Candidates almost universally know the name 'Lloyd's Open Form' but then stall. They cannot explain what it actually commits the Master to, why 'no cure no pay' matters commercially, or how towage and salvage differ in legal effect. That gap is where the examiner presses.
The fundamental distinction
Towage is a contract service: the tug provides motive power under the Master's direction, for an agreed price. The vessel is not in danger; the tug owner bears no maritime lien on the tow and earns the fee regardless of outcome. Liability remains with the vessel being towed. Standard commercial towage contracts — BIMCO TOWCON (lump sum) or TOWHIRE (daily hire) — set out pre-agreed terms and fees; there is no salvage award. The critical boundary is whether the operation is a planned commercial tow or a response to a vessel in danger: if the latter, salvage law applies regardless of what the parties call the arrangement.
Salvage arises when property is in danger at sea and is preserved by a volunteer salvor acting without a pre-existing contractual duty to do so. The salvor acquires a maritime lien on the saved property and is entitled to a reward. If they save nothing, they earn nothing — that is 'no cure no pay'.
The distinction has direct command consequence: if you engage a commercial tug under a towage contract when your vessel is actually in distress, you may inadvertently restrict the salvage rights of a third party who later assists, and you remain financially exposed.
Lloyd's Open Form (LOF)
LOF is the standard salvage agreement used internationally. The current edition is LOF 2024 — the thirteenth edition, launched 1 June 2024 by Lloyd's Salvage Arbitration Branch. Its key characteristics:
- 'No cure — no pay' is stated on the face of the form: the salvor earns a reward only on success.
- Agreed on the spot; work begins immediately — paperwork follows.
- Remuneration is determined by London arbitration after the event, assessed against the criteria in the International Convention on Salvage 1989 as incorporated into English law: degree of danger, salvor's skill, value of property salved, degree of environmental protection.
- LOF 2024 incorporates the Lloyd's Standard Arbitration Clause (LSAC) and, via Box 7, the SCOPIC clause. SCOPIC provides a minimum remuneration based on a published tariff for equipment and personnel, plus a 25% uplift funded by the P&I Club, where salved values cannot sustain a conventional Article 13 award — a modification to pure no cure no pay where the vessel poses an environmental threat even if property is not saved.
- The 2024 edition introduced fast-track document-only resolution for smaller casualties, greater award transparency, and ESG reporting requirements — the fundamental 'no cure — no pay' structure is unchanged.
- The Master has authority to sign LOF without owner's prior approval. This is critical: delay seeking permission can increase damage and prejudice salvage prospects. The Master acts on behalf of shipowner, cargo owner and other interested parties.
- Once LOF is signed the Master must notify property owners that the agreement has been concluded. Salvage security will be required separately — General Average security does not discharge the salvage security obligation.
Command-level points
- Never misrepresent the vessel's condition to avoid engaging salvage; this can defeat the LOF later.
- Record everything: time of distress, when LOF offered and by whom, Master's assessment of danger, time of signature, weather, position. The log is evidence in arbitration.
- If a tug arrives and begins assisting without a contract, a salvage situation may already exist in law — engaging on LOF promptly gives clarity and controls the process.
- Inform owners and P&I Club at the earliest opportunity; they will engage salvage consultants, but the Master remains in command on scene. Early P&I Club contact is especially important where SCOPIC is likely to be invoked, as the Club typically funds SCOPIC payments.
- Know that cargo interests have separate rights and that a good LOF outcome balances awards across all saved values.