Lloyd's Maritime and Commercial Law Quarterly
THE SCOPE OF CHARTERPARTY INDEMNITY CLAUSES
The Eurus
A breach of contract gives rise to a right to damages, the extent of recovery dependent upon the principles of remoteness of loss derived from the celebrated case of Hadley v. Baxendale.1 In The Eurus
2 the Court of Appeal had to consider whether the breach of cl. 36 in a voyage charterparty making the “Owners … responsible for any … loss suffered by Charterers due to failure to comply fully with Charterers’ voyage instructions …” imposed on the owners an obligation to indemnify the charterers in respect of the consequences of a failure to follow instructions and, if so, whether the principles of remoteness precluded recovery for losses that were not in the reasonable contemplation of the parties.
The defendant charterers appealed from the decision of Rix, J.,3 allowing the appeal of the shipowners from a majority arbitration award. This award held that cl. 36 cast an obligation on the owners to indemnify the charterers for losses incurred when the ship’s master effectively presented the Eurus for loading earlier than he had been instructed to do so. The arbitrators held that an obligation to indemnify, as opposed to one to pay damages for breach of contract, required proof of causation only; it did not matter that the indemnity was sought in respect of unforeseeable losses. Rix, J., differed from the
1. (1854) 9 Ex. 341.
3. Total Transport Corp. v. Arcadia Petroleum Ltd (The Eurus)
[1996] 2 Lloyd’s Rep. 408; noted R. Halson, “Indemnity Clauses, Remoteness and Causation” [1996] LMCLQ 438 and P. S. McCarter, “Re-Defining the Function(s) of the Notice of Readiness” [1997] LMCLQ 483.
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