CHAPTER VII

CONTRACTS OF AFFREIGHTMENT, BILLS OF LADING AND CHARTER PARTIES

=1. Definitions.=--Contracts of affreightment are for the carriage of goods in vessels. This definition is sufficiently comprehensive to include contracts evidenced by bills of lading and charter parties. In practice the expression, "contracts of affreightment," is commonly used in a somewhat narrower sense to indicate those cases in which a vessel is operated by her owners on their own account, contracting directly with the shippers.

A bill of lading is the document issued for carriage of goods which form only a part of the cargo; it is both a receipt and a contract of carriage.

A charter party is a contract in writing by which the shipowner lets the ship in whole or in part. It corresponds to a lease of lands or buildings. The name comes from the fact that it was formerly prepared on a card which was then cut into two parts from top to bottom (_carta partita_) and each of the parties retained one for production when required and thus prevented counterfeiting.

By an order dated October 1, 1920, made pursuant to the provisions of the Merchant Marine Act (see Appendix), the Shipping Board requires two certified copies of every charter or contract of affreightment made on American or foreign steam or sailing vessels leaving continental United States to be filed with the Chartering Executive Committee, 45 Broadway, New York, which will then issue a certificate of filing. Unless this is done, clearance will be refused the vessel; but where there is not time to file certified copies before sailing, a letter or telegram to the Committee, giving all details of the contract, will answer the purpose. General cargo and passenger vessels, those in ballast and those carrying cargo for owners are not subject to this regulation.

Freight is the price of the carriage of goods by sea under a bill of lading, and also the sum agreed on for the hire of the ship under a charter party.

Before discussing the particular features of these contracts it will be well to observe certain elements which enter into substantially all contracts for the carriage of goods for hire. These are the warranty of seaworthiness, the obligation against deviation and the exemption of the carrier from liability on account of the perils of the sea.

In the Chapter, "Liabilities and Limitations," § 10, will be found a discussion of the Harter Act. This must be taken into consideration in connection with these subjects.

=2. Seaworthiness.=--The warranty of seaworthiness underlies all contracts between the vessel and the shipper. It is an implied warranty on the part of the owner that the vessel is seaworthy, and sufficient for the use to which she is to be devoted. This warranty may be modified between the parties as they see fit by express agreement or necessary implication; a man may hire an unseaworthy boat and agree to put her in good condition; a charterer who examines and accepts a ship whose condition is defective cannot complain of an injury to the cargo caused by such defects. Otherwise the warranty subsists and the charterer cannot be held liable to the owner for depreciation in the ship resulting from unseaworthiness and has also the right to cancel the charter on the same ground. He may also hold the owner for such damages as he is obliged to pay third parties on account of unseaworthiness. This warranty, unless restricted by agreement, extends to latent or hidden defects, since it requires that the ship be seaworthy at the commencement of the voyage and is not satisfied by the fact that the shipowner does not know her to be unseaworthy or has used his best efforts to make her seaworthy. It runs up to the time she breaks ground for the voyage, but is modified by the results of subsequent excepted perils until it is reasonably practicable to repair them.

In Bowring _v._ Thebaud, 56 Fed. 520, it was held:

The shipowner in every contract of affreightment impliedly engages with the shipper of the goods that his ship on the commencement of her voyage is seaworthy for that voyage and supplied with a competent crew.

And the following statement of the law, from Carver on _Carriage by Sea_, was approved:

The warranty of seaworthiness for a voyage must be satisfied at the time of sailing with the cargo. It is not sufficient that the ship was fit for the voyage while the cargo was being taken on, if she became unfit before she started. The warranty in truth appears to be a double one, viz., that the ship shall be fit to receive the cargo when receiving it and shall be fit to sail at the time of sailing.

The Court proceeded:

The warranty that the vessel is tight and fit for the employment for which she is offered,--that is, for the contemplated voyage on which she is to carry cargo,--is the very foundation and substratum of the contract of charter. The exception in a charter party as to dangers of the seas and navigation is not applicable to the perils and dangers which arise from the breach of the owner's obligation. Consequently it does not apply to the warranty of seaworthiness. Undoubtedly in cases where, under the language of the charter party, the warranty is satisfied if the vessel is seaworthy at the commencement of a voyage preliminary to her being laden, the shipowner is relieved by the exception from liability for any peril of the seas or navigation which are subsequently encountered without fault or negligence on his part.... In all of these adjudications, the question was as to the meaning of the contract of the parties. This must be decided in each case by applying the rules of interpretation to the contract on hand.

=3. Deviation.=--The ship must cover the proposed voyage without deviation. Deviation is defined to be "a voluntary departure without necessity or reasonable cause, from the regular and usual course of a voyage" (Hostetter _v._ Park, 137 U. S. 30). Deviation makes the carrier liable for losses occasioned thereby as an insurer notwithstanding any limitation of liability in the contract of carriage. It may be excused for the purpose of saving life or avoiding perils if the master acts in accordance with sound judgment, and it is excused if it be the custom of the trade to put in at a particular port on similar voyages. The consignee, if he intends to insist upon the deviation as a defense to his liability for freight, should refuse to receive the cargo.

An instructive discussion of the rule with regard to deviation is found in the case of the Indrapura, 171 Fed. 929, where a vessel bound from Hong Kong to Portland, Oregon, was placed on a drydock at Hong Kong without maritime necessity and there caught fire, whereby the cargo was injured. The owners of the cargo libeled the ship for their damages, alleging that the unnecessary docking of the ship was a deviation. The Court said:

The term "deviation" in the law of shipping has at the present day a varied meaning and wide significance. It was originally employed no doubt, for the purpose its lexicographical definition implies, namely, to express the wandering or straying of a vessel from the customary course of voyage; but it seems now to comprehend in general every conduct of a ship or other vehicle used in commerce tending to vary or increase the risk incident to a shipment. Thus delay in starting a shipment when unreasonable or unexcused came to be regarded as a deviation, not because the vehicle employed departed from the usual route of travel, but because the risk of shipment was changed or increased, and became, in effect, not the same as the one with reference to which the parties contracted.

