General Average

1.
Charterparty Contract

1.4
1.1
Contract General
of Average
Towage Carriage
of Goods
by Sea

1.3 1.2
Contract Contract
of of
Pilotage Salvage
A Loaded ship was hijacked in Somalian water and pirates
demanded the ransom for the release of the ship. After
much negotiation ransom for the Released of the Ship was
30,00, 000(3 million) US Dollars.

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5
 Average, in maritime law, loss or damage, less than total, to maritime property (a ship or its
cargo), caused by the perils of the sea. An average may be particular or general. A particular
average is one that is borne by the owner of the lost or damaged property (unless he was insured
against the risk). A general average is one that is borne in common by the owners of all the
property engaged in the venture.
 The basic idea of general average (the more important form) pertains to property
that is voluntarily sacrificed to preserve the remainder of the property from
destruction (as by throwing cargo overboard or cutting away masts to preserve
the ship in a storm); the owners of the property saved must contribute to the
owners of the property sacrificed in such an amount that all will have contributed
proportionately to the aggregate value of the lost property. (The Editors of
Encyclopaedia Britannica)
 Such a custom of contribution was firmly established in Roman law by the 6th
century AD. What is now called the law of general average thus has an ancient
lineage, and the doctrine has been admitted by all seafaring nations as part of
their maritime laws. Repeated attempts to draft international conventions in the
field of general average, however, have met with failure. (The Editors of
Encyclopaedia Britannica)
 The law of General Average is a principle of maritime law whereby all
stakeholders in a sea venture proportionally share any losses resulting from a
voluntary sacrifice of part of the ship or cargo to save the whole in an
emergency. It is a unique maritime concept. One of the most ancient aspects of
shipping is the general average.
 When an intentional sacrifice of property is made onboard a ship to avoid a
common peril, the general average law requires all of the parties to the maritime
adventure that benefited by the intentional sacrifice to contribute money on a
pro-rata basis. Who are the parties to the maritime adventure? They are of
course, the vessel's owner, the charterer, as well as other parties such as the
cargo interests.

PREREQUISITES FOR A GENERAL

AVERAGE & THE YORK ANTWERP RULES
 General Average is not limited to the carriage of goods under a
charter party. It applies equally to the transport of goods under
other forms of contract, such as a bill of lading.
 Imagine that a fully loaded vessel is sinking. She is trading under a time charter
party, and bills of lading have been issued to various cargo interests. The master of
the vessel must act quickly. To save the vessel and her cargo, the master orders
that the vessel is lightened by tossing part of the cargo overboard (jettison).
 The intentional sacrifice promotes the saving of the vessel. Days later, the ship and
her remaining cargo arrived safely at the destination. Who suffers the loss arising
out of the jettison? Is it the owner of the jettisoned cargo? The shipowner? The
charterer?
 It seems natural that the most equitable solution will be to allocate the loss among
the many parties that benefited by the intentional sacrifice. It is the rule of the
general average. It shifts part of the loss suffered by the owner of the jettisoned
cargo onto the various other parties that benefited by the intentional sacrifice, in
this case, the vessel's owner, the charterer, as well as the other cargo interests
onboard. All of the parties to the maritime adventure that benefited by the
sacrifice must share in the loss. Everyone must contribute to the loss on a pro-rata
basis.

 General average contributions are, roughly speaking, determined by comparing

the value of an individual's interest on board a vessel (such as the value of your
cargo) with the overall valuation of the maritime adventure (ship and all of her
cargo, bunkers, freight, etc.).
 The general average is not limited to cases involving jettison of cargo. Nor is the
sacrificed interest always the vessel's cargo. Most often, it is the vessel and her
owners that seek contributions. In short, many intentional sacrifices and
expenditures of an extraordinary nature may give rise to general average
contributions.
A vessel that is in danger of sinking is intentionally grounded. The
hull damage arising out of the grounding is the general average. It
will require contributions from the other parties to the marine
adventure. Everyone must pay their fair share of the hull damage.
 A vessel is removed from the ground by a tug. The costs of the
tug will be a general average as ship and cargo were both in
peril.
 The shipowner incurs expenses in calling a port of refuge to
avoid extremely heavy weather. All parties must contribute to the
intentional expenditures incurred.

