Concept of General Average in Maritime Commerce

Topics
1. Introduction
2. Definition
3. Requisites
4. Expenses, by whom borne
5. Examples

1. Introduction
Long before the existence of maritime insurance, general average has been used as an ancient form
of spreading risk in the sea transport.[1] General average is said to date from the Rhodian Law of
approximately 800 B.C., which stipulated that if a ship was in danger and cargo was jettisoned to
save the ship, then the ship and the remaining cargo were required to make a contribution to the
owner of the lost cargo.[2] What remains of the Rhodian law is found in Roman law, which in turn
was adopted in the Rles of Olron and all the subsequent sea codes until the present day.
General average is still a sui generis subject. It likewise relevant to contracts of carriage of goods by
sea, and the damages resulting therefrom are insurable. Under Philippine law, the provisions on
general averages are contained in the Code of Commerce.

2. Definition
General averages refer to all the damages and expenses which are deliberately caused in order to
save the vessel, its cargo, or both at the same time, from a real and known risk.[3]
The Code classifies averages into simple or particular and general or gross. In contrast to general
averages, simple or particular averages refer to all expenses and damages caused to the vessel or
cargo which have not inured to the common benefit,[4] which are, therefore, borne only by the
owner of the property giving rise to same.[5] They are not for the common benefit, and are therefore
not borne by the owners of the articles saved. The distinction is better appreciated by looking into the
requisites of general average.
3. Requisites
According to Tolentino, the following are the requisites for general average:[6]

First, there must be a common danger. This means, that both the ship and the cargo, after it has been
loaded, are subject to the same danger, whether during the voyage, or in the port of loading or
unloading; that the danger arises from the accidents of the sea, dispositions of the authority, or faults
of men, provided that the circumstances producing the peril should be ascertained and imminent or
may rationally be said to be certain and imminent. This last requirement excludes measures
undertaken against a distant peril.

Second, that for the common safety part of the vessel or of the cargo or both is sacrificed deliberately.
As a general rule, sacrifice is made through the jettison of the cargo or part of the ship is thrown
 overboard during the voyage. Exceptions are: (a) where the sinking of a vessel is necessary to
extinguish a fire in a port, roadsteads, creek or bay; and (b) where cargo is transferred to lighten the
ship on account of a storm to facilitate entry into a port.[7]

Third, that from the expenses or damages caused follows the successful saving of the vessel and
cargo.

Fourth, that the expenses or damages should have been incurred or inflicted after taking proper legal
steps and authority.[8] The procedure for recovery includes: (a) assembly and deliberation; (b)
resolution of the captain; (c) entry of the resolution in the logbook; (d) detailed minutes; (e) delivery
of the minutes to the maritime judicial authority of the first port, within 24 hours from arrival; and
(f) ratification of the captain under oath.
4. Expenses; by whom borne
Under the Code of Commerce, all the persons having an interest in the vessel and the cargo therein at
the time of the occurrence of the average shall contribute to satisfy this average.[9] The
insurers[10] and the lenders on bottomry and respondentia shall likewise contribute.[11] Several
interests are involved and their share of expense or damage shall be in proportion to the value of the
owners property saved.

It must however be pointed out that a claimant (ship or cargo) is not entitled to obtain contribution
from the other parties even if there is common danger when he or his employees are at fault, or
negligent in law.
5. Examples
A. Magsaysay Inc. v. Anastacio Agan, G.R. No. L-6393 (January 31, 1955)
Facts: The S S San Antonio vessel (plaintiff) with general cargo for different ship owners left Manila
and was bound for Basco, Batanes, vis Aparri, Cagayan. It reached Aparri, had a stopover, and as it
would proceed to Basco but still in port, it accidentally ran aground at the mouth of the Cagayan
River. Plaintiff have it refloated by the Luzon Stevedoring Co.. The vessel returned to Manila to refuel
and then proceeded to Basco, where the cargoes were delivered to their respective owners or
consignees, who, with the exception of defendant, made a deposit or signed a bond to answer for
their contribution to the average. Thus, the plaintiff brought an action to make defendant pay his
contribution. Defendant denies liability. The lower court decided against the defendant, thus the
appeal.
Issue: Whether the expenses incurred in floating a vessel so stranded should be considered general
average and shared by the cargo owners.
Held: The expenses should not be considered as general average.

The said expenses do not fit into any of the specific cases of general average enumerated in article
811. No. 6 of this article does mention expenses caused in order to float a vessel, but it specifically
refers to a vessel intentionally stranded for the purpose of saving it. In the present case, the
stranding was not intentional.
 The expenses also lack the requisites of general average. First, the expenses sought to be recovered
from defendant were not incurred to save vessel and cargo from a common danger. The vessel ran
aground in fine weather inside the port at the mouth of a river, a place described as very shallow.
There was no imminent danger. It is, of course, conceivable that, if left indefinitely at the mercy of
the elements, they would run the risk of being destroyed. But as stated at the above quotation, this
last requirement excludes measures undertaken against a distant peril. What does appear from the
testimony of plaintiffs manager is that the vessel had to be salvaged in order to enable it to proceed
to its port of destination. But as was said in the case just cited it is the safety of the property, and not
of the voyage, which constitutes the true foundation of the general average. Second, the cargo could,
without need of expensive salvage operation, have been unloaded by the owners if they had been
required to do so. Third, the sacrifice was for the benefit of the vessel and not for the purpose of
saving the cargo, the cargo owners are not in law bound to contribute to the expenses. And fourth,
the procedure was not followed.
1. Philippine Home Assurance Corp. v. CA and Eastern Shipping Lines, Inc.
Facts: Eastern Shipping Lines, Inc (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan,
shipment for carriage to Manila and Cebu, freight pre-paid and in good order and condition. While
the vessel was off Okinawa, Japan, a small flame was detected on the acetylene cylinder located in
the accommodation area near the engine room on the main deck. The acetylene cylinder exploded
sending flame throughout the accommodation area, thus causing death and severe injuries to the
crew and instantly setting fire to the whole superstructure of the vessel. The ship was abandoned by
the master and the crew.

The vessel was towed by Fukuda Salvage Co. to the port of Naha, Japan. The fire was eventually
extinguished at the said port and the cargoes which were saved were loaded to another vessel for
delivery to their original ports of destination. ESLI charged the consignees several amounts
corresponding to additional freight and salvage charges, which were paid by Philippine Home
Assurance Corp (PHAC)under protest for and in behalf of the consignees. PHAC filed an action for
recovery of sum paid. The trial court ruled in favor of ESLI which was affirm on appeal by the CA.

