Section 66 of the Act defines General Average as a loss caused by or directly consequential on a general average act which includes a general average expenditure as well as a general average scarifies.
The general average loss will be there where the loss is caused by an extraordinary sacrifice or expenditure voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperiled in common adventure. The following elements are involved in general average.
The loss must be extra ordinary in nature. The sacrifice or expenditure must not be related to the performance of routine work. A state of affairs may compel the master to do something beyond his ordinary duty for the preservation of the subject-matter.
The whole adventure must be imperiled. The peril should be something more than the ordinary perils of the sea. It should be imminent and real.
The general average act must be voluntary and intentional accidental loss or damage is excluded.
The loss, expenses or sacrifice must be incurred or made reasonably and prudently. The master of the ship is proper person to decide the reasonableness of a particular circumstance.
The sacrifice, loss or expenditure should be made for the preservation of the whole adventure. It should be made for the common safety.
If the sacrifice proved abortive, it will be allowed as the total loss. Therefore, to call it general average, it must be successful at least in part.
In absence of contrary provision, the insurer is not liable for any general average loss or contribution where the loss was not incurred for the purpose of avoiding, or in connection with the avoidance of a peril insured against.
The loss must be direct result of a general average act. Indirect losses such as demurrage and market losses are not allowed as general average.
General average must not be due to some default on the part of the person whose interest has been sacrificed.