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Demurrage compensates only for lost freight?

If laytime is exceeded, demurrage kicks in to compensate a shipowner for the loss of prospective freight earnings. But is that all demurrage is intended to do, or is there more to it? What about claim for deterioration of cargo as a result of the delay? UK Court of Appeal looked at these questions in The Eternal Bliss [2021].

Discharging was delayed by approx. 31 days due to port congestion and lack of storage ashore. As a result, cargo of soya bean deteriorated. Owners settled with the receivers for $1.1m. Owners wanted to recover that cost from charterers alleging breach of their obligation to complete discharge within the permitted laytime. Charterers contended that that demurrage liquidates all losses flowing from the laytime being exceeded; and if unliquidated damages (such as damage to soya bean cargo) are to be sought in addition to demurrage already paid ($600k+) then owners need to prove that charterers breached another obligation under the C/P.

Leading textbooks had conflicting views on this issue. The only authority was a 30 yr old case, The Bonde. Camps were split on whether it was correctly decided, but the Court of Appeal in The Eternal Bliss had little hesitation in endorsing the view put forward in that case that demurrage covers all losses (including cargo damage caused by deterioration) flowing from a failure to complete cargo ops within the laytime.

Popular belief that demurrage provision is there only to compensate the owner for lost freight is not correct. Owners and charterers of course can agree otherwise in the C/P but the clause must be clearly worded.

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