CONTRACT OF AFFREIGHTMENT

Carriage of goods by sea is carried out on the basis of a contract of

carriage between the consignor and the carrier. The contract is evidenced
by a transport document issued after the goods have been delivered to
the consignor. A contract for the carriage of goods by sea is called the
contract of affreightment. Ordinarily a carrier by sea is a common
carrier, liable absolutely, like all others, for the loss of the goods subject
only to a few exceptions. But carriage by sea, being a hazardous job, the
carrier usually makes a special contract and, in order to emphasise this
special nature of the contract, it is called, not the contract of carriage ,
but the contract of affreightment, Freight means the charges for which
the carrier agrees to carry the goods.
A contract of affreightment may take one of the two forms, namely, it
may take the form of a charter-party, or a bill of lading. In a charter-party
the ship itself is hired and in a bill of lading the goods are delivered to the
ship owner for carriage and he issues a bill of lading the goods are
delivered to the ship owner for carriage and he issues a bill of lading as a
document of title for the goods.
1

Seaworthiness

The first and the most important of such undertakings is that the ship
shall be seaworthy. This means that the ship shall be fit for the journey
and also fully equipped for the type of cargo that it contracts to carry.
The test of seaworthiness is: would a prudent shipowner have made
good the defect before sending the ship to sea, if he had known of it?
If he would, the ship was not seaworthy. The expression is thus
explained by Viscount Cave in Elder, Dempester & Co Ltd v Paterson
Zochonis & Co Ltd.
2

Reasonable Despatch

In all contracts by charter-party, where there is no express agreement

as to time, it is an implied condition that there shall be no
unreasonable delay in commencing the voyage. The voyage must be
commenced within a reasonable time. This is so because in all
seagoing business expedition is important, for, by delay, the whole
object of the voyage may be defeated.This has been the principle since
long and is evidenced by Mndrew V Adams

No Deviation

The third important implied warranty is that the ship should follow the
agreed or the agreed or the customary route. Any departure from such
route is called deviation and this may operate as a breach of the
contract making the shipowner absolutely liable like a common carrier
and disentitling him from relying on the exception clauses, if any
Unjustifiable deviation displaces the bill of lading contract and with it
any exceptions included therein; accordingly shipowners are liable for
damage which happens after deviation through not caused by it.
4
Ship

Not to load Goods Liable to Cause Danger or Delay to

There is an obligation on the part of the shipper not to load the ship
with dangerous goods or goods likely to cause delay to the ship. He
should not ship goods likely to involve unusual danger or delay to the
ship without communicating to the shipowner facts which are within his
knowledge indicating that there is the risk, provided that the
shipowner does not and could not reasonably know those facts. Thus
where a shipper delivered casks of what he described as bleaching
power, but they in fact contained corrosive contents which, due to
defective packing, escaped and caused damage, the shipper was held
liable.

CHARTER PARTIES
When the agreement is to carry a complete cargo of goods or to
furnish a ship for that purpose, the contract of affreigtment is almost
always contained in a document called a charter-party, the shipowner
letting the ship for the purpose of carrying, or undertaking to carry, the
charterer hiring the ship for such purpose, or undertaking to provide a
full cargo.
The contract of affreightment may be either in the form of a charterparty or bill of lading. A bill of lading is a pure and simple contract of
carriage, whereas, a charter-party involves the hiring of the ship itself.
Where a ship is booked to the exclusive use of one shipper either for a
particular voyage or voyages or for a certain time, that is a charterparty. In the words of the Supreme court:
It it wrong to assume that a charter-party has to be an agreement for
the carriage of something like goods, passengers, livestock or mail. It