Issue: Whether or not the expenses incurred in saving the cargo are considered general average.
Held: There was no general average.

The goods subject of the controversy were neither lost nor damaged in transit by the fire that razed
the carrier. Thus the issue is who among the carrier, consignee or insurer is liable for the additional
charges or expenses incurred by the owner of the ship in the salvage operations and in the
transshipment of the goods via a different carrier.

Moreover, fire is not considered a natural disaster or calamity since it almost always arises from
some act of man or by human means. It cannot be an act of God unless caused by lightning.
General averages include all damages and expenses which are deliberately caused in order to save
the vessel, its cargo, or both at the same time, from real and known risk. The formalities prescribed
under the law were not complied with. ESLI must return to PHAC the amount paid under protest in
behalf of the consignees.
 Chapter CHAPTER 15

PRINCIPLES OF GENERAL AVERAGE

1 INTRODUCTION
This chapter is intended to provide a concise overview of the principles applicable to general average. It sets out only the
elementary principles which derive from maritime law, equity and public policy. It is rather a sui generis subject, and is relevant
to contracts of carriage of goods by sea, and the losses that result from a general average act are insurable as provided by the
Marine Insurance Act 1906. Space does not permit a detailed treatment of general average in this book, which can be found in
specialist texts on the subject.

1 One should consult the leading authority in this field, Wilson, DJ, and Cooke, JHS, Lowndes & Rudolf: The Law of General
Average and the York-Antwerp Rules, 12th edn, 1997. See also a more recent text by Rose, FD, General Average Law and
Practice, 2nd edn, 2005.

To gain an insight into general average, readers are specifically referred to the bible of Carver.

2 13th edn, 1982, vol 2, para 1345.

In his introduction to the subject, he begins by explaining the difference between general average loss
and particular average, the latter being a partial loss sustained by individual interests, being exposed
to particular risks; such particular loss, or average, which is not a loss sustained for the preservation
of the whole common adventure, lies where it has fallen. By contrast, if an interest of the common
adventure is sacrificed to avert a danger which threatens the whole adventure, and the sacrifice is
intentional for the benefit of the remainder, the whole burden of the loss occasioned is not left on the
interest upon which it has fallen. It is imposed upon that and all those others for whose benefit the
sacrifice has been made, rateably, in proportion of the saved values. That is why the loss is said to be
a general average loss, and the contributions made to it by those benefited are general average
contributions.

As a principle, therefore, general average applies where the common adventure is at risk and an interest of it is sacrificed, or
extraordinary expenditure is incurred, in order to preserve that property and other interests involved in the same maritime
adventure. The expenditure or sacrifice is the general average act and must be voluntary (meaning intentional) and reasonable.
The result is an entitlement to a general average contribution by the person whose property has been sacrificed, or the
expenditure incurred, against the other interests which are saved. The word average means loss. Such loss is claimed back as a
rateable contribution (the general average contribution) of the saved values of those interests which have benefited as a result.

The obligation to contribute does not depend so much upon an implied term of a particular contract, since there are many
interests involved other than those of the contracting parties, but it depends upon a general rule of maritime law, as a matter of
natural justice.
3 Simonds v White (1824) 2 B & C 805, 811, per Abbott CJ; Burton v English (1883) 12 QBD 218, p 200, per Brett LJ; cf Lord
Bramwell in Wright v Marwood (1881) 7 QBD 62 said that, to judge from the way in which contribution is claimed in England,
it would seem to arise from an implied contract inter se to contribute by those interested. And in Strang Steel v Scott (1889) 14
App Cas 601, p 608, PC: whether the rule ought to be regarded as matter of implied contract, or as a canon of positive law
resting upon the dictates of natural justice, is a question which their Lordships do not consider it necessary to determine. The
principle upon which contribution becomes due does not appear to them to differ from that upon which claims of recompense for
salvage services are founded. But, in any aspect of it, the rule of contribution has its foundation in the plainest equity.

The concept of general average is very ancient, having its roots in Rhodian law, being adopted into the Digest of Justinian, and
it is said that its origins date back to at least 1000 BC.

4 Op cit, Rose, fn 1, p 1; see also an interesting article: John Macdonald General Average, Ancient and Modern [1995] LMCLQ
480.

Its justification is based mainly on equity as well as mercantile custom, common law, public policy and
natural justice.

5 Op cit, Rose, fn 1, pp 68.

These grounds are the same as in salvage. There are also some common elements between salvage
and general average, as they both arise in situations of necessity, and there is a benefit conferred to
the property in danger. Unlike in incidents of salvage, however, where a volunteer, being a third party
to the adventure, saves property in danger (see Chapter 13, above) the rights and obligations in
general average arise only between those who are involved in the common maritime adventure.

The ancient law of general average was, during the Christian era, incorporated into a number of national legal systems. In the
course of this process, it received a number of differing interpretations. Therefore, in the 19th century enthusiasm for
internationalisation, efforts were made to impose on its interpretation some measure of uniformity. This resulted in what have
become known as the York-Antwerp Rules (YAR). These Rules do not form an international convention, but are incorporated by
reference into contracts of carriage. This process has in fact imposed a quite remarkable measure of uniformity on the basis of
average adjustments around the world.

There have been various sets of YAR over the years; the most commonly known have been the 1890, the 1924, the 1950 Rules,
and the most recent editions, which have modernised general average, are YAR 1974 (as amended in 1990), the 1994 and 2004
YAR.

Most general average adjustments are today drawn up on the basis of the YAR 1994, although some are still prepared according
to the YAR 1974 (as amended in 1990). The most recent set of Rules, dated 2004, were the result of pressures imposed by cargo
insurers. They have therefore found little favour with the remainder of the maritime community, and are seldom encountered in
contracts of carriage.
1.1 The York-Antwerp Rules (YAR)
The fact that a general average act can occur in any international waters, or on the high seas, raises the questions of which law
and jurisdiction should apply to the general average adjustments. But, if the Rules are incorporated into the contract, they will
govern the adjustment of general average. They provide a complete code and, by the general rule of interpretation, they shall
apply to the exclusion of any law and practice inconsistent with them, if the parties to a contract have adopted them.

These Rules consist of a set of lettered rules, followed by a set of numbered rules. The lettered rules from A to G state the general
principles, while the numbered rules (I to XXIII) are specific and deal with commercial practicability; they qualify the general
principles.

