Once on demurrage, always on demurrage. If the charterers fail to ensure that cargo operations are completed within the agreed laytime, they have breached the charter.
Breach of the laytime provision is closer to a breach of warranty and compensation may be claimed in the nature of “damages”. These damages are referred to as “demurrage”.
The obligation contained in the “laytime warranty” is strict. The charterer would generally be unable to avoid a claim for demurrage. The example of The Forum Craftsman, above, demonstrates how charterers were prevented from avoiding a large claim £or demurrage, even though the owners were partly responsible for the delay. Only some exceptions in the charterparty may assist the charterer. An example is the CENTROCON strike clause or any other provision found in the charterparty as a rider clause. An example is found in the case of The John Michalos, 1987, in which a rider clause absolved the charterers from liability for “any” delay caused completely or partly by strikes. This included demurrage.
“On demurrage” is explained in the “Charterparty Laytime Definitions 1980” meaning that “…. the laytime has expired. Unless the Charterparty expressly provides to the contrary the time on demurrage will not be subject to the laytime exceptions”.
Therefore, time on demurrage is continuous unless an exception to demurrage is contained in the charterparty. Exceptions to laytime, such as Sundays and holidays or unfavourable weather, do not normally apply to time on demurrage because such exceptions are protective for the charterer and by his breach of the laytime warranty he loses the right to protection. In the case Dias Compania v. Louis Dreyfus, 1978, it was said in the House of Lords:
“When once a vessel is on demurrage no exceptions will operate to prevent demurrage continuing to be payable unless the exceptions clause is clearly worded so as to have that effect.”
It must be recognised that this maxim is not necessarily new. The common phrase, “once on demurrage, always on demurrage” is used frequently by arbitrators, judges and commercial people in deciding disputes. For example, in The Tassos N, 1983, the judge said:
“Although catch phrases seldom help and sometimes confuse legal analysis, this is, as it seems to me, a true case where one can apply the phrase ‘Once on demurrage, always on demurrage. “
The origin may be seen in Aktie Reidar v. Arcos Ltd., 1926, where the judge said, in somewhat different words but expressing the same idea:
“Demurrage days are days in which the charter is in breach, and this view-alone explains what I conceive to be the well-established principle that, unless by express stipulation, exceptions that would protect the Charterer no longer protect him during demurrage days.”
The statement in Dias Compania v. Louis Dreyfus, 1978, merely confirmed this. In Dias, a fumigation clause in the charterparty stated that “At discharging, charterers have the option at any time to treat at their expense ship’s cargo, and time so used, not to count”. The Court held that fumigation time after laytime had expired was not excepted by this clause.
In The Kalliopi, 1988, the charter provided:
“The act of God, restraint of princes and rulers . . . and all and every other avoidable hindrances which may prevent the . . . discharging . . . during the voyage always mutually excepted.”
The charterers attempted to argue that delays within the general exceptions clause, after the laytime had expired, should not be counted in the time lost. The judge in the English Court of Appeal held that the words “mutually excepted” were not explicit enough to discharge a burden to pay demurrage. The. Charterers were not concerned with the exceptions having any effects during the laytime but only when the laytime expired. If their argument was permitted to prevail, it may lead to a “bizarre contract” where an exception was not important enough to interrupt laytime but was important enough to interrupt demurrage.
However, the charterer may be protected in a limited manner by the words in the charterparty, as for example in the TANKERVOY 87 clause extracted above, where the demurrage rate is halved for certain events. For tankers at discharging ports, demurrage may cease when the vessel commences ballasting, as was found in the (now obsolete) STB VOY tanker charterparty. Words excepting demurrage in this charterparty were subject to decision in the House of Lords in The Notos, 1987. In that case, the relevant clause stated:
“ . . . if the vessel is on demurrage, demurrage shall not accrue, for any delay caused by ” strike, lockout, stoppage or restraint of labour of master, officers and crew of the vessel or tugboats or pilots or any other cause of whatsoever nature or kind over which the Charterer has no control.”
Heavy swell prevented the vessel from discharging its oil cargo at the buoy berth because it could not be connected to the “sea line”. It was decided that swell was a cause of delay over which the charterers had no control. The word “whatsoever” at the end of the above clause was not permitted to have a restricted meaning as the owners were contending in the case. Therefore the exceptions to demurrage can be wide if the charterparty is explicit enough.
Time on demurrage may not be continuous on passage between ports when the vessel completes cargo operations, during demurrage time, at one port and then departs from that port. Time on demurrage will resume when the vessel arrives at the next agreed destination. The reason for this is that on passage the vessel is not being delayed or detained by the charterer. The vessel is engaged in a voyage on which it would have been engaged even if demurrage had not been incurred by the charterer.