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Affreightment

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AFFREIGHTMENT. Payment for the carriage of goods by water, more especially by sea, is called freight, and a bargain made between the carrier and the person whose goods are to be so carried is called a contract of affreightment. The law does not require that a contract of this kind shall be made in writing, but usually it is expressed in that form. The terms on which goods are carried by sea are, except in coasting trade, ordinarily expressed in a charter-party or a bill of lading or both. The former may be shortly described as a contract between a ship owner and a merchant for the hire or use of a ship, and the latter as a receipt for goods, stating the terms on which they are delivered to and received by a ship. A charter-party usually relates to the full cargo of a ship, and a bill of lading may do the same, but it is more often given with reference to a particular parcel of goods.

Terms Implied by Law.

The parties to a contract of affreightment are assumed by law (unless the contract expressly negatives or qualifies the assumption) to have dealt with each other on the footing of certain obligations included among the terms of contract. In the unusual case of no terms being expressly agreed, the implied terms alone would regulate the relations of the parties. In the common case of terms being expressly agreed, the implied terms are included, subject to any modification of them specifically and explicitly made by the express terms. It should be mentioned in passing that, where the goods are carried under bills of lading, certain terms are by statute (as explained below) included in the contract which the parties are not free to exclude even if they wish.

Subject then to any modification made by the contract, a person who for payment carries goods by sea is under an implied obligation to exercise due care and diligence. Except possibly in a case where the sea carrier is not a common carrier (i.e., where he does not profess himself ready to carry goods for everybody) he has a further degree of responsibility, in that he is liable for every accident, unless caused by act of God, or of the king's enemies, or by inherent defect of the goods themselves, or by their having been sacrificed for the general safety. He also im pliedly undertakes absolutely that the ship is seaworthy at the beginning of the voyage, and that he will proceed on the voyage with reasonable dispatch, and without unnecessary deviation. Seaworthy has a special meaning as explained later. The carrier may in some circumstances be entitled to claim statutory limita tion of the amount of his liability.

On the part of the shipper an undertaking is implied not to ship dangerous goods without notice, and he or the person entitled to take delivery of the goods is impliedly under obliga tion (I) to be prepared, without notice from the carrier, to take delivery within a reasonable time after the arrival of the ship at the place of delivery, and (2) to pay freight and general average contribution (if any) before he can claim delivery of the goods. In some circumstances where performance of the contract be comes impossible the parties may be released from performance under terms deemed to be implied in the contract.

Parties to the Contract.

As already mentioned, the terms of contract are ordinarily expressed in a charter-party (shortly, a charter) or a bill of lading, or both. A bill of lading may be more fully described as "a receipt for goods shipped on board a ship, signed by the person who contracts to carry them, or his agent, and stating the terms on which the goods were delivered to and received by the ship. It is not the contract, for that has been made before the bill of lading was signed and delivered, but it is excellent evidence of the terms of the contract" (Scrutton). Usually the printed form of the particular carrier is filled up in writing and signed by the captain, broker or other agent of the carrier, and the terms of the contract made or deemed to have been made before the bill of lading was given are thus reduced to documentary form. Though in form a receipt, a bill of lading is also a transferable document of title representing the goods to which it relates.

Where the contract is between a shipper and a carrier who is himself the shipowner the bill of lading binds the shipowner. In the case of a chartered ship—i.e., a ship hired by a charterer— the bill of lading may, according to the circumstances, bind the shipowner or the charterer. Charters are varied in form. Under some, where the shipowner parts with the whole possession and control of the ship (so that the charter amounts to a demise, a form rare in modern practice) the contract would be between the shipper and the charterer. Under other charters the char terer may merely undertake that a full cargo shall be shipped and guarantee payment of a certain freight. There the contract would be between shipper and shipowner. Where, in interme diate cases, the shipper is a person other than the charterer, the bill of lading may, according to the terms of the charter, bind the shipowner or the charterer.

Charter-parties.