And in Bulkley _v._ Insurance Co., Fed. Cas. No. 2,118, it was said:

The shortness of time or distance of deviation is immaterial if voluntary and without necessity, and not justified by usage.

The contract of carriage frequently purports to give the ship liberty to make deviation. This is construed strictly against the owner of the vessel. She may make only "reasonable deviation." She may call at a port lying directly on the route of her voyage, but may not go out of her way to any considerable degree, and if she does so and the shipper is damaged the exemption will not avail to protect her owner.

=4. Perils of the Sea.=--Almost every contract in respect of employment of the ship contains an express or implied exception of perils of the seas. This provides an exemption of liability on account of losses caused by these perils. These casualties cannot be accurately defined. The expression denotes accidents peculiarly incident to navigation, whether on lake, river, or the deep sea, not attributable to any human agency or intervention. It is rather more comprehensive than the "acts of God," but by no means includes all the dangers which may occur while journeying on the sea. Collision is a peril of the sea if it occurs without fault of either ship but not if by reason of the negligence of the carrying ship. Tempests, rocks, shoals, icebergs and other obstacles are within the expression; so are incursions of sea water, which damage the goods, as well as such bad weather as prevents ordinary ventilation and causes the cargo to heat and sweat. Where the peril is the proximate cause of the loss, the shipowner is excused.

=5. Fire.=--Sec. 4282, U. S. Rev. St., is as follows:

No owner of any vessel shall be liable to answer for or make good to any person any loss or damage which may happen to any merchandise whatsoever, which shall be shipped, taken in, or put on board any such vessel, by reason or by means of any fire happening to or on board the vessel, unless such fire is caused by the design or neglect of such owner.

It will be noticed that while this statute provides complete protection against fire on shipboard it does not protect against liability for damage by fire occurring on shore. To cover this it is common to insert in the contract of carriage an exemption from loss "before loading in the ship or after unloading." Such an exception is upheld by the courts where fire is not attributable to the neglect of the owner of the ship. Such a case was that of Constable _v._ National Steamship Co., 154 U. S. 51, where goods were delivered on the pier of the Steamship Company and injured by fire before they were laden. The Court held that the clause in the bill of lading, excepting loss by fire "before loading in the ship or after unloading," was a valid defense.

=6. Restraint of Princes.=--The contract usually contains a provision exempting the shipowner from liability for damage due to "restraint of princes." This quaint phrase means any kind of governmental action which interrupts the voyage, or otherwise prevents the performance of the contract. These restraints occur most often during war, although they may happen in time of peace, as in the case of detention in quarantine. If the restraint results from some action taken by the shipowner, such as the taking on of contraband goods, the clause will not relieve him from liability.

A simple illustration of the restraint of princes clause appears in Allanwilde Transport Corp. _v._ Vacuum Co., 248 U. S. 377, where a sailing vessel, the _Allanwilde_, was chartered to the libellants for the transportation of a cargo of oil and nails to Rochefort, France. The freight was prepaid. She started on the voyage and while she was at sea the government prohibited sailing vessels departing from the United States on voyages which would carry them through the war zone. The vessel ran into bad weather and was obliged to put back to the United States for repairs. By reason of the governmental order she did not resume her voyage. The owners of the cargo libeled the vessel to recover the prepaid freight. They also presented a claim for damages. The Court held that the restraint of princes clause of the charter party was a valid defense to the suit. Thus the vessel retained the freight which had been prepaid, although the voyage did not take place, and the cargo-owners did not recover their damages.

=7. Freight.=--(a) _Dead Freight._--In case the charter party provides for the shipment of a full cargo by the charterer and compensation to the owner of the ship is payable per unit of cargo, the shipowner will be entitled to recover from the charterer the amount of freight which would have been payable by so much cargo as could have occupied the space left vacant. This is called dead freight.

On the other hand cases arise in which the owner has to pay dead freight to the charterers. This occurs where the compensation for the ship is a lump sum and the owner fails to load a full cargo.

(b) _When Freight is Earned._--Freight is earned when the goods have been carried to their destination and not until then. If it be paid in advance and the goods do not arrive at destination it must be refunded. Of course, the parties may by their express stipulations in charter parties, bills of lading and other forms of agreement change these rules, and frequently do so. For example it is sometimes provided that prepaid freight shall be considered earned on the shipment of the goods, or if the ship be lost the freight shall not be refunded. Such bargains are, of course, entirely legal and will be enforced by the courts according to their tenor.

Charters sometimes provide for the carrying of cargo out and back. Here the terms of the contract with reference to the outbound and homeward-bound voyage are inseparable. No freight is earned until the ship returns with the homeward-bound cargo. But if the contract can be construed so as to regard each voyage separately, the freight for the outbound voyage will be earned at destination whether the ship returns with cargo or not.

=8. Contracts of Affreightment.=--Where the contract is not plainly a demise of the ship, i.e., a conveyance which turns over her full operation and control, it will not be so interpreted, and the owner will be in a position of a carrier of goods or as himself contracting for such other service by the ship as the charter requires, that is to say, the contract is one of affreightment.

Thus in Hagar _v._ Clark, 78 N. Y. 45, it was held:

If it remains doubtful whether the charterers were to have sole possession and control of the vessel during the voyage or were to be constituted owners _pro hac vice_, then the general owners must be deemed such for their rights and authority continue until displaced by some clear and definite transfer of them. The legal presumption is in favor of continuance of ownership and against any transfer of the ship to the charterer for the voyage, and is said to be so strong that, if the end sought to be effected by the charter party can conveniently be accomplished without the transfer of the vessel to the charterers, courts of justice are not inclined to regard the contract as a demise of the ship, although there may be express words of grant in the formal part of the instrument.

