OK Petroleum AB v Vitol Energy SA [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Colman J |
| Judgment Date | 05 May 1995 |
| Date | 05 May 1995 |
| Court | Queen's Bench Division (Commercial Court) |
Queen's Bench Division (Commercial Court).
Colman J.
Christopher Smith (instructed by Sinclair Roche & Temperley) for the plaintiffs.
Simon Kverndal (instructed by Ince & Co) for the defendants.
The following cases were referred to in the judgment:
Annefield, TheELR [1971] P 168.
Aughton Ltd v M F Kent Services LtdUNK (1991) 31 Con LR 60.
Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corp LtdELR [1981] AC 909.
Hamilton & Co v Mackie & Sons (1889) 5 TLR 677.
Heyman v Darwins LtdELR [1942] AC 356.
Home Insurance Co of New York v Victoria-Montreal Fire Insurance CoELR [1907] AC 59.
Merak, TheELR [1965] P 223.
Thomas (T W) & Co Ltd v Portsea Steamship Co LtdELR [1912] AC 1.
Contract of sale — Incorporation of terms — Contracts for sale of gasoline — General incorporation of terms of charterparty — Time bar in demurrage provisions — Discharge of cargo took longer than laytime — Notification after time allowed in charterparty — Whether time bar incorporated into contracts of sale — Whether demurrage claim time-barred.
This was a preliminary issue arising out of a sellers' claim for demurrage, which the buyers contended was time-barred. The issue was whether the time bar in the charterparty was incorporated into the contract of sale.
By two contracts of sale of 25 November 1991 and 24 January 1992 the plaintiffs sold quantities of gasoline to the defendants. Each contract expressly provided for demurrage “as per charterparty”. To perform each contract the plaintiffs chartered vessels on the Asbatankvoy form. The charterparties incorporated the plaintiffs' charterparty terms and conditions, which included in cl. 10 a time bar by which the charterers were not to be liable for demurrage incurred under the charterparty unless the charterers received notification of the claim together with the necessary documentary evidence of that claim within 90 days from the disconnection of the hoses on discharge.
Under both sale contracts the defendant buyers took longer than the laytime to discharge the cargo. The plaintiff sellers therefore claimed demurrage under both contracts, the claim in each case being notified more than 90 days after disconnection of hoses. The defendants contended that the claims were time-barred.
Held, giving judgment for the plaintiffs on the preliminary issue:
1. General words of incorporation would not normally be wide enough to incorporate any provision from one contract into another unless that provision was part of the subject-matter of the incorporating contract and not merely ancillary to it.
2. The time-bar provision in cl. 10 of the charterparty was essentially ancillary to the substantive provisions of that contract relating to demurrage, since its contractual function was confined to the enforcement of already-accrued contractual rights. The general words of incorporation in the sale contracts were consequently insufficient to incorporate cl. 10 of the charterparty in the absence of special circumstances to depart from the normal rule of construction. It followed that the plaintiffs' claims were not time-barred.
Colman J: The preliminary issue that arises in this case is of some importance to many of those who trade in oil and petroleum products. I am told by counsel that the point has been arbitrated on several occasions in London with awards going in opposite directions. It has not hitherto been considered by the English courts.
By two contracts of sale the plaintiffs, who carry on business in Stockholm, sold quantities of gasoline to the defendants, who carry on business in Geneva. For reasons which will appear I refer to the contract dated 25 November 1991 as “the Chemical Venture contract” and that dated 24 January 1992 as “the Jade contract”.
By the Chemical Venture contract the plaintiffs sold 20,000-25,000 units in sellers' option of Italian leaded premium gasoline c.i.f. Genoa with the buyer having the option to discharge French Mediterranean and Italian Port Ravenna at charterparty costs. The contract then expressly provided:
“10. Demurrage
As per Charter Party.
11. Laytime
36 + 6 Hours SHINC”
It is common ground that “36 + 6” means that discharging time is six hours' notice of readiness and 36 hours in berth regardless of whether discharging begins within the six hours. The contract was expressly governed by English Law and subject to the jurisdiction of “The High Court, London”.
