Explanatory notes

• Clause 1 - Definitions
• Clause 2 – Specifications/Grades/Quality
• Clause 3 – Quantities/Measurements
• Clause 4 – Sampling
• Clause 5 – Delivery
• Clause 6 – Documentation
• Clause 7 – Price
• Clause 8 – Payment
• Clause 9 – Claims
• Clause 10 – Risk/Title
• Clause 11 – Compliance with Laws and Regulations
• Clause 12 – Sanctions Compliance Clause
• Clause 13 – Indemnity
• Clause 14 – Force Majeure
• Clause 15 – Termination
• Clause 16 – Pollution
• Clause 17 – Drugs and Alcohol Policy
• Clause 18 – Confidentiality
• Clause 19 – Third Party Rights
• Clause 20 – Assignment
• Clause 21 – Partial Validity
• Clause 22 – Dispute Resolution Clause 2015
• Clause 23 – Notices
• Clause 24 – Entire Agreement
• Clause 25 – UK Sale of Goods Act 1979

The following notes are intended to provide an explanation of the thinking behind the various clauses of the BIMCO Terms 2015.

Clause 1 - Definitions

The Definitions section sets out the contractual meaning of important terms that appear in several places in the contract.

“Banking Day” – This definition establishes what constitutes a banking day for the purposes of the agreement and distinguishes between payments made in US dollars which require New York banks to be open, and payments made in other currencies, which do not.

“Confirmation Note” – A signed Confirmation Note (sometimes referred to as a confirmation order in practice) should, ideally, be used for every bunker supply. It should list the specific terms agreed and make reference to the underlying standard terms and conditions (BIMCO Terms 2015). In the absence of a formal Note, this definition will encompass a seller's written confirmation of the final binding main terms.

“Marine Fuels” – In order to accommodate not only current fuel types but also new and as yet, perhaps, unnamed fuels that may be used in the future, this definition simply refers to what the parties have agreed to in the Confirmation Note.

“Sellers” – This definition covers not just the sale of bunker supplies but also the arrangement for actual delivery to the ship, which may in many cases may be carried out by a third party physical supplier. 

Clause 2 – Specifications/Grades/Quality

It is the buyer's responsibility to nominate the specifications and grades of bunkers that are suitable for their ship. It is not the task of the sellers to provide fuels that are "fit for use by the vessel" as it is not reasonable to expect suppliers to be fully conversant with every main engine design to be able to make such an informed decision.

Clause 3 – Quantities/Measurements

Sub-clause (a) takes account of the various methods used around the world to measure the quantity of bunkers delivered to the ship.

Sub-clause (b) ensures that the buyers have the possibility to be present and to access gauges when quantity measurements are taken by the sellers. It is intended that the buyers should make all of the tanks on the bunker barge or barges available for inspection.

Clause 4 – Sampling

This Clause has been carefully drafted to reflect current practices and establish a fair balance of obligations and responsibilities.

One of the main issues is the location of the sampling point – at the bunker barge's manifold or at the vessel’s bunker manifold. Most buyers prefer to have samples taken at the ship's manifold. However, practical factors may determine that the sampling point should be located elsewhere, such as accessibility to the receiving vessel from the bunker barge. To address these practical considerations and to give the parties a degree of flexibility in the location of the sampling point, the parties can agree on the location on a case by cases basis, provided it's closest to the ship’s bunker manifold and otherwise in accordance with the procedures set out in the IMO Resolution MEPC. 182(59) Guidelines for the Sampling of Fuel Oil for Determination of Compliance with MARPOL 73/78 Annex VI.

Recognising that in some parts of the world, notably Singapore, mandatory local rules and regulations for bunkering operations apply, the Terms clarify that these will take precedence over the provisions of subclause (a).

The number of samples taken also varies, so the Terms set a minimum number of 5 samples to be collected. Sub-clause (b) deals with how they should be handled correctly and Sub-clause (c) describes by whom the different samples should be retained and for how long. Two samples should be retained by the sellers for the minimum period stated, as these are the samples most likely to be used for checking purposes, and the other three, one of which should is the MARPOL sample, are to be retained on board the ship.

