General principles

1.1 Laytime and demurrage comprise one aspect of English maritime law, in particular the law relating to voyage charters. The present law has for the most part been developed by judicial interpretation of clauses in commercial charterpar-ties over the last 150 years, although some of the basic principles were established somewhat earlier, at around the time that Queen Victoria came to the throne.

1.2 The development of this branch of the law has been closely allied to the historical and social changes that took place as sail gave way to steam, and more recently as improved methods of communication have given greater central control to those controlling the commercial adventure, which a voyage charter still represents. It is perhaps one of the few remaining areas of English common law in which there has been little statutory intervention.

1.3 The establishment of standard forms of charter, the meaning of almost each word of which has been the subject of judicial interpretation, might have resulted in a static law, but fortunately that has not been so and the law continues to develop to meet present and future needs. The increasing use of additional clauses to charterparties, some of which are not always accidentally ambiguous, will also no doubt continue to provide much material for future litigation.

1.4 Whilst most of the cases relating to laytime and demurrage arise in the context of charterparties, it must always be remembered that the law relating to these matters also plays an important role in contracts, such as sale contracts.

1.5 It is perhaps important to remember that whilst judges, and increasingly arbitrators, lay down the interpretation to be given to particular clauses, these are often drafted by commercial men and the interpretation they are given in practice only rarely reaches arbitration, and still more rarely the higher courts.

1.6 Recent changes in arbitral law and practice have meant fewer appeals and this has reinforced the importance of publishing some arbitration awards of general importance in a form where the identity of the parties is not disclosed and the confidentiality of the award is preserved. Lloyd’s Maritime Law Newsletter is now the accepted forum for this type of limited publication and many of the awards reported in it are quoted in this book.

1.7 An indication of the number of reported cases there have been over the years is given by the length of the table of cases.

1.8 Notwithstanding the earlier reference to the basic principles of laytime and demurrage being traced back to early Victorian times, the concept of laytime, that is the time allowed for cargo operations, can be traced back much earlier, at least to the Rolls or Laws of Oleron and possibly through them to Rhodian law in the Mediterranean.

1.9 Oleron is a small island on the Atlantic coast of France, about 20 miles north of the mouth of the Gironde estuary and that in the middle ages was a centre for Atlantic trade. It was part of the duchy of Aquitaine, which extended from Oleron down to the Spanish border. With the death of her father and brother in 1137, control of Aquitaine passed to the tenth Duke’s daughter, Eleanor, who in the same year married the heir to the French throne who, when his father died less than a month later, became Louis VII of France. Louis and Eleanor both went on the second crusade and she brought back with her the code that became the Laws of Oleron. These were based on the ancient Lex Rhodia, which had governed commercial trade in the Mediterranean for over a thousand years and had been adopted by King Baldwin III of Jerusalem as the Maritime Assizes of the Kingdom of Jerusalem. The laws of Oleron were promulgated by Eleanor in Aquitaine in about 1160, Eleanor’s marriage to Louis VII had been annulled in 1152, following which in the same year she married the Duke of Normandy and Count of Anjou, the heir to the British throne, who became Henry II. When their son, Richard the Lionheart (Richard I) went on the third crusade, his mother, Eleanor, became Regent and in about 1190, the Laws of Oleron were introduced into England by Eleanor.

1.10 The Laws of Oleron contain some 47 articles or individual laws dealing with the rights and responsibilities of ship’s captains in relation to discipline, mutiny, pay, cargoes, sickness on board, pilotage, accidents and similar matters. Article XXI is the article relating to laytime and provides:

If a master freight his ship to a merchant and set him a certain time within which he shall lade his vessel that she may be ready to depart at the time appointed and he lade it not within the time but keep the master and mariners by the space of eight days or a fortnight or more beyond the time agreed on, whereby the master loses the opportunity of a fair wind to depart, the said merchant in this case shall be obliged to make the master satisfaction for such delay, the fourth part whereof is to go among the mariners and the other three-fourths to the master because he finds them their provisions.

The Laws of Oleron were later codified in the Black Book of the Admiralty in 1336 which also contained a list of the ancient customs and useages of the sea. The Black Book of the Admiralty subsequently gave rise to the Articles of War, the forerunner of the Naval Discipline Acts, which set out the codes of discipline in the Royal Navy. Therefore, although they might be thought to be inconsistent bed-fellows, laytime and naval discipline can both be traced back to the Laws of Oleron.

