voyage charter responsibilities

Voyage Charter vs Time Charter – Everything You Need to Know

Voyage Charter vs Time Charter – Everything you need to know.

One of the biggest questions facing a charterer is whether to opt for a voyage charter or a time charter. Evaluating voyage charter vs time charter can be a complex process, but we’ve broken everything down on this page, making it easier for charterers to decide which type of vessel chartering is best for them.

1. What is a Charter? 2. What is a Voyage Charter? 3. Voyage Charter Features/Terms 4. Voyage Charter Pros & Cons 5. What is a Time Charter? 6. Time Charter Features/Terms 7. Time Charter Pros & Cons 8. How to Choose a Charter Type 9. Charter Cost 10. Ongoing Cost 11. Flexibility 12. Contract Length 13. Convenience 14. FAQs About Voyage Charter and Time Charter 15. Conclusion

What is a Charter?

A voyage charter and a time charter are two options commonly found in the chartering business. A voyage charter is when the charterer leases a vessel for a specific voyage, such as Dubai to Singapore, while a time charter is a type of lease that allows the charterer use of the vessel for a specific period of time.

As you might imagine, there are many differences between these two types of charters, and both vessel chartering options have their own pros and cons. Keep on reading this page about voyage charter vs time charter to find out which of the two options will be most suitable for your ship chartering requirements.

Voyage Charter

What is a voyage charter.

A voyage charter is a type of ship chartering that sees the charterer agree to lease the vessel for one specific voyage. So, for example, the agreement might be for the charterer to gain use of the charter ship for a journey from Dubai to Dover.

Features/Terms

As just mentioned, a voyage charter is when a charterer leases a vessel for one voyage. Before the charter contract is signed, the parties will agree on the end destination, any ports of call, and whether there will be any restrictions on cargo. Once signed, the charterer must not deviate from any of these agreements.

The terms and conditions of the charter agreement will also stipulate the laytime permitted. The laytime refers to the amount of time it takes for the vessel to be loaded and unloaded. As the ship owner pays for all costs at the port, they need this process to be as quick as possible. If the charterer exceeds the agreed time, they must pay demurrage to the ship owner. Conversely, the ship owner will usually refund some money if the loading and unloading is quicker than stipulated.

But who is responsible for what costs? Well, with a voyage charter, nearly all costs are covered by the ship owner. These include costs relating to staffing, berthing, loading, unloading, and fuel. They cover these costs by charging the charterer a fee for leasing the vessel.

The amount of money paid by the charterer can be determined in two ways. The most common way to pay is on a per-ton basis. As the name implies, this sees the charterer paying a set price for every ton of cargo they transport. This is preferred by charterers when the amount of cargo they’re transporting is significantly less than the vessel’s gross maximum cargo tonnage.

The other payment type is a lump sum – one payment that allows the charterer to transport as much cargo as they want to. It is the ship owner’s responsibility to ensure the cargo weight does not exceed the gross maximum tonnage of the vessel. This type of payment is preferred by charterers when they’re carrying a higher weight of cargo.

This type of vessel chartering is generally preferred by charterers. This is because it often has more competitive prices, plus they are not tied down to any long-term commitments.

Pros & Cons

Pro: Charterer not liable for any costs, except initial charter fee Pro: Incentives to complete port operations quickly Pro: No need to find a crew Pro: No long-term contract

Con: Lack of flexibility for charterer Con: Higher initial charter fee

Time Charter

What is a time charter.

A time charter is a type of vessel chartering that sees the charterer lease the ship for a set period of time. So, they might lease the ship for two months, during which time they have the flexibility to choose their own routes and destinations.

Before anything is signed, the ship owner and the charterer will agree the exact period of time the lease will run for. Unlike with voyage charters, the two parties will not need to agree on ports of call and destinations, as the charterer has complete discretion over this.

With a time charter, the ship owner does not cover all costs. Instead, the charterer must pay for fuel and supply costs, as well as the cost of cargo operations. However, the charterer won’t have to pay such a large charter fee, which balances things out somewhat. The owner is still required to pay for the crew and ongoing maintenance, and also must ensure the vessel meets all necessary maritime safety standards.

It is generally the case that the charterer will pay for hire in advance, on a per-day basis. Payment is not usually made in one lump sum, with the charterer instead paying the lease charge in set instalments, which are usually quarterly. It’s important to note that, should the ship be held up in unforeseen circumstances, such as inclement weather, the lost time – referred to as off-hire hours – will not usually be charged for, although if too many off-hire hours are accrued, the charterer might end up being liable.

Ship owners generally prefer their vessels to be leased on a time charter. This is because time charters guarantee income for a long period of time, giving the ship owner increased security.

Pro: Guarantees charterer access to a vessel Pro: Initial lease cost is lower Pro: More flexibility for the charterer

Con: Several ongoing costs to pay Con: Tied down to long-term contract

How to Choose a Charter Type

We’ve discussed voyage charter vs time charter above, looking at the various pros and cons of each. But which should you choose when looking to charter a ship?

Well, this really depends on your requirements. We’ve broken things down into five sections – charter cost, ongoing costs, flexibility, contract length, and convenience – and will let you know which of the ship chartering options is better for each one.

Charter Cost

When it comes to the initial cost of chartering a ship, it’s nearly always going to be cheaper to go with a time charter. This is because the ship owner will be more amenable to a lower price, as they know you’ll be hiring the vessel for longer. What’s more, you, and not the ship owner, will be expected to cover other costs, pushing the initial price down further.

So, if you’re looking for the lowest possible upfront cost, the best option is a time charter. However, remember that other costs will also need to be paid.

Ongoing cost

If you choose to take out a time charter, you will have to pay several costs, including fuel and supply costs. With voyage charters, the only significant cost payable is the initial charter – all other major expenses are covered by the ship owner.

Therefore, if you want the lowest possible ongoing costs, the clear winner is the voyage charter. However, the upfront cost will be more expensive than a time charter.

Flexibility

Those who sign up for a voyage charter are limited in their movements, as they will have already agreed a set route with the ship owners. Those who have taken a time charter have far more freedom, as they can choose where to go throughout their charter.

