Eagle Bulk PTE. LTD. v. Salt Source, LLC, (M/V “Gladiator”) – SMA No. 4448, 29 July 2022
The MV Gladiator was chartered under a Contract of Affreightment (COA) on January 10, 2020. The owner, Eagle Bulk, disputed load port demurrage incurred during the first lifting, unpaid freight charges, and losses for a breach of contract due to the charterer, Salt Source, failing to nominate a second cargo. Salt Source counterclaimed for damages to a portion of their cargo which they claimed had been contaminated during the voyage. They also claimed that they were owed further damages for the cancellation of the remaining three contracted voyages.
The force majeure clause of the COA stated:
Force Majeure and Acts of God – Neither party shall be responsible for not fulfilling its obligations under this agreement in case of war, fire, acts of terrorism, riots, strikes, lockouts, labor disputes, floods, high water, other acts of God, the disruption breakdown or unavailability of facilities beyond the reasonable control of the party claiming force majeure, and/or any other cause beyond the reasonable control of such party (each, a ” force majeure event”): provided that shortfalls in mine production not caused by the foregoing events will not be deemed a force majeure event.
In the event of a delay in performance or non-performance resulting from a force majeure event, the delaying or non-performing party shall notify the other party in writing within 48 hours specifying the cause of delay or non-performance and the estimated time of performance. The delaying or non-performing party shall make all reasonable efforts to resolve such force majeure event. The lack of communication within the period defined above will result in the loss of the right to claim a force majeure event.
The COA agreement was for four liftings of solar salt between March and December 2020. The vessel arrived for the first time at the load port in Brazil on April 11 and left April 29. The vessel arrived at the discharge port in Alabama on May 14. After the discharge was completed no more liftings were nominated by Salt Source or performed by Eagle Bulk.
The first demurrage dispute was whether or not laytime should be counted during the drying of a lime wash on the vessel. Salt Source argued that the lime wash was not complete until it was dry, while Eagle Bulk argued that the lime wash was complete right after its application 6 hours before it was completely dry.
The panel ruled that the drying time was not a part of the lime wash and did not disrupt the running of laytime. They came to this decision citing a general rule that once laytime commences, it continues without interruption unless there is a specific exception in the charter. They also found that no actual loading time was lost during the drying period.
The terms of the COA included that the vessel must be clean of previous cargo, loose rust scale, and must pass inspection by charterer’s inspector. At the loading port, Salt Source’s surveyor issued a report that the Gladiator’s holds were suitable for loading. However, while the Gladiator was discharging, it was noticed that there was contamination of cargo in several of the holds. Salt Source estimated that the contaminated quantity of the cargo that was no longer viable to be about 1200-1500 MT. This cargo was separated and unloaded onto the ground outside the discharging terminal on May 14. Salt Source informed the owner of the contamination, but no joint survey was arranged at the time of discharge.
Over four months later, a joint survey was finally made that noted the pile contained debris and other contaminants. At this time, the amount of contaminated cargo remaining was estimated to be about 900 MT. The head owner of the vessel stepped in to refute the claims of damaged cargo saying that Salt Source failed to document the damage to the cargo, failed to mitigate its damages, and could not claim lost profits that may never be incurred.
The panel noted that a portion of the cargo had been damaged during the voyage. However, they also noted that the cargo was loaded with a clean bill of lading. They stated that it was the duty of the receivers to launch an investigation into the contamination of the cargo, and industry standard that an independent surveyor be arranged quickly. Because this did not happen and the extent nor quantity of the damage was documented by reliable sources, the panel ruled that Eagle Bulk only owed damages for the later estimated 900 MT of contaminated cargo. The panel refused to award Salt Source damages for potential profits of the cargo because there was no evidence that the cargo had already been contracted for sale.
In the case of the canceled 2nd, 3rd, and 4th voyages, Salt Source claimed that it did not nominate a second cargo due to complications of COVID-19 and then Hurricane Sally. Salt Source claimed that these two disasters counted as force majeure under the COA and the charter was thereby canceled. Eagle Bulk countered that Salt Source wrongfully sought to repudiate and cancel the COA. Eagle Bulk sought arbitration on September 11 for the declaration of Force Majeure, and Salt Source claimed that this was a repudiatory breach of the COA. Salt Source claimed that they still had several months in the year after September 11 in which they could have completed the final three voyages.
The panel found that Eagle Bulk seeking arbitration in September did not constitute notice that they would not perform further voyages and thus was not a repudiatory breach. They also found that the communications between the parties were not sufficient declarations of force majeure regarding the procedure for doing so laid out in the COA. For this reason, the panel sided with Eagle Bulk in their claim for damages for the loss of the second voyage (as they were able to mitigate costs for the 3rd and 4th voyages).