Clause 5 – Delivery

Delivery can take place at any time (which includes holidays, statutory or otherwise), but is subject to any restrictions imposed by authorities at the port or place of delivery. The buyers are required to gives notices to the sellers of the vessel’s expected time of arrival as set out in Sub-clause (b), ending with a 24-hour definite notice of arrival providing the time and location where delivery will take place.

Responsibility for compliance with local regulations in respect of deliveries rests with the sellers who, if local regulations permit, will also assist the buyers in connecting and disconnecting hoses.

Clause 6 – Documentation

A bunker pre-delivery form or similar document must be presented to the Master or its representative (in practice usually the Chief Engineer) for acknowledgement and should contain values for the various analytical parameters required by ISO 13739. The sellers are required only to sign for values for viscosity, density, sulphur content, flash point and delivery temperature, and, if available, similar information for vanadium, ash content, water content and pour point. Wording is included to provide for where local mandatory rules apply, which will then override Sub-clause (a).

The Bunker Delivery Note (BDN), which should be signed by the Master or authorised representative after completion of delivery of the bunkers, should contain the information listed in Sub-clause (b) which is warranted by the sellers, for example, delivered quantity and delivery temperature.

The Master may make appropriate remarks on the BDN if not satisfied with the sampling, quantity or other matters concerning the bunkers or the delivery. These remarks should be made on completion of delivery so that the sellers can start investigate the claim as soon as possible. The remarks should either be stated in the BDN or in a separate letter of protest, if remarks in the BDN are not permitted. To reduce the likelihood of disputes about the receipt of such remarks, the sellers’ representative must acknowledge them in writing. It should be noted that there is a different time frame in respect of quality claims in Sub-clause 9(b)(i) stating that quality claims must be notified promptly after the circumstances giving rise to such claim has been discovered (which is unlikely to be at the time of delivery because of the need for analysis of samples).

Clause 7 – Price

Any additional charges incurred by the sellers but which the buyers should pay for should be listed in the sellers’ quotation and Confirmation Note to avoid unpleasant surprises after delivery. If charges such as overtime cannot be specified as a lump sum then they should, at least, be included as a rate per hour.

Clause 8 – Payment

There is a 30-day time limit within which payment should be made unless another limit has been agreed in the Confirmation Note. The basic principle is that payments should be made on or before the due date. This may be amended by the parties on a case by case basis if they so wish. Any additional payment or refund should be made within seven days from delivery.

Sub-clauses (b) to (f) set out the terms for payment, for example, that buyers do not have the right to make deductions, and that payment is deemed earned when it has been credited to the sellers’ bank account and that delay in payment or refund will entitle the other party to interest.

Clause 9 – Claims

This Clause consolidates all the claim-related issues in the BIMCO Terms into a single provision that also covers excluded losses and time bar provisions. Given the importance of properly dealing with claims under a bunker contract, this Clause warrants a detailed explanation.

Sub-clause (a)(i) deals with claims about the quantity of bunkers delivered that must be noted at the time of delivery (which has been underlined in the text of the Terms to emphasise the importance of timing). 

The first stage of the claim process is to make a remark in the BDN or in a separate letter of protest. The second stage requires the buyers to present their claim to the sellers within 14 days from the date of delivery. This means that the buyers cannot bring any other claims than the initial claims that have been noted in the BDN or in the letter of protest. The 14 days is given to allow the buyers sufficient time to get their documentation in order and is considered a reasonable time in which sellers would still be able to verify delivered quantities. After the two weeks’ period, such claims will be considered waived by the buyers and therefore time barred. However, it is important to note that if the buyers are unable for whatever reason to provide all the documentation in support of their claim within 14 days, it will not be time barred provided they have submitted at least some documentation at that point. 