is a contract by which an entire ship or some principal part thereof is

let to a merchant, who is called the charterer, for the convewyance of
goods on a determined voyage to one or more places, or until the
expiration of a specified period; in the former case it is called a voyage
charter-party and in the letter a time charter-party. In the latter
case, the contract is really one of letting the ship, and, subject to
express terms of the charter-party, the liability of the owner and the
charterer to one another are to be determined by the law which relates
to the hiring of chattels and not by reference to the liabilities of
carriers and shippers. In the instant case, the contract is of the nature
of time charter-party and the owners were only entitled to payment for
the use and hire of the ship and the amount was payable irrespective
of what use the ship was put to by the time-charterer, or indeed,
whether it was put to any use at all and no part of the payment can be
said to have been made on account of the carriage of goods.
Two kinds of charter
Charterparties themselves are of two kinds, namely, (1) voyaged
charterparty or (2) time charter-party. Time charter-party is also
known as charter-party by demise because the ship is for the time
being leased out to the charterer. Whether it is one or the other
depends upon the intention of the parties as shown by their contract.
Charterparty by demise
Where the Charter-party is by demise, the charterer becomes the
owner for the time being not only of the ship but also of the crew and
their negligence falls on him. The charterer becomes responsible for
the consequences of bills of lading signed by the master. Where the
master signed bills of lading without proper care and consequently the
owner was not able to recover general average contribution from
cargo-owners, the charterer was held liable to the owner under an
Indemnity clause.Where, on the other hand, it is an ordinary charterparty, the crew remain the employees of the shipowner and he is as
much liable for their negligence. Holding the above to be an ordinary
Charter-party.
An illustration of a charter-party byu demise is to be found in the
decision of the House of Loards in Baumwoll Manufactur Von Carl
Scheibler v Furness.
The owner of a ship let her by a charter-party for a term of four
months. The charter-party provided that the captain, officers and crew

should be paid by the charterer, that the captain should be under the
orders of the charterer as regards employment, agency or other
arrangements; that the charterer should indemnify the owners for all
liabilities arising from the captain signing bills of lading. The only
obligation on the owners was to maintain the ship and pay for its
insurance. The charterer took possession and appointed the captain
and other crew, but the chief engineer was appointed by the owners.
The charterer sent the ship to New Orleans where cotton was loaded
on it for which the bills of lading were signed by the captain. The ship
foundered on the voyage owing, as was alleged, to the
unseaworthiness of the ship. The cargo owner sued the shipowner also.
The House of Lords held that the captain not being the servant of the
owner, the owner was not liable. This is so because the owner who has
parted with the possession and control of a ship under a charter-party
is no longer the employer of the crew and is not liable for their acts.
Lord WATSON emphasised that at the time when the bills of lading
were signed and also at the time when the goods of the appellant
suffered damage, the ship was in the possession and under the control
of the charterers, who employed their own master and crew in her
navigation.
Usual clauses of charters party
It is open to the parties to include in a charter-party or contract of
affreightment any lawful terms. But many such terms have now
become more or less stereotyped and are known as the usual clauses
of a charter-party. Some of such terms operate as conditions and
others as warranties. Whether it is one or the other dep[ends upon its
relative importance. Only some of such terms may bhe noted here.
1. Ready to Load
A charter-party usually contains a statement as to the position of the
ship. Such a statement may, in circumstances, become a condition of
the contract any breach of which entitled the charterer to repudiate the
contract. For example, in Bentsen v Taylor Sons & Co:
A charter-party dated March 29, described the ship as now sailed
or about to sail to the United Kingdom ,and that the ship, after
discharging homeward cargo, shall proceed to load. But, in fact, she
sailed to the United Kingdom on April 23. The parties then entered
into correspondence. The ship arrived and the charterers refused to
load.

2. Fit for Voyage

Charterparties usually provided that the ship shall be tight, staunch
and strong and every way fitted for the voyage. It has been admitted
by the Court of Appeal in Hong Kong Fir Shipping Co Ltd v. Kawasaki
Kisen Kaisha Ltd that whether such a stipulation is a condition or a
warranty is not easy to classify.
3. Full and complete cargo
Full and complete cargo clause means that the charterer undertakes
to supply the agreed cargo lest the ship owner may suffer loss of
freight. Where a charterer refused to load more than 2,673 tons,
whereas a full and complete cargo would have been 2,950 tons, it was
held that the charterer ought to have loaded a full and complete cargo
and freight was payable accordingly. Similarly, where in a charter-party
the defendant agreed to load a full and complete cargo say, about
1,000 tons, it was held that the words say about 1,100 tons, were
words of contract and not of expectation only.
4. Kings Enemies and Restraints of Princes
Charterparties often provide that the shipowner would not be liable in
certain events, for example, that no liability would arise if the goods
are lost due to an act of God or of national enemies . Such perils
are then known and excepted perils.
The words Kings enemies mean the enemies of the sovereign of
the person who made the bill of lading and restraints of princes and
rulers include all cases of restraint or interruption by lawful authority,
leaving, of course, the case of pirates to be ranked with other dangers
of the sea.
5. Perils of Sea
Charterparties also contain exception in favour of perils of the sea,
namely, if the goods are lost on account of a peril of the sea the
shipowner would not be liable. The term perils of the seadoes not
cover every accident or casualty which may happen to the subjectmatter. It must be a peril of the sea. These words do not protect, for
example, against that natural and inevitable action of the winds and
waves which results in what may be described as wear and tear.
BILL OF LADING