EXAMPLES OF GENERAL AVERAGE

SACRIFICES OR EXPENDITURES INCLUDE:
 “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”. ( Rule A YAR 1978)
 If a vessel arrives at port having made a General Average Act during the voyage
the vessel is said to have arrived “UNDER AVERAGE”.

 The Master of the vessel will advise the owners or ship’s agents as soon as possible
to allow for arrangements to be made for the discharge of cargo and the
necessary security for General Average Contributions to be obtained from the
‘cargo owners’. NOTE: Until adequate security is lodged to the satisfaction of the
ship’s owner(s) there will be a lien on the cargo.

GENERAL AVERAGE PRACTICE

 The ship’s owner(s) will appoint an Average Adjuster who will make a rough
calculation in order to estimate the percentage of contribution which the ship’s
owner(s) may demand.
 Surveyors may be called in by the ship’s owner(s) and/or cargo underwriters to
assess any damage to the cargo and to protect the interests of the various
parties. NOTE: The damage to cargo must be properly assessed as this will form
an allowance in the actual General Average adjustment.
If the General Average proves to be small the ship’s owner(s) may dispense with
formality and adopt one of two options:-
 (A) Approach the Hull underwriters and obtain an agreement from them to settle
without contribution from other parties. In turn, the Cargo underwriters will settle
any General Average sacrifice under direct liability.
 This practice is one of pure convenience which is based on economies of scale
and which has no legal sanction.
 (B) The ship’s owner(s) may release the cargo under a General
Average GUARANTEE secured from cargo insurers
 There are many forms of guarantee but, in its most basic form, a guarantee
merely states that the insurers will guarantee the due payment to the ship’s
owner(s) of any contribution for general average and/or salvage and/or any
other charges which were properly incurred and chargeable against the cargo
in return for the immediate delivery of the cargo to the consignees. The vessel’s
name, voyage date, and a brief description of the goods insured will be included
in the guarantee.
The said interface between the two is not always an easy one.
Cargo owner will normally be insured against the risks of loss or damage to his goods caused by a
general average loss and against the liability to contribute in respect of such a loss.
Sec. 66 of the Marine Insurance Act, 1906 defines General Average as:
(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 extra ordinary sacrifice or expenditure is voluntarily
and reasonably made or incurred in time of peril for the purpose of preserving the property
imperiled 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.

INTERFACE BETWEEN GENERAL

AVERAGE AND INSURANCE LAW.
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 GA Sacrifices:
Cargo and Freight:
1. Jettison from under deck
2. Jettison from on deck, provided that on deck stowage is in accordance with
the recognized custom of the trade in which the ship is engaged.
3. Damage by water or other means used to extinguish a fire on board ship.
4. Discharge and reshipment of cargo for the purpose of floating a stranded ship
when in a position of peril.

EXAMPLES OF GENERAL AVERAGE

SACRIFICES AND EXPENDITURES UNDER
ENGLISH LAW:
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 Ships Materials:
5. Masts, spars, sails or rigging cut away for the common safety.
6. Chains and anchors slipped to avert a threatening peril.
7. Damage to a vessel’s machinery, ropes, winches, wind lass and other gear
sustained in edeavours to float a stranded ship when in a position of peril.
8. Damage sustained in the efforts to extinguish a fire on board or in the
process of jettisoning cargo.

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 Expenditure:
9. Expenses incurred in floating a stranded ship if in peril.
10. Inward expenses entering a port of refuge to repair damage
to ship.
11. Cost of discharging cargo at a port of refuge for the common
safety or repair damage to ship.
12. Cost of ware housing, ware house rent on cargo, re-shipment
of cargo and outward expenses leaving the port of refuge, but
only when the cause of the vessel putting into port has been to
repair damage which is itself the consequence of a general
average act.

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1. There must be a common danger, during a common maritime
adventure which must be real and not merely apprehended by the
master, however reasonably.
2. There must be necessity for a sacrifice.
3. The sacrifice must be voluntary.
4. It must be a real sacrifice and not a mere destruction and casting off
that which had become already lost and consequently of no value.
5. There must be a saving of an imperiled property through the sacrifice.
6. The common danger must not arise through any default for which the
interest claiming a general average contribution is liable in law.

