Hyundai Merchant Marine Company Ltd v Trafigura Beheer BV

Contractual performance warranties are construed by identifying what a reasonable person with the relevant background would understand the parties to have meant, reading the contract as a whole. Where clear wording requires performance to be calculated over all sea passages and the whole period of hire, the warranty may be an all-weather warranty. An incorporated document does not automatically prevail over other contractual provisions. If incorporation creates an inconsistency, an express precedence clause must be applied. Subsequent contracts are generally inadmissible as aids to construing an earlier written contract.

This was a preliminary issue concerning two materially identical time charters for the vessel Gaz Energy. The claimant charterers contended that the charterparties contained an all-weather warranty of average speed and consumption. The defendant disponent owners contended that any speed warranty was limited to weather conditions up to Beaufort Force 4 by the terms of Gas Form C.

The issue required construction of amended Shelltime 3 forms, Additional Clause 42 and Gas Form C, including the effect of wording stating that the average speed was to be calculated on all sea passages and throughout the period of hire.

1. Construction of the charterparty. The court preferred the charterers’ construction. Additional Clause 42 had to be read with clause 24 and filled the otherwise incomplete speed and consumption figures. The figures had not been left blank.
2. All-weather warranty. Clause 24 required average speed to be calculated on all sea passages and throughout the relevant period of hire. Those words clearly created an all-weather speed warranty. The relevant figures were those in Additional Clause 42.
3. Gas Form C. The words “Otherwise as per Gas Form C” supplemented, rather than replaced or contradicted, Additional Clause 42. They incorporated matters not expressly dealt with in that clause, including inert gas generator consumption, but did not qualify the expressly stated speed and consumption provisions by the Beaufort Force 4 limitation.
4. Inconsistency. Even if the owners’ construction of Gas Form C were accepted, a Beaufort Force 4 qualification would conflict with the all-weather performance calculation in clause 24. The closing words of clause 24 provided that, in any conflict between Gas Form C and another contractual provision, the other provision prevailed.
5. Authorities and ancillary provisions. The reasoning in The Gas Enterprise did not apply because the contractual provisions there operated in the opposite way. The observations concerning clause 21 were supportive only and were not necessary to the decision.
6. The answer to the preliminary issue was that the charters contained the all-weather warranty contended for by the charterers.