Remember the importance of the New Jason Clause

The ‘New Jason Clause’ has been recommended for many years for inclusion in contracts for the private or common carriage of goods,^[1] particularly if the trade involves US law or cargo shipped to or from the US._^[2] The practice of including the clause is so common that most bills of lading and charter parties include the clause in one form or another. While rare, chartering or cargo interests may attempt to remove the clause during contract negotiations whether due to intent or confusion as to the need for the clause. This alert is a reminder to shipowners of the importance of including the clause in their contracts particularly if there is a US dimension to the trade.

Under English law and the law of several other countries, a shipowner is entitled to a general average (GA) contribution from cargo interests when the GA incident is caused by the fault of the owner or crew, provided the owner is not liable for that same conduct under the rules governing the contract of carriage (eg Hague or Hague-Visby Rules). The classic example arises when the event giving rise to GA is caused by negligent navigation or management of the ship by the vessel crew. In such cases, the owner is likely able to claim a GA contribution from cargo interests because a carrier has a complete defence to negligent navigation or management under Article IV Rule 2(a) of the Hague or Hague-Visby Rules (assuming those rules apply). The owner’s entitlement to GA contribution essentially rises and falls on whether the owner breached its carriage obligations or can otherwise escape the consequences of that fault via the terms of the contract or statute.

US law is different. The default position under US law is that an owner is not entitled to a GA contribution from cargo when the GA event is caused by the owner’s or his agent’s fault or neglect. This is so even if US COGSA applies to the voyage and the neglect or fault constitutes a defence under COGSA.^[3] The incorporation of a New Jason Clause in the contract of carriage changes this default rule.

A standard New Jason Clause confirms that cargo interests are required to contribute to GA when the event results from any cause whatsoever, whether due to negligence or not, or for the consequence of which the owner/carrier is not responsible by statute, contract or otherwise. Thus, provided a New Jason Clause is incorporated, the position under US law is like the position under English law – cargo interests cannot avoid contributing to GA if the event was caused by owner/vessel fault unless that fault would render the owner liable under the rules applicable to the contract of carriage, eg if owners have failed to exercise due diligence to make the vessel seaworthy.

Considering the position under US law, it is customary for a New Jason Clause to be inserted into contracts of carriage in the event US law applies to the owner’s GA recovery rights against cargo interests. The York-Antwerp Rules, pursuant to which many GA adjustments are conducted, do provide that the rights to GA contribution shall not be affected by fault of one of the parties to the voyage, ‘but this shall not prejudice any remedies or defences which may be open against … that party in respect of such fault.’^[4] Incorporation of York-Antwerp Rules therefore may not have the same effect as the New Jason Clause in changing the default position under US law. It is still advisable to include the New Jason Clause when York-Antwerp Rules are incorporated.

Subject to certain exclusions, P&I cover responds to the proportion of GA which the member is or would be entitled to claim from cargo or another party ‘which is not recoverable solely by reason of a breach of the contract of carriage’ (see rule 3.14). As such, cover for GA contributions that are unrecoverable due to a failure to incorporate a New Jason Clause, rather than a breach of the contract of carriage, would be rendered discretionary.

The key takeaway to the above is that members should ensure that the standard, unamended wording of the New Jason Clause^[5] is always incorporated into their bills of lading and charter parties if US law might apply to the GA contribution claim against cargo interests or the trade involves cargo shipped to or from the US. If in doubt or, say, a time charter includes worldwide trading limits, then it is best practice to insist on the incorporation of a New Jason clause.

This article is intended to provide general guidance and not intended to provide legal advice in relation to a specific query. Should members require further information on this topic, please contact your usual club contact in the first instance.

[1] See the club’s Web Alert: The New Jason Clause: a reminder of its importance (18 March 2015) which is available by clicking here.

[2] The original Jason Clause was named for the case of The Jason, 225 U.S. 32 (1912), in which the US Supreme Court upheld the validity of such clauses. The original clause was amended in certain respects after the passage of US COGSA in 1920. The one presently in use is now generally known as the ‘New Jason Clause’ or ‘Amended Jason Clause'.

[3] Like Hague and Hague-Visby, US COGSA exonerates the ship and carrier from liability for loss or damage resulting from an error in navigation or management of the ship or from unseaworthiness when the owner/carrier has exercised due diligence to make the vessel seaworthy. Carriage of Goods by Sea Act (COGSA) § 4, reprinted in 46 U.S.C. § 30701, note.

[4] The York-Antwerp Rules 2016, Rule D.

[5] BIMCO has published a standard New Jason Clause which is available on the BIMCO website here.

Category: Cargo