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What is General Average?

Published 16 Dec 2020

What is General Average?

Often, a ship in distress with cargo can be saved by the captain's considered actions. This is known as general average. The law of general average is a principle of maritime law whereby all stakeholders in a sea venture proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency.

General Average

If the ship faces a sudden threat, such as a storm, some cargo may need to be removed from the ship. In this case, since the discarded cargo will save the entire ship, the cargo owners and the ship owner are responsible for their share of the total assets on the ship, regardless of whom the discarded cargo belongs. If these people have transport or ship insurance, their replacement insurers will be responsible.

The concept of a common average allows sailors to act without hesitation in the face of a sudden threat and the sacrifice made is shared fairly.

The concept was first introduced into legislation by the York Antwerp rules in 1890. U.S. companies adopted the rule in 1949.

In what cases does General Average condition apply?

• If the act occurs in order to protect the ship from a thread, is made in a logical way and there is some sacrifice, it can be general average.
• If there are extraordinary expenses “general average” is valid. The expenses and the direct result of the action are general average.

Conditions that must be provided

1. There must be cargo on board
2. There must be a transportation agreement
3. Freight must be paid, guaranteed or about to be paid
4. The ship must be at sea, that is, on a cruise

Three elements of the General Average

1. A common threat: Ship, cargo and sailors must be affected by this common threat. The threat must be imminent and seem inevitable. So much so that the only way to protect it, should be to sacrifice some of the burden.
2. Some of the threatened assets must be disposed voluntarily in order to avoid the threat. Thus, the threat to the whole must be limited to a part of the whole.
3. This initiative must have been successful.

Particular Average

Bouncers made without general average conditions are paid only by the owner of the property. This condition is called special average. In the damage investigations of transportation insurance, it is important whether the average is general or particular.