rules are applicable to the sale of goods and
bills of lading.
12.3 Claims and Disputes

An action in rem will be favoured if robust security is needed by the claimant, as it gives the
possibility of arresting the ship. In case of a cargo claim, the buyer is likely to be the claimant, for the
following reasons: goods damaged or lost, not delivered, delivered at the wrong place, or delivered
late. A surveyor would be requested in the case of damaged cargo, he or she can be hired by any of
the interested parties needing data, information, or advice on the damaged cargo.
A contract for the carriage of goods will bind parties originating from different countries and is likely
to cover shipping between ports based in other states as well. So, for one contract, four different
nationalities are already involved! Not to mention the flag state of the ship and the nationality of the
shipowner, which will be different as well.
12.4 Choice of Jurisdiction and Choice of Law

Consequently, the choice of the relevant jurisdiction might be problematic. To avoid lengthy
discussions or claims on the choice of jurisdiction, both bills of lading and charterparties usually
include a clause in order to choose and agree on a forum.
It was explained earlier in this module that English jurisdiction and law is traditionally favoured.
Although a claimant could be inclined to favour its own country, it is a convenient “neutral choice”,
and almost necessary in views of the large number of nationalities that may be involved.
English courts tend to happily accept their designation as the forum required by the parties. Once the
jurisdiction is agreed, the choice of law is also mentioned. It is only logical to choose the same
country for the legal system and the jurisdiction.

It should be noted that statutory rules might contain their own provisions on jurisdiction, which
would then limit the freedom to select a forum. Furthermore, as explained in the contract section,
there are several European instruments, and UK Acts, that apply to decipher conflict of law issues.
12.5 Nature of Contract Terms

It is difficult to cover, in an exhaustive manner and in a short time, the full range of terms included in
a carriage contract. One element should, however, be borne in mind: terms have different natures,
and the consequences of a breach will depend on the nature of the term. This was covered in the
contract law section, but a review, as applicable to carriage contracts, is given in table 6.
Please note that common law principles might interfere sometimes with principles laid down by
statutes, for example the Sales of Goods Act 1995. Courts may also have different attitudes
depending on the nature of the case (for example, in international sales of goods, courts are prone to
interpret terms as “innominate”).
Table 6: Nature of contract terms.

Nature of the Warranty Condition Innominate
term
A minor term, damages only A major term, the “essence Neither warranty, nor
can be awarded (subject to of the contract”. Breach of condition. The effect of the
limitation clauses). such term is “fundamental”. breach is analysed, is it a
The effect of the breach fundamental breach?
does not matter (can be Does it go to the “root of
trivial) the contract”?
Consequence of Buyer, as innocent party, Allows for damage claims Damage only, or damage
the breach may claim damages. and repudiation of the and repudiation of contract.
Buyer may reject the goods contract.
in some instances.
Example Seaworthiness of vessel at Nomination of vessel. Time terms (charterparty).

the commencement of
voyage.
Loading of cargoes in a
specified time.
Terms requiring cargo to be Reasonable dispatch

ready (seller’s duty). (charterparty).
Deviation of voyage.
12.6 Some Terms Common to all Types of Contracts

Some terms are common to charterparties and bill of lading contracts, although some differences are
inevitable. Some of the key terms and duties are reviewed below.

12.6.1 Seaworthiness
Seaworthiness is considered as an implied duty, although it may sometimes be specifically

mentioned in the terms of a charterparty. Originally, seaworthiness was considered to be a strict
liability for the carrier (does not depend on negligence) but The Hague and Hague-Visby Rules have
modified the nature of the liability, as applied to bill of lading contracts.
Seaworthiness is related to the level of safety provided by the vessel. A ship must be fit at the
commencement of a voyage, for that specific voyage and for the specific cargo to be carried,
otherwise it becomes “unseaworthy”. The carrier is liable for the seaworthiness before the voyage,
at the start of the voyage, but not once the voyage has started. Seaworthiness is not a continuous
duty.
The carrier shall focus on:

• taking relevant measures to make the ship seaworthy: organise repairs in preparation for a
charter, have sufficient bunkers on board etc;
• having the relevant crew on board – a crew qualified and certified as needed; and
• the necessary parts or equipment for the voyage: sufficient spare parts etc.
A ship may become unseaworthy due to a defect, as long as it affects the safety (of the ship or the
cargo). It may also be linked to the competence of the crew, or to the ship’s documents.
Incorrect, invalid, or inappropriate documents (legal or mandatory documents) will make the ship
unseaworthy.
Of course, seaworthiness of the ship, being related to safety, is influenced by the ship’s level of
compliance to relevant standards (SOLAS, MARPOL, various codes). Such instruments are not seen as
“contractual documents” but of course, they participate in the definition of a “safe ship”.
The duty of the carrier is also defined according to the standards of reasonable care and due
diligence. For example, a shipowner is not expected to provide the most modern and state of the art
equipment for his vessel, if such equipment is not widely available and used. There is no breach of
this duty in this case. The “vessel is to be reasonably fit”. [Bradley & Sons Ltd v Federal Steam
Navigation Company (1926) 24 LR 446, p 448, Lord Justice Scrutton.]
Examples:
The following are examples of cases where a vessel was considered unseaworthy:
• Lack of appropriate firefighting training for the crew (Eurasian Dream, 2002).
• Insufficient number of crew and incompetence of the crew (Hongkong Fir, 1961).
• Explosion due to inappropriate stowage, not compliant with IMDG Code (Kapetan Sakharov,
2000).
• Defective propellers (Sni v Suzuki, 1924).
And cases where the vessel was not unseaworthy:

• Failure of emergency electrical system due to an entry of seawater through opened skylight
and vent covers was held as an error in management of the ship (Folger Coffee Co v
Olivebank, 2000, American case).

• A missing panel on a shut-off valve lever (which was activated by mistake and led to the
grounding of the ship) did not make the ship unseaworthy (Lendoudis Evangelos II, 2001).
12.6.2 Cargoworthiness
This is a sub-category of seaworthiness. The ship must be specifically capable of carrying the cargo.
The ship itself might be safe, but not its cargo equipment. And it depends on the cargo carried on the
given voyage. Uncargoworthiness usually relates to defective cargo gear, non-waterproof hatch
covers, lack of proper fumigation, failure to provide special equipment for a specific cargo.
The case of bad stowage is a bit special. Bad stowage will trigger unseaworthiness if the safety of the
ship is endangered. If the safety of the cargo only is impacted, the ship is not considered
unseaworthy.
12.6.3 Duty to Take Reasonable Care of the Cargo
The carrier takes custody of the goods, so it is expected that he also takes reasonable care of the
cargo during the voyage, including loading and unloading operations. It is supported by two notions:
• the speed achieved to perform the voyage; and
• the care taken during loading and unloading.
12.6.4 Duty to Perform the Voyage with Reasonable Despatch
The vessel should proceed with the required speed during the voyage but also during the approach
voyage, in charterparty contracts, when the ship proceeds to its loading port for the commencement
of the charter.
For example, if a vessel proceeds at slow speed, using one engine out of the two available, and
consequently delays arrival for pilotage and further manoeuvring, the duty of reasonable care is
breached. [Ease Faith Ltd v Leonis Marine Management [2006] EWHC 232.]
12.6.5 Loading and Unloading Operations
The carrier is liable for any damage to goods during cargo operations. Liability might still be incurred
even if such operations are performed by dockers, stevedores or other personnel in the port. It will,
however, depend on the terms of the bill of lading (the shipper might be liable if he is responsible for
loading/unloading under the bill of lading). The charterparty might provide for specific attribution of
liability.
For example, in the Jordan II, [Jordan II [2005] 1 Lloyd’s Rep 57.] the contract provided the following
repartition of responsibility: loading and stowage operations for the shipper, unloading for the
receiver of the cargo, hence no responsibility for the shipowner for any of the cargo operations.
Carrier’s liability should not apply when the goods are still on the shore side of the ship’s rail.
12.6.6 Dangerous Cargoes
It is not allowed to ship dangerous cargoes without informing the carrier. It is an absolution
obligation under common law. The shipper is strictly liable.