1.11 The term demurrage first appears in an English case in the fourteenth century.

1.12 There have now been four attempts to introduce standardised laytime and demurrage clause definitions: The Charterparty Laytime Definitions 1980, The Voyage Charterparty Laytime Interpretations Rules 1993, The Baltic Code 2007 and The Laytime Definitions for Charter Parties 2013. The last of these is also incorporated into The Baltic Exchange Code 2014. The first three were reproduced in full in earlier editions of this book, but since they have now been superseded by the 2013 definitions, it is only these in their original form and as reproduced by the Baltic Exchange that appear in this edition in the Appendix. In addition, each definition is dealt with under the relevant chapter heading. These definitions will however only apply where they are specifically incorporated into the relevant charter or other contractual document, although, even where they are not, parties often pray in aid their defined meaning in litigation.

1.13 This first chapter is intended to set the scene on laytime and demurrage. It deals with the general principles involved and is intended to present an overview of the subject for anyone who is not familiar with it. All the topics covered in this first chapter are dealt with in greater detail elsewhere in the book.

1.14 It is important, before considering the principles of laytime, to see how laytime fits into the scheme of a voyage charter. The words “laytime” and “demur-rage” are themselves defined in the following terms in the Laytime Definitions for Charter Parties 2013.1

“LAYTIME” shall mean the period of time agreed between the parties during which the owner will make and keep the vessel available for loading or discharging without payment additional to the freight.

“DEMURRAGE” shall mean an agreed amount payable to the owner in respect of delay to the Vessel once the Laytime has expired, for which the owner is not responsible. Demurrage shall not be subject to exceptions which apply to Laytime unless specifically stated in the Charter Party.

The definition of laytime is unchanged from that in the Voylayrules 93, but in the definition of demurrage, the words at the end, “unless specifically stated in the Charter Party” have been added.

Laytime is probably a shortened version of lying alongside time.

1.15 In The Johanna Oldendorff,2 Lord Diplock divided the adventure contemplated by a voyage charter into four successive stages. These are:

  • (1) The loading or approach voyage, viz. the voyage of the vessel from wherever she is at the date of the charterparty or the conclusion of her previous fixture, if that is later, to the place specified as the place of loading.
  • (2) The loading operation, viz. the delivery of the cargo to the vessel at the place of loading and its stowage on board.
  • (3) The carrying or loaded voyage, viz. the voyage of the vessel from the place of loading to the place specified in the charter as the place of delivery.
  • (4) The discharging operation, viz. the delivery of the cargo from the vessel at the place of delivery and its receipt there by the charterer or other consignee.

1.16 Although of late there have been increasing attempts to blur the distinction between the stages, Lord Diplock’s speech is clear authority that under English law the stages are consecutive and each must be completed before the next can begin. As will be seen, that means, for instance, that a vessel must reach its specified destination before a notice of readiness can be presented and notice cannot therefore be given whilst underway. There cannot be any gap between the stages, nor is there any overlap.

1.17 In its simplest form, a voyage charter therefore provides that:

The vessel shall proceed to (the specified place of loading) and there load (the designated cargo) and being so loaded shall proceed to (the specified place of discharge) and deliver the same.

1.18 The two voyage stages are in the hands of the shipowner, whilst loading and discharging are joint operations between the shipowner and the charterer, or those for whom they are responsible. The shipowner’s aim is that all stages should be completed as economically as possible, whilst earning the maximum possible return on his capital investment. The charterer, on the other hand, wishes his cargo to be carried to its destination, at the least possible cost. Time may or may not be of importance to him compared with cost but, to the shipowner, time is money. The voyage stages, including proceeding to sea, are normally to be prosecuted with all reasonable or convenient despatch.3 However, depending on bunker costs at the time, the shipowner may negotiate to perform the laden voyage at a reduced speed, usually referred to as slow steaming, taking slightly longer but resulting in a lower overall cost, because of the bunker savings achieved.

