Voyage Charters. NOR and Laycan. on:  28-Aug-2014

"Laydays" are literally the agreed days for loading and discharging and as such a form of synonym for "laytime" (save that the expression "time" is more general and flexible than "days"). As used in this charterparty, however, "laydays" appear to be used to describe what elsewhere are often referred to as the "laycan" days, that is to say (a) the earliest day upon which an owner can expect his charterer to load and (b) the latest day upon which the vessel can arrive at its appointed loading place without being at risk of being cancelled.
Per Rix LJ, in Tidebrook Maritime Corporation v Vitol SA of Geneva (The Front Commander) [2006] EWCA Civ 944 at para 38.

Timely arrival

There is abundant authority for saying that the courts always insisted on strict compliance with stipulations as to the time in the contracts of affreightment. In the eighteenth century case of Croockewit v Fletcher (1857) 1 H & N 893 it was held that the stipulation as to the time "is the condition precedent upon the performance of which the defendant contracted to take and load the ship". In more recent case-law on this proposition - Evera SA Commercial v North Shipping Co Ltd [1956] 2 Lloyd’s Rep 367, Devlin J outlined commercial background of charterer’s, expectations to have vessel ready for his cargo by a certain date or range, at p.370:

A charterer manifestly wants, if he can get it, a fixed date for the arrival of the ship at the port of loading. He has to make arrangements to bring down the cargo and to have it ready to load when the ship arrives and he wants to know as near as he can what that date is going to be. On the other hand, it is to the interest of the shipowner, if he can have it, to have the date as flexible as possible because of the inevitable delays due to bad weather or other circumstances that there might be in the course of a voyage. He can never be sure that he can arrive at a port on a fixed and certain day.

Therefore a charterparty usually contains a stipulation, namely a range, within which the owner must present vessel at load port and a further option entitling the charterer to cancel the contract if the ship is not ready to load within a specified time. This option is not qualified by excepted perils clause.

Laycan’ is a period of time within which the vessel should arrive at loading port and tender ready for loading without risk of being rejected by the charterers. As indicated in the name itself, ‘laycan’ is an agreed time range at the end of which comes the date when the charterers are entitled to exercise their option and cancel the charterparty for non-arrival of the owners’ vessel. Thus laycan gives to the charterers very powerful legal instrument of cancellation. Depending on economic factors and substitute tonnage availability the charterer can, but is not obliged to exercise this option, therefore it is not unusual for the parties to come to solution and extend laycan for a day or so, for instance see below cl. 11 of SHELLVOY5 and SHELLVOY6 charter forms, which specifically defines procedure for laycan extension.

Shellvoy5

11. Laydays/Termination
Should the vessel not be ready to load by noon local time on the termination date set out in Part I(C) Charterers shall have the option of terminating this charter unless the vessel has been delayed due to Charterers’quo;change of orders pursuant to Clause 26, in which case the laydays shall be extended by the period of such delay.
However, if Owners reasonably conclude that, despite the exercise of due diligence, the vessel will not be ready to load by noon on the termination date, Owners may, as soon as they are able to state with reasonable certainty a new date when the vessel will be ready, give notice to Charterers declaring the new readiness date andasking Charterers to elect whether or not to terminate this charter. Unless Charterers within 4 days after such notice or within 2 days after the termination date (whichever is earlier) declare this charter terminated, Part I(C) shall be deemed to be amended such that the new readiness date stated shall be the commencement date and the second day thereafter shall be the termination date.
The provisions of this Clause and the exercise or non-exercise by Charterers of their option to terminate shall not prejudice any claims which Charterers or Owners may have against each other.

