Explanatory notes

Explanatory Notes

The following explanatory notes are intended to explain the drafting team’s thinking behind some of the key clauses. This document is intended as a living document and as BIMCO receives questions on some of the clauses, the notes will be expanded.

Structure

The contract is divided into the now familiar two sections. Part I is used to insert the contract variables such as the name of the parties, the details of the ship, the freight and the load and discharge ports. Part II contains the standard terms and conditions.

Part I

The box layout of GENCON is a standard design used by BIMCO.

Part I incorporates the BIMCO Authenticity Clause immediately above the signature boxes. The objective of the clause is to combat the industry’s – often unknowing – use of counterfeit and/or erroneous copies of BIMCO forms. If one of the parties provides the contract template for negotiation and is reluctant to include this clause, then this should serve as a warning that the offered contract may not be a genuine BIMCO standard agreement.

Part II

Clause 1 – Scope of Contract Voyage

This clause covers the same ground as Clause 1 of GENCON 1994, but with the text broken into three subclauses for the sake of clarity.

Under subclause (a), the Owners’ obligation to ensure the vessel sets out “as soon as its prior commitments have been completed” has been qualified by the addition of “unless prevented or hindered by events beyond the Owners’ control”. The purpose here is to cover external causes of delay which prevent the vessel from departing immediately on the approach voyage, such as tug strikes or channel blockage.

Clause 2 – Owners’ Responsibilities

This clause replaces the Owners’ Responsibility Clause of previous versions of GENCON. That clause, which goes back to the 1922 version of the charter, is essentially a pre-Hague Rules bill of lading clause. While it provided broad protection to the Owners for loss, damage or delay to the cargo, its scope was strictly limited to the carriage of goods. So, for example, it provided no protection to the Owners in respect of an accident occurring on the approach voyage to the loading port, or for failure to load all or part of the cargo.

Under subclause (a)(i) of this new Clause 2, the Owners have two express obligations to exercise due diligence: (1) to have the cargo spaces fit for the cargo at the commencement of its loading; and (2) to have the ship seaworthy and properly manned and equipped at the commencement of each cargo-carrying voyage, reflecting Article III(1) of the Hague Visby Rules (“HVR”). And under subclause (a)(ii), the Owners undertake properly to carry and care for the cargo while it is on the vessel, reflecting HVR Article III(2).

Subclause (b) reflects the protections available to a carrier under the HVR.  In this regard, there are three protective provisions which are expressly available to the carrier “in any event”, ie regardless of whether there is a breach of the Article III(1) obligation. These are: the one year time bar in Article III(6), the package limitation in Article IV(5)(a) and the exoneration of liability in Article IV(5)(h where the nature or value of the goods has been knowingly misstated. The first sentence of subclause (b) refers to these defences; and their availability is unaffected by a breach of subclause 2(a)(i), mirroring the availability of these particular defences “in any event” under the HVR.

Under the HVR, the remaining protections are available to a carrier only if it has  met its obligations under Article III(2); and this is mirrored in the second sentence of this subclause (b). 

The final paragraph of subclause (b) extends the scope of these protections beyond cargo claims to all other aspects of performance. For example, the one year time bar now applies to all other claims against the Owners under the charterparty.

In addition, the HVR obligations under subclause (a)(i) have been restricted to two specific moments: the commencement of loading, and the commencment of each cargo-carrying voyage. 

Clause 3 – Cargo

When compared to GENCON 1994, this is a new clause. Over the past 25 years or so, shipping has become more highly regulated, with the imposition of many new requirements on the carrier in relation to the cargo. Because GENCON remains a FIOS charter, it is necessary to define exactly how these obligations are being allocated between the parties.

Subclause (a)(i) deals with the documentation and stowage of the cargo as presented for shipment. Subclause (a)(ii) addresses the treatment and handling of stowing and securing materials. Subclause (a)(iii) requires the cargo to be lawful at all material times. Subclause (a)(iv) requires the cargo to be properly fit and suitable for the intended voyage. And subclause (a)(v) obliges the Charterers to provide in good time all information required for any advance cargo declarations.

