What are the main types of General Average Loss?

The general average losses are divided into two classes.

1. General Average Sacrifices:

The general average sacrifices are made for common safety. For example ‘jettison’ which means throwing away of the cargo in order to lighten the ship. Similarly, the use of cargo as fuel, cutting away of a spare and sails.

2. General Average Expenditure :

The general average act involves expenditure. In this case extra expenditures are involved for common safety. Here, additional charges are incurred at the port ship is repaired; expenses may be involved for lightening and re-loading of the cargo.

General Average Contribution :

The general average loss is rated able contributed by the parties interested. In contribution of general average loss the contributory interest, amount to be made good and contributory values are considered.

1. Contributing Interests :

The interests saved by the general average act are liable to contribute rate ably to make good the sacrifices or expenses.

There are certain articles which are not required to contribute towards general average loss. For example, postal articles, parcel, crews, effects and the personal effects of passengers not shipped under a bill of lading.

There are three main contributing interests’ ship, freight and cargo. When a general average loss occurred among different interests, it is of vital importance that the interest which has been sacrificed must also rate ably contribute to the loss, otherwise it would be in a better position than the interests saved by general average act.

2. Amounts to be made good:

The amount to be made good in general average differs from adventure to adventure.

(a) Ship:

The amount to be made good in general average in respect of a ship is measured by reasonable cost of repairs less the actual deduction (if any) new for old.

The costs of repairs are taken into account as they have been actually effected either at a port of refuge or at destination.

(b) Cargo:

The amount of general average in case of goods is their net value. The net value is calculated taking into account the value of goods sacrificed at their safe arrival and from this the expenses (i.e., freight unpaid, duty and landing charges) which would have been incurred had the goods arrived safely, are deducted. Thus, the net value of goods is obtained.

The remaining cargo arrives damaged from causes which would have actually affected the sacrificed goods. The amount to be made good for general average purposes is their net value based on what the goods sacrificed would have realised, had they reached the destination damaged to some extent as the other cargo.

For goods arriving damaged owing to general average sacrifice, the allowance is the difference between their net value in sound condition and net value in damaged state.

(c) Freight:

Where the freight is to be paid at destination in respect of a cargo which is used for general average act, the ship owner will lose it and it would be made well in general average.

The ship-owner is entitled for the gross freight which he would have earned, had the goods not been sacrificed less the charges which he would have incurred to earn such freight during the remainder of the voyage, but which he has not incurred as a result of the sacrifice.

(d) Expenses:

All the extra ordinary expenses properly incurred by the ship owner in time of peril for the common safety of all the interests are also made under the general average contribution.

3. Contributory Values :

The third process is to determine what the bases to contribute to general average are. The interest contributes on their net value at the place where the voyage ends, i. e., at destination or at intermediate port if the voyage be abandoned there. The values are contributory values. It may be of three types.

(i) Ship:

The ship-owner will contribute on the ship’s value as saved by the sacrifice. The value is the amount for which the ship owner as a reasonable man would be willing to sell her on arrival at her destination. Any amount that may have been contributed in respect of general average damages is added to this value to arrive at contributory value.

(ii) Cargo:

The cargo owner will contribute on the market value of goods saved at the place where the voyage ends. To arrive at the value the expenses incidental to the safe arrival of the cargo is deducted from the selling price of the cargo.

(iii) Freight:

If the freight has been paid in advance, it would have been included in the value of separate interest. The goods arrived safely at destination will have to contribute on the basis of the net value of freight saved if the freight was not paid in advance.

The contribution of freight will arrive at by ascertaining the actual sum of freight received at port of destination less the expenses of earning it from the date of general average act.

Application of General Average to Insurance :

In absence of contrary to the contract, the general average losses and contributions are recoverable from the respective marine insurers insuring ship, freight and cargo if the general average has been incurred for the purpose of avoiding a peril insured against.

The extent of insurers, liability for general average contribution is the full amount of the contribution provided the contributory value does not exceed the insured value.

The York-Antwerp Rules 1950 :

The York-Antwerp rule was formulated in 1877. The rule was again revised and extended at a meeting of the International Law Association held at Stockholm in Sept. 1924.

The rule was again amended in 1950 and 1974. Now, the rule is called the York-Antwerp Rules 1974. It has been formulated in two forms (1) Lettered Rules and (2) Numbered Rules.

Lettered Rules :

There shall be a general average act when and only when any extra-ordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril.

The general average sacrifices and expenses shall be borne .by the different contributing interests. Only such losses, damages, or expenses which are the direct consequence of the general average act shall be allowed as general average. The lettered rules are described from A to G.

Numbered Rules :

The numbered rules I to XIX specify the various losses and expenses that are considered to be general average sacrifices. The last three rules XX, XXI and XXII govern the banking arrangements in connection with the adjustment.

It is provided that cash deposits paid to the adjusters as security for the final general assessment shall be treated as fiduciary funds and placed in a special bank account.

Jettison of Cargo, Fire :

No Jettison of cargo shall be made good as general average unless such cargo is carried in accordance with the Rule 1 and II.

Rule III :

Extinguishing fire on shipboard done to a ship and cargo or either of them by water or otherwise will be included in general average.

Rule IV and V :

Cutting Away wreck, stranding: Where a vessel has been partially wrecked by a sea peril and portion of the spares remain, the cutting away of these remnants is not allowed for in general average.

The place of stranding should be voluntarily selected by the master. Loss or damage incurred in refloating such stranded ship shall be allowed as general average.

Rule VI and VII :

Damage or loss caused to soils and spares and machinery shall be allowed in general average if it was due to general average act.

Rule VIII to XII :

Expenses involved from lightening a ship to the reloading or discharge of cargo are involved in general average ships’ materials and stores build for fuel are also taken as general average.

Wages and maintenance of crew and other expenses at a port of refuge are taken into general average if these are involved for general average act.

Rule XIII :

In adjusting claims for general average repairs to be allowed in general average shall be subject to

Marine Losses:

Deductions in respect of “new for old” according to the rules. Temporary repairs made for the common safety shall be admitted as general average (Rule XIV).

Rule XVII :

This rule mentioned that the contribution to a general average shall be made upon the actual net value of the property at the termination of the adventure to which values shall be added the amount made good as general average for property sacrificed.

Rule XV, XVI, XVII, XVIII :

These deal with the loss of freight, amount to be made good for large and damage to ship.

Rule XIX:

This rule deals with the undeclared value of goods without the knowledge of the ship owner or his agent or to goods willfully mis described of the ship-owner or his agent or to goods willfully mis described at the time of shipment shall not be allowed to general average but such goods shall remain liable to contribute.

Rules XX, XXI and XXII deal with the banking provision of the general average.