Charters (apart from the unusual form amounting to a demise of the ship) are entered into for a voyage (or series of voyages) or for a period of time. A voyage charter commonly provides that the ship, as described, shall proceed to a named place, and there load a cargo, and shall then proceed to a named place of discharge, where the cargo is to be delivered. Freight is to be paid in a lump sum, or at a rate named on the cargo carried, or calculated in some other way. The number of days within which the charterers are to load and discharge (called lay days) is specified, and also a rate for demurrage should the ship be longer detained, with provisions to apply in the event of stoppages occurring. "Days" in a charter is under stood to mean calendar days of 24 hours commencing at mid night. Sundays and holidays are included unless expressly excepted. "Working days" means all days on which work is ordinarily done at the port, excluding Sundays and holidays. Provisions as to time are frequently expressed in hours instead of days. Further clauses deal with issue of bills of lading, ex ceptions from liability, discharge of cargo, payment of freight, general average, ceasing of charterer's liability, brokerage, etc.

By a time charter the ship is hired to the charterers for a specified time, commencing on a certain date, when the ship is to be placed at the disposal of the charterers, at some specified place, or place to be named, to be employed in lawful trades between certain limits. The clauses deal with various matters in connection with the employment of the ship, such as payments for stores, provisions, wages, insurance, fuel, port and other charges, the appointment and giving of directions to the master of the ship, stevedoring, exceptions from shipowner's liability, arbitration, etc. A number of common forms of charter are in use containing clauses adjusted to the requirements and conditions of particular trades.

In determining the effect to be given to a charter it may be necessary to take into consideration along with its express terms other terms which, as already explained, are implied by law. Thus if a charter contains no express provision as to sea worthiness there is underlying the contract, and implied and involved in it, a warranty by the shipowner that the ship is seaworthy. The special meaning attached to this word is that the ship shall have that degree of fitness which an ordinarily care ful and prudent owner would require his ship to have at the corn mencement of her voyage, having regard to all the probable circumstances of it. Not only must the ship be tight, staunch and strong, but also fit for the carriage of the particular kind of cargo to be carried. This implied absolute warranty of sea worthiness is fulfilled if the ship is seaworthy when she leaves her moorings, and does not include any undertaking that the ship shall continue seaworthy; but where the voyage is in stages the ship must be fit for each stage when entered upon.

There may also have to be taken into consideration, in con struing a charter, trade usages or customs with reference to which the parties are presumed to have made their contract. The express terms often refer to custom (which in a charter means a settled and established practice of the port) and they may be explained by evidence of usage or custom short of alleging anything inconsistent with them. For example, stipulations as to loading or discharging cargo in a port may be thus construed. Evidence of custom may be given to explain the meaning of working day at the port.

When a ship has reached the place where (under a voyage charter) she is to be ready to load, and is ready to load, and the charterers have been notified of this, the ship is an arrived ship the lay days (for loading) begin to run.

Subject to any express or implied qualification, a charterer undertakes absolutely to furnish a cargo. When he fails to fur nish a full cargo the damages which the shipowner is entitled to recover for this breach of contract are called dead freight. It is the duty of the master of the ship on behalf of the owner to receive and properly stow on board the cargo to be carried, which ordinarily is to be delivered to him alongside, but this duty may be subject to modification by custom or contract.

Should a ship be detained beyond the lay days the charterer will become liable to pay for the detention. If the basis for payment has been agreed by the charter the payment is known as demurrage. If it has not been agreed or if the charter refers to a fixed number of demurrage days which has been exceeded, then the payment, or part of it, will be damages for detention, the rate of which may have to be ascertained and may be dif ferent from the demurrage rate.

A common provision in a charter is the cesser clause, which is to the effect that the charterer's liability shall cease on the shipment of the cargo to the extent to which the charter gives the shipowner a lien. Under common law the shipowner's lien on the cargo is in respect only of freight and general average contributions. The cesser clause ordinarily confirms this, and gives a lien for demurrage, and sometimes also for dead freight.

Bills of Lading.

Thougheither a charter or a bill of lading or both together may express the terms of a contract, the trans actions in which no bill of lading is issued are few, because the bill of lading, in addition to its primary purpose of expressing terms of contract, serves in commerce as a transferable docu ment of title representing the goods to which it relates. Where the charterer is also the shipper, the bill of lading, as between shipowner and charterer, is regarded as no more than a receipt which does not alter the contract contained in the charter. It is merely a receipt until used by the charterer as a transferable document of title, i.e., until negotiated. Where the shipper is a person other than the charterer, the bill of lading is the evidence of the contract and does not, except by plain words, incorporate or impose on the shipper the obligations of the charter. Where the shipper (whether he is the charterer or not) has indorsed the bill of lading to a holder for value, the bill of lading is the only evidence of the contract.

