Resolved: What is the Meaning of a Safe Berth Clause?

Citgo Asphalt Refining Co. v. Frescati Shipping Co., 886 F.3d 291 (2020)

In this case involving an allision between a crude oil tanker and a submerged anchor, the Supreme Court of the United States resolved the circuit split between the Fifth and Second Circuits regarding the interpretation of safe berth clauses in charter-parties. While the Fifth Circuit held that safe berth clauses establish only a duty of diligence, and not one of strict liability, See Orduna S.A. v. Zen-Noh Grain Corp., 913 F.2d 1149 (5th Cir. 1990), the Second Circuit has long maintained that such  clauses impose a warranty of safety regardless of the due care taken by the charterer. See Paragon Oil Co. v. Republic Tankers, S. A., 310 F.2d 169 (2nd Cir. 1962).

The safe berth provision in this case was based on the industry standard charter-party template known as the ASBATANKVOY form. This form, like all maritime contracts “must be construed . . . by their terms and consistent with the intent of the parties.” Norfolk Southern R. Co. v. James N. Kirby, Pty Ltd., 543 U.S. 14, 31 (2004). Additionally, “where the words of a contract in writing are clear and unambiguous, its meaning is to be ascertained in accordance with its plainly expressed intent.” M&G Polymers USA, LLC v. Tackett, 574 U.S. 426, 435 (2015).

Using this framework of analysis, the Court examined the safe berth clause which stated that the charterer “shall . . . designate and procure . . . a safe place or wharf . . . provided that the Vessel can proceed thereto, lie at, and depart therefrom always safely afloat.” The Court applied the prevailing meaning to the operative words contained in this clause and found that a charterer who fails to select a berth satisfying these conditions would be in breach of the charter-party. In other words, the Supreme Court affirmed the Second Circuit’s long-held rule, that a safe berth clause “binds the charterer to a warranty of safety,” making a breaching charterer strictly liable for damages resulting from such a breach.

The full text of this opinion may be found here: https://www.law.cornell.edu/supremecourt/text/18-565.