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BAREBOAT CHARTERS

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BAREBOAT CHARTERS Powered By Docstoc
					BAREBOAT
CHARTERS
 SECOND EDITION




           BY

   MARK DAVIS
      Davis & Co.




      |L|L|P|
 LONDON     SINGAPORE
          2005
                                     Contents




Acknowledgements                                                                             vii
Preface to the Second Edition                                                                 ix
Table of Cases                                                                             xxiii
Table of Legislation                                                                       xxxi
Table of Conventions                                                                      xxxiii



 1 THE NATURE OF A BAREBOAT CHARTER
                                                                                      para nos
   Introduction                                                                             1.1
   Operating charters                                                                       1.7
   Finance charters and leases                                                              1.8
   The essential characteristics of a bareboat charter                                      1.9
   The fundamental terms of a bareboat charter                                            1.13
   The liability of the owners of a bareboat chartered vessel to third parties            1.14
      Owners' liability for acts or omissions of the bareboat charterers                  1.15
     Owners' liability to third parties for their own negligence                          1.16
     Owners' rights where the vessel is simultaneously bareboat chartered and taken
        back on time charter                                                               1.17



 2 THE FORMATION OF A BAREBOAT CHARTER
   Formal requirements                                                                     2.1
   Fixture before formal charter signed                                                    2.6
   Construction of the contract                                                            2.8
     General principles                                                                    2.8


                                            XI
                                     CONTENTS
   Presumption against surplusage                                                2.10
   Deletions                                                                     2.11
   Printed/typed clauses                                                         2.12
 Conditions, warranties and "innominate" terms                                   2.13
   Conditions                                                                    2.14
   Warranties                                                                    2.15
   Innominate terms                                                              2.16
 Terms implied by statute                                                        2.18
   The Supply of Goods and Services Act 1982 as amended by the Sale and Supply
      of Goods Act 1994                                                          2.18
      The right to transfer possession of the vessel and the right to quiet
         enjoyment                                                               2.20
      Correspondence with description                                            2.24
      Satisfactory quality                                                       2.29
      Fitness for purpose                                                        2.30
      Repudiation                                                                2.31
   Unfair Contract Terms Act 1977                                                2.32
   The Law Reform (Frustrated Contracts) Act 1943                                2.34




3 THE BIMCO BARECON 2001 FORM                                                     3.1

4 CLAUSES 1, 2 AND 3—DEFINITIONS, CHARTER PERIOD
  AND DELIVERY

 Definitions                                                                      4.1
 Charter period                                                                   4.2
 Delivery                                                                         4.3
 Introduction                                                                     4.4
 Due diligence                                                                    4.5
 Seaworthiness                                                                    4.8
 Readiness for service                                                            4.9
 What constitutes delivery?                                                      4.11
 Breach of owners' obligations                                                   4.12
 Place of delivery                                                               4.13
 Properly documented                                                             4.15
 Survey cycles, trading and class certificates                                   4.16
 Discharge of owners' obligations under Clause 3                                 4.17
 Latent defects                                                                  4.21
 Damage existing at the time of delivery                                         4.24



5 CLAUSE 4—TIME FOR DELIVERY
 Window for delivery                                                              5.1
 Notice                                                                           5.2
 Change in vessel's position                                                      5.4


                                          xn
                                          CONTENTS

 6 CLAUSE 5—CANCELLING
   The charterers' contractual right to cancel                                        6.2
   Owners' notice of delay                                                            6.4
   Cancellation before the cancelling date                                            6.6
   Claims against the owners                                                          6.7
   Measure of damages                                                                 6.8


 7 CLAUSE 6—TRADING                    RESTRICTIONS

   Purpose of trading limits                                                          7.1
   Breach—measure of damages                                                          7.3
   Withdrawal of the vessel and termination of the charter                            7.6