Subclause (b) addresses two aspects of bulk cargoes which are not loaded in accordance with the vessel’s natural segregation: (i) where such stowage results in commingling or contamination; and (ii) where there are resulting claims for under- or over-delivery – in each case, absent fault on the part of the Owners.

Subclause (c) allows the Owners to load additional cargo where the Charterers’ contractual commitment is for a less-than-full cargo.

Subclause (d) makes the Charterers responsible for the disposal of cargo residues which may be harmful to the marine environment

Subclause (e) deals with the situation where the cargo is loaded from or discharged into lighters. (Note that this provision deals only with lighterage, and does not permit ship-to-ship operations.)

Clause 4 – Loading and Discharging

This clause deals with the allocation of risk and responsibility for the handling of the cargo and its stowage and securing. In recent years, several judgments have addressed the issue of how responsibility for safe stowage and handling of cargo should be allocated between owners and charterers who have divided up the carrier’s responsibilities under the contract of carriage. An obvious example is where, unknown to the Charterers, their stowage materially affects the vessel’s seaworthiness: how far should the Owners be held responsible for the loss? The solution adopted by Clause 4 of the new GENCON is to follow the approach adopted by the NYPE 2015 time charter, making the Charterers responsible, but subject to the supervision of the Master.

With this qualification, subclause (a) makes the Charterers responsible for all loading and discharging operations, and for the safe stowage of the cargo for the loaded voyage and also when shifting between ports or berths.

Subclause (b) deals with the situation where the vessel has to incur additional costs and/or to leave the berth part-loaded for reasons of safety (e.g. hurricane, excessive swell). (Note that this subclause says nothing about laytime.)

Subclauses (c) and (d) are conventional provisions dealing with the provision of the vessel’s lighting and gear, and with stevedore damage.

Clause 5 – Cargo Fumigation

Clause 5 deals with on-board fumigation of cargo. It is designed to deal with problems of cost and delay which can arise with this operation, often because the parties are not sure about their respective rights and obligations. It is assumed that it will simply be deleted where on-board fumigation is not required or allowed.

Clause 6 – Deck Cargo

This clause can only be activated by the specific written consent of the Owners.

Subclause (c) places the risk of loss or damage to deck cargo on the Charterers, including claims arising from the negligence of the Owners.

Clause 7 – Freight

This clause deals separately with how freight is to be paid (subclause (a)) and how it is to be earned: subclause (b) provides that all freight other than lump-sum freight is earned progressively as the cargo is loaded; and subclause (c) provides that lump-sum freight is earned only on completion of loading.

Subclause (d) provides that freight is non-returnable even if ship or cargo is lost.

Subclause (e) provides that the Charterers are entitled to demand “Freight paid” bills of lading only where the freight has been paid in full.

Clause 8 – ETA Notices

This clause is a conventional provision giving effect to the notice provisions set out in Part I of the charter.

Clause 9 – Notice of Readiness

This clause deals with the commencement of laytime. As before, and like many other charters, the new GENCON provides for a mixed port/berth regime.

Subclause (a) provides for the tendering of the Notice of Readiness where the vessel is at the berth and in all respects ready to load or discharge. It also provides that, prior to tendering Notice, the Owners shall exercise due diligence to ensure that any cargo spaces required for loading at that place are clean, dry and in all respects suitable for receiving cargo.

Subclause (b) allows the Notice to be tendered from the anchorage if the berth is not designated or if it is not reachable on the vessel’s arrival. Laytime will commence accordingly, but time actually shifting from the anchorage to the berth will not count.

Subclause (c) deals with the difficult situation where the vessel over-runs the cancelling date because it is obliged to wait for a berth on its arrival, and is then found to require further cleaning following inspection alongside. Under such circumstances, the Charterers shall have the right to terminate the charter on the later of the cancelling date and the expiry of 96 hours from the time of reinspection. But then, if the charter is so terminated, the Charterers will compensate the Owners at the demurrage rate for the original waiting period.

Subclause (d) allows the Notice of Readiness to be tendered prior to the opening of the laydays; but laytime cannot commence before that time unless Charterers elect to commence cargo operations sooner.

Subclause (e) provides that, if more than one Notice is tendered, no such notice shall prejudice any other notice.

