Charterer's Liabilities under the Ship Time Charter

Article excerpt

  I.  BACKGROUND

 II.  SCOPE

III.  THE TIME CHARTER
      A.  Nature Of the Time Charter
          1. Contract
          2. Allocation of Duties
      B.  Limited Duties of a Time Charterer
          1. Cargo Risk of Loss
          2. Safe Ports/Berths
          3. Special Nature of the Ship

 IV.  POTENTIAL THIRD-PARTY LIABILITIES UNDER A TIME
      CHARTER
      A.  Potential Liability Based on Direct Negligence or
          Fault
          1. Collisions and Explosions
          2. Burden of Proof
          3. Navigation, Operation and Maintenance of the
             Ship
          4. Towage, Loading and Unloading
          5. Jones Act--Death on the High Seas Act
          6. Minimum Potential Liability
      B.  Potential Liability Based on Strict Liability
          Theories
          1. Inherently Dangerous Cargoes
          2. Owner of the Technology/Design Defect
      C.  Potential Liability Under Carriage of Goods
          Regimes
          1. Carriage of Goods Under United States and
             International Law
          2. Bills of Lading
          3. Applicability of COGSA

  V.  LIABILITY LIMITATIONS UNDER MARITIME LAW
      A.  General
      B.  United States Law
      C.  International Conventions
          1. General
          2. The 1976 Convention
          3. The 1996 Protocol

  VI. ENVIRONMENTAL LIABILITY RISKS AND REGULATIONS
      UNDER UNITED STATES LAW

 VII. INSURANCE
      A. Shipowner Policies
      B. Charterer policies

VIII. CONCLUSION

I BACKGROUND

In the early hours of the morning of October 30, 1951, the steamship Wagon Mound was taking on fuel, bunkering oil, at a wharf in Sydney Harbor. During the process, a large amount of that oil was spilled into the bay. The oil quickly spread across the bay, and a significant amount accumulated under the wharf of a nearby ship repair facility where welding work was being performed on two ships. After completing its loading operations, the Wagon Mound slipped its lines and left Sydney Harbor. Some twelve hours later, the oil laying under the nearby repair facility wharf was ignited by sparks from welding torches being used by workers above. The subsequent fire severely damaged the wharf and the two ships being repaired alongside. At trial, lengthy expert testimony showed that--although the fuel oil was clearly designed to burn in the Wagon Mound's furnace, which powered the ship the owners of the Wagon Mound could not reasonably have been expected to know that fuel oil was capable of being set on fire when spread on water. (1) The Wagon Mound owners were, therefore, found not liable to the wharf owner for the damages caused. After years of working its way through the courts, the Judicial Committee of the Privy Council eventually upheld the trial court's finding that the Wagon Mound owners were not guilty of negligence to the shipyard wharf owner. (2) However, in a related case, the Privy Council later held the Wagon Mound owners to be negligent to the owners of the two ships damaged in the blaze based on evidence which showed that even though unlikely, the owners should have known it was possible the oil could have ignited and that the Wagon Mound owners' representative at the scene made no attempt to contain the spillage of oil into the water. (3)

The Texas City disaster of 1947--when the French vessel, Grandchamp, which was loading a cargo of ammonium nitrate fertilizer, caught fire and exploded, triggering the subsequent explosion of two other nearby ships--left approximately 500 dead and 3,500 injured. (4) The original cause of the fire on the Grandchamp is still unknown, but the subsequent loss of life, personal injury, and property damage is unparalleled in the United States maritime industry. (5)

Clearly, the risks of personal injury and damage to property and the environment in the marine transportation industry have increased substantially since the arrival of the internal combustion engine and the discovery of oil. …