The Carriage of Goods by Sea Act, 1925 applies only when the contract
of affreightment is evidenced by a bill of lading. The definition in Article
1 of a contract of carriage, says that it applies only to contracts of
carriage covered by a bill of lading or any similar document of title. The
definition also includes any bill of lading or similar document issued
under or pursuant to a charter-party from the moment at which it
regulates the relations between the shipowner and the holder of the
bill of lading.
The greater number of contracts of carriage of goods by sea are made
in the form of bill of lading. This is so because the sender is either a
merchant or a manufacturer who wants to have the goods transported
and is not interested nor versed in the management of ships. Ships are
usually hired or chartered by those carrying on the profession of
carriers. The bill of lading is a typ0ical document of title. Thanks to its
character as a document of title, the bill of lading is invested with
particular attributes of great practical importance commercially. This
enables it to become one of the key instruments in international trade.
There is no definition in the Act of the document called bill of
lading.Neither is there any definition in the Bills of Lading Act, 1856.
The (English) Admiralty Court Act, 1861, however, in Section 6
provides that a document whereby the receipt of goods is
acknowledged for shipment on board a named ship, or on some other
ship for carriage by sea and delivery to the shippers order, the
document being signed on behalf of the master, is a bill of lading for
the purposes of the Bills of Lading Act, 1855. In Halsbury6s LAWS OF
ENGLAND it is stated that a bill of lading is a document of title signed
by the shipowner or by the master, or other agent of the shipowner
which states that certain specified goods have been shipped upon a
particular ship and which purports to set out the terms on which the
goods have been delivered to and received by the ship.
1. Prima facie evidence of receipt of Goods
Article 3, Rule 4 provides that a bill of lading shall be prima facie
evidence of the receipt by the carrier of the goods as therein
described. Thus it operates as a certificate that the goods have been
received. This may constitute an estoppels against the shipowner in
the sense that he may not afterwards by permitted to deny the truth of
the matter. At any rate, the burden will lie upon him to show that no
goods were received, and that the bill was obtained from him by fraud,
or in connivance with his agents.

2. Bill of Lading as evidence of Contract of Affreightment

The bill of lading is not the contract of affreightment in itself, but it is
the evidence of the contract, the terms of the contract of carriage are
no doubt to be found in the bill, but since the bill is only an evidence of
the contract, and not the contract by itself, there can be other terms
also.
3. Bill of Lading as Document of Title
A bill of lading is a document of title; it is a symbol of the goods; it
represents the goods themselves. It is a symbol of the right to
property in the goods specified in the bill. Its possession is equivalent
to the possession of the goods themselves, and its transfer being a
symbolic delivery of the goods themselves has by mercantile usage the
same effect as an actual delivery.
4 Responsibilities and Liabilities of the Carrier (Article III)
(1) The carrier shall be bound, before and at the beginning of the
voyage, to exercise due diligence to :(a) make the ship seaworthy;
(b) property man, equip, and supply the ship;
(c) make the holds, refrigerating and cool chambers, and all other
parts of the ship in which goods are carried, fit and safe for their
reception, carriage and preservation.
(2) Subject to the provisions of Article IV, the carrier shall properly
and carefully load, handle, stow, carry, keep care for the discharge the
goods carried.
(3) After receiving the goods into his charge, the carrier or the master
or agent of the carrier, shall on demand of the shipper, issue to the
shipper a bill of lading showing among other things :(a) The leading marks necessary for identification of the goods as
the same are furnished in writing by the shipper before the loading of
such goods starts, provided such marks are stamped or otherwise
shown clearly upon the goods if uncovered, or on the cases or
coverings in which such goods are contained in such a manner as
should ordinarily remain legible until the end of the voyage.

