FOREIGN TRADE UNIVERSITY

HO CHI MINH CITY CAMPUS

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GROUP WORK

Module: Sea and Air Transportation

MID-TERM TEST
CASE STUDY ANALYSIS

Class code: ML29 Group: 10

Hoàng Châu Hà Uyên - 2112533054
Nguyễn Phạm Minh Triết - 2112533051
Supervisor: Phd. Lê Thị Thanh Ngân

Ho Chi Minh City, November 29th 2024

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PEER ASSESSMENT

Name Student ID Tasks Contribution

Background, Timeline,
Nguyễn Phạm Minh Triết 2112533051 Analysis of Clause 6, 100%
7, Conclusion

Parties proposition,
Analysis of Laydays
Hoàng Châu Hà Uyên 2112533054 100%
and Laytime clause,
Clause 18, 30(c)
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TABLE OF CONTENTS

PEER ASSESSMENT ............................................................................................... i

TABLE OF CONTENTS ......................................................................................... ii
I. CONTEXT ..............................................................................................................1
II. ANALYSIS ............................................................................................................3
1. Clause A: Laytime........................................................................................3
2. Clause B: Laydays .......................................................................................3
3. Clause C: Demurrage ..................................................................................4
4. Clause 6: Notice of readiness ......................................................................4
5. Clause 7: Hours for loading and discharging............................................5
6. Clause 18: Cleaning .....................................................................................5
7. Clause 30(c): Inspection/Cleaning - Amended ..........................................5
III. CONCLUSION ...................................................................................................9
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I. CONTEXT

The case study revolves around a legal dispute between Viagra Ltd (hereafter
referred to as “Charterer”) and Titanic Inc (hereafter referred to as “Shipowner”)
concerning whether the Charterer had violated the charterparty’s clauses, subjecting
the latter to demurrage.

1. Background

The Charterer entered the charterparty with the Shipowner on 3 November

2000, on the basis of the Asbatankvoy form, in which the laycan period was supposed
to start on 17 November 2000 and end on 22 November the same year. However, due
to certain occurrences, it was not until 3 January 2001 that cargo loading was
completed, which incurred a significant amount of demurrage fee to be claimed by
the Shipowner.

Specifically, the laytime allowed was 24 hours; however, when the Mary
entered berth for loading cargo, it got rejected due to unfit conditions for gas oil. This
thus requires the Vessel to get back to the anchorage for further cleaning and it took
around 2 days, until 5 December 2000, to achieve the eligibility needed. Disputes
arose when the Vessel stayed put throughout December until 2 January 2001 when it
was only able to enter berth again and finished loading the cargo. Such a discrepancy
of around one month must have been the root cause of the dispute and hence any
monetary claims.

2. Event timeline

Date Hour Events

3/11/2000 Viagra chartered the Vessel

17-22/12/2000 Laydays period

08:00 Vessel arrived in Sikka and first NOR tendered

2/12/2000
14:00 Laytime started

Entered berth, tanks inspected by one surveyor

Vessel rejected to load cargo due to unclean tanks,

3/12/2000
moved back to anchorage

14:00 Laytime ended

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Date Hour Events

9:30 New NOR tendered after tank cleaning

5/12/2000 Vessel waiting at anchorage

15:30 Laytime started

6/12/2000 15:30 Laytime ended

6/12/2000 - 2/1/2001 Vessel waiting at anchorage

2/1/2001 15:00 Vessel entered berth

3/1/2001 10:00 Loading completed

Charterer: Viagra Ltd

Shipowner: Titanic Ltd
Shipper/Supplier: Reliance Petroleum Ltd

3. Parties’ propositions

Against the background that it took the Vessel nearly a month to be loaded
with cargo following the valid NOR tendering on 5 December 2000, Titanic Inc
pressed for demurrage charges to be paid by the Charterer.

Viagra Ltd, however, submitted that such waiting time was due to the fact that
the Vessel lost its turn to be loaded due to additional cleaning and invoke clauses
under the charterparty between the Shipowner and the Charterer to oppose the
liability for demurrage during the above time period.

