I read Andrew Wilding’s article in the latest Asdem newsletter about a time bar case he was involved in. This dispute went to arbitration and is another lesson for claimants to adhere to the wording of the clause. The clause required the owners to notify charterers within 60 days of completion of discharge an estimate of demurrage incurred. The Owners notified the Charterers that demurrage had been incurred but they omitted to advise the estimated value of the demurrage and as a result the arbitrators held that the claim was time barred.
This got me thinking about notification clauses and I have to ask “What is the point of them?”
Why would charterers want to be notified within 60 days of discharge, what does this achieve? If charterers are relying on Owners’ notifications to trigger their recoveries under their oil contracts isn’t that a risky strategy? Many FOB oil contracts have time bars of 45 days from Bill of Lading Date so a notification some 60 days from completion of discharge is not going to help them. Charterers need a better system to track their demurrage liabilities – may I suggest CMS from www.hubse.com? Sorry I couldn’t resist a quick advert there!
What’s the point of an estimated value? This is where the case mentioned in the Asdem newsletter fell down for the Owners, they omitted the value and the claim was time-barred. The tribunal held that “an estimate must be given honestly and upon reasonable grounds”. What if the Owner had given an estimate of say US$30,000. What are the consequences if the actual demurrage turns out to be US$20,000? Charterers would presumably be happy with such an outcome but could Charterers consider the notification given in error and what could they do about it?
If the actual claim turned out to be US$50,000 could the charterers legitimately limit the claim to the value of the estimate? The estimate may have been given honestly and on reasonable grounds – as an example the Owners may have thought there was a substantial delay awaiting weather at half time/rate which turned out to be awaiting berth. Or maybe it was just a mistake. Is the claim valid at US$50k or US$30k? I don’t know whether this point was considered by the panel.
Notification clauses are prevalent in the industry and I remember several years ago in the North Sea crude trade notifications were routinely being passed down to every counterparty in the chain. These contracts did not require a value when notifying the existence of a demurrage claim, sadly this just meant that every company at every lifting “notified” of a potential claim whether there was a claim or not. To protect itself every other party in the chain was obliged to pass the notification on to the next party and so on creating an industry out of notifications. These notifications would lie on the file until an actual claim materialised which I seem to remember was rare compared to the numerous notifications given.
What if the actual documented claim is presented prior to both the notification time bar and the documents time bar. Does the claim satisfy both parts of the clause? I think it does but there has not been a case on that yet – will some smart alec find a loophole in this? I hope not.
So this case is another lesson to read and comply with the clause agreed in the charter party. I think the best way to avoid missing a notification time bar of 60 days is to submit the full claim sooner. In this day of speedy communication it should be possible to send a full claim within 30 days of completion of discharge, do the notification at the same time and it’s “job done” until it’s time to collect the cash!
What do you think of notification clauses? Do they serve a purpose or are they a waste of time? Please post your comments here.
One thought on “Time bar notification clauses”
The short answer is to carefully check the contract terms. If they require a 60 days claim notification with details, that remains the requirement, for which failure invites the consequences which the term spells out. Terms which may prove a problem to meet should be dealt with at the negotiation stage, as if not trouble will brew from the start. That such provisions may seem illogical is neither here nor there once they have been agreed. Unfortunately there are no shortages in situations where time bar clauses have given rise for concern, but the fact remains they are all too commonly part and parcel of contractual terms and something we have to live with,..