Update Volume 2020/31 Demurrage in the event of cargo damage
Demurrage will often be incurred when delays arise due to cargo damage being alleged in the discharge port. Ordinarily it is the responsibility of the receiver to take delivery of the cargo and to arrange the necessary onward transportation or storage. In the event however that the cargo is damaged, the receiver suspends discharge operations in order to appoint a surveyor to inspect the cargo or may simply does not have sufficient storage capacity to separate the damaged cargo.
Any condition issues may result in additional laytime and demurrage and the question is whether or not the Owner can claim this additional time, despite the fact that it has caused the damage as a result of which operations have been delayed. After all, the carrier is entitled to the agreed demurrage in the event the receiver is unable to discharge the cargo within the agreed time-frame but the receiver also has a duty to take delivery and to mitigate any losses regardless of whether or not the cargo is alleged to have been damaged. In addition, an owner will often appeal to the “once on demurrage always on demurrage” principle to argue that he should be paid for the entire duration of the delay.
We recently had to deal with a case where a vessel transported a cargo of wheat in bulk from France to the Netherlands when during discharging operations part of the cargo was observed to be wet. According to the receiver it was not possible to find a suitable solution for the 50 Mts of wet cargo within reasonable time and the damaged cargo therefore remained on board of the vessel. Subsequently the vessel had to wait several days until she was completely discharged which resulted in a considerable amount of demurrage. The Charterers of the vessel stated that the vessel was not entitled to claim for demurrage because the delay was caused by the wet cargo which was delivered by the vessel. On behalf of the Owners we took the position that the receivers had a duty to receive the cargo and to find a solution for the damaged part in order to avoid delay as much as possible which fell outside the scope of the charterers responsibilities under the Charterparty. In addition, we argued that it was not reasonable that the vessel had to wait for several days before 50 Mts of cargo could been unloaded. Furthermore, it appeared that the economic loss of the cargo was even less than the demurrage of the vessel. Fortunately, a commercial solution was found between the Owners and the Charterers.
In summary, it is important to keep in mind that a claim for cargo damage under a bill of lading concerns a different interest than demurrage under a charter party even if the demurrage is a consequence of the cargo damage. As such, the Owners would be entitled to calculate the demurrage under the Charterparty without being prejudiced by the receivers failure to take delivery or failure to mitigate their losses.