Wednesday, June 20, 2018 | ISSN 0719-241X

The weather report: impact on contracts of carriage

Deviation, load/discharge port issues, cargo damage and frustration of contract
Edition of October 02, 2017

Mother nature can be more cruel than we think. Recent natural disasters have brought the spotlight onto the impact extreme weather can have on infrastructure and operations. According to an analysis by Norweigan risk management company Gard, storms like Harvey, Irma and Maria in the USA and Caribbean, have jeopardized contracts of carriage agreed by the carrier. 

The insurance experts outline eight issues as some of the most relevant that may arise in connection with an extreme weather event, based on English law: deviation from planned route; changing the place of discharge in the bills of lading; che cover available for discharge at other port or place; named load and discharge ports in voyage charters; Force Majeure; frustration of contracts; payment of hire under time charters and damage to cargo.

Plan B

Deviations from planned route and changing the place of discharge in the bills of lading are obvious effects of a natural disaster, because the first reaction to damage by extreme weather is to avoid places where the downpour/winds/shattered infrastructure is at its most delicate state. Vessel deviation from the planned route affects delivery of the cargo, which may lead to potential losses for receivers who may not be entitled to recover where their cargo has been carried under bills of lading (BoL) that incorporate the Hague-Visby Rules, that safeguard the discharge of cargo.

When the place of discharge in the BoL changes, the terms of the BoL may entitle the carrier to discharge the cargo elsewhere to ensure its safety. If the terms do not entitle the carrier to discharge elsewhere, it may nonetheless be possible for the carrier to agree with the holder of the BoL that the cargo is to be discharged at a substitute location. Same goes for payment of hire under time charters, it must be agreed upon beforehand. If it becomes impossible or dangerous for the vessel to reach or stay at the stipulated port, the cover available for discharge at other port or place enables the carrier to discharge the cargo safely in a different port without breach of contract, as long as it is triggered by extreme weather.

Named load and discharge ports in voyage charters is applied when it is not possible to load or discharge cargo from the port and/or berth named in the voyage charter, other terms of the charter may give a right to the owners of the vessel to load or discharge cargo at a substitute place.

Out of Man’s hands

There is no predetermined specification about Force Majeure (superior force), but it may be included in contracts considering various weather conditions, setting out what rights and obligations the parties are to have if Force Majeure occurs and how to make those terms effective. On the other hand, to determine a case of frustration of contract, the contract must be rendered worthless. For instance, if the BoL does not provide a clause on an alternative discharge location and the stipulated location is unavailable, the contract is therefore frustrated.

Damage to cargo is almost inevitable when it comes to extreme weather. When this is the case, the carriers of the cargo may have a defence to claims for that cargo damage under Article IV Rule 2 of the Hague and Hague Visby Rules which states:“Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from: (…) (c) Perils, dangers, and accidents of the sea and other navigable waters...”.

Mother nature is inevitable, and insurance is the best way to make the most of a spoiled situation.

By MundoMaritimo

Source: Gard

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