Cesser Clause

What it does

A cesser clause provides that the charterer's liability under the charter ceases once the cargo has been shipped, or at some defined point, with the owner agreeing to look to its lien on the cargo, freight, and sub-freights for the sums due rather than to the charterer personally. It typically arises where the charterer is an intermediary, such as a shipper or trader, that does not want continuing personal exposure after loading.

Because a cesser of liability without security would leave the owner badly exposed, the clause is almost always read together with the lien, and the cesser has generally been treated as effective only to the extent the owner actually has an effective lien for the relevant sums. The clause therefore couples the charterer's release with the owner's security, and the two stand or fall together in practice.

Commercial effect

The cesser clause reallocates where the owner looks for payment, moving it from the charterer to the cargo and freight. For the charterer-intermediary this is valuable, ending its personal liability once it has performed its loading role, while for the owner the trade-off is acceptable only if the lien gives it real recourse against the cargo and the receivers who take it.

The practical effect therefore depends on the effectiveness of the lien at the discharge port and against the parties who owe freight or hold the cargo. Where the lien is good, the cesser works as intended; where local law or circumstances make the lien ineffective, the linkage between cesser and lien is what protects the owner, since the charterer's release is generally limited to what the lien can actually secure.

Owner's perspective

The owner is cautious about cesser clauses because releasing the charterer from liability removes a solvent and identifiable debtor. It accepts cesser only on the basis that it retains an effective lien for the sums concerned, and it wants the clause drafted so that the charterer's release is expressly conditioned on, and co-extensive with, the owner's ability to recover through the lien.

The owner therefore focuses on the scope and enforceability of the lien at discharge, since that is what it is relying on in place of the charterer. It resists a broad, unconditional cesser that would let the charterer walk away even where the lien turns out to be worthless, and it negotiates the cesser and lien provisions as a single package so that it is not left without recourse.

Charterer's perspective

The charterer-intermediary values a cesser clause because it ends its personal liability once it has shipped the cargo, matching its limited role in the transaction and avoiding continuing exposure for freight, demurrage, or deadfreight that it expects the cargo or receivers to bear. It wants the cesser to be as clean and complete as the market will allow.

The charterer is aware, though, that cesser is usually only as good as the owner's lien, so it focuses on ensuring the lien arrangements are workable and that the release operates as intended. It negotiates the cesser and lien together, accepting that its release will in practice be limited to what the owner can recover from the cargo and freight, and structuring its position so it is not unexpectedly left liable.

Negotiation points

• The point at which the charterer's liability ceases under the clause.
• Which sums are covered by the cesser and the corresponding lien.
• Whether the cesser is expressly conditioned on the owner having an effective lien.
• The enforceability of the lien at the discharge port that underpins the cesser.

Common variations

• A cesser of liability on shipment coupled with a lien on cargo and freight.
• A cesser expressly limited to the extent the owner has an effective lien.
• A partial cesser leaving the charterer liable for defined sums only.
• A clause omitting cesser entirely, keeping the charterer liable throughout.