 8 CLAUSE 7—SURVEYS ON DELIVERY AND REDELIVERY
   Purpose of survey                                                                  8.1
   Expenses of survey                                                                 8.2
   Disputes as to vessel's condition                                                  8.3
   Drydock                                                                            8.5


 9 CLAUSE 8—INSPECTION
   Owners' right to inspection/survey                                                 9.1
   Cost of inspection/survey                                                          9.3
   Right to inspect the vessel's log books                                            9.6
   Duty to keep owners advised of the intended employment of the vessel               9.7


10 CLAUSE 9—INVENTORIES, OIL AND STORES

   Preparation of inventory                                                         '0-1
   Payment                                                                          10-2
   Property in bunkers                                                              10.3


II C L A U S E 1 0 — M A I N T E N A N C E A N D O P E R A T I O N

   Maintenance and operation
      10(a) Maintenance and repairs, New class and other safety requirements and
        Financial security                                                          ' ' -2
      10(a)(i) Maintenance and repairs                                              H-3
      10(a)(ii) New class and other safety requirements                             11.6
      10(a)(iii) Financial security                                                 H-8
   Operation of the vessel                                                          ' ' -9
   Intended employment                                                             11.10

                                                 xiii
                                         CONTENTS
   Flag and name of vessel                                               11.11
   Structural changes                                                    11.12
   Use of outfit, equipment and appliances                               11.13
   Periodical drydocking/cleaning and painting of underwater parts       11.14
   Breach of charterers' obligations                                     11.15



12 CLAUSE 11—HIRE
   Introduction                                                           12.1
   Time of the essence                                                    12.2
   Payment of first month's hire                                          12.4
   Payment of subsequent instalments of hire                              12.5
   Payment of last month's hire                                           12.6
   Payment in cash without discount                                       12.8
   Set-off                                                                12.9
   Vessel lost or missing                                                12.11
   Part payment                                                          12.12
   Interest                                                              12.13
   Waiver and estoppel                                                   12.14
      Waiver                                                             12.15
      Estoppel                                                           12.17
   Acceptance of late payment                                            12.18


13 C L A U S E   12—MORTGAGE

   Introduction                                                           13.1
   Vessel not financed by a mortgage                                      13.2
   Vessel financed by a mortgage                                          13.3
   Rights of the mortgagee                                                13.4


14 C L A U S E S 1 3 / 1 4 — I N S U R A N C E A N D R E P A I R S

   Introduction                                                           14.1
   Clause 13
      Hull and machinery, war and P&I                            risks    14.3
      Hire/purchase                                                       14.5
      Additional insurances                                               14.6
      Documentation                                                       14.7
      Actual, constructive, compromised or agreed total loss              14.8
      Termination of the charter                                         14.10
      Abandonment                                                        14.11
      Value of the vessel                                                14.12
   Clause 14
      Marine and war                                  risks              14.14
      Protection and indemnity                             risks         14.15
      Vitiation of the insurances                                        14.16
      Responsibility for insured repairs                                 14.17

                                               xiv
                                        CONTENTS
    Responsibility for uninsured repairs                                             14.18
    Time for repairs                                                                 14.19
    Additional insurances                                                            14.20
    Agreed, constructive, compromised or agreed total loss                           14.21
    Termination                                                                      14.22
    Abandonment                                                                      14.23
    Value of the vessel                                                              14.24
    Classification certificates                                                      14.25



15 CLAUSE 15—REDELIVERY
  Introduction                                                                        15.1
  Place of redelivery                                                                 15.2
  Time and notice for redelivery                                                      15.3
  Early redelivery                                                                    15.4
  Late redelivery                                                                     15.7
  Condition of the vessel upon redelivery                                             15.9
  Measure of damages                                                                 15.12
  Survey cycles and class certificates                                               15.16



16 CLAUSE 16—NON-LIEN
  Introduction                                                                       16.1
  Common law and liens                                                               16.2
     Introduction                                                                    16.2
     Ostensible authority                                                            16.3
     Notice                                                                          16-6
     Arrest                                                                          16-7


17 CLAUSE 17—INDEMNITY
  Introduction                                                                       ' 7.1
  Indemnity by the charterers                                                        '7-2
  Indemnity by the owners                                                            17.4


18 CLAUSE 18—LIEN
  Introduction                                                                       '8.1
  The owners' lien upon all cargoes belonging to the charterers                      18.2
  The owners' lien upon sub-hires and all sub-freights belonging to the charterers   18.3
  The owners' lien upon any bill of lading freight                                   18.5
  The charterers' lien on the vessel for all moneys paid in advance and not earned   18.6
  Priority                                                                           18.7
  Registration                                                                       ' 8-8



                                             xv
                                        CONTENTS

19 CLAUSE 19—SALVAGE

  Introduction                                                      19-1


20 CLAUSE 20—WRECK REMOVAL                                           01
                                                                    2.

21 CLAUSE 21—GENERAL AVERAGE

  Introduction                                                       21.1
  English law of general average                                     21.4


22 CLAUSE 22—ASSIGNMENT, SUB-CHARTER AND SALE

  Introduction                                                       22.1
  Assignment of benefits                                             22.3
  Assignment of burdens                                              22.4
  Vicarious performance                                              22.6
  Legal and equitable assignments                                    22.7
  Novation                                                           22.8
  Consent not to be unreasonably withheld                            22.9
  Effect of assignment in breach of contractual prohibition         22.12
   Sub-bareboat charter                                             22.17
  Time or voyage charter                                            22.18
   Sale of the vessel by the owners                                 22.19
   Discharge of guarantee                                            22.20


23 CLAUSE 23—CONTRACTS OF CARRIAGE

   Paramount Clause                                                  23.2
   New Jason Clause                                                  23.4
   Both-to-blame collision clause                                    23.5
   Claims by cargo owners                                            23.6
   Passengeer tickets                                               23.11


24 CLAUSE 24—BANK GUARANTEE

   Introduction                                                      24.1
   The nature of a bank guarantee                                    24.3
   The nature of a performance bond                                  24.6
   "First class" bank guarantee or bond                              24.8
   Discharge of the surety under a bank guarantee                    24.9
      General                                                        24.9
      Extension of the charterparty                                 24.12
      Assignment by the owners of the benefit of the charterparty   24.18
      Charterers ordering the vessel outside trading limits          24.20

                                              xvi
                                           CONTENTS
    Enforceability of the guarantee                                                        24.21


25 CLAUSE 25—REQUISITION/ACQUISITION

    Introduction                                                                            25.1
    Requisition for hire                                                                    25.2
    Compulsory acquisition or requisition for title                                         25.4
    Requisition for hire and frustration                                                    25.5


26 C L A U S E 2 6 — W A R

    War risks definition                                                                    26.1
    The scope of Clause 26                                                                  26.3


27 C L A U S E 2 7 — C O M M I S S I O N

    Introduction                                                                            27.1
    Broker's commission—who is responsible?                                                 27.2
    Brokers' ability to recover commission                                                  27.5
       Contracts (Rights of Third Parties) Act 1999                                         27.5
       At common law                                                                       27.10
       Common law and the Contracts (Rights of Third Parties) Act 1999                     27.12


28 CLAUSE 28—TERMINATION

   Introduction                                                                             28.1
   Charterers' default                                                                      28.2
      Failure to pay hire                                                                   28.3
      Failure to comply with Trading Restrictions (Clause 6) or the Insurance and Repair
        provisions of Clause 13(a)                                                          28.5
      Failure to comply with the Maintenance and Repair provisions of Clause 10(a)(i)       28.7
   Owners' default                                                                          28.8
   Loss of the vessel                                                                       28.9
   Insolvency                                                                              28.10
   Reservation of                                   rights                                 28.11
   Practical consequences of termination                                                   28.12
   Effect of withdrawal of the vessel                                                      28.13


