UK: SHELLTIME 4: What Is The "Price Actually Paid" For Bunkers Under Clause 15?

Last Updated: 19 April 2012
Article by Daniel Jones and Alex Chisholm

Eitzen Bulk AS v. TTMI SARL (m/v Bonnie Smithwick) [2012] EWHC 202 (Comm)

In common with many disputes that have gone to court or arbitration in the past three years, this one took place against the background of the financial crisis in late 2008 when the market for both charter rates and bunker prices dropped considerably. The issue here related to the price to be paid for bunkers on redelivery under clause 15 of a SHELLTIME 4 2003 standard form.

SHELLTIME 4 clause 15

The 2003 version of SHELLTIME 4 provides at clause 15:

"Charterers shall accept and pay for all bunkers on board at the time of delivery, and Owners shall on redelivery...accept and pay for all bunkers remaining on board at the price actually paid, on a "first-in-first-out" basis. Such prices are to be supported by paid invoices."

The question for the court was whether the words "price actually paid" meant the price paid by the party seeking reimbursement under the clause or the price paid when the bunkers were stemmed. The judge (Mr Justice Eder) upheld the arbitrators' finding that they meant the price paid when the bunkers were stemmed.

The background facts

In 2007, TTMI let the vessel to Eitzen on amended SHELLTIME 4 terms (the "head-charter"). Eitzen then sub-let the vessel on a number of voyage and trip sub-charters. The penultimate of those was a trip time charter to Cargill (the "Cargill charter"), providing for Cargill to pay on delivery and Eitzen (as disponent owner) to pay on redelivery fixed prices for bunkers at rates of US$ 625/mt IFO and US$ 1,100 MDO.

When charter rates crashed in late 2008, Eitzen let the vessel back to TTMI (the "sub-charter") at a rate of hire much lower than that payable under the head-charter, but otherwise on back-to-back terms for the remaining period of the head-charter. The vessel was delivered to TTMI at the same time as it was redelivered under the Cargill charter. On delivery, TTMI paid Eitzen the same fixed price for bunkers that Eitzen had paid to Cargill. This was not disputed.

TTMI stemmed bunkers twice while the vessel was on sub-charter to them. The rates they paid to bunker suppliers were US$ 283 IFO in November 2008 and US$ 270 IFO in January 2009. Redelivery then took place simultaneously under the sub-charter (from TTMI to Eitzen) and the head charter (from Eitzen to TTMI). The price to be paid for bunkers (by Eitzen) on redelivery under the sub-charter was the fixed price expressed in the Cargill charter. This too was undisputed.

Eitzen claimed that TTMI should pay for bunkers on redelivery under the head-charter at the same rate Eitzen had paid to Cargill. Eitzen claimed this amount in accordance with clause 15 on the basis that it was the "price actually paid" by them for the bunkers remaining on board at the end of the head charter.

Bunker prices had also dropped in late 2008, and the prices TTMI had paid for bunkers while the vessel was on sub-charter to them were therefore much lower than the fixed rates to be paid under the Cargill charter. TTMI therefore argued that the "price actually paid" under clause 15 of SHELLTIME 4 meant the price they had paid to bunker suppliers.

The arbitrators agreed with TTMI. Eitzen appealed.

The Commercial Court decision

The judge dismissed Eitzen's argument that TTMI's interpretation was unworkable because clause 15 required "prices to be supported by paid invoices" and a charterer would not usually be in possession of (nor would they have a right to obtain) invoices issued by a bunker supplier to a third party. Rather, the judge said that while a charterer may have difficulty obtaining copies of the relevant invoices, it would not be impossible for them to do so.

Eitzen also argued (in the wake of the Supreme Court decision in Rainy Sky v. Kookmin Bank, an Ince case reported on in our January 2012 E-Brief) that the words "price actually paid" had more than one possible meaning and should be given the interpretation that is most consistent with business common sense. In Eitzen's view, the purpose of clause 15 was to make sure that the transferor of bunkers on delivery or redelivery was reimbursed the price they actually paid for them. Eitzen claimed it would not make good business sense for a party seeking reimbursement to be exposed to the risk of a bad bargain having been struck with bunker suppliers when they had no control over that bargain.

Again, the judge was not persuaded. He thought it equally, if not more, inconsistent with business common sense for an owner to be taken to have agreed to pay a price for bunkers over which he has no control and which does not necessarily bear any relation to market prices (if prices fixed by the terms of a sub-charter) or the amount actually paid to the bunker supplier.

TTMI, in support of their case, relied on the use of the words "first-in-first-out" as the basis on which the "price actually paid" should be assessed under clause 15. The judge was persuaded by this line of reasoning, in particular because such wording seemed to suggest that the price was intended to be linked to the physical movement of the fuel. In other words the stemming of bunkers "in" and the consumption of bunkers "out".

The judge therefore agreed with TTMI that the "price actually paid" should be the price paid to bunker suppliers for the fuel being taken in at any particular time, whether this was done by a charterer or a sub-charterer. Accordingly the decision of the arbitrators was upheld, and TTMI succeeded in arguing that the price they should pay to Eitzen on redelivery under the head charter was the price they paid to bunker suppliers when those bunkers were stemmed.


The judge acknowledged that clause 15 of the subject charter is potentially open to more than one interpretation. He also agreed with the arbitrators that the SHELLTIME 4 standard form is not well suited to being the source document where there is a chain of charters, and that it is more appropriate for use in a long term charter between two parties who can be expected to have copies of all bunker invoices available to them and where charterers intend to stem bunkers themselves. This case highlights the need to consider having specially tailored provisions in a string of time charters to deal with bunker prices on delivery and redelivery, rather than simply adopting the standard form charterparty language.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions