GUIDE: Cargo Claims

Cargo claims are claims for compensation made against a carrier for loss of or damage to cargo which they carried for reward. These claims are usually brought by owners of the cargo, in contract, based on an allaegation that by damaging the cargo whilst in their custody the carrier breached an express or implied term of the contract.

Subrogation
Most cargo claims against shipowners are brought not by the owners of damaged cargo but by their insurers. As covered in our 'Cargo Insurance' guide, when a party moves cargo they will normally take out insurance to protect them against its loss or damage. These insurance policies typically state that claims will be paid once the cost of the loss or damage to the cargo is known (i.e. they do not require the cargo owner to pursue any legal recourse against the responsible party first).

The reason for this is that most of these policies have a 'subrogation' clause, whcih requires the assured to allow the insurer to pursue a claim against any responsible party where a claim is paid under the policy. The insurance compamny will not have a dircet legal recourse, in contract or tort, against a responsible carrier so any claim they bring would have to be brought in the name of the cargo owner, for which the insurance company would clearly require their permission and cooperation.

Subrogated rights can be evidenced on a form of subrogation signed by the cargo owner / insured and addressed to their insurer. These forms are often sent along with claim settlement cheques where the insurer considers that there may be a legal recourse for damage done to property during tranit.  

Terms
Responsibility for cargo loss / damage will generally turn on evidence of causation and terms of the contract. The contract terms will generally be found in the Bill of Lading, Charterparty or other prevailing carriage document and will usually be subject to one of the main international conventions on the carriage of goods by sea (Hague Rules, Hague Visby Rules, Hamburg Rules etc.). Which convention applies will depend on the countries of transit and the proposed law and jurisdiction of the contract.  

GUIDE: Towage Claims / Law

When we consider towage, we generally think of one vessel pulling another at sea. However, technically towage is merely any operation where one vessel is assisting another (helping to berth, ating as pusher tug, providing an escort, etc.

The vast majority of towage claims are claims in contract.[1] Routine towage operations under contract are referred to in law as “ordinary towage”, and are contrasted with the sort of ‘emergency’ towage which takes place during a salvage operation. In the vast majority of ordinary towage situations a tug will be providing services on a standard form of contract wording, which both parties will be familiar with.

“Knock-for-Knock” Terms (kfk / k4k)

It is important that our Members enter towage contracts which are on what is known as “knock-for-knock” terms, or terms more favourable. Knock-for-knock terms are essentially an agreement whereby each party takes responsibility for damage to their own property or injury to their own employees, regardless of how caused (i.e. who was negligent). Accordingly, the parties also agree to indemnify each other against claims brought by third parties against the wrong side. The most common standard form towage contracts all include such terms, or terms more favourable still.  

Standard Form Contracts

The main standard form towage contracts used are as follows: 

“UK Standard”[2] - These are the main terms used by harbour authorities in the UK and are used for all general day-to-day towage operations undertaken by their tugs. They are found throughout the common law world and are considered exclusionary, in that they generally exclude the liability of the tug, for damage to the tow and even for damage to the tug (which must be paid for by the tow). For this reason they are considered more favourable, for the tug, than basic “knock-for-knock” terms.

“Towcon” 2008[3] - Towcon contains a basic form of knock-for-knock terms, where the tow and tug agree to meet their own liabilities. Where the tug collides with another vessel or property it accepts liability for the damage and where the tow collides it does the same. The contract is designed for use in the ocean towage of a vessel from one place to another at a fixed rate.

“Towhire” 2008[4] - Towhire contains the same basic form of knock-for-knock terms as Towcon, but the contract is designed for the hire of a tug for a period of time, rather than for one specific job.

“Supplytime” 1989 or 2005[5] - Supplytime is not technically a towage contract but a charterparty for the hire of a vessel. However, it is often used in the offshore industry as a contract under which to hire a tug, which will then provide towage services. The contract contains knock-for-knock terms but there is a risk if the tug, once hired, is used for towage operations involving third party vessels. They may then bring claims directly against the tugowner, who would be unable to rely on contractual defences or limits.

Contracts at Common Law 
Sometimes terms are not agreed in advance of the towage operation, or the terms used by the tug are not properly incorporated into the contract of towage. In these circumstances the courts will apply what they call an ‘ordinary contract of towage’. This is a contract with only basic terms, under which the owner of the tug is required to provide a seaworthy tug, which is properly manned and equipped and they must be competent and use skill in carrying out the operation.

A common law towage contract, such as this, is not desirable for a tugowner because although it still absolves them of liability for accidents beyond their control, it does not provide the necessary defences, limitations of liability and safeguards that the normal standard form conditions provide.

The often cited general principle of towage that "tug is servant of tow", in other words the tug is (generally) the smaller vessel and is only acting under the instructions of the larger vessel. The principler comes from The Niobe (1888).   

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[1] There are some notable exceptions. In salvage claims where there is no contract claims arising are based on equitable rights at common law. In so-called ‘gratuitous’ towage situations, where no charge is made for the towage service, claims are based in tort. And where the tow is capable of being considered ‘property’ (say a dumb barge incapable of independent navigation and with no crew) then a claim in bailment is also possible.

[2] UK Standard Conditions for Towage and Other Services (Revised 1986) – Issued by the British Tug Owners Association.

[3] BIMCO’s Towcon 2008 – International Ocean Towage Agreement (Lump Sum).

[4] BIMCO’s Towhire 2008  – International Ocean Towage Agreement (Daily Hire).

[5] BIMCO’s Supplytime ’89 / Supplytime 2005 – Time Charter Party for Offshore Service Vessels.