TO GIVE RISE TO A CLAIM FOR GENERAL

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AVERAGE CONTRIBUTION:
Burden of Proof: As per Rule E of YAR, onus of proof is upon the party
claiming a general average contribution to show that the loss claimed
is properly allowable in general average. (Corfu Navigation Co. v.
Mobil Shipping Co. ( The Alpha) (1991)).

There is no requirement that the property be insured or uninsured.

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Conditions for General Average.

1. Subject matter of GA could be maritime property at risk viz., the ship,

cargo or freight.
(Cargo generally means goods carried for commercial purpose and
which attract the payment of freight – Goods covered by the Bill of
lading. Rule 17 excludes mails, passenger luggage, personal effects
accompanied private motor vehicles.)
(In case of Freight, its calculation and at whose risk it is assumes
importance ) Rule 15 of YAR
(Human lives: GA has not evolved out of admiralty jurisdiction.
Common law dealt with GA and admiralty jurisdiction dealt with
salvage. Not fully settled as GA is concerned with either property or
commerce. But a GA claim has succeeded where sacrifice or
expenditure was incurred for preservation of life. (Mongomery v.
Indemnity Mutual MI Co. 1902) But doubtful if there is no danger to
the ship, freight or cargo)
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2. GA right only arises from a maritime adventure in the nature of
a voyage: Under English law, GA applies only to ships and
goods in peril at sea. Though general average services could
be rendered at sea or at land, for seeking contribution, it has
to be a “a maritime adventure in the nature of a voyage”.
White Cross Wire Co. v. Savill (1882) GA covers events on a ship
which has not completed un loading since although the
voyage may be over, the maritime adventure is not
necessarily so. (P.21)

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3. There must be a real danger:
❖ Threat to the physical integrity of the property involved.
❖ Mere risk of loss of economic value or commercial utility is
insufficient.
❖ There must be a danger to the safe prosecution of the
adventure.
❖ Masters conduct – to be as a person of ordinary firmness and
sound judgment.
❖ Mere bonafide belief of the master that there is an imminent
peril may not give rise to any claim unless the peril actually
exists.
❖ Mere potential of a danger to the common adventure is
insufficient.
❖ Once a peril is found to exist, it is immaterial that it differs from
the one that the master expected.
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4. Danger must be to the common adventure and action taken
must be necessary for the safety of the common adventure or
a direct consequence of such action:
(a) There must be a common adventure ( and not a single
interest at risk) (at least two interests should be exposed to
danger.
(b) The danger must be to the common adventure (danger not
threatening all interests- Nesbitt v. Lushington – mob
compels the master to sell cargo of wheat for less than
invoice value- no threat to the ship or other cargo)
(c) The action taken must be necessary to avert or minimize the
threat or a direct consequence of such earlier action
(d) The action must be taken for the safety of the common
adventure.

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5. Authority to act: GA focuses on liability for acts done in the
interests of contributors without scrutiny of the plaintiff’s
entitlement to generate that liability.
1. Who is the proper person to sanction a GA act, and therefore
impose liability for GA contributions.
2. Whether another person may be entitled to override the
authority of the Master and also to create liability to a GA
contribution?
3. To what extent the owners of the interests can exclude their
liability to a GA contribution and /or restrict the freedom of
the master in dealing with the danger?
Pappayani v. Grampian SS Co. (1896) (master and port
captain – scuttling of vessel as directed by latter- master does
not object- held valid GA)
Price V. Noble (1811) ( prize vessel- former mate jettisons ships
stores- held the cargo owners should contribute.)
Mouse’s Case (1609) ( passenger jettisoning to save lives –
great and imminent danger- stranger can jesttison) (P.32,33)
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6. There must be a sacrifice or expenditure of an extraordinary
nature:
Ship owner has to do all that is required for successful completion
of the journey in the usual course. He can only claim freight and
nothing more. (Wilson v. Bank of Victoria – Additional loads of
coal purchased by the Master does not lead to GA
contribution. P.37)
GA can be claimed only if sacrifices or expenditure has been
made for some thing over and beyond the ordinary duties and
expenses of navigation. (The Bijela) Theory of common benefit
cannot be divorced from the contractual rights of the parties.
Societe Nouvelle d’ Armement v. Spillers & Bakers Ltd. 1917 1 KB
865 – (tugs engaged by captain for escaping sub marine attack
– not justified for GA claim)

