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Lloyd's Form is a no cure – no pay contract. In the traditional manner, the salvor is rewarded for the successful salvage of ship and cargo. This system operates on the principle of “natural equity” – first established in a marine salvage context over 2,000 years ago, in the world of Classical Greece. LOF celebrates its centenary in 2008. The contract’s origins, however, date back to 1890 and the efforts of Colonel Sir Henry Hozier, then Secretary to Lloyd’s, to reach an understanding with salvors in the Dardanelles/Black Sea region. Sir Henry’s initiatives led to the introduction of a new system allowing the Committee of Lloyd’s, or the Committee’s appointed Arbitrator, to adjust prices agreed for salvage services if the amounts were subsequently considered inappropriate. In this way the sum could be increased or reduced. During the following years Lloyd’s sought to persuade other salvors to adopt a standard form of salvage contract, but it took almost two decades for this concept to take hold. The first Lloyd’s Standard Form of Salvage Agreement was published in January 1908. The basic text was not significantly different from the form that had been in use for the previous 18 years or so, for which Sir William Walton (who became the first Lloyd’s Arbitrator) was responsible. The new Standard Form provided that, whether or not the contract stipulated the payment of a lump sum, the salvors were required to notify Lloyd’s, on completion of the services, of the amount for which they required security. This reflected the objective that, regardless of whether or not the agreement was a fixed price contract, the final remuneration payable should be determined by arbitration by the Committee or its appointed Arbitrator unless, following a period for reflection, all parties were satisfied that the price agreed was fair. |
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