(b) Either the number of package or pieces, or the quantity or

weights, as the case may be, as furnished in writing by the shipper.
(c) The apparent order and condition of the goods :
Provided that no carrier, master or agent of the carrier, shall be bound
to state or show in the bill of lading any marks, number, quantity, or
weight which he has reasonable ground for suspecting not accurately
to represent the goods actually received or which he has had no
reasonable means of checking.
(4) Such a bill of lading shall be prima facie evidence of the receipt by
the carrier of the goods as therein described in accordance with
paragraph 3(a), (b) and (c).
(5) The shipper shall be deemed to have guaranteed to the carrier the
accuracy at the time of shipment of the marks, number, quantity, and
weight, as furnished by him, and the shipper shall indemnify the
carrier against all loss, damages and expenses arising or resulting from
inaccuracies in such particulars. The right of the carrier to such
indemnity shall in no way limit his responsibility and liability under the
contract of carriage to any person other than the shipper.
(6) Unless notice of loss or damage and the general nature of such
loss or damage be given in writing to the carrier or his agent at the
port of discharge before or at the time of the removal of the goods into
the custody of the person entitled to delivery thereof under the
contract of carriage, or, if the loss or damage be not apparent, within
three days, such removal shall be prima facie evidence of the delivery
by the carrier of the goods as described in the bill of lading.
The notice in writing need not be given if the state of the goods has at
the time of their receipt been the subject of joint survey or inspection.
In any event, the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within one
year after delivery of the goods or the date when the goods should
have been delivered.
In the case of any actual or apprehended loss or damage, the
carrier and the receiver shall give all reasonable facilities to each other
for inspecting and tallying the goods.
(7) After the goods are loaded the bill of lading to be issued by the
carrier, master or agent of the carrier to the shipper shall, if the

shipper so demands, be a shipped bill of lading, provided that, if the

shipper shall have previously taken up any document of title to such
goods, he shall surrender the same against the issue of the shipped
bill of lading but at the option of the carrier, such document of title
may be noted at the port of shipment by the carrier, master or agent
with the name or names of the ship or ships upon which the goods
have been shipped and the date or dates of shipment, and when so
noted the same shall for the purpose of this Article be deemed to
constitute a shipped bill of loading.
(8) Any clause, covenant or agreement in a contract of carriage
relieving the carrier or the ship from liability for loss or damage to or in
connection with goods arising from negligence, fault or failure in the
duties and obligations provided in the Article or lessening such liability
otherwise than as provided in these Rules, shall be null and void and of
no effect.
A benefit of insurance or similar clause shall be deemed to be a
clause relieving the carrier from liability.
Rights and Immunities of the Carrier (Article IV)
(1)

(2)

Neither the carrier nor the ship shall be liable for loss or
damage arising or resulting from unseaworthiness unless
caused by want of due diligence on the part of the carrier to
make the ship seaworthy, and to secure that the ship is
properly manned, equipped and supplied, and to make the
holds, refrigerating and cool chambers and alol other parts of
the ship in which goods are carried fit and safe and their
reception, carriage and preservation in accordance with the
provisions of paragraph 1 of Article III.
Whenever loss or damage has resulted from unseaworthiness
the burden of proving the exercise of due diligence, shall be
on the carrier or other person claiming exemption under this
section.
Neither the carrier nor the ship shall be responsible for loss or
damage arising or resulting from :(a)
Act, neglect, or default of the master, mariner, pilot, or
the servants of the carrier in the navigation or in the
management of the ship;
(b) Fire, unless caused by the actual fault or privity of the
carrier;

(c)

(3)

(4)

(5)

Perils, dangers and accidents of the sea or other

navigable waters;
(d) Act of God;
(e) Act of War;
(f)
Act of public enemies;
(g) Arrest or restraint of princes, rulers of people or seizure
under legal process;
(h) Quarantine restrictions;
(i)
Act or omission of the shipper or owner of the goods,
his agent or representative;
(j)
Strikes or lock-outs or stoppage or restraint of labour
from whatever cause, whether partial or general;
(k)
Riots and commotions;
(l)
Saving or attempting to save life or property at sea;
(m) Wastage in bulk or weight or any other loss or damage
arising from inherent defect, quality or vice of the
goods;
(n) Insufficiency of packing;
(o) Insufficiency or inadequacy of marks;
(p) Latent defects not discoverable of marks;
(q) Any other cause arising without the actual fault or
privity of the carrier, or without the fault or neglect of
the agent or servants of the carrier contributed to the
loss or damage.
The shipper shall not be responsible for loss or damage
sustained by the carrier or the ship arising or resulting from
any cause without the act, fault or neglect of the shipper, his
agents or his servants.
Any deviation in saving or attempting to save life or property
at sea, or any reasonable deviation shall not be deemed to be
an infringement or breach of these Rules or of the contract of
carriage, and the carrier shall not be liable for any loss or
damage resulting therefrom.
Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection with
goods in an amount exceeding 1001 per package or unit or
the equivalent of that sum in other currency, unless the
nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading.