Explanatory notes

GENCOA is designed using the well-known BIMCO box layout pattern with the form consisting of two main parts: a box layout in Part I and the main terms and conditions in Part II.

Part l    

Part II

• Preamble
• Clause 1 - Subject of Contract
• Clause 2 - Total Quantity/ Number of Shipments
• Clause 3 - Period of Contract
• Clause 4 - Quantity per Shipment
• Clause 5 - Final Shipment
• Clause 6 - Programme of Shipments
• Clause 7 - Scheduling/Nomination
• Clause 8 - Declaration of Loading Port(s)
• Clause 9 - Declaration of Discharging Port(s)
• Clause 10 - Performing Vessels
• Clause 11 - Cancelling of Shipment
• Clause 12 - Freight
• Clause 13 - Demurrage/Despatch Money
• Clause l4 - Late Payment of Freight and Demurrage
• Clause 15 - Interruption of Performance
• Clause 16 - BIMCO Bunker Price Adjustment Clause
• Clause 17 - BIMCO War Cancellation Clause 2004
• Clause 18 - BIMCO Dispute Resolution Clause
• Clause 19 - Commission
• Clause 20 - BIMCO Notices Clause
  

 

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Part l

The boxes in Part I contain a brief description of the particular item of information to be added and a reference to the relevant clause in the printed body of Part II.

Additional clauses covering special provisions, if necessary and agreed for a particular contract, may be added as a Rider to the contract and the clauses should be referred to in Box 24 in Part I. It should be noted that the incorporation of additional clauses, as with amendments to the standard text, may alter the balance of responsibilities and liabilities between the parties in the pre-printed form and, potentially, prejudice P&I cover.

Part II

This part of the document contains the main terms and conditions governing the agreement. A brief description is given of the clauses contained in Part II to explain the thinking behind these provisions so as to assist owners, charterers, brokers and other parties interested in the practical use of the document.

Preamble

The preamble of Part II contains two definitions designed to clarify that references to the “form” mean Parts I and II of the GENCOA form only, while references to “contract” mean the “form” plus the underlying voyage charter party regulating the individual voyages performed under the COA.

The Preamble also makes it clear that GENCOA must be used with a voyage charter party - although the parties are free to decide on which voyage charter party to use. Should there be any conflict between the terms and conditions of the underlying voyage charter party and GENCOA then the terms and conditions of GENCOA will prevail.

This is done to ensure that any terms or conditions in the charter party that are inconsistent with the operation of the contract of affreightment do not create contractual difficulties for the parties.

Clause 1 - Subject of Contract

This is the essence of the contract and the point here is to define the mutual obligations of the parties.

Clause 2 - Total Quantity/ Number of Shipments

This clause is divided into two optional provisions. The parties must make a clear choice of which provision is to apply by indicating their choice in Box 8 of Part I.

Sub-clause (a) is a “total quantity” option allowing the parties to state a minimum/maximum amount to be carried under the contract. The parties must state in Box 8 which of them has the option in respect of the total quantity and when such option is declarable.

In order to avoid recurring disputes, the provisions in Lines 22-24 clearly provide that in the context of Clause 2, the intaken quantity for each shipment shall apply when calculating the total quantity shipped.

Sub-clause (b) is a “number of shipments” option - which is probably the more widely used method today.

Clause 3 - Period of Contract

This Clause establishes the duration of the contract, making it clear that the first layday must coincide with or be later than the date of commencement of the contract period stated in Box 9. While the final shipment may be completed after the contract period has ended, the cancelling date for the final shipment must not be later than the end date of the contract.

Clause 4 - Quantity per Shipment

The quantity of cargo for each separate voyage is an integral part in the performance of the whole contract. Whereas the option of the quantity for the total contract quantity (Clause 2(a)) may rest either with the owners or the charterers, when it comes to the minimum/maximum quantity per shipment this is solely at owners’ option; Box 10 in Part I should be properly filled in to reflect what has been agreed in this respect.

Clause 5 - Final Shipment

It happens that problems and disputes arise in regard to the minimum quantity of cargo for final shipment under contracts of affreightment. The provisions of Clause 5 attempt to regulate contractually the matter before any problems arise. It is strongly recommended that the owners ensure that Box 11 is correctly filled in.

