A notice of readiness (NOR) is the notification that (i) the vessel has arrived at the agreed place; and (ii) it is ready to load or discharge (physically and legally). The purpose of providing an NOR is two-fold, it both confirms to the charterers that the vessel is at their disposal and also gives a start point of when laytime has commenced. The validity of an NOR is a common source of dispute and can lead to arguments over whether a charterer is entitled to cancel the charterparty as the vessel has not met the laycan (the specific time frame when a vessel is permitted/required to arrive at the load port). Disputes may also arise regarding whether demurrage (liquidated damages for delay) can be charged.
When is an NOR valid?
An NOR will be valid if the vessel:
(i) has arrived at the agreed destination within the period of time agreed by the parties; and
(ii) is both physically and legally ready for cargo operations.
Arrived ship
For the NOR to be valid, the vessel must constitute an “arrived ship”, meaning the NOR must be tendered upon the ship’s arrival at the agreed destination between the parties. The terms of the charterparty will determine the exact location, but normally this will be either a specified port, dock or berth.
The charterparty may contain additional qualifying provisions in relation to whether the vessel is an “arrived ship”, such as:
- WIPON – ‘Whether In Port Or Not’
- WIBON – ‘Whether In Berth Or Not’
- WICCON – ‘Whether Customs Cleared Or Not’
- WIFPON – ‘Whether in Free Pratique Or Not’ (this refers to permission given by a port for a vessel to enter once it has been certified as being free of infectious disease by the competent health authorities).
The addition of clauses such as these may allow an owner to tender an NOR earlier than they would be contractually permitted to, had the clause not been included in the original charterparty.
Physically ready
The ship must be in a ready condition so cargo operations can commence without delay and charterers’ orders can be complied whenever they are dictated. This not only covers the cargo holds but extends to all the vessel’s equipment required for cargo operations as well as personnel. Whilst not an extensive list, this would imply that a vessel’s cranes, pumps or any other equipment required to load or discharge the cargo should also be ready to perform the cargo operation.
In the case of The Tres Flores[1] the Court of Appeal held that to give a valid NOR, a ship must be prepared to obey the charterer’s loading instructions whenever they are given. In this case, pests in the holds meant the ship was not ready to receive the chartered cargo until fumigation had been completed, resulting in the NOR becoming invalid.
In the case of The Massalia (No. 2)[2] it was held that an NOR was invalid as the cargo in question was inaccessible. In this case, the vessel had to firstly discharge over stowed cargo that was loaded on top of the cargo that was intended to be discharged. The Court held that no NOR could be given until the cargo was accessible.
Readiness is a preliminary existing fact which must exist before the NOR can be given.
Legally ready
A vessel must also be legally ready with express provisions commonly indicated in charterparties, usually concerning customs clearance or entry, immigration and police approval and health or free pratique.
The tendering of the NOR can be modified through the following common clauses:
- “Time actually used before commencement of laytime shall count”: where work is carried out before the laytime begins, the time used will count.
- “Time lost in waiting for berth to count as loading or discharging time”: places the risk of congestion upon the charterer, whether the charter is a port or a berth charter.
Format of an NOR
Under English law there is no specific format in which an NOR should be tendered. A statement confirming the vessel is ready to be delivered/loaded/discharged depending on the specific case should be sufficient, as long as it is accurate.
Attention should be paid to the applicable charterparty form to see if there are any specific requirements that are expressly contained within that must be followed closely.
In The Port Russell[3] case the NOR was tendered via email. The vessel was chartered on an amended BPVOY3 form, with clause 19 of the charter stating that the NOR was to be tendered either by “letter, facsimile transmission, telegram, telex, radio or telephone (and if given by radio or telephone shall subsequently be confirmed in writing and if given by facsimile transmission confirmed by telex)…”
The Judge ruled that email was not a valid method of serving the NOR as the only contractual methods that were valid were those that were expressly mentioned within the clause. Therefore, the service via email was not validly served within the terms of the charterparty and consequently the NOR was invalid.
Can invalid NORs ever become valid?
No, an invalid NOR (for whatever reason) can never become valid if the requirements are met at a later date and time.
In “The Mexico I”[4] case, notice was given before the ship was ready to discharge. It was held that the notice was invalid and did not become valid when the ship became ready.
Owners should therefore follow the general principle that they should serve a new NOR once they have satisfied themselves that the conditions are met. If owners are concerned about the validity of an NOR, they should keep serving NORs ‘without prejudice to the validity of any previous NORs’.
What happens if an invalid NOR is accepted?
Even though an invalid NOR will never become valid, there is nothing stopping a charterer in accepting an invalid NOR. This may be done either through their conduct or expressly and if this is the case, there is an argument to be made that charterers could lose their right to argue that the NOR was invalid later.
In The Happy Day[5] case, the Court of Appeal held that although an invalid NOR was tendered by owners, laytime commenced when cargo operations began, as the charterers had sufficient knowledge that the vessel was ready. The charterers’ confirmation that discharge could commence was deemed sufficient to trigger the start of laytime, and they may be considered to have waived their right to rely on the invalidity of the original notice.
Summary
Ensuring that a valid NOR is tendered at the correct time is a vital step under any charterparty. As explained in the above guide, the potential consequences of non-compliance can be severe and may lead to the charterparty being cancelled or owners losing their right to claim demurrage. Therefore, if a Member is unsure we encourage them to please reach out the Club’s LCC Claims team for advice.
Our Members are reminded that if they are concerned about a legal issue arising out of the points discussed in this article, they may be entitled to some initial legal advice free of charge, from a select panel of external lawyers under the Club’s Legal Advice Benefit. If Members wish to take advantage of this benefit, please contact the Claims team to discuss.
[1] COMPANIA DE NAVIERA NEDELKA S.A. v TRADAX INTERNATIONAL S.A. (The Tres Flores) [1973] 2 Lloyd’s Rep. 247
[2] GOVERNMENT OF CEYLON V SOCIETE FRANCO-TUNISIENNE D’ARMEMENT-TUNIS (The Massalia) (No. 2) [1960] 2 Lloyd’s Rep 352
[3] Trafigura Beheer BV v Ravennavi SPA (The Port Russel) [2013] EWHC 490 (Comm).
[4] Transgrain Shipping B.V. Global Transporte Oceanico S.A. (The Mexico 1) ]1990] 1 Lloyd’s Rep. 507
[5] Glencore Grain Ltd v Flacker Shipping Ltd. (The Happy Day) [2002] EWCA Civ 1068 [2002] 2 Lloyd’s Rep. 487