Where the lettered rules do not mention a specific item, but the numbered rules deal with it, the question arose in Vlassopoulos v
British and Foreign Marine Insurance Co (Makis)

6 [1929] 1 KB 187.

whether or not the circumstances that gave rise to the expenditure was general average. The underwriters argued that, since the
event which resulted in the expenses at the port of refuge was not covered by the lettered rules, the specific numbered rules had
no application. The shipowners, on the other hand, argued that the particular rules should prevail over the general. The judge
rejected both arguments, and said at pp 196, 198:

This is a matter of construction, and in my view the true construction of these Rules, general and particular, is not precisely what
either of the contending parties has contended for. In my view those who drew up the Rules intended to provide a complete code
which is to govern the law of general average for anybody who adopts it It may be that there are omitted cases not covered by
the general or by the specific Rules. That I do not decide. Nor do I decide any question as to the law apart from the Rules,
because there is a finding that the parties by their contract intended that the code which should govern their rights and obligations
should be the York-Antwerp Rules of 1924, and I treat that as conclusive for the present purpose and the common law of this or
any other country as being outside the scope of my consideration and my decision

(The parties) may choose a self-contained code, and of this code, it may be observed, that although the general Rules are not
identical with the law of England, they approach much more nearly to the law of England than they do to the laws of many other
countries, and that is not perhaps surprising, having regard to the known and admitted predominance that this country holds in
maritime matters. But when that has been done, and a general set of Rules provided laying down the general principles which are
to operate, then the Rules go on to deal with certain specific cases, and I am satisfied on the true construction of the Rules that
those cases are dealt with not by way of mere illustration, but in order to make definite and certain what the Rules decide about
certain cases which are on the border line, and which might be held to be on one side or the other of the line which is to be drawn
under the general Rules.

Thus, in construing the 1974 York-Antwerp Rules, the judge held that the lettered rules enunciate the general principles, and the
numbered rules settle how the general principles are to be applied in what might, otherwise, be doubtful cases. Roche J further
stated:
The York-Antwerp Rules, 1924, are framed in order that the parties, if they choose to adopt the Rules by way of contract, may
not be troubled with any question as to what, if any, general law is to apply The Rules must be read together and as a whole,
and not as two codes one of which may contradict the other.

In any question of a lacuna in the lettered rules, therefore, or an issue of conflict between the lettered and the numbered rules, the
rules should be read as a whole, and the result in a particular case will be a matter of construction of the rules in the context of the
circumstances. Whether a literal and purposive approach of interpretation, or a strict interpretation of the rules should be adopted,
would depend on the circumstances of a case.

7 The Bijela [1993] 1 Lloyds Rep 411 (CA), reversed [1994] 1 WLR 615 (HL) indicating a combination of a literal and
purposive approach; for the strict approach, see The Trade Green [2000] 2 Lloyds Rep 451.
Since the lettered rules enshrine the principles and the numbered rules enshrine commercial practicability, if principle and
commercial practicability are found to conflict, practicability should be preferred.

8 Macdonald, op cit, fn 4, at 493.

It should be noted that the scheme of the rules is governed by the rule of interpretation which, in the 1974 Rules, provides that
except as provided by the numbered rules the lettered rules shall be applied.

9 Corfu Navigation Co v Mobil Shipping Co Ltd (The Alpha) [1991] 2 Lloyds Rep 515, p. 518.
A rule paramount has been added to the 1994 and the 2004 Rules, requiring the principle of reasonableness to apply in any
sacrifice or expenditure that might be incurred, which is not required in the 1974 Rules (see para 2.3 below). Thus, the rule of
interpretation, in both the 1994 and 2004 Rules, has been amended and reads: except as provided by the Rule Paramount and the
numbered Rules, general average shall be adjusted according to the lettered Rules.

A difficult point of construction arose in The Bijela.

10 Op cit, fn 7, and [1994] 2 Lloyds Rep 1 (HL).

The issue was whether the owners of The Bijela could claim general average contribution in respect of the cost of temporary
repairs carried out in the course of a voyage before the ship reached destination, in India. Hobhouse Js view, at first instance,

11 [1992] 1 Lloyds Rep 636, p 644.

was that the repairs in dry dock were not necessary for the safe prosecution of the voyage, thus the cost of discharging, storing
and reloading the cargo at Providence was not allowed in general average. The majority of the Court of Appeal, Hoffmann LJ
dissenting, agreed.

The question in the appeal by the owners to the House of Lords turned on the construction of the second paragraph of Rule XIV
of the YAR 1974.

On the facts, the shipowners vessel was chartered for the carriage of cargo from Providence, Rhode Island, to the West Coast of
India, under a charterparty which provided that general average was to be settled in London according to the York-Antwerp
Rules 1974. Whilst still in Rhode Island Sound, the vessel grounded and sustained damage. She put into the port of Jamestown,
where it was discovered that she could not safely reach New York, the nearest port where permanent repairs could be carried out
in dry dock, without discharging the whole of her cargo. The shipowners elected to carry out temporary repairs in Jamestown, at
a cost of US $282,606. The cost of discharging, storing and reloading the cargo to allow permanent repairs in New York would
have exceeded $535,000. The vessel having completed her voyage to India, the shipowners declared a general average loss. The
adjusters did not allow the cost of the temporary repairs. The shipowners instructed a second firm of adjusters, who included the
cost of the repairs in general average as being less than the expense which would have been incurred and allowed if the
temporary repairs had not been effected, within rule XIV of the Rules of 1974. The cargo owners refused to pay their
contributions and the shipowners issued a writ for their recovery. The judge dismissed the claim on the ground, inter alia, that
rule X(b) of the Rules only allowed for the cost of discharging and storing cargo in respect of repairs necessary for the safe
prosecution of the voyage; and that since repairs in dry dock had not been necessary, the cost of handling and storing the cargo
in New York would not have been allowed in general average and there had been no saving in expense. The Court of Appeal, by
a majority, dismissed the shipowners appeal.

On appeal by the shipowners, the House of Lords held, allowing the appeal, that rule XIV of the York-Antwerp Rules 1974 was
to be applied on the assumption that the temporary repairs had not been effected, and that assumption was to be carried through
when applying rule X of the Rules; that if the temporary repairs had not been carried out, the shipowners vessel would have been
required to discharge its cargo and go into dry dock in New York for the repairs necessary to enable the vessel to proceed to
India; and that, accordingly, since, on that assumption, such repairs would have been necessary, within the meaning of rule X(b)
of the Rules, for the safe prosecution of the voyage, the shipowners had shown that the cost of handling and storing the cargo
would have been allowable in general average.

Apparently the judge and the Court of Appeal misinterpreted the meaning of Rule X(b) and Rule XIV which have to be read
together. Unfortunately, the drafters of the 2004 Rules made Rule XIV(b) almost incomprehensible. The Rules generally are not
easy to follow, and their drafting leaves a lot to be desired.

