This article has been written by Prathamesh More, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com.

Introduction

We all are aware of laws that work on land, such as Criminal law, Family law, even laws regarding freedom of speech. But when it comes to the incidents that take place in water bodies especially seas and oceans, the above-mentioned laws do not work. There are specific laws that govern nautical issues on open water and those laws belong in Maritime Law.

The Origins of Maritime Law

Maritime laws originated from the times when transportation of goods and people by water was one of the most ancient types of commerce. The Mediterranean Sea was one of the water bodies where the early Egyptians, Greeks and Phoenicians carried their trading extensively. It is believed that the oldest Maritime code was written in the Island of Rhodes, Greece.

From a historical aspect Maritime law is developed from the law of merchants. The rules and procedures which governs the substantive aspect of law or the adjective of maritime law is known as admiralty law. However, in common parlance admiralty law and maritime law are used interchangeably. 

What does Maritime law imply?

At present Maritime law is considered as the most important governing law regarding any type of event taking place on open water. Governments, corporations and individuals who do commerce on sea give utmost value to the Maritime law because it helps them make sure the appropriate behavior of all the people and institutions working on sea commerce and also fair trade. This has changed the way commerce is done on open water.

As mentioned above Maritime law is also known as admiralty law. It is a body of laws, conventions, and treaties that govern private maritime business and other nautical matters, like shipping or offences and disputes.

These laws are not limited to the transportation of goods or people. They also involve how companies treat their workers, how the workers get paid or even how their protection is ensured while working on board a vessel.

The four principles of maritime law are:

• maritime safety
• navigation security
• commercial spirit and preventing contamination
• environmental protection

Maritime law in India

Maritime law or Shipping law in India, as elsewhere, is a wide-ranging branch of the law which has within its boundaries, carriage of goods by sea; marine insurance; laws of ownership; and registration of ships; ship sale and building contract; ship financing; mortgages; law of collisions; salvage; towage; pilotage; maritime pollution laws; custom laws; port laws; etc. All these various aspects are covered by legislations of India.

Maritime Law of India which is developed over a century, from colonial times sourcing from the following acts:

Admiralty Offences (Colonial) Act, 1849; The Inland Steam-vessels Act, 1917; The Coasting Vessels Act, 1838; The Indian Registration of Ships Act, 1841; The Indian Ports Act, 1908; The Indian Merchant Shipping Act, 1923; The Merchant Seamen (Litigation) Act, 1946; The Control of Shipping Act, 1947; Territorial Water Jurisdiction Act, 1878; etc.

The Shipping Industry is also governed under the rules and regulations framed by International Maritime Organization (IMO).

Maritime Contracts

First of all, contracts are the product of proposals, acceptance, considerations and negotiations which are completed by the performance of the requisite provisions mentioned in an agreement. It works similarly in the Maritime Industry. But only in a regulated business such as shipping do companies run to the government when contract negotiations get problematic.

When a contract is made relating to a ship it is referred to in Maritime contracts. They are different from general contracts. When goods are sold, there can be confusion as to when each party’s ownership begins and ends. For example, a shipping company had an accident; Who suffered the loss? The seller? The buyer? Or the shipping company? There are various types of contracts each having its own feature which helps in knowing the same.

A Maritime contract is an agreement pertaining to the operations, navigation, maintenance and repair or provisioning of a vessel.

Here are the 10 Types of Maritime Contracts:

• Charter Agreements

There are four types of charter agreement in Maritime—voyage charter, time charter, bareboat charter, and “lump-sum” contract. Under the voyage charter a ship is chartered for a one-way voyage between specific ports with a specified cargo at a negotiated rate of freight. On time charter, the charterer hires the ship for a definite period of time, for a specified round-trip voyage, or, occasionally, for a stated one-way voyage. Whereas on a voyage charter the owner bears all the expenses of the voyage (subject to agreement about costs of loading and discharging), on time charter the charterer bears the cost of bunkers and stores consumed.

The charter which is not used all the time in ordinary commercial practice is a bareboat charter. The owner of the ship delivers it up to the charterer for the agreed period without crew, stores, insurance, or any other provision. Contracts can also be arranged on a lump-sum basis, when an owner agrees to ship a given quantity of a stated cargo from one port to another for a stated sum of money.

• Wharfage and Dockage Agreement

On the harbor shore the ships are docked to load and unload cargo or passengers around a structure which is called a ‘Wharf’ and ‘Wharfage’ is the duty paid for getting the access to use the wharf. Whereas the building, repairing, loading and unloading of the ships and ferries takes place at a dock. The owner of the ships or ferries have to pay a certain amount of fee at the dock which in Maritime terms is called ‘Dockage’.

Such claims come under the jurisdiction of admiralty courts.  This is because a wharf is a necessary terminus of every voyage. All kinds of ships, vessels and water-craft of every name and description whether employed in carrying freight or passengers or engaged in the fisheries need Wharf accommodation for navigation. Thus, wharfage is must for the ships and it also helps ensure the benefit of everyone interested therein. 

• Ship Repair Contracts

By the term itself, Ship Repair Contracts includes maintenance, ship conversions, modifications, major and minor damage repairs. It is the most important factor of the shipping and shipbuilding industry.

The ship repair procedure does not take much time to complete. It is like the new construction procedure, except that it is performed on a smaller scale than the usual construction procedure. It requires a proper coordination and intensive bidding process for ship repair contracts. Usually the navy, commercial ship owners and other marine structure owners are the repair work customers.

