Alpaca v. Primex
DMC Category Rating: Confirmed
N N N
Alpaca Shipping Corp., owners of the products tanker ‘Artesia’, chartered her to Grupo Primex for a ‘pipeline service’ carrying vinyl chloride monomer from the US Gulf to Mexico, over three consecutive periods of one year. Clause 24 of the charterparty, which was on an amended SHELLTIME 3 form, provided that ‘owners guarantee that the average speed of the vessel up to Beaufort scale 4 will be ‘about 12 knots in ballast and 12 knots fully laden, with a maximum consumption of 1.8 tons M.gas oil/10,5 tons fuel oil per day…..’. The clause went on to provide that, if the vessel fails to meet the guaranteed speed, the charterers are entitled to a downward reduction in hire for speed and consumption. Similarly, if the vessel exceeds the guaranteed speed, the owners are entitled to an upward adjustment for speed and consumption. The word ‘about’ had been inserted by the parties. It does not appear in the printed text of the SHELLTIME 3 charterparty form. Neither side presented evidence as to why this had been done.
At the end of the charter, the owners submitted a claim for an adjustment in hire of US$137,414, based on average speed calculations for the three years of 12.56, 12.61 and 12.62 knots. In addition, owners claimed for fuel and diesel savings in the combined amount of US$65.407. Charterers rejected owners’ claim and counter-claim for a pumping deficiency.
In an agreed award, the arbitrators noted that, under clause 24 of the charterparty, the compensation for over- and under-performance was not, as in the typical time charter speed claim, a claim for damages for breach of charter; rather was it an increase or reduction in hire in amounts proportionate to the time gain or loss and excess fuel saved or used.
The main issue was the benchmark for performance in either speed or consumption. The panel found that, in interpreting clause 24, the word ‘about’ applied to both the ballast speed and the laden speed, but did not apply to the fuel consumption. The panel noted that the usual allowance for the word ‘about’ in speed and consumption claims was a downward allowance of 0.5 knots to the guaranteed average speed and decided that this allowance should also be applied to owners’ over-performance claim. On that interpretation, owners were entitled to an upward hire adjustment to the extent that the vessels’ average speed exceeded 12.5 knots. As regards the fuel and diesel consumption, owners were entitled to the full saving, because the vessel had met the benchmark speed of ‘about’12 knots, that is, 12.5 knots, each year and there was no allowance built into the wording.
The panel recalculated owners’ claim on this basis and awarded them a hire adjustment of US$20,186 for the speed over-performance and the full amount of US$65.407 for the saving in fuel and diesel. The charterers’ counter-claim failed, as the loss of time fell within the 72 hours ‘free’ time allowed to owners under the charter for off-hire for breakdowns of this nature.
N N NComments contributed by Pat Martin, arbitrator
The word ‘about’, on which this award turned, appears in most of the printed charterparty forms of long standing, such as the New York Produce Exchange Form, especially in the dry bulk trades. Most of the tanker forms of charter, on the other hand, do not use the word ‘about’.
The older forms also treated the speed and consumption warranties as a representation of the vessel's capabilities and the owner wanted some protection for any alleged breach. Since this was a representation, there were no negotiations as to what the figures should be.
The newer forms treat the speed and consumption matters as a performance clause and they are therefore not exactly tied to the vessel's capability. Indeed, within reasonable limits, the speed and consumption figures can be negotiated. Higher figures would generally mean a higher hire rate, but with a greater possibility that the owner would have to give something back under the clause if the vessel did not make the grade. Lower figures would mean a lower rate, with the likelihood that the charterer would have to pay a bonus, if the measures were exceeded.
N N N
These Case Notes have been prepared with care, but neither the Editor nor the International and other Contributors can guarantee that they are free from error, nor that they contain every pertinent point. Reliance should not therefore be placed upon them without independent verification. The Editor and the International and other Contributors disclaim all liability for any loss of whatsoever nature and howsoever arising as a result of others acting or refraining from acting in reliance on the contents of this website and the information to which it gives access. The Editor claims copyright in the content of the website.