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 In reviewing comments and statistics on which articles most interest readers of AWT Insights, it is clear that articles related to Charter Party terms and claims are among the most popular. This month we tackle a sometimes confusing and controversial topic – whether a claim for a deviation is simply “off-hire” or results in a claim for “damages.” Enjoy your reading. We welcome your comments. |
| Thank you, |
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Skip Vaccarello |
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| Charter Party: Off-Hire Clause and Deviation Calculations |
| by George Schlinkert |
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Calculations regarding off-hire events and deviations should be governed by specific terms detailed in the agreed Charter Party documentation. Countless articles and awards have been written relating to this topic but many have strayed from the basic premise of what constitutes off-hire. All ship operators need to be aware of the fundamental premise relating to this part of their agreed Charter Party description. Following is the general wording found in the NYPE 93 form: |
"In the event of loss of time from deficiency and/or default and/or strike of officers or crew, or deficiency of stores, fire, breakdown of, or damages to hull, machinery or equipment, grounding, detention by the arrest of the Vessel, (unless such arrest is caused by events for which the Charterers, their servants, agents or subcontractors are responsible), or detention by average accidents to the Vessel or cargo unless resulting from inherent vice, quality or defect of the cargo, drydocking for the purpose of examination or painting bottom, or by any other similar cause preventing the full working of the Vessel, the payment of hire and overtime, if any, shall cease for the time thereby lost. Should the Vessel deviate or put back during a voyage, contrary to the orders or directions of the Charterers, for any reason other than accident to the cargo or where permitted in lines 257 to 258 hereunder, the hire is to be suspended from the time of her deviating or  putting back until she is again in the same or equidistant position from the destination and the voyage resumed therefrom. All bunkers used by the Vessel while off-hire shall be for the Owners' account. In the event of the Vessel being driven into port or to anchorage through stress of weather, trading to shallow harbors or to rivers or ports with bars, any detention of the Vessel and/or expenses resulting from such detention shall be for the Charterers' account. If upon the voyage the speed be reduced by defect in, or breakdown of, any part of her hull, machinery or equipment, the time so lost, and the cost of any extra bunkers consumed in consequence thereof, and all extra proven expenses may be deducted from the hire." |
| Although the above is quite clear there is often a great deal of confusion surrounding whether a claim for loss is ‘damages’ or ‘off-hire’. In the case of the ‘MV IOANNA’: |
| "Off-hire events are not necessarily a breach of contract at all. So one should not be too surprised if one finds that [the off-hire clause] leads to a different answer than would ensure in the case of a claim for damages for breach of contract." |
| There is a clear distinction between the two different scenarios. If a vessel performs at a speed less than the speed described in the Charter Party then any under performance claim should be on the basis of ‘damages’ and not ‘off-hire’. It is our understanding that any claim pursued as a claim for damages due to an owner’s breach should therefore credit any related bunker savings. On the other hand, any claim falling under the auspices of the off-hire clause will not require such an offset and the total damages should in fact also include bunkers consumed. |
| There is logic to the premise that the loss resulting from a deviation should be calculated at the time the deviation occurs, as the vessel owner is only accountable for the deviation and the actual physical parameters which then affect the vessel are beyond their control. Ship Charterers often feel they are being unfairly treated when a deviation occurs and a weather situation (i.e. storm or typhoon) affects the vessel voyage when returning to hire. Of course, it is equally possible that the direct route would have been delayed by a similar weather feature, whereas the route after the deviation was not. Unless the deviation was to such an extent that it placed the vessel in a situation or location which was not contemplated when the agreement was signed, it is our understanding such ‘usual’ weather affects are a part of the charterer’s responsibility where they bear the burden of delays at sea due to weather. |
| There is logic to the premise that the loss resulting from a deviation should be calculated at the time the deviation occurs, as the vessel owner is only accountable for the deviation and the actual physical parameters which then affect the vessel are beyond their control. Ship Charterers often feel they are being unfairly treated when a deviation occurs and a weather situation (i.e. storm or typhoon) affects the vessel voyage when returning to hire. Of course, it is equally possible that the direct route would have been delayed by a similar weather feature, whereas the route after the deviation was not. Unless the deviation was to such an extent that it placed the vessel in a situation or location which was not contemplated when the agreement was signed, it is our understanding such ‘usual’ weather affects are a part of the charterer’s responsibility where they bear the burden of delays at sea due to weather. |
| Clients frequently seek the advice of AWT when faced with complex ‘damages’ and ‘off-hire’ calculations. AWT advice will be based on an unbiased, scientific and acceptable approach, cognizant with present arbitration findings. Although we are aware that we are not recognized experts in this legally challenging area of ship performance interpretation, we do have many years of experience in this area and usually provide this advice as part of our standard optimum ship routing service. |
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