This clearly means that those looking for more flexibility should opt for a time charter, as there are no limitations on route, ports of call, and destinations.

Contract Length

With a time charter, you’re tied into a long contract, committing you to ongoing payments. Voyage charters, on the other hand, only last for the duration of the voyage, meaning voyage charters are generally much shorter than time charters.

This all means that those looking for the shortest contract should opt for a voyage charter. However, if you know you’ll constantly need an available vessel, the long contract of a time charter could be more suitable.

Convenience

There will be no need to hire and pay a crew when opting for either the time charter or the voyage charter. It’s only bareboat charters that require the charterer to hire and pay their own crew. However, the ongoing costs associated with time charters can be inconvenient.

Overall, voyage charters are the more convenient of the two options, as there’s no need to organise payment for such things as port costs and fuel. However, both options are generally far more convenient than a bareboat charter.

FAQs About Voyage Charter and Time Charter

What are BIMCO Sanctions Clause for Voyage Charter Parties 2020?

These are intended to help in two scenarios. Firstly, if one of the signatories of the agreement gets sanctioned, the other signatories will be able to end the contract and claim damages. Secondly, when the trade or activity is subject to or becomes subject to sanctions, the ship owners can refuse to perform their contracted duties.

What is the difference between bill of lading and charter party vs time and voyage charter?

A charter party is an agreement between charterer and ship owner to lease a ship. A bill of lading is an agreement that legally obligates the charterer to carry cargo that has been loaded aboard the ship.

A time charter is a type of vessel chartering whereby the ship owner leases the ship for a set length of time. A voyage charter is a type of vessel chartering whereby the ship owner leases the ship for the duration of a specific voyage.

What are the duties and responsibilities of the ship owner and charterer under a time charter and voyage charter party?

Under a voyage charter, the ship owner assumes almost all responsibility, including hiring and paying crew, and paying for all significant costs associated with the journey. The charterer simply has to pay the ship owner a fee to secure their vessel.

With time charters, ship owners must still hire and pay staff. However, most other significant costs associated with a voyage, such as fuel and port fees, must be paid by the charterer.

Why do ship owners prefer voyage charter over time charter?

Quite simply, they don’t. Ship owners usually prefer time charters, as they ensure that their ship is guaranteed to be chartered for a longer period, generating income throughout.

Voyage charters are short, meaning the ship owner must continually find new charterers to lease the vessel to – something that isn’t always possible. When a new charterer can’t be found, the ship owner loses money.

Please note that charterers are required to take out insurance for both types of charter, to cover them against damage, injury, marine salvage , and more.

Those looking for short-term charters are best served by opting for a voyage charter, as these don’t require a long contract to be signed. They do have a higher initial cost, but this is offset by the fact that no other significant fees need to be paid.

However, those who know they’ll regularly require the use of a vessel might be better off with a time charter, as these see vessels leased for a long period of time. During this time, the vessel can be used to travel anywhere, without restriction. Time charters cost less upfront, but require the charterer to pay various other costs, such as the cost of fuel and port fees.

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Time Charter vs. Voyage Charter: Everything You Need to Know

Navigating maritime logistics demands a robust understanding of chartering options—each type has unique implications for operational strategy and financial outcomes.

Choosing between a time charter and a voyage charter isn’t merely a logistical decision; it’s a strategic one that impacts cost, control, risk management, and operational flexibility.

In this article, we delve deep into the two main types of charters – a time charter and a voyage charter – exploring their advantages and disadvantages, and offering a comparison between the two.

The goal of this article is to:

• equip you with the essential knowledge to navigate these choices 
• ensure that your chartering decisions align seamlessly with your business objectives and market conditions 
• enhance your company’s competitive edge in the global marketplace.

But before going any further, it’s important to understand the terms used by the industry. Here are the most common: 

Time Charter

A time charter   grants the charterer the use of a vessel and its crew for a specified period from a shipowner. The ship owner and the charterer will agree on the exact period the lease will run for. 

However, the two parties will not need to agree on ports of call and destinations, as the charterer has complete discretion over this. The charterer can direct the vessel’s movements and cargo operations within agreed and imposed contractual limits. 

The shipowner retains responsibility for the vessel’s operational aspects, including maintenance (ensuring the vessel meets all necessary maritime safety standards), and crewing, but the charterer must pay for fuel and supply costs, as well as the cost of cargo operations and port charges. 

This arrangement is akin to leasing a car, where the lessee drives but doesn’t worry about long-term maintenance. For example, a charterer might lease the ship for six months, during which time they have the flexibility to choose their routes and destinations.

Ship owners generally prefer their vessels to be leased on a time charter. This is because time charters guarantee income for a long period, giving the ship owner increased security.

Voyage Charter

A voyage charter focuses on the transportation of a specific cargo on a single voyage between designated ports.

The most common way to pay for this type of charter is on a per-ton basis. As the name implies, this sees the charterer paying a set price for every ton of cargo they transport and is preferred when the amount of cargo they’re transporting is significantly less than the vessel’s gross maximum cargo tonnage.

The second most common payment method is a lump sum – one payment that allows the charterer to transport as much cargo as they wish. It is the ship owner’s responsibility to ensure the cargo weight does not exceed the gross maximum tonnage of the vessel. This type of payment is preferred by charterers when they’re carrying a higher weight of cargo.

Under this contract, the ship owner is tasked with delivering the cargo and handling all nuances of the voyage itself. Nearly all costs are covered by the ship owner and include costs relating to staffing, berthing, loading, unloading, and fuel. They cover these costs by charging the charterer a fee for leasing the vessel.

Before the charter contract is signed, the parties will agree on the end destination, any ports of call, laytime, and whether there will be any restrictions on cargo. The ship owner pays for all costs at the port of call. If the charterer exceeds the agreed time, they must pay demurrage to the ship owner.

This type of vessel chartering is generally preferred by charterers. This is because it often has more competitive prices, plus they are not tied down to any long-term commitments

Voyage and Time Charters

There are other definitions which are useful to understand.