But the definition of “dangerous” covers lots of different situations. Goods are not only dangerous in
the sense of the “IMDG Code” as any good may become dangerous if there is a risk of damage to the
ship, its cargo, or its crew. For example, in the Giannis NK, [Giannis NK [1998] AC 605.] a general
cargo ship loaded a cargo infested with insects. It was clearly dangerous as the ship was carrying
other cargoes of grains, threatened by possible infestation.
Furthermore, it was expected that the ship would be stopped on arrival and lose its cargo, as the port
of destination was operating strong quarantine rules. The judge held that the cargo was dangerous
also because of the quarantine threat. In this sense, the danger does not have to be direct.
12.6.7 No Deviation to the Voyage
A ship is required to follow the appropriate route, at the appropriate speed. The appropriate route is
the “most reasonable” route from A to B. However, deviations are sometimes required and
accepted, if justified.
A deviation to reach a most appropriate port of bunker, or to disembark a seriously ill crew member,
is justifiable. The circumstances under which deviation is possible might be specified in a “Liberty
clause” in the contract (bill of lading or charterparty).
12.6.8 Exemption Clauses – Perils of the Sea and Act of God
A party willing to rely on the exemption clause shall prove that the loss is imputable to the event
described in the clause. Perils of the sea are described simply in Duhaime’s Law Dictionary (Duhaime,
2020), as:
“damage to property occurring as a result of an accident at sea”.
But note a mere accident might not qualify as a peril of the sea. It is further described as:
“a sea damage, occurring at sea and of nobody’s fault”. [Hamilton, Fraser and Co v Pandorff (1885) 16 QBD
629.]
It refers to “fortuitous” accidents. The following accidents could amount to perils of the sea:
• some collision cases;
• ship’s flooding, depending on the cause; and
• cargo damage due to unforeseen weather conditions.
Exceptional bad weather or any act of nature is more likely to be considered an “Act of God”, which
is another common exception clause.

12.7 Insurance
Buyer, seller, and carrier will be insured, by different means, and their insurance will participate in
the claim process. When a buyer has insured the goods, the insurer will first indemnify the buyer,
and then has the possibility to raise an action against the carrier (subrogation process).
Shipowners use the services of P&I clubs to cover their liability, and they offer different types of
guarantee and services. Cargo claims will be covered by P&I clubs. They usually also offer to cover
legal expenses.
Two notions should be described briefly in the context of marine insurance, loss of ship or property
and the calculation of possible damages. A distinction is made between “constructive total loss” and
“actual total loss”, which are concepts specific to maritime law. Duhaime’s Law Dictionary provides
the following definitions:
Constructive Total Loss:
“Insured property that has been abandoned because its actual total loss appears to be unavoidable, or
because it could not be preserved or repaired without an expenditure which would exceed its value.”
Actual Total Loss:
“Property that is completely destroyed or lost and irretrievable; a term of insurance and maritime law. In
case of actual total loss, for example when the ship is lost at sea or hijacked, when a full shipment of cargo is
stolen, nothing is left to assess damages, but the policy of insurance will cover the loss.”
(Duhaime, 2020)
12.8 Arbitration
Arbitration is now the favoured method to settle disputes in the context of shipping. Parties need to
mention it clearly in the contract. It is very common for the charterparty to include a clause on
arbitration, if not automatic.
Arbitration has many advantages – it is a private and confidential procedure, usually quicker and
cheaper. But there is a very limited right of appeal in case of disagreement. Parties agree on the
procedural rules to be applied. It could be the London Maritime Arbitration Association Rules (LMAA)
terms, available at the IMAA website.
It could be other rules designed by other specialised associations, with expertise in specific cargo,
such as the Grain and Feed Trade Association (GAFTA), which is involved specifically in arbitration
and provides experts for this purpose.
The arbitrators are selected freely by the parties. The number of arbitrators is free as well. Usually,
each party selects its arbitrator.
In the UK, procedures in arbitration are regulated by the Arbitration Act 1996, as amended.
The inconvenient of arbitration is its limited right to appeal (to the High Court), as appeal can be
granted only:
• by mutual consent of the parties; and
• must be related to a question of law arising out of an award made in the proceedings.

A fraud in arbitration will also permit an appeal, as long as the fraud has impacted the verdict.
Interestingly, in Chantiers de l’Atlantique SA v Gaztransport & Technigaz, [SAS [2011] EWHC 3383
(Comm).] a major fault was committed by one of the arbitrators (falsification of test results), but
since it didn’t affect the results of arbitration, appeal was not granted.
12.8.1 Assessment of the Award for Cargo Claims
The contract may specify a particular currency for the award. If not, the arbitrators will define one.
In order to assess the award, the value of goods is taken into account. But the question is:
The value of the goods at what time:
• when the goods left the factory;
• when they were loaded on board the ship; or
• when the ship arrived at the port of destination?
Usually, it is the market value of the goods at the port of destination. Two values are defined:
The Arrived Sound Market Value
Market value if the goods had arrived undamaged.
The Arrived Damaged Market Value

Market value of the damaged goods at:
• the date they (should have) arrived; and
• the place delivery.
The difference between the two values can be used for the estimation of the award.
Another solution used by arbitration is to use the value of the goods based on the contract of sale.
Reference should also be made to the principles laid down in The Hague and Hague-Visby Rules (and,
in the UK, the Sales of Goods Act 1992 and Consumer Rights Act 2015).
The main principles of contract of carriage have been reviewed. The following chapters review in
detail the bill of lading contract and the charterparty contract.

Directed Learning
More detailed information on the deviation to the route may be found in this article from a P&I club,
“Deviation: justified or allowed and implications for the P&I cover: slow steaming”, available at Skuld
website.
Read the article on the above-mentioned case at the Ince Law website.
Comment on the questions below:
• What principles were applied for the choice of law award?
• What is the limitation period?

13. Bill of Lading, Bailment and International Conventions
13.1 Introduction
There are different types of carriage contracts leading to the use of a bill of lading. Depending on
their nature, responsibilities and risks are shared differently:
• property in the goods passes from seller to buyer at different times; and
• payment is made at different times.
A ship carries individual cargoes, shipped by different parties, under different contracts, and a bill of
lading is issued as an evidence of the contract of carriage. This chapter reviews the different types of
contract, the functions of a bill of lading and the duties of the parties.
13.2 FOB and CIF Contracts

When a cargo claim is raised, the important questions to be asked and answered are:
• When does the property pass from buyer to seller?
• In case of damage to goods, who is liable?
• When does the risk pass (who is in charge of insuring the goods)? Answers will differ whether
the contract is:
o Free on Board (FOB); or
o Cost, Insurance, Freight (CIF).
Table 7 details the key elements of FOB and CIF contracts.
Table 7: Key elements of FOB and CIF contracts.

