Re-Appraising the Concept of Laytime

Charterparty is an agreement between a shipowner and a charterer, wherein a ship or part of a vessel is hired or lease, for the carriage of goods by sea for a specific period. One of the most

frequent challenges in the contract of carriage by sea is the issue of bearer of liability for delay in loading or unloading of the goods from the chartered ship. Despite the introduction of several uniform forms to address the challenge of accurately construing time, the problem remain unabated as the sailing of vessels on sea are  delayed or impeded by various unprecedented and often times uncontrollable factors. Faced with unanticipated delay either in the loading or unloading of the cargo, the crisis of who as between the shipowner or charterer bears the liability thereof becomes inevitable. It is the position of this paper that the introduction of an extension of time clause, good knowledge of the ports concerned and an elegance drafting of the agreement would reduce the friction of liability for delay in carriage at sea.

INTRODUCTION

Layday otherwise called, Laytime is the period agreed between the parties to a charterparty for the loading and unloading of a cargo without penalty to the parties chartering the vessel. If more time than agreed is used to load or unload the vessel, the vessel’s owner (shipowner) is generally entitled to compensation for the delay. The compensation is called Demurrage. Laydays have also been described as the time allowed to the cargo-owner to remove the goods after arrival of the ship at the port of destination, after which, if he does not do so, he would have to pay rent called “demurrage” for the space his goods occupied on the ship during the extra days.

In charterparties agreements, laydays may be calculated by days, time and or tonnage. Laytimes are described in different ways and may also be stipulated and variously calculated. Laydays may also be called working days and what is a working day is determines by the port of destination and the country in question. But one of the duties of the charterer is to nominate within a reasonable time, a port or berth, where appropriate, for loading or discharge of his goods from the chartered vessel. The charterer also has a duty to load and discharge the cargo at that berth or port within a reasonable time, on completion of the approached or the carrying voyage. If the charterer fails to perform either obligation, he would be liable to the shipowner in damages for detention. What is known and called Laytime is thus the agreeable time for the discharge of the vessel that is now stipulated by a set period of timing.

Generally, if loading or discharge takes longer than the permitted laytime, the charterer would be made liable for “demurrage”. Demurrage is a pre-agreed daily rate liquidated damages which replaces the common law liability for detention, assessed at the market rate. The laytime and demurrage calculations will cease with the completion of loading or discharge as the case may be. This is however a general rule with rooms for exceptions. A charterparty agreement will usually contain an exception clause, which provides for the suspension of laytime on the occurrence of various unanticipated incidence interfering with loading or discharging. Such events may be sudden war, bad weather, etc.

Lay days may use such expressions as “running days”, “weather working days” and “working days”. Such expressions answer such questions as to what is the normal number of days required for a ship for instance to sail from Apapa port in Lagos Nigeria to Leiden in Netherland? Is it inclusive of night or only day? Is it 24 hours per day? Is it every day including Sundays and public holidays?

In the case of a “weather working days”, the correct definition is a day on which the weather permits the relevant work to be done, whether or not any person avails himself of that ‘permission’. The status of a day as being a weather working day, wholly or in part or not at all, is determined solely by its own weather, and not by extraneous factors. In Reardon Smith Line Ltd. Vs Ministry of Agriculture Fisheries and Food, the court held that where the weather is bad only for a fraction of the day, the whole day would not be written off, but only that fraction. This is understandable because the whole essence of a laytime is to ensure speedy completion of the charter for commercial expediency. It is equally for the same reason that many charterparty agreements contain a “dispatch clause” under which charterers become entitled to payment by the shipowner in the event that they finish those operations before the expiration of their allotted laytime. 

The difference between charters in which a specific time is allowed, whether for loading and unloading, and those in which laydays are wholly unidentified, is of great importance[8]. It is therefore pivotal to identify the type of voyage for the purposes of calculating time. A voyage may be port charter or berth charter. The laytime provision of the charter is also expected to determine the point at which the approach and carrying voyages end. If it is when the vessel reaches the port, then the charter will be a “port charter”. But if at the point the vessel reaches a berth within the port, then it is called a “berth⁶ charter”. Thus the character of the charter is determined by the laytime clause in the charterparty agreement.