The master remains the agent of the owner under any contract falling short of a demise, and the owner is bound by all his acts and omissions within the scope of his authority as in the ordinary relation of carriage by sea. If the instrument amounts to a demise, the master is the charterer's agent, and not that of the owner. Bills of lading or other contracts of affreightment signed by the master bind the owner or the owner _pro hac vice_ on the theory of the master's agency. This subject is discussed in the case of Freeman, 18 How. 182, quoted extensively in Chapter III, § 10, _supra_. Charter parties frequently contain a clause whereby the charterer agrees to indemnify the shipowner against any liability arising from the signature of bills of lading by the master. Probably this clause would be implied in a charter party if not expressed therein. This gives the owner of the ship a right of action over against the charterer on account of any liability to which the shipowner or ship may have been subjected at the hands of the shipper. Thus if the charter party contained covenants for the protection of the shipowner under certain circumstances and the bill of lading issued by the master did not contain these restrictions and the shipper recovered under the bill of lading against the ship or her owner, the latter in turn could recover against the charterer (Field Line _v._ South Atlantic Co., 201 Fed. 301).

=9. Bills of Lading.=--The forms differ greatly in contents and legal effect but have the common features of an acknowledgment of the receipt of the goods; a description by which they may be identified; an agreement to carry to destination and deliver; the rate of freight and an exception of certain perils. In addition to these features it has been usual to include more or less elaborate provisions tending to a diminution or limitation of the ship's liability, sometimes extended to great length in small or illegible type, and the attempt to take advantage of these is sometimes described as "fine print and coarse work." These stipulations, in so far as they attempt to exempt the shipowner from the consequences of his own or his servants' negligence are not enforced in courts of the United States on grounds of public policy. They probably, however, have some value as deterrents of claims and litigation but should be studied in connection with the Harter Act (7 Comp. St. §§ 8029-8035). (See Chapter VIII, p. 119.) The common carrier by sea is subject to the same rules of extraordinary liability as the common carrier by land but this liability is controlled by the admiralty law of limited liability (Liabilities and Limitations, Chapter VIII, p. 112) and the provisions of the Harter Act. Like the land carrier, he may also enlarge or diminish his liability by special contract; such a contract must be clear and plain, based upon a meeting of minds, due consideration or mutuality, and conformity with law; it will not, however, protect against negligence on the part of the carrier. An example is found in the Guildhall, 58 Fed. 796, where a cargo was damaged in a collision occasioned by improper navigation. The owners of the ship based their defense on a provision in the bill of lading, which attempted to exempt from liability for "any neglect or defaults of the master, mariners, or others in the service of the owners, collision, perils of the seas," etc. It was held:

These stipulations are valid by the law of Rotterdam (the port of departure), and of England. But the obligation of the steamer, as a common carrier, was to deliver her cargo safely in this country, at the port of New York. As against the consignee and owner here, she can not commit torts on the high seas against his property with immunity, nor justify such torts, except by some valid contract, proved according to the law of the forum. By numerous decisions of the Supreme Court of the United States, stipulations like these, inserted by a common carrier in a bill of lading, are, first, void as against public policy; and secondly, they are not evidence of any contract to that effect on the part of the shipper and consignee; because unreasonable and not having the necessary element of voluntary assent.

See also Compania de Navigacion La Flecha _v._ Brauer, 168 U. S. 104:

Exceptions in a bill of lading or charter-party, inserted by the shipowner for his own benefit, are unquestionably to be construed most strongly against him.

In this case the cargo consisted of cattle, and the bill of lading contained this:

On deck at owner's risk; steamer not to be held accountable for accident to or mortality of the animals from whatever cause arising.... It is also mutually agreed that the carrier shall not be liable for loss or damage occasioned by ... accidents of navigation, of whatsoever kind, even when occasioned by the negligence, default or error in judgment of the pilot, master, mariners or other servants of the shipowner.

The vessel was improperly ballasted and rolled over on her beam ends. Some of the cattle were injured and in order to right the ship a number of them were thrown overboard, no discrimination being exercised between sound animals and those which had been injured. The court after laying down the general principles above quoted, further held:

The bill of lading itself shows that all the cattle to be carried under this contract were to be on deck. The words "on deck at owner's risk" cannot have been intended by the parties to cover risks from all causes whatsoever, including negligent or willful acts of the master and crew. To give so broad an interpretation to words of exception, inserted by the carrier and for his benefit, would be contrary to settled rules of construction, and would render nugatory many of the subsequent stipulations of the bill of lading.

The wrongful jettison of the sound cattle by the act of the carrier's servants cannot reasonably, or consistently with the line of English authorities already cited, or with our own decisions, be considered either as an "accident or mortality of the animals," or as a "loss or damage occasioned by causes beyond his control, by the perils of the sea, or other waters," or yet as a loss or damage "by collisions, stranding, or other accidents of navigation." There having been no collision, stranding, or other accident of navigation, there was nothing to which the only stipulation in the bill of lading against the consequence of negligence, default, or error in judgment of the master and crew could apply.

The bill of lading may be both a receipt and a contract and where the shipper accepts it at the time of delivering his goods, he is presumed to have agreed to its stipulations so far as they are reasonable and just. Such a contract merges all prior and contemporaneous negotiations and precludes parole evidence to vary its terms, but the subsequent delivery of a bill of lading will not necessarily affect a prior agreement, written or verbal, for the carriage; in other words, when a contract has been already made, the carrier cannot change it by a bill of lading without the shipper's consent.

If the holder of the bill of lading is also the charterer the rights and obligations of the parties will ordinarily be governed by the charter party. Where the bill of lading incorporates the charter party by reference to it, of course the holder of the bill of lading is bound by the terms of the charter party. Where the charter party provides that bills of lading are to be made subject to the provisions of the charter, the rights of the holder of the bill of lading are subject to the charter party if he had knowledge or notice of it.