Free on Board (FOB) Cost, Insurance, Freight (CIF)
The seller arranges delivery of the goods to the ship. The seller arranges delivery of the goods to the ship.
The buyer makes the shipping arrangements, choses The seller makes the shipment arrangement,
the ship and pays the freight. chooses the ship and pays the freight.
Freight is payable on delivery.
The buyer is responsible for insurance of the goods. The seller is responsible for insurance of the goods.
He is in charge of customs procedures.
Free on Board (FOB) Cost, Insurance, Freight (CIF)

Risks are passed on shipment, with physical delivery Risks are passed on shipment, with physical delivery
to the ship (“when the goods pass the ship’s rail”). to the ship (“when the goods pass the ship’s rail”).
CONCLUSION
Price of goods under FOB will be cheaper. CIF gives an inclusive price for the goods, as freight
and insurance are included.
Seller is more involved.
In theory, risks pass from seller to buyer at the same time, whether CIF or FOB. Passing of risk and passing
of properties are not necessarily simultaneous.

13.3 Freight on Board (FOB) Contract
Under a FOB contract, freight is paid on delivery of the goods. Which might be convenient for
transactions of certain cargoes, when the value might rise (or decrease) during the journey, such as
oil for example.
There are three main types of FOB:

• classic FOB;
• FOB with additional duties; and
• traditional FOB.
These are detailed in table 8.
Table 8: Freight on Board – types of contract.

Classic FOB FOB with Additional Duties Traditional FOB
The buyer nominates the ship. The seller nominates the ship. The buyer nominates the vessel.
The seller makes the contract of The seller makes all arrangements All duties of the seller discharged
carriage, delivers goods to the for the contract of carriage. when the goods are loaded on board.
ship.
The seller is a party to the The seller takes a bill of lading in
contract of carriage until the bill his name.
of lading is issued in the buyer’s
name.
The seller is the shipper. The seller is the shipper. The buyer is the shipper.
There is a larger range of FOB contracts, and sometimes they may be very similar to CIF contracts.
13.4 Cost, Freight, Insurance (CIF) Contracts

The seller is required to arrange the carriage of the goods and their insurance in transit, and the cost
of those arrangements is included in the contract price. The seller obtains a bill of lading and a policy
of insurance, and forwards them to the buyer, together with an invoice for the price. The buyer pays
on receipt of the documents.

13.4.1 Obligations of Buyer/Seller under a CIF Contract
Figure 29: Seller and buyer duties (Caillerie, 206)
As shown in figure 29, the seller is not requested to deliver the goods to the destination port, this is
the carrier’s obligation. The seller’s duties regarding the goods end when shipment begins. However,
some obligations are maintained after shipment, due to the contract terms and, in the UK, due to the
provisions of the Sale of Goods Act 1995 (SGA).
In Hindley and Co Ltd v East Indian Produce, [[1973] 2 LR 515.] a bill of lading was produced for a
cargo of jute, and the buyer had paid on tender of the document. When the ship arrived in Bremen,
the jute was not on board, it was never shipped. The sellers were held liable, as in breach of their
obligation to ship the goods.
In the UK, several sections of the SGA 1995 extend the seller’s duties. It gives rise to situations
where, in practice, the risk extends to the seller during shipment:
• “Buyer to enjoy quiet possession” – if the seller allows the vessel to reach a different port, it
could be seen as preventing the buyer from enjoying quiet possession.
• “Goods of satisfactory quality must be provided” – a buyer might reject the goods and seller
would be liable for deterioration during shipment.
• “Seller must make a contract with the carrier on behalf of the buyer as may be reasonable” –
lots of possible interpretations and reasons for a buyer to hold the seller responsible for
damage to cargo.
13.4.2 Nomination of Vessel
Under FOB contracts, there is a specific obligation for the buyer to nominate the vessel (although in
some variations this is transferred to the seller).
The vessel nominated shall be effective for the goods concerned and must be able to load on time.
The nomination shall be made in due time as a late nomination could prevent loading of goods.
There is also a right of substitution; one ship can be replaced by another one, providing it has equal
characteristics.

Once the vessel is in port, the seller has the obligation to load within a “reasonable time” or within a
given period.
13.5 Bill of Lading

A bill of lading is a document acknowledging the shipment of goods, signed by or on behalf of the
carrier and containing the terms and conditions on which it has been agreed to carry the goods.
The bill of lading is specific to maritime trade, where goods travel on very large distance, and the
parties involved has never and will never meet. This creates a “two-side” problem:
• With the buyer being physically so remote, the seller does not have much guarantee of its
financial situation and, once the goods are on board the ship, they are literally out of his sight
and out of his control.
• On the other hand, the buyer waits for its goods and has not even seen the goods or checked
the quantity.
A document is needed to acknowledge the shipment of goods, but also to act as a security. The bill of
lading has this function, it is a document used to obtain security and payment.
Banks are usually involved in the transaction. The buyer’s bank will issue a “letter of credit” to the
intention of the seller’s bank. This is called “documentary credit”. The bill of lading is involved as a
security in this process.
13.6 Types and Functions of the Bill of Lading

All bills are signed by the master of the ship (acting as an agent of the carrier) once the goods are on
board. But they are usually prepared by the seller, or consignor.
A bill of lading contains at least the following information:
• Condition and quantity of the goods.
• Vessel, ports of loading and unloading, date of loading.
• Identification of the party named to receive the goods on arrival (the consignee) or left blank,
“to order”, for anyone bearing the bill.
Bills are usually produced in three original copies. Once signed, they are given back to the seller, as
they will be used for payment by the buyer. The carrier (the shipowner or charterer) takes custody of
the goods for the shipment.
Once the bill of lading is issued and the goods shipped, the risk passes from the seller to the buyer.
On arrival of ship at the destination port, the consignee will receive the goods in exchange for the
original bill of lading.
The carrier is requested to deliver the goods to the consignee as named or to anyone in possession of
the bill, if “to order” was chosen.
A bill of lading has three main functions which are detailed in Figure 30:

Figure 30: The three main functions of a bill of lading (Caillerie, 2016)
There are three main categories of bill, depending on the parties mentioned and their intended use.
Table 9: Categories of bill

Straight Bill Negotiable Bill Sea Waybill
The name of the consignee is No specific name mentioned, the Does not need to be tendered on
mentioned. words “to the order of” or “to the arrival of the goods.
Must be produced and bearer” are added. Not a document of title.
surrendered on delivery of the Must be produced and
goods. surrendered on delivery of the
goods.
Non-negotiable document. Is a negotiable and transferable Non-negotiable document.
document. Can be endorsed by the
buyer, the bank, or any party. Not allowed by banks in the
context of documentary credit.
13.6.1 Transfer of Property
As a document of title, the bill represents property in the goods.
Property passes on endorsement and physical delivery of the bill. The goods can be sold during
transit, and the bill will “represent” the goods in a transfer sale. But this is possible only with a
negotiable bill.
On delivery of the goods at the destination port, the person taking the goods must present the bill as
a document of title. Except with a “sea waybill”, which does not have the function of acknowledging
property.
Things are a bit more complicated in the context of container transport, as usually it involves multi-
modal transport, with different carriers (rail, sea, road) in charge of the same container.
Specific bills of lading are used, covering different situations. One carrier may be responsible for the
full journey (“through” bill of lading), or each carrier involved is responsible for its stage of the
journey (“combined” bill of lading if several modes of transport are involved).