Having identified the general nature of the concept of laytime, it is pivotal to this discourse to know the appropriate ways of calculating loading and unloading times in charterparty agreements.

HOW TO CALCULATE LAYTIME

Subject to the agreement of the parties, Laytimes may be calculated by a fixed number of days or by daily rate or exact quantity of loading and unloading.

Fixed Number of Days.

One way to calculate the duration of laytime is by reference to a fixed number of days. The presumption is that days mean “calendar days”. Thus where only part of a day is worked, that is counted as a whole day in laytime. This rebuttable presumption has however now given way to the more normal conventional day of 24 hours running from the start of laytime. For instance, if time starts at 0500hrs on a Tuesday and loading is completed at 11.00hrs on a Friday, under a “Calendar” day, four laydays is deemed to have been used. But under a “conventional day” only three and a quarter laydays would be used.

Some learned authors are of the view that Laytime could also be calculated according to running working days. Normally, a charterparty specifies the number of “laydays”, i.e. the number of days allowed for loading and discharging the cargo. Where they are referred to as “running working days”, it means days on which work is usually done in the particular port in question. Unless there are exemption clauses in the charter, the charterer is liable to load and unload within the agreed time.

Daily rate or quantity of Loading or offloading:

Laytime may also be calculated by reference to a daily rate of loading and or discharge. For example, 500 tons daily. In the case of General Capinpin, the House of Lords held that a variant of the clause which read “at the average rate of 1,000 metric tons basis five or more available workable hatches pro rata, if less number of hatches fixed an overall discharge rate of 1,000 tons per day.

Sometimes the rate will be expressed as one being “per working/available hatch”. In most cases, the hatch which is to take the largest quantity of cargo will be the “critical hatch” and the laydays will be the result of dividing the cargo for that hatch by the average rate specified by the charter. Therefore if the average rate is 500 tons per day and the charterer loads 1,000 tons into hatch one and 800 into hatch two and 200 into hatch three, the charterer will have available a total of two laydays, calculated by dividing cargo loaded into hatch one by the daily rate.

COMPLETION OF LOADING / UNLOADING BEFORE THE EXPIRATION OF LAYTIME

A charterer will usually wish to complete loading before the expiration of laytime so as to avoid liability for demurrage. Where loading is completed before the expiration of laydays, the charterer is obligated to present bill of lading immediately and enable the ship to proceed. The charterer need not delay the departure of the ship only to complete laytime, otherwise he would be liable. But the charterer is entitled to delay the ship up to the expiration of laydays. He cannot be held liable for using the whole time only by showing that he could have conveniently completed the loading earlier. In return however, the charterer may subject to the charterparty be entitled to a rebate called “dispatch money” if he loads or unloads the ship earlier than the time to which he is entitled under the charterparty.

It should be noted however that the completion of loading before expiration of the laydays may sometimes cause problems to the charterer if it means that bills of lading are dated earlier than the date specified on their sale contract. What the charterer cannot do is to delay the presentation of the bills for signature. Bills of lading must be presented within a reasonable time of completion of loading. Any delay caused by charterer’s failure to comply with this obligation will be compensated by damages for detention, and not at the demurrage rate.

In Nolisement vs Bunge, a vessel completed loading 19 days prior to the expiration of laydays. Bills of lading were not presented until three days after completion of loading, whereas on the facts a reasonable time for presenting bills of lading for signature would have been not more than one day. The charterer was held liable. However, it is quite legitimate to spin out the loading operation so that the bill of lading eventually issued bears the date that is in accordance with the charter’s sale contract. In the case of Margaronis Navigation Agency London Ltd. v. Henry W. Reabody and Co. of London Ltd. (The Vrontados), the charterer delayed the loading of the final 1% of the cargo so that a January bill of lading could be issued in respect of the whole cargo. It was held that the charterer was entitled to have the fixed time to load and was under no duty to accelerate the rate of loading to shorten the time to which it was otherwise entitled.

