General Average Clauses- Charter Party Law By: Jeffrey A. Weiss One of the most ancient aspects of maritime law is general average. When an intentional sacrifice of property is made onboard ship to avoid a common peril, or when an intentional expenditure is made, also to avoid a common peril, general average requires all of the parties to the marine adventure that benefited by the intentional sacrifice or expenditure to contribute money on a pro rata basis. Who are the parties to the marine adventure? They are of course, the vessel's owner, the charterer, as well as other parties such as the cargo interests. In this article, I will discuss two clauses that concern general average that are routinely found in charter parties and bills of lading. The first clause refers to the York Antwerp Rules. The second is the New Jason Clause. However, I will first provide a quick review of the principles of general average. Prerequisites for a General Average. Imagine that a fully laden vessel is sinking. She is trading under a time charter party and bills of lading have been issued to various cargo interests. The master of the vessel must act quickly. In order to save the vessel and her cargo, the master orders that the vessel be lightened by tossing part of the cargo overboard (jettison). The intentional sacrifice promotes the saving of the vessel. Days later, the ship and her remaining cargo arrive safely at destination. Who suffers the loss arising out of the jettison? Is it the owner of the jettisoned cargo? The shipowner? The charterer? It seems natural that the most equitable solution will be to allocate the loss among the many parties that benefited by the intentional sacrifice. This is general average. It shifts part of the loss suffered by the owner of the jettisoned cargo onto the various other parties that benefited by the intentional sacrifice   in this case, the vessel's owner, the charterer, as well as the other cargo interests onboard. All of the parties to the marine adventure that benefited by the sacrifice must share in the loss. Everyone must contribute to the loss on a pro rata basis. The calculation is complicated. However, contributions are more or less determined by comparing the value of an individual's interest onboard a vessel (such as the value of your cargo) with the overall valuation of the marine adventure (ship and all of her cargo, bunkers, freight, etc.). General average is not limited to cases involving jettison of cargo. Nor is the sacrificed interest always the vessel's cargo. In fact, most of the time it is the vessel and her owners that seek contributions. In short, there are many intentional sacrifices and/or expenditures of an extraordinary nature that may give rise to general average contributions. Examples of general average sacrifices or expenditures include: 1) A vessel that is in danger of sinking is intentionally grounded. The hull damage arising out of the grounding is general average. This will require contributions from the other parties to the marine adventure. Everyone must pay their fair share of the hull damage. 2) A distressed vessel may require the skill and efforts of professional salvors. The salvage award earned by the salvors is typically shared by all of the benefited parties to the marine adventure. 3) The shipowner incurs expenses in calling a port of refuge in order to avoid extremely heavy weather. All parties must contribute to the intentional expenditures incurred. The law of general average is very old. It has its historical basis in the ancient sea codes of the early Mediterranean civilizations. It is part of the maritime law of virtually every seafaring nation. The York  Antwerp Rules The fundamental application of general average is remarkably consistent throughout the world's maritime community. However, there are differences from nation to nation. In order to provide uniformity, the international shipping community created the York Antwerp Rules. These Rules are routinely merged into the contract of carriage by a charter party or bill of lading clause. An example follows: "General Average shall be adjusted, stated and settled according to the York Antwerp Rules 1994, and, as to matters not provided for by those rules, according to the laws and usages at the port of New York...." By the middle of the nineteenth century, the rules of general average were incorporated into the statutory laws of most European nations and were fully recognized in the common law of the United States. However, as suggested before, the practice of general average throughout the world, and most particularly in the European and Anglo-American systems, still differed to some extent. For this reason, attempts were made during the latter half of the nineteenth century to establish uniformity. his was accomplished with the adoption of the York  Antwerp Rules of 1890. The Rules were quickly accepted by most seafaring nations and are now universally incorporated into contracts for the carriage of goods. They were since modified numerous times. The Rules are used to identify those sacrifices, acts and expenditures that should be considered general average. They also provide guidelines for valuing property in order to determine the various contributions required by the parties. Let's look at a couple of the Rules. Rule A of the York   Antwerp Rules reiterates the basic requirements for a general average: "There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure. General average sacrifices and expenditures shall be borne by the different contributing interests on the basis hereinafter provided Rule III is more specific and states: 'Damage done to ship and cargo, or either of them, by water or otherwise, including damage by beaching or scuttling a burning ship, in extinguishing fire on board the ship, shall be made good as general average except that no compensation shall be made for damages by smoke