The Reasonable Grounds Model (RGM) is founded on the legal framework governing performance warranties under time charterparties. These clauses generally require that a vessel maintains a minimum average speed while adhering to a maximum specified daily fuel consumption rate. However, disputes often arise when performance is evaluated using manipulated data or limited “good weather” windows. Courts and tribunals have long recognised the difficulties in interpreting performance clauses and have voiced concern about rigid reliance on restricted weather data. RGM addresses these issues by offering a fair, transparent, and legally consistent model for determining whether underperformance is reasonably established.

Representations v. Warranties

In either case, clarity in drafting and record-keeping remains vital. As the boundary between inducement and commitment becomes less clear, tribunals are increasingly attentive to context, conduct, and the quality of supporting data.

Under the Reasonable Grounds Model (RGM), this distinction guides both the threshold analysis and the categorisation of alleged failures. If the claim is based on a misstatement in pre-fixture marketing materials, the question becomes whether reasonable grounds existed for the statement at the time it was made. If the claim involves a breach of a performance warranty, the model shifts to assess whether the vessel was capable of performing as warranted under the agreed conditions.

From an evidentiary perspective, the distinction is vital. A misrepresentation requires proof of reliance and inducement, whereas a warranty only needs proof of breach. Misrepresentation often depends on pre-fixture communications and intentions, while warranty claims concentrate on contractual wording and operational data. Crucially, a representation must be factual (not just an opinion or promise) and must materially influence the opposing party's decision to enter into the contract. The courts will consider whether the representee relied on the statement and whether it was a significant factor in their decision to agree to the terms. The burden of proof rests on the party claiming misrepresentation, and in some cases, a misstatement may be deemed non-actionable if the contract would have been entered into anyway.

Notably, courts and tribunals have hesitated to treat such warranties as implied representations regarding the vessel’s past performance. As noted in The Larissa [1983] 2 Lloyd’s Rep. 325, including a performance clause was recognised as a contractual obligation, not a representation about recent voyage data.

Warranties are frequently linked to specific conditions, such as “good weather”—a term that has become increasingly restrictive in modern charterparties. Clauses may exclude performance obligations unless the weather meets narrowly defined parameters (e.g., BF4 or less, calm seas, no adverse current). When framed too restrictively, these clauses can make the warranty illusory, causing tribunals to question whether they have any real effect.

Unlike representations, a breach of warranty does not entitle the innocent party to terminate the contract; however, it does allow them to claim damages. Warranties may be express or implied, and they are generally regarded as innominate terms under English law. In exceptional circumstances, a breach of warranty may justify termination if it deprives the innocent party of substantially the entire benefit of the contract.

A warranty, by contrast, is a term of the contract itself—a promise that certain facts or outcomes will remain true during the performance of the agreement. In shipping, this typically pertains to speed and consumption warranties, often expressed as “The vessel is capable of maintaining 14 knots on 32 mt/day IFO in good weather.” In SK Shipping Europe PLC v Capital Maritime and Trading Corp. [2020] EWHC 3448, for instance, performance data provided in a pre-fixture circular was considered negligent rather than fraudulent. The court drew a clear line between misleading factual assertions made before the contract and the binding contractual terms. Even when the data was inaccurate, the lack of clear inducement meant that the Charterers were not entitled to rescind.

A representation is a statement of fact made by one party with the purpose of inducing the other party to enter into a contract. In the context of chartering, this may involve claims about a vessel’s past performance, recent fuel consumption data, or anticipated voyage efficiency. If the representation is false, it may lead to remedies under the Misrepresentation Act 1967, including rescission of the contract or damages, depending on whether the misstatement was fraudulent, negligent, or innocent.

Understanding the difference between representations and warranties is crucial for the legal framework surrounding performance disputes in dry bulk chartering. These two concepts serve different legal purposes and lead to separate remedies; however, they are often confused or muddled in practice, especially when performance terms are discussed during charterparty negotiations or pre-fixture talks.