When Box 11 is filled in, Clause 5 (Final Shipment) - which is an exceptions clause - takes effect and will supersede the provisions of Clause 2(a) as regards total quantity and of Clause 4 as regards quantity per shipment.

If Box 11 is not filled in, the provisions of Clause 2(a) as regards total quantity will bind the owners in spite of Clause 4 (Quantity per Shipment) whatever is the quantity left for final shipment. This could expose the owners to having to ship a quantity of cargo that is substantially less than the agreed minimum quantity on a vessel that would still be required to fall within the description of performing vessels in Box 13.

Clause 6 - Programme of Shipments

For a standard document like GENCOA, which is not tied to a particular trade but intended for a wide range of dry bulk cargo trades on a world wide basis, it would be difficult to contractually regulate all and every kind of programme of shipments and nomination of tonnage because the individual requirements are at such great variance. Instead of incorporating alternative clauses for programme of shipments in GENCOA, it was decided to use the concept of “fairly evenly spread” which should be sufficient in most cases. For those parties wishing to opt for a more specific programme of shipments, provision is made in Box 12 for programme details to be entered.

The concept of “fairly evenly spread” in GENCOA is regulated by the provisions of Clause 6(b) which require the charterers to give the owners a programme of shipments in advance of each shipment period. The advance notification of shipments is intended to help with the smooth running of the contract and to avoid any unexpected “bunching together” of cargoes during one part of the period.

Clause 7 - Scheduling/Nomination

This Clause provides a scheduling and nomination procedure for each of the liftings under the COA. In Clause 7(a) the charterers are obliged to give the owners a provisional notice providing an agreed spread of laydays for each shipment followed by a definite notice narrowing the laydays to an agreed number of days within the original spread of laydays. On receipt of the charterers’ definite notice, the owners are obliged to accept the laydays by nominating a vessel or substitute.

It should be noted that the use of the term “vessel or substitute” in the context of a COA does not infer any substitution rights, but is a phrase used to indicate that the owners agree to provide appropriate carrying capacity on the dates required by the charterers. The naming of a vessel at this stage is intended to be meaningful from a commercial rather than a legal point of view. The formal nomination of the actual performing vessel comes at a later stage of the procedure (Clause 7(c)).

The acceptance by the charterers of the owners’ nominated vessel is dealt with in Clause 7(d). The principle is that if the charterers fail to advise the owners whether or not the nominated vessel is accepted within 24 hours of the nomination, then the vessel will be deemed to be accepted.

Clause 8 - Declaration of Loading Port(s)

This Clause regulates the declaration of loading port or ports in accordance with the notices provided in Clause 7(a) and Box 12.

Clause 9 - Declaration of Discharging Port(s)

It should be noted that this Clause requires the charterers to make their declaration of discharge port or ports “so as not to delay” the vessel. The Clause deliberately avoids a requirement to specify a number of days notice as this could cause an unnecessary conflict with the notice provisions contained in the underlying voyage charter party.

Clause 10 - Performing Vessels

This Clause is a reminder to the parties that a detailed description of the vessels envisaged for the performance of the COA is necessary and should be given in Box 13. How detailed such description should be depends on each particular case and on the type of transportation envisaged.

Clause 11 - Cancelling of Shipment

The purpose of this clause is to spell out what the consequences will be of cancelling a vessel and how such a cancellation affects the total quantity under the contract - depending on whether the cancellation is caused by an incident outside either party’s control. The provision emphasises that a cancellation under the terms and conditions of the underlying voyage charter party affects only the shipment. This is an important provision that is often found lacking in “home-made” contracts of affreightment derived from voyage charter parties, where a cancellation of one shipment can bring the entire agreement to a premature end.

It is also important to note that the owners’ failure to provide tonnage or the charterers’ failure to provide cargo must be due to reasons that fall within the exceptions clause of the underlying charter party. If the owners simply fail to provide a vessel or the charterers a cargo, they are in default of the contract and cannot avail themselves of this provision. The issue of whether the charterers may make a claim for damages resulting from the default or seek to cancel the contract in the event of a prolonged failure to provide tonnage is left to background law on repudiation and frustration. In any event, a lack of nomination should not give rise to a demand for an extra voyage at the end of the period, thus creating the basis for double compensation, i.e., damages and an extra voyage.