1.19 As far as the periods underway during the voyage stages are concerned, the adventure is normally entirely under the control of the shipowner and it is therefore logical that he should bear the risk of any delay occurring during this time. With regard to the periods not underway during the voyage stages and the time taken during the loading and discharging operations, it is open to the parties to decide which risks of delay each shall be responsible for, together with how long shall be allowed for the loading and discharging operations. As Scrutton LJ said in Inverkip Steamship Co Ltd v Bunge & Co:4

The sum agreed for freight in a charter covers the use of the ship for an agreed period of time for loading and discharging, known as the lay days, and for the voyage.

The apportionment of risk will depend on the freight payable and the state of the freight market, i.e. the amount of commercial pressure that each can bring to bear against the other.

1.20 Voyage charters are divided into two principal types depending on the laytime provisions they contain. There are those with customary laytime and those with fixed laytime. Each will be considered in detail in subsequent chapters.

1.21 Under a customary laytime charter, the laytime allowed is that length of time that is reasonable in the circumstances appertaining in the particular port with the particular ship at the time of loading or discharging, as the case may be. Since the time will vary from ship to ship and from time to time, the period allowed cannot be determined in advance. In the absence of default by the charterer, the normal risks of delay, e.g. congestion, weather, holidays, strikes, etc., usually lie with the shipowner. If the parties fail to specify how much laytime is allowed, then customary laytime will be implied by law.

1.22 The other type of laytime allowed is fixed laytime. As its name implies, it is of fixed duration. It may be described either in terms of days or hours, a particular type thereof or as a rate of working cargo. Examples of the former would be “to load in 3 running days” or “to discharge in 7 weather working days”, and of the latter, “to load at an average of 2000 metric tons per day” or “to discharge at an average rate of 500 tons per working hatch per working day”. The point about fixed laytime is that its duration can in theory be predicted in advance. The reason why it is only “in theory” is that the unit of time chosen by the parties, e.g. weather working days and other clauses in the charter, may cause time to be suspended during the running of laytime so that the actual time taken to expend a given number of days of that type may be more than originally thought. However, in the absence of modifying provisions, the incidence of risk in this type of charter as between the shipowner and the charterer lies entirely with the charterer. In other words, the situation is exactly the opposite of a customary laytime charter. As Lord Selborne LC said in Postlethwaite v Freeland of the undertaking by the charterer to load within a fixed period of time,5 that is:

an absolute and unconditional engagement, for the non-performance of which he is answerable, whatever may be the nature of the impediments which prevent him from performing it and which cause the ship to be detained in his service beyond the time stipulated.

1.23 The parties having decided that the charterer should bear the risk of delay, the reason why this should be an absolute liability was explained by Lord Diplock in The Johanna Oldendorff in the following terms:6

Charterparties originated at a period when contractual obligations were as a general rule treated as absolute. A party’s obligation was to secure that anything that he warranted should be done, was done. If it was not, then, unless this was the result of some default of the other party, he was liable in damages, even though circumstances over which he himself had no control and could not even have foreseen made it impossible for it to be done.

1.24 Whilst the customary laytime charter was once an important form of commercial document, it is now seen less often, although it survives in the form of liner terms or an obligation to load or discharge with customary despatch.7 There is also a hybrid term of customary quick despatch.8 Customary laytime has, however, played an important role in the development of the law relating to laytime.

1.25 The reason why fixed laytime charters are preferred is probably because of their greater certainty when it comes to estimating the permitted length of a charter and because they offer more flexibility by the use of exception clauses in varying the apportionment of risk.

1.26 Whichever form of laytime is chosen, voyage charters are also divided up into berth, dock and port charters, depending on which of these three alternatives is chosen as the specified destination for loading or discharging, as the case may be. There is no reason why a charter should not be, say, a berth charter for loading and a port charter for discharging. In general, however, laytime commences upon the vessel’s arrival at the specified destination, notice of readiness having been given (if required) and after any time provided for in the charter has elapsed. Upon laytime commencing, liability for delay may change from the shipowner to the charterer, depending on the terms of the charter. This is why it is important to be able to establish precisely when the specified destination is reached. Berth and dock charters on the whole create few problems in this respect, since it is comparatively easy to say whether a vessel has reached its berth or dock. The port charter is, however, more difficult. Until the decision of the Court of Appeal in Leonis Steamship Co v Rank