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7. The Sacrifice or expenditure must be real:
if some thing of no value is sacrificed, no GA is attracted.
Shepherd v. Kottgen (Mast already rendered useless, cut off, not a
GA act)
8. The GA should be intentionally incurred for the benefit of the
common adventure:
GA act must be intentional- master should not be acting under
superior orders.
9 The action taken must be reasonable: If not reasonable
jettisoning by master, whole loss can be claimed from the ship
owner. Master has the absolute choice or freedom.
10. Success: Act done with right intention alone does not qualify for
GA contribution, it is also necessary that property is preserved
due to such act.
Chellew v. Royal Commision on the Sugar Supply (1921) (p.46) 32
11. The general average loss should be a direct consequence of
the general average act:
Party claiming a GA contribution must prove that the relevant loss
was a GA loss and that it was caused by a GA act.
Causation and effect: A claimant can recover a contribution for
loss if he can show that it was the direct consequence of a GA
act and if there has been no breach in the chain of causation.

Eg: Loss of freight is a common consequence of jettison of cargo.

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1. Deck cargo
2. Claimants fault
3. Contractual qualification of liability to General Average. The
contract may define what is capable of being a GA loss.
4. Illegality- Contribution cannot be claimed in respect of acts
which are prohibited by law. Parsons v. Scott ( payment of
ransom to an enemy)

EXCEPTIONS TO LIABILITY TO
CONTRIBUTE
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 The subject of General Average is so entirely in the hands of
average adjusters.
 It is not clear when the average adjusters started practicing as a
special profession.
 Each party is entitled to appoint an average adjuster.

AVERAGE ADJUSTERS
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 BIMCO documents currently contain general average clauses that refer
either to the York-Antwerp Rules (YAR) 1994 or, to a lesser extent, the YAR
1974. BIMCO’s recommendation in respect of new and revised charter
parties, bills of lading, and waybills has so far been that the general
average should be adjusted in accordance with the YAR 1994.
 A new set of YAR 2016 was adopted by the Assembly of the Comité
Maritime International (CMI) at its 42nd International Conference held from
3rd to 6th May 2016 in New York. As the YAR 2016 is considered to represent
a set of Rules that BIMCO could refer to in its standard documents, BIMCO’s
Documentary Committee decided, at its meeting on 10th May 2016, that
all new and revised BIMCO charter parties, bills of lading and waybills will
now refer to general average being adjusted in accordance with the York-
Antwerp Rules 2016. References to earlier versions of the YAR in existing
BIMCO documents will gradually be replaced by a reference to the YAR
2016 in the online versions of these documents.
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 York Antwerp Rules have no inherent binding force.
 But they are widely accepted by incorporating it into charter parties, bills of
ladings and marine insurance policies in standard form clauses.
 These rules were developed in mid 19th century for the purpose of removing
differences between municipal laws and for reaching general agreement
on matters of detail and principle.
 The Bijela Marida Ltd. v,. Oswal Steel (1993) “It is ….not surprising that those
concerned with international shipping sought to devise general conditions
which, even if to some extent arbitrary and not necessarily reflecting a
single consistent principle, were at least clear in their practical application”.

YORK ANTWERP RULES 37

 May1860 – Open Letter to the maritime countries of Europe by the National Association for
the Promotion of social science the Lloyds, the London General Ship Owners Society, various
Chambers of Commerce and other bodies representing shipping, mercantile and
underwriting interests in the United Kingdom. This lead to the Glasgow Resolutions of 1860.
 The York Rules of 1864 – 11 Rules were formulated by the 3rd International General Average
Congress held at York.
 The York and Antwerp Rules, 1877 – York Rules amended and a 12th Rule was added.
 The York-Antwerp Rules, 1890 – Crystallized position.
 The York-Antwerp Rules, 1924.
 The York-Antwerp Rules, 1950.
 The York-Antwerp Rules, 1974.
 The York-Antwerp Rules, 2004.