29 C L A U S E 2 9 — R E P O S S E S S I O N

   Introduction                                                                            29.1
   Repossession                                                                            29.2
   The position pending repossession                                               .       29.3
   Disembarkation and repatriation expenses                                                29.4

                                               xvii
                                            CONTENTS
                                                                29 5
   Arrest                                                         -
   Relief against forfeiture                                    29.6


30 C L A U S E 3 0 — D I S P U T E R E S O L U T I O N

   Introduction                                                  30.1
   Arbitration—London/New York                                   30.2
   English law and London arbitration                            30.4
      Scope of the disputes                                      30.4
      Procedure under the LMAA rules                             30.5
      Small claims                                               30.8
      Commencement of arbitration proceedings                    30.9
      Rights of challenge/appeal                                30.11
      Back-to-back contracts                                    30.14
      Enforceability of the award                               30.15
      Arbitration by third parties                              30.16
    Mediation                                                   30.17


31 C L A U S E 3 1 — N O T I C E S

    Introduction                                                 31.1
    Time of service                                              31.2
       The general rule                                          31.2
       The postal rule                                           31.3
       Service by email                                          31.4
       Service by telex and/or fax                               31.5
    Failure to comply with the notices provision                 31.7


 32 PART III: PROVISIONS TO APPLY FOR NEWBUILDING
    VESSELS ONLY
     Introduction                                                32.1
     Specifications and building contract                        32.3
     Time and place of delivery                                  32.7
     Guarantee works                                            32.10
     Name of vessel                                             32.11
     Survey on redelivery                                       32.12


 33 PART IV: HIRE/PURCHASE AGREEMENT
     Introduction                                                 33.1
     Provided the charterers have fulfilled their obligations     33.2
     Delay in payment of the final instalment                     33.3
     Guarantee and indemnity                                      33.4
     Miscellaneous provisions                                     33.5

                                                 xviii
                                           CONTENTS
      Purchase and registration expenses                                33.5
      Bill of sale and deletion from Register                           33.6
      Wireless installation and nautical instruments                    33.7
      Sellers'                                      risk                33.8
      Repatriation                                                      33.9


34 PART V: PROVISION TO APPLY FOR VESSELS
   REGISTERED IN A BAREBOAT CHARTER REGISTRY
   Introduction                                                         34.1
   Bareboat charter registration under British                  flag    34.2
      Governing law                                                     34.2
      Qualification for registration                                    34.3
      Period of registration                                            34.4
     The effect of registration                                         34.5
     Application for registration                                       34.6
      Changes in circumstances                                          34.7
     Notification of primary registry                                   34.8
     Regulation 87                                                      34.9
     Registrar's power to refuse registration                          34.10


35 F I N A N C E C H A R T E R S A N D L E A S E S

   Introduction                                                         35.1
      Loans and leases                                                  35.1
      Main differences                                                  35.2
     Tax/accounting treatment                                           35.3
     Re-characterisation                                 risk           35.4
      Financing bareboat charters                                       35.5
   Typical financing charter terms                                      35.7
     Introduction                                                       35.7
     Definitions                                                        35.8
     Transfer of risk provisions                                        35.9
        "Hell or high water" payment terms                              35.9
        Hire                                                           35.10
        Owners'liability                                               35.11
        Charterers' indemnity                                          35.13
     Owners'                                      rights               35.14
        Right to mortgage or sell the ship                             35.15
        Rights on termination                                          35.16
     Other common provisions                                           35.17
        Conditions precedent to the grant of the lease                 35.18
        Charterers' representations and warranties                     35.19
        Charterers' covenants and undertakings                         35.20
        Termination events                                             35.21
   Owners' liability issues                                            35.22
     Introduction                                                      35.22
     Oil pollution                                                     35.23