Apart from statutory limitations on freedom of contract pres ently to be referred to, a common form of bill of lading (as set out in Carver, Carriage of Goods by Sea), was as follows :— "Shipped, in good order- and condition, by in and upon the good ship called the whereof is master for this present voyage, now riding at anchor in the port of , and bound for (description of goods) marked and numbered as in the margin, and are to be delivered in the like good order and condition at aforesaid (the act of God, the king's enemies, fire, and all and every other dan gers and accidents of the seas, rivers, and navigation of whatever nature and kind soever excepted), unto , or to his assigns, he or they paying freight for the said goods at the rate of , with primage and average accustomed. In witness whereof, the master or agent of the said ship hath affirmed to bills of lading, all of this tenor and date, the one of which bills being accomplished the others to stand void.

"Dated in the day of "(Signed) Many "negligence clauses" (exceptions from liability formerly inserted to protect sea carriers) have disappeared from bills of lading as a result of legislation. In the United States the Harter Act was passed in 1893. It requires the exercise of due diligence properly to equip the ship and make it seaworthy, and, subject to this being done, gives exemption from navigation risks as dis tinguished from carrier's risks which the act compulsorily imposes on the carrier by prohibiting the insertion in any bill of lading or shipping document of any clause whereby obligations carefully to handle and stow the cargo and to care for and deliver the same may be lessened, weakened or avoided. Similar legislation was afterwards passed by some of the British dominions.

More recent legislation has attempted to define by its express terms the liabilities as well as the immunities of the carrier. The Carriage of Goods by Sea Act, 1924, was formulated in this way. Scheduled to it is a series of rules which are in effect standard clauses to be deemed part of the terms of bills of lading. This act is applicable to these documents when issued in Great Britain or Northern Ireland. Similar legislation has been passed in Australia, India, most of the British colonies and Belgium.

The Carriage of Goods by Sea Act requires that (subject to exceptions) the bill of lading shall expressly incorporate as part of its terms the provisions of the rules scheduled to the act. These impose on the carrier an irreducible minimum of re sponsibility for the safe carriage of the goods.

Though the Act thus defines the carrier's liabilities, it does not (except in the case of the implied absolute undertaking to provide a seaworthy ship) expressly exclude the implied obligations re , ferred to above. Though an alternative basis of liability is expressly laid down, the question apparently might arise whether those obligations (other than that of seaworthiness) still exist underlying the contract and implied and involved in it. In any event the compulsory minimum of responsibility is a protection to third persons (such as endorsees) who, though not parties to the contract, may be affected by it, as well as to shippers.

As the rules scheduled to the act become part of the terms of British and Belgian bills of lading they are important, but it is not practicable to give here more than a summary.

Under the definitions in Article I "Goods" includes articles of every kind except live animals and deck cargo and "carriage of goods" covers the period from the time when the goods are loaded on to the time when they are discharged from the ship.

By Article II the carrier is subject to the responsibilities and liabilities, and entitled to the rights set forth in the rules.

The carrier's responsibilities and liabilities detailed in Article III are to exercise due diligence to (I) make the ship seaworthy, (2) properly man, equip and supply the ship, (3) make the holds fit and safe for goods. He must also properly and carefully load, handle, stow, carry, keep, care for and discharge the goods, and issue a bill of lading showing certain particulars of quantity and condition of goods. This document becomes prima facie evidence of receipt by the carrier of the goods as therein described. Unless notice of loss or damage is given on delivery (or, if not apparent, within three days) delivery is prima facie evidence of delivery and, in any event, carrier is discharge'd from all liability unless suit is brought within one year. Nothing may be added lessening carrier's liability, but clauses increasing it are allowable, e.g., clause making bill of lading conclusive evidence of shipment.

Article IV relieves the carrier from liability for loss or damage resulting from (I) unseaworthiness, unless caused by want of due diligence, (2) a number of specified perils (e.g., act or neglect of the servants of the carrier in the navigation or in the manage ment of the ship, fire, perils of the sea, act of God, etc.) which are mostly perils arising without the actual fault or privity of the carrier. Reasonable deviation is allowed. The carrier is not liable for loss or damage to goods in an amount exceeding f i oo per package or unit unless value is declared before shipment and inserted in bill of lading.

