Explanatory notes

Part I

Part II 

• Clause 1 - Definition
• Clause 2 - The Services
• Clause 3 - Company Representative
• Clause 4 - Change of Method of Work and/or Personnel, Craft and Equipment
• Clause 5 - Miscellaneous
• Clause 6 - Permits 
• Clause 7 - Delays
• Clause 8 - Suspension or Termination
• Clause 9 - Delivery
• Clause 10 - Price and Conditions of Payment
• Clause 11 - Time of Payment and Interest
• Clause 12 - Extra Costs
• Clause 13 - Security
• Clause 14 - Liabilities
• Clause 15 - Himalaya Clause
• Clause 16 - Lien 
• Clause 17 - Time for Suit
• Clause 18 - Governing Law and Arbitration
• Clause 19 - Warranty of Authority 
   

 

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Set out below are the changes made to the original WRECKHIRE Agreement in order to create the new WRECKHIRE 99 Agreement.

Part I

Box 4 now refers to GT, NT and DWT.

There is a new Box 9 (Permits), which deals with changes made to Clause 6.

The remaining boxes, up to and including the original Box 12 are re-numbered accordingly. Box 13 (Security Requirements) has been deleted due to changes to Clause 13.

A new paragraph has been added to the Preamble above the signature boxes, to deal with any conflict that may arise between the terms and conditions of Part I and Part II.

Part II

There are now 18 clauses in WRECKHIRE 99, all of which featured in the original WRECKHIRE. Changes have been made to the original WRECKHIRE clauses 3, 4, 5, 6, 12, 13, 14, 15, 17 and 18. Clause 19 (Warranty of Authority) has been deleted. The line numbering adopted in this article relates to the new WRECKHIRE 99, unless otherwise stated.

Clause 1 - Definition

This clause defines the “Vessel” and is self-explanatory. The wording is unchanged from the original WRECKHIRE. It should be noted that, in order to give the Agreement as wide an application as possible, the term “Vessel” not only includes the ship, but also cargo, containers, stores and bunkers.

Clause 2 - The Services

This clause deals with the Contractors’ obligations in rendering the services set out in Box 7, as well as the provision of personnel, craft and equipment, the method of work, and any change in the method of work, or provision of personnel, craft and equipment. Consistent with the approach taken in the 1989 Salvage Convention, the Contractor is obliged to exercise “due care” when rendering the services. Provided that it is not inconsistent with the nature of the services to be rendered, the Contractor must also exercise “due care” to minimise damage to the environment.

Clause 3 - Company Representative

This clause provides for a representative of the Company to be available during the services, with full authority to act on behalf of the Company. It also deals with the provision of information required by the Contractor and for the attendance of sufficient officers, or equivalents, who are fully conversant with the layout of the Vessel and its cargo system. The wording of this clause has been amended to make it clear that the primary role of the ship’s officers, or equivalents, is to provide advice and not assistance to the Contractor.

Clause 4 - Change of Method of Work and/or Personnel, Craft and Equipment

Problems may arise during any operation which require a substantial change of method, equipment, etc. This Clause deals with the circumstances under which the Contractor may seek a variation to the Rates of Hire.

During the revision of WRECKHIRE, the P&I Clubs raised a point relating to a situation where the services become easier due to a change of circumstances. The particular instance they gave as an example was a sunken vessel which had to be reduced to give a certain depth clearance. Between agreeing the contract price and commencement of operations the vessel had sunk into the seabed. As a result the work required was significantly reduced.

The Clubs considered it was only fair and reasonable for Clause 4 to be amended to work both ways and, as a result, a new sub-clause 4.4 has been introduced reading as follows:

4.4 If, as a result of a material change in the position and/or condition of the Vessel, or the worksite, subsequent to entering into this Agreement, the services set out in Box 7 and Annex I become easier to perform in terms of personnel, craft, and/or equipment requirements, then:

4.4.1 the Company may, subject to the provisions of Clause 10.4 hereof, seek a reduction in respect of the monies payable pursuant to Clause 10.1 hereof;

4.4.2 in the event of a failure to agree the amount of any such reduction, then such dispute shall be dealt with pursuant to the provisions of Clause 18 hereof.

Clause 5 - Miscellaneous

This clause deals with matters such as the marking of the Vessel; use of the Vessel’s machinery and equipment; removal or jettison of parts of the Vessel and/or its cargo, and provision of plans and manifests.

The original WRECKHIRE sub-clause 5.4 indemnity for removal, disposal or jettison of property has been deleted, as it is considered that the “hold harmless” provisions of the new sub-clause 14.2.2 adequately deal with this matter.

Clause 6 - Permits

This clause deals with the need to obtain licences, approvals, authorisations and permits. In practice, this clause has frequently caused problems as the Clubs have always been of the opinion that the Contractor should arrange all permits, licences, etc., necessary for his operations.

The Clubs wanted to reverse the obligation by placing the burden on the Contractor to obtain any permits, etc. However, the wording of Clause 6 now leaves it to the parties to decide this matter, on a case by case basis, by nominating in Box 9 the party who will be responsible for obtaining permits, licences, etc.

Clause 7 - Delays

Delays may be caused by any reason outside the control of the Contractor, but in WRECKHIRE 99 they will only count as delays if no meaningful work can be performed. For example, if the Contractor is prevented from carrying out his intended work, but can nevertheless progress the operation in other ways, then this would not constitute a delay. During any actual delays the Contractor can be placed on the Standby Rate as set out in Box 10.

BIMCO recommends that the Standby Rate should be set at a level which will encourage the Contractor to progress the operation. It should be noted that in WRECKHIRE 99 it is the Company who must notify the Contractor when, in its opinion, the Standby Rate should apply. Without such notification the normal Daily Hire Rate(s) will continue to apply.