howsoever caused by heat of the fire." Therefore, in accordance with Rule 111, damage done to the vessel arising out of efforts to fight a shipboard fire (such as seawater damage to the vessel's machinery) is general average and is to be shared by all parties to the marine adventure. However, the shipboard damage caused directly by the fire (and not due to the voluntary act of firefighting) is particular average, which is strictly for the shipowner's account. The York Antwerp Rules do not have the force of law, unless they are expressly incorporated into the contract of carriage, which they almost invariably are. Thus, the Rules represent a consensus of the international shipping industry as to how a general average should be adjusted. The New Jason Clause This standard clause read substantially as follows: " In the event of accident, danger, damage or disaster before or after commencement of the voyage resulting from any cause whatsoever, whether due to negligence or not, for which, or for the consequences of which, the Carrier is not responsible by statute, contract or otherwise, the goods, shippers, consignees, or owners of the goods shall contribute with the carrier in general average to the payment of any sacrifices, losses or expenses of a general average nature that may be incurred, and shall pay salvage and special charges incurred in respect of the goods." The maritime law of the United States denies the shipowner the right to seek general average contributions when the peril avoided by the sacrifice or expenditure was occasioned by the carrier's fault, such as the fault of the master or crew. The classic example would be when a vessel grounds because of an error in navigation and the shipowner subsequently makes expenditures and sacrifices to save the vessel and her cargo. Under the law, the shipowner will not be entitled to seek general average from cargo interests and/or the charterer, even if the remaining property is indeed saved. This rule was affirmed by the U. S. Supreme Court in an old case involving the vessel IRRAWADDY. She grounded due to the negligent navigation of her master. It was conceded that the shipowner was not liable for any direct damage to the cargo due to the vessel's stranding because of the protection afforded the shipowner under the terms of the Harter Act and the bill of lading. The Harter Act is an old statute that provides (as does the subsequent Carriage of Goods By Sea Act of 1936) protection for the shipowner against being held responsible for cargo loss or damage arising out of certain causes, such as an error in the navigation or management of the vessel. The owner of the IRRAWADDY also sought general average contributions from cargo interests, to help pay for the sacrifices and expenditures that it made after the grounding to save the vessel and her cargo. The Supreme Court rejected owner's general average claim. The Court opined that while the bill of lading and the Harter Act shielded the shipowner from liability for cargo loss or damage, it could not be used as "a sword by which he might attack the cargo by claiming general average ...... This result was unacceptable to shipowners. They began to insert special clauses into bills of lading and charter parties (then called "General Average Negligence Clauses") that attempted to overcome the adverse precedent established by the Supreme Court in the URRAWADDY. These clauses essentially provided that if the shipowner exercises due diligence to make the ship seaworthy, he was not only exonerated for cargo loss or damage arising out an error in the navigation or the management of the ship, but was also entitled to general average contributions. The legality of these clauses was suspect until a small vessel called the JASON ran aground on the south coast of Cuba in 1904. The vessel stranded because of negligent navigation. The contracts of carriage for the JASON contained a General Average Negligence Clause similar to the one described above. There was no question that at the outset of the voyage the vessel was seaworthy and was properly manned, equipped and supplied. The shipowner incurred considerable salvage charges and sought general average contributions from cargo interests. The cargo interests refused alleging that under the rule of the HUUWADY, no such contribution was allowed. Additionally, cargo interests argued that the General Average Negligence Clause was unenforceable and against public policy. The Supreme Court ruled that it was not against public policy or the law for a carrier to provide in its contract of carriage a clause that requires contributions into a general average even if the need for the general average sacrifice or expenditure arose out of a cause for which the carrier is exonerated, such as an error in the navigation of the vessel. The General Average Negligence Clause was thereafter given its present name, the Jason Clause (it has been modified over the years and is now referred to as the New Jason Clause). The clause survived succeeding legal challenges and has been expanded in application. The basic rule today is that the New Jason Clause gives the shipowner the right to seek general average contributions if the accident, danger, damage or disaster occurs with or without the negligence of the shipowner or his employee, so long as the need for the intentional sacrifice or expenditure is a cause for which the carrier is not responsible for cargo loss or damage under the terms of the contract of carriage or the maritime law. However, you should realize that under U. S. law, the shipowner must still expressly provide in the contract of carriage for a "Jason" result by including a Jason Clause. Otherwise, the rule of the IRRAWADDY will control and the shipowner will be denied contributions in general average when the need for the sacrifice or expenditure was due to the negligence of the shipowner or its employees.