Charter party

Central to these contracts is the charter party —the formal agreement that stipulates the specific terms, conditions, and obligations agreed upon by the ship owner and the charterer. 

This document is crucial as it governs what each party is responsible for, including costs, risks, and how disputes are resolved.

Freight Rates

Freight rates, a critical element of the contract, determine the cost associated with transporting cargo and are influenced by various market conditions and ship specifications.

These rates not only affect the profitability of a voyage but also influence global trade patterns.

Cost Analyses

Cost analysis in this context involves evaluating the expenses related to different chartering options to determine the most cost-effective approach. 

This analysis is essential for chartering managers and financial analysts who aim to optimize operational costs against market conditions. 

The Statement of Facts (SoF) is an important maritime document that logs vessel activities while in port. It includes times of arrival and departure, cargo handling details, and records of any delays or incidents, providing a factual foundation for operational and legal evaluations.

Freight and Charges

Lastly, understanding freight & charges—the costs incurred during the shipment of cargo—is vital. These charges can vary widely depending on the route, type of cargo, and specific terms of the charter party.

Once again, the use of historical data from SoFs can assist in providing clarity and transparency on these fees.

Advantages and Disadvantages of a Time Charter

Time chartering presents a unique set of advantages and disadvantages that vessel chartering managers, operations VPs, and demurrage cost analysts must weigh carefully when strategizing for optimal operational flexibility and cost efficiency.

Advantages:

• Flexibility in Operations : Time charters offer charterers significant control over the vessel’s employment, including the types and routes of cargoes, as well as one of the most important: access to a vessel. This flexibility is invaluable for adapting to changing market conditions or specific logistical requirements. Using no-code workflows to streamline processes and voyage turnaround simulators can support maritime operations and greatly improve flexibility.
• Cost Predictability : With a fixed daily hire rate, companies can better forecast and manage their shipping expenditures. This predictability aids in budgeting and financial planning, reducing the unpredictability associated with fluctuating freight rates in spot market dealings.
• Reduced Exposure to Market Volatility : During periods of market volatility, time charter arrangements protect the charterer from soaring freight rates, as the hire rate remains constant regardless of market conditions.

Disadvantages:

• Long-term Commitment : One of the primary drawbacks of time charters is the requirement for a longer-term commitment to a vessel. This can be a double-edged sword, especially if market rates fall below the agreed hire rate, potentially leading to higher-than-market operational costs.
• Operational Costs and Risks: While the shipowner handles maintenance and crewing, the charterer is responsible for costs related to the voyage, including fuel, port charges, and other variable expenses. 

Charterers should employ proactive cost tracking, negotiate favorable fuel clauses, utilize cost-efficient routing software, and maintain transparent communication with shipowners about anticipated expenses and operational strategies.

For example, a well-prepared and accurate Statement of Facts (SoF ) can provide detailed information about the events that occurred during the time a vessel spent at port.

However, when the opportunity to properly analyze the SoF has not been made available, disputes over ambiguous statements may arise.

On one side, charterers will try to leverage the delays that happened to decrease demurrage. Shipowners, on the other hand, may challenge a charterer’s laytime statement based on the events that are available in the SoF.

Time charters often include terms for demurrage (charges when the charterer uses the vessel beyond the agreed period) and dispatch (rewards for completing operations early). The SoF provides the necessary data to calculate these charges or rewards accurately, documenting the exact time spent during loading and unloading.

• Lesser Control Over Maintenance : Charterers have limited control over the maintenance and condition of the vessel, relying on the shipowner to maintain standards. Poor maintenance can affect cargo schedules and overall shipping efficiency.

Maintenance of the vessel can also have a direct effect on the charterer due to new emissions regulations. 

Keeping track of current changes in maritime emissions regulations is a challenging task. With so many initiatives and new norms being implemented, trying to provide frameworks to capture and report on emissions, makes the topic extremely complex for operators, shipowners, and commodity manufacturers.

Advantages and Disadvantages of Voyage Charter

Voyage charters represent a different approach compared to time charters, focusing on specific trips rather than extended periods. This method suits operations that require precise cargo deliveries without long-term ship commitment, but it also carries its own set of pros and cons.

• Direct Cost Association : The major appeal of voyage charters lies in their direct cost association with individual voyages. The charterer is not liable for any costs, except the initial charter fee, and is not responsible for finding a crew. Charterers pay per trip, making it easier to allocate costs directly to specific cargoes or projects. 
• No Long-Term Commitment or Contract: Unlike time charters, voyage charters do not require a long-term commitment to a vessel, providing flexibility to switch between ships and routes as dictated by cargo needs or market conditions.
• High Control Over Cargo Operations : Charterers maintain extensive control over the loading and unloading processes, ensuring that handling aligns with their standards and schedules. This is particularly beneficial for sensitive or high-value cargoes. 
• Vulnerability to Market Fluctuations : While time charters protect against market volatility, voyage charters expose charterers to fluctuating freight rates. During peak times, costs can escalate significantly, affecting overall profitability and a lack of flexibility for the charterer.
• Inconsistent Costs (and higher initial costs): The costs in voyage charters can vary widely from one trip to another, influenced by factors like fuel prices, port fees, and canal dues. This inconsistency makes budgeting and financial planning more complex.

For example:

a. Exceeding laytime – the time allowed for loading and unloading cargo at ports – can lead to demurrage charges. Having a well-prepared SoF ensures that the arrival, cargo operations, and departure times are documented, which are key data points for laytime calculations.

b. New emissions regulations leading to the use of specific fuels or ship adjustments may soon be passed on to charterers via higher freight costs. For many ships, technical modifications may be the only realistic way to attain the required certifications and to be under the emissions limit, impacting the commercial operation of the vessel.

• Dependency on Ship Availability : Charterers are at the mercy of market availability. During periods of high demand, finding suitable vessels can be challenging and more expensive, potentially leading to delays and increased operational risks.