Shellvoy6

11. Laydays/ Termination
Should the vessel not be ready to load by noon local time on the termination date set out in Part I clause (C) Charterers shall have the option of terminating this Charter unless the vessel has been delayed due to Charterers’quo;change of orders pursuant to Part II clause 26, in which case the laydays shall be extended by the period of such delay. As soon as Owners become aware that the vessel will not be ready to load by noon on the termination date, Owners will give notice to Charterers declaring a new readiness date and ask Charterers to elect whether or not to terminate this Charter. Within 4 days after such notice, Charterers shall either:
(i)  declare this Charter terminated or
(ii) confirm a revised set of laydays which shall be amended such that the new readiness date stated shall be the commencement date and the second day thereafter shall be the termination date or,
(iii) agree a new set of laydays or an extension to the laydays mutually acceptable to Owners and Charterers. The provisions of this clause and the exercise or non-exercise by Charterers of their option to terminate shall not prejudice any claims which Charterers or Owners may have against each other.

Earlier arrival

Situation when vessel arrives within laycan does not require any additional elaboration. If, however, the vessel arrives earlier than the first date of laycan, then the question whether she may, should or should not tender an NOR will depend on the wording of charter in question.

BPVOY4 in para 6.2 says that NOR shall not be tendered, nor shall the Vessel proceed to berth, prior to the Commencement Date without Charterers’ prior agreement in writing, while SHELLVOY5 and SHELLVOY6 in cl.13(1)(a) states that notice shall not be tendered before commencement of laydays without any qualification for Charterers’ consent. There is, however, further dealing with an earlier NOR in both SHELLVOY5 and SHELLVOY6 cl.13(3), which clarifies that:

Shellvoy5

13. Notice of readiness/Running time
(1) Subject to the provisions of Clauses 13(3) and 14, if the vessel loads or discharges cargo other than by transhipment at sea.
(a)Time at each loading or discharging port shall commence to run 6 hours after the vessel is in all respects ready to load or discharge and written notice thereof has been tendered by themaster or Owners’ agents to Charterers or their agents and the vessel is securely moored at the specified loading or discharging berth.  However, if the vessel does not proceed immediately to such berth time shall commence to run 6 hours after
(i) the vessel is lying in the area where she was ordered to wait or, in the absence of any such specific order, in a usual waiting area and
(ii) written notice of readiness has been tendered and
(iii) the specified berth is accessible. A loading or discharging berth shall be deemed inaccessible only for so long as the vessel is or would be prevented from proceeding to it by bad weather, tidal conditions, ice, awaiting daylight pilot or tugs, or port traffic control requirements (except those requirements resulting from the unavailability of such berth or of the cargo).
If Charterers fail to specify a berth at any port, the first berth at which the vessel loads or discharges the cargo or any part thereof shall be deemed to be the specified berth at such port for the purposes of this Clause. Notice shall not be tendered before commencement of laydays and notice tendered by radio shall qualify as written notice provided it is confirmed in writing as soon as reasonably possible.
(b)Time shall continue to run
(i)  until cargo hoses have been disconnected, or
(ii) if the vessel is delayed for Charterers’ purposes for more than one hour after disconnection of cargo hoses, until the termination of such delay provided that if the vessel waits at any place other than the berth, time on passage to such other place, from disconnecting of hoses to remooring/anchorage at such other place, shall not count.
(2) If the vessel loads or discharges cargo by transhipment at sea time shall count from the arrival of the vessel at the transhipment area or from commencement of the laydays, whichever is later, and, subject to Clause 14(c), shall run until transhipment has been completed and the vessels have separated.
(3) Notwithstanding anything else in this Clause 13, if Charterers start loading or discharging the vessel before time would otherwise start to run under this charter, time shall run from commencement of such loading or discharging.
(4) For the purposes of this Clause 13 and of Clause 14 "time" shall mean laytime or time counting for demurrage, as the case may be.

cl.13 in new Shellvoy6:

