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Exceptions clause ("Exclusion of liability")

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Typography

Exceptions clause ("Exclusion of liability"). In chartering, and, indeed, in any contract the expression "exceptions clause" describes the effect on liability of one or both parties to the contract. Such clauses fall under a general heading of "protective clauses".

The phrases, "exclusion clauses", "exemption clauses" and "force majeure" clauses are sometimes used instead of "exceptions clause". These clauses generally exclude the liability of a party. There are other clauses that have a smaller effect of merely reducing the amount of compensation payable. These are "limitation of liability" clauses.

The effect of such clauses is to protect the shipowner and/or the charterer from liability should a breach of the charterparty take place or a breach occurs of any contractual obligation such as to carry a cargo safely under a bill of lading. An exceptions clause can also cause one party's obligations to cease (come to an end) on the happening of a certain event, for example, the' loading of a cargo. The "Cesser clause" has this effect. A cesser clause reduces or removes some of the charterer's obligations after loading has been completed.

In relation to liability, exceptions clauses can have either a general effect (for both parties to the charter) or a more particular effect (for only one party). For example, a "general exceptions clause" in a charterparty can state:

"The vessel, its master, the Owner and the Charterer shall not, unless expressly provided far in this Charterparty be responsible for loss of or damage or delay to or failure to supply, load, discharge or deliver the cargo arising from:

Act of God, act of wax, act of public enemies, pirates or assailing thieves; arrest or restraint of princes, rulers or people; seizure under legal process provided a bond is promptly furnished to release the vessel or cargo; floods;-fires; blockades; riots; insurrections; civil commotions; earthquakes; explosions . . ."
(MULTIFORM charterparty)

Such a clause has a very wide effect and is designed to exempt the parties from liability for events that are really outside the control of both.

In the GENCON and BALTIME charterparties, clauses state the owner's responsibility under the charter and continue to exempt him from liability in certain circumstances. For example, in BALTIME it is stated:

"13. Responsibility and Exemption The Owners only to be responsible for delay in delivery of the Vessel or for delay during the currency of the Charter and for loss or damage to goods on board, if such delay or loss has been caused by want of due diligence on the part of the Owners or their Manager in making the Vessel seaworthy and fitted for the voyage or any other personal act or omission or default of the Owners or their Manager. The Owners are not to be responsible neither in any other case nor for damage or delay whatsoever and howsoever caused even if caused by the neglect or default of their servants. The Owners not to be liable for loss or damage arising from strikes, lock-outs or stoppage or restraint of labour (including the Master, Officers or Crew) whether partial or general . . . “

(The clause continues to describe the responsibility of the charterer.)

As the first sentence indicates, the shipowners are "responsible" for delay and for loss or damage of goods. This can almost mean that they may be "liable" for delay and loss or damage. The liability will arise if the vessel is not seaworthy or fit for the service because neither the carrier nor his manager exercised due diligence or care or because of the personal act or omission of the owner or manager.

Under the second sentence, if the owners or the managers have exercised due diligence, there will be no liability for delay or loss or damage. This exception relates only to delay or damage or physical loss of the cargo. It does not apply to non-physical loss. Therefore if the sentence does not apply to non-physical loss, the shipowner will not be able to exclude his liability for this type of loss.

In The TFL Prosperity, the English House of Lords established that the second sentence did not extend to financial losses suffered by the charterer. The ship, a "RO/RO" vessel, was time-chartered on the BALTIME standard form. The description of the vessel included an incorrect reference to the vertical clearance for trailers laden with containers moving in and out of the ship. The charterer claimed financial loss from the shipowner because of the wrong description. There was no clear fault of the owner in the description. However, the House of Lords held that the responsibility (liability) in the above clause was expressed only for delay, loss or damage. Therefore the exception in the second sentence referred only to liability for failing to carry out the same type of responsibility. The exception did not apply to other liabilities of the shipowner and therefore did not protect him.

Thus it is seen that exceptions clauses are treated very strictly by the courts should a dispute arise. Exceptions to liability refer only to liability for specified breaches, not a general exception to all liability for every breach, unless the loss or damage is proved to be outside the party's control.

Exceptions clauses are also found in bills of lading. However, most carriage under a bill of lading is subject to The Hague Rules or Hague-Visby Rules. In these Rules, Article IV deals with exceptions of liability of the carries.

If an exceptions clause is unreasonable it can, under English law, be disregarded by a court should a dispute arise and one party attempts to rely on it. This is established in English legislation by the Unfair Contracts Terms Act 1977. However, this applies generally to consumer contracts and leaves alone contracts between businessmen (such as shipowners and charterers) because it is considered they can afford to insure against liability losses. Indeed, the Act does not apply to commercial charterparties and other contracts for carriage of goods by sea. The only instance where the Act applies to carriage by sea is in section 2 ( 1 ) which provides that liability cannot be excluded or restricted for death or personal injury resulting from negligence.

If a very serious breach of the charter occurs, for example, the shipowner fails to provide a seaworthy vessel, any protection offered by exceptions clauses may be lost, because the contract no longer exists in its original form. In this example, the shipowner could become strictly liable with no defence for the losses of the cargo owner and/or the charterer.

 

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