A suit in which a conflict arose between a bill of lading issued by a charterer and master, and a charter party of prior date, was the early case of Gracie _v._ Palmer, 8 Wheat. 605. The owners of the ship _America_ chartered her at Philadelphia for a long voyage, the whole charter hire to be paid on the return of the ship to Philadelphia, but before the discharge of cargo. The owners appointed the master. In Calcutta, the charterer, who was on board, with the master's consent, got an advance of money from Palmer & Company, a Calcutta firm, and gave Palmer & Company a bill of lading which stipulated for the delivery of the cargo free of freight to Palmer & Company's agent in Philadelphia, who were to sell the goods and collect the amount of the advance out of the proceeds, unless the charterer's drafts for the amount of the advance, drawn in Palmer & Company's favor on a Philadelphia house, should be honored, in which event Palmer & Company's agents should deliver the goods to the charterer. The master signed the bill of lading given to Palmer & Company in Calcutta, which contained the clause, "Freight for the said goods having been settled here." The drawee refused to accept the charterer's drafts, and Palmer & Company's Philadelphia agent accordingly demanded the goods on the arrival of the ship. It was held, sustaining the contention of Daniel Webster, who represented the owners, that the shipowner had a lien on the cargo for the charter hire, the Court saying:

On what principles rests the general lien of goods for freight? The master is the agent of the shipowner, to receive and transport; the goods are improved in value, by the costs and cares of transportation. As the bailee of the shipper, the goods are in the custody and possession of the master and shipowner, and the law will not suffer that possession to be violated, until the laborer has received his hire. But this is literally the effect of that provision in the charter party which deprives the charterer of the right of landing the cargo until the stipulated hire be paid; or rather it would seem to go beyond it, and impose a liability beyond what the common law exacts. It may, therefore, be fairly construed into a stipulation, that the charterer should, under no circumstances, dispense with the legal lien of the shipowner.

* * * * *

That the shipowner would not confide in the charter to land his goods without buying off his right to detain, is expressly proved by the contract. That contract was accessible to the foreign shipper, and ought to have been looked into to determine the extent of the power vested in the charterer.... The charterer has contracted with the shipper to do an act, which he could not perform without violating his own contract to the shipowner, and must therefore be considered as having entered into a contract, subordinate in its nature to that previously existing between the owner and charterer.

On-the other hand, it is held that the innocent _bona fide_ endorsee of a bill of lading, which makes no reference to the charter party, and contains nothing to put him on notice or inquiry as to the existence of the charter party, is liable for freight only according to the terms of the bill of lading.

=10. Statements in Bills of Lading.=--The bill of lading commonly contains a statement of the number of packages or the weight of the goods or other representations with regard to the quantity shipped. There are several rules applicable to the effect of such statements. Where they appear in bills of lading covering shipments in interstate commerce or shipments from the United States to foreign ports, the effect of such statements is governed by the Federal Bill of Lading Act, approved August 29, 1916 (39 St. at L. 538). Under this act (§ 20) if the goods are laden by the _carrier_ he is bound to count the packages, or ascertain the kind and quantity of bulk cargo. He is forbidden to insert in the bill of lading or in any other document relating to the ship any expression such as "shipper's weight, load and count," or any language indicating that the goods were loaded by the shipper and the description of them made by him. Where the goods are loaded by the _shipper_ the act provides:

Section 21. That when package freight or bulk freight is loaded by a shipper and the goods are described in a bill of lading merely by a statement of marks or labels upon them or upon packages containing them, or by a statement that the goods are said to be goods of a certain kind or quantity, or in a certain condition, or it is stated in the bill of lading that packages are said to contain goods of a certain kind or quantity or in a certain condition, or that the contents of packages are unknown, or words of like purport are contained in the bills of lading, such statements, if true, shall not make liable the carrier issuing the bill of lading, although the goods are not of the kind or quantity or in the condition which the marks or labels upon them indicate, or of the kind or quantity or in the condition they were said to be by the consignor. The carrier may also by inserting in the bill of lading the words "Shipper's weight, load and count," or other words of like purport indicate that the goods were loaded by the shipper and the description of them made by him; and if such statement be true, the carrier shall not be liable for damages caused by the improper loading or by the non-receipt or by the misdescription of the goods described in the bill of lading: _Provided, however_, Where the shipper of bulk freight installs and maintains adequate facilities for weighing such freight, and the same are available to the carrier, then the carrier, upon written request of such shipper and when given a reasonable opportunity so to do, shall ascertain the kind and quantity of bulk freight within a reasonable time after such written request, and the carrier shall not in such cases insert in the bill of lading the words "Shipper's weight," or other words of like purport, and if so inserted contrary to the provisions of this section, said words shall be treated as null and void and as if not inserted therein.

This act of Congress has no application to bills of lading for goods shipped from foreign ports and the rules governing representations in such bills of lading are different. Bills of lading for shipment from foreign ports when issued by the master do not bind the shipowner of the vessel for the number of packages or quantity of goods which the bill represents as having been shipped. This is the rule which prevailed as to all bills of lading prior to the passage of the act. It is based on the theory that the implied agency of the master for the shipowner does not extend to making misrepresentations in the bill of lading, so as to make it, as against the shipowner, a receipt for goods not received. It was intended to protect the shipowner against frauds committed collusively between the master and shipper who have been known to enter into conspiracies whereby the master issued false bills of lading upon which the shipper subsequently raised money by assigning the bill.

There is another class of representations commonly found in the bill of lading relating to the condition of the goods, as that they are in "good condition" or "damaged condition." Where the goods are loaded by the shipper the effect of such statements is governed by § 21 of the Bill of Lading Act, above quoted, as to shipments in interstate commerce or from United States ports. In other cases, e.g., where the carrier does the loading or where the act is not applicable, the rule is that representation made by the master in the bill of lading as to condition, bind the shipowner where the bill of lading has passed into the hands of a _bona fide_ holder for value, the theory being that representations as to order and condition are within the scope of the master's authority.

