Implied indemnities 1: Unsafe ports

Norway-based marine insurer Skuld has started a series on the concept of the obligations and potential liabilities which charterers might find themselves be burdened with, even when those are not expressly agreed in a charterparty.

Safe berths/ports

Skuld noted that ordinarily there would be express provisions concerning the charterers’ obligation to employ a vessel between safe ports/berths/anchorages (absolute duty vs mere exercise of due diligence) contained both in time charters and in voyage charters.

However, what would happen if there were no express provisions in the contract?

Time charters

In time charters, the position was relatively straightforward (although not deprived of exceptions). Where there were no express terms to safety contained in the contract, the court may imply one (see The Evaggelos Th [1971] 2 Lloyd’s Rep. 200, confirmed by The Evia (No. 2)). The twist however came with The A.P.J. Priti [1987] Lloyd’s Rep. 37 (C.A.) where the Court of Appeal considered whether a safe berth warranty should be impliedly extended to a safe port warranty. It found that it should not . In any event, the court would not imply a term as to safety, unless it took the view that this was necessary to give business efficacy to the charter.

Voyage charters

Skuld noted that in voyage charters the position was much less straightforward. In Compania Naviera Maropan S/A v. Bowater’s Lloyd Paper Mills, [1955] Vol. 1 (The Stork) the charter provided for “approved” loading ports. Morris LJ found that “there is an implied term in the contract that the charterers will in fact order or direct the ship to the place where she would find the cargo to be loaded, together with an express or implied term that the place to which the ship would be directed would be safe.”

Contrarily, in the case of The Reborn ([2009] 2 Lloyd’s Rep 639) it was found that the test should be one of necessity. The judges concluded that whether a port safety warranty would be implied depended on the degree (and range) of liberty that the charterer had to nominate ports and the information provided to the owners about the intended port of call. The greater the liberty, the greater the need for implication of the warranty, whereas the more extensive the information the owner received, the lesser the need became.

Skuld concluded by saying that the moral of the story was, in the words of Samuel Johnson “he is no wise man who will quit a certainty for an uncertainty”. The issue of the ports’/berths’ safety warranty is far too important to be left to be decided by the coin-toss of a trial and terms should thus be expressly agreed upon. So let’s play it safe.”