Time Charters
11
Maintenance Clause
Maintenance Clause
| “36. | 1. That the Owners shall provide and pay for all provisions, wages and consular shipping and discharging fees of the Crew; shall pay for the |
| 37. | insurance of the vessel, also for all the cabin, deck, engine-room and other necessary stores, including boiler water and maintain her class and keep |
| 38. | the vessel in a thoroughly efficient state in hull, machinery and equipment for and during the service.” |
Wages and crew costs
11.2 “Wages” in this context means the remuneration to which the crew is lawfully entitled for its services. It was so held in The Manhattan Prince , by Leggatt, J., who rejected an argument by the charterers, on a similar provision in Clause 5 of the Shelltime 3 form, that the owners were in breach of this provision by failing to pay the higher rates which the International Transport Workers Federation (I.T.F.) sought to impose on the owners by boycott.Insurance of the ship
11.3 The provision in Lines 36 and 37 of the New York Produce form that the owners are to pay for the insurance of the ship is reinforced by Clause 26 which places on the owners the responsibility for insurance “same as when trading for their own account”. These provisions require the owners to insure against war risks as well as against hull and machinery risks. The subject of insurance is discussed generally in et seq., below. 11.4 For comments on the effect of additional clauses providing for reimbursement of certain insurance premiums to the owners by the charterers, see to .Maintenance
11.5 Under Clause 1 of the New York Produce form, the owners have an obligation to maintain the ship which continues throughout the charter period. It complements the owners’ undertakings in Lines 5 and 22 as to the good order and condition of the ship at the start of the charter (as to which, see further et seq. and ). 11.6 Despite the categorical language of Lines 37 and 38, which requires the owners to “maintain her class and keep the vessel in a thoroughly efficient state in hull, machinery and equipment for and during the service”, the duty that these words impose is not an absolute duty. It is a duty to exercise reasonable diligence. Consequently, the owners are not in breach of their obligation under Clause 1 of the New York Produce form merely because a breakdown occurs or the ship becomes unseaworthy. In Tynedale v. Anglo-Soviet Shipping (1936) 54 Ll.L.Rep. 341 (C.A.), at page 344, Lord Roche said that such a maintenance obligation does “not constitute an absolute engagement or warranty that the shipowners will succeed in so maintaining her whatever perils or causes may intervene to cause her to be inefficient for the purpose of her services”. However, some other types of maintenance clause are more strict: see , below. 11.7 The owners’ obligation to maintain the ship has two aspects: (a) an obligation to keep up a prudent programme of inspections and surveys, replacements and renewals (preventive maintenance); and (b) in the event that the ship, its machinery or equipment becomes inefficient during the charter period, an obligation to take reasonable steps within a reasonable time to effect repairs (remedial maintenance). In relation to the latter, Greer, J., said in Snia v. Suzuki (1924) 17 Ll.L.Rep. 78, at page 88, that the maintenance obligation “does not mean that [the ship] will be in [a fully efficient] state during every minute of the service, it does mean that when she gets into a condition when she is not thoroughly efficient in hull and machinery [the owners] will take within a reasonable time reasonable steps to put her into that condition”. 11.8 The question of what is reasonable maintenance is not to be judged by reference to the cost of the work required or by asking whether the cost of repair is proportionate to the nature of the defect. Cooke, J., held in The Elli and The Frixos , at [59], “once the owners become aware of a deficiency, or more accurately, once they should have become aware of a deficiency, the duty to exercise reasonable care and skill to remedy the position arises”. This requires that “Reasonable steps must be taken within a reasonable time, using reasonable care and skill”. In so doing, although “[t]here may be some latitude about when, where and how the work is done, there cannot be a financial limit to the obligation, unless issues of frustration arise”. No question of proportionality in terms of financial expenditure arises. (The facts of The Elli and The Frixos are set out at , below.) 11.9 On the other hand, the question whether the owners have exercised reasonable diligence in maintaining the ship must depend to some extent on whether the charterers’ use of the ship has allowed the owners a reasonable opportunity to carry out maintenance: see for example Lond. Arb. 24/91 (LMLN 315).Absolute maintenance clauses
11.10 Although the maintenance clause in the New York Produce form imposes only an obligation to exercise reasonable diligence to maintain the ship, other forms of maintenance clause may be so worded that the obligation is absolute, subject to any applicable exceptions. For example, in Adamastos Shipping v. Anglo-Saxon Petroleum (The Saxon Star) (C.A.), it was held by the Court of Appeal that an absolute obligation was created by a clause reading, “being tight, staunch and strong, and every way fitted for the voyage, and to be maintained in such condition during the voyage, perils of the sea excepted”. This maintenance provision had been included as part of the initial warranty of seaworthiness; it also contained its own exception of perils of the sea, which would not have been necessary if it was intended to impose an obligation that was less than absolute. As Parker, L.J., said at page 280: “The nature of the obligation to maintain must depend on the exact words used.” 11.11 Adamastos Shipping v. Anglo-Saxon Petroleum (The Saxon Star), above was dealt with by the House of Lords on other grounds at (H.L.). Its facts are set out at , below.An intermediate term, not a condition
11.12 The owners’ obligation under this provision, like the initial undertaking of seaworthiness, is an intermediate obligation, not a condition. So the charterers cannot treat the charter as discharged merely because the owners have not complied in some respect: see the judgment of Salmon, J., in The Hongkong Fir , at page 173, approved by the Court of Appeal at . For the facts of this case, see . 11.13 The charterers can terminate however if they can show that the breach was so serious as to deprive them of substantially the whole benefit of the contract – for example, if the owners’ failure to remedy deficiencies in the engines were to result in a delay that would frustrate the contract: see the judgment of Sellers, L.J., in The Hongkong Fir (C.A.), at page 489. In the same case at first instance, , Salmon, J., commented on the decision in Snia v. Suzuki (1924) 18 Ll.L.Rep. 333, summarised at above, in which the charterers had been held entitled to terminate a charter after a defect was discovered in the ship’s propeller. He said, at page 174: “The facts of that case were exceptional. The charterers, after the failure of repeated efforts of the owners to make the vessel seaworthy, had good reason to believe that the shipowners would never be able to do so.” 11.14 Where the owners refuse to remedy a defect in the ship, that refusal might amount to a renunciation of the contract. That is, it might evince an intention no longer to be bound by it. But for there to be a renunciation, the owners’ conduct must be unequivocal and the breach must be sufficiently serious that, left unremedied, it would ultimately go to the root of the contract.The Hermosa was chartered on the New York Produce form for a period of two years with options to extend the period for a further four months in certain circumstances. She was sub-chartered by the head charterers on the same form for a similar period. Following delivery in December 1974 there was serious damage to the cargo carried on her first voyage, as a result of seawater ingress. Surveys at the discharge port revealed that the hatch covers were in a poorly maintained condition. Because of the repairs which were then carried out, and which took from mid-January to the end of March 1975, the sub-charterers lost their next employment for the ship. On the subsequent ballast voyage in April the ship was in collision and had to put into Curaçao for further repairs. Since the sub-charterers could obtain no satisfactory reassurances as to the time the further repairs would take to complete, or as to their efficacy, they obtained a court order to survey the ship on 9 August 1975. This survey revealed that the deficiencies in the ship’s hatch covers remained unrepaired and that the ship was in bad condition in other respects. Having received no firm assurances from the head charterers (who were without information from the owners) that these defects were being satisfactorily dealt with, the sub-charterers purported to terminate the sub-charter on 29 August 1975. Unknown to the sub-charterers the owners had arranged for the repair of these defects prior to 29 August and the repairs were properly completed by 22 October.