How to Choose Between Time Charter and Voyage Charter: Factors to Consider

Choosing between a time charter and a voyage charter is a strategic decision that hinges on several criteria to be weighed carefully to align with organizational objectives and the dynamic nature of the maritime industry.

Here we present six criteria that every chartering manager or analyst should consider.

• Duration and Frequency of Cargo Needs

Consider the length and frequency of your shipping needs. 

Time charters are more suitable for longer and more regular shipping requirements, providing stability and predictability. These agreements are signed only for a limited period, without providing any specified route to the other party. Throughout this charter period, the Charterer can use the vessel for trading on the recognized trade routes without restrictions. 

On the other hand, voyage charters are ideal for single, occasional, or irregular shipments. These contracts are signed for carrying a particular quantity of goods on the preset by the two parties. They also are obliged to carry the stated commodity onboard between pre-decided ports only. After the said trip is completed, the contract is automatically terminated.

• Market Conditions and Freight Rate Volatility

The current and anticipated market conditions play a crucial role. In a volatile market with rising freight rates, a time charter might lock in a more favorable rate for a longer period. 

Conversely, in a stable or declining market, voyage charters might offer more cost-effective and flexible options.

• Operational Control

Evaluate the level of control you need over the vessel’s operation. 

Time charters offer more control over the vessel’s itinerary and operations, beneficial for complex logistics operations.

Voyage charters provide control over the cargo but less so over the vessel’s operations.

• Financial Planning, Profitability, and Budget Constraints

Assess your financial flexibility

Time charters require a substantial and consistent financial commitment, which is predictable but potentially higher in the long term. 

Time charters provide more predictable cash flow due to fixed daily hire rates, which can be advantageous in a volatile market as they protect against rate increases. 

However, they may result in negative cash flow if the market rates decrease significantly below the charter rate agreed upon, as the charterer still must pay the fixed rate.

Voyage charters , while potentially more variable in cost, do not require long-term financial commitments and can be adjusted according to budgetary needs. The absence of a long-term commitment allows companies to avoid the financial drain of a non-performing asset, which is possible in a time charter if market conditions worsen. 

Typically, payments in voyage charters are tied to specific milestones, such as loading or unloading completion, which can help in planning cash flow. 

• Cargo Specificity and Handling Requirements

Consider the nature of the cargo. Special handling requirements, sensitivity, and value of the cargo might dictate the need for more direct control over handling processes, favoring voyage charters.

• Risk Tolerance

Finally, analyze your company’s risk tolerance. 

Time charters minimize exposure to market fluctuations but involve commitment risks . They provide more predictable cash flow due to fixed daily hire rates, which can be advantageous in a volatile market as they protect against rate increases. However, they may result in negative cash flow if the market rates decrease significantly below the charter rate agreed upon, as the charterer still must pay the fixed rate.

Voyage charters offer flexibility but expose the charterer to market rate risks and operational uncertainties. Profitability and effectiveness in managing cash flow depend on the charterer’s ability to manage and mitigate risks associated with market volatility and operational uncertainties.

By automating manual workflows with available low-code technology , companies can save and reduce risk while maintaining data integrity and real-time visibility of their voyages’ most essential KPIs. 

To reduce risk, dedicated software to automatically assign tasks and notify stakeholders prevents constant back and forth through emails or updating of spreadsheets can be implemented. Stakeholders can be given dedicated access to track their inbound shipments, schedule changes, and collect documents.

If you want the lowest possible ongoing costs, the clear winner is the voyage charter.

Why? Because they don’t require a long-term contract. They do have a higher initial cost, but this is offset by the fact that no other significant fees need to be paid, in general.

But, when it comes to the initial cost of chartering a ship, it’s nearly always going to be cheaper to go with a time charter.

A ship owner is more open to a lower price, as they know you’ll be hiring the vessel for longer. What’s more, you, and not the ship owner, will be expected to cover other costs, pushing the initial price down further. As the vessels are leased for long periods, the vessel can be used to travel anywhere, without restriction.

In making your final decision, engage with stakeholders, including operations managers, financial analysts, and logistics coordinators, to understand the full implications of each option.

Besides, using a holistic approach to evaluate these factors will guide you toward the most strategic chartering decision for your specific circumstances.

• April 30, 2024

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Voyage Charter : Definition & Full Guide

• By MascotMaritime
• April 22, 2022
• 3 mins read

Table of Contents

What is a voyage charter.

Voyage charter definition : The voyage charter is a contract (voyage charter party) between the shipowner and the charterer wherein the shipowner agrees to transport a given quantity of a shipment, using a pre-nominated vessel for a single voyage from a nominated port (say X) to a nominated port (say Y), within a given time period.

Who is a voyage charterer? What is the freight & voyage charter party? 

The person who charters the vessel is called the voyage charterer , the payment is called freight & the contract is called the voyage charter party. The freight rate is calculated as $/tonne of shipment. 

What is the most significant part of a voyage charter party?

The most significant parts are the description of the voyage, size & capacity of the vessel, cargo, the allocation of duties and costs in connection with loading and discharging, the specification of the freight, and the payment of the freight, the laytime rules, the allocation of the liability for the cargo and the allocation of other costs and risks.

Depending on the circumstances, other questions and clauses can be very important in the negotiations between the owners and the charterers.

In this type of charter, the vessel must be in the position that the owner specified when the charter was concluded & the vessel must, without undue delay, be directed to the port of loading.

At the port of loading, the charterer must deliver the agreed cargo. 

The cargo must not be dangerous cargo unless otherwise agreed. The cargo must be brought alongside the ship at the loading port & must be collected from the ship side at the port of discharge.

Mainly with the bulk cargoes, the charterer often undertakes to pay to load and discharge & often clauses of f.i.o or f.o.b are met. Very often parties agree on f.i.o.s or f.i.o.s.t terms.

In voyage charter, the discharge port need not be nominated in the charter party & in such cases, the charterer must have the right later to direct the vessel within a certain range to a specific port of discharge.

In a voyage charter where the charterer carries out loading &(or) discharging, it is generally agreed that the charterer will have a certain period of time at his disposal for loading & discharging of the vessel & it is called laytime .

