Analysis of The Difference Between Salvage and Towage from The Legal Point View

The main aim of this paper is to analyze the difference between salvage and towage from the legal point of view and explaining the function of the bill of lading as a document of title. The research questions this paper will try to answer are:

How are salvage and towage services differentiated?

It is well known that salvage and towage have some similarities, at least at the first glance when examining them. But that is mainly due to the fact that under certain circumstances a towage can become salvage, but not the opposite. So, by focusing on the differences it will be clear how each of those terms differs from the other (White, 2000).

What is the function of the bill of lading as a document of the title?

A bill of lading is a document of title to goods shipped aboard a sea-going vessel. It is issued by, or on behalf of, a sea carrier in favor of the person who delivers goods for shipment and onward carriage to a distant seaport. The bill often declares that the carrier will deliver the goods to the shipper, or to the order of the shipper, at the agreed destination.

This wording enables the shipper to endorse the bill in favor of a buyer and hand it over in return for the price of the goods. In turn, the buy. The main aim of this paper is to analyze the difference between salvage and towage under the legal point of view and explaining the function of the bill of lading as a document of title. The research questions this paper will try to answer are:

How are salvage and towage services differentiated?

It is well known that salvage and towage have some similarities, at least at the first glance when examining them. But that is mainly due to the fact that under certain circumstances a towage can become salvage, but not the opposite. So, by focusing on the differences it will be clear how each of those terms differs from the other (White, 2000).

What is the function of the bill of lading as a document of the title?

A bill of lading is a document of title to goods shipped aboard a sea-going vessel. It is issued by, or on behalf of, a sea carrier in favor of the person who delivers goods for shipment and onward carriage to a distant seaport. The bill often declares that the carrier will deliver the goods to the shipper, or to the order of the shipper, at the agreed destination. This wording enables the shipper to endorse the bill in favor of a buyer and hand it over in return for the price of the goods.

In turn, the buyer can then obtain delivery of the goods from the carrier by tendering the bill at the port of discharge. It also enables a bill to be pledged with a bank as security for an advance in favor of a buyer. The advance enables the buyer to pay the purchase price. The legal effect of the bill as a document of title is said to be its ability to confer on the lawful holder of the bill the right to receive delivery from the carrier. (White, 2000).

Those two questions will be answered with references to noticeable cases that will prove the differences to salvage-towage and explain the functionality of the bill of lading as an as a document of title.

What is Towage?

Towage differs from the carriage of goods in that under a towage situation one vessel which is self-propelled generally tows one or more vessels, usually barges that are not self-propelled. Towage is “the supplying of power by a vessel . . . to draw another” vessel. The key determination between towing and salvage is whether a peril exists. Simply put, if the vessel is not in “peril” then it is not salvaged. If a vessel is simply providing a service, i.e. fuel, tow, assistance, then it is likely a tow (White, 2000).

What is Salvage?

A contractor three elements are necessary to a valid salvage claim:

1. A marine peril.
2. Service voluntarily rendered when not required as an existing duty or from a special contract.
3. Success in whole or in part, or that the service rendered contributed to such success.

Therefore, as described above a vessel must be in trouble, danger, or specifically “peril”. For example, if it is a soft aground vessel the danger may not be described as peril, however, if it is hard aground then the danger may fall into the realm of “peril”. When a vessel is in this perilous state the salvager must be doing so voluntarily, not under a duty like a coast guard or other similar mechanism. Finally, the salvage must be successful (SEMCO SALVAGE & MARINE PTE. LTD., 1997).

The admiralty courts have addressed the difference between “simple towage” and salvage services on numerous occasions and have made it abundantly clear that, in most such situations, the services rendered are salvage. Indeed, one leading admiralty treatise has described the act of rescuing a ship at sea by towing her to a place of safety as the “prototypical” act of salvage. However, this does not necessarily mean that the salvor will be entitled to a huge reward for such services.

