Maritime Law and Practice in China
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CHAPTER 10
Sea towage contracts
Sea towage contracts
10.1 In the CMC 1992, a sea towage contract is a contract whereby the tug owner undertakes to tow an object by sea with a tug from one place to another, and the tow party pays the towage. Towage in the CMC 1992 does not include the towage service rendered to ships within the port area.1 Furthermore, maritime towage services between the ports of the PRC shall be undertaken by ships flying the national flag of the PRC, except as otherwise provided for by laws or administrative rules and regulations. No foreign ships may engage in the maritime towage services between the ports of the PRC unless permitted by the competent authorities of transport and communications under the State Council.2 10.2 Sea towage contracts in Chinese shipping practice are always based on standard form of towage, e.g. CHINATOW of China Ocean Engineering Corporation and BIMCO’s TOWCON and TOWHIRE. A sea towage contract must be between tug and tow. Where a tug owner tows a barge owned or operated by him to transport goods by sea from one port to another, it shall be deemed as an act of carriage of goods by sea, and not a towage.3 The CMC 1992 requires that a contract of sea towage shall be made in writing.4 Although a sea towage contract is not a named contract in the Contract Law 1999, the general principles of the Contract Law 1999 can apply to the sea towage contract except where the CMC 1992 has special rules for the sea towage contract.Third parties to sea towage contracts
10.3 Normally, a tow owner directly enters into a sea towage contract with a tug owner. In some special cases, a sea towage contract may be concluded between a tug owner and a third party rather than a tow owner. Meanwhile, the third party can enter into another contract with the tow owner for the towage service. Of course, it is the tug owner who actually provides towage service for the tow owner. When the object of towage is damaged due to the fault of the tug, a question may arise that whether the tug owner or the third party shall be liable for the damage to the object of towage. This question has been examined in Huatai Property Insurance Co Ltd Shanghai Branch v Shanghai Safe Shipping Enterprises Co (Huatai v Safe Shipping).5 In this case, the defendant entered into a towage contractPage 117
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Seaworthiness of tug and tow
10.7 Under the CMC 1992, seaworthiness of the tug and tow is not absolute. On the one hand, the tug owner shall, before and at the beginning of the towage, exercise due diligence to make the tug seaworthy and towworthy and to properly man the tug and equip it with gears and tow lines and to provide all other necessary supplies and appliances for the intended voyage. On the other hand, the tow owner shall, before and at the beginning of the towage, make all necessary preparations therefore and shall exercise due diligence to make the object to be towed towworthy and shall give the tug owner a true account of the object to be towed.9 10.8 The tow owner also needs to provide the certificate of towworthiness and other documents of the object to be towed issued by the relevant survey and inspection organisations.10 If the tow owner fails to provide the necessary certificates and documents, he shall be liable for the damage to the tug owner even if the towage is not performed. In The Zhao Qing Gong 1111,11 the tug owner agreed to tow the vessel Zhao Qing Gong 1111 for a coastal voyage from Fujian Fuzhou to Guangdong Sihui and the tow owner agreed to pay the towage. The towage contract provided that the tow owner was responsible for the certificate of towworthiness. The tow owner paid RMB 80,00012 as the first instalment of towage fee. The tug owner sent the tug from Xiamen to Fuzhou but could not contact the tow owner. Thus the towage contract was not performed. The tow owner claimed against the tug owner for return of the paid instalment of towage fee. It was found that the tow owner failed to provide the certificate of towwothiness because the tow vessel Zhao Qing Gong 1111 was an inland water vessel only. The tug owner argued that the cost of fuel for the return voyage of the tug was more than RMB 80,000 which was the damage to the tug owner because of the tow owner’s breach of the towage contract. The Guangzhou Maritime Court held that it was the tow owner, not the tug owner, who breached the towage contract and, therefore, dismissed the tow owner’s claim.Force majeure in sea towage contract
10.9 The general principle of force majeure in contract law applies to the sea towage contract in the CMC 1992. Where the object towed cannot reach its destination due to force majeure or other causes not attributable to the fault of either party, unless the towage contract provides otherwise, the tug owner may deliver the object towed to the tow party or itsPage 119
Towage fee and duress
10.11 The payment of the towage fee is an important obligation of the tow owner in a towage contract. Where the tow owner fails to pay the towage fee or other reasonable expenses as agreed, the tug owner shall have a lien on the object towed under the CMC 1992.16 If the tow owner refuses to pay the towage fee relying on duress, he has the burden to prove the existence of the duress. In Zhoushan Yuntong Shipping Co Ltd v Zhejiang Qianhong Marine Co Ltd,17 although the towage fee was fixed to be RMB 1.25 million, the tug owner required a further RMB 200,000 for the towage. Because the tow lost power before the towage, the tow owner agreed to pay the further towage fee. After the towage service, the tow owner refused to pay the further towage fee and argued that he had to agree to pay the further towage fee at the request of the tug owner in duress, because otherwise both the tow and the crews and goods on board the tow would be in danger. This argument was refused by the Ningbo Maritime Court. The Ningbo Maritime Court pointed out that the tow owner could cancel the towage contract if he refused to pay the further towage fee. It was found that the tow was still safely anchored and had kept the correct anchoring position before and during the towage. Therefore, the tow owner failed to prove the existence of duress and was liable for the payment of the further towage fee as was agreed.Liabilities and immunities
10.12 The liability regime of towage in the CMC 1992 is based on the fault of parties. This liability regime applies only if and when there are no provisions or no different provisions in this regard in the sea towage contract. In the course of the sea towage, if the damage suffered by the tug owner or the tow owner was caused by the fault of one of the parties, the party in fault shall be liable for compensation. If the damage was caused by the faults of both parties, both parties shall be liable for compensation in proportion to the extent ofPage 120
- (1) fault of the master or other crew members of the tug or the pilot or other servants or agents of the tug owner in the navigation and management of the tug;
- (2) fault of the tug in saving or attempting to save life or property at sea.