Clause 10 – Laytime

Subclause (a) deals with the nature and definition of laytime, incorporating BIMCO’s 2013 Laytime Definitions, subject to consistency with the terms of the charter. It is important that the parties are alert to the significance of this inclusion and consider the implications of the relevant definitions.

The expressions “SHINC” and “SHEX” are defined, the latter in such a way (“customary days of rest”) as to deal with the situation where the exclusion relates to Fridays or lunar holidays.

Subclause (b) – where the older versions of GENCON used the expression “weather permitting” to make it clear that laytime would run continuously unless the actual working of the vessel was prevented, the new version has replaced this phrase with the following exception: “except to the extent that the actual loading/discharging is delayed or prevented by weather”. The purpose here is to avoid ambiguity as to the intended effect. Users should note that GENCON never has been drafted to accommodate “weather working days” or similar definitions of laytime. If, therefore, the parties should agree to define laytime in this way, they should recognise that the exception set out in subclause (b) may be inconsistent with that definition and so may be rendered ineffective.

Subclause (b)(i) states in terms that, where separate laytime is allowed for loading and for discharge, laytime is not reversible between the two operations.

Subclause (c) deals with the situation where the laytime is based on the tonnage loaded, and the Charterer has paid full freight on the cargo short-loaded: in that case, the Charterers are entitled to laytime based on the larger quantity.

Clause 11 – Commencement of Laytime

This clause addresses when laytime should start to run. Subject to subclause 9(d), it states that laytime shall commence at the earlier of (1) commencement of cargo operations and (2) specified times on that or the next working day.

Clause 12 – The Running of Laytime

This clause deals with issues affecting the counting of laytime.

Under subclause (a), time and costs used for shifting between berths in the same port are to be for the Charterers’ account (unless carried out for Owners’ purposes).

Subclause (b) addresses the issue of time lost on account of environmental or public health issues relating to the cargo (e.g. dust), providing that time will count and any costs will be for the Charterers’ account.

Subclause (c) defines the conclusion of laytime/time on demurrage. It allows the Charterers three hours for provision of cargo documents.

Clause 13 – Demurrage and Despatch

Subclause (a) provides that despatch will be payable at half the demurrage rate on all laytime saved.

Subclause (b) provides that demurrage will run continuously unless, but then only to the extent that, time is actually lost to the Charterers by the vessel’s inability to perform the service immediately required.

Under subclause (c), demurrage falls due day by day, and is payable upon receipt of invoice.

Note that the English Court of Appeal has recently decided that, absent clear agreement to the contrary, and absent any other causative charterers’ breach, the expression “demurrage” covers any loss incurred by the shipowner as a result of delay in loading or discharging the cargo. The issue will be taken up by the Supreme Court in 2023. In this current state of uncertainty, the GENCON subcommittee has decided to leave the expression as defined by the BIMCO Laytime Definitions (see subclause 10(a)): “… an agreed amount payable to the owner in respect of delay to the Vessel once Laytime has expired, for which the owner is not responsible.” However, the parties should consider whether this definition truly reflects their agreement.

Clause 14 – Cancelling

Subclause (a) provides that, where the vessel has not tendered its Notice of Readiness by midnight on the cancelling date, the Charterers have the option of cancelling the charter; but its declaration must be made within 48 hours of the cancellation date.

Subclause (b) is deals with the situation where it is clear that the vessel is running late and will miss its cancelling date. The purpose of such an interpellation provision is that the vessel shall not have to proceed on a long ballast voyage towards the loading port not knowing whether or not the charterers will accept the vessel once it has arrived. When Owners have informed the Charterers that the cancelling date will be missed and provided a new ETA, the Charterers then have 48 hours to accept that new ETA as the revised cancelling date or cancel the charter.

Subclause (c) provides that action or inaction under the cancelling clause does not prejudice any claim for damages which either party may have against the other.

Clause 15 – Lien

This clause is a conventional lien provision. It has been kept separate from Clause 16 because it may qualify for inclusion in bills of lading where such inclusion is limited to charter provisions relating to the carriage of goods.

Clause 16 – Suspension and Termination

This clause relates to actions which the Owners may take where the Charterers have failed to make due payment under the charter.

