The Conoco Weather Clause - When is Bad Weather n June 2018

Video Article
 
The Conoco Weather Clause (“CWC”) is frequently incorporated into charterparties but disputes as to its
application often arise. There is no clear line of authority on its application and, as with
all laytime and demurrage disputes, a careful analysis of the factual matrix including whether laytime has started
and the demurrage provisions in the charterparty, will be required. Assuming time has started, the cause of delay
will also be a factor. This article discusses some practical examples of its application in the context of various
standard form charterparties.

The Clause
The CWC provides that:

“Delays in berthing for loading or discharging and any delays after berthing which are due to weather conditions
shall count as one half  laytime or as time on demurrage at one half demurrage rate”

Commencement of Laytime
As with all laytime disputes the starting point is whether laytime has commenced, as until the clock has started
the CWC will not be applicable. Whilst this will depend on the provisions agreed and the particular
circumstances, the broad position under two of the standard form charterparties is as below:

Asbatankvoy – Laytime
Under clause 9 of the Asbatankvoy form, charterers are required to procure a berth that is ‘reachable on arrival’
(‘ROA’). This absolute warranty applies equally to physical and non-physical obstructions1 - the cause of
the unreachability is immaterial and a berth is equally deemed to be not ROA in instances where there is
unavailability of tugs2, where there is congestion, or in instances of bad weather.
While the Asbatankvoy form includes an exception to laytime at clause 6 which provides that:
“where delay is caused to vessel getting into berth after giving notice of readiness for any reason over
which  charterers  have no control, such delay shall not count as used laytime”,  this can only be relied on if a
berth is ROA and a valid NOR has been issued with the result that laytime has commenced3.
Shellvoy 5 – Laytime
Unlike the Asbatankvoy form, Shellvoy 5 does not require a berth to be ROA. Clause 13(1)(a) of Shellvoy 5
specifies that laytime can commence in two scenarios:

1) If the vessel proceeds straight to berth then time shall commence to run 6 hours after the vessel is in all
respects ready to load or discharge, written notice thereof has been tendered;

2) If the vessel does not proceed immediately to berth, time shall commence 6 hours after (i) the vessel is lying in
the area where she was ordered to wait or, in the absence of any such specific order, in a usual waiting area and
(ii) written notice of readiness has been tendered and (iii) the specified berth is accessible. A berth will be
deemed inaccessible where there is bad weather, tidal conditions, ice, awaiting daylight pilot or tugs, or port
traffic control requirements.

The fact that the vessel cannot proceed directly to the berth does not preclude laytime from commencing and
therefore it follows that the CWC could apply in situations where the vessel is not yet in the berth as long as that
berth is ‘accessible’. Accessibility under clause 13(1)(a) is a defined term and a berth will only be deemed to be
inaccessible in one of the prescribed circumstances.

Establishing the CWC applies
Once it has been established that laytime has commenced, charterers are permitted to rely on the CWC in
circumstances where they can prove that they delays are “due to weather conditions”. If the vessel is in berth and
bad weather causes delays, it is clear that the CWC would apply. However, even if the vessel does not proceed
immediately to berth, for example as a result of congestion, providing that laytime has commenced
the CWC should apply to any period of delay due to bad weather.

In order to rely on this clause, charterers would need to provide contemporaneous evidence that during the
period of delay there was bad weather. This requirement could be satisfied by provision of a notice from the port
or local agents that the reason for the closure of the port or stoppages in operations was bad weather and not
some other cause.
However, this may not be the end of the matter. If there was more than one cause of delay or owners can
demonstrate that there was a break in the chain of causation there is scope for rejecting the application of
the CWC. Whether owners can prove a break in the chain of causation will require a careful consideration of the
factual matrix and will be heavily dependent on the particular circumstances.

Pre-existing congestion does not restrict the application of the CWC, as even if there is another vessel in the
berth the bad weather may still be the effective cause of the delay. While there is an unreported 1997 arbitration
which suggests that the vessel must be at the head of the queue to rely on the CWC, it could be argued that this
is not the correct position. Notwithstanding that a vessel is not first in line to berth, it would still be open
to charterers to provide evidence that bad weather was the effective cause of the additional delay suffered.

