This chapter is the most important in the work. It deals with the knock-for-knock arrangement and the exclusion of consequential damages, which are the main points where a charterparty for an offshore vessel such as Supplytime is similar to other contracts in the offshore oil and gas industry and differs from charterparties for ordinary cargo vessels.
The chapter is in reality a small book in itself. It attempts to deal with all the varieties of knock-for-knock provisions, with all the exceptions which are found and all the wordings which are used: for instance, there are full discussions of “gross negligence” and “wilful misconduct” which do not feature in Supplytime but appear quite often elsewhere as exceptions to a knock-for-knock. Also, I have given full quotations for the authorities which define the meanings of phrases. In a book to be printed and published between hard covers, it would be better just to state the conclusion and give a reference to the judgment(s), but in a work which is being made available online, quotations may be helpful to the user.
The overall moral of the chapter is that the knock-for-knock provisions in Supplytime will be broadly successful in doing the job intended, although there are issues; however, the exclusions of consequential damages will not do the job intended. The “consequential damages” sub-clauses in Supplytime 89 and 2005 were too narrow; the “excluded losses” provision in Supplytime 2017 goes too wide, and is liable to be interpreted restrictively.
The issues with the knock-for-knock provisions have four main sources:
- The definitions of the persons and property to be covered (in Supplytime 2005 and 2017, the owners’ and charterers’ “Groups”) do not include all the persons and property which should be covered (in relation to Supplytime 2017, most of the points are dealt with in Chapter C).
- In Supplytime, the wordings of the first “limb” (“shall not be responsible for”) are not parallel as between owners and charterers.
- The second “limb” (“indemnify, protect, defend and hold harmless”) is absolutely necessary to the working of the knock-for-knock arrangement, but in Supplytime it extends too far and will have effects which are not intended (and also will contradict the first “limb”); it may be a difficult task to draft the second “limb” in a way which keeps it under control.
- The working of the arrangement as a whole depends on the indemnities in the second “limb”, but in Supplytime the functioning of these indemnities is liable to be interfered with by the reservation of the right to limit liability.
The discussion of “consequential damages”/”excluded losses” will also be useful as a sort of encyclopedia: those who need to know what is covered by “loss of use” or “loss of revenue” will find the phrases judicially defined here. But the main target of the discussion is the interpretation of the “excluded losses” provision in Supplytime 2017. The problem is not one which can be resolved simply by yet more clever drafting : there are reasons which are deeply embedded in the way English law interprets contractual wordings for why such very wide exclusions will be interpreted restrictively rather than literally. Those who are cynically inclined may say that my background is in dispute resolution and so I do not want the world to be made safe for the non-contentious lawyers who draft contractual wordings. However, in my view there is an approach that will work, which involves first agreeing on what substantial remedies for breach of contract are to be available to the parties, and then drafting to exclude all other remedies. (But there may be — so to speak — “political” reasons why those who draft and approve BIMCO documents may find it difficult to agree on substantial remedies which are to be left open to charterers of offshore vessels.)