By the Jade contract the plaintiffs sold to the defendants 10,000 metric (+ or – 5 per cent in sellers' option) tons of premium 0,15 leaded Mogas (intermediate quality) c.i.f. Dunkirk and Rouen aboard sellers' nominated vessel. The contract expressly provided:
“Laytime:
12 hours SHINC + 6 hours NOR (for each port)
Demurrage:
As per Charter Party rate, terms and conditions pro rata for part cargo.”
Again the contract was expressly subject to English Law and jurisdiction.
In order to perform the Chemical Venture contract the plaintiffs on 28 November 1991 chartered a vessel called the “Chemical Venture” on the Asbatankvoy form. By that charter it was provided as follows:
“H. Total Laytime in Running Hours: 72 hours (as per Worldscale)
I. Demurrage per day or pro rata: USD 14,000
OK Petroleum AB's Charter Party Terms and Conditions 1.9.1991 are deemed to be incorporated in this Charter Party as attached.”
In order to perform the Jade contract the plaintiffs on 14 February 1992 chartered “The Jade”, also on the Asbatankvoy form. By that charter it was provided
“H. Total Laytime in Running Hours 48 hours, Sundays and holidays included.
I. Demurrage per day or pro rata USD 11,250.
OK Petroleum AB's Charter Party Terms and Conditions dated 1st September 1991 clause 1-33 Section One as attached were deemed to be incorporated in the charter.”
Part II of both charters included detailed clauses relating to notice of readiness, hours for loading and discharging, demurrage and safe berthing and shifting, these providing that the charterer had the right to shift berth time consumed on account of shifting to count as used laytime.
Included in OK Petroleum AB's charter party terms and conditions of 1 September 1991 were the following provisions:
“9. Notice of readiness
If at the port of loading notice of readiness is given prior to commencement of laydays, laytime shall not begin to run until the lapse of six (6) hours after 0000 hours on the first day of the laydays or when the loading commences, whichever occurs first.
10. Time bar
Charterers shall not be liable for demurrage incurred and/or other cost and/or charges incurred under the charterparty and pertaining to Charterers use of the vessel, unless Charterers within 90 days from the moment of hoses disconnected on discharge have received notification of the claim together with the necessary documentation evidencing such claim. On such receipt Charterers are entitled to a 90 day period for the handling of the claim and remittance of the amount due.
11. Calculation of laytime
(a) Time shall not count against laytime or, if the vessel is on demurrage, for demurrage, when spent
or lost:
(i) on an inward passage moving from anchorage — even if lightening has taken place at the anchorage — to the berth or other place of loading and/or discharging specified by Charterers.
(ii) due to fault, failure or inefficiency of the vessel, or the crew, including master and officers causing delay in loading and/or discharging.
(iii) whilst handling ballast and/or taking on bunkers, unless such operation is concurrent with the loading and/or the discharging operation and no loss of time results.
(iv) as a result of strike, lockout stoppage or restraint of labour of the master, officers and/or crew of the vessel, tug boats or pilot.
(v) delays due to the vessel's failure to carry onboard and/or maintain valid certificates, records or other documents necessary for Charterers intended use of the vessel.
(b) If due to the weather the vessel is delayed in loading and/or discharging, such delay shall for the purpose of the laytime calculation count as one half of the time used for such delay.”
In the Chemical Venture charterparty, subcl. (ii)–(v) inclusive of cl. 11 were deleted.
It is common ground that under both sale contracts the buyers took longer than the laytime to discharge the cargo. The sellers therefore claim demurrage under both contracts. The buyers, however, contend that by reason of the provisions of cl. 10 of the terms and conditions, the sellers' claim is time-barred because they failed to give notification of claim within 90 days from disconnection of hoses. It is common ground that more than 90 days had expired before notification of claim was given to the buyers. The essential issue is whether the time bar is incorporated from the charterparty into the sale contract.
If it is not incorporated, the defendant buyers have a fall-back argument that none of the laytime or demurrage provisions are incorporated and there are therefore no effective demurrage provisions in the sale contract. Alternatively, demurrage falls to be reduced because this runs only from when the vessel arrives in berth.
The effect of contractual provisions which are directed to the incorporation of the terms of one contract, to which one party to the incorporating contract is a party, into another has given rise to much controversy and to many decided cases. These authorities are particularly prevalent in the field of the incorporation into bills of lading of the terms of charterparties in respect of the same voyage or, in the case of time charters, relating to the same vessel. It is therefore not...
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