Clause 12 - Freight

Clause 12 makes it clear that the freight rate for each voyage is determined by the rate stated in Box 14 and not by any freight rate contained in the underlying voyage charter party. The freight provisions of GENCOA are tied closely to Clause 14 (Late Payment of Freight and Demurrage) - which is a provision not normally found in voyage charter parties but spells out the consequences of late freight and demurrage payment in the context of the relationship between owners and charterers under the GENCOA contract.

Clause 13 - Demurrage/Despatch Money

Demurrage and despatch computation is governed by the terms of the underlying voyage charter party, but the rates are those stated in Box 16 of GENCOA.

Clause l4 - Late Payment of Freight and Demurrage

GENCOA follows the modern trend of late payment clauses with a period of grace, penalty interest on outstanding freight and demurrage combined with the owners’ right of suspension as long as any freight, deadfreight or demurrage is outstanding and their ultimate right of cancellation of the contract.

The second paragraph of Clause 4(a) recognises that settlement of demurrage claims may take more time than freight settlement; therefore interest on outstanding demurrage starts to run only after a delay of 15 days.

Parts (b) and (c) of this Clause deal with suspension and cancelling under the contract due to the failure on the part of the charterers to pay on time freight, dead-freight or demurrage. In many ways the provisions of Clauses 14(b) and 14(c) mirror the late payment and grace period provisions commonly found in modern time charter parties. The original VOLCOA late payment provision permitted the charterers to make a late payment after the grace period had ended, which meant that the owners lost their right to cancel the contract. The current position under English law in respect of late payments of hire under a time charter is that the owners maintain the right to withdraw the vessel and terminate the charter even if the charterers tender a late payment, as the late payment of hire does not rectify the breach of obligation to pay hire by the agreed date.

To be consistent with other recently developed BIMCO forms, Clause 14 provides that the owners should not lose their right to cancel the contract when a late payment is received (after the grace period). However, the decision by the owners whether to cancel or not should be made promptly with a clear and unambiguous notice sent to the charterers.

In the event of late payment the owners may, according to the cancelling provision of Clause 14(c), give the charterers 120 running hours notice in which to make the payment, failing which the owners will have the right to cancel the contract. On the expiry of the 120 running hours the owners must immediately notify the charterers in writing that the contract is cancelled with immediate effect - unless the owners decide not to exercise their right to cancel, in which case the contract remains in full force and effect and no notice need be given. For the avoidance of doubt, the provision prevents the receipt of a late payment from the charterers after the grace period being construed as a waiver by the owners of their right to cancel.

Clause 15 - Interruption of Performance

Clause 15 is a straightforward force majeure provision that has been qualified by the additional provision that any quantities not carried as a result of a force majeure event are deducted from the outstanding balance of cargo and no demand for their subsequent shipment can be made.

Clause 16 - BIMCO Bunker Price Adjustment Clause

This is the latest BIMCO standard wording, designed specifically for use in contracts of affreightment. The common practice in dry bulk trades is to make a specific reference to the prices quoted by a named supplier or published index at the named port or place to avoid disputes over which reference price is to be used for calculations.

Clause 17 - BIMCO War Cancellation Clause 2004

This is BIMCO’s War Cancellation Clause, revised in 2004 in connection with the updating of the War Risks Clauses for voyage and time charter parties.

Clause 18 - BIMCO Dispute Resolution Clause

This clause, previously the “Law and Arbitration Clause”, is the latest edition of BIMCO’s standard suite of dispute resolution provisions. In addition to BIMCO’s Law and Arbitration Clause 1998, the provision incorporates a new mediation clause. The mediation provision is designed to function in conjunction with the chosen arbitration option, whether that is English law, London arbitration; US law, New York arbitration; or law and arbitration as agreed. Mediation is a technique that is recognised as offering savings in costs and time over traditional methods of dispute resolution for certain types of disputes. BIMCO’s mediation provision is only triggered once arbitration proceedings have commenced and then runs in parallel with those proceedings, if the parties so choose. This has been done to ensure that one party cannot invoke mediation as a delaying tactic. It also provides for the parties to mediate on all or just some of the issues being arbitrated.

Clause 19 - Commission

This clause reflects the way in which commission is usually dealt with in practice.

Clause 20 - BIMCO Notices Clause

This is a standard BIMCO clause dealing with the methods to be used for writing and sending notices.