13.6.2 Charterer’s Bill of lading
A charterparty can be combined to a bill of lading. In this case, bills are used as a receipt for the
goods, for example when a charterer needs documents for its own goods on board the chartered
vessel. Or if the charterer intends to sell the goods during the voyage, then the bill is used in its
function as a document of title.
The charterer has a right to issue bills, but in such circumstances, the bill is NOT an evidence of the
contract of carriage, since the charterparty prevails as the relevant contract between shipowner and
charterer.
13.6.3 Electronic Bill of Lading, Containerisation
Evolution of the industry and generalisation of much faster ships gave rise to a problem: the cargo
could arrive before the bill of lading.
With the general modernisation of technology, a solution was then offered in the electronic bill of
lading. However, the use of e-bills is not yet generalised, as the traditional paper bill is still seen as
the only valid document. Wide use of e-bills is prevented by the COGSA 1992, as some of its rules
specifically apply to paper bills of lading.
13.6.4 Bailment on terms
When a claim cannot be supported by a contractual relationship between two parties, the “claimant-
to- be” could consider another framework, like the breach to an implied contract, a claim in tort or a
claim based on the bailment doctrine.
Bailment is defined in Duhaime’s Law Dictionary as:

“The transfer of possession of something (by the bailor) to another person (called the bailee) for some
temporary purpose (e.g. repair or storage) after which the property is either returned to the bailor or
otherwise disposed of in accordance with the contract of bailment.”
(Duhaime, 2020)
In a maritime context, it covers the following situations:

• a shipper contracts directly with the charterer and receives a bill of lading. There is no
contractual relationship between the shipper and the carrier;
• the shipper (bailor) leaves the good in the custody of the carrier, or for storage in a
warehouse before clearing customs;
• stevedores become bailees if they take custody of the goods during a period before or after
shipment;
• a transhipment of the goods took place, the first carrier has transferred the goods to a
second carrier, and the seller had contracted only with the first carrier. The second carrier is
a sub-bailee to the shipper; or
• any situation where there is no contractual link between the parties, as shown in Figure 31
below, but parties are connected by the goods.

SELLER SALE CONTRACT BUYER
CARRIAGE
SHIPOWNER
CHARTERER
CHARTER PARTY
Figure 31: Relationships between parties (Caillerie, 2016).
Bailment is mainly used to support actions against the carrier when the shipper has no title to sue.
The situation of the party wishing to claim, but left out of the contractual relationship, is quite similar
to a third-party position. On the other hand, the defendant is also willing to limit its liability and
benefit from protection in case of a claim, especially from statutes such as The Hague and Hague-
Visby Rules.
When a bailor/bailee relationship is established, the “bailment on terms” doctrine applies. The effect
of the “bailment on terms” is to bind the parties by terms (possibly terms of the bill of lading in the
case of a shipper and a charterer) although no contractual relationship exists. Bailee owes a duty to
the bailor.
In the reference case on the subject, the Pioneer Container: [ [1994] 2 AC 324.]
“goods were trans-shipped and damaged on a second sea voyage. The second carrier, as a sub-bailee, was
liable to the original shipper but was entitled to rely on the jurisdiction and choice of law clause in the bill of
lading it had issued to the first carrier on transhipment”.
(Baughen, 2012)
In the case of sub-bailee, it should be noted that they would benefit from protection clauses
established in a contract or bill of lading only if the shipper had clearly consented to the sub-
bailment. Finally, stevedores are also considered sub-bailees of the carrier. Under the bailment
doctrine, they would also limit their liability toward the owner of the goods.
13.7 International Conventions

13.7.1 The Hague and Hague-Visby Rules
“At common law, the parties to a contract of affreightment covered by a bill of lading or a similar document
had complete freedom to negotiate their own terms as had the parties to a charterparty. Abuse of the
carrier’s stronger bargaining position during the 19th century, however, resulted in the curtailment of this
freedom and the formulation in 1924 of The Hague Rules.
The object…was to protect cargo owners from widespread exclusion of liability by sea carriers. This objective
was achieved by requiring standard clauses to be incorporated into bills of lading, defining the risks which
must be borne by the carrier and specifying the maximum protection he could claim from exclusion and
limitation of liability clauses.”
(Wilson, 2010)

This introduction highlights perfectly the purpose and the scope of The Hague and Hague-Visby
Rules.
The Hague and Hague-Visby Rules (hereafter referred to as H/V rules) cover contracts of carriage
which provide for the issue of a bill of lading (so not applicable to a charterparty). In the UK, those
rules have been integrated into the Carriage of Good by Sea Act 1995 (COSGA 1995).
Note that the USA has a similar regulation, with the same name.
The key features and provisions of the H/V rules have been combined, in a non-exhaustive manner,
table 10, so as to provide a more “student-friendly” presentation of the rules. It derives from
information given in Wilson, (2010) Chapter 6.
Table 10: Key features of the H/V rules.

Scope of the Rules Comments
Application To carriage contracts with the issuance of a In case of multimodal transport with
bill of lading. a combined bill, would still apply
In states parties to the rules. throughout, as per a reference case.
For the transport at sea only: from loading
to unloading.
Cargo excluded Live animals. But, breach of express term

Deck cargo: cargo stowed on deck, as stated requiring hold carriage did not
on bill and consented by parties. prevent application of H/V rules on
limitation of liability for carrier, as
held in The Kapitan Petro Voivoda
[2003] 2 Lloyd’s Rep 1.
Key Provisions Comments

Duties of the carrier Provide a seaworthy ship plus crew plus BUT no absolute obligation as under
cargo space fit for the cargo. common law – duty to exercise due
diligence.
Shall properly and carefully load, handle; Equivalent to a standard of

stow, carry, keep, care for and discharge the reasonable care.
goods delivered.
Obligation to issue a bill of lading, with

specific information.
List of exceptions 17 cases described: act/neglect/default of

the master, mariner, pilot or servant of the
carrier in the navigation or management of
the ship; fire (unless caused by fault or
privity of the carrier); strikes; insufficiency of
packing.

Limitation of liability Not exceeding “666.67 SDR of account per Problem of application to third
package or unit or per kilo of the goods lost parties. Servant and agent (but not
or damaged, whichever is the higher”. contractors) of the owner are
covered.
To be converted by states in their currency.
Other Key Provisions Comments

Deviation Not specifically defined, so common
Deviation allowed for assistance to distress.
law principles apply.
Dangerous cargoes Carriage not allowed if not declared by
shipper. Goods can be landed and
destroyed, without compensation to the
shipper.
13.7.2 Possible Incorporation of The Hague-Visby Rules in a Charterparty
The Hague and Hague-Visby Rules were not intended to apply to charterparties. However, they are
commonly incorporated in such contracts. This creates situations of conflict as many obligations vary
slightly under common law, which regulates charterparties, and the H/V rules.
Seaworthiness of the ship is an example, as it is a strict obligation at common law, but under the H/V
rules, the shipowner “only” has the duty to exercise due diligence in making the ship seaworthy.
13.7.3 The Hamburg Rules and the Rotterdam Rules
Those rules were created as a response to the critics made against the H/V rules, being carrier-
friendly and offering insufficient protection for cargo owners.
The Hamburg Rules were introduced by the relevant convention in 1992 but there are only 34
parties.
The evolution of shipping then gave rise to the need for a further amendment of the rules on
carriage contracts, and the Rotterdam rules (or United Nations Convention on Contracts for the
International Carriage of Goods Wholly or Partly by Sea) were drafted in 2008.
They are not yet applicable, as only five countries have ratified them (20 needed for entry into force).

