Performance Warranties in Charterparties- “Good Weather” Qualification Again!  

Eastern Pacific Chartering inc v. Pola Maritime Ltd (The Divinegate) [2022] EWHC 2095 (Comm)

The Divinegate was trip chartered on an amended NYPE 1946 form with additional clauses for a carriage of pig iron from Riga via the Baltic Sea to the Mississippi River in the United States. Following discharge of the cargo, the owners sought unpaid hire, bunkers and expenses totalling US$ 99,982.79 and the charterers sought deductions from hire of US$ 93,074.55 for the failure to proceed with utmost despatch on the voyage and hull fouling. The charterers also made a counterclaim for US$ 72, 629.01 as damages in tort on grounds of the owners’ allegedly wrongful arrest of the vessel, The Polo Devora, of which charterers believed to be the beneficial owner. The wrongful arrest counterclaim failed and will not be discussed here.

The charterparty contained a performance warranty to the effect that “Speed and consumption basis no adverse currents and valid up and including Douglas Sea State 3/ Beaufort Force 4.”

The essence of the litigation was the assessment of the chartered vessel’s performance to determine whether there was, in fact, a failure to proceed with utmost despatch on the voyage. The owners contended that the performance of the vessel should be assessed in a conventional way, i.e. by reference to the vessel’s speed during “good weather”. The charterers, on the other hand, suggested that underperformance could be established by reference to the vessel’s measured RPM (revolution per minute) which reflects the engine speed maintained by the crew.   

The Judgment and Lessons for the Future          

Ms Clare Ambrose, sitting as a High Court Deputy Judge, made significant observations on the state of law in this area and reached interesting conclusions which are likely to inform the judges and arbitrators who are often called in to deal with performance related claims in the context of time (and trip) charters.

  1. It was stressed that traditional way of establishing breach and loss in performance claims is the “good weather” method and in instances where the parties have adopted such a formulation in their contracts (which was the case here) this will be the primary method of assessment used by the court.

2. The judge also appreciated that this is not the only available methodology for making calculations and there is no bar for alternative methods being used to measure vessel’s performance. However, any alternative method must be consistent with the express wording contained in the charterparty and must also be established as “reliable”. On the facts of this case, the RPM method was not found to be reliable in identifying loss of time as it made incorrect assumptions as to the resistance on the hull and made no allowance for weather conditions being a reason for a reduction in engine speed, as well as ignoring the fact that there were periods the vessel could not achieve the warranted speed due to other factors, e.g. currents.

Therefore, the judge left it open to parties to argue that alternative methods (especially in the light of emerging technologies) could be used to assess a chartered vessel’s performance but strongly hinted that so far no satisfactory method has been put forward to sway judges/arbitrators away from the traditional method and legal principles that have been developed for years. Referring to the “good weather” method, Ms Ambrose said (at [90]):

The approach adopted in the authorities reflects commercial practice in assessing performance and the specific wording chosen by the parties, rather than the court imposing legal methodologies.

3. An interesting debate in the case related to the impact of currents in the assessment of performance of the vessel. It was contended by the charterer that allowance should be made for the positive currents and positive currents should be, therefore, a factor in determining whether the vessel’s performance is at the warranted level. This argument found no support from the judge. It was held that in the absence of wording excluding the benefits of positive currents, such benefits should not be deducted in measuring the vessel’s speed for the purposes of the performance warranty. This provides a judicial clarity on the matter and is logical from a commercial perspective. A contrary solution would have meant that the owners would be penalised for its master finding a favourable current and ensuring that the vessel goes faster and burns less fuel (something that is economically beneficiary for both parties).

The judge applying the “good weather” method, reached the conclusion that the chartered vessel failed to meet the warranted speed so there was underperformance giving rise to a loss of time of 16 hours.

4. The judge also rejected the claim for hull fouling indicating that the use of good weather method for calculating loss from slow steaming would otherwise lead to double recovery.

The judgment is a reminder to the market that in the absence of clear and contrary wording it will be rather difficult to shift the traditional method of assessing a chartered vessel’s performance with reference to good weather method. However, especially in trip charters there remains a realistic possibility that it might not be possible to obtain good weather sample so as to be able to assess the performance of the vessel. In those instances, with the advances in technology, the courts and arbitrators might come under pressure to consider alternative assessment methods that could shed light on the performance of the chartered vessel.              

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Professor Barış Soyer

Professor Soyer was appointed a lecturer at the School of Law, Swansea University in 2001 and was promoted to readership in 2006 and professorship in 2009. He was appointed Director of the Institute of Shipping and Trade Law at the School of Law, Swansea in October 2010. He was previously a lecturer at the University of Exeter. His postgraduate education was in the University of Southampton from where he obtained his Ph.D degree in 2000. Whilst at Southampton he was also a part-time lecturer and tutor. His principal research interest is in the field of insurance, particularly marine insurance, but his interests extend broadly throughout maritime law and contract law. He is the author of Warranties in Marine Insurance published by Cavendish Publishing (2001), and an impressive list of articles published in elite Journals such as Lloyd’s Maritime and Commercial Law Quarterly, Berkley Journal of International Law, Journal of Contract Law and Journal of Business Law. His first book was the joint winner of the Cavendish Book Prize 2001 and was awarded the British Insurance Law Association Charitable Trust Book Prize in 2002, for the best contribution to insurance literature. A new edition of this book was published in 2006. In 2008, he edited a collection of essays published by Informa evaluating the Law Commissions' Reform Proposals in Insurance Law: Reforming Commercial and Marine Insurance Law. This book has been cited on numerous occasions in the Consultation Reports published by English and Scottish Law Commissions and also by the Irish Law Reform Commission and has been instrumental in shaping the nature of law reform. In recent years, he edited several books in partnership with Professor Tettenborn: Pollution at Sea: Law and Liability, published by Informa in 2012; Carriage of Goods by Sea, Land and Air, published by Informa in 2013 and Offshore Contracts and Liabilities, published by Informa Law from Routledge in 2014. His most recent monograph, Marine Insurance Fraud, was published in 2014 by Informa Law from Routledge. His teaching experience extends to the under- and postgraduate levels, including postgraduate teaching of Carriage of Goods by Sea, Transnational Commercial Law, Marine Insurance, Admiralty Law and Oil and Gas Law. He is one of the editors of the Journal of International Maritime Law and is also on the editorial board of Shipping and Trade Law and Baltic Maritime Law Quarterly. He currently teaches Admiralty Law, Oil and Gas Law and Marine Insurance on the LLM programme and also is the Head of the Department of Postgraduate Legal Studies at Swansea.

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