It must be stressed that the charterer’s duty is to load within the laytime allowed. The charterer owes no further duty to load or discharge with reasonable dispatch. But the shipowner will bear liability where he is responsible for the delay in the loading or discharge.

WHEN LAYDAYS BEGINS TO RUN

Subject to the terms of the charterparty agreement laytime will begin to run upon the arrival and readiness of the vessel couple with notice of the arrival of the ship to the charterer.

Upon Arrival of the Vessel.

Laydays generally begins to run after the arrival of the ship and its availability for loading or unloading. The charterparty agreement determines when a ship would be deemed to be available for the purpose of laytime. The question as to whether or not a ship is an “arrived ship” depends on whether a charterparty is a berth charter or a port charter. In a berth charter, the ship does not become an arrived ship unless it is at the particular berth, and therefore laytime begins to run once she is ready to load. 

In Sociedad Financiera De Bienes Raices S.A vs. Agrimpex Hungarian Trading Co (The Aello),the vessel under a port charterparty, was held not to be an “arrived ship” until she was within the commercial area of the port. The ship was anchored at a point and not allowed to go further unless there was a certificate that a cargo had been allocated to her. The House of Lords held that the charterers were in breach in failing to provide cargo in time to enable the ship to perform its obligation of becoming an arrived ship.

The readiness of the vessel also means the actual readiness of the ship and not anticipated readiness. By readiness, the cargo gear, cranes, cleanliness, cargo space accessibility, fumigation etcetera must be intact requiring no further work or checking. Legally, it also means the vessel has fulfilled all port formalities for loading and or unloading before laytime can start running. The implication of this assertion is that under a berth charter party any time lost before the vessel can get to the berth where loading or discharging can be done falls upon the owner of the ship or on the charterer if he fails to provide cargo except it is expressly provided otherwise. Conversely, in a port charterparty, the moment a ship arrives at the port, any subsequent delay in berthing would normally be at the risk of the charterer.

TENDERING OF VALID NOTICE OF READINESS

If the vessel has arrived and is ready to load or unload, the shipowner is required to serve a valid Notice of Readiness (NOR) of the vessel on the charterer before laytime could commence. The tendering of the Notice of Readiness (NOR) on the charter must be subsequent to the arrival and readiness of the vessel for it to be valid. Anything short of this, the notice would be invalid except, otherwise expressly agreed.

Laytime start running after a valid Notice of Readiness (NOR) has been given to the charterer. In The Mexico 1, a failure to give a valid Notice of Readiness was held to prevent laytime from running until the actual start of discharge. But notice for the purpose of discharge is not necessary. What is paramount is that the notice tendered is not defective. It is generally immaterial if the notice though valid does not fully conform to the requirements of the charterparty agreement. If loading in fact starts before the earliest time specified for giving of Notice of Readiness, laytime will not commence until that time has passed.

Laytime may not run in the absence of notice. In the case of Fairbridge V Pace[26], the ship entered at the custom house but no notice of readiness was given to the charterer, it was held that the charterer was not liable for failure to provide a cargo for the purposes of loading because they were not aware of the arrival of the ship.

LEGAL READINESS OF THE SHIP. 

      

Apart from being physically available to the charterer, the ship must be legally available. This means that all the necessary permits have been obtained and no laws or regulations prevent his having access to the ship for his work. She must have free pratique, be free from any quarantine (disease) restrictions and be fully documented. The documentation may be stipulated by national or local laws, or established at the discretion of the authorities. The documents include in the case of most ports, the certificate of registry, bills of lading, charter-party, manifest, official log-book, ship's articles, lists of dutiable stores, trade line and wireless installation inspection certificates and in some ports a bill of health. In Nigeria, the ship before proceeding to the sea for loading must have obtained a LoadLine Certificate. In the Nigerian case of ISC Services Ltd. V. G. C Ltd, the appellate court held that the Pre-Shipment Inspection of goods is a pre-requisite for the commencement of carriage by sea. Conversely, the ship will be deemed not ready if the failure to meet these requirements results in her not being available to the charterer to whatever extent he requires her.