Under Sub-clauses (a)(ii)-(iii) the sellers and the buyers respectively have the right to charge each other for proven additional expenses. The sellers will have this right where the buyers have failed to take delivery of the full quantity of the ordered bunkers, and the buyers will have the right when the sellers fail to deliver the agreed quantity (unless the Master has put in writing that a lesser quantity is to be taken). The type of costs that are envisaged are, for example, if buyers receive less bunkers than ordered they may have to call at another port to top-up with bunkers, which will mean extra costs. From the sellers’ perspective, additional costs may be incurred if the buyers do not take full delivery of bunkers. As bunkers are often customs cleared for export, the sellers will have to wait for an opportunity to sell and deliver the fuel to another client as they cannot easily be “re-imported”.

Sub-clause (b)(i) gives the buyers 30 days from the date of delivery to give notice to the sellers of claims relating to the quality or specification of the bunkers. The longer time bar for these type of claims is due to the fact that samples will have to be tested by laboratories, which can be a time-consuming process involving shipping samples to a remote location.

The procedure for quality or specification claims is set out in Sub-clause 9(b)(ii). The buyers have the option to request a full ISO 8217 analysis showing all fingerprint parameters. If such option is exercised, the analysis should always be made in accordance with the latest ISO version. A full analysis may not be possible in all parts of the world, so the parties are free to agree the extent of the analysis. The party whose claim is unfounded will have to pay for the analysis.

If a party suffers a loss because of a delay, they can claim compensation from the other party for those losses. From the buyers' side, the delay may spring from their failure to observe the notices requirements or failure to receive the bunkers at the previously advised pumping rate and pressure. The sellers, on the other hand, may cause a delay by failing to commence bunker delivery as agreed or their inability to deliver bunkers at the agreed minimum pumping rate and pressure.

The purpose of Sub-clause (d) is to exclude certain direct and indirect losses from the available claims that the parties can make. For example, no claims may be made for loss of profit, loss of use or production, and, likewise, no claims may be made for any consequential or indirect losses. However, liability for such losses should be included if they are a result of a breach of the previous sub-clauses of Clause 9, hence the words “other than those mentioned above”.

Sub-clause (e) contains an overall time bar of 12 months from the date of delivery or the date when delivery should have commenced. To break the time bar, arbitration proceedings have to be initiated in accordance with the dispute resolution provisions under Clause 22.

Clause 10 – Risk/Title

The risk in the bunkers passes to the buyers when the bunkers have passed the sellers’ flange connected to the ship’s bunker manifold. The title to the bunkers passes once payment for the bunkers has been made. 

So, until payment is made, the sellers retain full title to the bunkers and the buyers are in possession of the bunkers as a "bailee" only (a legal obligation to look after something owned by another, while in your possession).

Clause 11 – Compliance with Laws and Regulations

This is a standard wording used in many recently published BIMCO contracts. The buyers and sellers mutually agree not to do or permit anything to be done that could result in a breach or infringement of the laws of the ship's Flag State or the laws applicable where the vessel trades or takes bunkers.

Clause 12 – Sanctions Compliance Clause

The affect of sanctions on international trade applies equally to the purchase of bunkers and it is essential that parties are fully aware of the importance of exercising due diligence. The purpose of this Clause is to protect parties against dealings with persons or undertakings prohibited from engaging in trade, commerce or financial transactions.

While sanctions clauses of this type are now a common feature of most maritime contracts, this provision has been extended to address the issue of "source of origin" in respect of bunkers which may have come from a sanctioned country or is a blend of products which include bunkers from a country subject to relevant sanctions.

Clause 13 – Indemnity

This indemnity is strictly limited to damages directly caused by compliance with directions given by one party to the other; excluding any other causes.

Clause 14 – Force Majeure

This Clause is based on the ICC (International Chamber of Commerce) model Force Majeure Clause 2003 which BIMCO has used to create a “standard” force majeure provision for its contracts. A "force majeure" event is a major or catastrophic event beyond the control of either party for which neither is responsible, but which prevents the party seeking to rely on the Clause from fulfilling its contractual obligations. The Clause requires the parties affected by a "force majeure" event to make reasonable efforts to minimise the effect of the event. Combined with the provisions of Clause 15(d), "force majure" can give rise to a right of termination by either party (under Clause 15 - Termination) should the event continue for a period exceeding 10 consecutive days from the date of the event or notification to the other party.