MILES STONES IN THE DEVELOPMENTS

OF YORK ANTWERP RULES TILL 2004
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 YAR provides an interpretation clause in the beginning which
states that , the adjustment of general average, the Rules
override inconsistent law and practice.
 YAR is divided into:
1. Rule Paramount
2. Seven Lettered Rules (A toG) ( Intro. in 1924)
3. Twenty two Numbered Rules (1 to 22) (they are more specific
rules)

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Until 1890, YAR consisted only a set of Rules which dealt with only
specific instances in those areas where laws and practises of
various countries had differed and were for that reason it was
desirable to have international uniformity.
These Rules were numbered in no particular sequence and
cannot be said to be a code of GA.
In 1924, lettered Rules were introduced.
The purpose of Lettered Rules was to supplement the particular
provisions of the numbered Rules and to furnish a general
frame work acceptable to the international maritime
community

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There was no provision at that time for governing the relationship
between the Lettered rules and Numbered Rules.
This deficiency was exposed after the judgment in Vlassopoulos v.
British and Foreign Marine Insurance Co. ( The Makis) (1929) (P25
Hudson)

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 General Average should be adjusted according to the lettered
Rules subject to the overriding requirement of reasonableness
(Rule paramount) and in particular to the numbered Rules even
if the numbered Rules results in qualification of the general
principles.

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York Antwerp rules do not purport to cover every aspect of the law of general
average.
The YAR are not part of any international convention, and are legally
binding by way of incorporation into bills of lading, charter parties, and in
some instances national law.
For eg. In Norway, the YAR 1994 have binding force through the provisions
in the Norwegian Maritime Code section 461, unless the parties agree
otherwise.
Parties have the freedom to choose which edition of the Rules is to apply to
their relationship.

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 In no case shall there be any allowance for sacrifice or expenditure unless
reasonably made or incurred.

RULE PARAMOUNT
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 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.
 General average sacrifices and expenditures shall be borne by
the different contributing interests on the basis hereinafter
provided.

RULE A
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 There is a common maritime adventure 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 a salvage operation.
 When measures are taken to preserve the vessels and their cargoes, if any,
from a common peril, these Rules shall apply.
 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 maritime
adventure continues.
 Notes: Idea of the rule was to cover tug and tow situations. There was a
need for uniformity in practice. Rhine Rules were found help ful in drawing up
this Rules.
 Cases: JP Donaldson, Sacramento & SC Loveland Company v. USA p. 42-43

RULE B
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  Only such losses, damages or expenses which are the direct
consequence of the general average act shall be allowed as
general average.
 In no case shall there be any allowance in general average for
losses, damages or expenses incurred in respect of damage to the
environment or in consequence of the escape or release of
pollutant substances from the property involved in the common
maritime adventure.
 Demurrage, loss of market, and any loss or damage sustained or
expense incurred by reason of delay, whether on the voyage or
subsequently, and any indirect loss whatsoever, shall not be
allowed as general average.

RULE C 47
 Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd or "Wagon
Mound (No. 1)" [1961] UKPC 1 is a landmark tort law case, which imposed a
remoteness rule for causation in negligence. The Privy Council held that a
party can only be held liable for damage that was reasonably foreseeable.
Contributory negligence on the part of the dock owners was also relevant in
the decision, and was essential to the outcome, although not central to this
case's legal significance.
 Overseas Tankship (UK) Ltd v The Miller Steamship Co or Wagon Mound (No.
2) [1967] 1 AC 617 is a landmark tort case, concerning the test for breach of
duty of care in negligence. The Judicial Committee of the Privy Council held
that loss will be recoverable where the extent of possible harm is so great
that a reasonable man would guard against it (even if the chance of the loss
occurring was very small).