=11. Negotiability of Bills of Lading.=--In mercantile law certain things have the quality of negotiability, that is, they are like money in that the title may pass from hand to hand by delivery without the necessity of inquiry into the antecedent ownership. Promissory notes, checks and drafts, payable to order or bearer, or so endorsed, are negotiable and the holder's title is not affected by any representations or transactions between the original parties or prior holders, without his knowledge. Many attempts have been made to give bills of lading the full quality of negotiability, but the courts have not favored the effort. Bills of lading are said to be quasi-negotiable. They may be transferred by endorsement and delivery and thereby pass the same title to the goods which they represent as if the goods themselves were handled. But prior to the passage of the Federal Bill of Lading Act, above mentioned, the transferee took only the title of his transferor, subject to all rights which may have been asserted against him. The bill of lading remained a mere substitute for the goods and the purchaser of a stolen bill, for example, acquired no more title than he would in the case of stolen goods. The latest legislation designed to confer upon bills of lading the quality of negotiable paper is that contained in § 22 of the Bill of Lading Act, which is as follows:

That if a bill of lading has been issued by a carrier or on his behalf by an agent or employee the scope of whose actual or apparent authority includes the receiving of goods and issuing bills of lading therefor for transportation in commerce among the several States and with foreign nations, the carrier shall be liable to (a) the owner of goods covered by a straight bill subject to existing rights of stoppage in transition or (b) the holder of an order bill, who has given value in good faith, relying upon the description therein of the goods, for damages caused by the non-receipt by the carrier of all or part of the goods or their failure to correspond with the description thereof in the bill at the time of the issue.

This appears to protect a person to whom a bill of lading has been negotiated for value and who took it in good faith, relying upon representations contained in it. A word of caution, however, is necessary. The provision is recent and has not been construed by the highest courts in a case involving a shipment by sea. The disposition of the courts has been to construe such legislation strictly. The act was intended to reverse the rule laid down in a line of decisions consistently adhered to by the Supreme Court down to the time of its passage. There can be no little doubt that any one seeking to maintain an action under § 22 of the act would have to bring himself strictly within the description of persons embraced in items (a) or (b) contained in the section.

=12. Duration of Carrier's Liability.=--The carrier's liability begins when he receives the goods for immediate transportation. He is not liable as a carrier if he receives the goods, but is ordered not to ship them pending further instructions from the consignor. In such case he remains a mere bailee, or perhaps a warehouseman, until the voyage actually begins. The carrier's liability ends when he gives notice of the arrival of the goods and has afforded the consignee a reasonable opportunity to remove them. He may go farther and stipulate in the bill of lading to terminate his responsibility as carrier immediately upon the putting of the goods ashore.

=13. Exceptions in Bills of Lading.=--In addition to perils of the sea, deviation and restraint of princes, which have already been mentioned, bills of lading frequently contain language designed to protect the carrier from liability for such things as damage due to breakage, leakage, heat, etc. Clauses of this kind will avail the carrier as a defense against suits for damages due to these causes provided the carrier is free from negligence. Inasmuch as these exceptions are in the nature of exemptions from a liability which is imposed by the policy of the law, the tendency of the courts is to interpret them with strictness against the carrier.

A provision in a bill of lading exempting the carrier from loss by theft will not relieve him from liability on account of a theft committed by a person in his employ, such as an officer of the vessel or a member of the crew.

=14. Valuation.=--There is some divergence in the decisions of the courts involving the valuation of the goods which is frequently stated in the bill of lading. If the language of the bill indicates that the amount stated is a limit or that the value is limited to the invoice price, the shipper may recover his actual loss up to but not exceeding that amount, subject to the invariable rule that a man may not contract for relief from the consequences of his own negligence. The right of recovery on the valuation clause depends upon whether the owner of the goods has been subjected to loss. Thus if after the accident or injury the goods continue to be worth the amount of the valuation there is no loss and consequently there can be no recovery. The valuation clause cannot be used for the purpose of exempting the carrier from liability for all goods above a certain value. As is succinctly stated in the syllabus of Calderon _v._ Atlas Steamship Co., 170 U. S. 272, 42 L. ed. 1033:

A stipulation in a bill of lading, that the carrier shall not be liable for goods of any description which are above the value of $100 per package unless special agreement is made therefor, does not mean that the liability is limited to $100 per package for such goods, but that the carrier shall not be liable for them to any amount, and is therefore void, under the Harter Act, as an attempt of the carrier to exonerate itself from all responsibility for such goods.

=15. Notice of Claim.=--It is very important for shippers to observe the provisions usually contained in bills of lading to the effect that the carrier will not be liable unless notice of loss be given within a certain limited time as such clauses are legal and enforceable, and if not complied with, the shipper will lose his right of action.

=16. Nature and Effect of Charter Party.=--This may be formal or informal, written or verbal, as the parties choose, but careful business men will prefer to have it executed with the same care and detail as is usually given to contracts of so important a nature. The operations under a charter always involve large responsibilities and liabilities upon some one, primarily upon the ship but ultimately upon the parties to the agreement. The adjustment of these by appropriate language necessitates a carefully drawn document and while many printed forms are in general use in various ports they should only be employed when both parties thoroughly understand the import of their provisions. The effect of the agreement may be to create a contract of carriage on the part of the owner or to completely divest him of any control over his ship. Where he merely rents or lets the carrying capacity, in whole or part, but retains possession, command and navigation through his own master and crew, he is the carrier and the charter is a contract of affreightment. Where he transfers the temporary ownership by relinquishing these things to the charterer, so that the latter hires the officers and crew and operates the ship, he is not in the position of a carrier and is freed from obligations on her account, though the ship herself remains responsible.

Charters are of various kinds. A charter party which turns over the full control and operation of the ship to the charterer is called a demise of the ship. This may be for a fixed term, or for a particular voyage. In commercial practice, however, charters for a fixed term, that is to say time charters, seldom amount to a demise of the ship, but are usually mere contracts of affreightment. A charter party for a particular voyage is called a voyage charter. In usage such a charter may amount to a demise or may not, depending on whether or not the full control and operation of the ship is surrendered to the charterer. A charter which amounts to a demise is sometimes termed a bare boat charter. Under a charter which amounts to a demise, the owner will require payment of the charter money or freight in such installments as are agreed, the maintenance of his ship in good, seaworthy condition, protection against maritime liens and the prompt payment of all her expenses, and her return to him in like condition as when taken at the termination of the contract. The charterer will require undisturbed possession of the ship so long as he is not in default and agrees, that in event of default, the owner may cancel and resume possession. Provision should also be made for insurance and stipulated value in event of damage or total loss.

=17. Subcharters.=--In the absence of any prohibition in the original charter, a charterer may execute a subcharter or may assign the original charter.