It is foreseeable that where there is bad weather but the port closes for reasons entirely unconnected with the
weather, such as breakdown of some of the cargo equipment, owners may have a valid argument that
the CWC does not apply. It is also foreseeable that where a vessel is removed from the berth due to bad weather
but is then ‘queue-jumped’ once the bad weather ceases, there would likely be a break in the chain of causation.
While the vessel would not have been removed from the berth had the bad weather not occurred, it would be the
port’s decision to place another vessel ahead of it in the queue and therefore it is this decision that is the effective
cause.

The CWC will only apply up to the point where the bad weather ceases. Subsequent to this the effective cause of
the delay is no longer bad weather, the cause of the delay once again being some other cause, for example
congestion. Subject to the application of any other exceptions, once the bad weather ceases time should run in
full.

Conclusion
The CWC will only apply where laytime has commenced under the charterparty. When laytime commences
depends solely on the agreed terms and it is often a source of debate when demurrage calculations arise.
Assuming time has started to run, whether the CWC then applies will be a question of fact and will require careful
consideration of the circumstances. If charterers can demonstrate that there was bad weather which caused a
delay, the burden will then lie with owners to show there has been a break in the chain of causation such that the
bad weather was not the effective cause of the delays.
Demurrage time bars - back in the courts again

4 June 2020

The English Commercial Court has again been tasked with resolving a dispute over the meaning
of the phrase “all supporting documents”, a term that is commonly encountered in demurrage
time bar clauses, writes William Stansfield, Senior Associate, CJC London.

We reported on the decision in The Amalie Essberger [2019] EWHC 3402 (Comm) in the April

edition of CJC Currents.

A similar point has now arisen in The MTM Hong Kong [2020] EWHC 700 (Comm) where the
English Commercial Court has again been tasked with resolving a dispute over the meaning of
the phrase “all supporting documents”, a term that is commonly encountered in demurrage time
bar clauses.  

As the name suggests, demurrage time bar clauses are clauses which require a demurrage claim
with supporting documents to be presented within the pre-agreed number of days, failing which
the claim will be time barred.  The courts recognise that demurrage time bar clauses can assist
with processing demurrage claims quickly and efficiently whilst the facts are still fresh in
everyone’s mind.

This latest decision will be of interest to the market generally. The case arises out of the situation
where simultaneous cargo operations are taking place, thereby triggering the pro-rating of laytime
and demurrage provisions in clause 10 of ASBATANKVOY (a charterparty form in common use
in the tanker trade).

Clause 10 of ASBATANKVOY provides:

"Laytime/Demurrage

 … …

(e) If load or discharge is done simultaneously with other parcels then laytime to be applied
prorate between the parcels.

(g) In the event of Vessel being delayed in berthing and the Vessel has to load and / or discharge
at the port(s) for the account of others, then such delay and/or waiting time and /or demurrage, if
incurred, to be prorated according to the Bill of Lading quantities.”

The time bar clause was in a rider clause which reads:

Charterer shall be discharged and released from all liability in respect of any claim/invoice the
Owner may have/send to Charterer under this Charter Party unless a claim/invoice in writing
and all supporting documents have been received by Charterer within [90] days after completion
of discharge of the cargo covered by this Charter Party or after other termination of the voyage,
whichever occurs first. Any claim/invoice which Owner may have under this Charter Party shall
be waived and absolutely barred, if claim/invoice and all supporting documents are not received
by Charterer before the time bar".
The vessel was fixed to carry liquid cargoes from Antwerp to Houston. At Houston, a second
parcel of cargo was discharged at the same berth.  This meant that laytime was to be pro-rated
between the parcels, in accordance with clause 10(e) of ASBATANKVOY.  Clause 10(g) of
ASBATANKVOY says that delay, waiting time, and demurrage is to be pro-rated according to
bill of lading quantities.  

