NOMINATION OF PORTS BY THE VOYAGE CHARTERER

• Author: CHAN LENG SUN
• Date: 01 December 1993
• Published date: 01 December 1993

In a voyage charterparty, it is common for a charterer to be given a right to select a specific port or berth within a range of options. After the selection is made, the nominated port or berth may become inaccessible for loading or discharge. This turn of events gives rise to a number of issues, some of which are addressed here.

A voyage charterer, if the port of loading or discharge is not specified in the contract, is usually given a right to nominate a port from a range of options. Once he nominates a port, that port is deemed to be the destination written into the contract from the beginning. This means that a voyage charterer who has exercised his right of nomination is bound by it. If he purports to change the destination of the ship, it will amount to an attempt to unilaterally alter the terms of the contract.1

The nomination will bind the charterer once the master or shipowner is notified of it. There had been attempts to change nominations on the ground that they were not binding until a later stage, for example, until the ship became an arrived ship,2 or unless the shipowner had committed his ship to the nominated destination and incurred expenses or liability to third parties in doing so.3 These arguments were emphatically rejected. It seems established that whether the charterer is selecting a port, or a berth within a port, under an express or implied right of nomination, the nomination takes effect irrevocably upon notification to the master or shipowner.4 The real controversies lie elsewhere.

A charterer has an obligation to nominate a port which is “prospectively safe for the ship to get to, stay at, so far as necessary, and in due course, leave.”5

This obligation is still subject to uncertainties. First, it has not been conclusively decided whether a safe port obligation can be implied in the absence of express provision for a safe port in the charterparty.6 The tentative comment can be made that there is no obvious principle against the implication of such a term in appropriate circumstances, especially where the range of ports at the charterer’s option is wide. We are unlikely to see this point decided very soon since most charterparties have stipulations as to the safety of the port. Secondly, the meaning of “prospective safety” and the extent of the charterer’s warranty of safety remain very much in contention.7 These issues will not be discussed. This article looks instead at the general consequences of delay or impossibility of performance at the port nominated by a voyage charterer.

The port nominated may not always be accessible, or if accessible, loading or discharge may not be possible because of conditions in the port. Of course, if the delay or impossibility is the result of a breach of the safe port obligation, the charterer will be liable for any loss suffered by the shipowner as a result of compliance with the nomination, subject to defences of novus actus interveniens and waiver, and the owner’s duty to mitigate his losses.8 Quite apart from the safe port obligation, there are other considerations which flow from the irrevocable nature of the voyage charterer’s nomination.

A. Responsibility for Delay

In the case of delay, it becomes important to determine who bears responsibility for the delay. Provided that the ship has arrived and is ready to load or discharge, laytime and demurrage normally run on the account of the charterer. If the ship is prevented from arriving by obstacles, and quite apart from considerations of a safe port obligation, the charterer may be in breach of an express “reachable on arrival” or “always accessible” undertaking. In such a case, the charterer will have to pay damages to the shipowner for detention of the ship.9

Apart from these general questions, the contract may have a clause excepting the charterer’s responsibility for delay. In such a case, the question arises whether, if there are obstructions at a nominated port, the charterer can refuse to nominate another port and still claim the benefit of the exception clause. This issue arose in The Prometheus.10 That case concerned a port charter under which the charterers had an implied right to name a berth or actual loading spot. The charterers named a spot which turned out to be congested, and loading was delayed as a result. The ship being an arrived ship, laytime would normally have continued to run at the charterers’ expense. The charterers relied on an exception clause which read:

If the cargo cannot be loaded … by reason of obstructions … beyond the control of the Charterers … in the Docks … the time for loading … shall not count during the continuance of such causes.11

The shipowners denied the application of the exception on the ground that the charterers had an obligation to change their selection of a berth. They argued that the exception could only apply if the charterers could prove that no alternative berth was available.

To a certain extent, Mocatta J. found in favour of the charterers. His Lordship affirmed the principle that once the charterers had nominated a berth, they could not change it unilaterally. That being so, the berth selected was the only place to be considered for the purposes of the exception clause. It was immaterial whether other berths were available at that time since they were not the nominated ones. Since the berth selected was congested, the delay fell within the clause and laytime did not run during this period. However, laytime did run prior to the nomination from the time of arrival of the ship. This is because there was no selection of a particular berth at that time, and the charterers had not shown that it was not commercially practicable to load in any of the berths. Consequently, laytime ran from the time the ship arrived until the berth was nominated.12

B. Payment of Freight

Sometimes, events occur which impede the performance of the charterparty to the point that the voyage is altered or even abandoned, and not merely temporarily obstructed. This happens, for instance, when a port which has been selected by the voyage charterer becomes an unsafe port or an impossible port.

In the context of a charterer’s obligation when he makes his initial nomination, impossibility is a separate concept from unsafety of ports. A port is an

impossible port when loading or discharge at that port will subject the ship to such delay that the commercial object of the adventure will be frustrated, so that the voyage when performed will be something different from that contracted for.13 In cases where there is either no warranty or no breach of the warranty of safe port, there may nevertheless be breach of an obligation not to nominate an impossible port.14 The test for the impossibility obligation is different from that for the safe port warranty. A charterer may arguably be in breach of a safe port obligation regardless of whether he knew or could reasonably have known of the conditions of the port at the time he made the nomination.15 The obligation not to nominate an impossible port is, on the other hand, that of a reasonable charterer having regard to the facts and prospects at the port as they appear to him at the time of the nomination.16

However, what I wish to address here is not the primary obligation of the charterer in making his nomination, but the consequences of the port subsequently becoming unsafe, or impossible, without any breach on his part. In this context, “impossibility” can include impossibility by virtue of unsafety.

If performance of the operation at the port selected becomes impossible, the question arises whether loading or discharging at another port is performance under the contract. This has practical import, for example, pertaining to the shipowner’s right to freight. Of course, if the charterer nominates a port or a berth which he should not have in the first place, and the ship has to be diverted elsewhere, the shipowner may still be entitled to payment in the form of damages, or even quantum meruit freight based on a new implied agreement to pay reasonable remuneration.17

In the absence of fault of either party, reason dictates that once performance at the port becomes impossible, and the charterer has exhausted his right or obligation to choose another port, the contract is frustrated.18 That being so, if the shipowner seeks to recover freight, it will have to be under a new agreement, express or implied. This line of reasoning is, however, not always followed.

In David Duncan v. Daniel Augustus Koster (The Teutonia),19 the voyage charter required the ship to proceed to “any one safe port in Great Britain or on the Continent between Havre and Hamburg” for discharge. The consignee (whose position in that case may be taken to be similar to that of a charterer) ordered the ship to discharge the cargo at Dunkirk. Dunkirk turned out to be unsafe by reason of the outbreak of war. The master refused to deliver the cargo to Dunkirk. The consignees later required delivery at Dover, which the master refused to do unless freight was paid. The relevant issue here is whether the master was entitled to the charterparty freight. This would depend on whether the charterparty was performed. If Dunkirk was the only port of delivery allowed, then the delivery at Dover would not be a delivery under the contract. The question then would be whether the shipowner was entitled to pro rata freight. Mellish L.J. wanted to render what he saw as justice in favour of the shipowner, but he was faced with the logical barrier:

The substance of the contract...