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Describe how General Average is settled.

When there is a general average act on a voyage, all parties who havebenefited shall contribute towards the loss. The ship has a possesory lien onthe cargo for its contribution to G.A.

At the discharging port, GA SETTLEMENT (calculation of losses,

contribution according to value etc.) shall be done. But this process iscomplex and takes months to complete. During this settlement process, the

cargo will have to be delivered to cargo owners.To ensure that cargo owners contribute towards the GA loss when the

GA settlement process is complete, the ship requires the cargo owner to signan AVERAGE BOND which is a promise to pay their GA contribution whensettlement is complete.

The ship thus exercises the POSSESORY LIEN on cargo in some form

of promise and guarantee that cargo owners will pay. In case of GA, it isimportant that AVERAGE BOND be signed by cargo owner before cargo is

delivered to him. LLOYD AVERGE BOND is the standard form used.

GENERAL AVERAGE DEPOSIT is the amount of money deposited in aspecial GA account in bank (joint account between ship and cargo owners). Itis based on arrived value of the property (usually about 10% of value) and

deposited after Average Bond was signed. In case of GA act on a voyage theship shall never release the cargo until Average Bond + Deposit completed.

Average Adjuster is a person appointed by ship owners for thepurpose of assessment and adjustment of GA Losses and claims following a

general average act.The ship owner has the duty to appoint average adjuster and

collecting the contributions due from various cargo owners in case of GA.An average adjuster will act as an ARBITRATOR and because of his

knowledge of the law and practice relating to insurance and average, will beable to decide and assess.1. What is allowable as GA? What is not allowable? & Amount allowed.2. The contribution from each party towards GA.

3. The estimate of loss/damage due to GA and the approximate rate ofcontribution from each cargo owner so that GA deposits can be

arrange. This will enable cargo to deliver to cargo owner withoutwaiting for final GA settlement. In some cases, GA guarantee given by

underwriters may be accepted.On completion of GA assessment, the adjuster will issue a GENERALAVERAGE SETTLEMENT consisting of all details of losses, damages allowableas GA on one side and contribution based on value by all parties (ship owner,

cargo owners etc.) on the other side.This average adjustment is a complex process which takes time, some time

month of even years.The usual practice for average adjustment is base on the YORK-ANTWERP

RULE and ADJUSTER RULE OF PRACTICE

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A ship has a fire in No.1 hold, and cargo A was destroyed by fire.Cargo B was badly damaged by the water which was used to

extinguish the fire, and cargo C was not damaged. Would the ownersof cargo C require paying an average contribution in respect A and B?

Cargo A is destroyed due to fire which is one of the insured perils under

marine insurance. The indemnity for damage / loss of cargo in this case willbe pay by underwriters of cargo A. It is due to accidental fire and thus shall

be Particular Average which is to be settled between cargo A owners andcargo A underwriters.

Thus, cargo C owners shall not contribute towards loss ofA.Cargo B was badly damage due to water used to extinguish the fire. This isan intentional act in times of Real Peril (fire) for the common benefit ofall interests in the common adventure.

Proved that it is reasonable, the loss to B shall be termed a GENERALAVERAGE SACRIFICE and this shall be settled according to rules agreed

between the parties to the adventure when the bill of lading or charter party

was signed.Thus, according to GA settlement terms and average adjustment by averageadjuster, cargo C will contribute rateably towards the loss/ damage of cargo

B which was a GA loss.To ensure that cargo owners who have benefited from the GA sacrifice shallcontribute to cover the loss, cargo owners such as owner of C shall signaverage bond or deposit, guarantee before the cargo C is delivered to them.

A ship bound for Africa from London ran into heavy weather andbecame listed. The hatches are opened to have the cargo jettisoned.Part of the cargo from No.1 hold were jettisoned, while someremaining cargo inside the hatch were damaged by sea water which

entered the hatch. Some cargo from No.2 hold, which happened to beillegal goods are also jettisoned. State which cargo is entitled to

General Average and which is not.

The act of jettisoning to save the voyage in times of extraordinary Peril isGeneral Average act.Cargo from No.1 hold which were jettisoned.This is GA sacrifice and the cargo owners are to be compensated from GA

funds as the loss is a General Average loss. (Rule I- York-Antwerp Rules)Other cargo from No.1 hold direct consequence of jettisoning, and thus

allowed as GA loss. The damaged cargo will be compensated from GA fundsafter settlement of GA.( Rule II York-Antwerp Rules)

Cargo from No.2 hold. Which was jettisoned but is illegal goods.The cargo owners of cargo from No.2 hold which happened to be illegalgoods shall

1. contribute towards GA (if some cargo saved)

2. But are not entitled to any compensation because of the fact that thegoods are illegal.(Rule XIX- York-Antwerp Rules)