=18. Provisions in Charter Parties.=--The legal construction of a charter party is governed by the rules of the law of contract. Material representations of fact contained in the instrument as inducements to the contract must be true or the contract will not be binding on the opposite party. Such representations are statements relating to the size, capacity, speed, condition and location of the ship.

(a) _Safe Port._--Among other provisions of the contract, especially in time charters, is usually one to the effect that the vessel is to be employed only between safe ports. A safe port is one in which the physical conditions do not ordinarily expose a vessel to danger. Thus a port entirely exposed to the weather has been held unsafe, as have ports blocked by dangerous bars. A port in which the vessel would be liable to forfeiture in time of war because of her nationality has been held unsafe.

(b) _Insurance._--Where a time charter provides that the owner shall pay for the insurance the reference is to insurance for the benefit of the owner and not that of the charterer.

(c) _Redelivery._--While a time charter is, as the name implies, a contract for the definite period of time expressed in the charter, it is obvious that the exigencies of navigation frequently render it impossible to redeliver the vessel on the precise date when the period expires. It is customary, therefore, to provide that the charter hire shall continue at the same rate until the time of redelivery unless the vessel be lost. It is the duty of the charterer to redeliver the vessel as nearly as possible to the expiration date of the charter, but if the vessel is delayed through no fault of his, he cannot be held in damages for breach of the charter, even though he may not be able to make redelivery for months beyond the expiration date. So long as the delay be practically unavoidable, he is liable merely for the stipulated charter hire until redelivery, and not in damages for breach of the charter (Anderson _v._ Munson, 104 Fed. 913).

The word "about" as a qualification of the charter period is sometimes inserted in time charters, as a further protection to the charterer, but it does not diminish his obligation to surrender the vessel as nearly as possible to the expiration date.

(d) _Cancellation and Withdrawal._--Charters usually contain a clause which provides that, if the vessel fails to arrive at the loading port by a certain date, in condition to be laden--i.e., with cargo space available--the charterers may cancel the obligation. The clause does not entitle the vessel to loaf toward the loading port so as just to arrive by the cancellation date. If she does not proceed with reasonable promptness, the charterer will be entitled to damages, even though she arrive by the cancellation date.

Correlative to the charterer's right of cancellation, it is usual for charter parties to contain a provision to the effect that charter hire is to be paid in advance and that in default of such payment the owner shall be entitled to withdraw the vessel from the charterer.

(e) _The Breakdown Clause._--Time charters frequently provide that in the event of loss of time arising from the breakdown of machinery, lack of men or supplies for more than twenty-four hours, the payment of charter hire shall be suspended for the period from which she is inoperative, but if the vessel is driven into port by circumstances of weather or accident to cargo, the loss of time due to these causes shall fall upon the charterer. Such provisions are enforcible according to their language and intent. If the breakdown endures beyond the period of twenty-four hours the charter hire ceases not only for the excess, but for the twenty-four hours also.

=19. Lien for Freight and Charter Hire.=--It is fundamental that the goods carried are liable for the carrying charges, but the questions arise: In whose favor does the liability exist, and during what period does it exist? The lien for freight exists in favor of the person with whom the shipper contracts to carry the goods. Where the shipowner is operating the vessel on his own account as a carrier, the lien for freight exists in his favor. Where the vessel is chartered the contract of carriage is between the shipper and the charterer, and the lien for freight exists in favor of the charterer. The owner of a chartered ship has no lien for freight (unless conferred by the cesser clause, mentioned below), but he may have a lien on the goods to the extent of the unpaid freight for the purpose of securing his charter hire. This lien does not exist in favor of an owner who has demised or let the ship to the charterer, unless there is an express stipulation to that effect.

The so-called "cesser clause" is to the effect that "owner to have lien on cargo for freight, dead-freight, and demurrage, charterer's liability to cease when cargo shipped." The purpose of this clause is to bring the charterer's liability to an end at the loading port. In return for his exemption from liability to suit at the port of destination, he turns over to the shipowner his lien on the cargo for freight, dead-freight and demurrage.

Possession of the goods is, generally speaking, essential to the lien for freight or charter hire. It does not attach until the goods have been delivered for transportation. If, by contract, expressed in the bill of lading or otherwise, the freight is not payable until after the goods have been delivered, there is no lien, and the same is true if the freight is payable at a time and place other than those specified for the delivery of cargo. Ordinarily the lien is discharged when possession of the goods is parted with; or by express waiver; or by implied waiver, such as a direction to pay the freight to another person.

It is usual to insert in time charters a clause providing for a lien for charter hire. Such provisions are valid, but they are not effective against the cargo unless the terms of the charter have been brought home to the shipper by a reference to the charter in the bill of lading, which is commonly done. To incorporate the charter in the bill of lading the reference to the charter in the bill must be explicit.

=20. Liability for Loss or Damage.=--In the case of goods, there is a primary liability on the ship.

The liability of a vessel _in rem_ for want of due diligence in the care and custody of the goods received on board for transportation is the same whether the owners of the ship remain in possession as carriers or whether the terms of the charter party are such as to constitute a demise of the vessel for the voyage, so as to render the charterers the owners _pro hac vice_ and alone personally responsible for the transportation. The T. A. Goddard, 12 Fed. 174.

As between the shipowner and the charterer, this will be borne as the charter party provides. In the case of loss or damage to the ship, the contract again controls if its provisions are explicit. If not, the ordinary rules of bailment of personal property control. If the charter amounts to a demise of the ship, the charterer is liable, for he engages to return the ship without injury by reason of his own negligence; if not a demise, the shipowner bears the loss. For losses caused by perils of the seas or by ordinary wear and tear, without negligence on his part, the charterer is not liable in the absence of an express stipulation.

