Bottomry is a contract by which a vessel or its freightage is hypothecated as security for a loan, which is to be repaid only if the vessel survives a particular risk, voyage, or period.
Civil Actions and LiensBottomry
Section § 450
Bottomry is a special kind of loan agreement where a ship or its earnings are put up as collateral. The borrower only has to repay the loan if the ship safely completes a specific journey or time period without being lost.
bottomry contract vessel collateral maritime loan
Section § 451
If you own a boat, you can use it as collateral, or security, for a loan through a process called bottomry, at any time or place, as long as the purpose for the loan is legal.
The owner of a vessel may hypothecate it or its freightage, upon bottomry, for any lawful purpose, and at any time and place.
vessel ownership bottomry collateral
Section § 452
The captain of a ship can take out a loan using the ship as collateral, known as bottomry, but only to get repairs or supplies needed for the trip, or to keep the ship safe.
The master of a vessel may hypothecate it upon bottomry only for the purpose of procuring repairs or supplies which are necessary for accomplishing the objects of the voyage, or for securing the safety of the vessel.
vessel hypothecation bottomry loan ship repairs
Section § 453
This law allows the captain of a ship to use the vessel as security for a loan, known as a bottomry bond, only when there's no other way to meet the ship's urgent needs, the owner's funds can't be accessed, and there's no way to contact the owner due to the situation's urgency.
The master of a vessel can hypothecate it upon bottomry only when he can not otherwise relieve the necessities of the vessel, and is unable to reach adequate funds of the owner, or to obtain any funds upon the personal credit of the owner, and when previous communication with the owner is precluded by the urgent necessity of the case.
vessel security bottomry ship financing
Section § 454
This law allows the master of a ship to use the earnings from freight as collateral for a loan in the same way he can use the ship itself as collateral. This can be done when specific circumstances allow him to do so.
The master of a vessel may hypothecate freightage upon bottomry, under the same circumstances as those which authorize an hypothecation of the vessel by him.
master of a vessel hypothecate freightage bottomry
Section § 455
This law allows parties involved in a bottomry contract, which is a loan secured against a ship, to agree on an interest rate higher than usual. However, if the rate is deemed unfairly high, a court can take action to reduce it to a reasonable level.
Upon a contract of bottomry, the parties may lawfully stipulate for a rate of interest higher than that allowed by the law upon other contracts. But a competent court may reduce the rate stipulated when it appears unjustifiable and exorbitant.
bottomry contract high interest rate loan against ship
Section § 456
This law allows a lender to enforce a loan agreement called a 'bottomry', which is a loan made to the master of a ship. Even if the specific conditions for the master to pledge the ship as security did not actually exist, the lender can still enforce the contract if they sincerely believed those conditions were met and made reasonable efforts to confirm this.
A lender upon a contract of bottomry, made by the master of a vessel, as such, may enforce the contract, though the circumstances necessary to authorize the master to hypothecate the vessel did not in fact exist, if, after due diligence and inquiry, the lender had reasonable grounds to believe, and did in good faith believe, in the existence of such circumstances.
bottomry ship loan vessel hypothecation
Section § 457
This law says that if a bottomry contract includes conditions that make the borrower responsible for the loan regardless of the maritime risks, those conditions are not legally valid. A bottomry contract involves borrowing money secured against a ship, which is only repaid if the ship completes its voyage successfully.
A stipulation in a contract of bottomry, imposing any liability for the loan independent of the maritime risks, is void.
bottomry contract maritime risks loan liability
Section § 458
If the item that was used as collateral for a loan is completely lost due to a covered risk, the lender cannot get their money back. If only part of the item is lost, the lender can only claim the value of the part that remains.
If there is a total loss of the thing hypothecated, from a risk to which the loan was subject, the lender upon bottomry can recover nothing; if a partial loss, he can recover only to the extent of the net value to the owner of the part saved.
bottomry collateral loss lender rights
Section § 459
In simple terms, a bottomry loan has to be repaid as soon as the risk (like a sea voyage) ends, unless there's an agreement that says otherwise, even if the loan contract mentions a specific credit period.
Unless it is otherwise expressly agreed, a bottomry loan becomes due immediately upon the termination of the risk, although a term of credit is specified in the contract.
bottomry loan repayment terms termination of risk
Section § 460
A bottomry lien, which is a claim for the security of a loan on a ship, doesn't require you to have physical possession of the ship. However, if you don't act to enforce this lien within a reasonable amount of time, you lose the right to do so.
A bottomry lien is independent of possession, and is lost by omission to enforce it within a reasonable time.
bottomry lien independent of possession enforcement time limit
Section § 461
If a bottomry lien, which is a claim on a ship used to secure a loan, is made out of necessity and in good faith, it takes priority over other claims on the vessel. However, there are exceptions: seamen’s wage liens, certain material-men liens for essential supplies or repairs, and salvage liens that come after the bottomry lien.
A bottomry lien, if created out of a real or apparent necessity, in good faith, is preferred to every other lien or claim upon the same thing, excepting only a lien for seamen’s wages, a subsequent lien of material-men for supplies or repairs indispensable to the safety of the vessel, and a subsequent lien for salvage.
bottomry lien priority lien necessity lien
Section § 462
If there are multiple bottomry liens on the same property, the one that was created later takes priority over the others, but only if it was made due to necessity.
Of two or more bottomry liens on the same subject, the latter in date has preference, if created out of necessity.
bottomry lien priority preference