As discussed, a salvage service implies that there was some degree of peril and assistance above towage that was provided. The peril does not have to be immediate. It is sufficient if the property is in danger, either presently or reasonably to be apprehended. The best way to understand the application of towage v salvage is to review the common law (Maritime Coverage Corp, 2016).

To make clear the differences between salvage and towage we will examine and analyze some case studies.

The vessel Neptune encountered a major storm and docked in the Crescent City harbor. While in the harbor, the Neptune became disabled and grounded on a sandy shoal. The crew of the Neptune secured the barge alongside the disabled tug. That night, a terrible storm caused gusts up to ninety knots and swells inside the harbor to reach six to eight feet.

These conditions pounded the barge against the port side of the tug. Because of the diesel fuel and oil aboard the Neptune as well as hydraulic fluid in the landing craft unit, the Coast Guard Pacific Pollution Strike Team assessed the threat of pollution as “substantial,” and a tow was called in to retrieve the barge (Evanow v. M/V NEPTUNE, 1998).

The question presented was whether a contract is one for towage or for salvage. The Court enumerated that this distinction has several consequences.

The Court examined the character of the service rendered to determine whether a contract is one for salvage. The Court found a marked and clear distinction between a towage and a salvage service. When a tug is called or taken by a sound vessel as a mere means of saving time, or from considerations of convenience, the service is classed as towage, but if the vessel is disabled, and in need of assistance, it is a salvage service (Evanow v. M/V NEPTUNE, 1998).

It was determined that the existence of a marine peril distinguishes a salvage contract from one for towage. Such a peril exists when a vessel is exposed to an imminent danger that can lead to her destruction. If a peril exists is something that can be judged. In this case, it was determined that this was indeed a salvage action (Evanow v. M/V NEPTUNE, 1998).

The Flottbek

The Flottbek was a vessel caught in a rough storm about a quarter mile to a half mile from the rocks. While the peril was in dispute, the fact that the vessel was unable to pull out of the predicament on its own accord was not. Thus, it anchored and called for help.

When towage happens the amount of compensation is somewhat reasonable and determined. When salvage, however, the amount is not fixed and is determined by many factors. That is since salvage is voluntarily, and courts are “friendly” to that aspect, towage is just a procedure of helping the vessel to continue her voyage without including the nature of the danger. (McConnochie v. Kerr, 1881).

The Court found that the crew felt that they were in enough peril to call for assistance and to drop their anchors for an expedited departure. Therefore, this was a salvage.

A barge was adrift in a calm sea when a tug pulled beside the barge to get a mate on board. Thus, commencing the tow and delivering the barge at a Pensacola dock three hours later.

A barge left on her own is in peril, so salvage is an act of bravery to rescue cargo and people when in danger voluntarily. It is important to point out. That the goal of salvage is to aid. By doing so the risk is high but so is the reward. Maritime salvage is the act of helping when in peril and having a success about doing so (D. Mississippi Valley Barge Line Co. v. Indian Towing Co., 1956).

Is a barge at the drift, in peril? The Court thought so and therefore a salvage was found. Bill of lading is a multiple choice of document i.e. it acts as a contract of carriage of goods by sea, as a formal receipt for the goods shipped and as a document of title.

Unlike a charter party, the contract of carriage of goods by sea in liner trade is evidenced by the bill of lading which itself is not a contract of carriage of goods rather an evidence of an already concluded contract of carriage between shipper and carrier orally. It is to be noted that whatever orally was agreed between shipper and the carrier, do not bind the lawful holder who acts in good faith.

The bill of lading as a document of title. In modern international trade and shipping, this is probably the most important characteristic of the bill of lading. A document of title is a document that enables the holder to deal with the goods described in it as if he was the owner. The title is the ownership of the cargo. Ownership means the handle the goods as to the owner’s will. The ownership or title can only be transferred by an endorsement and/or delivery of the document itself (Wegener v Smith, 1854).

