When does Undisputed Demurrage Become Disputed Demurrage?

9th October 2014 phil Demurrage 2 Comments

Vessels heading to West Africa often incur lengthy delays as the nature of the trade now dictates that discharge is to a series of lightering vessels to several different final receivers.  Clearly delays due the timing of these lighter vessels combined with weather and other operating problems means that the mother vessel could be waiting off the coast of West Africa for several weeks.

It is not uncommon for a clause to be added to a charter party along the lines ‘Undisputed demurrage in West Africa to be paid every x days’.  The interval ‘x’ is usually agreed as anything from every 5 days to as much as every 10 days.  This is a good way of ensuring that the owner is seeing some cash flow for his daily expenses despite the fact that freight will not be paid until completion of discharge.

What is ‘Undisputed Demurrage’?  I guess this is all the time the vessel is waiting around for the lighter vessels to turn up and for favourable weather conditions subject to any weather clause which may be applicable.  What about the actual discharge time – is this undisputed? 

I have recently heard of charterers happily paying interim demurrage invoices in this way but only until the vessel commences discharge.  I don’t know enough about the details to say whether once the vessel has commenced discharge no more interim invoices are paid or whether the charterer will pay interim invoices covering the period of wait in between lighter vessels.

What does seem clear is that the charterers have not raised any specific disputes for the time the vessel is discharging so can this time be classified as undisputed?

On the other hand I can see charterers view.  They presumably don’t want to pay any time the vessel is discharging in case the vessel is not performing as per the pumping clause or any other exclusion under the charter party.

Perhaps a way round this would be to have a clause which allows the charterer to retain the last three days demurrage until full documents have been provided and the charterer has a reasonable time to check things out.  Or better still perhaps Owners and Charterers should agree to the Asdem Code of Practice (see downloads at www.asdem.co.uk) so that the Owner gets prompt settlement of demurrage in exchange for agreeing to reopen the claim if the charterers subsequently find a legitimate reason to believe they over paid the demurrage.

Failing specific agreements such as the above the question remains – can any period be ‘disputed’ if Charterers have not presented Owners with specific objections?

What do you think?  Have you had a similar case?  If so how was it resolved?  Please add your thoughts and comments here.

2 Comments

  1. Petros 3 years Reply

    Dear Phil

    In my opinion / experience, in case the owners don't wish to encounter problems with the above, the best term to be used is 'demurrage on account' instead of 'undisputed demurrage'.

    Whenever we send a 'demurrage on account' or 'undisputed demurrage' invoice, we accompany it with a wording similar to the below, in order for the charterers to confirm owners' fair intentions:

    'Payment of demurrage on account / undisputed demurrage is made strictly without prejudice to charterers' rights. Fully executed demurrage claim will be sent in due course, along with full supporting documents. Thereafter, the claim will be negotiated between the two parties and agreed as per charter party terms. In case of any balance in charterers' favour after the two parties' agreement on the final demurrage claim, same will be refunded by the owners accordingly'.

    Unless something extraordinary has occurred (vessel's stoppage due to technical problem etc.), in case the phrase in the charter party is 'undisputed demurrage', I believe that the charterers can either pay the demurrage period or present their disputed times to the owners for subsequent discussion / agreement.

    Petros

  2. Annette Lyngesen 1 year Reply

    Dear Phil,

    I agree with Petros, very good wording, and indeed in line with the ASDEM Code of Practice.

    Annette