As said earlier, the York-Antwerp Rules are voluntary. Therefore, where they are not incorporated into a charterparty or bill of
lading, they do not apply. The question therefore arises as to which jurisdiction a general average act falls within, where no
mention is made of the York-Antwerp Rules.

12 Although, in practice, most parties insert rider clauses into their charterparties which provide for the application of the York-
Antwerp Rules, there can be instances where this does not happen.

The authorities in this area are supportive of the view that, in the absence of any contrary agreement, general average is governed
by the law of the place where the maritime adventure ends,

13 Simonds v White (1824) 2 B & C 805.

although the parties can agree a different place.

1.2 Definition
The York-Antwerp Rules define general average in Rule A uniformly, thus:

There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably
made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime
adventure.
Where there is general average there is, of course, insurance to cover the losses that have resulted from a general average act.
Thus, the principle was codified in s 66 of the Marine Insurance Act 1906:

General Average Loss

(1) A general average loss is a loss caused by or directly consequential on a general average act. It
includes a general average expenditure as well as a general average sacrifice.

(2) There is a general average act where any extraordinary sacrifice or expenditure is voluntarily and
reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the
common adventure.

(3) Where there is a general average loss, the party on whom it falls is entitled, subject to the conditions
imposed by maritime law, to a rateable contribution from the other parties interested, and such
contribution is called a general average contribution.

It can, therefore, be said that there are four elements to satisfy for a general average act to occur: (1) a danger, or peril, to the
common adventure; (2) extraordinary sacrifice or expenditure; (3) voluntarily or intentionally and reasonably made; and (4)
preservation of the property involved in the danger. Before these elements are examined under para 2, below, it is important to
look at the issue of authority to act in general average.

1.3 Authority to act in general average

For an act to be considered as a general average act, the test was set by the court in Athel Line Ltd v Liverpool & London War
Risks Ins Assn Ltd

14 [1994] KB 87, p 94.

, by Tucker J:

The rule (A) I think, clearly envisages the exercise by someone of his reasoning powers and discretion applied to a particular
problem with freedom of choice to decide to act in one out of two or more possible ways, and the language is quite inappropriate
to describe the blind and unreasoning obedience of a subordinate to the lawful orders of a superior authority.

On the facts of this case, there was no general average act when the commodore of a convoy ordered the convoy to a port of
refuge under the orders of the admiralty in order to protect British ships from enemy acts.

On the point as to who should have ultimate authority to decide the act of sacrifice, the judge did not decide the issue, but
expressed his opinion that there was no clear authority as to whether the act giving rise to a general average claim must be the act
of the master, or some other member of the crew in case of his incapacity or unavoidable absence, or whether the act may, in
exceptional circumstances, be that of a stranger.

This raises an interesting question in a situation when a SOSREP orders the ship to a port of refuge for the safety of the common
adventure. Expenditure incurred by the parties to the adventure on account of salvage, whether under contract or not, for the
purpose of preserving the common adventure from peril is allowed in general average (Rule VI), including expenses incurred at
the port of refuge (Rule X). The SOSREP has statutory powers and he takes control of a casualty; for this reason, it is submitted,
his authority should be the authority of a proper person to act. In the recent casualty, MSC Napoli, which was ordered to a port of
refuge by the SOSREP, there was unfortunately no general average declared, presumably because of the very many items of
cargo carried on board for various individuals, and the nature of the casualty.

In ordinary circumstances, the masters authority in cases of necessity, in which he has to act for the interests of all parties, and
where there is no superior power involved, has not been doubted for an act of general average to arise, and it was confirmed by
the House of Lords in Morrison v Greystoke Castle (The Cheldale):

15 [1947] AC 265, p 281, per Lord Roche.

The shipowner through the master has imposed upon him other and super-added duties causing him to act as agent for all the
persons whose interests are endangered.

He is the person, according to the test stated earlier, to apply his reasoning and discretionary powers to a particular problem of
danger, and he has the authority to take reasonable steps in the circumstances, provided his steps are for the interests of all parties
involved in the adventure.

16 See further Papayianni v Grampian Ltd (1896) 1 Com Cas 448; Price v Noble (1811) 4 Taunt 123; Rose, op cit, fn 1,
discusses other possibilities of intervention at 3135.

As to whether strangers can act, the view according to the principle of agency of necessity is that the master, who is generally
authorised to act on behalf of the ship owner and cargo interests, should be consulted.

17 Goff & Jones, The Law of Restitution, 6th ed, 2002; The Winson [1982] AC 939.

2 CONDITIONS GIVING RISE TO GENERAL AVERAGE

The subject matter of general average includes all the interests of the common adventure which are at risk. Such interests are
physical, namely the ship, the cargo, the bunkers, stores, personal effects; but there are also those interests which are dependent
on the safety of the physical property, such as the freight, time charter hire (which are earned upon the safe carriage of the cargo),
and any other property involved which is at risk during a maritime common adventure. The definition of general average, given
above, identified four elements to be satisfied in order for a general average act to occur. These elements are examined in more
detail below, including how the YAR treat the incidents of general average.

2.1 Danger or peril to the common adventure

Danger or peril
Under s 66(2) of the Marine Insurance Act 1906, no recovery can be made in general average unless there exists a peril. The
danger or peril must affect the whole adventure and not only one interest.

18 Nesbitt v Lushington (1792) 4 TR 783, where a mob took the corn loaded on board by threats to the master of the ship.
English law has given a strict interpretation to this phrase in requiring such peril to be real and not imaginary.

19 Joseph Watson v Firemans Fund [1922] 2 KB 355.

Even a belief reasonably held will be insufficient for recovery.

The wording of Rule A of the York-Antwerp Rules does not include the phrase in time of peril. It refers instead to preserving
from peril. It is doubtful whether, in practice, there is any difference between the two phrases; the latter expresses the purpose of
a general average act, while the former indicates the trigger of a general average act.

There are difficulties of degree when it comes to deciding whether property is in peril. What should be the extent of the peril,
which threatens the common property, before the response to it can qualify as a general average act? Although it is a requirement
under English law that the peril must be real,

20 Vlassopoulos v British and Foreign Marine Insurance Co (The Makis) [1929] 1 KB 187, p 199.

it need not be immediate, in the sense of actually pressing at the moment, but it may be imminent. Indeed, English law allows for
the recovery in general average of taking precautionary measures that avert an imminent peril.

