The appeal in BP Oil International Ltd v Target Shipping Ltd  EWCA Civ 196 concerned the amount of overage freight payable by Charterers to Owners.
The vessel was chartered on an amended BYVOY4 form, for a cargo of minimum 80,000mt fuel oil. The charterparty stated that freight was payable at Worldscale 135 rate if discharge was in the United States. The fixture recap stated that freight was payable at 50% on overage “for Euromed discharge only”.
The vessel loaded a total of 112,871mt cargo which was discharged in the United States. Owners invoiced for, and Charterers paid, freight at the Worldscale rate for the entire cargo. Charterers subsequently argued that, on a correct interpretation of the charterparty, freight was due in a lumpsum, or where the vessel discharged in the US, at a percentage of the Wordscale rate on the minimum cargo quantity of 80,000mt. They said that freight was only payable on overage for “Euromed discharge”, and not for discharge in the US.
Owners were not entitled to freight at the Worldscale rate on the entire cargo, but Charterers were required to pay something in respect of overage. As the parties had not specifically agreed an amount due on overage for discharge in the US, an inquiry had to be made into a reasonable figure.
The Court of Appeal held that, in the absence of agreement to the contrary, the parties agreed that overage would be at 50% of the freight rate. If no overage was to be payable, the parties would have stated this in terms. The parties had not expressly said that no freight was payable for discharge outside the Euromed. Charterers’ construction of the charterparty, that no freight was payable on overage for US discharge, was incorrect.
The Court disagreed with the first instance judge: there was no requirement in the charterparty, and the parties had not intended, that any inquiry should be made into “reasonable” freight. The only reliable alternative to Charterers’ incorrect construction was that the agreed Worldscale rate applied to all cargo. Owners, therefore, were entitled to overage at 50%.
This is a clear example of the approach taken by the courts in construing charterparty terms. Where there is no express provision, they will consider the parties’ intentions and the outcome which makes commercial sense in light of those intentions. When negotiating and drafting charterparties, never make assumptions as to the meaning of a particular provision. Drafting should be clear and accurate. If a particular provision or requirement is to be included, it should be stated in clear terms. This will prevent disputes arising over parties’ differing interpretations.