Category: Maritime Contract

Olympic Tug & Barge, Inc. v. Lovel Brier, LLC

2024 U.S. Dist. Lexis 49733 (W.D. WA March 20, 2024)

This was a dispute between a barge owner and the charterer of the barge. The charterer sued the barge owner after the latter said it would double the hire rate for the barge and declare the charterer in default.

The barge owner moved to amend its counterclaim to include a claim for breach of the duty of good faith and fair dealing based on the charterer’s refusal to turn over full insurance policies it was required to obtain pursuant to its charter agreement. The court denied the motion concluding that the amendment would be futile.

Section 7 of the charter agreement did not create a duty for the charterer to produce insurance documents at any time upon the barge owner’s demand. The agreement said that the charterer’s insurance policies (1) shall be subject to the barge owner’s approval and (2) shall be endorsed to require 30 days written notice to the barge owner in the event of any cancellation, non-renewal or other material change in policy terms or conditions. The court interpreted this language as stating conditions giving rise to the barge owner’s right to review and approve the charterer’s insurance policies after the barge owner’s initial approval of the policies. But the charterer did not have a duty to produce the policy documents absent the occurrence of the stated conditions, i.e. cancellation, non-renewal or other material change.

The lesson here for vessel owners who charter out their vessels is to include a specific provision in the charter agreement requiring the charterer to produce copies of any insurance documents on demand by the vessel owner.

Sunday, January 7, 2024

What Hurts, LLC v. Volvo Penta of the Ams., LLC (E.D. Virginia – January 5, 2024)

The court addresses whether a breach of express warranty claims falls within the court admiralty jurisdiction.

Federal courts have original and exclusive jurisdiction over any civil case of admiralty or maritime jurisdction. Contract disputes fall within admiralty jurisdiction if the nature or subject matter of the contract is maritime. 

Contracts for repair, alteration, or reconstruction of a vessel which, before such work, was actively engaged in maritime commerce or navigation, generally are considered maritime contracts. However, contracts to build a ship, or contracts involving work performed on a non-maritime object, are not maritime. Uncertainty between the two are resolved in favor of admiralty jurisdiction. 

The court found that the vessel was built before the underlying Release, that gave rise to the express warranty claim, was signed. Thus, the Release was a contract for the modification of a vessel and was properly considered a maritime contract. 

Plaintiff’s claim, however, was for breach of an express warranty and warranty claims generally do not fall within a federal court’s original admiralty jurisdictoin because they are grounded in nonmaritime contracts, such as contracts for the sale of a vessel. But because the parties agreed in the Release to create a new limited warranty as part of their agreement to alter the vessel’s engines, the limited warranty was grounded in a maritime contract and the express warranty claim was held to fall within the court’s original admiralty jurisdiction.