21 Lawrence v Minturn (1854) 17 How 100; Socit Nouvelle dArmement v Spillers & Bakers Ltd [1917] 1 KB 865.

However, it is also clear that such peril must be substantial and not negligible.

22 The Makis, op cit, fn 20.

It is worth referring to the facts of the Vlassopoulos case (see also under 1.1 above) as it shows the degree of danger required for
an act to qualify as a general average act.

A ship was in the port of Bordeaux for the purpose of loading a cargo. While she was so engaged, the foremast broke and fell on
to the main deck doing damage, and in consequence of the breakage a derrick, which was attached to the foremast, fell into a hold
and was damaged. The casualty was an accidental and fortuitous occur-rence, and the ship was not in consequence, thereof, at
any time in any danger. The ship was then moved into a wet dock for the purpose of repairs. After being repaired, the ship
proceeded on her voyage to her destination. While at sea she fouled some submerged wreckage and damaged the blades of her
propeller, and was thereby rendered unfit to encounter the ordinary perils of the sea, and accordingly she put into Cherbourg for
inspection and repairs, this being necessary for the common safety of the ship, cargo and freight. Both the charterparty and the
policy of insurance in respect of the ship provided that average was to be adjusted according to the York-Antwerp Rules 1924. A
dispute arose between the shipowner and the underwriters with regard to liability for certain expenses incurred, and payments
made by the owner in the ports of Bordeaux and Cherbourg in connection with the two casualties, namely wages and provisions
of master, officers and crew during the time the ship was being repaired; coal consumed in shifting the ship in and out of dock;
handling cargo on board; discharging cargo; towage in and out of port, mooring expenses and port charges. The dispute was
referred to arbitration, and the arbitrator held that none of these expenses was the subject of general average contribution, but
stated a case for the opinion of the High Court. It was held that:

(1) none of the above mentioned items of expenses incurred at the port of Bordeaux in connection with the first casualty came
within Rules X, XI or XX of the York-Antwerp Rules, 1924, and therefore they were not recoverable in general average, because
they were not incurred for the common safety for the purpose of preserving from peril the property involved in a common
maritime adventure, and Rule X did not apply to a case of the repair of accidental damage and the shifting of cargo thereby
caused where the ship was in no danger; (2) but that the above mentioned items of expenses incurred at the port of Cherbourg in
connection with the second casualty were recoverable in general average under Rules X and XI, because they were expenses
incurred for the common safety for the purpose of preserving from peril the property involved in the common maritime
adventure.

Threat
Another question that troubles the interpreters of the Rules is whether or not a general average act should be a response to a
physical threat to the property, or could a commercial threat to the completion of the voyage qualify for the act to be a general
average act? It is suggested that the Rules embody both threats, physical and commercial, and the costs of releasing the common
property from the solely commercial threat should form the proper subject of a general average contribution.

23 Macdonald, J, op cit, fn 4, at 483487; this is indicated by the scope of Rules X, XI and XIV, relating to ports of refuge
expenses and temporary repairs to the ship for the purpose of enabling it to continue the adventure.

The distinguishing feature of general average is that the danger must be threatening to the common adventure; there must be at
least two interests

24 If there is only one interest in danger, this is known as particular average loss which is not a general average loss (s 64(1),
MIA 1906); expenses incurred by the assured to preserve the subject matter insured, other than general average and salvage
charges, are called particular charges (s 64(2), MIA 1906).

exposed to danger, regardless of whether or not such interests belong to the same owner. The danger to the common adventure
will end when the property is brought to a safe place. Ideally, that place should be the place where the delivery of the cargo was
stipulated by the contract of carriage. But sometimes the cargo may have to be taken off prior to reaching that place, and the ship
may have to be taken to a safe place. Once the cargo is taken off, it should not, in principle, be obliged to contribute to general
average, or be entitled to general average contribution, unless its removal formed part of complex salvage operations,

25 See some old authorities in Rose, op cit, fn 1, at 25.

but this goes beyond the scope of this chapter.

Common maritime adventure

The 1994 and 2004 YAR define, in Rule B, common maritime adventure as including circumstances when one or more vessels
are towing or pushing another vessel or vessels, provided that they are all involved in commercial activities and not in salvage
operation. It further provides that a vessel is not in common peril with another vessel or vessels if, by simply disconnecting from
the other vessel or vessels, she is in safety; but, if the disconnection is itself a general average act, the common adventure
continues.

Throughout the successive editions of the Rules, adventure has been used in a way which naturally describes the common
enterprise represented by the carriage of goods by sea in which ship and cargo are both involved, while voyage has been used to
refer to the passage of the vessel from her first loading port to her final discharging port.
26 See The Trade Green, op cit, fn 7.

2.2 Extraordinary expenditure or sacrifice

The ship-owners obligation to perform the voyage under the contract of affreightment is to deliver the cargo safely to the port of
destination upon payment of the agreed freight. He must have complied with his obligation to provide a seaworthy ship at the
commencement of the voyage.

27 For a recent example of no general average contribution to the ship owner, because of his actionable fault in failing to provide
a seaworthy ship as required by the contract, see Sunlight Mercantile Ltd v Ever Lucky Shipping Co Ltd [2004] 2 Lloyds Rep
174.
Contribution for general average, when incurred for the common safety, does not absolve the parties from their contractual rights
and obligations. Only when the sacrifice or expenditure is beyond the contractual duties will it be allowed in general average.

28 The Bijela [1993] 1 Lloyds Rep 411.

The term extraordinary is of more relevance when looking at general average expenditures. This is because a charterer or the
holder of a bill of lading will have already paid freight in return for the shipowner bearing the costs and expenses that are
incidental to the voyage and which safeguards both the ship and the cargo.

The classic examples of an extraordinary sacrifice that will be allowed in general average is the jettisoning of part of the cargo
(Rule I); or causing damage to the ship or cargo for the purpose of making a jettison (Rule II); or pouring water into the holds to
extinguish a fire on board a ship and thereby damaging the cargo carried in such holds, including damage by beaching or
scuttling a burning ship (Rule III); or voluntary stranding (Rule V); or damage done to machinery or boilers when the ship is
aground (Rule VII); or ships materials and stores burnt for fuel for the common safety (Rule IX).

The above are subject always to the operation of the York-Antwerp Rules. For example, Rule I of YAR states that: No jettison
of cargo shall be made good as general average, unless such cargo is carried in accordance with the recognised custom of the
trade. Similarly, damage to the ships machinery or boilers shall only be allowed as general average where such damage is
occasioned in attempting to refloat her (Rule VII).

