General Average: Contribution, Average Bonds and Challenging the Adjustment

A fire breaks out in a hold, the master deliberately grounds the vessel to save the venture, and weeks later the shipper of an untouched container receives a demand for security running to several hundred thousand euros. He did nothing, his cargo suffered nothing, and he will nonetheless contribute. This is general average, one of the oldest mechanisms in maritime law and one of the least understood by those who discover it by being subjected to it.

A decision of the master, taken for the common safety

Article L. 5133-3 of the Transport Code defines general average as damage, loss and extraordinary expenditure decided upon by the master and incurred for the common and pressing safety of the interests engaged in the maritime venture. Three conditions appear in that sentence: a decision, not an accident endured; an extraordinary character, which excludes ordinary operating expenditure; and a common and pressing peril, which rules out a precautionary measure taken at leisure. Damage that fails those conditions remains particular average and, under article L. 5133-2, is borne by the owner of the thing damaged or by the party who incurred the expense.

Contribution is then apportioned between vessel, freight and cargo, each valued according to the rules of the section (article L. 5133-7). One detail deserves the attention of cargo interests: article L. 5133-1 provides that the chapter applies in the absence of contrary stipulation by the interested parties, but treats as unwritten any provision by which a carrier reserves, in a bill of lading, terms other than those of the chapter. Contractual freedom exists, but it cannot be imposed unilaterally on the reverse of the document.

The real issue: security demanded before delivery

General average is rarely settled in court and almost always at the terminal. The owner who declares general average appoints an average adjuster and makes delivery of each parcel conditional on an undertaking to contribute, generally an average bond signed by the consignee, accompanied either by a cargo underwriter’s guarantee or by a cash deposit where the goods are uninsured. Without those documents the cargo stays at the terminal, and storage charges run.

That is where the costliest decision in the file is taken, often within hours and without advice. Signing an unqualified undertaking whose provisional amount has been fixed unilaterally, accepting a deposit percentage calculated on an overstated value, or conversely refusing to provide security and leaving the goods immobilised for weeks, are three symmetrical errors. Good practice is to obtain the cargo underwriter’s guarantee where it is due, to discuss the provisional figure demanded, and to reserve expressly the right to challenge the adjustment later, which the standard form permits once it is read before signature.

Challenging the adjustment, and within what period

The adjuster produces a statement allocating the sacrifices admitted and the contributory values. That document, technical and voluminous, is not a judgment: it can be disputed, on the admission of an item into general average, on the values adopted, or on the initial fault that made the act necessary, unseaworthiness of the vessel on sailing being the most effective argument available to cargo interests refusing to contribute. In practice, arguing the adjuster’s figures item by item produces more than a challenge of principle.

The time limit is generous by maritime standards: article L. 5133-17 bars any action arising from general average after five years from the date on which the venture ended. Compare that with the single year available to cargo interests against the carrier for loss or damage. Five years on one side, one year on the other, arising from the same casualty: the two calendars must be tracked separately, and the second closes long before the adjustment is issued.

Based in Paris, the firm acts in all French ports, from Le Havre to Marseille and from Nantes-Saint-Nazaire to Antibes, as well as before the Chambre arbitrale maritime de Paris, and works in English with shipowners, P&I clubs and foreign counsel.

Typical cases handled

The situations below are illustrative, anonymised scenarios. They show when the firm steps in and what the work consists of.

An average bond signed unread

After a grounding, the owner demands an average bond and a guarantee before delivery. The firm verifies that a genuine voluntary sacrifice occurred, negotiates the guarantee amount and reserves recourse against the vessel.

A disputed adjustment

The adjustment allocates to the shipper a contribution of 18% of the cargo value, calculated on questionable port expenses. The firm challenges the adjustment, item by item, before the competent court under the York-Antwerp Rules.

Fault of the ship and exoneration

The cause of the general average is unseaworthiness at the start of the voyage. The firm proves initial unseaworthiness to defeat the shipper’s contribution and turn against the owner.

Frequently asked questions

What is general average?

Damage, loss or extraordinary expenditure decided upon by the master for the common and pressing safety of the interests engaged in the venture, under article L. 5133-3 of the Transport Code. The burden is shared between vessel, freight and cargo.

Why contribute when my cargo is undamaged?

Because contribution rests on the benefit derived from the salvage, not on the loss suffered. Article L. 5133-7 places general average on the vessel, the freight and the cargo, each according to its contributory value.

Must the average bond be signed to recover the cargo?

Delivery is in practice conditional on it, but the undertaking should be signed with the reservations it permits, after checking the provisional amount demanded and, where the cargo is insured, substituting the underwriter’s guarantee for a cash deposit.

What is the time limit in general average?

Five years from the end of the venture, under article L. 5133-17 of the Transport Code. It must not be confused with the one-year limit applicable to claims against the carrier for loss or damage.

The firm assists cargo interests, consignees, underwriters and owners at every stage of a general average: negotiation of the security demanded before delivery, critical review of the adjustment, challenges founded on unseaworthiness, and recourse against the carrier. See also carrier liability and maritime law, or contact the firm.