While each of the above propositions put forward by both parties may be
underlined with differing lines of reasoning and principles invoked from the
Asbatankvoy form and relevant amendments made to the charterparty, a
comprehensive analysis and discussion of the clauses thereof ought to be made in
order to arrive at a sound judgment for the dispute in question, which is the task of
the author group over the succeeding parts of this report.
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II. ANALYSIS

1. Clause A: Laytime

As specified in the Asbatankvoy form, the total laytime allowance was 24

hours. Theoretically, the following three conditions consisting in the commencement
of laytime: (1) the Vessel must have arrived at the customary anchorage at the port of
loading, (2) the Vessel must be ready and in fit condition to load cargo, and (3) a NOR
must have been tendered to the Charterer. In this case, the second condition had not
been met when the Vessel first entered berth on 3 December 2000, following the
pronouncement from the Inspector appointed by the Charterer and the Shipper that
the Vessel’s tanks were unfit to load gas oil; therefore, it was not until the second
NOR tendering that the laytime clause became effective. Clause 7 on Hours for
Loading and Discharging also specified that delay due to the inability of the Vessel’s
facilities to load the cargo within the time permitted would not constitute used
laytime, further underpinning the implication that no laytime was in place between 2
December 2000, and 5 December 2000.

In addition, Clause 6 on Notice of Readiness (NOR) stipulated that laytime

shall start to count 6 hours after the submission of the valid NOR or upon arrival of
the Vessel at berth, whichever first occurs. In the given case study, seeing that the
Master tendered the valid NOR at 9.30 AM on 5 December 2000, following additional
cleaning to render the Vessel’s tanks passed as clean for loading, laytime commenced
at 3.30 PM the same day and expired at 3.30 PM the following day.

2. Clause B: Laydays

The charterparty provided for the time window during which the Shipowner
must present the Vessel for loading at the loading port, in particular from 17
November 2000 to 22 November 2000. Yet, the Vessel in this case failed to arrive at
the loading port within the above period; the Vessel, in fact, arrived on berth later on
December 2, 2000. In essence, should the Vessel does not arrive within the agreed
laydays, the Charterer has the option to cancel the charterparty and the Shipowner
may also incur financial penalties as consequences. Such concepts could be found
under Clause 30(c) which will also be discussed in further detail in the subsequent
sections in this report. It is noteworthy, however, that strict coordination between the
Shipowner and the Charterer is especially crucial to tie in the Vessel’s arrival with the
cargo loading operations before laytime would begin. Furthermore, there were no
clauses present in the charterparty that allowed the laytime period to be extended even
if it would have been too late for loading operations to be made within the stipulated
laydays.
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3. Clause C: Demurrage

With the laytime period prescribed as 24 hours for loading, in the event that
loading operations fail to be completed within this timeframe, the Charterer is obliged
to pay liquidated damages in the form of demurrage to the Shipowner at the rate of
10,000 USD per day pro rata as per the charterparty. Given that the Vessel spent
virtually a month waiting for cargo at the anchorage, such delay resulted in significant
losses of earnings for the Shipowner from future voyage charters as well as ordinary
Vessel running expenses incurred during such wait; this explains why the Shipowner
would claim demurrage from the Charterer as a result. In a subsequent part, the author
group would present the final judgment on this case study, including whether or not
demurrage would be awarded to the Shipowner as well as the detailed calculation for
such sum.

4. Clause 6: Notice of readiness

It is explicitly stated in this clause that any delays caused to the Vessel entering
berth that is out of the Charterer’s control, although NOR has been tendered, will not
be counted as used laytime. In fact, due to the second cleaning, the Vessel was said
to lose the queue and therefore have to get in line again, causing additional waiting
time. This is feasibly considered as an occurrence over which the Charterer had not
been able to have control.

Thus, it is worth considering what constitutes an out-of-control situation for

the Charterer, and whether the delay caused by such a loss of queue turn falls within
the protection of this clause. In the given case, the Vessel lost its turn due to the
presence of other Vessels there that made up a queue. If it was the Charterer who
decided on the choice of berth at the beginning and this was to be clearly indicated in
the charter, then it should have been within his obligations to make sure that the
chosen berth, at the time of arrival, is reachable. As a result, the charterer in this case
may not have been protected by Clause 6. Nevertheless, such clear indication was not
present in the charterparty, which grants the charterer protection from the delay.

