VII. Salvage Contracts
are many sound reasons why a salvor would want the vessel master or
owner to sign a salvage contract or agreement. Such a document would
clearly establish that the vessel accepted the salvage services.
Similarly, the contract may address issues such as security,
arbitration, interest, attorney's fees or other terms. The contract may
or may not specify the compensation to be paid in the event of success.
If the contract predates the services, rather than being executed
contemporaneously with or after the services, the services are not
salvage services because the services are not rendered voluntarily but
as the result of a preexisting legal duty.
Not every salvage contract results in contract
salvage. If the contract provides that the contractor will be paid
regardless of success, the services become contract salvage services.
The contract salvor retains a lien on the vessel but not a high
priority salvage lien.
if the contract provides that the salvor will be paid only in the event
of success, whether or not the contract fixes the amount of
compensation the salvor retains his status as a "pure" salvor and
retains also his salvage lien. Such contracts are called "no cure-no
pay" salvage contracts.
If the contract fixes the compensation to be paid
to the salvor but only in the event of success, it is a fixed price,
"no cure-no pay" salvage contract. Under such a contract, the salvor
loses his right to a discretionary salvage award and can only be
awarded the agreed amount.
contract does not contain an agreement to pay a given sum or to pay
without regard to success but only provides that the salvor will be
entitled to an award in the event of success on a "no cure-no pay"
basis, the services do not become contract salvage but retain their
status as "pure salvage services".
While some use is made of contract salvage for recreational vessels,
primarily in the context of wreck removal, most salvage contracts
presented to recreational vessel operators and owners are "no cure-no
pay". The use of fixed price contracts is uncommon except in cases of
raising vessels sunk at their berths in shallow water or in the salvage
of vessels of relatively low value.
A number of questions arise even with regard to "no cure-no pay"
contracts calling for a discretionary salvage award. On one of the
first inquiries raised, assuming that the owner did not execute the
agreement, is whether the person executing the contract on behalf of
the owner had, or needed, the authority of the owner to sign the
agreement. It is well settled that when a vessel requires salvage
services, the vessel's master has the authority to sign a salvage
agreement without special authority from the owner who is bound by the
actions of the master. However, the signing of a salvage agreement by
the master after the vessel has been assisted requires authorization by
the vessel owner.
Next, the insurer presented with a salvage agreement signed by the
insured or his agent will often argue that the agreement is void
because it was signed as the result of duress or coercion. Of course,
if the agreement was signed after the services were rendered, any
duress or coercion created by the exigent circumstances is no longer a
factor. Just because the contract was signed under exigent
circumstances, however, does not automatically mean that it is
unenforceable as a result of duress. A certain amount of duress is
inevitably present when the master or owner is under the pressure of
the peril threatening his vessel. Duress of that nature does not,
however, automatically void the salvage agreement. An admiralty court
will closely scrutinize the agreement for any sign of overreaching,
improper coercion or over charging by the salvor, and will set aside
the contract if it finds that the salvor took advantage of the
situation to impose unconscionable or inequitable contract terms on the
Extortionate demands forced by a salvor upon the master of a vessel in
extremis will not only void the contract but often results in a salvage
award that is less than it would otherwise be. If, however, the terms
of the contract are reasonable and not oppressive, the contract will be
upheld without regard to pressures created by the emergency faced by
Many of the same factors that will void a contract under common law
such as fraud, collusion, mutual mistake, misrepresentation or
suppression of material facts or compulsion will also void a salvage
contract. There are few reported cases involving recreational vessels
where a salvage agreement has been found to be void because of duress,
fraud or coercion. In one case, however, the arbitrator found an
agreement to salvage a recreational vessel to be unenforceable, not
because the provisions with regard to compensation were unconscionable,
but because they were incomprehensible. The arbitrator found, however,
no misconduct on the part of the salvor and went on to award $8,500 for
the salvage of a motorboat worth $41,500.
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