Carriage of Goods by Charterparty

AuthorEdgar Gold; Aldo Chircop; Hugh M. Kindred; William Moreira
Cargoes carried by sea are governed by two separate and strikingly dif-
ferent regimes according to the kinds of goods involved and the type
of ships on which they are transported. For practical reasons, goods
are moved across the oceans either in bulk or in packaged form. The
type of cargo determines the way in which it will be handled. Thus oil,
ores, grains, timber, and other primary products are transported in bulk,
while manufactured products and personal goods are moved in individ-
ual protective packages, otherwise known as break bulk goods. Such
packages are typically made up into units, for ease of handling by fork-
lift trucks and cranes, by strapping them together on pallets or stuff‌ing
them in twenty- or forty-foot metal containers. Very large and unwieldy
items, like yachts and earth moving equipment, may be shipped as sin-
gle units with a minimum amount of wrapping.
Different kinds of cargoes not only demand different types of ships
but, more importantly from a legal perspective, different modes of oper-
ation. A bulk cargo, as the name suggests, generally occupies all the carry-
ing space of the ship, which, accordingly, will be directed by the cargo
owner to proceed more or less directly to a selected destination. Thus
ships which carry bulk goods tramp from port to port around the world
as cargoes are available and cargo owners engage them. Such tramp ships
do not sail to a schedule but carry their cargoes by individual agreements
with the cargo owners in contracts known as charterparties.
Carri age of Goods by Charterpa rty 505
Packaged goods may be numerous but not individually bulky, and
so they need to be combined to f‌ill the holds of a ship. In fact, a mod-
ern container ship may carry several thousand containers of goods be-
longing to hundreds of different owners. Such multiple ownership of
cargoes on the same ship inevitably means the vessel must sail on a
prearranged schedule of ports and timetable. Equally, the shipowner
cannot negotiate individual terms of carriage with each cargo owner,
but offers transportation services on a set of standard trading conditions
made available in advance. Such liner service, as it is called, is recorded
for each cargo in a bill of lading or similar document.
As the manner of moving goods by tramp ships or liner service de-
termines the kind of contractual document under which they are car-
ried, so the legal regime governing the relations between the shipowner
and the cargo owner will differ. Charterparties are regulated by the
maritime common law of contracts as to their validity, interpretation
and effect. In principle, therefore, the parties have freedom to contract
as seems f‌it, overlaid only by a multitude of standard clauses and cases
interpreting their technical meanings.
Bills of lading, on the other hand, are now governed by one or other
sets of internationally uniform rules. The maritime common law proved
to be an inadequate regimen to balance the shipowner’s and cargo owner’s
risks in the estimation of most countries, so a set of rules, known as
the Hague Rules,1 was agreed to in 1924 limiting the freedom of contract
in the liner trades. Subsequent technological improvements in ships and
their equipment, as well as the development of cargo handling methods,
have necessitated extensive reform of the Hague Rules but no general
international acceptance and implementation of one new set of rules has
yet been achieved. As a result, bills of lading are largely regulated by na-
tional legislation which imposes some variant of the Hague Rules.
This division of applicable legal regimes is not in practice, so sim-
ple. In particular, goods are frequently carried under bills of lading on
a chartered ship. Bulk cargoes of oil are typically processed this way so
that they may be sold in the market, often many times over, by negoti-
ation of the bills of lading while the carrying ship is still at sea. Again,
when a charterer loads goods of another person, that cargo owner will
always need a bill of lading or similar document as evidence of the
transaction. The legal implications of issuing bills of lading for the car-
riage of goods on a chartered ship can quickly become complex. It is
not easy to determine the intended contractual relations between three
1 International Convention for the Unif‌ication of Certain Rules of Law Relating to Bills
of Lading, 25 August 1924, 120 LNTS 155 [Hague Rules].
parties to two different contracts, especially when the terms of the char-
terparty and the bill of lading are not aligned and complementary. The
diff‌iculties are compounded by the multiplicity of documents that may
be involved, such as when bills of lading are issued for goods being car-
ried on a voyage chartered ship which has been time chartered from the
charterer by demise of the shipowner.
Such is the difference in the law regulating tramp ships carrying
goods in bulk under charterparties, and liner vessels moving packaged
goods covered by bills of lading, that this subject calls for separate treat-
ment in this and the following chapter. Accordingly, the law surround-
ing charterparties is explained in this chapter and the regulation of bills
of lading and similar documents is discussed in the following Chapter
13. There are, however, a set of fundamental obligations in maritime
common law that are borne by the carrier and cargo owner in any tran-
sit of goods, be it processed under a charterparty, a bill of lading or any
other document. These obligations ref‌lect the commercial elements of
every ocean transport transaction and so they will be discussed f‌irst.
In the absence of contrary agreement or mandatory legislation, the par-
ties to any contract for the carriage of goods by water will bear a num-
ber of obligations implied by Canadian maritime common law. In other
words, all the charterparties, bills of lading, and other contracts of af-
freightment being made every day are written against the background of
these common law obligations. They were established a long time ago by
very old and mostly English leading cases. The obligations are:
On the carrier:
»to provide a seaworthy ship
»to care for the cargo
»not to deviate on the voyage
»to deliver the cargo without delay
On the cargo owner:
»not to ship dangerous goods without appropriate warning
»to pay the freight (transport charge)
Shared by carrier and cargo owner:
»general average
Each obligation will be discussed in turn, except for general average
which is the subject of Chapter 15.

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