Contracts can be Firm Fixed Price (FFP), Firm Fixed Price Award Fee (FFPAF), Cost Plus Fixed Fee (CPFF), Cost Plus Award Fee (CPAF) or urgent repair contracts. The repair process starts in the marketing area when the shipyard is asked for a Request for Proposal (RFP) or an Invitation for Bid (IFB). The IFB contract is awarded to the lowest bid price, while an RFP award can be based on factors other than price. The cost estimate and the proposal for the repair contract are prepared by the repair estimate groups under REP contract. Whereas, Bid estimates generally include worker-hours and wage rates, materials, overhead, special service costs, overtime and shift premiums, other fees, facilities cost of money and, based on these, the estimated price of the contract. A production plan is created as soon as the contract is signed.

• Preferred Ship Mortgages

To obtain boat loans “Preferred Ship Mortgage” is a good option. It is specifically used for vessels that are over 26 feet in length. For boats that are smaller than that, the title and a notation of the security interest recorded on the title should be enough to protect the lender. 

In the usual terms a mortgage is a security on a loan which is given by the client to the lender, in the same way a ship mortgage is a security on a loan given by the shipowner to the lender (mortgagee). There are three parts in a ship mortgage: the mortgage loan, the mortgage document (deed) and the rights derived from the mortgage deed onto the money lender. Even if we say a ship mortgage is similar to the other types of mortgages, it still differs from other types of mortgage in three ways. First, the privileged claims could have a higher ranking over that of mortgagee against the ship. Second, ships usually move between jurisdictions. And third, it is always believed that a ship is at risk of partial or total damages at sea and this point is mentioned in the Mortgage contract every time.

• Seafarer’s Employment Contracts 

Seafarer’s employment contracts gained importance since the enforcement of the Maritime Labor Convention (MLC). MLC mandates the shipowner/employer to have written employment agreements with all seafarers working on seagoing ships. The payment of wages of seafarers shall match the standards formed by MLC.

This contract helps the seafarer to know about the working conditions, working hours, wages and facilities provided on the vessel. This contract is important from the Fair- Trade Practice perspective. 

The agreement must be signed by both the parties i.e., the seafarer and the employer/shipowner. 

• Marine Insurance Contracts

Insurance is a contract, in which an individual or a company obtains financial security or reimbursement against losses from an Insurance Company. Similarly, in maritime such insurance is called Marine Insurance. It is used to indemnify the insured in a manner and to the interest thereby agreed against marine losses. Like an individual, a shipping company also has to pay premiums to the insurance company but in this industry the amount is always huge. 

Fundamentals of Marine Insurance:

1. Insurable Interest,
2. Utmost Good Faith,
3. The doctrine of Indemnity,
4. Subrogation,
5. Warranties,
6. Proximate cause,
7. Assignment and nomination of the policy, and
8. Return of premium.

• Marine Salvage 

When a ship or its cargo is trapped in the perils of the sea it costs loss of lives and property on the sea. To compensate the families of the people who lost their lives on the ship or to compensate the company which provided its cargo to get shipped from one place to the other a contract which is called Marine salvage is made between the seamen or manufacturing company and shipping company.

Generally, in contract salvages, before the commencement of the salvage operations there is a contract between the rescuer and the owner of the cargo or vessel for a fixed remuneration irrespective of the recovery. The objective of the marine salvage is to provide an economic inducement to seamen to save their property as a reward for their services.

Marine salvage arises when a ship is in distress due to some kind of emergency like hurricane or a localized danger like the attacks that took place near Somalia by the Somali Pirates or any other technical danger.

• Dredging Contracts

Dredging is the procedure of excavating material from a water environment. It is used for improving existing water features; reshaping land and water features to alter drainage, navigation and commercial use; construct dams and other controls for streams and shorelines and to recover valuable mineral deposits and marine life having commercial value. To carry out such operations a contract is made between the dredging contractor and its client who wants to carry out dredging for the sake of commercial purpose.

A dredging contract not only requires technical knowledge associated with marine civil engineering construction projects but also maritime expertise about the particular constraints of the operation of a dredging vessel coupled with compliance with maritime shipping regulations.

• Contract of affreightment

The transport contract between the Shipper and the Carrier to carry goods from point A to B is called a Contract of Affreightment. The bill of lading is evidence of this contract. It is the responsibility of the Carrier to receive and deliver the goods in the same condition it received it in. The carrier has the right to be paid for its services. The shipper has the obligation to get the goods to the carrier and to pay the carrier for its services. In turn the Shipper has the right to have the goods delivered to it in the same condition that it was delivered to the Carrier in.

• Ship Management Agreements

A vessel is a big model of a ship which carries cargo or any other material in huge quantity and all the staff working on the vessel are not always well aware of the technicalities of the vessel, the ship owners hire a ship management company to look after their vessel as the employees of the ship management companies are well aware of the technical issues of a vessel. In earlier days, functions like financial management of vessels, employment of personnel, maintaining the vessel, technical supervision, operation, etc. These functions used to cost a lot of time which made the shipping process quite slow. But now, the shipowners usually hire resources to manage the operations carried on ship while supplying goods.

It is necessary to employ experts to manage the operations of the ship because a ship is always expensive, all the devices used in a ship, all the material used in a ship costs a fortune. Therefore, having professionals to look after the ship operations is better. Hence, the ship owners delegate their functions in various areas to ship management companies.

Conclusion

Maritime law is a kind of law that deals with issues which are far from a man’s reach. It is quite different from the laws that work on land. Contract is the essential part of the Maritime law. There is no activity that can take place without any kind of agreement in water bodies. Even if for amusement in the sea like scuba diving or water skiing, we have to sign an agreement to get access for the same. Henceforth, Maritime Contracts are valuable and necessary for smooth negotiations of terms and conditions taking place on open water between the contracting parties.

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