Sunday, August 10, 2008

Article 7

There seems to be a rash of salvage claims being challenged by insurance companies on the grounds that the entire contract is void because it was signed "under duress or undue influence" - i.e. the boat owner was compelled to accept a salvage agreement because he felt he had no other choice.

Perhaps the insurance companies are confusing the "duress" of actual bodily harm with "marine peril" and its potential for physical damage to a vessel. IF a salvor has threatened to leave a crew to die or get injured aboard an imperiled yacht, that salvor is probably guilty of using "undue influence" to force a salvage contract. But to ask an otherwise healthy and un-injured crew to accept that a yacht in perilous circumstances should be covered under a salvage contract is acting completely within the spirit of Blackwall and SALCON 89.

Lets have a look at what SALCON 89 actually says about the influence of danger. Salcon 89, Article 7 states:

“A contract or any terms thereof may be annulled or modified if: (a) the contract has been entered into under undue influence or the influence of danger and its terms are inequitable; or (b) the payment under the contract is in an excessive degree too large or too small for the services actually rendered.” (bold emphasis mine)

The word and in part (a) is a key to understanding what Article 7 is about. During any true salvage situation, there is obviously going to be some danger. Indeed, every salvage is contingent on the presence of PERIL. And everyone who is on scene at the time is certainly going to be influenced by the presence of the dangers involved.

The authors of Article 7 were not suggesting that any agreement made while in the heat of a dangerous situation would be automatically void. The intent of Article 7 is to link the danger to equitable terms - that is why the word and is in part (a). To make an equitable agreement, the terms should fit the situation, which if covered by SALCON 89, is by definition a situation that involves danger (Article 1, para 1).

To claim that the presence of danger somehow voids a marine salvage contract is constructing an argument based some very torturous logic. How can you toss out a contract to resolve a perilous situation because there was danger present?

Furthermore, the challenge to the contract based on the influence of danger almost always includes the additional argument that there is no salvage because the peril so insignificant that it didn't even exist at all!

This is where they shoot themselves in the foot and the entire argument falls apart. If you are going to challange an agreement based on the presence of danger, don't go on later in your plea to downplay the danger and argue that it didn't exist.