Generally, expenditure that will be allowed as general average will come under one of the following examples:

Additional expenses which would not normally be allowed as general average, but which replace
expenses that would normally be classed as general average (Rule F)

Expenses incurred in saving the ship and cargo from loss or damage. Classic examples include: the
engagement of salvage services following a stranding; the cost of employing lighters to transfer cargo in
order to lighten the vessel; and the employment of towage services (Rule X)

Expenses incurred in lightening the ship when ashore (Rule VIII)

Expenses for wages etc in port of refuge (Rule XI)

Expenses for temporary repairs either at the port of loading or a port of refuge (Rule XIV)

Port of refuge expenses.

 29 Many expenses that are incidental to port of refuge expenses are expressly provided for in Rules X and XI of the
York-Antwerp Rules.

2.3 Voluntary, or intentionally and reasonably made

The rule paramount which is found in YAR 1994 and 2004 (but not in the 1974 Rules) provides that: In no case shall there be
any allowance for sacrifice or expenditure unless reasonably made or incurred.

The word voluntary, in s 66 of the Marine Insurance Act 1906, has been replaced with the term intentionally in Rule A of the
York-Antwerp Rules.

30 This appears in all three recent York-Antwerp Rules revisions: 1974, 1994 and 2004.

This emphasises the fact that, just because a decision was made under extreme pressure, when there was no effective alternative,
this will not of itself be enough for the act to lose its voluntary nature.

The requirement of intention means that the general average act must be made or incurred with the sole objective of preserving
the interests involved from peril.

31 Athel Line Ltd v Liverpool & London War Risks Ins Assn Ltd [1994] KB 87, p 94.

The requirement of reasonableness is a fetter on the masters discretion as to what action to take in times of peril. However, this
fetter is not wide-ranging and would only bite when the master makes a decision that fails to benefit the common adventure as a
whole. He has complete freedom to choose which action to take in order to benefit the common adventure. For example, the
master will be able to enter into a contract for towage or salvage services on standard terms which are widely used in practice.

32 See further commentary on standard form towage contracts (at Chapter 14, above) and salvage contracts (at Chapter 13,
above).

Such action will be reasonable. Even if the master enters into a contract for the provision of services on particularly onerous
terms, such losses flowing from this action will be recoverable in general average, provided there was no reasonable alternative
open to the master.

33 Australian Coastal Shipping Commission v Green [1971] 1 QB 456, p 483, per Lord Denning MR.

The fetter on the masters discretion is examined in the context of having to make his choices in time of danger for the ship and
property on board for the purpose of preserving the common adventure.

It should be noted that Rule D provides that rights of contribution in general average shall not be affected if the event giving rise
to the sacrifice or expenditure is due to the fault of one of the parties to the adventure, but this shall not prejudice any remedies or
defences which may be open against or to that party in respect of such fault.

34 Goulandris Brothers v B Goldman & Sons [1957] 2 Lloyds Rep 207: the objects of Rule D were to keep all questions of
alleged fault outside the adjustment and to preserve, unimpaired, the legal remedy at the stage of enforcement.
But the question of actionable fault will depend on the terms of the contract and, if the Hague Rules or Hague-Visby Rules are
incorporated, negligence in navigation or management of the ship is an excepted peril (Art IV, r (2)(a)).

However, if in the course of taking action for the purposes of general average, there is negligence in carrying out the operation,
which causes damage to the property on board, it may be actionable in a claim for breach of contract.

35 See also The Oak Hill [1975] 1 Lloyds Rep 105: breach of contract was proved in handling the cargo carelessly during
discharge and storage after the vessels accident. See also The Hector [1955] 2 Lloyds Rep 218: the fact that the master acts as
agent of necessity does not relieve him of his duty to exercise reasonable care in the preservation of the cargo; see
also Goulandris Brothers, op cit, fn 34.
In addition, such negligence may break the chain of causation between the general average act and the loss, and the expenditure
may not be recoverable in general average.

For example, whether the master was negligent, in The Alpha case,

36 See Corfu Navigation Co v Mobil Shipping Co Ltd (The Alpha) [1991] 2 Lloyds Rep 515.
in putting the ship aground in the first place and in dealing with the resultant situation, whereupon he caused damage to the
engine of the ship, was irrelevant. He was criticised, however, for acting unreasonably in many respects, when he was trying to
refloat the vessel after grounding. The defendants, cargo owners, who were sued by the owners of the ship for general average
contribution, argued that either what the master did could not be general average, or that the element of unreasonableness broke
the chain of causation between the general average act and the damage. The court held that, on the evidence, the risk of damaging
the engine had been appreciated by the master and the damage arose from an actual intention of the master to try to refloat the
vessel at risk of such damage. Therefore, the owners recovered general average contribution for the damage to the engine.

The requirement of reasonableness appears in Rule A of YAR. However, if a general average act falls within one of the
numbered rules that does not impose a requirement for reasonableness, it follows that such losses that are incurred will be
recoverable in general average, even if such action that is taken is unreasonable.

37 Ibid. The rule of interpretation in the York-Antwerp Rules 1974 provides that, where the numbered and lettered rules conflict,
it is the numbered rules that prevail.

Such possible conflict has been remedied by the introduction of the rule paramount, in the York-Antwerp Rules 1994 and 2004
(mentioned above), which prevents recovery for sacrifice or expenditure unless reasonably made or incurred. (See further about
the rule of construction of the Rules under para 1.1 above.)

2.4 To preserve property imperilled

This requirement relates to the subject matter relating to general average recovery. Traditionally, general average concerns the
preservation of property involved in the common adventure, ie the ship,

38 The equipment on board the ship also qualifies as property in general average.

bunkers, her cargo and freight (see para 2, above).

In order to be liable to contribute in general average, the freight has to be at the carriers risk. Therefore, once freight has been
earned, it does not contribute as an interest since it is no longer at risk to the carrier. However, the cargo for which the freight has
been earned will still be liable to contribute.

3 CAUSATION IN GENERAL AVERAGE AND FAULT

Rule C of the YAR states that only such losses, damages or expenses which are the direct consequence of the general average act
shall be allowed as general average; and Rule E provides that the onus of proof is upon the party claiming in general average to
show that the loss or expense claimed is properly allowable as general average. Section 66(1) of the Marine Insurance Act 1906
allows recovery in general average for losses caused by or directly consequential to a general average act.

Thus, the claimant has to prove that his loss was a direct consequence of a general average act to recover contribution. The
defendant has the burden of showing a break in the chain of causation.