Directed Learning
More detailed information on the use of electronic bills of lading can be found in the article from the
law firm Ince & Co, “BIMCO’s new charterparty clause for the use of electronic bills of lading” available
at: Ince Law
Further reading on the subject, including a good summary table of the different conventions, in the
guide entitled “Cargo Conventions Comparing Hague, Hague-Visby and Hamburg Rules incorporating
US COGSA 1924”, by Hill Dickinson firm, Shipping “At A Glance” Guide.
Type those references into a search engine to download the pdf document.
On the forum, discuss the term “Burden of Proof”.

14. Charterparties
14.1 Introduction
In this chapter, we will review the different types of charterparties, their key features and
differences.
It is now clear that charterparties are contracts different from bills of lading, as they are outside the
scope of The Hague and Hague-Visby Rules and the UK COSGA.
A charterparty is agreed between the charterer and the shipowner, based on agreed terms, and
usually by means of a standard form.
When agreeing on terms of the contract, each party will benefit from a certain level of “bargaining
power”, which varies with the state of the market. There are periods when, due to an excess of
available tonnage, charterers may be in a better position to bargain, and the situation might reverse
in the following weeks, leaving a charterer with not much room for bargaining with a shipowner. The
terms and the format of the charterparty are likely to reflect such positions at a given time.
Standard forms are dedicated to the main types of cargo, i.e., dry cargo and liquid cargo (tankers).
It is understood that dry cargo charterparties, being more traditional, tend to be more favourable to
shipowners, whereas tanker charterparties, as more modern, are more “pro charterer”. Standard
forms are then heavily amended to suit parties’ needs.
14.2 Different types of charterparties

A basic overview is given below.
Figure 32- Differences between Charterparties.
Some of the terms and obligations in a charterparty have been reviewed previously, as they are
common to all types of carriage contract. See also figure 32.

14.2.1 Example of Forms
The BIMCO website provides a list of available charterparty forms, which gives an idea of the wide
array of forms available and how they adapt to the cargo carried. They can be downloaded at the
Bimco website. A charterparty usually contains a Part I and a Part II:
Part I:
This is to be filled with the basic information (period of hire, trade limits, speed capability).
Part II:
This contains the terms and can be amended by the parties.
Note that the amendments would prevail in case of construction questions on the contract.
14.3 Some Concepts Common to Charterparties

Failure to comply with the terms of the charterparty will depend, again, on the nature of the term
and the extent of the breach. A breach of the terms may lead to termination of the charter.
14.3.1 On the Charterer’s Side
Charterer’s Orders:
Charterers are allowed to give their specific instructions on a number of subjects, as long as they are
legitimate. Failure to comply with charterer’s orders may be considered a breach of charter.
If the order is found to be illegitimate, the shipowner will refuse to accept it, and the charter could
even be terminated on the ground of a breach from the charterer. It is sometimes found easier to
comply with the order and then claim for damages if it had detrimental consequences.
Navigation:
Some charterparty forms include a clause to clearly specify that the master is under the order of the
charterer as regards employment of the vessel, but it does not prevent the master from dismissing
illegitimate orders from the charterer. If he does obey an illegitimate order, claims might be raised
later to recover possible losses.
In the context of navigation, in theory the master could refuse an order that would threaten the
safety of the vessel. When it comes to the order to follow a specific route, it might not be so clear.
In the Hill Harmony, [(1999) LMCLQ 461 and [2000] 3 WLR 1954, HL.] the master refused to follow
the charterer’s order to follow one route, as he preferred a second one that he found safer. On
arbitration, it was found that the master acted unreasonably. But when the charterers claimed
damages from the shipowner on the ground that master didn’t obey a legitimate order, the judge
argued that the choice of a route was a navigational choice, not an “employment” one, and the
master was entitled to refuse. On appeal, the House of Lords decided otherwise, and agreed that the
choice of route belonged indeed to the employment of the vessel.
Bills of Lading:
The charter will also set the terms related to the bill of lading, that the charterer will require the
shipowner to issue. Globally, charterers have the authority to choose specific bills of lading and the
shipowner is meant to comply with such orders. In the context of cargo claims based on a

shipowner’s bill of lading, the shipowner is likely to be sued, and then seek to recover his loss from
the charterer.
Cargoes Allowed under the Charterparty:

The charterparty will list the cargoes allowed to be carried during the charter. If the charterer fails to
give all relevant information on a permitted cargo, then he could be liable for the consequences.
It covers data related to the risks in terms of safety of course, but it can be construed to a wider
sense. If the cargo requires special customs or health clearance, but the shipowner is not made
aware of this, the shipper might be liable for the delays incurred.
Nomination of Ports:
When the loading and unloading ports are mentioned on a voyage charterparty, the charterer cannot
change its mind and order a different port. The duty to nominate a safe port is a time charter feature
but some voyage charters may also have a “safe port clause”.
For example, in the BALTIME 1939 form, the clause is worded as such:
“The vessel to be employed in lawful trades for the carriage of lawful merchandise only between good and
safe ports or places where she can safely lie always afloat within the limits stated in Box 17.”
Again, what is a “safe place” is a question of facts but also interpretation. The traditional definition “a
contrario” of an unsafe port was given as such:
“port will not be safe unless, in the relevant period of time, the particular ship can reach it, use it and return
from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be
avoided by good navigation and seamanship.”
(Sellers LJ in Eastern City [1958] 2 LR 127.)
It was held that not only the port should be safe, but the berth as well.
The following criteria are likely to render a port unsafe: unprotected anchorage, ice-infested waters,
heavy and permanent wave, but also political instability.
14.3.2 On the Shipowner’ Side
Reasonable Despatch:
The shipowner has the duty to make sure the ship proceeds at “reasonable despatch”, not too fast,
not too slow, during the agreed voyage, or during the approach phase (as the vessel proceeds to its
place of delivery), for a time charter.
Being considered an innominate term, the right to terminate the contract is not automatic if the
vessel does not proceed at the necessary speed. The consequence of such delays must be serious
enough to do so.
Various Statements Related to Readiness and Position of the Vessel
Charterparties commonly include a provision on expected readiness to load, Estimated Time of

Arrival (ETA) at the port of loading, and a statement on the “present position” of the vessel. All those
clauses are statement of facts, and an inaccurate or deliberately false statement may constitute a
breach (if the clause is considered as a condition, not just a warranty).