Whilst clause 10(e) does not expressly refer to pro-rating laytime by reference to bill of lading
quantities, it was accepted that the effect of clauses 10(e) and (g) taken together meant that
laytime and time on demurrage were both to be pro-rated in accordance with bill of lading
quantities.

After completion of discharge, the owners presented a demurrage claim and supporting
documents to the charterers. However, the bills of lading (for both the charterers’ parcel and the
second parcel) were not included.  The bill of lading quantities were mentioned on the statement
of facts, but the charterers argued that the omission to include the actual bills of lading meant that
the claim was time barred.

A London arbitration tribunal concluded that the owners’ claim was not time barred.  The
charterers were granted permission to appeal on the following question of law:

"Where a charterparty requires demurrage to be calculated by reference to bill of lading

quantities, and contains a demurrage time bar which requires provision of all supporting
documents, will a claim for demurrage be time-barred if the vessel owner fails to provide copies
of the bills of lading?"

The court answered this question in the affirmative, and ruled that the owners' failure to produce
bills of lading in support of their demurrage claim barred the entire claim.

The court’s reasoning was essentially one of contractual interpretation – in particular the court
placed emphasis on the express provisions of clause 10(g) of ASBATANKVOY that pro-rating
of time is to be done by reference to bill of lading quantities, and on the requirement to provide
“all” supporting documents with a claim.

The court stressed at the end of its judgment that the decision was based on these particular
clauses, and the court also said that the position might be different if bills of lading were not
available for whatever reason. A differently worded clause could have produced a different result.

Nonetheless, an owner should now ensure that whenever laytime and demurrage is calculated by
reference to bill of lading quantities, copies of the actual bills of lading (for all parcels carried)
should be included as part of the claim.  Relying on bill of lading figures printed on other
documents may not be sufficient to comply with a demurrage time bar clause. 

7. Answer BOTH parts of the question.

a) Describe FOUR main areas of dispute that may arise under an Asbatankvoy charter
party where existing clauses do not fully cover all aspects under the fixture.
b) Describe and explain the provisions of a clause for each of the above disputed areas
which are set aside in the Asbatankvoy charter party to prevent disagreement arising.
Content required
In order to gain 50% of the marks a student needed to, in this two part question, describe at
least two main areas of dispute that may arise under an Asbatankvoy charter party where
existing clauses do not fully cover all aspects under the fixture. This would include issues
covering non-payment or delay in payment of freight, arrival prior to commencement of
laydays, set off, demurrage claims, safe port warranty, cargo loss, documentary dispute. In
each case a fair explanation of the reasons for disagreement. In the second part of the
question describe the clause in the Asbatankvoy charter party that is designed to prevent
disagreement arising.

General comments and areas of improvement

This question reasonably well answered however some students failed to provide sufficient
examples of dispute that arise which are not covered by charter party clauses. This may
include non-payment or delay in payment of freight, arrival prior to commencement of
laydays, set off, demurrage claims, safe port warranty, cargo loss or documentary dispute. In
the second part of the question students failed to make a direct reference to the
Asbatankvoy charter party or link areas of dispute to existing clauses where a remedy may
be available. An example of this may be clause two which requires charterers to pay freight
in full, without discount on outturn quantity less advances made to master or Owner’s agent
at load/discharge and costs of insurance of same.