The main problems arose when the Charterer submitted that the delay was
caused not only because of losing the turn, but it was also due to the complication in
the supply schedule of gas oil from Reliance, the shipper. According to the
charterparty, laydays commenced on 17 November and ended on 22 November,
meaning that the key obligation of the Charterer was to ensure the loading of cargo
right within this period. As long as he did not exceed the given laytime of 24 hours
and load the cargo in the given laycan period, the Charterer would be free from any
liability. The Shipowner, at the same time, did not have the obligation to intervene in
the Charterer’s logistics arrangements during this time, which protected him against
the present case where the Charter was unable to load the cargo within the allowed
period.
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As stipulated in the Laydays clause, the Charterer could have cancelled the
charterparty when the Vessel failed to arrive within the laydays period. Yet, he
decided not to do so, which consequently resulted in the fact that he continued to fall
within his obligation of loading the cargo on the Vessel between 17 and 22 November
2000. But because the Charterer had failed to meet this, and he did not review his
contractual relationship with Reliance, which caused a considerable mismatch
between the loading time in the charterparty with Shipowner and the supplier
contract. The Charterer could have rightly demanded for the cargo for November;
however, when everything was dragged onto December and there was no cancellation
or clear exercise of right from him, Reliance at that time had already been under the
December commitment and had to prioritize other obligations than the one with the
Charterer.

5. Clause 7: Hours for loading and discharging

In the submission by the Charterer, the delay can all be boiled down to the
dirty tank that needed further cleaning in the beginning. Clause 7 does mention that
if there is delay caused by improper Vessel’s condition or breakdown or any issues
with its ability to load cargo, then such a delay will not be counted as used laytime.
Thus, the Charterer believed that the dirty tank is eligible to bring this clause into
effect, which then would make the Shipowner the one at fault. Personally, this is
indeed true and grants the Charterer certain protection against having to pay penalties
for demurrage starting as early as 2:00 PM on 3 December 2000.

However, it is important that from the analysis of Clause 6 above, the Charterer
would not have been able to have the cargo and load them until 3 January 2001.
Despite further cleaning efforts, there is no cancelling decision coming from the
Charterer. This means that even if the Shipowner had the Vessel arrived in the best
condition, the delay still arose either way. For this reason, we believe that the
demurrage shall be counted when the laytime of the second NOR ended on 6
December 2000.

6. Clause 18: Cleaning

This clause basically sets out that the Shipowner shall be charged with the
responsibility to clean the Vessel’s tanks, pipes, and pumps to the satisfaction of the
Charterer’s inspector. However, to suit the specific needs of the parties involved in
the charterparty and clarify ambiguity surrounding cleaning and inspection
operations, further amendments were made under Clause 30(c), which shall be
explored in the succeeding section.

7. Clause 30(c): Inspection/Cleaning - Amended

As indicated by the term “Amended, the clause was supplemented to the

charterparty, seeking to elucidate the obligations imposed on the Shipowner in terms
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of cleaning the Vessel to the satisfaction of the Inspector on behalf of the Charterer,
as well as the grant of Charterer’s rights to cancel the charter should the Vessel be
deemed unclean following inspection by the jointly appointed Inspector and the
preservation of such rights notwithstanding the number of times the Vessel continues
failing to meet the required standard of cleanliness later after further cleaning. The
clause also put forward an exception to laytime and demurrage for time lost due to
additional cleaning carried out to render the Vessel clean for loading until the
connection of hoses. While at first sight, this clause may seem to support the
Charterer’s appeal against the inclusion of time spent waiting at the loading port in
the calculation of laytime and demurrage; Clause 30(c) could not be relied on to
exempt the Charterer from such penalties given the conflicts between the content
prescribed under this clause and the actual context surrounding this case study.

On the one hand, there was no explicit indication that the Inspector in point
was a “jointly appointed Inspector” - which could be understood as an Inspector
appointed by both the Shipowner and the Charterer. In this case, however, it was only
mentioned that the inspection was carried out by a “surveyor (Caleb Brett) on behalf
of Viagra Ltd and the shipper, Reliance Petroleum Ltd”, or in other words, by an
Inspector appointed by the Charterer and the Shipper. Therefore, the procedure
prescribed under Clause 30(c) could not be implemented in the interests of the
Charterer’s protection against demurrage.

