Lloyd's Maritime and Commercial Law Quarterly
Laytime and demurrage clauses in contracts of sale—links and connections
Charles Debattista *
Laytime and demurrage clauses (L&D clauses) have attracted much attention and analysis in their original habitat, charterparties. They exist also in international sale contracts where they raise two issues: first, what is the link between a laytime and demurrage clause in a sale contract and its counterpart in the relevant charterparty; secondly, in applying such a clause in a sale contract, are we to be guided by court decisions on charterparties? These questions have given rise to many practical problems. A new approach to the drafting of such clauses in international sale contracts is suggested: to separate such clauses
—and the accompanying law—from their counterparts in charterparties.
Laytime disputes and demurrage claims under charterparties are the staple diet of shipping lawyers the world over, monies obtained as demurrage or despatch being well recognized both by owners and charterers not only as devices encouraging speed in loading and discharge, but also as hedges against fluctuating freight markets. The law reports and the literature are replete with decisions and guidance on the application and construction of these L&D clauses in charterparties.1
However, charterparties are concluded in most cases in order to perform obligations under sale contracts and charterers may find themselves liable under charterparties for delays caused by their counterparties under their sale contracts. Consequently, most sale contracts, at any rate in the commodity markets, also contain as a matter of course clauses which provide for a period of laytime on the lapse or saving of which demurrage or despatch money is respectively due.
The purpose of this paper is to answer two questions, both of which relate to the link between such clauses in sale contracts and charterparties: first, what is the financial link between the two clauses: is an L&D clause in a sale contract intended simply to indemnify the party to the sale contract against losses suffered under the counterpart clause in the charterparty, or does the clause in the sale contract stand quite independently of the liability under the charterparty? Secondly, what is the legal link between these clauses: when applying and construing an L&D clause in a sale contract, ought we to transplant into the sale contract all the law surrounding similar clauses created in the context of charterparties? The following answers will be suggested. In answer to the first question, the default position is that L&D clauses in sale contracts stand free and independent of
* Professor of Commercial Law, University of Southampton.
1. For the law on laytime and demurrage clauses in charterparties, see H.Tiberg, Law of Demurrage,
4th edn (Sweet & Maxwell, 1994 hereafter “Tiberg”); J.Schofield, Laytime and Demurrage,
4th edn (2001 Informa); D.Davies, Commencement of Laytime,
3rd edn (Informa, 1998); J.Cooke et al., Voyage Charters,
2nd edn (2001, Informa) (hereafter “Cooke”).
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