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Performance

Speed and consumption claims

On a time charter the charterer pays for the fuel and for every day the voyage takes. So the ship's speed and fuel use are part of the price. The owner describes them in the charterparty, for example "about 13.0 knots on about 30 tonnes VLSFO per day, laden, in good weather". That description is a warranty: a promise the owner can be held to. If the ship is slower or burns more, the charterer can claim the cost of the lost time and the extra fuel.

What the warranty actually promises

The ship promises a speed on a stated fuel use, in stated conditions. Three parts of the wording decide almost every claim:

Some charterparties add "without guarantee" to the figures. That wording can reduce the promise to an honest estimate given in good faith, which is much harder to claim against.

"About": the margin read into the figures

Where the charterparty does not define it, "about" is commonly applied as half a knot on speed and 5 percent on consumption. On a ship described at about 13.0 knots on about 30 tonnes, that gives:

WarrantedWith the margin
Speed13.0 knotsno claim at 12.5 knots or faster
Consumption30.0 t per dayno claim at 31.5 t per day or less

Two questions are still argued. Does the margin apply to both speed and consumption at the same time? And is the margin deducted when the claim is calculated, or only used to decide whether there is a claim at all? English decisions do not give one settled answer. The safe course is to write the tolerance into the charterparty, for example "plus or minus 0.5 knots and plus or minus 5 percent consumption, both to apply".

Good weather days

A ship cannot be expected to make its described speed in a storm. So the warranty is tested only in good weather. The usual definition is wind up to Beaufort force 4, which is about 11 to 16 knots of wind, and sea up to Douglas sea state 3, waves of about 0.5 to 1.25 metres. Where good weather is not defined at all, it is understood to mean wind of Beaufort force 4 or less.

Many clauses add more conditions: no adverse current, no swell above a stated height, and a minimum period, often 24 consecutive hours, for a stretch to count. Each condition removes days from the test. Charterparties often define good weather so strictly that very few days qualify, which makes a claim harder to prove.

Where the evidence comes from

There are two sources, and they often disagree:

BIMCO's Evidence of Performance Clause 2006, where it is used, sets this rule: the logs are used, unless an independent weather routing report, based on data from a member of the World Meteorological Organization, substantially contradicts them. A related BIMCO clause lets the master depart from the route for safety and does not oblige the master to follow routing advice.

How a claim is calculated

The usual method in London arbitration has three steps:

  1. Find the good weather periods and measure the speed and consumption the ship actually achieved in them.
  2. Compare those figures with the warranty, after the margin.
  3. Apply the shortfall to the whole voyage, leaving out periods that do not count, such as slow steaming at the charterer's request and off-hire time.

Applying a good weather shortfall to bad weather days as well is called extrapolation. It is the usual approach, but some clauses forbid it, and tribunals read those clauses closely.

A worked example

Time charter, laden passage. Illustrative figures only.

  Warranty      about 13.0 knots on about 30.0 t VLSFO per day
  Margin        0.5 knots, 5%    ->   12.5 knots, 31.5 t per day

  Good weather found in the logs:  200 hours, 2,400 nm
  Good weather speed               2,400 / 200 = 12.0 knots
  Good weather consumption         32.5 t per day

  Passage to be assessed           6,000 nm

  TIME
  At the warranted speed           6,000 / 12.5 = 480 hours
  At the speed achieved            6,000 / 12.0 = 500 hours
  Time lost                        20 hours = 0.83 days
  Hire                             US$15,000 per day
  Time claim                       0.83 x 15,000 = US$12,500

  FUEL
  Days at sea, as performed        500 / 24 = 20.8 days
  Excess per day                   32.5 - 31.5 = 1.0 t
  Excess fuel                      20.8 x 1.0 = 20.8 t
  Fuel price                       US$600 per t
  Fuel claim                       20.8 x 600 = US$12,500

  Total claim                      US$25,000

Change one assumption and the answer moves a lot. Measured from 13.0 knots instead of 12.5, the time lost almost doubles. Measured from 30.0 tonnes instead of 31.5, the fuel claim more than doubles. This is why the wording of "about" matters more than any other line of the clause.

Lost time must be a real loss

The charterer has to show that the underperformance cost money. In London Arbitration 12/24, the ship lost about 9.65 hours against its warranty, but used 18.85 tonnes less fuel than allowed. The saving cancelled the time lost, so there was no loss, and the arbitrator found the claim should not have been brought. The same decision criticised a routing company for choosing good weather days without following the benchmarks London arbitrators use.

What to do on each side

Charterers: give the routing company the exact warranty wording, ask for the report to follow it, and check the logs before claiming. Claim both time and fuel, and net them against each other.

Owners: describe the ship honestly, keep accurate logs, and record every instruction to slow down or change route. Over a long charter, overperformance on one passage may be set against underperformance on another, if the charterparty allows it.

Both: the figures in the description feed every TCE estimate made for the ship. An estimate built on the warranted speed is a promise, not a forecast.

References

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