A merchant in Livorno asks a captain to takes his box of grain to Genoa. A second merchant also asks for his two boxes to be transported too. The ship encounters a storm and the captain throws a box of grain into the sea to lighten the ship so that it can survive the storm.
The ship makes a forced stop at Pisa where the captain presents an account to the port authority and a case of General Average is declared.
Each survived element (vessel, freight, cargo) will pay a partial compensation to each damaged or lost element. The logic is: we lost something belonging to you to save the ship and continue the voyage. It is fair that I contribute to your loss accordingly to the value of my goods on board (or of the ship itself, if I’m the owner).
See the example below.
The value contributing to risk is actually the opposite of the damage. A box of grain has a value of 20 lire. Let’s say it doesn’t get damaged. It will contribute, in proportion to its 20 lire value, to the damages.
Example: in this case we have 2 boxes of grain of 20 lire each and a third box of 20 lire which is thrown overboard. The ship is worth 100 lire and the freights, in this case, don’t contribute. We would have these elements:
Risk vessel: 100 lire
Risk cargo: 20 + 20 + 20 lire (we count even the thrown box)
Damages: 20 lire (the thrown box).
We calculate the contributing percentage by summing up all the risks and dividing the damages by this sum. 20/(100+20+20+20) = 0,125.
This value is multiplied by 100 to calculate the %, hence it becomes 12,5%. This percentage is the contributing sum to be applied on each contributing (risk) value.
The vessel will pay 12,5 lire and the two surviving boxes of grain will pay each 2,5 lire.
The total contribution will be of 17,5 lire.
All this money will be transferred to the owner of the lost box of grain.
As can be seen, this is a partial compensation, because the owner of the thrown cargo is still losing 2.5 lire. However, this loss is much more bearable than a loss of 20 lire!