Cancellation clauses and

other means by which
owners may protect against
defaulting charterers
INSIGHT 155, 1999
01 AUG 1999
This article
highlights some
alternative steps
which owners may
consider when
entering into a
voyage charter in
order to protect
against certain
failures on the part
of charterers. In
particular, it refers
to charterers' failure
to provide cargo on
vessel to the nominated load port only to find that no cargo is available immediately and there
is uncertainty as to whether it will become available at all. Whilst the non-availability of
cargo may, prima facie, amount to a breach on the part of charterers, it may not necessarily
amount to a repudiatory breach entitling owners to terminate the charterparty. Owners must
therefore seek monetary compensation for the time lost usually by way of demurrage after
laytime has expired, or by way of damages for detention, if for some reason the unavailability
of cargo prevents the vessel from becoming an arrived ship.
Depending on the precise wording, the laytime exceptions clause may also apply to
unavailability of cargo (in addition to delay in loading) and therefore laytime may be
interrupted if the unavailability of cargo has been caused by one of the events contained in
the exceptions clause, for example strikes or causes beyond charterers' control. In such a case,
owners are faced with possible long delays causing substantial losses and yet demurrage may
not accrue. Even where demurrage does accrue, it may not fully compensate owners if the
delay is considerable. Furthermore, owners may have difficulties in recovering large amounts
of demurrage from charterers in such circumstances.
Often, the best commercial solution for owners would be to "cut their losses" and leave the
load port once they are aware that cargo is not available. In coming to such a decision,
however, owners face a dilemma: do they leave and look for business elsewhere and in doing
so risk being in repudiatory breach of the charterparty themselves, or do they remain and wait
longer and risk not being able to recover demurrage? In normal circumstances there can be no
temporary withdrawal of services although some standard forms provide for a right to
withhold services whilst hire remains unpaid.1 Withdrawal of a vessel is recognised as a
remedy with severe consequences and it must be done correctly and timely, failing which the
owner will be held liable for repudiation of the charter. Furthermore, in most cases
withdrawal of the vessel is of practical assistance only when the vessel is free of cargo. Thus
where the owner has loaded the cargo he is bound to deliver the cargo in accordance with the
bills of lading.
In an attempt to avoid the above problems, it is, therefore, preferable to include a cancellation
clause in the charterparty, by which owners may elect to cancel the charterparty in specified
circumstances.
Suggested wording for cancellation clause
The following are wordings which may be used in order to avoid some of the problems
described above.
"A) In the event that the cargo is not available for loading upon:
*i) vessel's arrival in port or the usual waiting place or
ii) vessel's tendering Notice of Readiness or
iii) vessel's arrival off the port in circumstances where the vessel is prevented from entering
due to unavailability of cargo and the vessel being in all respects ready to load, Owners have
the option to cancel this charterparty by giving written notice of such cancellation (including
by fax, telex or cable) to Charterers or their agents within [ ] hours thereafter. (* Owners
should select i), ii) or iii), whichever is the most appropriate point in time. This may vary
from fixture to fixture.)
B) Further, whether cargo is available or not, in the event that loading has not commenced
within [ ] hours of* [ ] unless such delay is caused by Owners, Owners shall have the option
to cancel this charterparty by giving written notice of such cancellation (including by fax,
telex or cable) to Charterers or their agent,s but such notice must be given within [ ] hours of
the option to cancel arising. (*Owners should select either i or ii from Clause A above or
expiry of laytime.)
Cancellation shall be without prejudice to any claim for damages and/or demurrage which
Owners may have."
If the charterparty contains a laytime and demurrage exceptions clause such as the wording of
Clause 8 of the Asbatankvoy Part II,2 it is suggested that the following additional wording be
inserted to protect owners in the event that any stoppage is prolonged. However, if using part
B of the above clause, care must be taken to ensure that no conflict arises in respect of the
time at which the charterparty may be cancelled.
"If laytime is interrupted or demurrage is incurred at port of loading by reason of strike,
lockout, stoppage or restraint of labour or breakdown of machinery or equipment in or about
the plant of the charterer, suppliers or shipper and such stoppage continues for a period of
[ ] days/hours from the time of the vessel being ready to load, Owners shall have the option
to cancel this charterparty provided no cargo has been loaded. Notice of cancellation must
be given in writing to Charterers or their agents within [ ] hours of the option to cancel
arising.
Cancellation shall be without prejudice to any claim for damages and/or demurrage which
Owners may have."
Further steps aimed at protecting against charterers' failure to make payments Prepaid
freight
Prepaid freight is one of the most secure ways for owners to ensure payment of freight. In the
Asbatankvoy form the charterer's obligation to pay freight is set out in clause 2 of Part
II. 3 Freight is payable upon delivery of cargo and the charterer is not entitled to deduct any
sums other than those stated in Clause 2 or otherwise specifically set out in the charterparty.
Arbitrators have consistently held that the wording and content of Clause 2 is "absolute" and
accordingly the withholding of freight by charterers as security is wrongful, not only for
cargo loss, but also for a variety of other claims. However, in reality, we know that charterers
do withhold freight to secure their claims or assist their own cashflow. Prepaid freight would
not only avoid any attempt to make set-offs but also hopefully help to avoid mere non-
payment.
Under the Asbatankvoy and BeePeevoy standard forms, freight is payable upon or after
delivery of cargo. It may be that due to the special nature of the oil trade, whereby cargoes
may be sold many times before arrival at the discharge port, that freight is customarily paid