If the charterer fails to load and(or) discharge the cargo from the vessel within the laytime, then he has to pay compensation for the extra time used called demurrage . Once in demurrage always in demurrage.

In other cases, if the charterer loads &(or) discharges the cargo from the vessel more quickly than the agreed laytime time, then he is entitled to claim compensation (only if agreed earlier) called despatch money.

In voyage charter, unless lumpsum freight is paid, the owner may claim freight compensation if less cargo is delivered, or cargo is delivered in such a way that ship’s capacity cannot be utilized due to broken stowage . This freight compensation is called deadfreight .

Voyage charter party agreement example:

Click here to see the example of a voyage charter party (NORGRAIN 73).

What are the factors which influence the freight rate in a voyage charter market?

In the voyage charter market, rates are influenced by cargo the charterer must deliver the agreed cargo size, commodity, port dues, and canal transit fees, as well as delivery and redelivery regions.

In general, a larger cargo size is quoted at a lower rate per tonne than a smaller cargo size. Routes with costly ports or canals generally command higher rates than routes with low port dues and no canals to transit.

Voyages with a load port within a region that includes ports where vessels usually discharge cargo or a discharge port within a region with ports where vessels load cargo also are generally quoted at lower rates because such voyages generally increase vessel utilization by reducing the unloaded portion (or ballast leg) that is included in the calculation of the return charter to a loading area.

What are the costs paid by the shipowner & charterer in a voyage charter?

In a voyage charter, the shipowner retains the operational control of the vessel and pays all the operating costs (crew, fuel, freshwater, lubes, port charges, extra insurances, taxes, etc.), with the possible exclusion of the loading/unloading expenses. 

The charterer’s costs are usually costs & charges relating to the cargo.

What are the types of voyage charter?

It can be of the following types:

• Immediate  –  which is carried out within weeks of the contract agreement and the agreed freight rate is called the spot rate.
• Forward –  which is scheduled & fulfilled at the agreed time in the future, for example in say three months.
• Consecutive – which refers to several same consecutive voyages.

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Charter Parties: The Complete Guide – Types & Agreements

August 21, 2023

Looking for a comprehensive guide to charter parties? Our page covers all types and agreements, distinguishing us from the competition.

Charter Parties The Complete Guide

Charter parties , the legal contracts for chartering vessels, are the backbone of international shipping. They define the rights and obligations of shipowners and charterers, ensuring smooth operations on voyages. Whether it’s a time charter or a voyage charter, these agreements play a crucial role in facilitating global trade for carriers.

A charter party is not just any document; it serves a specific purpose in the context of chartering. Its clauses, articles, and provisions outline the terms that govern the relationship between parties involved in maritime commerce, typically in a contract. Shipowners carefully craft these agreements, known as charterparties, to protect their interests while meeting the needs of charterers who engage their services as carriers.

Understanding charter parties is essential for anyone venturing into international shipping. From specifying the duration of the charter period to determining responsibilities during loading and unloading, every detail matters in chartering. So let’s dive into this intricate world of maritime contracts and explore how they shape our interconnected global economy, specifically in relation to carrier and specific cargo.

Types of Charter Parties

Time charters.

A ship chartering, or time charter, involves leasing a vessel from a ship owner for a specific period. This type of charter party allows the charterer, or carrier, to have exclusive use and control over the vessel during the agreed-upon timeframe. It provides flexibility as the charterer can determine the ports of call and cargo carried.

Voyage charters

Voyage charters in ship chartering involve hiring a vessel for a single journey. Unlike time charters, which focus on an extended period, voyage charters are specific to one trip. The charterer pays the ship owner for transporting goods from one port to another without long-term possession or control over the carrier.

Bareboat charters

Bareboat charters involve ship chartering by leasing a vessel without crew or provisions. In this type of arrangement, the charterer assumes complete responsibility for operating and maintaining the ship during the agreed charter party duration. The shipowner transfers possession and control to the charterer, who becomes the carrier responsible for all aspects of navigation, crewing, and provisioning.

These main types of charter parties, including time charters, voyage charters, and bareboat charters, offer different options depending on the specific needs and requirements of the charterparty, carrier, ship owner, or shipowner. Time charters provide flexibility and extended use, voyage charters focus on individual trips, while bareboat charters grant full control to the lessee. By understanding these various types, individuals and businesses can choose which option best suits their particular circumstances.

Charter Party Agreements

Charter party agreements, also known as charterparty agreements, are legally binding documents that are negotiated between shipowners and charterers. These agreements specify important terms such as freight rates, laytime, demurrage, and more. Here’s a brief overview of charterparty agreements and how they form an essential part of container shipping.

• Charter party agreements, also known as charterparty agreements, are contracts that outline the terms and conditions of the chartering arrangement for container ships. They are typically negotiated between the shipowner, who owns the vessel, and the charterer, who will be using the container ship for a specific period or voyage.
• Charter party agreements include various provisions that define important aspects for ship owners. This includes details about freight rates (the cost of hiring the vessel), laytime (the allowed time for loading and unloading cargo), demurrage (additional fees if there is a delay in cargo operations), and other relevant terms.
• Legally binding documents: Once both ship owners agree to the terms outlined in a charter party agreement, it becomes a legally binding document. This means that both ship owners are obligated to fulfill their respective responsibilities as stated in the agreement.

Charter party agreements play a crucial role in the shipping industry by providing clarity and protection for all parties involved. They ensure that both shipowners and charterers understand their rights and obligations throughout the duration of the charter. Whether it’s a slot charter (a partial space booking) or a demise charter (complete transfer of vessel control), these agreements establish clear guidelines for smooth operations.

The Importance of Charter Parties in International Trade

Charter parties play a vital role in facilitating global trade, ensuring the efficient transportation of goods by sea. These agreements establish clear responsibilities and liabilities for both shipowners and charterers, promoting smooth operations and minimizing disputes. Let’s explore why charter parties are crucial in international trade.

