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.
The owner of a vessel may hypothecate it or its freightage, upon bottomry, for any lawful purpose, and at any time and place.
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.
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.
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.
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.
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.
A stipulation in a contract of bottomry, imposing any liability for the loan independent of the maritime risks, is void.
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.
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.
A bottomry lien is independent of possession, and is lost by omission to enforce it within a reasonable time.
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.
Of two or more bottomry liens on the same subject, the latter in date has preference, if created out of necessity.