Law Clause News

“An ounce of prevention is worth a pound of cure.” – Henry de Bracton, DeLegibus, ~1240Often clients or prospective clients come to me with a commercial contract issue perched on the precipice of full-blown litigation or arbitration. When I ask to see the contract, often times I see errors in drafting that either (1) give rise to the problem before me or (2) could create a bigger problem for the client in the future.The risk of drafting error is higher for Europeans looking to contract with American companies.

What’s the problem? On one side the owner has an obligation to follow the charterer’s slow-steaming instructions under the charterparty yet on the other the owner has the usually implied obligation under the Bill of Lading to proceed with due dispatch. Due dispatch means the most direct route at the fastest speed. There is legal authority that an unreasonable delay is a deviation. A deviation in this respect is a departure from the contractually agreed voyage that deprives the carrier of the defences and rights of limitation that are usually available under The Hague or Hague Visby Rules.

In an unpublished decision, the U.S. Court of Appeals for the Second Circuit ruled that a freely negotiated choice of law clause is binding, even where that choice tacitly included forfeiture of a claim. In the instant case, an insurance policy purchased by a ship owner included a clause providing that Norwegian law was controlling. Norwegian law does not recognize a maritime lien for unpaid insurance premiums. The ship owner went into bankruptcy, owing various debts, including the insurance premiums and various mortgages. The court held that, in transactions of an international character, a choice of law clause is binding unless the court finds that it would be unfair, unjust, or unreasonable to hold a party to its bargain. In re Millenium Seacarriers, Inc., No.