• Facilitate global trade by providing vessel availability : Charter parties enable shipowners to make their vessels available for hire, allowing them to meet the demand for transporting goods across borders. This availability ensures that businesses can access reliable shipping services to move their products worldwide.
• Ensure efficient transportation of goods by sea: By defining the terms and conditions of carriage, charter parties help streamline the logistics process for ship owners. They specify loading and unloading procedures, delivery timelines, and any additional requirements for cargo handling. This clarity promotes efficiency and helps avoid delays or misunderstandings during transit, benefiting both shipowners and the overall shipping industry.
• Establish clear responsibilities and liabilities: Charter parties outline the obligations of both shipowners and charterers, ensuring accountability throughout the voyage. They determine who is responsible for vessel maintenance, crew expenses, insurance coverage, and compliance with maritime regulations. Clearly defined responsibilities minimize uncertainties and protect all parties involved.

Charter Parties and Bills of Lading

A bill of lading issued under charter party terms serves as a crucial document for shipowners in the shipping industry. It provides evidence of cargo receipt and condition, making it essential for transferability and financing.

• Under voyage charters or bareboat charters, a bill of lading is often issued to acknowledge the receipt of specific cargo by the shipowner or charterer.
• This document is essential for shipowners and charterers in the shipping industry as it serves as proof that the cargo has been loaded onto the ship and is in good condition. It is particularly important for both bareboat charter and voyage charter party agreements during the specified charter period.
• Charter parties facilitate the agreement between the shipowner (or bareboat charterer) and the charterer, outlining their respective rights and responsibilities.
• The bill of lading acts as a contract between the carrier (shipowner) and the shipper (charterer), ensuring that both parties fulfill their obligations.
• For freight forwarders, having a bill of lading issued under charter party terms allows them to confidently arrange transportation for their clients’ cargo with the ship owner’s assurance.
• The bill of lading also enables financing options for shippers who may need to use it as collateral or provide proof of ownership for obtaining loans during a bareboat charter, slot charter, or voyage charter party within the charter period.
• In addition to its importance in commercial transactions, bills of lading issued under charter parties serve as critical documents for ship owners’ insurance claims related to damaged or lost cargo.

Charter parties and bills of lading are integral components within the shipping industry. They ensure smooth operations, protect stakeholders’ interests, and provide necessary documentation for various purposes.

Ship Speed and Fuel Consumption in Time Charter

Ship speed plays a crucial role in determining fuel consumption within time charter agreements. The rate at which a vessel travels directly impacts the amount of fuel it consumes during its journey. Here are some key points to consider:

• Slow steaming: Slowing down the ship’s speed can significantly reduce fuel costs. By adopting this practice, charter parties can achieve substantial savings. However, it is important to note that slow steaming also extends the duration of the voyage.
• Cost versus time: When deciding on ship speed, charter parties must strike a balance between cost reduction and voyage duration. While slower speeds may result in lower fuel consumption, they can lead to longer transit times, affecting overall efficiency and profitability.
• Fuel efficiency considerations: In time charter agreements, fuel efficiency is a critical factor that influences financial outcomes. Parties involved must carefully evaluate the impact of ship speed on fuel consumption to ensure optimal profitability.

By considering these factors, charter parties can make informed decisions regarding ship speed and its effect on fuel consumption within time charter agreements. Achieving the right balance between cost reduction and voyage duration is essential for maximizing profitability while maintaining operational efficiency.

Understanding Laytime and Total Laytime

Laytime, a crucial aspect of charter parties for ship owners, refers to the time allowed for loading/unloading cargo. It determines the financial implications for both ship owners and other parties involved. Exceeding the laytime incurs demurrage charges, resulting in additional costs for ship owners.

Key points to understand about laytime and total laytime:

• Laytime : Laytime is the agreed-upon period during which the charterer has the right to load or unload cargo. It is typically expressed in days, hours, or even minutes. The clock starts ticking once the vessel arrives at the designated port or berth.
• Demurrage : When laytime is exceeded due to delays caused by either party, demurrage charges come into play. Demurrage refers to the money the charterer paid to compensate for the extra time taken beyond the agreed-upon laytime. This ensures that shipowners are compensated for any lost time and potential revenue.
• Financial Implications : Understanding laytime is essential because it directly impacts both parties’ financial interests. For shipowners, shorter laytimes result in quicker turnaround times and increased efficiency. On the other hand, charterers aim to maximize their use of laytime while avoiding demurrage costs.

By comprehending these concepts related to laytime and total laytime, ship owners and other parties involved in charter parties can effectively manage their operations while minimizing potential financial risks.

Remember: Promptly completing loading or unloading operations within the agreed-upon timeframe helps avoid unnecessary expenses and contributes to smoother logistics processes for all stakeholders involved in the ship charter, slot charter, voyage charter party, and charter party chain.

Safe Port Requirements in Voyage and Time Charters

Voyage charters require the charterer to transport cargo from one port to another by ship. In these agreements, it is crucial for the charterer to ensure that the chosen ports for cargo operations meet certain safety requirements. Similarly, time charters impose an obligation on the charterer to nominate safe ports throughout the duration of the agreement.

The selection of a safe port is crucial for ships due to the potential risks involved. Safety concerns encompass navigational hazards, ship security measures, and infrastructure conditions. By considering these factors, charter parties can mitigate dangers and ensure smooth ship operations.

Here are some key points regarding safe port requirements for ships in both voyage and time charters.

• Charterers must carefully evaluate the safety aspects of each port before initiating cargo operations on their ship.
• When entering a voyage charter party, it is essential to consider navigational hazards such as shallow waters, narrow channels, or unpredictable weather conditions that may be encountered during the ship’s journey.
• Security measures at ports are crucial in safeguarding cargo, whether on a ship or on land, from theft or any other criminal activities.
• The responsibility to nominate safe ship ports lies with the charterer throughout the duration of the contract.
• It is essential for charterers to stay updated on any changes in safety conditions at nominated ports to ensure their ships’ safety.
• Regular communication between all parties involved in the ship ensures that any safety concerns related to the ship are promptly addressed.