Shellvoy6

13.Notice of readiness/ Running time
(1) Subject to the provisions of Part II clauses 13(3) and 14,
(a)Time at each loading or discharging port shall commence to run 6 hours after the vessel is in all respects ready to load or discharge and written notice thereof has been tendered by the master or Owners’ agents to Charterers or their agents and the vessel is securely moored at the specified loading or discharging berth. However, if the vessel does not proceed immediately to such berth time shall commence to run 6 hours after
(i) the vessel is lying in the area where she was ordered to wait or, in the absence of any such specific order, in a usual waiting area and
(ii) written notice of readiness has been tendered and
(iii) the specified berth is accessible. A loading or discharging berth shall be deemed inaccessible only for so long as the vessel is or would be prevented from proceeding to it by bad weather, tidal conditions, ice, awaiting daylight, pilot or tugs, or port traffic control requirements (except those requirements resulting from the unavailability of such berth or of the cargo).
If Charterers fail to specify a berth at any port, the first berth at which the vessel loads or discharges the cargo or any part thereof shall be deemed to be the specified berth at such port for the purposes of this clause. Notice shall not be tendered before commencement of laydays and notice tendered by radio shall qualify as written notice provided it is confirmed in writing as soon as reasonably possible.
Time shall never commence before six hours after commencement of laydays unless loading commences prior to this time as provided in clause 13 (3).
If Owners fail;
(i) to obtain Customs clearance; and/or
(ii) to obtain free pratique unless this is not customary prior to berthing; and/or
(iii) to have on board all papers/certificates required to perform this Charter, either within the 6 hours after notice of readiness originally tendered or when time would otherwise normally commence under this Charter, then the original notice of readiness shall not be valid. A new notice of readiness may only be tendered when Customs clearance and/or free pratique has been granted and/or all papers/certificates required are in order in accordance with relevant authorities’ requirements. Laytime or demurrage, if on demurrage, would then commence in accordance with the terms of this Charter. All time, costs and expenses as a result of delays due to any of the foregoing shall be for Owners’ account.
(b)Time shall:
(i)   continue to run until the cargo hoses have been disconnected.
(ii) recommence two hours after disconnection of hoses if the vessel is delayed for Charterers’ purposes and shall continue until the termination of such delay provided that if the vessel waits at any place other than the berth, any time or part of the time on passage to such other place that occurs after two hours from disconnection of hoses shall not count.
(2) If the vessel loads or discharges cargo by transhipment at sea time shall commence in accordance with Part II clause 13 (I) (a), and run until transhipment has been completed and the vessels have separated, always subject to Part II clause 14.
(3) Notwithstanding anything else in this clause 13, if Charterers start loading or discharging the vessel before time would otherwise start to run under this Charter, time shall run from commencement of such loading or discharging.
(4) For the purposes of this clause 13 and of Part II clause 14 and Part II clause 15 "time" shall mean laytime.

In Tidebrook Maritime Corporation v Vitol SA of Geneva (The Front Commander) [2006] EWCA Civ 944 the vessel arrived at Escravos and tendered her NOR at 00.01 hours on 8 January 2004 prior to the first day of the laycan which was 9/10 January 2004. Charterparty was based on ASBATANKVOY form ( clause 5 and clause 6) with additional Vitol clauses (below).

31. Operational Compliance Clause

Owner shall indemnify Charterer for any damages, delays, costs and consequences of not complying with Charterer’s voyage instructions given in accordance with the Charterparty… The vessel shall not tender Notice of Readiness prior to the earliest layday date specified in this Charterparty and laytime shall not commence before 0600 hours local time on the earliest layday unless Charterer consents in writing.

33. Early Loading Clause.

If Charterer permits vessel to tender NOR and berth prior to commencement of laydays, all time from berthing until commencement of laydays to be credited to Charterer against laytime and/or time on demurrage. Saved time to be split 50/50 Owners/Charterers.

On 6 January 2004, charterers sent the following email to owners, via the brokers, the following orders: "Charterers confirm NOR to be tendered on arrival Escravos, and to berth/load as soon as instructed by terminal" and reconfirmed this order on the next day. The vessel anchore at Escravos and tendered her NOR at 00.01 hours on 8 January 2004 and was instructed by the terminal to proceed to berth to load in the morning. She weighed anchor at 1018 hours on 8th January and was all fast at her loading berth at 1200 hours. Hoses were connected at 1312 hours and loading commenced at 1648 hours on 8 January. Loading was completed at 0736 hours on 10 January; hoses were disconnected at 0842 hours and the vessel sailed from Escravos at 1306 hours on 10 January.