Key Authorities

Court Line v Dant & Russell [1939] 64 Ll L Rep 212
This early authority illustrates the orthodox approach to speed warranties that such representations are binding promises to be tested against objective benchmarks. The case involved a vessel that failed to achieve warranted speed due to hull fouling, and the court treated this as a breach of the delivery condition. Although it was decided before the modern trend of inserting restrictive performance carve-outs, Court Line remains relevant for affirming the contractual significance of performance warranties.

The Didymi [1988] 2 Lloyd’s Rep 108 (CA)
Confirmed that performance warranties must be assessed by reference to the voyage as a whole. Although performance may be evaluated during periods of good weather, any deficiencies observed during those periods may be extrapolated to reflect overall voyage performance. The Court of Appeal rejected attempts to isolate short intervals of favourable conditions to excuse overall underperformance.

The Pearl C [2012] 2 Lloyd’s Rep 533
In Bulk Ship Union SA v Clipper Bulk Shipping Ltd, Popplewell J upheld the tribunal’s finding that the vessel was indeed capable of achieving the warranted performance, and that the master had deliberately reduced speed in breach of Clause 8, resulting in underperformance. The judge cautioned against "cherry-picking" short segments of calm weather to justify deductions or claims of non-performance, and stressed the need to assess performance based on a representative sample of conditions in line with the charterparty’s intent, rather than through artificially narrow periods. He rejected the owners’ attempt to rely broadly on the exclusionary provisions of Art.IV r.2(a) Hague-Visby Rules.  The ruling affirms that all exclusion clauses must be strictly construed and will not be permitted to deprive the counterparty of a fundamental remedy.

The Triton Lark [2012] 1 Lloyd’s Rep 151
In Pacific Basin IHX Ltd v Bulkhandling Handymax AS, the court clarified that the evidentiary burden of proof lies with the party alleging performance failure. The claimant must show, on the balance of probabilities, that the vessel failed to meet warranted performance.

The Apollonius [1978] 1 Lloyd’s Rep 53 (QBD)
In The Apollonius, Mocatta J confirmed that a clause warranting a vessel's performance in good weather was a positive obligation enforceable under ordinary principles of contractual interpretation and that a breach entitles the charterer to damages. The court upheld the tribunal’s approach of assessing performance based on the entirety of the voyage, even in the absence of qualifying "good weather" days as narrowly defined in the charterparty and emphasised the importance of reliable logbooks and the risks posed by falsified entries. This case reaffirms the enforceability of performance warranties but highlights the risk of clauses being framed so narrowly that the warranty becomes functionally meaningless.

The Lipa [2001] 2 Lloyd’s Rep 17
In Losinjska Plovidba DD v Valfracht Maritime Co Ltd, Andrew Smith J addressed whether a clause stating that performance figures were provided “without guarantee” amounted to a binding warranty. He held that such language unequivocally negated any warranty, stating: “The words 'without guarantee' mean what they say. They negate any warranty. The decision illustrates a clear-cut instance where no performance obligation arose at all. The case is therefore instructive as a baseline for comparison: where no warranty is given, the issue of exclusion does not arise, which contrasts with cases where performance warranties are expressly included in the charterparty, but the drafting effect is to make them practically untestable. The decision clearly distinguishes between estimations and enforceable commitments within charterparty performance clauses. This does not preclude scrutiny of the vessel’s actual capability under other implied terms but confirms that no contractual performance standard was promised.

The Strathallan [1983] 1 Lloyd’s Rep 183 (HL)
In Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd, the House of Lords upheld the validity of contractual clauses limiting liability, even in cases of negligence. Although not directly concerning vessel performance, the case is authoritative on the enforceability of limitation clauses in maritime contracts and informs how courts interpret such provisions in broader charterparty disputes.

The RGM rejects rigid reliance on filtered data sets and instead considers whether, across the voyage, there are reasonable grounds to conclude that the vessel could not have met her warranted speed and consumption. This approach aligns with judicial reluctance to allow technicalities or manipulated data to defeat legitimate claims.

The model is designed to assist arbitrators and practitioners by focusing on what a vessel could reasonably be expected to do, considering both technical indicators and evidentiary standards established in case law.