SCOTUS Opinion: “Safe-Berth” Clause In Maritime Contract Creates A Warranty of Safety

In Citgo Asphalt Refining Company v. Frescati Shipping Company, a punctured hull in a tanker caused a huge oil spill, which the owner of the tanker and the United States then paid millions to clean up. Those parties then sued the groups who chartered the tanker to recover those costs under a clause in the maritime contract that required the lessors to select a “safe” berth that would allow the tanker to be “always safe afloat.” The Third Circuit held that the clause created a warranty of safety, which imposed liability regardless of whether the lessors were diligent, while other circuits held that such clauses merely imposed a requirement of diligence.

The Court, in a 7-2 opinion by Justice Sotomayor, held that “safe-berth clauses” are warranties, reasoning that the plain language of the clause created an absolute duty to keep the ship “free from harm or risk.” The Court acknowledged that the parties to the contract could have limited the scope of that warranty, but there was no language to that effect in the given contract. Justice Thomas, joined by Justice Alito, argued that the language of the clause did not plainly indicate a warranty, and that the case should be remanded for factfinding as to whether such a warranty was part of the industry’s custom and usage. A link to the opinion is here: