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Reshaping ocean towage contracts

BIMCO’s popular ocean towage agreements have been overhauled.
Grant Hunter explains what’s new and what’s changed

TOWCON and TOWHIRE are the most widely used standard agreements in the ocean towage industry. The documents, which were first published by BIMCO in 1985, have recently been updated to ensure that they reflect current commercial practice, laws and regulations. During the revision process the opportunity was taken to resolve various ambiguities and to clarify areas of the contracts where necessary. From the outset it was decided to avoid unnecessary rewriting of provisions in order not to disturb the popularity these documents continue to enjoy.

The team behind the revision project was composed of practitioners from the towage industry, including representatives from the International Salvage Union, Svitzer, Fairplay Towage, Marint and LKL Oceantrade. P&I club advice was provided by Steamship Mutual P&I Club.

This article contains a brief overview of some of the key changes that appear in the revised forms. Many of the provisions of TOWCON (lump sum agreement) and TOWHIRE (daily hire agreement) are common to both forms; therefore the main changes and additions, which are described below, apply to both forms, unless otherwise stated.

Bunker Price Adjustment

To improve the structure and readability of the agreements, the important provisions relating to fluctuations in bunker price during the voyage have been taken out of the Price and Conditions of Payment clause to form a new Clause 4 (Bunker Price Adjustment). The purpose of Clause 4 is to protect both parties from fluctuations in the price of bunkers during the course of the voyage:

Sub-clause (a) establishes the bunker price for the purposes of price adjustment. This figure will usually be the price of the tug’s bunkers at the time of fixing the contract. It should be noted that the revised clause deals with actual prices paid and not average prices as in the previous edition.

Sub-clauses (b) and (c) provide the adjustment mechanism to pay compensation to the hirer if the actual price paid for bunkers during the voyage is higher or to the tugowner, if the price paid is lower, than the price stated in sub-clause (a).

Sub-clause (d) requires that both the log book and bunker supplier invoices are required as conclusive evidence of the quantity of bunkers consumed and the actual prices paid.

Canal and Restricted Waterways

This is a new provision for TOWCON. Clause 7 (Canal and Restricted Waterways) is based on the Canal Transit Clause found in the PROJECTCON form (a BIMCO standard contract designed for tug and barge combinations).

Sub-clause 7(a) echoes the provision of Clause 6 (Free Time/Delay Payments). If the contemplated route as stated in Box 23 of Part I, involves a transit of a canal or restricted waters, the hirer is granted free time for any such transit, with such free time counting against the number of hours stipulated by the parties in Box 28. If the stipulated free time is exceeded due to delay, then the extra time incurred is payable by the hirer at the delay payment rate. However, if the tugowner is responsible for the delay to the tow then the delay payment is not payable for that part of the delay.

Sub-clause 7(b) contemplates the situation where the intended canal or waterway route is closed to the tow through no fault of the tugowner. In such circumstances the tow will have to re-route to reach the destination and consequently the hirer is obliged to pay for the extra time incurred at the delay payment rate.

Place of Departure notices

Clause 13 (Place of Departure) now incorporates the notice requirements into the main body of the form. This information, describing when the notice must be given and what period must be stated, used to be printed as a guiding note on the reverse of Part I of TOWCON. The drafting team considered that it was more appropriate to incorporate this information into the main terms, especially as with the greater use of BIMCO forms in an electronic format the note might be overlooked.

Sub-clause 13(d) contains a default position in respect of the date of departure should the parties fail to comply with the notices procedure in sub-clause (c). In such cases the date of departure will be deemed to be the last day of the Initial Departure Period or the last day of the Final Departure Period, whichever is earlier.

Riding Crew

The original Riding Crew Clause from TOWCON has been rewritten to make its meaning clearer to the parties to the agreement. The purpose of Clause 15 (Riding Crew) is to allocate the cost and responsibility for riding crew placed on board the tow either by the hirer or the tugowner for the hirer’s purposes, or by the tugowner for his own purposes.

The Riding Crew Clause is divided into three sub-clauses. Sub-clause 15(a) deals with the provision of riding crew for the hirer’s purposes and which party will provide them at the hirer’s request. A new box has been added to Part I (box layout) so that the parties can agree from the outset how many riding crew are to be provided to man the tow. If the hirer elects to provide his own riding crew then permission for this, subject to various conditions, is entirely within the tugowner’s discretion. The riding crew, whether provided by the tug or the hirer, is always at the hirer’s expense. As the tug is responsible for the control of the tow, of paramount importance is the proviso that the riding crew is under the orders of the tugmaster at all times.

Sub-clause 15(b) relates to the provision by the hirer of accommodation and victualling for the riding crew as well as ensuring compliance with applicable legal or regulatory requirements. The final sentence of sub-clause 15(b) deals with the common working language that the riding crew need to be able to speak, and understand, for their communications with the tug crew.

The previous edition of TOWCON called for the riding crew to be able to understand English or another “mutual” language. However, it was not clear whether the “mutual” language should just be mutual to the members of the riding crew or mutual to the members of the tug’s crew and the riding crew. The language issue has been dealt with in TOWCON 2008 by expressly stating that the riding crew must be able to speak and understand a language that is also readily spoken and understood by the crew of the tug. Sub-clause 15(c) deals with the tug providing riding crew for its own purposes: for example to check the towing connection or adjust the tow’s trim. In such cases the riding crew will be at the tugowner’s expense.

Liability and Indemnity

The most important clause in the agreements is Clause 25 (Liability and Indemnity), which has always been based upon “knock-forknock” principles and is a cornerstone of both the TOWCON and TOWHIRE agreements. It has been amended to bring greater clarity to its provisions. It has also been renamed “Liability and Indemnity” to be more descriptive of its content. The purpose of the Liability and Indemnity Clause is to strike a balance between the tugowner and the hirer so that each party bears responsibility for the injury or death of its own employees, servants or agents, and, with one exception, for the damage to or loss of its own equipment. This reflects standard practice in the offshore industry where liabilities between the parties are agreed on a so-called “knock-forknock” basis.

Sub-clause 25(a)(i) provides the hirer with an indemnity from the tugowner in respect of death and/or personal injury to the tug’s crew, the tugowner’s riding crew and any other personnel placed on board the tug or tow by the tugowner, or anyone who is on the tug but who is not there on behalf of or at the request of the hirer. Sub-clause 25(a)(i) has been amended to specify, more clearly, the period to which it applies. Previously it stated that it covered injury or death “occurring during the towage or other service hereunder”. It was considered that this phrase might not necessarily encompass injuries to or death of personnel that occur at the very beginning or the very end of a towage operation.

In order to resolve this concern new wording has been added to clarify that the intention is that the period of liability commences with the arrival of the tug at the pilot station or customary waiting place and ends when disconnection occurs at the place of destination. In respect of riding crew or other personnel provided by the tugowner and placed on board the tow, the period of responsibility is extended, if appropriate, to whatever point such personnel are placed on board the tow until they finally disembark or, for example, to cover a situation where an accident occurs during a deviation to the voyage. Sub-clause (a)(ii) is the reciprocal indemnity to sub-clause (a)(i) indemnifying the tugowner for any injury or death to the hirer’s personnel or personnel other than those of the tugowner on board the tow.

Sub-clause 25(b) deals with liability for certain types of loss or damage. In sub-clause 25(b)(i) the tugowner agrees to bear the responsibility for the listed losses. It should be noted that in 25(b)(i) (1) towing gear and accessories used by the hirer that are lost, damaged or become unserviceable are excluded from the tugowner’s liability. Sub-clause 25(b)(ii) deals with losses to be borne by the hirer. A previous source of some uncertainty as to whether the seaworthiness of the tug has an effect on the knock-forknock division of liability has been clarified by the addition of express wording in sub-clause 25(b)(ii). This has been done in the light of Smit v. Mobius [2001] CLC 1545 where it was considered that issues of seaworthiness should not interfere with the division of liabilities under TOWCON.

More recently, in the case of A. Turtle Offshore SA Assuranceforeningen Gard-Gjensidig v. Superior Trading Inc [2008] EWHC 3034 (Admlty) the issue of protection from liability for breach under Clause 18 (Liabilities) of TOWCON was considered. It was held in the Turtle that although the loss of the tow was caused by the tugowner’s breach of their contractual obligations to exercise due diligence to provide a seaworthy tug and to use their best endeavours to perform the towage, the provisions of Clause 18 (Liabilities) nevertheless exempted them from liability for the losses incurred by the owners of the tow.

Sub-clause 25(c) deals with liability for other types of financial loss. This provision has been substantially rewritten from the old 18.3 that appears in TOWCON. The purpose of subclause (c) is to exclude both parties from liability for consequential loss or damage whether direct or indirect. The wording specifies particular types of financial loss to be excluded: loss of profit, loss of use and loss of production. However, the provision includes liability for such losses if they are a result of a breach of the Agreement by one of the parties of Clauses 17, 18, 19, 22 and 23.

These clauses include:

• The hirer’s obligation to provide certificates and permits for the tow;
• The hirer’s obligation to tender a tow-worthy tow;
• The tugowner’s obligation to tender a seaworthy tug; and the wrongful termination of the contact by either party.

Sub-clause (d) gives the tugowner the right to avail himself of all applicable statutory rights and limitations irrespective of any provisions to the contrary contained in the contract.

Concluding comments

BIMCO feels confident that the revised TOWCON and TOWHIRE forms will provide users with a greater degree of certainty as a result of the improved structure and clarification of wording, as well as being up-to-date with the latest commercial practice.

Sample copies of both forms can be found on BIMCO’s website, www.bimco.org. As with all BIMCO’s recently revised documents, they can also be obtained electronically in an editable Word format through idea, BIMCO’s online charterparty editor.

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