On the other hand, even if it would have been set forth that the Inspector
involved in the two-time inspection was in fact a “jointly appointed” one, the
Charterer actually took no action to exercise his rights under Clause 30(c). Despite
the Vessel’s late presentation at the loading port on 2 December 2000 and
unsatisfactory condition for cargo loading as pronounced on 3 December 2000, the
Charterer did not seek to cancel the charter as no such notice had been given to the
Shipowner within 24 hours following the Inspector’s rejection of the Vessel. It could
be understood that the Charterer implied their agreement to the extension of the
cancelling date for the Vessel’s laydays from 22 November 2000 to December 2,
2000, and then to 5 December 2000 when the Vessel was finally passed fit for loading.
In addition, it was firmly established during legal proceedings that following
the notification from the governmental body, the Oil Coordination Committee of
Sikka, Reliance Petroleum Ltd had undertaken to supply to the domestic market as
per its December commitments under the directions of the aforementioned body. This
constituted the Shipper’s unwillingness to incur a new loading obligation to Viagra
Ltd and prioritization of other Vessels having arrived within the December loading
periods, ultimately causing the delay to the Vessel as it was not until 2 January 2001
that the Vessel re-entered the berth for loading. While the Charterer asserted that such
delay was due to reasons beyond their control which, in this case, is the Shipper’s
belated loading due to its commitments with the government and the Shipowner’s
belated presentation of the Vessel in unfit condition at the loading port; it should be
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brought to the fore that the Charterer did allow the charter to continue in effect
notwithstanding the above circumstances. It was the Charterer’s duty to ensure the
timely supply of cargo to the Vessel, not the Shipper’s alone.

When the Vessel arrived later than the agreed time period and was rejected for
loading due to unfit condition, the Charterer could have rearranged with the Shipper
for corresponding extension to the loading period; it may be highly likely that the
Shipper would explicitly express their refusal to the extension, however, due to many
complications arising from re-programming their supplying process to make way for
Mary’s loading. In that regard, the Charterer would have had the option to cancel the
charter to protect themselves from demurrage, contractual breach penalties and other
relevant expenses incurred; yet the former did not perform that right as per Clause
30(c). As the Charterer did not take stringent measures to ensure that the Vessel would
be loaded by the Shipper within the allowed laytime, the Shipper was given the free
rein to leave the matter in abeyance until 2 January 2001 when cargo would become
available again for loading on the Mary. It should be brought to the fore that the
Charterer could have also reconsidered the laydays and laytime clause, and relevant
provisions in the charterparty with the Shipowner to coordinate the loading period
with the back-to-back arrangements in place with the Shipper concerning the
availability of the cargo for loading; nevertheless, the failure to implement a risk
reduction plan through appropriate revisions and amendments to the existing
charterparty with the Charterer as well as the decision not to cancel the charter did
not relieve the Charterer of the consequences for the failure to make cargo available
for loading, and subject them to demurrage payment for Mary’s waiting period at
Sikka from 3.30 PM 6 December 2000(expiry of laytime period allowed as per the
charterparty) to 10.00 AM 3 January 2001(completion of cargo loading at berth).
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III. CONCLUSION

All things considered, since the root cause of the delay of almost a month lied
in the lack of the Charterer’s effort to ensure a consistency between his arrangement
with both the Shipowner and Shipper, we believe that the Charterer shall be liable for
paying the demurrage fee counting from 6 December 2000 to 3 January 2001.

Statements Demurrage

Date Hour Events Day Hour Min

3/11/2000 Viagra chartered the Vessel

17-22/12/2000 Laydays period

Vessel arrived in Sikka and first

08:00
NOR tendered
2/12/2000
14:00 Laytime started

Entered berth, tanks inspected by

one surveyor

Vessel rejected to load cargo due to

3/12/2000 unclean tanks, moved back to
anchorage

14:00 Laytime ended

New NOR tendered after tank

9:30
cleaning
5/12/2000 Vessel waiting at anchorage

15:30 Laytime started

6/12/2000 15:30 Laytime ended 8 30

6/12/2000 -
Vessel waiting at anchorage 27
2/1/2001

2/1/2001 15:00 Vessel entered berth

3/1/2001 10:00 Loading completed 10

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In conclusion, Viagra Ltd, the Charterer, shall be liable for a demurrage lasting
27 days, 18 hours, and 30 minutes. According to the charterparty, the demurrage rate
is USD 10,000 per day pro rata, so we have the following calculations:

- 27 days: 27 x 10,000 = 270,000 USD

- 18 hours: 18/24 x 10,000 = 7500 USD
- 30 minutes: 30/ (24 x 60) x 10,000 = 208.33 USD

Therefore, the total demurrage fee that Viagra Ltd shall pay is 277,708.33 USD.