THE PHYSICAL READINESS OF A SHIP

The cargo charterer must be allowed physical control of the ship including access to the holds, so far as that is necessary for them to perform their part of the joint operation of loading or discharging. This is known as the physical readiness of the ship to load. Such control could include stopping the shipowner from loading the cargo.

Practically speaking, the readiness of the ship at the loading port will usually be within the peculiar knowledge of the shipowner, who must give notice of her arrival to the charterer. A statement as to the position (location) of the ship will generally be construed as a condition precedent, the falsity of which entitles the charterer to rescind the contract.

It is also submitted that the master of a ship when in doubt as to the place where notice should be given to just issue the notice to avoid demurrage. This advice is predicated on the need to act on the part of caution and surplusage than to pay high cost of demurrage.

If the charterparty provides that notice shall be given in a particular form, then mere notice or awareness of readiness is not enough. The master of the ship must adhere to the method prescribed. For example, where the charterparty agreed that notice should be given in office hours, failure to adopt the prescribed method will prevent time from running. In Gordon V. Powis, the charterparty provided that "captains or owners to telegraph advising probable arrival, and at least eight clear days notice shall be given previous to requiring cargo". The court held that it did not amount to a notice requiring cargo where the Master telegraphed that he had left Philadelphia, the last port on the previous voyage, for Quebec. According to Day J, that is something entirely distinct from the telegraphic notice as to probable arrival and that is not a notice requiring cargo as agreed by the parties. It is a provision precedent that such notice should be given.

NOTICE REQUIRES AT FIRST LOADING PORT ONLY

In a charterparty agreement where the cargo are in more than one ports or the vessel is passing through multiple ports, notice of readiness is mandatorily requires at a sole loading port, even in the absence of an express stipulation to that effect in the charterparty. Conversely notice of readiness is not needed at the second and subsequent ports unless otherwise expressly agreed. This rule is predicated on the ground that where there has already been a call at the loading port, the charterer is aware that the ship has already begun to fulfill its obligation. The presumption then is that the charterer is following its course and making loading preparations accordingly. This position was affirmed in the case of Burnett S.S. Co. Ltd. V. Oliver & Co. Ltd.

It submitted however that notice can be required at each loading port where it was so agreed. In such cases, the charter- party should contain such clauses as "...laydays at each loading port to commence on the day following notice of readiness to load..."

Under English law, there is generally no requirements for issuance of notice at the port of discharge. Notice of the readiness of a ship to discharge is to be given to the receiver where the bill of loading or charterparty expressly provides or where it is customary to the country in question[33]. Such notice would also be given where there is custom to that effect. In the absence of these the shipowner is not obliged to give notice of readiness.

The presumption of the law is that the consignee (charterer) must always be on the watch out for the arriving ship while the shipowner must not make it difficult or impossible for the charterer to locate the ship.

In modern charterparties agreements however, the circumstances in which notice of readiness has to be given, and the mode of giving the notice is often spelt out in more details.

Notice of readiness of a ship for the purposes of loading and or unloading is a notice to the charterer of certain facts, in whatever form it may have been prescribed. These facts include the arrival of the ship at her contractual destination or so near thereto as she can safely get and her readiness to load.

If all the requirements of readiness, subject to minimal and insignificant qualifications are not satisfied when the notice is given, the notice wholly is ineffective. In this circumstance, notice would have to be given again upon the readiness requirements being out. Similarly if there is an express "provision for a further waiting period to elapse after notice and before laytime can begin” then that further waiting period will have also to elapse after the requirements of readiness have been satisfied. It should be noted however that this latter provision may be dispensed with so that laytime begins when the readiness requirements are satisfied. This is a rare possibility but has been acknowledged where some reciprocal concession had been made by ship-owners delaying the beginning of the "time lost in waiting" period and the charterer did not need the notice period.

