Duhaime's Law Dictionary


Demurrage Definition:

A term of transportation law which refers to the damages payable to a carrier as compensation for lost time.

Derived from the French word demeurer, which means to stay or remain somewhere although the legal definition refers to damages paid in respect of a delay in a transportation or charterparty contract. The days specified by the ship to load or unload are called lay days. When a charterer exceeds that time, the damages are pre-specified, liquidated, and known as demurrage.

In Norfolk Southern Railway, Justice Peter Fay of the United States Court of Appeals, Eleventh Circuit wrote:

"The right to assess detention or demurrage charges against parties to a transportation contract for delay in releasing transportation equipment is well established at common law.

"Motor carriers term such a delay as detention while rail carriers refer to it as demurrage. Prior to rail transport, demurrage was recognized in maritime law as the amount to be paid for delay in loading, unloading, or sailing beyond the time specified.

"Unlike maritime law, a railroad carrier can collect demurrage even if the shipping contract contains no provision to that effect. In the railroad setting, demurrage charges serve a twofold purpose. One is to secure compensation for the use of the car and of the track which it occupies. The other is to promote car efficiency by providing a deterrent against undue detention. As such, demurrage charges are properly assessed even if the cause for the delay is beyond the party's control, unless the carrier itself is responsible for the delay."

In Law of Demurrage, author Hugo Tieberg defined it as:

"(P)ayment provided by contract or by law for the use by the charterer of time beyond which is conceived to be normally necessary for loading or discharging of a ship of for the performance of certain functions relating thereto."

Causes for the delay need not necessarily be related to the charterer’s action and include ice demurrage, or repairs occasioned by collision.

In English law, demurrage is taken as a per diem (daily) rate and always as a fixed sum, liquidated damages; damages contemplated upon in advance, "just in case", by the contracting parties.

In Maritime Law, the authors wrote:

"Demurrage is usually typically quoted at a certain rate per day and pro rata for a part day. If no limit is set to the number of days on demurrage, the shipowner is bound to keep the ship at the loading port as long as it is necessary for the charterer to load,or at lease until commercial frustration overtakes their contract, since the charterer is paying extra for the privilege of detaining the ship. Commonly, however, a fixed number of days on demurrage is stipulated in the charterparty (contract) so that holding over longer is a breach of contract."

Days beyond the specified date for the end of the charter, and during which demurrage accrues, are called demurrage days.

REFERENCES:

  • Gold, E. and others, Maritime Law (Toronto: Irwin Law, 2003), pages 390-391.
  • Moor Line Ltd. v Distillers Co Ltd 1912 SC 514
  • Nielsen v Wait 16 QBD 67 (1885)
  • Norfolk Southern Railway Co. v. Groves, 586 F. 3d 1273 (2009)
  • Tiberg, Hugo, The Law of Demurrage (London: Sweet and Maxwell, 1995), pages 1-3.

 

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