39 Eg The Alpha, op cit, fn 36.

The right of contribution in general average shall not be affected if the event giving rise to the sacrifice
or expenditure is due to the fault of one of the parties to the adventure, but this shall not prejudice
any remedies or defences which may be open against or to that party in respect of such fault (Rule D
and Goulandris v Goldman under para 2.3 above).

In addition to the obvious sacrifices and expenditures incurred in general average, other losses resulting from general average
acts may qualify for recovery in general average. Whether they can or not is dependent upon whether such losses are a direct
result of the general average act. Should the loss have been foreseen, or would it be enough if the loss was foreseeable to the
general average act?

In Australian Coastal Shipping v Green,

40 [1971] 1 QB 456.

there were two vessels in peril. The ship owner contracted for two tugs to tow both vessels to safety,
contracting on UKSTC terms. In both cases, the towing line broke, rendering one tug a total loss, with
the other tug claiming salvage expenses. Under the UKSTC, the ship owner was liable to indemnify the
towage company for all losses and expenses suffered. The shipowner contended that these losses
were recoverable by him in general average. Lord Denning MR in the Court of Appeal held that they
were, stating:

If the master, when he does the general average act, ought reasonably to have foreseen that a subsequent accident of the kind
might occur or even that there was a distinct possibility of it then the subsequent accident does not break the chain of
causation If, however, there is a subsequent incident which was only a remote possibility, it would be different.

41 Ibid, 482.

As discussed under para 2.3 above, an intervening negligence during the general average act may or may not break the chain of
causation between the act and the loss.
Rule C of the 1974 and 1994 YAR specifically excludes losses caused by delay or loss of market. In addition to these excluded
losses, the 2004 YAR also excludes loss and expenses incurred with respect to damage to the environment or connected with the
escape or release of pollutant substances from the property involved.

4 WHEN THERE WILL BE NO LIABILITY TO CONTRIBUTE

As noted earlier, the rights and liabilities of the parties in general average are dealt with independently of fault of the parties to
the adventure, even if that fault brought about the event which gave rise to the expenditure or sacrifice. But this shall not
prejudice any remedies or defences which may be open against or to the claiming party in respect of such fault (Rule D).

In Rule I, it is stated that no jettison of cargo shall be allowed as general average, unless such cargo is carried with the recognised
custom of the trade. Thus, if deck cargo is carried with the consent of the parties in accordance with the custom of the trade,
general average contribution will be allowed.

In Strang Steel v Scott,

42 (1889) 14 App Cas 601, pp 608, 609.

the Privy Council expounded the exceptions to general average contribution:

There are two well-established exceptions to the rule of contribution for general average, which it is necessary to notice.

When a person who would otherwise have been entitled to claim contribution has, by his own fault, occasioned the peril which
mediately gave rise to the claim, it would be manifestly unjust to permit him to recover from those whose goods are saved,
although they may be said, in a certain sense, to have benefited by the sacrifice of his property. In any question with them he is a
wrongdoer, and, as such, under an obligation to use every means within his power to ward off or repair the natural consequences
of his wrongful act. He cannot be permitted to claim either recompense for services rendered, or indemnity for losses sustained
by him, in the endeavour to rescue property which was imperilled by his own tortious act, and which it was his duty to
save. Schloss v Heriot is the leading English authority upon the point. In that case, which was an action by the shipowner against
the owners of cargo for contribution in an average loss, a plea stated in defence, to the effect that the ship was unseaworthy at the
commencement of the voyage, and that the average loss was occasioned by such unseaworthiness, was held to be a good answer
to the claim by Chief Justice Erle, and Willes and Keating, JJ.

The second exception is in the case of deck cargo. The reason why relief by general contribution is denied to the owners of goods
stowed on deck, when these are thrown overboard in order to save the cargo under hatches, is obvious. According to the rules of
maritime law, the placing of goods upon the deck of a seagoing ship is improper stowage, because they are hindrances to the safe
navigation of the vessel; and their jettison is therefore regarded, in a question with the other shippers of cargo, as a justifiable
riddance of incumbrances which ought never to have been there, and not as a sacrifice for the common safety. But the owner of
deck goods jettisoned, though not entitled to general contribution, may nevertheless have a good claim for indemnity against the
master and owners who received his goods for carriage upon deck; and the exception does not apply, either (1) in those cases
where, according to the established custom of navigation, such cargoes are permitted, or (2) in any case where the other owners
of cargo have consented that the goods jettisoned should be carried on the deck of the ship.
If the ship deviated from the voyage route without the consent of the contracting party, or without waiver of the breach, and the
deviation caused the general average act, there will be no general average contribution to the owner.

43 Hain SS Co Ltd v Tate & Lyle Ltd (1936) 41 Com Cas 350.

As was stated earlier in Strang v Scott, a fault of the claimant which gave cause to the danger (and would give the party from
whom contribution is sought a cause of action against the claimant) will disentitle the claimant from recovering contribution, on
the basis of the principle that the claimant should not recover for the consequences of his own wrong,

44 The rule against recovery is known as equitable defence: Goulandris Brothers Ltd v B Goldman & Sons Ltd [1958] 1 QB 74.

for example when the ship was unfit for the voyage at the outset.

45 Schloss v Heriot (1863) 14 CB (NS) 59 (improper stowage).

A few examples illustrate how the ship owner can be deprived of general average contribution.

In The Evje No 2,

46 [1976] 2 Lloyds Rep 714; see also The Aga [1968] 1 Lloyds Rep 431: ship had stability problem before she left port,
resulting in heavy listing, which necessitated beaching her.
the ship was found unseaworthy at the beginning of the voyage because there were insufficient
bunkers or because the bunkers were of the wrong quality and the unseaworthiness was the cause of
the casualty, when the fuel ran out and the ship needed towage. No general average contribution was
due to the owners from the charterers.

In The Kasmar Voyager,

47 [2002] 2 Lloyds Rep 57.

the ship was carrying a cargo of soya beans under a contract of carriage evidenced by a bill of lading,
which was subject to the Hague Rules. Engine problems arose during the voyage, and the vessel was
immobilised, needing towage services to reach a repair port. Investigations revealed that there was a
defect in manufacture of the piston skirt which developed into a crack in the life of the piston. The
major damage to the engine had been caused after a spare piston had been fitted whose dimensions
were not compatible with the main engine. Upon a claim by the owners against the cargo insurers for
general average contribution, the claim was resisted on the ground of the owners failure to exercise
due diligence to make the ship seaworthy before and at the beginning of the voyage. On evidence, it
was found that the service of the cylinder had been postponed, and the routine maintenance
prescribed had not been followed. The vessel was unseaworthy and the owners could not discharge
the burden of proof that they, or their agents, exercised due diligence before and at the beginning of
the voyage.

