Most voyage
charterparties make the commencement of laytime conditional on the tender of a
valid notice of readiness. If the notice is invalid, then in the absence of a
waiver by charterers laytime will not commence at all, even if the charterers
knew or ought to have known that the vessel was in all respects ready.
Overview
The tender of a valid notice of readiness and the subsequent
commencement of laytime has been a fertile area of debate in the English courts
and given the financial consequences, will no doubt continue to be litigated.
If a notice is required but none is given then strictly, laytime
will not start to run. Arbitrators may, however, take a more commercial view
and decide on the facts that the charterers were aware or ought to have been
aware that the vessel was ready to load and knew that loading was taking place,
and that therefore laytime should commence on loading. The burden of proof,
however, is on the owners to show that laytime should start to run even though
a notice of readiness was not given. This is not satisfactory from the owners’
point of view as there is no assurance for them that laytime will commence at
all.
Where a notice is required then in the absence of an express
provision to the contrary, this is required only at the first load port and not
at the subsequent load ports or at the discharge port(s).
At common law, the notice may be given orally or in writing.
Where the charterparty requires service of the notice, e-mail will not be
considered permissible unless expressly provided for in the charterparty – see
the “PORT RUSSEL” [2013] EWHC 490 (Comm); [2013] 2 Lloyd’s Rep 57. Best
practice is to make sure when fixing the vessel that the charterparty provides
for service of the notice of readiness by e-mail as some older forms still
refer to telex.
The contents of the notice of readiness
The notice of readiness is the notice to the charterer, shipper,
receiver or other person as may be required under the charterparty that:
(1) The vessel has arrived at the specified destination where
the notice of readiness can be given. The question of whether the vessel is an
’arrived’ one for the purposes of commencement of laytime has been the subject
of much discussion and case law which is outside the scope of this article.
However, it can be said briefly that the specified destination will depend on
the terms of the contract. If the charterparty is a berth charterparty then the
specified destination is the nominated berth or, if a berth has not been
nominated, it will be the first available berth to which the vessel is ordered
and the notice of readiness may be tendered at that place subject to the other
conditions being satisfied. If, however, the charterparty is a port charterparty
then the notice of readiness must be tendered when the vessel is in berth
within the specified port or, if a berth is not available, when the vessel is
within the port limits and at the waiting area where vessels usually wait for a
berth.
Various clauses in the charterparty may put forward the time
that the vessel may tender the notice even though she may not be at the
specified destination. The most familiar is the WIBON (whether in berth or not)
provision which means that under a berth charterparty, if the berth is not
immediately accessible, the notice of readiness may be given when the vessel is
in the port in which the berth is situated.
Similarly, a WIPON (whether in port or not) provision will
enable the notice in certain circumstances to be tendered even if the vessel
has not yet entered the port area.
(2) The vessel is ready to load or discharge the cargo as the
case may be. This means that the vessel must be both physically ready in that
the holds are ready to receive the cargo and legally ready in that all
documentation necessary to enable her to commence loading is in order. If,
however, the vessel is ready subject only to a mere formality then the notice
may still be able to be tendered. For example, if customs clearance is only
obtainable on berthing but the notice can be tendered when the vessel is off
berth then this will not affect the vessel’s readiness.
(3) All other requirements under the charterparty concerning the
form, timing and the party to whom the notice is to be tendered have been
complied with.
Validity of the notice of readiness
A notice of readiness therefore contains several statements of
fact. In order to be a valid notice, those statements must be true. If the
statements are incorrect the notice is invalid and a nullity so far as the
contract is concerned and ineffective to start laytime. Further, as was made
clear in the leading authority of the "MEXICO I" [1990]
1 Lloyd’s Rep. 507 (CA) if the statements were untrue when they were
made, the notice does not subsequently become valid when the circumstances
change. If therefore, there is any doubt as to the validity of the notice, it
is always advisable for the master to tender a further notice.
