Oil Majors’ Approval - Legal Issues under time charter contract

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First time the effect of the owners’ failure to obtain in due time an oil major approval came in sight in The Seaflower case . Although the main difficulty met in this case was the clause drafted with insufficient consideration given to the precise meaning and effect of the terms , this decision attracted general attention to the importance of oil majors’ approval rather than to the importance of careful drafting.

First of all, majors’ approvals or rather their absence negatively affect tradability of the vessel, i.e. vessels which do not have an approval simply cannot carry products of that oil major .

Secondly, an approval is a matter of status, as Rix LJ stated at para 64: ‘An oil company's approval may reflect the vessel's condition, but it is a matter of status rather than condition. Similarly, a vessel's class is a matter of status - although that status may be affected in many different ways: at one extreme a vessel may be completely out of class, which is a most serious matter, because such a vessel cannot trade, but at another extreme there may be only a recommendation or even a mere notation of class that something relatively minor be attended to within a certain date. In the case of an oil majors' approval, however, the vessel either has it or it does not. In that respect it is like a term as to the vessel's class at the time of contract: if the vessel is out of class, the condition as to her class is broken.’

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Igor Sterzhantov s.r.o. | Attorney Advertising

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