                                                 xix
                                       CONTENTS
   Third party liabilities                                                                35.24
   Flag liabilities                                                                       35.25
   Other civil liabilities                                                                35.26
   Insurance cover                                                                        35.27
 Insolvency issues                                                                        35.28
    Repossession                                                                          35.29
      Liquidation                                                                         35.30
      Administrative receivership                                                         35.31
      Administration                                                                      35.32
    Recovering hire                                                                       35.33
      Liquidation                                                                         35.33
      Administrative receivership                                                         35.34
      Administration                                                                      35.35
    Disclaimer of charter                                                                 35.36
    Disposal of ship                                                                      35.37
    Automatic termination on liquidation or administration                                35.38


36 IN REM CLAIMS AND ADMIRALTY JURISDICTION
  Introduction                                                                             36.1
  Claims in personam and in rem                                                            36.2
     Claims in personam                                                                    36.2
     Claims in rem                                                                         36.3
     Advantages of an action in rem                                                        36.4
     Procedural issues                                                                     36.5
  Statutory liens                                                                          36.6
  Maritime liens                                                                           36.7
     Introduction                                                                          36.7
     Main features of a maritime lien                                                      36.8
     Discharge of a maritime lien                                                          36.9
     Maritime liens and actions in rem                                                    36.10
   The distinction between in rem and arrest jurisdiction                                 36.11
   Priority                                                                               36.13
   Claims against the bareboat chartered ship                                             36.14
      Introduction                                                                        36.14
     When can a third party arrest or proceed in rem against a bareboat chartered
         ship?                                                                            36.15
     When can a third party arrest or proceed in rem against a sister ship of the owner
         and/or bareboat charterer of the bareboat chartered ship?                        36.18
   Summary                                                                                36.20


37 POLLUTION
  Introduction                                                                              37.1
  OPA 90                                                                                    37.2
     Introduction                                                                           37.2
     Strict liability                                                                       37.3
     Who can be held liable?                                                                37.4

                                              xx
                                          CONTENTS
     Type of damage covered                                                                  37.5
     Exceptions to liability                                                                 37.6
     Limitation of liability                                                                 37.7
     Certificates of financial responsibility                                                37.8
     Oil Spill Liability Trust Fund                                                          37.9
 ''The International Convention on Civil Liability for Oil Pollution Damage 1992 and
        the International Convention on the Establishment of an International Fund for
        Compensation for Oil Pollution Damage 1992                                          37.10
     Introduction                                                                           37.10
     Strict liability                                                                       37.12
     Who can be held liable?                                                                37.13
     Type of damage covered                                                                 37.14
     Exceptions to liability                                                                37.15
     Limitation of liability                                                                37.16
     Compulsory insurance and certification                                                 37.18
   The International Convention on the Establishment of a Fund for Compensation for
        Oil Pollution 1992 and the IOPC Fund                                                37.19
   Supplementary Fund                                                                       37.20
   The Hazardous and Noxious Substances Convention 1996                                     37.21
     The HNS Fund                                                                           37.22



38 FRUSTRATION
  The doctrine of frustration                                                                38.1
  Applicability of the doctrine of frustration to bareboat charters                          38.3
  Foreseen events provided for in the charter                                                38.4
  The effect of frustration at common law                                                    38.5
  The Law Reform (Frustrated Contracts Act) 1943                                             38.6
    Background                                                                               38.6
    Applicability of the Act                                                                 38.7
    Recovery of advance payments                                                             38.8
    Obligations other than to pay money                                                     38.11
    Identification of the benefit                                                           38.12
    Valuation of the benefit                                                                38.13
    Award of a just sum                                                                     38.14
  Loss of the ship                                                                          38.15
  Frustration by delay or strike                                                            38.17
  Frustration by illegality                                                                 38.18
  Frustration by war                                                                        38.19
  Frustration by requisitioning                                                             38.20
  Arbitration                                                                               38.21

                                                                                         page nos
  APPENDIX 1: BARECON 2001                                                                    251

  APPENDIX 2: BARECON 89                                                                     265


  Index                                                                                      279



                                              xxi

				
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