The "MEXICO I"
The owners let their vessel to the charterers for the carriage of
a part cargo of maize from Argentina to Angola. Under the charterparty, the
owners had a right to complete the vessel with other cargo. On completion of
loading, the vessel was also carrying a cargo of beans for the same charterer
under another agreement. Both the maize and the beans were overstowed by parts
of the completion cargo. On arrival at the discharge port, the vessel tendered
notice of readiness on 25th January. However, at the time of tender neither of
the charterers’ cargo was accessible due to the overstow of the completion
cargo. The charterers’ maize cargo became accessible on 6th February and the
beans on 19th February which is when discharge of both cargoes commenced. The
owners claimed that laytime commenced when the cargo became fully accessible on
6 February. Charterers on the other hand claimed that time commenced only when
discharge actually commenced on 19 February.
The Court of Appeal held that the notice was invalid and a
nullity when given and ineffective therefore to commence laytime even if the
charterers knew or ought to have known of the vessel’s subsequent readiness.
Accordingly, the charterers were entitled to insist on a further notice of
readiness in order for laytime to commence unless they had in the meantime
waived their right to a further notice or agreed that it would not be
necessary. On the particular facts in this case, the Judge found that although
the notice was invalid, the charterers had nevertheless accepted it via their
agents on the commencement of discharge. As a matter of principle, however, the
judge confirmed that an acceptance of an invalid notice in circumstances where
the charterers were unaware of the inaccuracy in the notice could not bind the
charterers and they were not prevented from subsequently disputing the effect
of the notice. What will constitute a waiver of the defect or acceptance of an
invalid notice is considered in more detail below.
Unless there is provision to the contrary in the charterparty,
the statements in the notice must relate to the time that they are made and
when the notice is given. There is a distinction, however, between an invalid
notice and one that is uncontractual in that it has been tendered to the wrong
party or at the wrong time of day. A notice that falls within the second
category may still be regarded as valid.
The "AGAMEMNON"
The "AGAMEMNON" [1998] 1 Lloyd’s Rep. 675 was
chartered to load a cargo of steel pipes from Baton Rouge to Brisbane. The
charterparty provided that the vessel was at the South West Pass and "ready
to proceed to loading port weather permitting". The South West Pass,
however, was 170 miles from Baton Rouge and it did not form part of that port.
A notice of readiness was tendered at the South West Pass. It was not until two
days later, however, that the vessel arrived at Baton Rouge general anchorage
but, due to the designated berth being unavailable, loading did not commence
until later the following day.
The charterparty provided that if the berth was not available on
the vessel’s arrival at the port or so near thereto as she may be permitted to
approach, the notice could be tendered on arrival and laytime would then
commence as if she were in berth and in all respects ready.
The charterers considered that the notice of readiness tendered
at the South West Pass was premature, since it was given prior to the vessel’s
arrival at a point so near to Baton Rouge as she could approach, i.e. the Baton
Rouge general anchorage, and as no notice was given when the vessel reached
that point later, laytime did not commence until loading started.
The charterers failed to persuade the arbitrators to agree with
this view, but on appeal, the Judge found in their favour. In accepting their
arguments, the Judge relied on the Court of Appeal decision in
the "MEXICO I" which made clear that when a notice is to be
given in order to start laytime running, this must be a valid notice and not an
’inchoate’ or ’delayed action device’ seeking to commence laytime automatically
on the happening of a certain event. In such cases, a fresh notice must be
given. Applying that case to the facts before him, the Judge found that the
notice of readiness in this case represented that the vessel was at the place
at which it was permissible for the notice to be tendered, i.e. the Baton Rouge
anchorage. This was clearly not the case and the notice was therefore invalid
and could not trigger the commencement of laytime.
The "PETR SCHMIDT"
In this case, the charterparty provided that the notice of
readiness had to be tendered to the charterer or his agent within 0600 and 1700
hours local time and laytime was to commence six hours from the receipt of that
notice or upon the vessel’s arrival, whichever first occurred. Of the various
notices given at the load and discharge ports, one was given at 0100 hours and
the other two at 1800 hours. The charterers argued that since the notices were
tendered outside the specified period, they were non-contractual being in
breach of the relevant clause and therefore invalid and of no effect in
accordance with the principles in the "MEXICO I".
It was common ground that (a) when the notice of readiness was
given the vessel had then arrived at the appropriate place within the port in
question (b) the vessel was in fact ready to load or discharge as required by
the charterparty and the statement of readiness was therefore correct (c) the
vessel continued to be ready and (d) no further notices were given.
In their judgment, the Court of Appeal confirmed the principle
decided in the "MEXICO I" namely, that in order to be a valid notice,
it must contain accurate statements of existing fact. In the "MEXICO
I" the notice stated that the vessel was ready when in fact she was not
and the notice was therefore invalid. In the "PETR SCHMIDT", [1997] 1
Lloyd’s Rep 284; (CA) [1998] 2 Lloyd’s Rep 1), however, the notice was correct
in that the vessel was ready and at the required place but was sent to the charterers
outside office hours. The Court drew a distinction between the requirement to
’tender’ a notice of readiness and to ’give’ or to ’receive’ one. The Court
found in this case that the telex notice was sent out of office hours but was
’tendered’ at the receivers’ office opening at 0600 hours the following morning
and that this therefore complied with the charterparty requirement. However,
the Court also considered what the position would be if the charterparty
required the notices of readiness to be ’given’ or ’received’ by charterers
within certain periods and they are in fact given or received outside these
periods. The Court held that in such cases, provided the notice was otherwise
correct, the notice would be non-contractual and therefore wrong but not invalid
at the time it was given. The practical effect of a non-contractual notice
which is tendered outside the required time is, that while it may not be
effective to start the laytime clock running, the defect may be ’cured’ by, for
example, the passage of time and laytime will start at that point. As the Court
pointed out, whether the defect can be so ’cured’ is a question of fact rather
than the law and will vary from case to case.
The charterers may choose to accept an otherwise invalid notice.
However, this acceptance must be in clear terms and in these circumstances,
owners will leave themselves open to the argument that this acceptance was
induced by an incorrect representation in the notice as happened in the
"MEXICO I". In those cases, the charterers would not be precluded
from disputing the effect of the invalid notice.
Acceptance/waiver by charterers The “HAPPY DAY”
The HAPPY DAY [2002] 2 Lloyd’s Rep 487 (CA) was chartered to
carry wheat from Odessa to Cochin. The Master tendered the notice of readiness
before the vessel could enter the port due to tidal conditions and no valid
notice was subsequently tendered. The vessel entered the port the next day and
continued to berth. The charterers did not reject the notice of readiness and
ordered the vessel to load and only later contested demurrrage on the ground
that laytime had not commenced due to the invalid notice.
The Court of Appeal heldthat under a voyage charterparty which
requires a notice of readiness to be served, laytime can commence even where no
valid notice of readiness had been served in circumstances where:
- a notice of readiness in
the prescribed form is served upon the charterers/receivers prior to the
arrival of the vessel;
- the vessel subsequently
does arrive and is, or is expected to be, ready to discharge to the knowledge
of the charterers; and
- discharge commences to the
order of the charterers/receivers without either having given any indication of
rejection or reservation in respect of the notice of readiness already served,
or any indication that a further notice of readiness is required before laytime
commences.
In these circumstances, the charterers may be deemed to have
waived their right to rely on the invalidity of the original notice of
readiness as from the time of commencement of discharge and laytime will
commence in accordance with the charterparty as if a valid notice of readiness
had been served at that moment.
In The “SHACKLEFORD” [1978] 2 Lloyd’s Rep. 154 (CA) charterers
were deemed to have accepted an invalid notice of readiness when they endorsed
the notice “accepted” in the full knowledge that it was defective. “
Even where a receiver or agent do not have express authority,
they may have implied or ostensible authority to accept a defective NOR” – see
“THE NORTHGATE” [2008] 1 Lloyd’s Rep 511.
Conclusion
Demurrage disputes are common, hence the name of legal cost insurance
product “Freight Demurrage and Defence or “FDD”. English case law may be slowly
moving from the literal to the more practical as evidenced by the cases on
waiver. Terms vary between charterparties and grey areas remain. In order
therefore, to be absolutely certain that time will start to count at the
earliest opportunity, if there is any doubt as to the validity of the original notice
the master should issue a further notice of readiness expressly stating that it
is without prejudice to the validity of the previous notice(s).
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