In the case of the Barnstable, 181 U. S. 464, the vessel was chartered, the charterer employing the officers and crew to navigate her, as well as providing the ship's stores, supplies and fuel, and undertaking to pay all pilotage, port charges and other expenses. The owner was to keep the vessel insured and in repair. She came into collision with the schooner _Fortuna_. The owners of the _Fortuna_ libeled the _Barnstable_ and the owners of the latter vessel called upon the charterers to defend the suit. It was conceded that the collision and the consequent damage were due to the negligent operation of the _Barnstable_ by the officers and crew employed by the charterers to operate her. The court held that the owners of the damaged schooner were entitled to look to the offending vessel for their damages. As between the owner and the charterer it was held that the charter amounted to a demise and the charterer was the temporary owner. He was therefore liable to the real owner, since he was bound to return the vessel. In the report of the argument of this case many authorities are cited showing the circumstances under which a charter party becomes a demise of the vessel.

In a contract of affreightment or charter not amounting to a demise--and this embraces time charters--the duty of navigation rests upon the shipowner. He is responsible for any damage due to negligence in navigation, even though the negligent individual had been employed by the charterer. In charters of this class the shipowner is also responsible for loading and discharging cargo. Stevedores are ordinarily regarded as being in the employ of the ship.

=21. Demurrage and Laydays.=--Time is usually of the essence of maritime and commercial transactions. Both parties must be punctual in the performance of their obligations. The shipowner must have the vessel at the appointed place and time for delivery to the charterer or to receive the cargo, as the agreement requires. The charterer must be on hand to receive her or to deliver the cargo for loading. The ship must pursue the voyage without deviation or delay. The consignee must be ready to receive his goods on their arrival. Failure to observe these requirements creates a liability for the damages ensuing or may dissolve the charter. If the contract is express in regard to these stipulations, no excuses will be useful unless they can be found in the agreement itself. It is usual to provide for these obligations under the name of demurrage. Of course, where the charter is for a definite period of time, they are unimportant, but otherwise, if it is for one or more voyages. The charterer has a number of days at his disposal for loading and discharging the cargo. These are termed laydays. If not specially provided, or fixed by the usage of the port or trade, a reasonable number will be implied. For the excess, the ship is entitled to demurrage to cover her loss of time and expenses, either at the rate named in the charter or of such amount as may be proved.

Until the laydays have expired there is no breach of the contract to load, but where the charterer refuses to accept the vessel or provide a cargo, the owner need not keep her in readiness for delivery during all the laydays.

What constitutes readiness, or under what circumstances a ship is an "arrived ship," depends upon the terms of the bargain. Thus if the charterer requires her to reach her berth a notice given when she is in the stream will be insufficient. If she is to report for loading cargo she must have her loading apparatus ready and her cargo space available. The notice must actually reach the charterer unless he prevents it by absenting himself or his representative from the place where it is to be given. Notice should not be given on Sunday or a holiday, unless the charter expressly permits it.

In accordance with the general principle of the law of contract, laydays do not run if delay in loading or discharge is caused by the master or owner.

It is the duty of the charterer to have his cargo ready and he is liable for demurrage on account of the delay in furnishing cargo.

The charter party usually excepts Sundays and holidays from the laydays allowed for loading, but, after the expiration of the loading period (i.e., the laydays and the Sundays and holidays occurring among them), demurrage begins to be payable to the ship, and she is entitled to demurrage for Sundays and holidays as well as for secular days. This is because the work of loading in port does not usually proceed on Sunday, but a ship at sea continues on her voyage every day, so that every day's delay in departure causes an equal delay in arrival.

Charters often provide for "despatch money," which is a premium or allowance to the charterer for speed in loading. This is computed on each running day saved; that is, it is to be credited to the charterer for every day, including Sundays and holidays, occurring after the day on which the master is placed in a position to clear the vessel, up to and including the last layday, i.e., the end of the loading period. Despatch is not allowed unless bargained for in the charter.

=22. Breach of Charter.=--If the shipowner refuses to perform the charter, the charterer has a personal action for damages against him but no maritime lien against the ship. There is no such lien for breach of a purely executory contract, that is to say a contract no part of which has been performed. So, if the ship is ready but the charterer refuses to perform, the remedy is personal only and not against the goods. Each must endeavor to mitigate his loss, the ship by seeking other employment, the charterer by looking for another ship. But after performance of the contract has once commenced, there are reciprocal liens on ship and cargo for its performance. The charterers have a lien on the vessel for all damages caused by a breach of the charter, the carrying out of which has been begun. For example, if the voyage is delayed after its commencement through the negligence of the owner, or if the master, while agent of the owner, violates the terms of the charter party, a lien arises in favor of the charterer.

In regard to the various obligations of the agreement, breaches by either party will either dissolve their relations or give rise to actions for damages. If nonperformance goes to the whole root and consideration of the contract, the other party may treat it as abrogated and be relieved from further obligation on his part in addition to his own claim for damages; if the nonperformance is not so vital, but may be amply compensated by damages, he will not be so relieved but must resort to his action.

The arbitration clause contained in a time charter is not enforcible in the United States.

=23. Dissolution of Charter.=--Like all other contracts, the charter party becomes dissolved by performance or by the acts of the parties amounting to a cancellation by agreement or waiver of performance. It may, however, be dissolved against the will of the parties and by causes extrinsic to them. Thus, although legal when made, if it becomes illegal before performance, it is as wholly void as if it were illegal at the outset. A state of war, for example, making all commercial intercourse with the enemy illegal, would annul all obligations under a prior charter for a voyage to an enemy port. So would legislation forbidding the importation of the cargo in question. A voyage charter may be dissolved by an accident to the vessel which prevents her making the voyage at the time contemplated. For example, in Jackson v. Union Marine Insurance Co., L. R. 10. C. P. 125, the ship was to proceed with all possible despatch (dangers and accidents of navigation excepted) from Liverpool to Newport, and there to load and carry to San Francisco a cargo of iron rails. She left Liverpool January 2, and on the following day ran aground, sustaining considerable damage. It would necessarily have been many months before she could be got off and put in repair to enable her to continue the voyage. The court held that in the commercial sense the voyage contemplated by the charter party had been brought to an end, and, under those circumstances, the contract was held to have determined. The voyage, if resumed, would have been a different voyage, "as different," in Baron Bramwell's words, "as though it had been described and intended to be a spring voyage, while the other, after the repair, would be an autumn voyage." The season within which the adventure was to be carried out was of importance to both parties, and it was thus easy to imply a condition that, if the voyage became impossible of completion within that season, the contract would be at an end. The exception as to dangers of the sea and accidents of navigation showed that the parties contemplated providing for some delay from these causes, but it was held that they were evidently not contemplating a delay so great that the spring voyage would become altogether impossible.