Subclause (a) allows the Owners to suspend performance

Subclause (b) deals with a prolonged (96 hour) failure by Charterers to pay or to provide security, this giving the Owners the right to terminate the charter and/or to discharge the cargo.

Subclause (c) contains a general indemnity in favour of the Owners for any action taken under the clause.

Clause 17 – Strikes

This clause is a reworking of the traditional General Strikes Clause which appears in previous versions of GENCON. As in the 1994 version, the clause is limited to strikes or lockouts which delay or prevent the actual loading of the cargo: that is, the clause is limited to strikes or lockouts which directly affect the vessel.

Subclause (a) deals with the situation where no cargo is on board the vessel. In that situation, the Owners may seek affirmation from the Charterers that they will ignore the strike. If the Charterers decline or ignore this request, the Owners will have the right, but not the obligation, to cancel the charter.

Subclause (b) deals with the situation at the loading port where the strike affects the actual loading of the ship. In that case, the laytime will run normally and any demurrage will be at 50% for up to 10 days, thereafter at the full rate.

Subclause (c) addresses the situation where the strike is prolonged. It provides that the Owners will be entitled to be paid the greater of the demurrage rate and the ship’s then open market value after 25 days.

Subclause (d) deals with the situation at the discharge port. There, the vessel must stay, with any demurrage to be incurred at 50% for 10 days, and thereafter at the full rate for up to 25 days. Thereafter, the Owners are entitled to receive the greater of the demurrage rate and the then open market value.

Subclause (e) provides for regular payment of amounts falling due under the clause; and subclause (f) exempts the parties from liability for the consequences of strikes.

Clause 18 – General Exceptions Clause

Under GENCON 1994 and its predecessors, the Charterers had no defence where their ability to perform was prevented by external events beyond their control. In effect, their obligations were absolute, short of extreme legal consequences such as frustration or supervening illegality.  The purpose of the General Exceptions clause is to provide a mutual exemption from liability for adverse effects which are beyond the control of the party claiming its benefit.  However, the charter otherwise remains in full effect, including the running of laytime and the payment of any sums falling due.

Clause 19 – Bills of Lading

This clause follows the logic of Clause 10 of GENCON 1994.

Where the 1994 form provided that the bill of lading must be presented in a particular form, this clause states that the terms must be no less favourable to the carrier than CONGENBILL 2022, and always in conformity with Mate’s receipts. The Charterers indemnify the Owners for failure to comply with the clause.

Clause 20 – BIMCO Electronic Bills of Lading Clause 2014

This is a standard BIMCO clause. The explanatory notes can be found here.

It should be noted that, although this clause refers to waybills, these are not mentioned or allowed under Clause 19 or otherwise under GENCON 2022. This omission is deliberate: while waybills are not bills of lading for purposes of the Hague/Hague-Visby Rules, they may count as such under other legislation such as the Harter Act, which continues to apply to contracts of carriage which fall outside the scope of the USA Carriage of Goods by Sea Act 1936.

Clause 21 – Classification and Insurance

This clause records the vessel’s classification and liability insurance, and provides that these will be maintained unless agreed otherwise, such agreement not to be unreasonably withheld.

Clause 22 – Liberty and Deviation

This clause is an expanded version of the Deviation clause of GENCON 1994, expressly including landing of stowaways, medical emergencies, taking on spares and ballast water exchange. It should be noted, however, that its scope is expressly limited to purposes reasonably necessary for the safe performance of the charter voyage.

Subclause (b) requires its incorporation in any subcharter and bills of lading.

Clause 23 – Substitution

This clause allows the Owners to provide a materially similar substitute vessel within the lay/can spread, subject to the Charterers’ prior consent not to be unreasonably withheld.

Clause 24 – Sub-let and Assignment

This clause allows the Charterers to sub-let or assign performance of the charter, subject to the Owners’ prior consent not to be unreasonably withheld.

Clause 25 – Taxes and Dues

This clause is essentially the same as Clause 13 of the 1994 GENCON.

Clause 26 – Agency

In recognition of standard market practice, subclause (a) of this clause is materially different from its 1994 predecessor. Unless provided otherwise, the vessel will be consigned to agents nominated by the Charterers and engaged by the Owners. However, where the agent is acting in relation to the cargo or any obligation of the Charterers, it shall be deemed to be the agent of the Charterers.

Subclause (b) provides that each party will be responsible for acts or omissions of their respective servants, agents and subcontractors, and that shippers and receivers are to be considered the agents of the Charterers in the performance of any function allocated to the Charterers under the charter.

Subclause (c) sets minimum quality standards for agents nominated by the Charterers.

Clause 27 – Limitation of Liability

Subclause (a) provides that neither party is surrendering any right of limitation of liability.

Subclause (b) requires the Charterers to indemnify the Owners for any such loss of limitation arising from the terms of use of any berth which is not expressly identified in the charter.

Clause 28 – Protective Clauses

This clause incorporates in the charter the CONGENBILL New Jason, Both-to-Blame Collision, and Himalaya clauses, and expressly requires their insertion in any bill of lading issued under the charter.

Clause 29 – General Average

This clause requires general average to be adjusted and paid in London (unless another place has been agreed) under the York-Antwerp Rules 2016.

Clause 30 – BIMCO Ice Clause for Voyage Charter Parties 2005

This is a standard BIMCO clause. The explanatory notes can be found here.

Clause 31 – BIMCO ISPS/MTSA Clause for Voyage Charter Parties 2005

This is a standard BIMCO clause. The explanatory notes can be found here.

Clause 32 – BIMCO Sanctions Clause for Voyage Charter Parties 2020

This is a standard BIMCO clause. The explanatory notes can be found here.

Clause 33 – BIMCO War Risks Clause for Voyage Chartering (VOYWAR 2013)

This is a standard BIMCO clause. The explanatory notes can be found here.

Clause 34 – BIMCO Piracy Clause for Single Voyage Charter Parties 2013

This is a standard BIMCO clause. The explanatory notes can be found here.

Clause 35 – Brokerage

This clause provides for the payment of brokerage commission on freight, deadfreight and demurrage as actually received by the Owners.

Clause 36 – Notices

This clause deals with the giving of notices – apart from notices relating to arbitration, which are dealt with under subclause 37(f).

Clause 37 – BIMCO Law and Arbitration Clause 2020

This is BIMCO’s 2020 edition of the law and arbitration clause which offers four named arbitration venues and a free choice of law and forum. When using SmartCon, the option chosen by the parties in Box 32 will appear automatically in the body of this clause. If the parties fail to make a choice, English law and London arbitration will be the default position.

Subclause 37(a) determines the governing law; the place of arbitration; the applicable arbitration legislation; and the seat of arbitration (where the arbitration takes place in a jurisdiction other than the agreed place of arbitration). It is an “exclusive” arbitration agreement. This is emphasised by the addition of the phrase “referred exclusively to arbitration”.

Subclause 37(b) requires the parties to appoint three arbitrators but allows for a different number of arbitrators to be agreed.

Subclause 37(c) applies the terms (or rules) of the chosen arbitration association to the conduct of the arbitration. An appointment procedure is no longer included in the clause because the terms of the named arbitration venue contain a procedure to which parties should refer when making appointments of arbitrators.

Subclause 37(d) provides for the small claims procedures offered by the named arbitration association. Parties are free to decide on the maximum applicable sum for small claims, but otherwise the clause will display the default amount used by each of the named venues. If the London arbitration version of the clause is chosen then an additional “intermediate claims procedure” provision will apply optionally.

Subclause 37(e) applies the terms, rules procedures of the chosen arbitration association current at the time that arbitration proceedings are commenced. This is the common approach for arbitration in London, Singapore and Hong Kong. In New York the rules are different and it is those current at the time the contract was concluded that will apply.

Subclause 37(f) addresses the correct service of arbitration notices and communications. Parties are free to serve notices by whatever effective means they choose, but if they choose email then they must provide the email address of someone authorised to receive arbitration notices (and advise the other party of any change of address during the period of the agreement). Notices are considered effectively served immediately on sending by email.

Clause 38 – Original Charter Party

Under this clause, each party undertakes to provide on demand a duly signed original of the charter. This formal document is sometimes required in litigation or arbitration with third parties, and the clause requires prompt cooperation.

Copyright and availability

Copyright in GENCON 2022 is held by BIMCO.