CITGO Asphalt Refining Co. v. Frescati Shipping Co.
The Supreme Court ruled that an oil company that chartered a tanker and chose a New Jersey dock for unloading must pay for a major oil spill caused by a hidden anchor, because the contract's unqualified 'safe-berth clause' guaranteed the dock's safety — not merely that the company would try its best to pick a safe one.
The decision resolves a longstanding split between federal appeals courts and establishes that companies choosing docks and berths for chartered vessels take on strict, no-excuses liability when those berths turn out to be unsafe, unless they write explicit fault-based limits into the contract.
“The safe-berth clause, in other words, binds the charterer to a warranty of safety.”
The majority's plain-language conclusion that the unqualified safe-berth clause creates strict liability for the charterer.
How it got here: After a 41-day trial, a 31-day evidentiary hearing, and two rounds of appeals, the Third Circuit ruled for Frescati and the United States; CARCO asked the Supreme Court to resolve a split between the Third and Fifth Circuits on what safe-berth clauses require.
The Case in Depth
What happened
In 2004, a 748-foot oil tanker called the M/T Athos I struck a nine-ton ship anchor abandoned on the floor of the Delaware River, puncturing the hull and spilling 264,000 gallons of heavy crude oil. Federal law required the tanker's owner, Frescati Shipping, to pay cleanup costs up front; the federal government's Oil Spill Liability Trust Fund covered an additional $88 million. Together they sued the oil company CARCO, which had chartered the tanker and designated the Paulsboro, New Jersey dock as the unloading destination, arguing CARCO's contract guaranteed the berth's safety.
The question before the Court
When a company charters an oil tanker, picks a dock, and the tanker strikes a hidden abandoned anchor causing a massive spill, must the company pay cleanup costs even if it had no idea the anchor was there?
The Court's answer
Yes — the Court ruled that the charter party's "safe-berth clause" was a warranty of safety, making CARCO strictly liable for the oil spill without any need to show it was careless in choosing the dock. The clause required CARCO to "designate and procure" a berth that was "safe" and where the vessel could proceed "always safely afloat" — unqualified language that bound CARCO to guarantee the result, not just to make reasonable efforts.
The Court rejected CARCO's argument that the clause only imposed a duty of reasonable care. Under basic contract law, a party that promises a result is strictly liable if that result doesn't happen — fault is irrelevant — unless the contract expressly limits liability. Other parts of the same charter party explicitly used "due diligence" language when the parties wanted a fault-based standard; the safe-berth clause contained no such limit, confirming that none was intended.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Companies that charter vessels and designate loading or unloading berths now have a clear national rule: if the berth turns out to be unsafe, they are liable for the consequences regardless of how carefully they chose it. The only way to avoid that exposure is to write explicit due-diligence limitations directly into the contract — something the oil company here did not do.
What changes now
CARCO must pay Frescati for the cleanup costs Frescati bore beyond the statutory cap, and reimburse the federal government for the $88 million disbursed from the Oil Spill Liability Trust Fund. Going forward, shipping companies that designate berths under unqualified safe-berth language bear strict liability for unsafe conditions. The Court explicitly noted, however, that charterers remain free to contract around this rule by writing explicit due-diligence or fault-based limits into future agreements.
What this does not decide
The ruling does not bar companies from limiting their liability — the Court expressly confirmed that charterers can write due-diligence caps or other liability limits into their contracts. It also does not address safe-berth clauses that already contain explicit qualifications, and it does not resolve whether a berth rendered unsafe by an "abnormal occurrence" might be treated differently under some contracts.
Concurrences and dissents
Dissent — Justice Thomas
Justice Thomas argued the safe-berth clause does not unambiguously create a warranty of safety. He read the clause as granting the charterer a right of selection and the vessel master a right of refusal — obligations governing conduct, not guarantees of a result. He also contended the majority's logic would create two contradictory warranties in the same clause (one on the charterer, one on the vessel master), a result courts normally avoid. He would have reversed the Third Circuit and sent the case back for factfinding on whether longstanding industry custom establishes a warranty in this context.
How the Court got there
The legal reasoning, step by step
- Maritime contracts follow the same rules as any other contract: when the written language is clear and unambiguous, the text controls, and the parties' intent is determined from the face of the agreement without resorting to outside evidence.
- The safe-berth clause required CARCO to 'designate and procure' a 'safe place or wharf' where the vessel could load and discharge and proceed 'always safely afloat.' The word 'shall' signals a mandatory obligation, not a discretionary one. 'Safe' means free from harm or risk; 'always' means at all times and in any event. Together, these unqualified terms impose an absolute duty.
- Under the default rule of contract law — which the Court calls 'strict liability' — a party who makes a contractual promise is liable for breach regardless of fault or diligence. Parties can limit that exposure by writing fault-based or due-diligence qualifications into the contract, but the safe-berth clause contained none.
- The same charter party used explicit 'due diligence' language in other clauses when the parties intended a fault-based standard — for example, requiring the vessel owner to exercise due diligence to ensure seaworthiness. The absence of that language in the safe-berth clause confirmed the parties did not intend such a limitation there.
- A separate 'general exceptions clause' in the charter party that exempted the charterer from liability for losses due to 'perils of the seas' did not save CARCO, because by its own terms that clause did not apply when another clause 'expressly provided' for liability — and the safe-berth clause did exactly that.
- Under long-standing maritime contract law, a material statement of fact in a charter party is a warranty even without using the word 'warranty.' Because the entire purpose of the safe-berth clause is to assure the safety of the berth — and that assurance is unqualified — it counts as a material warranty on par with any express warranty elsewhere in the contract.
Doctrinal impact
Cases affected by this decision
Distinguishes Atkins v. Disintegrating Co. (18 Wall. 272)
The Court said CARCO 'greatly overreads' Atkins, whose passing remark about berth safety was not its controlling holding.