The particular adventure being a voyage to be carried out within reasonable limits of time furnished a definite standard by which it would be determined whether the delay which actually occurred was or was not within the exception clause. There was, therefore, no inconsistency between the implied condition and the express provisions of the contract.

Termination of a charter by frustration of adventure is not applicable to time charters. Thus the taking of the ship for the use of the government does not dissolve a time charter. This was held by the House of Lords, upon a very full consideration in the recent case of Tamplin Steamship Co. _v._ Anglo-Mexican Products Co., Ltd., 2 A. C. 397. There a vessel was chartered for five years for a fixed sum per month for the carriage of oil as the charterers or their agents should direct. The charter party contained an exception of arrests and restraint of princes, and the charterers had the liberty of subletting the steamer on admiralty or other service. After the outbreak of the war, when the charter party had nearly three years to run, the steamer was requisitioned for an indefinite period by the admiralty, which made extensive alterations and used her as a transport. The owners contended that the charter party had been determined by the requisition. The charterers, who were willing to continue to pay the charter hire (no doubt in order to entitle themselves as temporary owners to the compensation paid by the government) contended that the charter party had not been annulled and this contention was sustained by the House, which held that the interruption was not of such a character that the court ought to imply a condition that the parties should be excused from further performance of the contract and that the requisition did not determine or even suspend the charter. Earl Loreburn said:

The violent interruption of a contract may always damage one or both the contracting parties. Any interruption does so. Loss may arise to some one whether it be decided that these people are or that they are not still bound by the charter party. But the test for answering the questions is not the loss that either may sustain. It is this: Ought we to imply a condition in the contract that an interruption such as this was to excuse the parties from further performance of it? I think not. I think they took their chances of lesser interruptions and the condition I should imply goes no further than that they should be excused if substantially the whole contract became impossible of performance or in other words impracticable by some cause for which neither was responsible. Accordingly I am of opinion that this charter party did not come to an end when the steamer was requisitioned and that the requisition did not suspend it or affect the rights of the owners or charterers under it and that the appeal fails.[16]

Where the charter provides for the return of the vessel at the expiration of the term in as good condition as when taken, fair wear and tear from reasonable and proper use only excepted, and requires the hirer to make all repairs and assume liability for all loss and damage, an absolute obligation to return her is created and her total loss without any fault on his part will not exempt him from liability; he must return the ship or pay her value, and, if the charter party contains an agreement as to what that value is, that amount will be decreed by the court. In Sun Printing & C. Association _v._ Moore, 183 U. S. 642, the New York _Sun_ newspaper chartered a yacht from Moore for newsgathering purposes in Cuban waters during the Spanish war. The charter party provided that the hirer was to keep "said yacht in repair and to pay all its running expenses and to surrender said yacht with its gear, furniture and tackle at the expiration of this contract to the owner or his agent ... in as good condition as at the start, fair wear and tear from reasonable and proper use only excepted." It was further provided that "for the purpose of this charter the value of the yacht shall be considered and taken at the sum of $75,000." The charter party was accompanied by a paper in the nature of a surety bond given by the _Sun_ to secure the owner against any loss or damage to the vessel in an amount _not exceeding_ $75,000. The yacht was wrecked and totally lost. Moore sued for $75,000 as representing the agreed value of the yacht. The _Sun_ contended that the figure represented a penalty, enforceable only to the extent of actual damage. The court sustained a recovery of the full amount without deducting the charter hire. Justice White said:

It is elementary that, generally speaking, the hirer in a simple contract of bailment is not responsible for the failure to return the thing hired, when it has been lost or destroyed without his fault. Such is the universal principle.... But it is equally true that where by a contract of bailment the hirer has, either expressly or by fair implication, assumed the absolute obligation in return, even although the thing hired has been lost or destroyed without his fault, the contract embracing such liability is controlling and must be enforced according to its terms....

As the stipulation for value referred to was binding upon the parties, the trial court rightly refused to consider evidence tending to show that the admitted value was excessive and the circuit court of appeals properly gave effect to the expressed intention of the parties.

REFERENCES FOR READING

_Charter-Parties_, XVI American Law Review, 6330.

_Charter-Parties and Bills of Lading_, T. E. Scrutton. London, 1899; Clowes and Cons, Ltd.

_Shipping and Admiralty_, Parsons, 274-337.

_Shipping and Admiralty_, Desty, §§ 217-286; 196-285.

Crossman _v._ Burrill, 179 U. S. 100.

Moore _v._ Sun Ass'n, 183 U. S. 642.

Boskenna Bay, 36 Fed. 697.

Majestic, 56 Fed. 244.

Centurion, 57 Fed. 412.

_Shipping and Admiralty_, Parsons, Vol. I, Chapter VIII.

_Admiralty_, Hughes, Chapters VII, VIII.

Francis, 21 Fed. 715.

Sprott, 70 Fed. 327.

Rosenthal, 57 Fed. 254.

Ronalds, 109 Fed. 905.

Burrill, 65 Fed. 104.

Dene, 103 Fed. 983.

Ely, 110 Fed. 563.

Dixie, 46 Fed. 403.

Mencke _v._ Sugar, 187 U. S. 248.

_Charter-Parties and Ocean Bills of Lading_, Poor.

[16] It may be inferred, however, that, if it had appeared that the requisition necessarily rendered the performance of the entire contract impossible, the charter would have been held to be dissolved. In this case, it was the owner, who saw a chance to make more money, who wanted the charter annulled; not the charterer whose adventure was being frustrated in a manner advantageous to him. It is a little difficult to suppose that the court would have required the charterers to go on paying charter hire, had they been unwilling to do so, for a vessel of which the government had deprived them of the use. Still, that conclusion is deducible from the language of the several lords who wrote opinions in the case.