Under the form of bill of lading set out above the goods are to be delivered to a named person "or to his assigns." A docu ment in this form is by English law a negotiable instrument, in the sense that it is transferable by indorsement and delivery. A bill of lading may be indorsed by the person named in it (the shipper or the consignee) either in blank, by a simple signature on the back, or specially by indorsing and signing a direction to deliver to some other person or order. The indorsee may then transfer by indorsing in blank or specially. If indorsed in blank, or made out to a name left blank, or to bearer, a bill may be dealt with by mere delivery.

The indorsement and delivery of a bill of lading transfers such property as it was the intention of the parties to the indorsement to transfer, and, by the Bills of Lading Act, 1855, also transfers to the indorsee, to whom the property in the goods passes, the rights and liabilities of the shipper under the bill of lading. A pledgee is however not an indorsee to whom the property passes, and does not incur liabilities unless he takes delivery of the goods.

Performance of the Contract.

Reference has already been made to the implied undertakings by the carrier that he will proceed on the voyage with reasonable dispatch and without un necessary deviation, and to the doubt whether these obligations still underlie the contract where a bill of lading has been issued subject to the statutory rules.

To complete the voyage the sea carrier should, if necessary, repair the ship, or tranship the cargo in order that it may be forwarded to its destination.

If necessary for the common safety a shipmaster may jettison cargo properly stowed. Any such extraordinary sacrifice or ex penditure intentionally and reasonably made or incurred for the common safety, for the purpose of preserving from peril the prop erty involved in a common maritime adventure, is a general average act. Damages, losses and expenses which are the direct consequence of a general average act are borne by ship, freight and cargo as contributing interests. The contributions are ad justed by a general average statement. If, as is commonly the case, the charter or bill of lading incorporates by reference the York-Antwerp Rules, 1924, the adjustment is made as provided by those rules. (See further as to this under AVERAGE.) Should the contract prove impossible of performance owing to circumstances which were unforeseen, and to which no provision in the contract is applicable (in particular where circumstances arise from the occurrence of war or in some other way, involving such delay as to frustrate the commercial purpose of the adven ture) the contract may be held by the court to have come to an end by virtue of a provision implied in it. Cases of this kind are, of course, quite different from those where the contract, when made, cannot be performed without breaking the law. It is then void from the beginning for illegality.

Under the contract the ship is bound to proceed (unless pre vented by an excepted peril) to the agreed place of discharge. On the ship's arrival there the charterer or consignee is bound to take delivery. Unless, under express provision, or by custom, notice of arrival is to be given, none is required. In the case of goods imported from abroad into Great Britain, if the owner of the goods fails to make entry of them at the Customs, or to take delivery, the goods may, under and subject to com pliance with the provisions of the Merchant Shipping Act, sections 492-501, be landed and warehoused. Delivery should not be made except to a person producing a bill of lading making the goods deliverable to that person. By custom bills of lading are made out in sets, usually of three copies, but the carrier is justified in delivering to the first person producing a bill of lading making the goods deliverable to him, if without notice or know ledge of anything making it wrong to do so.

If goods are carried to the place where the voyage is to end, and, though damaged, are in a merchantable condition and ready for delivery, freight is payable. For delivery short of destination no freight is due unless the parties have taken steps justifying the conclusion that they intended to make a fresh contract whereby the owner of the goods has agreed to accept the goods at an intermediate port. English law in this respect differs from some continental laws under which proportional distance freight is payable. For short delivery at destination pro rata freight is payable. The carrier is entitled to a lien for freight payable on delivery. This is a possessory lien entitling him to withhold delivery until payment. It extends also to a general average contribution and to expenses incurred in the protection and preservation of the goods. If expressly so provided by the con tract, the lien may extend to other matters, e.g., demurrage, dam ages for detention and dead freight.

See T. G. Carver, Carriage of Goods by Sea (1925) ; T. E. Scrutton, Charter-parties and Bills of Lading (1925). _ (S. D. C.)

ship, lading, contract, bill and terms