General Average

General Average

Summary of General Average

An ancient principle in international maritime law requiring a contribution by the vessel and cargo interests to pay for “extraordinary expenses and sacrifices”incurred in saving the vessel and its cargo. The term average derives from an Arabic word meaning a loss attributable to sea water. A general average (i.e., common loss) arises when the vessel is endangered and extraordinary actions are required to save it. The law views the vessel owner and owners of the cargo aboard it as bound in a common adventure; the vessel’s master is vested with the responsibility for this common interest. Should the adventure become imperiled, and losses arise in order to save the enterprise, the costs of this saving will be apportioned over the vessel and cargo, proportional to the value of each party’s rescued property. A general average condition is apt to arise, for example, when cargo is jettisoned (i.e., thrown overboard) in a conscious effort to lighten a vessel during a storm. The law regards this sacrifice as being in the common interest of all; as a result, the owners of the jettisoned cargo will be substantially reimbursed by the owners of the vessel and cargo saved.

It is recognized that three conditions must exist in order to invoke general average: (1) the adventure must be exposed to a common and imminent peril; (2) extraordinary expenses or sacrifices must be incurred to avert or mitigate the peril; and (3) the adventure (or at least part of it) must be saved. Should the vessel and cargo sink or be lost through fire or otherwise, general average would not apply.

A general average is proclaimed by a participant in the adventure; as a practical matter, this proclamation is usually made by the vessel owner, who is apt to hear first of any incident from which a general average condition arises. A maritime lien arises for sums owed in satisfaction of a general average claim and the vessel owner is empowered to withhold the consignee’s goods until a cash deposit or bond is posted to cover the estimated contribution of each shipment to the fund used to pay for the expenses generated to save the ship. Such contributions are covered by marine cargo policies. The exact obligation of each shipper may not be known for several years, during which time an average adjuster will calculate each party’s contribution in accordance with accepted practice. The rules of average adjusting are substantially codified in the York-Antwerp Rules (read this and related legal terms for further details).

The institution of general average is addressed in Justinian’s Code, which refers to the practice in the lost Rhodian Sea Code, promulgated c. 900 B.C.

(Main Author: William J. Miller)

General Average (GA) in International Trade

Meaning of General Average (ga), according to the Dictionary of International Trade (Global Negotiator): A voluntary sacrifice or extraordinary expense incurred during waterborne transit to protect all interests from an impending peril. The main principle behind general average is that when sacrifice is made to save the interests of all parties involved in transportation, the party who makes the sacrifice must be compensated by all parties who stand to benefit from the sacrifice or expenditure. For instance, when cargo is jettisoned to save a vessel from sinking, all parties whose cargo was not thrown overboard must contribute to reimburse those parties whose cargo was. Carriers will require some form of security (promissory note) or insurance company guarantee bond prior to releasing cargo, in order to enforce each party’s contribution. While this can be a burden for owners of uninsured cargo, insurance companies provide such guarantees for cargoes they insure.

Description of General Average

In this reference work, general average is a sort of the Maritime law, Commercial law category.

General Average

Resources

See Also

  • Average
  • General average contribution

Resources

See Also

  • Shipping
  • Maritime law
  • Commercial law
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