Present Position:
Is an innominate term. If the position given is not accurate enough (60 nm was judged as inaccurate),
repudiation might be possible depending on the consequences of the breach.
Expected Readiness to Load (ERL):

This a prevision given by the owner, as to when the ship should arrive and be ready to load. It is likely
to be construed as a condition but there are not strict rules.
Estimated Time of Arrival (ETA):

Similar to the ERL clause, but only stipulates a prevision on the arrival of the vessel. The vessel could
arrive at anchorage and not be ready to load yet if holds are not ready for example.
Cancellation Clause:
This is an optional clause, but very often added in charterparties. It is always part of a voyage charter,
and sometimes added for a time charter. It gives the charterer a right to cancel in very specific cases,
and discharge the contract, without a breach from the parties.
It usually contains a “cancellation date”: if the vessel has not arrived (at destination or delivery port)
or is not ready to load by the said date, then the charterer has a right to cancel the contract. It
reinforces the obligation of the shipowner to proceed at reasonable speed.
14.4 Voyage Charterparty

14.4.1 Payment of Freight
The freight rate is calculated to cover the vessel’s operating costs (crew wages, fuel, insurance, port
fees etc) and give a profit to the shipowner. Loading/unloading costs may be shared, it all depends
on the terms of the charterparty.
It can be based on the quantity of cargo to be shipped or, more rarely, it can be a sum per day.
Freight used to be paid once the cargo was delivered but nowadays it is usually paid just after
loading. It is then called “advance freight” and is commonly used for dry cargo.
Payment on delivery is more a feature of tanker charterparties.
When the quantity delivered does not correspond to the quantity loaded, the full amount of freight
might still be recoverable, especially if “advance freight” was agreed and based on the amount of
cargo taken on board.
With the payment on delivery, risks of cargo being lost rest on the shipowner. Although, in the Aries,
[[1977] 1 LR 334.] a cargo of oil was delivered with a shortfall, and payment was agreed on delivery.
However, the freight rate was calculated on the untaken quantity of cargo, and charterers were
required to pay the full amount, no deduction for the lost cargo was made.
14.4.2 Laytime and Demurrage
Since the shipowner does not have any control over the loading/unloading operation, a mechanism is
needed to ensure that the charterer will not delay cargo operations. The laytime and demurrage
regime is a “punitive” regime that sets penalties to be paid by the charterer in case of delayed
operations.

The regime, as shown in figure 33, only applies during loading and discharge operations. Delays will
be compensated only if they occurred during those phases. So, it is important to define when those
periods start and end. Some “marking times” are defined for this purpose, and statements made by
the shipowner and its master are highly important in this context.
The time sequence is shown below.
Figure 33: Time sequence in a voyage charterparty (Caillerie, 2016)
The laytime is the period permitted for cargo operations. If it takes longer than agreed, demurrage is
due to the shipowner. The demurrage rate is specified in the charterparty (it is usually less than the
freight rate).
Laytime is an agreed number of days, and it commences as agreed in the charterparty:
• when the ship has arrived in port: problem for the charterer if the ship is held at anchorage
inside the port limits; or
• when the ship is berthed: risks of delays are born by the shipowner.
14.4.3 Notice of Readiness
The counting of laytime starts once the Notice of Readiness (NOR) is given by the shipowner. It
should be given when the ship is truly ready. For example, in the Tres Flores, [[1974] QB 264.] the
NOR was given but the holds had not been fumigated yet, and the Court of Appeal held the NOR as
invalid.
Some circumstances may provide for interruption of laytime, such as bad weather. A charterparty
usually lists such cases and provides that laytime runs only during “weather working days”. Laytime
exception can also cover delays due to an unavailable berth, congestion at the port and strikes.

14.4.4 Demurrage
Once the laytime period has expired, demurrage will run as long as it takes to finish the cargo
operations. There is no interruption of demurrage as such. In the Kalliopia, [2 LR 101.] the court held
that:
“once a vessel is on demurrage, no exception will operate to prevent demurrage continuing to be payable,
unless a clear exception clause is worded to that effect”.
If the delays are really serious, the shipowner might try to repudiate the charter. This would be
possible only in case of “unreasonable delay”, a delay so important that it “frustrates the commercial
purposes of the contract”, as was defined in this case [Universal Cargo Carriers Corp v Citati [1957] 2
QBD 401.]
“When the delay becomes so prolonged that the breach assumes a character so grave as to go to the root of
the contract, the aggrieved party is entitled to rescind. What is the yardstick by which this length of delay
is to be measured? Those considered in the arbitration can now be reduced to two: first, the conception of a
reasonable time, and secondly, such delay as would frustrate the charterparty.”
(Singh L)
14.5 Time Charter

The time charter is a more recent form of chartering. It can be used by shipowners needing to
increase temporarily their fleet, by traders shipping commodities, by major oil or mine companies
etc.
Hire is paid, instead of freight on the voyage charterparty, and the main difference in concepts is that
it treats differently the risks on charterers and owners. The charterer has a total freedom with
regards to the employment of the vessel, within contractual limits regarding allowed trading ports,
type of trade etc. The shipowner is still responsible for the navigation aspects.
The description of the vessel to be hired is essential, as the charterer will base its estimations on the
information given regarding cargo capacity, speed, fuel consumption etc. Specifications related to
the ship have a contractual value, and a vessel whose performance is not as described is likely to lead
to a claim for damages.
The problem is to establish if such statements are valid only at the time of signing the charterparty or
remain valid for the duration of the contract. The answer will depend on the circumstances and
courts.
14.5.1 Payment of Hire
Hire is usually due at regular intervals, to cover the shipowner’s expenses. The charterer has the duty
to pay on time and the full amount agreed. The place, time and frequency of payments is specified. If
one condition is not fulfilled, he is in breach of the charter.
In some cases, only it would allow the shipowner to terminate the contract. So, the shipowner may
rely on a “withdrawal” mechanism as a remedy for non-payment or late payment. The shipowner
shall then give a “notice of withdrawal” to the charterer, in due time, so that arrangements can be
made on his side. The charterer has to give its consent.

In the Laconia, [[1976] 2 LR 395.] payment was one day late, because it was due on a Sunday, when
banks are closed. The shipowners accepted the late payment. The Court of Appeal hold that
withdrawal could not be valid on that ground, but this was overruled by the House of Lords. The
owners were entitled to withdraw.
However, in such cases, owners might need a bit of time to make their decision, and a very small
margin of time should be given to the charterer as well in order to proceed with the payment. For
this reason, the “anti-technicality” clause was created. It gives 48 hours to the charterer to process
the full payment, before the notice of withdrawal is given.
14.5.2 Set-off
A particularity of hire is that charterers have a right to make deductions to the amount due. They
may deduct an amount related to claims against the shipowner, when they have been “wrongly
deprived of the use of the vessel”, [ Judge Denning in Nanfri [1978] QB 927.] in other word, when the
charterer suffered a prejudice. It usually relates to loss of speed, or to fuel consummation provisions
(if some bunker is left by the end of the charter), but it does not apply in the context of cargo claims.
However, in the Leon, [ [1985] 2 Lloyd’s Rep 470.] under an allegation of fraud related to bunkering,
the charterer used its rights for set-off, but the court held it was not justifiable, since the fraud didn’t
actually affect the use of the vessel.
14.5.3 Off Hire
In case of delay, there is only one provision in a time charter, the possibility to “stop the clock” in
case of specific events. Hire is not payable for the period covered by the off-hire clause. The cost of
bunkers used might also be deductible if the contract provides so.
To benefit from the off hire, some conditions must be met, as summed up in table 11.
Table 11: Off-hire conditions

Off-hire
Vessel not able to perform One of the listed events has Calculation of the time lost
occurred
As worded in NYPE form, “full Events are listed in clauses. There Period clause: the hire is interrupted
working of the vessel” is might be several clauses. for any deficiency of the vessel, and
prevented. it restarts only when the vessel can
resume its services.

