Overview

Transportation of goods from the seller’s country to the buyer’s country is an important part of any international sale contract.This applies equally to contracts concluded offline and those online, unless, of course, the sale is for software, electronic books and other electronically stored information that can be transferred online.

Much of the cargo in international trade is still transported by sea, and bills of lading continue to play an important role as a transport document. Among its many characteristics is its role as a transferable document of title, which contributes to its popularity. International developments in relation to the carriage of goods by sea are significant. The number of conventions in force – the Hague Rules, the Hague-Visby Rules and the Hamburg Rules – affecting sea transportation, in particular, bills of lading, and the new transport convention (the Rotterdam Rules) indicate the commercial and political interests vested in sea carriage by both the developed and developing countries. The Hague Rules and the Hague-Visby Rules, products of shipowning interests that are influential and widely accepted, determine the responsibilities and liabilities of the carrier where goods are transported using bills of lading or documents of title. On the contrary, the Hamburg Rules, which casts its net wider as a result of a strong political agenda on the part of developing nations, when measured against the numbers of ratification, are of limited application.The current regime of three conventions is, to say the least, undesirable. Emerging new practices in relation to transport documents in the form of electronic bills of lading and electronic waybills as a result of developments in information technology also compound the uncertainties. Hence, the drafting of a new convention, which was adopted in 2008.

Chapters 5 and 6 start off with the different guises of a contract of carriage of goods by sea. Chapter 5 deals with voyage charterparties in brief, and Chapter 6 deals with bills of lading, a multipurpose transport document that plays a dominant role in international sales involving sea transportation. Chapter 7 deals with obligations of the carrier and the shipper in respect of a bill of lading under common law, and Chapter 8 deals with the Hague Rules and the Hague-Visby Rules (implemented in the United Kingdom (UK) by the Carriage of Goods by Sea Act 1971). Chapter 9 examines the Hamburg Rules and the Rotterdam Rules. As and where relevant, the common features between the Hague-Visby Rules, the Hamburg Rules and the Rotterdam Rules are highlighted.

Although sea carriage is the predominant mode of transporting worldwide, other forms of unimodal transport – air, rail and road – also play an important role on the international cargo transportation scene. The responsibilities and liabilities of the parties to transport contracts involving these different modes of transportation have been regulated by various international conventions. Chapter 10 deals with the Warsaw regime that affects international transportation of cargo by air and concludes with a section on the Montreal Convention 1999. Chapter 11 considers the CIM 1999, the international convention affecting transportation by rail, and Chapter 12 devotes itself to the Convention on the International Carriage of Goods by Road 1956 (CMR), an international convention affecting international road transportation of cargo.

Containerisation brought its own exciting developments in the form of door-to-door transport using a combination of modes of transportation and the use of a multimodal (combined) transport document. Attempts to harmonise the law through an international convention surprisingly have

been unsuccessful. Chapter 13, therefore, looks at the current legal framework against the backdrop of standard forms used by trade associations, such as British International Freight Association (BIFA) (in the UK) and the International Federation of Freight Forwarders Associations (FIATA), which draws on the United Nations Conference on Trade and Development (UNCTAD)/International Chamber of Commerce (ICC) Rules on Multimodal Transport. As and where relevant, the reader’s attention is drawn to recent studies and proposals emanating from international organisations, such as the United Nations Economic Commission for Europe (UNECE) and UNCTAD.

Chapter 5

Transportation of Goods by

Sea – Charterparties

Chapter Contents

Introduction

As seen in Chapter 1, under a contract for sale on cost, insurance, freight (CIF) terms, the seller is responsible for arranging transport of cargo from his country to the buyer’s. Even where the sale is not on CIF terms, transport is still an integral part of an international sale transaction. For instance, in a free on board (FOB) contract, the buyer may arrange transport or he may ask the seller to arrange transport on his behalf. Depending on the amount of cargo, a number of options are open to the shipper (seller or buyer) where sea carriage is envisaged. Where the cargo is insufficient to fill the entire cargo space of a ship, it is normal for the shipper to find space on a liner service1 and obtain a bill of lading – a document that the seller is obliged to tender to the buyer in a CIF contract.2 Where the shipper is the buyer, he is also likely to obtain a bill of lading, which, because of its versatility, can be used to sell the goods on to a third party or used as security for raising money to finance the sale.3 Where the amount of cargo is sufficient to take up a vessel’s full cargo carrying capacity, it is commonplace to charter a ship. Under this type of arrangement, the shipowner agrees to make the ship available to the charterer for a specified voyage(s) – from Southampton to Singapore – or a specified period of time – from 1 January 2008 to 1 January 2009. However, not all charterparties fall neatly into these two classifications. A number of variations are found in practice – trip charter, consecutive voyage charter and long term freighting contracts. In a trip charter, the contract is for a voyage on time charter terms, thereby providing a minimum/maximum period for the voyage.4 In a consecutive voyage charter, the contract is for a number of consecutive voyages within an agreed period, and, in a long term freighting contract, the agreement is to carry quantities of cargo on particular routes over an agreed period of time with the shipowner choosing the ships.

The contract between the charterer (one who charters the ship) and the shipowner is known as a charterparty.5 In English law, there is no requirement that it be in a written form. However, it is usual for the charterparty to be in writing. The charterparty will identify the vessel, the cargo it is to carry, the voyage(s) or time for which the ship is made available and contain terms in respect of the various responsibilities and liabilities of the shipowner and the charterer. Charterparties have been standardised since the beginning of the 20th century by organisations such as the Baltic and International Maritime Conference – now known as the Baltic and International Maritime Council (BIMCO) – and the Chamber of Shipping. A number of standard charter forms are available – some for use with all cargoes and some for special cargoes, such as grain. Of course, the parties may vary the charterparty clauses, should they wish to. It is not unusual to find amendments or additional clauses, since some of the standard charterparties drafted in the early part of the 20th century do not reflect the current trade practice.6 Other than standard form charterparties, charterers such as oil companies who charter vessels on a frequent basis have their own charterparty forms (e.g., British Petroleum’s Beepeevoy and Shell’s Shellvoy). Terms expressed in the charterparty, provided it is governed by English law, are subject to rules of interpretation of contract terms and general principles of English contract law.7 However, English common law implies a few

1 In liner service, there is a regular schedule of sailings to particular ports. This is different from tramp shipping where sailings are dependent on cargo and there is no regular schedule. A tramp shipping service is normally used for sending bulk cargo in shiploads. Note that tramps are not common carriers – they are contract carriers. See Buckley, The Business of Shipping, 8th edn, 2008 Cornell Maritime.

2 See Chapter 1, pp 12–17.

3See Chapters 6, 7, 8 and 15. Note that the bill of lading is also a document called for under a documentary credit (letter of credit) arrangement. See Chapter 15 for further on documentary credit arrangements.

4These are classified, however, as time charters for the purposes of Law Reform (Frustrated) Contracts Act 1943, which does not apply to voyage charters (s 2(5)). See also The Eugenia [1964] 2 QB 226. Note that, in a trip charter, the charterer pays hire, not freight.