Where a bill of lading is silent as to the time within which the consignee is to discharge ship's cargo, the charterer is obligated to discharge within a reasonable time. That obligation is performed if he discharges the cargo within a time which is reasonable under the existing circumstances, assuming that those circumstances, in so far as they involve delay, are not caused or contributed to by him. Thus in the case of Hick V. Raymond and Reid, a cargo was shipped for the port of London under bills of lading which did not specify the time within which the consignees were to take discharge of it. Upon arrival of the ship, the consignees began to unload, but it was interrupted for several days by a strike of the dock labourers. The consignees were held not liable to the shipowner for the delay.

SOME CLAUSES THAT MAY MODIFY THE GENERAL REQUIREMENTS ON COMMENCEMENT OF LAYTIME

There are certain express terms/clauses which when included in a charterparty agreement may modify the usual conditions for the commencement of laytime. Such clauses could be drafted thus:

1.        "Time lost in waiting for berth to count as loading time" and "time lost in waiting for berth to count as discharging time".

2.         "Whether in berth or not"

3.         "Time... to commence on being reported at custom house”

4.         ”In regular turn”. E.g. the cargo is to be loaded in regular turn as customary commencing when notice is given of steamer being ready to load..."

5.         "Demurrage in respect of all times waiting”

6.         "To be loaded as per colliery Guarantee”

7.         “Time to count twenty-four hours after arrival at or off the port..."

In North River Freighters Ltd. V. President of India, the Radnor was chartered to carry soya beans from "one safe berth Dairen (Manchuria)" to Mandras and Calcutta. The charterparty provided, by clause 17, that laydays should begin twenty-four hours after notice of readiness to load had been given by the master. It also stated "Time lost in waiting for berth to count as loading time". When the ship anchored in the quarantine anchorage at Dairen, custom and port official sealed up the radio, took away a number of ships documents and banned communication with the shore. Seven days later, the ship was taken to berth (though not loaded there) and on the following day the master was able to give notice of readiness. The court of appeal held that the ship owner was entitled to count the eight days as time used although the notice had not then been given.

It is equally pivotal to understand that even in the case of a port charterparty, the beginning of laytime can be postponed, in spite of the ship having arrived at the port, being ready, and having given notice, if she must await her "regular turn". It is possible for the notice and the regular turn provisions to be so closely linked as to suggest that laytime begins when notice is given, but this may not be the case. The consequence of this is avoidable confusion.

SUSPENSION OF LAYTIME.

A good drafter of charterparty agreement must educate the parties thereto on the imperative to ensure the charter agreement contains a laytime exception clause that will list certain eventualities that can interrupt the running of laytime. The most important of these circumstances is Bad Weather.

The Concise Oxfords Dictionary define weather to include the atmospheric conditions prevailing at a place and time, combination produced by heat or cold, clearness or cloudiness, dryness or moisture, wind or calm, high or low pressure, electrical state of local air and sky..." When any natural phenomenon falling within this definition has the effect of preventing work from being done, or would have that effect if anyone had been working (they having not worked for some reason other than the weather), then laytime is interrupted if the laytime clause refers to 'weather working days'.

Other natural phenomenon which may constitute bad weather includes earthquakes, rain, snow, storms and ice surf.

In Dampskibsselskabet Botnia A/S V C.P Bell and Co., the charterparty provided for the loading of pit props in Finland in mid-November at a specified rate "per weather working day". The ship was ordered to Mollersvik, Middle Finland, which was normally blocked with ice from about the middle of November. At first cargo could be towed out in the form of rafts but later in November ice formed and loading was impossible. The ship sailed with a part cargo because the charterer told the master that they could load no more. The port was then closed for the winter. The court per Bateson J. held that the shipowner was not entitled to any dead freight rejecting his argument that ice was not weather.

 Bad Weather Before Laytime Begins

It is probable before the commencement of laytime the ship may still be on her way to her destination in order to load or discharge in which case bad weather can have no effect on laytime calculations. If the ship is delayed at sea, any loss of time is on the account of the ship owner. If the ship is delayed by bad weather immediately outside but before reaching her contractual destination whether that be a berth, port or other place, the charterer will not be responsible since he has not caused the delay.