Covers deficiency of the vessel Charterer has to prove the event Net clause: a partial deficiency is not
or its equipment (cranes, belongs indeed to the list. penalised as much as a total
deficiencies in the holds) but For example, in BALTIME 1939 deficiency.
could also be due to a deficiency clause 11 covers “drydocking or The hire is suspended only for the
related to the ship’s documents other necessary measures to specific amount of time lost due to
and preventing service. maintain the efficient of the the partial deficiency.
vessel, deficiency of menor
owners’ stores, breakdown of
machinery, damage to hull or
other accessories, either
hindering or preventing the
working of the vessel…”
Deficiency does not cover phases where the vessel is inoperative due to operations related to its
service, such as shifting berths.
14.5.4 Other Specificities of a Time Charter
Redelivery and Last Voyage Clauses
The period of a charter is not so easy to determine, as there are uncertainties in exactly when the
last voyage will end. A reasonable margin should be given to the charterer. Again, it will depend on
the type of forms and the clause chosen.
To include such margin in a given date or period, the wording “MOLCHOPT” may be added, for More
or Less to the Charterer’s Option, reading “redelivery the 1 of march, +/- 10 days MOLCHOPT”.
When the vessel is redelivered late, a calculation shall be made of the hire to be paid now that the
original period of hire is over. Note that redelivery made far too early or at the wrong port amounts
to a breach by the charterer.
The vessel shall also be redelivered to the “owners in the same or as good structure, state, condition
and class as that in which she was delivered, fair wear and tear not affecting class excepted”, as
worded in most charterparties. “Fair wear and tear” being a relatively vague term, it is subject to
interpretations, and of course, disputes.
On/Off-hire Surveys
Used as a record of the vessel’s condition at the beginning, or end, of a charter. It is performed just
before the delivery or redelivery. Specific parts of the ship are inspected (including cleanliness) and
documents will be verified as well.
A bunker survey might also be performed, to assess the quantity of bunkers on board and report the
figures on the charter. Other consumables will also be assessed. Needless to say, disputes arise
frequently on those figures. The facts and statements are valid at the specific time of the survey.
The survey will record potential damages to the ship and its equipment, and the parties will be liable
to compensate for such damages.

It is essential that the record is as detailed as possible, to avoid possible claims raised during the
following chartering period, and to restrict any possibility of a party as well trying to exploit
weaknesses in a survey report.
Some standard forms include a clause on on/off-hire survey, such as ASBATIME, worded as such:
“Prior to delivery and redelivery the parties shall each appoint surveyors, for their respective accounts, who
shall conduct joint on hire/off-hire surveys. A single report shall be prepared on each occasion and signed by
each surveyor, without prejudice to his right to file a separate report setting forth items upon which the
surveyors cannot agree. If either party fails to have a representative attend the survey and sign the joint
survey report, such party shall nevertheless be bound for the purposes by the findings in any report
prepared by the other party. On hire survey shall be on charterers’ time and off-hire survey on owners’
time.”
(The Association of Ship Brokers & Agents (U.S.A.) 1981)
14.6 Demise Charter

Also referred to as bareboat charter. A demise charter is a contract for the use of the ship, where the
charterer will be in charge of operating the ship as well. This includes crew management and
commercial management. It may be used as financing tool, when the ship is hired for a period of 10
to 15 years, before ownership passes to the charterer.
The demise charterer has a possessory lien on the vessel, whereas a time charterer would have
contractual lien on the property hired. It can give rise to complicated situations.
In the Mineral Transporter, [ [1986] AC 1.] the owner A chartered on demise to B, and B contracted
back a time-charter to owner A. After the vessel was damaged by another vessel due to negligence, A
was not entitled to claim in negligence for damage, since he had a contractual lien, but not
possessory rights to the vessel. The charter period is also defined, such as delivery and redelivery
ports. And restrictions to ports are also provided.
The charterer is liable for the maintenance and operation of the vessel, and consequently bears all
related costs. The charterer also has the obligation to repair the vessel as needed and to maintain it
in classification. The owners might have the right to inspect the vessel during the charter, for specific
reasons expressed in the contract.
BARECON 2001 is a common sample form used for demise charters.
Directed Learning
Discuss on the forum why there is no “interruption” to the period of “Demurrage”.

15. The Law of Evidence
15.1 Introduction
In marine claims, whether they relate to cargo damage or to any damage to the ship, facts, and
details matter. The legal profession, arbitrators, lawyers or insurers, might need specific evidence to
understand better the circumstances, and parties are likely to support their claim or defend
themselves by giving relevant evidence of the facts.
Surveyors will be involved in this process, and their role in the context of conflict resolution will be
pivotal. However, courts remain in control of the evidence and the use made of it.
This chapter aims at reviewing the main legal principles applicable to the production and use of
evidence, by focusing on the law applicable in the UK.
15.2 Legal Framework

In the UK, the main statutory framework of the law of evidence is formed by the Civil Procedure
Rules (CPR). Several parts cover the general principles applicable to evidence, such as:
• Part 31 Disclosure and inspection of documents.
• Part 32 Evidence.
• Part 33 Miscellaneous rules about evidence.
• Part 35 Experts and assessors, supplemented by a practice direction.
The full version of those rules can be found on the UK Ministry of Justice website at the UK
Government Justice website.
The rules are different for criminal trials and governed by the Criminal Procedure Rules (CPR), with a
part on witness experts.
Note that:
• witness statements must comply with the requirements of PD32; and
• expert’s reports must comply with the requirements of PD35.
The main elements of Practical Direction 35, supplementing CPR Rule 35, are provided on the
following page.

Figure 34: Main elements of Practice Direction 35, supplementing CPR Rule 35 (Caillerie, 2016).
15.2.1 Admiralty Court Guide
Specific instructions, or recommendations, are provided for cases dealt with by the admiralty court.
A section deals with witnesses and experts. The full text can be found at UK Government Justice
website.
15.3 Experts Witnesses

Experts are called as witnesses during a trial. In European jurisdictions, experts are appointed by
courts, whereas in the UK they are appointed by each party. Consequently, the parties bear the costs
of appointing an expert, whereas in Europe, the court pays for such fees.
This explains as well why some criticisms are sometimes expressed toward the partiality of experts in
such cases, as being appointed by the parties.
15.3.1 Who Can be an Expert Witness?
An expert witness shall prove his or her knowledge of the subject, through relevant qualifications and
experience.
Credentials will be requested, and the court may refuse such a witness. They are requested only if
the court and its judge do not have the specific skills required to deal with the case, which could be
common in maritime cases.
However, the admiralty court has traditionally requested the services of nautical assessors, but
expert witnesses could still be needed for any technical subject. For example, it could be necessary to
use specific IT tools for simulation purposes, as it may help in difficult collision cases.