Upon completion of voyage owners claimed demurrage incurred. In their calculation of the laytime used at the port of Escravos, owners gave charterers credit for 50 per cent of the time between 1200 hours on 8 January (when the vessel was made all fast at her berth at Escravos) and 0001 hours on 9 January (being the commencement of the laydays and the time at which owners considered laytime would otherwise have commenced). However, Charterers disputed that part of the demurrage claim which concerned laytime in Escravos, contending that, pursuant to clause 5 of the standard ASBATANKVOY form and additional clause 31, laytime should not start to count prior to 0600 on the first day of the laydays, which was 9 January 2004. Furthermore they said, that although they consented to early tender of the notice of readiness, to early berthing, and to early loading, they did not consent in writing, as required by clause 31, to the separate requirement of the early commencement of laytime.

In the High Court the judge set the question whether Owners have shown that the emails amounted to that consent in writing as cl.5 required and answered it in the negative, i.e. that the emails do not give consent explicitly. The judge left untouched the question how clause 33 was intended to work, where the Charterer permitted vessel to tender NOR and berth prior to commencement of laydays but at the same time has not sanctioned laytime commencement. The judge, however, gave leave to appeal acknowledging that the point was of wider interest, arose in other cases, and was being disputed in current arbitrations.

In the Court of Appeal discussion was whether if the vessel arrives early and the charterer wishes to load early, he can require the owner to do so, without being, at the same time, liable for laytime. The court held that the charterer is obliged to be ready, if the vessel is ready, by the earliest layday, but if he wishes to load early, he cannot require the owner to do so before the earliest layday [highlighting is mine].

Secondly, it was held that the owner is obliged to give notice of readiness to load, as required by cl. 6 of ASBATANKVOY, if he can, upon arrival, even if he has arrived early. Thus it was recognised that a notice of readiness may be given prior to the earliest layday, with the effect that the notice period, here 6 hours, may have already elapsed before the earliest layday begins.

I do not think that that means that there is any automatic breach on the part of the owner if he is not immediately ready to load on arrival, but, as it seems to me, if he is ready to load, he is obliged to give notice that he is. It seems to me that, under the standard provisions of the Asbatankvoy charter, an owner is obliged to give notice of readiness to load, if he can, upon arrival, even if he has arrived early. There is commercial good sense in this.
Tidebrook Maritime Corporation v Vitol SA of Geneva (The Front Commander) [2006] EWCA Civ 944, per Rix LJ at para. 41.

Accordingly, while the charterer cannot require vessel to load before the earliest layday, the owner has to tender NOR on arrival, even if arrived before laycan, as required by cl.6 of ASBATANKVOY, such Notice, however, cannot oblige a charterer to load, for that obligation cannot start before the earliest layday. The owner in such situation is obliged to comply with the charterer’s orders. But is he doing it for free, so far as charterer’s obligation to pay laytime accrues not earlier than laydays? The Court of Appeal held that the combination of provisions in clause 5 and clause 6 means that the start of laytime under cl. 6 is postponed to the beginning of the earliest layday, unless the charterer sanctions otherwise. The charterer’s order to or request of the vessel to load before the beginning of the earliest layday is such a sanction.

Lord Justice Rix said at para 45:

The charterer is not obliged to commence loading before the earliest layday if he does not want to load, but if he does, he is entitled to, once the vessel is presented as ready to load: and it seems to me that if once he has decided to ask the vessel to load earlier than he, the charterer, was obliged to load, then he has sanctioned the earlier commencement of laytime, the protection of the provision regarding the earliest layday is spent, and clause 6 rules as the clause otherwise governing the commencement of laytime.

This decision formulates a rule that although NOR tendered on arrival is required by cl.6 of ASBATANKVOY, even before commencement of laydays, that will not automatically lead to commencement of laytime unless the charterer orders vessel to berth and load ahead of laycan. Such orders would constitute necessary concession as cl.5 requires and ‘sanction’ the earlier commencement of laytime.

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