#3 BIMCO Revision

Question 1

BIMCO Ship Management Agreement 2009

Answer 1

typical ship management and agency agreement
outline power required by manager, obligations to ship owner

Ship managers should never conceal their agency status to third parties

Ship management companies are to be “co-insured” with ship owners in all insurance relating to the vessel

Question 2

Responsibilities of Ship Managers

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Answer 2

Depends on the contract between the ship owner and ship
manager.
Varies from ship management company to ship management
company.

Maintain ship in class and efficient and seaworthy condition
Negotiate and approve repair and maintenance contracts.
Provide technical and operational information as required by owner.
Buy stores, spares and lubricants. To employ advisers.
Contract for towage and salvage.
Arrange insurance (if required by owner).
Obtain owner’s approval for non-budgeted expenses.

Deals with claims on behalf of the owner.
Make all necessary arrangements for cargo care.
Engage ship crew on behalf of owners, including to replace and dismiss them.
Not to charter the ship out.

Not to sell the ship.
Sign bonds, undertakings as agent for the owner.
Arrange dry-docking and class surveys.

Question 3

Accounting Services

Answer 3

Establish an accounting system and procedure acceptable to owner
Supply ,maintain, keep records on expenses and fund received

Question 4

Budget and Management of Funds

Answer 4

1. Manager to present to owner an annual budget for the following 12 months on the expenses required.
2. Annual budget to be submitted three months b4 anniversary date of the agreement or expiry of the current budget.
3. Owner to approved the budget within one month of receipt., if not considered approved
4. Manager to request fund in writing in advance from owner for working capital on a monthly basis.
5. Fund to be made available to manager within 10 running days after receipt by the Owners.
6. To provide report on the actual and budgeted expenses monthly to Owner.
7. Managers are not required to use own funds to finance he provision of the management services.

Question 5

Undertakings of a Ship Manager to
his Ship Owner

Answer 5

Maintain discipline and operational efficiency “as per good ship management practice”.
To give access to owner’s representative to the ship and the owner’s cabin, and manager head office
Not to modify the ship without prior approval.

Question 6

Undertakings of a Ship Owner to
his Ship Manager

Answer 6

Ratify and confirm all the manager lawful actions.
Indemnify the manager against all costs and claims.
Indemnify the manager for any action of the ship’s master related to instructions given by the owners, charterers or their servants.
Inform the manager about Owner’s policy changes.
Issue voyage instructions.
Not to withhold permission to conform to regulatory requirements.
Not to withhold approval of non-budgetted expense.
Reimburse all reasonable expenses incurred

Question 7

Funding for Ship Managers

Answer 7

Owner to fund the estimated expenses monthly in advance, 7 days before each month.
Lien on the ship’s earnings of all debts

Question 8

Relationship between a Ship Owner
and a Ship Manager

Answer 8

If ship manager fails to effect the contract, there is a breach of contract. Ship manager may be liable in damages.
Must comply with owner’s lawful instructions except illegal act.
Exercise care and due diligence. Not to do so is a breach of implied duty.
Cannot delegate to another party unless approved by the owner.
Avoid conflict of interest. In doubt, to get permission from owner if serving more than one owner.
Keep confidential information even after the contract expires.
No secret profit or bribe.
Keep proper accounts.
Manager’s right against owner
 Indemnity from the owner against all expenses or losses incurred
 Cannot claim remuneration other than what has been agreed.
 Lien on money belonging to the owner

Question 9

Relationship between a Ship Owner and
third parties

Answer 9

Owner is a disclosed principal where the third party is aware of owner’s existence.

If owner is disclosed, he can enforce the contract against third party.
If owner is undisclosed,
 Third party is not bound to accept instructions from owner.
 If third party paid money to the manager who then absconded, owner is powerless to recover money from the third party.
 If an undisclosed owner pays money to his manager who absconded with the money meant for the third party, the third party can still recover the amount from the owner provided he is able to identify the undisclosed owner.
Ship manager is not a party to the contract he has made with a third party on the owner’s behalf as his agent.
 Sign as ‘agent for and on behalf of XYZ Company’. = Owner disclosed and named.

Question 10

Claims

Answer 10

 Shipman clause 18
 Cargo damage
 Insurance department and P&I club
 Wrong initial response/Non-response
 Hasty admission of fault can result in losses not
recoverable even from insurance.
 Delay in handling or responding is also not
encourage.
 Hague Rules 1 year.
 Obtain a writ to arrest the ship.

Question 11

Importance of co-assurance

Answer 11

Ship Managers should be co-insured with ship owners
for the following reasons:
 Exposed to large claims from third parties
 Insurers are not providing extra cover by including the ship managers
 The management fees does not include ship manager
purchasing their own insurance
 The co-insurance cover for ship managers is available to the owners for no additional cost

Question 12

Himalaya Clause

Answer 12

Is a contractual provision expressed to be for the
benefit of a third party who is not a party to the
contract. The purpose is to protect any employee or
agent of the ship managers so that they are not liable
whatsoever to the Ship Owners for any loss, damage
or delay.