Clause 8 - Suspension or Termination

The provisions of this clause set out the circumstances under which the Agreement may be terminated by the Company (sub-clause 8.1); the manner in which the suspension or termination of the Agreement will be carried out by the Contractor (sub-clause 8.2); and the situation if permission to suspend or terminate the services is not given by the competent authorities (sub-clause 8.3).

Clause 9 - Delivery

Clause 9 is concerned with delivery of the Vessel on completion of the services. Sub-clause 9.1 deals with delivery of the Vessel to the Company; the nature of the place of delivery; and the consequences of any delays.

Sub-clause 9.2 deals with the consequences of a failure by the Company to take delivery, and the right of the Contractor to sell the property in such a situation. Finally, sub-clause 9.3 explains that references to the “Vessel” includes parts of the Vessel and/or its cargo and that delivery of such may take place at different times and at different places.

Clause 10 - Price and Conditions of Payment

This clause is fundamental to the proper working of the Agreement and deals with the rates of hire for personnel, craft and equipment (sub-clause 10.1); provides that such hire is fully and irrevocably earned on a daily basis and is non-returnable (sub-clause 10.2); provides for overpayments to be made back to the Company (sub-clause 10.3); provides for payment to be made to the Contractor without deduction (sub-clause 10.4); deals with the bank account for payment (sub-clause 10.5); and gives a right of termination in the event that payment is not made in accordance with the terms of the Agreement, or if security is not provided in accordance with the provisions of Clause 13 (sub-clause 10.6).

Clause 11 - Time of Payment and Interest

Clause 11 enables the Contractor to charge the Company interest at the rate stated in Box 12 in the event payment is not made in accordance with the terms of the Agreement.

Clause 12 - Extra Costs

This clause provides for any various extra costs that might be incurred to be for the account of the Company. In Clause 12.7, at line 204, the words “portable salvage” have been inserted to make it clear that the equipment referred to does not include sheerlegs, cranes, tugs, barges, etc. Clause 12 also permits the Contractor to levy a handling charge, as set out in Box 13, in the event that the Contractor pays any such costs on behalf of the Company.

Clause 13 - Security

While the Security Clause still requires the Company to provide an irrevocable and unconditional security, it is no longer required to be in the form of a bank guarantee, but can be in any form as agreed between the parties. The Company is required to provide satisfactory security to cover monies due to the Contractor. The Contractor may also commence operations without the provision of initial security, but can request it to be provided at a later stage.

Clause 14 - Liabilities

The Liabilities Clause has proved particularly troublesome throughout the history of WRECKHIRE. The clause establishes the position between the parties with regard to liability for their own personnel, craft and equipment. The Clubs raised objections to the wording of the WRECKHIRE Liabilities Clause, in particular to the indemnities in respect of wreck removal or third party claims. Their reasoning is that they consider that third party claims should be covered by the common law of negligence for which a Contractor can obtain suitable insurance cover, the cost of which will form part of his lump sum price, and that the party liable to remove a subsequent wreck should meet such claims through his own P&I Club cover, or other liability insurance. The result of the discussions with the Clubs is a new and much shorter clause which deals only with loss or damage to property of the Contractor/Company.

Contractors should note that the cross indemnities relating to liability for pollution from the “Vessel” or from the Contractor’s Craft are excluded from the Agreement. Contractors should therefore ensure that they have adequate and proper cover for such risks.

It should also be noted that sub-clause 14.2.1 has also been amended at lines 241 - 242 by including the words “excluding portable salvage equipment, materials or stores which are lost damaged or consumed during the services”. This is to avoid any conflict or ambiguity between sub-clause 12.7 and this sub-clause 14.2.1.

In addition, the Clubs requested that WRECKHIRE sub-clause 14.4 be deleted, as it could be used to argue that if the Contractor is liable to a third party and is unable to limit his liability, then the Company should indemnify the Contractor for any excess liability.

This could result in the Company accepting liabilities in excess of its own limit of liability.

Clause 15 - Himalaya Clause

This standard clause has been slightly amended (lines 259-260) from the version currently found in WRECKHIRE in order to clarify the position if the Company is the demise or bareboat charterer of the Vessel.

Clause 16 - Lien

This is a standard clause which remains unchanged from WRECKHIRE. The clause provides that the Contractor has a possessory lien on the Vessel for any amounts due to him under the Agreement.

Clause 17 - Time for Suit

This clause deals with the period within which a claim arising under WRECKHIRE 99 may be brought by either party.

The clause has been slightly amended from the original WRECKHIRE in that a claim must be brought either within 12 months of completion or termination of the services, or within 12 months of notification of a claim by a third party, but any suit must be brought within one year of the notification to the party against whom the claim is made.

Clause 18 - Governing Law and Arbitration

This clause remains unchanged from the original WRECKHIRE other than reference is now made to the Arbitration Act 1996 and LOF 1995. Although BIMCO normally endeavours to have its Standard Law and Arbitration Clause incorporated into approved forms, the specialised nature of the WRECKHIRE 99 Agreement makes it more sensible to provide for arbitration in London before a member of the existing Panel of Lloyd’s Arbitrators, who are experts in this field. However, Clause 18 does follow the traditional pattern of the BIMCO Law and Arbitration Clause in providing the parties with the option to agree to a different jurisdiction and place of arbitration. In addition, should the parties fail to indicate their preference for a particular alternative jurisdiction and place of arbitration then, by default, the dispute will be referred to London arbitration subject to English law.

Clause 19 - Warranty of Authority

This clause has been deleted from “WRECKHIRE 99” as it is now dealt with by the additional Part I Preamble.