Before the voyage commences
1 General average clause in bills of lading or charter party
a) Code of Adjustment
The contract of carriage is evidenced in the bill of lading or charter party or both, and it is customary for a clause to be incorporated which deals with the adjustment of general average. Such a clause might read:
“General average to be adjusted, stated and settled in accordance with the York-Antwerp Rules 1974”.
It is important that, as far as possible, both the bills of lading and the charter party should have the same clause. If there is a difference, an amendment should be made at the time the contract is negotiated. It is also important to see that old bills of lading are brought up to date by including reference to the York-Antwerp Rules 1974 and that all bills of lading in use contain the same reference.
b) Place of adjustment
The clause dealing with the code of the adjustment may also deal with the place of adjustment either in general terms,
General average to be adjusted according to the York-Antwerp Rules 1974 at a port or place at carrier’s option;
or it may specify the place,
General average to be adjusted according to the York-Antwerp Rules 1974 in London (or New York or Toyko or Rotterdam).
c) Currency of adjustment
Consideration should be given to the question of the currency in which the adjustment of the general average should be prepared. Generally it is the shipowner who is responsible for financing the general average situation and he may wish the adjustment to be prepared in his trading currency.
The York-Antwerp Rules do not particularize the currency of the adjustment, but they do state in Rule G that:
General average shall he adjusted as regards both loss and contribution upon the basis of values at the time and place when and where the adventure ends.
This rule does not affect the place where the average statement is to be made up and it does not necessarily imply that the proper currency is that of the place of destination. However, the matter can be clarified, and ambiguity avoided, if the general average clause in the bill of lading declares the carrier’s option for a particular currency.
It may be in very general words such as,
General average to be adjusted according to the York-Antwerp Rules 1974 in London in a currency at carrier’s option.
or it may specify the currency,
General average to be adjusted according to the York-Antwerp Rules 1974 in London and to be stated and settled as regards sacrifice, expenditure and contribution in United States Dollars.
2 Small general averages
There are occasions when a ship with cargo on board incurs a small amount of general average expenditure or there is a small general average sacrifice.
It there are a number of bills of lading and receivers, the cost of preparing a full adjustment and collecting all the comparatively small contributions would exceed the amount recovered from the cargo, or the amount of time and trouble necessary to make such collection would be disproportionate to the sum collected.
In these circumstances there are different ways in which the problem may be resolved.
For commercial reasons the shipowner may decide to bear the full amount of the general average, or if the vessel is under time charter, he may ask whether the time charterer would pay the cargo’s proportion in order to maintain the goodwill of the cargo by not asking them for small contributions.
It may be that there are on board a few items of cargo with high values, and it may be worthwhile obtaining security from them and ultimately collecting their proportion of the general average.
Another alternative is for the average adjusters to prepare figures for submission to hull underwriters inviting them to pay the general average in full, on grounds of economy. While underwriters do make such payments, it is not always possible to demonstrate the economy of the action if the cargo has a much higher value than the ship.
Perhaps the best solution to this problem is to insert into the hull policy a small general average clause which may read as follows:
It is agreed that, where the vessel has cargo on hoard and it is estimated that the general average will not exceed (€ 50.000,00), the assured has the option of claiming up to a limit of (€ 50.000,00) under this insurance, without recourse to cargo, hut excluding commission and interest and subject always to the application of the policy deductible. (The figures in brackets may be varied).
It should be noted with regard to a small general average clause that:
As underwriters are being asked to make payment in full up to a certain figure it is usual for them not to pay commission and interest.
The only charge which they pay additionally is the adjuster’s fee for drawing up the estimated claim.
The sum claimed under the clause is subject to the deductible being applied to the claim, and it is only the difference between the amount of the deductible and the (€ 50.000,00) which would be claimable.
If the clause is to be of practical use, it is essential that the difference between the sum in the clause and the amount of the deductible should be sufficient to take care of most small general averages. For example, in the clause above, a deductible of (€ 5.000,00) would give a reasonable margin to claim, but a deductible of (€ 30.000,00) or more would not.
In cases where the general average exceeds the clause limit nut the circumstances so justify, underwriters may still be approached to pay the full general average on grounds of economy.
Takis Kalogerakos
Marine Underwriter