48 The Muncaster Castle [1961] 1 Lloyds Rep 57 was applied.

Thus, the general average expenditure was caused by their actionable fault and they were unable to
recover general average contribution from the cargo interests.

By contrast, in The Torepo,

49 [2002] 2 Lloyds Rep 535; see also The Isla Fernandina [2000] 2 Lloyds Rep 15; The Lendoudis Evangelos II [2001] 2
Lloyds Rep 304.
where the ship grounded due to various navigational faults and sought the assistance of salvage, the
ship was not found unseaworthy, even with the finding of discrepancy in the charts (being not
causative of the grounding). The owners were protected by the exception in Art IV, r 2(a) of the HVR
(negligence in navigation). Therefore, upon a claim by cargo interests against the owners to recover
the amount they were obliged to pay to salvors and for the return of their general average security,
their claim failed.

As discussed in causation earlier, the defendant must show a causal link between the fault and the event giving rise to the general
average act and to the loss, as is shown in The Evje and The Kasmar Voyager, unless the claimant of general average contribution
proves that his liability for the fault is excluded.

50 Milburn & Co v Jamaica Fruit Co [1900] 2 QB 540 (CA), approved by the House of Lords in Louis Dreyfus & Co v Tempus
SS Co [1931] AC 726.

Similarly, when the shipper ships goods that he knows to be dangerous, which results in the jettison of the cargo for the safety of
the common adventure, he will not recover general average contribution.

51 Greenshields, Cowie & Co v Stephens & Sons [1908] AC 431: in this case, the owners of the coal were entitled to claim
against the ship contribution in general average in respect of the sacrifices voluntarily made for the common advantage of all, the
fire having been caused by the inherent qualities of the coal, or, in other words, by spontaneous combustion, without default on
the part of the shippers.

Rule XIX also provides that undeclared or wrongfully declared cargo loaded without the knowledge of
the ship owner or his agents, or goods wilfully mis-described at the time of shipment, shall not be
allowed as general average, if damage or loss is caused to them, but such goods shall remain liable to
contribute, if saved.

5 THE CAUSE OF ACTION FOR GENERAL AVERAGE CONTRIBUTION AND TIME LIMIT
The cause of action for contributions in general average under contractual provisions, which did no more than require general
average to be adjusted according to York-Antwerp Rules, accrues at the time when each general average sacrifice is made or
general average expense is incurred.

52 The Potoi Chau [1983] 2 Lloyds Rep 376 (PC); Chandris v Argo Insurance Co Ltd [1963] 2 Lloyds Rep 65 approved.
It was stated by the Privy Council in The Potoi Chau that:

The general average clause incorporated in a bill of lading creates a contractual liability on the part of the consignee as indorsee
of the bill of lading to pay general average contribution, if there be any chargeable on the cargo shipped, whether it was he, the
shipper or some intermediate indorsee of the bill of lading, who happened to be owner of the goods, at the time when a general
average sacrifice took place, or a liability for a general average expenditure was incurred. Since this liability arises under a simple
contract, the period of limitation is six years from the accrual of the cause of action; but the clause is intended to regulate, and to
transfer to whoever acquires title to the consignment of cargo under the bill of lading, what would otherwise be a common law
liability of the owner of the cargo at the time of the general average act.
53 The Potoi Chau, p 379.

6 SECURITY
At the time of the Digest of Justinian, the obligation was upon the master of the vessel to have a general average, arising on the
voyage, adjusted. In modern times, this responsibility has devolved upon the ship owner. In order to protect the rights of general
average creditors, he is obliged

54 Crooks v Allan (1879) 5 QBD 38.

to obtain reasonable security from contributing interests. The law assists him in this by allowing him
to exercise his right of the common law possessory lien on the property until such security is given.
The general average act gives rise to a possessory, not maritime, lien on the property. The owner,
therefore, through the master, may withhold delivery of property at the destination until reasonable
security has been provided.

Such reasonable security is usually construed as consisting of the following:

(i) an average bond signed by the consignee, and

(ii) either an average guarantee signed by the insurer of the cargo, or,

(iii) if the cargo is uninsured or the particular cargo insurer is not acceptable to the ship owner, a general
average deposit

55 Such cash deposits are provided for by YAR, Rule XXII.

of an amount which is usually recommended by the average adjuster, which amount will be held by the
average adjuster, pending the completion of his adjustment.

Where, during the course of the contracted voyage, cargo is forwarded by some other vessel or conveyance, the ship owner will
usually require that a non-separation agreement forms part of the average bond and the average guarantee. If the contract of
carriage provides that general average is to be adjusted according to the York Antwerp Rules 1994 or 2004, a non-separation
agreement wording will automatically apply. A non-separation agreement provides that, although cargo has been separated, by
forwarding, from the rest of the maritime adventure, its contribution to the general average will be calculated as though it had not,
but had remained with the carrying vessel until its delivery. The agreement is between the ship owner and the cargo owner, and
enables the ship owner to recover his general average expenses as if the cargo had remained on board.

The average bond, as backed by an insurers guarantee or a cash deposit, is a new contract, being independent from the contract
of affreightment, between the ship owner and the owner of the other interest. The consideration provided is the release of the
possessory lien on the cargo by the ship owner and, as far as cargo interests are concerned, the consideration is the assumption of
personal liability to pay when the adjustment is presented. Usually the parties agree the law and the jurisdiction to which the
security will be subject for adjudication of any disputes that might arise between the parties under the terms of the security.

The contractual obligation assumed by the cargo interests under the security is to make payment of a liquidated sum at a future
date, which will not arrive until the general average statement has been completed by an average adjuster appointed by the
shipowners. That is the earliest date at which the shipowners cause of action against the consignees under the average bond for
payment of general average contribution arose.

56 The Potoi Chau, op cit, fn 52, pp 382383.

Rule XXIII of YAR 2004 provides that a claim for general average contribution, including any rights to claim under general
average bonds and guarantees, shall be extinguished, unless an action is brought by the party claiming such contribution within a
period of one year after the date upon which the general average adjustment was issued. In no case shall such an action be
brought after six years from the date of termination of the common maritime adventure. The period may be extended upon the
agreement of the parties after the termination of the common maritime adventure.

At the end of the day, it is the insurers (for hull or cargo) of the respective parties involved in the common adventure that pay for
general average contributions which the parties can recover by way of indemnity under their respective insurance contracts. This
falls within the scope of marine insurance, and so detailed consideration is outside the scope of this book.