Leduc And Co V Wards is a case which proves that specific nature of Bill of Lading, where the bill of lading contained a clause enabling the carrier to deviate from the agreed route which caused the ship to be lost and delivery of goods was delayed. The lawful holder sued the carrier. The carrier claimed that the shipper knew about the deviation clause in the bill of lading.

Therefore, no breach of contract had been created. However, the court refused to accept the claim of the carrier and held that the real owner that has no clue about such an action is not bound to approve it without knowing (Case Leduc And Co V Wards, 1888).

Furthermore, as mentioned one of the characteristics of the bill of lading is as a document of title. A bill of lading to be a document of title must be negotiable which simply means it should be transferable. A bill of lading to be transferable must be a draw as delivered or assignee. a bill which is specifically drawn in the name of a receiver, would not fall within the category of negotiable instrument and would not be able to transfer title to goods in transit, such a bill is called is called “straight bill", the traders prefer order bill of lading for the reason that it enables them to sell/transfer goods while they are at high sea (sanders bros. v Maclean, 1883).

The function of the Bill of Lading as a document of title was originally recognized first in the case (Lickbarrow v Mason, 1788) and the recognition as a document establishing the ownership of the goods and the decision making up to a point by the one that transfers the goods. In that case, was also stated that the right to “stop” is not to anyone’s hand other than the buyer and seller.

Bill of Lading is, therefore, a control document and when it is transferred to another person by way of endorsement and delivery, a constructive possession is transferred rather than the title. In the case of a contract of sale when the shipper, first indorse some sets of original Bills of Lading to a party and then on a later date assigned and transferred remaining sets of original Bills of Lading to another party, the former would be the owner of the goods and not the latter one who subsequently received another set of original bills.

In the case of documents of title to goods, the legal obligation is that the carrier or the holder who is having the physical possession of the goods can deliver the goods only to the ‘holder’ of the document of title to goods or Bill of Lading having sufficient control over the goods and not to any other person. But no assignment could be done once the delivery of the goods is completed. In this situation, the carrier has no other choice but to deliver the goods to the person who is having “constructive possession” over the goods (Lickbarrow v Mason, 1788).

Bill of Lading

When the cargo is in transit it is not possible to sell or resell it to another buyer by way of physical delivery of the goods. It is required to wait until the goods arrive at the destination for selling or reselling. This was a big disadvantage for the shipper who must wait till the completion of the voyage. Sometimes due to various reasons, the ship may subject to ‘prolonged period of transit by the sea’.

To overcome this hindrance, need arises for a sales process in transit, without physical delivery of goods. This is also popularly known as ‘High Sea sales’ among the international traders. Negotiability of Bills of Ladings help the traders to do a process of endorsing and transferring Bill of Lading in place of the goods and therefore do the transfer rights of the goods to more than one person’s even when the cargo is moving.

Towage and Salvage

A contract for towage is for agreed purposes and an agreed sum, i.e. the tug's duties and the price are fixed beforehand, usually according to the towage company's tariff of rates. The towing vessel's services are not voluntary, and no salvage reward will be due unless some peril arises during the towage such as to require extraordinary assistance from the tug. Salvage, on the other hand, is governed by admiralty law. It is a voluntary action, and any reward is dependent on some measure of success. The term "no cure, no pay" is used in most salvage agreements.

The reward can only be determined after completion of the salvage services. Er, can then obtain delivery of the goods from the carrier by tendering the bill at the port of discharge. It also enables a bill to be pledged with a bank as security for an advance in favor of a buyer. The advance enables the buyer to pay the purchase price. The legal effect of the bill as a document of title is said to be its ability to confer on the lawful holder of the bill the right to receive delivery from the carrier. (White, 2000).

Those two questions will be answered with references to noticeable cases that will prove the differences to salvage-towage and explain the functionality of the bill of lading as an as a document of title.