Clause 15 – Termination

Fundamental to any contract of this nature is the right of the parties to terminate the agreement under certain specified circumstances. For ready-reference, all of the BIMCO Terms' termination provisions are consolidated into a single clause. The termination rights are mutual and clearly set out in the text.

Clause 16 – Pollution

This collaborative provision deals with incidents of pollution that may occur during any stage of the bunkering operation.

Regardless of which party is responsible for a spill, sub-clause (a) requires that buyers and sellers jointly take immediate steps to effect a clean-up operation in accordance with local laws and regulations.

In sub-clause (b) an obligation is put on the sellers to have in place valid oil-spill contingency plans, approved by the relevant authorities.

Sub-clause (c) mainly requires the sellers to indemnify and hold harmless the buyers for any claims, losses, damages, penalties and other liabilities incurred under the United States OPA 90 or any other pollution legislation of any state, country or jurisdiction occurring during transport to or from the vessel’s bunker manifold, unless caused by any fault of the buyers. Similarly, the buyers are to indemnify the sellers where any spillage occurs after the risk in the bunkers has passed to the buyers.

In sub-clause (d), the sellers are made responsible for ensuring that the bunker company has satisfactory insurance for oil spills, either by ensuring that the bunker supplying company takes out such insurance or by providing such coverage themselves.

Clause 17 – Drugs and Alcohol Policy

The buyers and sellers must have in place, and enforce, drugs and alcohol policies that, as a minimum, meet the standards in the latest edition of STCW 1978 (Standards of Training, Certification and Watchkeeping for Seafarers). The policies apply primarily to the buyer's ship and to the sellers bunker barge, but in the case of the sellers, it also extends to their shore facilities. The ban on drugs extends to prescription drugs if used or abused for purposes other than those for which they were medically prescribed.

Clause 18 – Confidentiality

This clause is designed to protect the parties from the disclosure of confidential information to third parties. The buyers and sellers are bound by confidentiality in respect of all information they receive in connection with the performance of the bunkering agreement. The Clauses provides certain exceptions where the confidentiality undertaking does not apply, for example regarding information that has already been published in the public domain or which is requested by regulatory authorities.

Clause 19 – Third Party Rights

This Clause clarifies that only third parties who are expressly identified in the contract can benefit from any of its provisions.

Clause 20 – Assignment

It is considered reasonable that if one of the parties to the bunker agreement wants to assign or transfer the rights to the contract to another party, then it can only do so by prior agreement with the original contracting party.

Clause 21 – Partial Validity

The purpose of this Clause is to avoid potential situations where the entire contract might be judged to be invalid simply because a particular provision is considered by a court or other competent authority to be invalid, illegal or unenforceable.

Clause 22 – Dispute Resolution Clause 2015

This BIMCO Dispute Resolution Clause offers four options on arbitration: London (which applies by default if no other venue is agreed); New York; Singapore; and, finally, a free choice of venue as may be agreed between the parties. The mediation provision applies in all circumstances. It is very important that the parties agree which jurisdiction and arbitration venue is to apply to their contract and that they clearly indicate their choice by striking out whichever options do not apply. If you do not indicate your choice of law and arbitration venue, then English law and London arbitration will apply by default.

Clause 23 – Notices

This is a general notice provision dealing with how contractual notices should be given and when they should be treated as received.

Clause 24 – Entire Agreement

The purpose of this Clause is to limit the rights of the parties to the written terms of the contract. As such it is intended to exclude representations, written and oral, not intended to be part of the final concluded contract. It does not mean that the charter party, annexes, etc., override all other contracts that might exist between the parties, for instance contracts concerning other vessels.

Clause 25 – UK Sale of Goods Act 1979

Following the decision of the United Kingdom’s Court of Appeal decision in the “Res Cogitans” case that the UK Sale of Goods Act did not apply to bunker purchase agreements and pending a final decision by the Supreme Court, this wording has been added to make clear that the intention of the drafters is that the BIMCO Terms 2015 is a contract for the sale of goods.