An award in a recent London arbitration provides insight into the legal risks that arise if a charterer instructs the shipowner to perform additional work not provided for in the in the charter party or in an addendum.
In the underlying case, the parties had concluded a charter party for a single voyage with one port of discharge. The cargo was refused at the intended port of discharge because the cargo did not meet the required import specification. The charterer subsequently nominated a second port where the cargo was again refused, after which the charterer instructed the shipowner to discharge the cargo in two separate alternative ports. The parties had an addendum to the charter party for the change in instructions, however without explicitly agreeing on the additional freight or extra expenses.
As a result of the problems with the cargo, the voyage took considerably longer and the shipowner requested payment of additional freight and costs from the charterer. The charterer refused to compensate the shipowner arguing that there was no agreement to do so in the Charterparty or addendum. Since no agreement had been made in the addendum and the parties could not agree on a settlement, the case was submitted to arbitration. The shipowner argued that since the addendum did not contain any agreement regarding compensation for the additional work, the tribunal should order payment of additional reasonable compensation. However, the tribunal ruled against the shipowner and concluded that the parties had laid down their agreements about the additional work in the addendum without additional compensation and therefore there was no room to award additional compensation.
We advise our members to ensure that before any additional work is done, either a suitable clause is contained in the charterparty or an addendum is drawn up setting out the compensation payable to the shipowner. Our members can of course always contact us at firstname.lastname@example.org for further advice on this issue.