DMC Category Rating: Confirmed

This case note has been contributed by Patrick V. Martin, a retired New York attorney and active arbitrator, who specializes in charter party and commodity disputes

Facts
On November 4, 1998, the parties entered into a time charter on the Supplytime 89 form, suitably amended, for the ""Sly Fox". The Charter was for a one-year term and the vessel was intended to trade in the North Atlantic carrying containers to and from various military installations. The "Sly Fox" had been built and configured as an offshore supply vessel serving oil rigs in the Gulf of Mexico. In order to perform the intended service the vessel underwent various modifications so that it could carry containers in the winter in the North Atlantic.

At the time the Charter was being negotiated, the Owners, Tidewater, insisted that the parties use the Supplytime form even though it was not easily adapted for the vessel’s intended service. This form also contained a standard Annex to be completed by owners, which gave details of the vessel’s characteristics and specifications. In this instance, Tidewater did not fill out this form. Instead, Tidewater simply took its pre-printed promotional form setting forth the specifications and taped the Bimco form "Annex A" header to the top. This document then became "Annex A" to the charter. Included in the form, now Annex A, was a simple statement: "Cruising vs Fuel Consumption:…Cruising 12.0 knots…95gph".

The information in Annex A was the description of the "Sly Fox" as an Offshore Supply Vessel before any modifications were made. After the modifications, the vessel was inspected by the Coast Guard and Class. However, Annex A was not redone to reflect any of these changes.

At the time the vessel was delivered under the charter, the Charterer issued standing voyage instructions, which were applicable for the entire duration of the charter, for the vessel to maintain a service speed of 12.0 knots "…weather and safe navigation permitting…" The performance of the "Sly Fox" in this new service was marginal. At the end of the Charter, the Charterer made deductions from the final hire payment for various claims including underperformance for speed and consumption based on the bench mark statements in Annex A.

The Owner denied that there was any breach or that the statements in Annex A were meant to be warranties of performance; they were merely "information". The Owner argued strenuously that the information given in Annex A was for promotional purposes only. It was never the intent to make this information into a representation of actual performance capabilities. The Owner emphasized that the "Sly Fox" had been used only as an offshore supply vessel and had undergone major modifications before being put into winter North Atlantic service. Therefore, it was not reasonable to think that Owner could have given performance guarantees for this new service.

The major issue before the Panel, therefore, was the legal effect to be given to Annex A, particularly the performance statements concerning speed and consumption.

Award
The Owner’s argument was rejected by the Panel majority. The majority determined that all aspects of the charter - including Annex A - must be given effect, even though this resulted in certain ambiguities because the parties did not address the "Sly Fox"’s post modification performance criteria. Since the Owner had insisted on the use of the modified Annex A and had failed to state clearly that the information contained therein was for information purposes only, it was bound by those statements and the vessel’s performance would be measured against them. The Panel also found that the modifications did not affect the vessel’s speed and performance specifications in any meaningful way.

The Panel then examined the vessel’s actual performance and considered the analyses submitted by experts on both sides. It found that, in fact, the vessel did maintain a speed of 11.99 knots overall and a speed greater than 12.0 knots on 12 of 24 voyages. The Panel decided that the vessel was not deficient in speed, considering the weather and sea conditions to which she was exposed in the North Atlantic. The Panel denied Charterer’s claim for underperformance with respect to speed.

The Panel then turned to fuel consumption. It found that the vessel had consumed an average of 121 gph during good weather, which was substantially more than the representation of 95 gph. It therefore awarded the Charterer damages in the sum of US$60,453, representing the excess consumption after allowance made for the vessel throttling down in periods of heavy weather.

Comment
Statements relating to speed and fuel consumption are one of the major negotiating points in any time charter. A charterer needs these bench marks in order to use the vessel most efficiently in its commercial operation. This arbitration illustrates that lack of attention to the wording of these statements often leads to misunderstanding followed by legal or arbitration proceedings.

Mr. Martowski's dissent that, in his view of the evidence, Annex A was only for informational purposes of the "Sly Fox" as an OSV and not as a container vessel in her actual service, adds emphasis to the point.

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