Witnesses having a close relationship, whether private or professional, with the party may also be
found unacceptable. It should be noted, however, that a person employed by a party may become an
expert, as long as he or she is deemed to be “independent”.
15.3.2 What is Expected from an Expert Witness?
Primarily, the nature and type of evidence needed is specified by the court and finally, the court
decides what to do, how to use the evidence. Evidence should be restricted to what is requested in
order to solve the case.
Experts are expected to be impartial, and he or she is here to help the court, not the parties. Experts
are the servant of the court, as clearly stated in the CPR. Hence, their report is addressed specifically
to the court. But, in the UK, they are request and paid by the parties, which can create uneasy
situations.
In a case in 2013, [ Versloot Dredging BV v Hdi Gerling Industrie Versicherung AG and six others
[2013] EWHC 581 (Comm).] a surveyor had performed a damage survey for a vessel in repairs (being
the defendant). The claimant later requested an interview with that same surveyor, in order to
gather fact and obtain his view, but the defendant’s lawyer disagreed. The court held that “there is
no property in a witness” and the defendant couldn’t prevent the claimant from calling the surveyor.
And it was for the surveyor to agree or not to the claimant’s request.
Generally speaking, experts are required to provide evidence of facts, and not evidence of opinion,
the latter involving a form of subjectivity. There are, however, exceptions, and situations where
opinions will be expressed, especially when the matter reviewed has a highly technical or scientific
nature.
15.3.3 Facts vs Opinion
Experts are entitled to provide their opinion, when a simple witness is required to provide facts,
based on what it has directly observed. The statement of an expert opinion is allowed in some cases,
but courts will anyway choose what weight to give to the opinion.
The courts admit the opinion of experts based on the ground that such experts possess instruction or
special knowledge of an area:
“to render his opinion of value in resolving the issue before the court”.
(Chief Justice King, R v Bonython [1984] SASR 45, p 46 – Australian case.)
In a recent case [Rogers & Rogers v Hoyle [2014] EWCA CIV 257.] related to an air crash and involving
a report prepared by the Air Accident Investigation Branch (AAIB), containing facts and opinions, and
used for the civil proceeding, the question of expert evidence prepared for another purpose than the
trial was raised. The court held that such evidence is not regulated by Part 35 and the common law
applies to this category.
15.4 Sanctions and Immunity

Most of the documents involved will include a statement of truth. False statements made by experts
are liable to prosecution, and a party may allege that the statement of truth is false.
As per the CPR, proceedings for contempt of court may be brought against a person in case of a false
statement in a document verified by a statement of truth, but only with the permission of the court.

Consequently, expert witnesses are liable to criminal prosecution for contempt of court. This covers
the case of a “person caused to be made a false statement”, i.e., a party requiring the expert to
produce a false statement.
Although originally witnesses benefited from immunity in civil proceeding, in the UK, this is not true
anymore since the Jones v Kaney case, [ [2011] UKSC 13.] and immunity will cease if a witness is
found negligent (expert witnesses have a duty of care).
15.5 Procedure and Report

Permission to use expert statements must be obtained from the court. The court may limit the
number of experts and refuse experts. The evidence should be supported by a written report,
although an oral statement could be requested. The other party may formulate questions, in a
written format.
The report should contain the information shown in figure 35:
Figure 35: What should be in the report.
15.6 Use of Digital Evidence

Surveyors commonly use photos or videos in their reports.
Use of photos and other digital evidence shouldn’t raise any problem, it is used commonly in
arbitration. However, note should be taken of a recent criminal case in the UK where digital photos
were refused as evidence, as it was argued that they could be easily tampered with.
At the end of this module, the law relating to surveys has been fully reviewed. Students are provided
with enough details to get the best possible overview and to cover all the key areas. However,
general law and maritime law cover a large variety of complex subjects and during their careers,
surveyors might need to refer to specialist publications, where they will find exhaustive details.
With this module, students should aim at acquiring a sound knowledge and understanding of key
notions for each area, i.e., contract law, negligence law, and specialist branches of admiralty law and
Carriage of Goods by Sea.

In the course of their activities, such knowledge of legal aspects will be necessary to perform
according to the highest standards expected, and it will ensure surveyors always get a clear and
broad picture of the challenges and difficulties implied by a claim.
Directed Learning
• With regards to digital images (photographs), research the term “original digital image”.
• Discuss why a court may not accept a digital image (photograph) in a court case.

16. Conclusion
In this module we have explored, in great detail, the relationship of the legal profession and the
maritime industry.
As discussed earlier in this course, the maritime industry is complex in its structure and operation,
and this highlights the need for laws and conventions to be in place. These laws protect the seafarer,
the environment and companies using maritime services to move goods around the world.
Backed by the IMO and Government States, the laws, regulations, and conventions applicable to
ships and commerce have often been tested in courts of law. These courts of law will apply the type
of law applicable to their nation but, often, the jurisdiction for the governing law will often be
specified in a contract.
Through the decades, and by repeatedly proving its effectiveness and efficiency, English Law is often
stated in contracts as the governing law under which maritime disputes will be assessed and settled.
Whilst some laws and conventions are quite old and well established, they do continue to be used. At
the same time, amendments, modifications, and new laws are frequently published. It is of course
important that surveyors dealing in legal matters ensure that they are working to the correct version
of documents.
In the next module, module 5, we shall turn our attention to a new topic and study marine surveying
and insurance.
The topics of law and insurance are of course related and as module 5 progresses, students should
recall relevant areas of this module 4.

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DIPLOMA IN MARINE

Original Author Marie Caillerie

Laws and Conventions Relating to Marine Surveying 2

Laws and Conventions Relating to Marine Surveying 3

Laws and Conventions Relating to Marine Surveying 4

Laws and Conventions Relating to Marine Surveying 5

Laws and Conventions Relating to Marine Surveying 6

Laws and Conventions Relating to Marine Surveying 7

This module is developed in three parts:

Laws and Conventions Relating to Marine Surveying 8

Laws and Conventions Relating to Marine Surveying 9

2. The Relationship of the Surveyor with the Legal Profession

Figure 1: Professional relationships of a surveyor (Caillerie, 2016)

Figure 2: The different types of surveys (Caillerie, 2016)

Laws and Conventions Relating to Marine Surveying 10

The sections below discuss these two areas of law.

2.1 Different Legal Systems

2.1.1 Common Law

Laws and Conventions Relating to Marine Surveying 11

The civil law system may be described as:

2.1.3 Mixed System

2.2 Choice of Law and Jurisdiction

Law is then applied by a jurisdiction.

Laws and Conventions Relating to Marine Surveying 12

Figure 3: Applicable jurisdiction is defined at different levels. (Caillerie, 2016)

Figure 4: Very brief review of the “judgements regulation principles”.

Laws and Conventions Relating to Marine Surveying 13

Laws and Conventions Relating to Marine Surveying 14

3.2 Main Concepts

3.2.1 Freedom of the Parties to Agree

Laws and Conventions Relating to Marine Surveying 15

3.2.2 Overview of Terms Commonly Used

In more detailed terms, a contract is:

Figure 5: Illustration of the contractual logic (Caillerie, 2016)

Laws and Conventions Relating to Marine Surveying 16

Third parties are:

Express Terms in a Contract:

3.2.4 Choice of Law/Choice of Jurisdiction

Laws and Conventions Relating to Marine Surveying 17

Or, if this is not applicable:

3.2.5 Example of a Conflict of Law

3.2.6 Classification of Terms

Laws and Conventions Relating to Marine Surveying 18

3.3 Implied Terms in a Contract

3.3.1 The Implied Duty to Exercise Reasonable Care and Skill

Laws and Conventions Relating to Marine Surveying 19

3.4 Failure to Perform the Contract – Breach and Remedy

3.4.1 Onus of Proof or Burden of Proof

3.4.2 Frustration and Repudiation of Contract

3.4.3 Time Limitation of Claims

Laws and Conventions Relating to Marine Surveying 20

Further details are given in the second part of this module.

Laws and Conventions Relating to Marine Surveying 21

• Answer the following questions for your own notes:

Post your answers to the forum for discussion.

Laws and Conventions Relating to Marine Surveying 22

4.2 Three Conditions for an Action in Tort

4.2.1 A Duty of Care Exists

Indeed, contractual duties are accompanied by duties in tort.

4.2.2 The Duty of Care was Breached

Laws and Conventions Relating to Marine Surveying 23

4.2.4 The Plaintiff Suffered Injuries or Damages as a Consequence of the Breach

4.3 Remedies in Tort