Essential features of general average.
(a) In a time of peril the common adventure must be in peril. The danger must be “real” and it must be “imminent”.
For example, smoke may be seen coming from a cargo hold. Water is pumped into the hold to extinguish the expected fire. The cargo is damaged. On arrival, no evidence of fire is found, and it may be held that because there had been no actual peril there could be no general average sacrifice.
This requires that action is taken for the common safety, not merely as a precautionary measure. For example, a vessel with a serious machinery breakdown in the middle of the ocean would be in peril and expenses to preserve it from peril may be allowed as GA. However, if the master heard weather forecasts that indicated stormy conditions ahead and called into a port for safety, this may not be accepted as GA. When the vessel entered the port it was not already in peril.
The imminence and degree of danger must be a question of fact. For example, where a ship is stranded, but not in danger and peril is not imminent, sacrifices or expenses made or incurred in trying to lighten and refloat the ship will not be admitted as general average.
(b) The general average act must be voluntary and intentional, not inevitable. An example would be the throwing overboard of cargo (“jettison”) to lighten a waterlogged vessel. The sacrifice is allowed as general average. If property is already lost, it cannot be considered to be sacrificed and would not be admitted as general average. For example, Rule IV of the York Antwerp Rules 1990 states that the cutting away of wreck or parts of a ship which are effectively lost by accident are not allowed as general average. This can be seen as meaning that inevitable loss is not allowed as GA.
(c) The act must be reasonably made. The sacrifices or expenditures must be reasonable and any sacrifice must be advisable or prudent.
(d) The loss must be extraordinary in nature and not merely connected with the contract of carriage of goods. For example, a vessel may meet rough weather. The use of extra fuel to make a scheduled call at the destination would not be allowable as general average.
Increase of an ordinary charge, e.g., crew’s wages, is not an “extraordinary” loss. Similarly, the loss of ship’s gear when used for the purpose for which it is intended cannot be considered “extraordinary”. Straining of a ship’s engines when the ship is aground and in a position of peril, in trying to force her off the ground, is “extraordinary” damage but if the vessel is afloat, any damage caused in working the propelling machinery is not allowed as general average (Rule VII of the York-Antwerp Rules 1990). When the vessel is ashore the use of the machinery would be an “abuse” and therefore extraordinary. Use of the machinery when the vessel is afloat is normal, even though there may be peril and any damage to the machinery would not be allowed as GA.
In one case, heavy weather caused a leak, which necessitated excessive pumping. This caused the bunkers to run low and ship’s stores were burnt as fuel. These stores were allowed in general average as an extraordinary sacrifice in time of peril.
(e) The object of the loss must be the general safety and the preservation of the whole adventure. Losses incurred for the benefit of individual interests are not general average.
For example, the expenses of lightening a vessel by the removal of cargo to enable her to refloat is general average but if cargo is removed from the vessel (merely for the cargo’s own safety) and forwarded to destination by another vessel, this expense is not allowed as general average.
(f) The adventure must be saved. The general average is obviously futile if the adventure becomes a total loss later, as the essence of general average is sacrifice by one person to save all. Moreover, the arrived value of the property saved is counted in the total general average contributions that must be made. If some property is not saved, there may be no fund from which the contributions can be made.
An example could be where cargo is sacrificed by jettisoning to prevent total loss of the vessel, and later, during the same voyage, the vessel is destroyed by fire, with all the remaining cargo on board. There is no general average.
For the same reason, if a further general average act should become necessary on the voyage, the second general average must be adjusted first, as without it the first would have had no real effect.
(g) The loss must be directly caused by the general average act. Consequential losses are not a direct result of a general average act and are not admitted as GA. But where cargo is jettisoned, and during the actual operation water enters the hold and damages cargo therein, the water damage is a sacrifice equally with the cargo actually jettisoned, despite the water damage being a consequential loss. Other consequential losses, e.g., demurrage and loss of market, would not be admitted as general average.
The action taken by the master can have many alternatives. For example, a fully loaded container vessel may go aground. By order of the master some containers are jettisoned and the vessel is refloated. The options open to the master include the hiring of a salvage tug to pull the vessel off the ground but this may have caused further damage to the vessel and possibly to the cargo. The master may also have decided to strain the main engine and use the anchors and cables with the possibility that these could be lost or damaged, in trying to pull the ship off the ground. In each case, different interests are sacrificed or suffer a loss. There may be a conflict of interest. For example, the cargo owners may prefer that the master hire a lighter or barge into which to discharge the containers but this requires the availability of a barge and also suitable equipment on board the vessel. The cargo owner may also have preferred that cargo belonging to another cargo interest was jettisoned. However, the master has the complete but reasonable discretion to act as he sees fit for the safety of the ship and cargo as a whole.
Examples of general average. The following are examples of extraordinary sacrifices intentionally and reasonably made for the common safety and allowed as general average:
(a) A vessel is aground and her engine and equipment are damaged in efforts to refloat the vessel.
(b) A fire occurs in the hold of a vessel and a hole is cut in another of her holds to gain access to the fire and put it out. The cargo not on fire may also be damaged.
(c) Cargo is jettisoned for the common safety in time of peril.
(d) Cargo burnt as fuel (e.g., fuel oil in the ship’s tanks) if there is a shortage of bunkers.
(e) Cargo not on fire is damaged by water being used to extinguish other cargo, which is on fire.
If cargo is lost and as a result the shipowner cannot collect the freight which is payable at destination, the freight is sacrificed equally with the cargo and is allowed as GA.
The following are examples of extraordinary expenditure intentionally and reasonably incurred for the common safety:
(a) The expense of hiring lighters for storing cargo in which efforts to refloat a vessel take place.
(b) The expense of hiring a tug with fire-fighting equipment to extinguish a fire on board a vessel.
(c) Port of refuge expenses.
(d) Salvage charges.