The Ocean Bill of Lading (B/L) is an acknowledgment by a carrier that it has received goods for shipment. It is also the contract of carriage of goods between a carrier and a shipper. Thirdly, it controls possession of the goods. B/L stipulates the exceptions, limitations, conditions and liberties between the two parties for the goods in the carrier's custody. General Average and Jason Clause in the B/L obligate the shipper to share the loss of/damage to the goods in the event of a specified incident. We often hear the declaration of a “general average” that the carrier would take as his course of action when the goods under its custody is damaged or lost in the incident. This page is not to provide any legal guidance in handling the General Average case. It is rather a broad-brush introduction of the General Average. What are the differences from a Particular Average and Total Loss?

An “average” in layman's terms is a partial loss as opposed to a total loss. A “general average” is that sort of partial loss which is incurred when some of the values at risk in the marine venture are sacrificed to save the remainder from peril. The general average loss might consist in either the payment to the owners of the sacrificed goods or the uncompensated loss by the owners of the saved goods. Whereas a “particular average” is a partial loss which falls on the owner of the goods alone and is not partly compensated by general average contribution. The “carrying vessel” is construed as a part of the total values at risk in the marine venture when a general average is declared by the carrier. It is the carrier's advantage to declare the loss at sea as a “general average”. This would bring all parties (shippers as well as the ship owner in the case of a chartered vessel) to share the losses. Nevertheless, not all losses at sea fall into the general average doctrine. The carrier shall demonstrate that the loss happens on the ship or under the contract of carriage of goods. The sacrifice to save other goods as well as the ship in peril has yielded success or partial success. The action of the sacrifice taken by the master of the ship is voluntary, not accidental and not as a result of any intervening negligence. Lastly, the peril is imminent and apparently inevitable, not imaginary. It is a common danger to the ship, cargo and crew. The acronym, “Very Smart Vice President” may help you remember the general average doctrine. Here is what it stands for:

        •   V for Maritime Commercial Venture
        •   S for Success or Partial Success
        •   V for Voluntary Sacrifice
        •   P for Peril


If the incident occurs on the carrier's owned vessel, the carrier will notify its P&I Club Underwriter and appoint a General Average Adjuster to handle the case. The adjuster will evaluate the validity of the declaration of the General Average based on the aforementioned evidences as well as its financial benefits whether the carrier should invoke the General Average under its bills of lading. The ship-owned carrier may discuss this incident with its Hull and Machinery Underwriter that could be one of the General Average contributors. In an event where the incident happens on a chartered vessel, the carrier will employ an independent General Average Adjuster to evaluate the case while the shipowner is doing the same. Both charterer (party that issues the B/Ls ) and shipowner have the right to declare General Average.

Total losses have two sorts: actual and constructive. An actual total loss occurs when the goods is no longer possible to arrive at their destination in specie. It is also deemed to exist when goods is so damaged in the course of the voyage that there is no reasonable possibility to be transported to its destination without complete destruction or loss of identity. Whereas, the constructive total loss occurs when the cost of bringing the goods to reach its destination in specie exceeds the value of the goods.