upon delivery or after discharge. For this reason it may be difficult to negotiate the payment
of freight in advance.
Payment "before breaking discharge"
Where freight is expressed to be payable "before breaking discharge", freight is payable once
the vessel has arrived at the discharge port but before discharge commences. The fact that
freight is payable before discharge commences enables owners to exercise a lien for freight if
it is not paid on time (see below).
Demurrage at load port
It may be advisable to collect any demurrage incurred at load port as soon as possible, so in
the event of non-payment owners may exercise a lien in respect thereof at the discharge port.
Therefore owners may wish to consider inserting a clause to this effect in the charterparty. It
is important at this point to remember that under English law there is no lien for non-payment
of demurrage and therefore it is necessary to provide for such a lien by a clause in the
charterparty.
Performance guarantees
An owner may also strengthen his position by including a performance guarantee in the
charterparty. When freight and/or demurrage due to owners becomes subject to dispute,
charterers would, under the terms of the charterparty, be obliged to provide a bank guarantee
for the disputed amount, pending settlement of the dispute. This kind of clause could be
balanced by providing that the party who is ultimately unsuccessful in the arbitration/legal
proceedings shall bear the costs of the guarantee. The status of the bank should be
investigated before accepting the guarantee and it is obviously preferable that a first-class
bank issues the bank guarantee. Letters of indemnity issued by charterers should, as a general
rule, not be accepted.
Cancellation clauses linked to performance
guarantees
The benefit given by a performance guarantee
clause is increased if it is linked to a cancellation
clause. We set out below an example of such a
clause.
"If Charterers have failed to pay freight or
demurrage or to provide a bank guarantee as per
clause [ ]of this charterparty, when such freight
or demurrage is due, Owners may give notice to
Charterers that unless they pay or provide a
bank guarantee within [ ] hours of receipt of
Owner's notice, Owners shall be entitled to
cancel the remaining part of this charterparty.
This option to cancel must be exercised no later
than [ ] after the expiry of the [ ] hours delay, but
shall cease to exist after actual payment, even if
late."
Suspension
Charterers' obligations at load port are
A suspension clause may also assist owners'
to provide a cargo and load it within the
position vis-à-vis charterers. However, this will
specified time.
depend on the circumstances and in particular the
time at which freight becomes due. Following is
an example of such clause:
"As long as freight or demurrage under this charterparty is due but not paid, Owners shall
not be obliged to:
- nominate further tonnage hereunder,
- let vessel proceed to loading or discharging port,
- load or receive cargo for shipment,
- issue bills of lading for any cargo received or loaded, or
- discharge or deliver cargo.
Time lost thereby to any vessel held ready for loading or for nomination shall count as
laytime or as time on demurrage. Charterers shall hold Owners harmless in respect of any
third party claims arising from such suspension."
In order to avoid claims from charterers for compensation based on owners' breach of the
charterparty, the rights given to owners by the suspension clause should only be exercised
when the freight and/or demurrage due to owners is undisputed or where charterers appear to
have no bona fide defence.
Lien clauses in charterparties and bills of lading
Both the Asbatankvoy and BeePeevoy 3 standard forms contain lien clauses in respect of
freight, deadfreight and demurrage, see:
i) Asbatankvoy clause 21 PART II4
ii) BeePeevoy 3 form clause 325
However, the effectiveness of such a lien clause may be questionable. Under the
Asbatankvoy freight is payable upon delivery. In theory, this creates two simultaneous
obligations - owners must be ready and willing to deliver the cargo and charterers must be
ready and willing to pay the freight. Owners may interrupt discharge to exercise a lien if
freight is not forthcoming, but the speed at which oil cargoes are discharged, coupled with
problems in checking instantly whether monies have been received in a bank account, may
mean that in practical terms it may be difficult to exercise a lien prior to discharge. The
Asbatankvoy form does provide that the lien shall continue after delivery of the cargo into the
possession of charterers or bill of lading holders, although it is doubtful to what practical
extent owners may exercise a lien in such circumstances.
The BeePeevoy provides for freight to be paid after completion of discharge. Again whilst in
theory a cargo may be discharged and owners may still retain some control over it, this may
not always be the case and will vary from jurisdiction to jurisdiction.
If owners lien cargo for outstandings under the charterparty, they may be exposed to a claim
for interfering with the rights of third party bill of lading holders. Therefore, owners should
also ensure that the bills of lading issued pursuant to the charterparty incorporate the terms of
the charterparty, so that the bill of lading holder has in theory notice of the lien clause and,
certainly under English law, will be bound by it. 6
Lien on sub-freights
Owners should consider the option of exercising a lien on any sub-freight.
It should be noted that owners may exercise a lien on sub-freights only if owners have a
contractual right against charterers to do so. To exercise a lien on sub-freight, payment by
charterers to owners must be due and owners must give notice to the sub charterers or
shippers (as the case may be) that payment must be made directly to them. Such notice must
be given prior to sub-charterers/shipper making payment to charterers, otherwise no lien can
be effective.
A lien on sub-freights may be exercised even if the amount due under the sub-charter or bill
of lading is unliquidated or in dispute.
Pre-fixture enquiries
Finally, the value of extensive pre-fixture enquiries cannot be underestimated. Such enquiries
should preferably be done by obtaining credit references from bankers, brokers and/or credit
reference agencies, as well as company searches. Furthermore, it is wise to ascertain the
identity of the charterer's main bank prior to fixing. This will assist in taking prompt action
against charterers' funds (so far as the law permits) in the event of non-payment.
1
 See clause 11(a) of the NYPE 1993 form.

2
 The clause reads: "DEMURRAGE. Charterer shall pay demurrage per running hour and pro
rata for a part thereof at the rate specified in PART I for all time that loading and discharging
and used laytime as elsewhere herein provided exceeds the allowed laytime elsewhere herein
specified. If, however, demurrage shall be incurred at ports of loading and/or discharge by
reason of fire, explosion, storm or by a strike, lockout, stoppage or restarint of labouir or by
breakdown of machinery or equipment in or about the plant of the Charterer, supplier, shipper
or consignee of the cargo, the rate of demurrage shall be reduced one-half of the amount
stated in Part I per running hour or pro rata of an hour for demurrage so incurred. The
Charterer shall not be liable for any demurrage for delay caused by strike, lockout, stoppage
or restraint of labor for Master, officers and crew of the Vessel or tugboats or pilots".
3
 The clause reads: "FREIGHT. Freight shall be at the rate stipulated in PART I and shall be
computed on intake quantity (except deadfreight as per Clause 3) as shown on the Inspector's
Certificate of Inspection. Payment of freight shall be made by Charterer without discount
upon delivery of cargo at destination, less any disbursements otr advances made to the Master
or Owner's agents at ports of loading and/or discharge and cost of insurance thereon. No
deduction of freight shall be made for water and/or sediment contained in the cargo. The
services of the Petroleum Inspector shall be arranged and paid for by the Charterer who shall
furnish the Owner with a copy of the Inspector's Certificate."
4
 The clause reads: "LIEN. The Owner shall have an absolute lien on the cargo for all freight,
deadfreight, demurrage and costs, including attorney fees, of recovering the same, which lien
shall continue after delivery of the cargo into the possession of the Charterer, or of the
holders of any Bills of Lading covering the same or of any storagemen"
 The clause reads: "Owners shall have a lien upon the cargo for all freight, deadfreight,
5

demurrage and the cost of recovering thereof".

6
 See artice "Demurrage: Lien and Cesser Clauses" in this edition of Gard News.