WAGON MOUND CASES 1 AND 2

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 Rights to contribution in general average shall not be affected,
though the event which gave rise to the sacrifice or expenditure
may have been 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.
 Notes: Effect of fault of the claimant, The Carron Park, If Hague
Visby is applicable position different. (See p.58,59), If the fault is
that of a party other than the claimant.
 The Irrawady, The Jason Clause, New Jason Clause etc see.
(P.60,61)

RULE D
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 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.
 All parties claiming in general average shall give notice in writing to the
average adjuster of the loss or expense in respect of which they claim
contribution within 12 months of the date of the termination of the common
maritime adventure.
 Failing such notification, or if within 12 months of a request for the same any
of the parties shall fail to supply evidence in support of a notified claim, or
particulars of value in respect of a contributory interest, the average adjuster
shall be at liberty to estimate the extent of the allowance or the contributory
value on the basis of the information available to him, which estimate may
be challenged only on the ground that it is manifestly incorrect.

RULE E
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Note: Many times parties claiming GA failed to give timely notice of
their intention to claim or having done so failed to produce adequate
evidence in support of their claim inspite of being requested to do so.
So the ‘cut-off’ provisions have been included.

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 Any additional expense incurred in place of another expense,
which would have been allowable as general average shall be
deemed to be general average and so allowed without regard
to the saving, if any, to other interests, but only up to the amount
of the general average expense avoided.
Note: This Rule lays down the ‘Principle of substituted expenses’ .
Contra English cases of Wilson v. Bank of Victoria, Lee v. Southern
Insurance.

RULE F
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 General average shall be adjusted as regards both loss and contribution upon the
basis of values at the time and place when and where the adventure ends.
 This rule shall not affect the determination of the place at which the average
statement is to be made up.
 When a ship is at any port or place in circumstance s which would give rise to an
allowance in general average under the provisions of Rules X and XI, and the cargo or
part thereof is forwarded to destination by other means, rights and liabilities in general
average shall, subject to cargo interests being notified if practicable, remain as nearly
as possible the same as they would have been in the absence of such forwarding, as if
the adventure had continued in the original ship for so long as justifiable under the
contract of affreightment and the applicable law.
 The proportion attaching to cargo of the allowances made in general average by
reason of applying the third paragraph of this Rule shall not exceed the cost which
would have been borne by the owners of cargo if the cargo had been forwarded at
their expense.

RULE G 53
 Rule I to Rule XXII
Rule I - Jettison of Cargo
Rule II - Loss or Damage by sacrifices for the common safety
Rule III - Extinguishing fire on shipboard
Rule IV - Cutting away wreck
Rule V - Voluntary stranding
Rule VI - Salvage remuneration (One of the most important and contentious changes in the YAR 2004
is the amendment to Rule VI disallowing salvage remuneration in general average. Thus, salvage
payment will lie where it falls. An exception is made where one party to the salvage has paid all or
any of the proportion of salvage due from another party. In such a case the unpaid contribution to
salvage due from that other party shall be credited in the general average adjustment to the party
that has paid it, and debited to the party on whose behalf the payment was made.)
Rule VII - Damage to machinery and boilers

NUMBERED RULES 54
Contract of Salvage
SALVORS TO SINK GIBRALTAR SHIPWRECK’S STERN
AHEAD OF HEAVY WEATHER
 salvage, in maritime law, the rescue of a ship or its cargo on navigable waters from
a peril that, except for the rescuer’s assistance, would have led to the loss or
destruction of the property. Under some jurisdictions, aircraft may also be salved.
Except for salvage performed under contract, the rescuer—known as the salvor—
must act voluntarily without being under any legal duty to do so, apart from the
general duty to give assistance to those in peril at sea or to stand by after a
collision. So long as the owner or his agent remains on the ship, unwanted offers of
salvage may be refused.
 A derelict—a vessel found entirely deserted or abandoned without hope or
intention of recovery—is, however, fair game for anyone who comes across it.
Typical acts of salvage include releasing ships that have run aground or on reefs,
raising sunken ships (or their cargo), putting out fires, and so on.
 The popular belief that a salvor becomes the owner of the property, at least if it
was abandoned by the owner or was derelict, is erroneous. The owner may
always reclaim his property from the salvor on paying salvage money. The salvor,
for his part, has a maritime lien on the salved property (in an amount determined
by national statute or juridical custom) and need not return the property to the
owner until his claim is satisfied or until security to meet an award is given. An
owner who elects not to reclaim his property cannot be made liable for a salvage
reward.
 Obtaining assistance: When a ship in distress and the Master has decided that assistance
is necessary, he should act promptly to request any available source using the most
expeditious means at his disposal. When one or more suitable ships respond to the call for
assistance, the Master should immediately request such ship(s) to undertake whatever
action is necessary.

 The assistance should never be delayed merely to negotiate a particular form of

agreement or contract terms. Generally, those rendering beneficial assistance to a ship in
peril are entitled to salvage. It is not essential to agree upon the contractual terms for the
required aid since there is a right under maritime law to rescue, which exists
independently of contract. If the assisting ship(s) request the Master to agree to a
contract for the assistance, Lloyd "s Standard Form of Salvage Agreement, known as Lloyd
"s Open Form ( is the Form most usually offered and should be agreed upon to avoid any
delay in assistance being rendered. This Form provides protection for both parties in the
salvage agreement.

SALVAGE CONTRACTS -THE LLOYD’S OPEN

FORM - “NO-CURE-NO-PAY” OR FIXED
PRICE CONTRACT
 Lloyd "s Open Form was revised in 1990 to reflect the 1989 International Conference on
Salvage and the text of the International Convention on Salvage, 1989. The Form bears
the reference LOF 90. Although earlier editions of Lloyd "s Open Form should have been
withdrawn, copies may still exist and be offered and, to avoid disputes or delays, they
should be accepted.

 LOF 90 can be agreed orally or by radio sending the following message: "ACCEPT
SALVAGE SERVICES ON BASIS LLOYD "S STANDARD FORM LOF 90 NO CURE NO PAY
ACKNOWLEDGE REPEATING preceding. MASTER........"
 If an earlier edition of Lloyd "s Open Form is offered and accepted, the message
should refer to that Form. The engagement of one salvor under LOF 90 does not
preclude the Master from engaging other salvors. Similarly, the salvors may hire
other salvors as subcontractors. If more than one salvor is involved, every effort
should be made to obtain the salvors' agreement to cooperate and to appoint
one leading salvor. The ship offering assistance may decline LOF 90 and
propose other terms. If the Master considers that immediate assistance is
essential, he should accept the terms offered. Still, if he feels that the terms
offered are unreasonable or greedy, he should register a protest immediately
or, if he thinks that this may delay the assistance.

 If the Master considers that immediate assistance is not essential, it may be

possible, where time allows, to have the assistance arranged on a contractual
basis stipulating ordinary tariff fixed lump sums or daily rates. However, it is
emphasized that where life, the ship, its cargo or the marine environment are in
peril, such negotiations should not delay the engagement of salvors.
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 The Lloyd's Open Form or "LOF" is the most widely-used "No-Cure-No-Pay" salvage
contract. In return for salvage services, the salver receives a proportion of the salved
value (the value of the ship, its cargo and bunkers).
 In the past, if there was no recovery, there was no payment, whatever the expense of
the operation. However, this made the salvers shy away from responding to high risk or
low-value casualties. This resulted in delays in salvage operation and increased risks of
environmental damage.
 (2) To counteract this, presently, there is a choice of 2 incentives to the salvers. The first
is "Special Compensation," which becomes payable to the salver when he has
prevented or minimized damage to the environment. Still, the value of the salved
property is insufficient to provide for a normal salvage award.
 Alternatively, the salver may choose the SCOPIC (Special Compensation P&I Club
Clause) [only if he had opted for it in the LOF]. The main difference between "Special
Compensation" and "SCOPIC" is that in the former, the award is decided by
Arbitration. In contrast, in SCOPIC, the remuneration is based on pre-agreed tariff
rates. Certain conditions apply when SCOPIC is used.
 (3) While actual salvage remuneration is covered by Property Underwriters (
H&M/Cargo), the Special Compensation/SCOPIC is covered by the P&I Club.

USING THE LLOYD'S OPEN FORM FOR "NO-

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CURE-NO-PAY" SALVAGE CONTRACT
Thank you

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