General Average

A general contribution of money paid by all parties concerned in a marine adventure in direct proportion to their several interests when a voluntary or deliberate sacrifice has been made of one or more of the party’s goods in time of peril with a view to saving the remainder of the property.

If the shipowner intentionally and reasonably incurs extraordinary expenditure (such as for salvage services) so the ship and the cargo on board are saved, the cargo owners are required to contribute to the expenses of the shipowner. An “Average Adjuster” will calculate the amounts of compensation.

Before the shipowner delivers cargo to the consignees or receivers or any other persons entitled to it,  he should ensure that some security for general average contributions is provided by the cargo interest. Such security could be a “general average deposit” (a sum of money), an “Average Bond” (for example, a “Lloyd’s Average Bond”) or an “Average guarantee” from the cargo underwriters or insurers that the contributions will be paid when they have been “adjusted”. Without this security, delivery of the cargo may cause the owner’s lien on the cargo to be lost.