But if the charterer has brought about a delay, by for example, creating congestion through an unreasonable and abnormal amount of chartering, he may be liable to pay detention damages to the shipowner.

Bad Weather After Laytime Begins

Whether bad weather occurring after laytime has begun will suspense the running of laytime or not is generally dependence on the terms of the laytime clause in the charterparty agreement. For instance,

a.         If the charter clause reads "weather working days", the day where work is not done due to weather will not be counted.

b.         Where the bad weather is for only part of a normal working hours, the hours (period) affected by bad weather will generally be excluded in calculating laytime unless the affected hours were substantial enough to affect almost the whole day. In the latter case, the day would be excluded.

It must be noted that what determines a working hours generally depend on the port, port area, trade, ship etcetera including overtime which is more of a rule than an exception at ports.

Apart from bad weather, laytime may be suspended or excluded on Sundays, Saturday and holidays. Time will also not run against the charterer where the inability to load or unload is due to a sudden strained in the relationship of two affected countries or hostile government policy. It may also be suspended due to labour union strikes or strikes of shipowner. The holidays may be general or local for example, Christmas day is general while October 1^st Independence Day celebration in Nigeria is local. Local holiday may also be a day peculiar to a particular port. It is however necessary to note that the general rule of labour union strike suspending laytime will not be applicable if by the time the strike started, the charterer was already in breach of the laytime agreement. Similarly, the moment a vessel is on demurrage, no other exceptions will operate to prevent the demurrage from continuing to be payable unless the exclusion clause in the charterparty agreement expressly provides otherwise. Where a ship is detained by relevant government on ground of overloading or improper loading, time will generally continue to run.

In addition, port congestions, lights and customary shifting could also suspend the running of laytime. Some standard charterparty form also contains situations when laytime may be suspended. Clause 6 of the Asbatankvoy Charterparty Form suspense laytime, where the delay is out of the charterer’s control.

REMEDIES FOR BREACH OF LAYTIME PROVISIONS

a. Demurrage: This is the general and main remedy available to the shipowner when the charterer fails to load or unload the ship within the agreed time. Demurrage is primarily due from the charterer, but recovery may also be made from a bill of lading holder provided the bill of lading incorporates the terms of the charter and the demurrage clause is worded so as to encompass the liability of a bill of lading holder. So long as the shipowner is desirous of continuing the contract his entitlement for breach of laytime would be the agreed demurrage.

b. Right to repudiate the contract: The shipowner will not generally be entitled to terminate the charter and sail off at the expiration of laytime. His right to terminate will arise only when the period of delay after the expiration of laytime may either be express as a period of "unreasonable delay" or of such delay so as to frustrate the commercial purposes of the contract. Depending on the circumstances of the particular case, the shipowner is entitled to terminate the contract at once without the need to wait till the end of the period of the day[48].

c. Right to Sue for Damages for Detention:

Damages for detention are the un-liquidated damages which accrue to a shipowner in respect of the wrongful detention of his ship. Wrongful detention can result from failure by the charterer to load or to give orders for a loading or a discharging place or some other breach by him. Such damages for detention become due either where there is no demurrage stipulation, the laytime (whether fixed, calculable or reasonable) having been exhausted or where there is the now rare stipulation that demurrage should run for a fixed time, that fixed time having expired. Demurrage is liquidated damages but damage for detention is generally un-liquidated having not been earlier agreed upon.

In conclusion, what determines laytime, calculation of laytime and demurrage for breach of laytime is generally dependence of the terms (clauses) of the charterparty and to some extent the prevailing port policies. In other to effectively reduce the challenges of calculating laytime, the agreed period for loading the cargo should be separated from the period for the discharge of same. A saving of time on one operation can be used to offset demurrage incurred on the other. Laytime can be averaged in which case two separate statements are drawn up and time saved on one operation can be credited against the other. The introduction of an extension of time clause into the charterparty agreement will enable the parties to regularize whatever challenges they may have.