The U.S. Supreme Court on March 30 rejected a Fifth Circuit Court’s precedent and ruled that safe-berth clauses are warranties of safety and not just duties of due diligence. The ruling imposes a greater responsibility on charterers to provide a safe berth for vessels to travel.
This litigation flowed from an oil tanker spilling 264,000 gallons of heavy crude oil into the Delaware River after its hull was pierced by an abandoned underwater anchor. The Oil Pollution Act of 1990 required the tanker's owner to cover the cleanup costs. According to statute, the owner's liability was limited to $45 million, and the Oil Spill Liability Trust Fund, operated by the federal government, reimbursed the tanker's owner for an additional $88 million in cleanup costs.
The United States and the tanker's owner sued the charterer to recover their respective portions of the cleanup costs. Both alleged that the charterer was ultimately at fault for the spill because the charterer had breached the contractual "safe-berth" clause in a charter agreement. They argued that the clause obligated the charterer to select a "safe" berth that would allow the vessel to come and go "always safely afloat," and that obligation amounted to a warranty regarding the safety of the selected berth.
The Supreme Court agreed with the tanker's owner and the federal government and held that the plain language of the parties' safe-berth clause established a warranty of safety. The Court found that the terms of the charter were unqualified and established an absolute duty: The charterer must designate a berth that is "safe" and that allows the vessel to come and go "always" safely afloat. That absolute duty amounts to a warranty of safety.
This case is significant because it rejects Fifth Circuit precedent that a similar unqualified safe-berth clause merely imposes a duty of due diligence on the charterer. The Supreme Court adopted Second Circuit precedent because justices determined it to be more consistent with traditional contract analysis.
Read the Court's opinion here.