Key Takeaways on Charter Parties

Charter parties are critical legal instruments in the maritime industry. They establish rights, obligations, and liabilities between parties involved in international shipping. Here are some key aspects to consider:

• Lesson: Charter parties serve as a vital framework that ensures smooth operations within the maritime sector.
• Aspects: These agreements cover various aspects, including vessel specifications, cargo details, and the duration of the charter.
• News: Staying informed about recent developments and changes in charter party regulations is crucial for all parties involved.
• Details: The terms and conditions outlined in charter parties provide specific details regarding payment terms, insurance requirements, and dispute resolution mechanisms.
• Act: Charter parties act as binding contracts that protect the interests of both shipowners and charterers.
• Fortior: By clearly defining responsibilities and obligations, these agreements fortify relationships between shipowners, charterers, and other stakeholders.

Charter parties play an instrumental role in facilitating international trade by ensuring the efficient transportation of goods across borders. As these agreements govern vital aspects of maritime operations, it is essential for all parties to familiarize themselves with their provisions. Understanding the intricacies of charter parties can help mitigate potential disputes while fostering mutually beneficial relationships within the global shipping community.

Real-world Challenges with Charter Party Disputes

Legal professionals play a crucial role in resolving charter party disputes, which can be complex and challenging. These disputes often arise from breaches of the terms outlined in the charter party agreement. Arbitration is frequently employed as an alternative to court proceedings to settle such disagreements.

The involvement of legal professionals is essential due to the intricate nature of charter party disputes . Breaches of contract terms can lead to various issues, including financial costs, risks, and responsibilities for both parties involved. Here are some examples that highlight the complexities faced in this industry:

• Maintenance Responsibility: Disagreements may arise.
• Demise Charter Issues: A demise charter involves transferring full control and possession of a vessel to another party. However, conflicts may occur regarding the condition or performance of the vessel during this arrangement.
• Country-Specific Practices: Different countries have their own regulations and practices concerning charter parties, leading to potential clashes between international parties.

Arbitration is commonly utilized to settle these disputes outside of traditional court processes. This alternative dispute resolution practice offers several advantages:

• Confidentiality: Arbitration provides a more private setting compared to court hearings.
• Expertise: Parties involved can select arbitrators with specialized maritime law knowledge or specific aspects of their cases.
• Flexibility: The arbitration process allows for tailor-made procedures that suit the unique circumstances of each dispute.

At ANHISA, we have established ourselves as trusted lawyers and counsels for shipowners and charterers involved in charter party disputes. Our extensive experience in practical cases has allowed us to successfully advise and resolve complex situations, such as indemnification requests by shipowners due to early termination breaches.

We understand the importance of finding amicable solutions that benefit all parties involved. However, when negotiations fail, our team at ANHISA is well-equipped to guide shipowners through the arbitration process, ensuring their claims are properly represented.

Our expertise goes beyond shipping knowledge; we possess the technical know-how and strategic insights required to meet our clients’ expectations. With a strong foundation in shipping practice and a track record of working with international and local clients, we are committed to providing efficient, reliable, and personalized service for all your charter party disputes.

If you require assistance in resolving any charter party dispute, do not hesitate to reach out to us for a consultation. We are here to help.

Contact us via:

• Mr. Dang Viet Anh
• Email: [email protected]
• T: +84 28 5416 5873
• M: +84 983 467070

Q1: How can ANHISA assist with charter party disputes?

At ANHISA, we offer comprehensive legal counsel and guidance throughout the process of resolving charter party disputes. From negotiation strategies to arbitration representation, we ensure that our clients’ interests are protected.

Q2: What sets ANHISA apart from other law firms?

ANHISA’s unique advantage lies in our deep-rooted expertise in shipping practice combined with years of experience working with international and local clients. Our team possesses the technical knowledge and insights necessary to navigate complex charter party disputes effectively.

Q3: Can ANHISA help with both voyage and time charter disputes?

Yes, our expertise covers both voyage and time charter disputes. Regardless of the type of charter party involved, we have the knowledge and experience to provide tailored solutions for our clients.

Q4: How long does resolving a charter party dispute typically take?

The duration of resolving a charter party dispute can vary depending on the case’s complexity and the parties’ willingness to reach a settlement. At ANHISA, we strive to expedite the process while ensuring thorough representation for our clients.

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The ins and outs of ship chartering

Ship chartering is the hiring out the use of a ship by a vessel owner to another company, the charterer, for the transportation of goods. It may sound straightforward enough, but in practicality, it’s anything but simple. There are many different types of charter contracts, various cost components, and of course many different players involved. In this article, we’ll breakdown the ins and outs of chartering, covering how it works, who’s involved and how costs are divided.

• The main players

The two main players in ship chartering are the ship owner and the charterer. There are others as well, the most important being the ship broker. There is also the shipping agent who takes care of the essential in-port details and the ship manager, who takes care of operating and crewing the vessel on behalf of the owner for a fee.

It should be noted that the term charter party refers to the contract itself, and not to the parties entering into the contract. The charter party defines the rate, duration, and terms agreed between the ship owner and the charterer.

The ship owner provides the means for transporting cargo from one port to another. The Charterer enters into a contract with the owner to hire the ship, or space in the ship, for transporting his cargo. In some cases a charterer may own the cargo and employ a ship broker to find a suitable vessel to deliver the cargo for a certain price, called the freight rate.

The charterer may also not have his own cargo, but instead charters a vessel for a certain period of time and trades the ship to carry cargoes at a profit. He can also sub-hire the ship to other charterers in positive market conditions.

The ship broker is essentially a middleman who connects the principals in order to earn a brokerage fee. He can represent either the owner or the charterer in negotiations, and usually specialises in specific areas of cargo carrying. For example, a dry cargo broker focuses on the chartering of bulk carrier vessels. He can represent either an owner looking for a charterer, or a charterer seeking a suitable vessel for shipping his cargo.

Similarly, and as the name suggests, a tanker broker specialises in chartering tanker vessels and has a good understanding of the specific needs for transporting crude oil, gas, oil products, or chemicals.

Shipping Agents are designated to take responsibility for handling shipments and cargoes at the ports on behalf of the owners, fleet managers, and charterers. They handle the essential routine tasks, such as crew transfers, customs documentation, waste declarations and so on, working closely with port authorities. They can also provide detailed information on activities at the destination port, so that the shippers can be aware of situations while the goods are in transit.

• Types of charters

The three most common types of charter contracts are the voyage charter, the time charter, and the demise (or bareboat) charter.

Voyage Charter

The basic hiring of a vessel and its crew for a voyage between the port of loading and the port of discharge is known as a voyage charter. In this type of contract, the ship owner is paid by the charterer either on a per-ton basis, or as a lump sum. Port costs, with the exception of stevedoring, fuel costs, and the crew costs are paid by the owner, and payment for the use of the vessel is known as freight.

Under the terms of a voyage charter, a specific time is agreed for the loading and unloading of the cargo. This is known as laytime, which, if exceeded, obliges the charterer to pay demurrage. Conversely, if laytime is saved, the owner may have to pay despatch to the charterer.

There is also a consecutive voyages clause. This is used when one voyage follows another immediately for an agreed number of voyages within a specific timeframe. The ship is thus going back and forth with an agreed cargo between agreed ports.

Time Charter

A time charter refers to the hiring of a vessel for a specific period of time. Here, the owner still manages the ship, but the charterer selects the ports, decides the routing, and has full operational control of the vessel for the duration of the contract. He pays the fuel costs, port charges, cargo handling costs, commissions, and a daily hire fee.

There is also a trip time charter covering a specific voyage route only for the transportation of a specific cargo. It can be said to be a combination of a voyage charter and a time charter. The responsibilities are similar to those with a time charter (the fixed costs being paid by the owner and the variable costs by the charterer), but as with a voyage charter, the period of the contract depends upon when the voyage is completed.

The Demise Charter

Under the terms of a demise charter, also known as a bareboat charter, the charterer has full control of the vessel. Apart from the capital cost of building the vessel, which is the owner’s responsibility, all other costs including fuel, crew, port charges and insurance, are paid by the charterer. The legal and financial responsibility for the vessel rests with the charterer.

Under the demise clause, the contract can be for long period charters lasting for many years. This is fairly common for tankers and bulk carriers. It can be a form of hire-purchase whereby the charterer eventually acquires ownership of the vessel.

In the leisure industry, the term used is Bareboat Yacht Charter and the Demise Charter term is not used. It is normally a short-term charter for a matter of weeks only. Here, the owner supplies the yacht fully fuelled and in seaworthy readiness. The charterer is expected to pay for the fuel consumed.

Contract of Affreightment

Finally, there is what is known as a contract of affreightment. This is not strictly a charter contract, but is somewhat similar to a voyage charter. Under this type of contract, the owner agrees to transport the goods for the charterer on a specified route and for a specific period of time. More than one ship can be used and, in contrast to a true charter, there is no laytime period and no demurrage is payable.

• Who pays what?

There are various cost components applicable to all charter contracts. These can be summarized as follows:

In all cases, the owner is responsible for the capital cost of building and equipping the ship. The operating costs (OPEX), i.e. operating and maintaining the ship and complying with all applicable rules and requirements, are also paid by the owner in voyage and time charters. In demise charters, however, the operating costs are paid by the charterer.

Periodic costs are those that are incurred at certain intervals of time. These include, for example, periodic technical inspections and surveys for class classification purposes. Here again, the owner is responsible with time and voyage charters, but not for demise charters. In demise charters, it is the charterer who pays such periodic costs.

Voyage costs cover the fuel, any right of passage dues, such as canal dues, towage and piloting costs, as well as port agency costs. With time and demise charters, the voyage costs are paid by the charterer. Only in voyage charters are these costs paid by the owner.

The same is true of cargo handling costs – the cost of loading and discharging the cargo. With time and demise charters this is the responsibility of the charterer, while the owner pays these costs only with voyage charters.

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Charter Party Agreements

Img is one of the only law firms in the pacific northwest that focuses on both the transactional side and the litigation side of charter party agreements..

Different charter parties impose different obligations, exclusions, and limitations between each entity. For this reason, both shipowners and charterers should consider seeking sound and practical legal advice before drafting, amending or complementing any time charter, voyage charter, or bareboat charter party. During a contentious charter party dispute, shipowners and charterers should be especially aware of their legal exposures and contractual liabilities.

With experience in bareboat, time and voyage charters, contracts of affreightment and slot charters, dry bulk and containerized cargoes, oil, gas and products, IMG regularly acts on behalf of the region’s largest shipowners and charterers. Indeed, our expertise in transactional and contentious charter party matters gives us an invaluable perspective – we can foresee the problems that might arise and take steps to avoid them. Need help understanding your legal rights in a charter party contract? IMG can help.

or call   (206) 707-8338 to speak to a legal expert.

Bareboat Charters – What you need to know

Strapped for capital but want to expand your fishing fleet?  Bareboat charters can be a great financial alternative, provided you understand your liability.  

Frequent Charters We Advise Upon

Time Charters

Time chartering is a complex business. The shipowners give the time charterers substantial control over the commercial operation of the vessel in exchange for the regular payment of hire. While this arrangement suggests that the shipowners have transferred much of the potential operational risk to the charterers and that the charterers can do more or less what they like with the ship, such an initial impression on behalf of the time charterer is both deceptive and dangerous.

If you would like clarification of your rights and liabilities as either a time charterer or a shipowner, IMG can help.

Voyage Charters

Voyage charters are the most commonly used charter party agreement. Under a voyage charter, a ship owner and a charterer enter into a contract whereby the vessel will carry cargo between two points. The voyage can be a single trip or multiple trips, provided that the charterer has absolutely no operational control over the vessel while it is being operated. Any delays during the loading and unloading of the cargo, as well as any delays during the seagoing part of a voyage, generally fall onto the vessel owner. Many charterers prefer this allocation of risk.

Bareboat Charters

A bareboat charter is the simplest type of charter party agreement. Under a bareboat charter (a.k.a. “demise charter”), the charterer effectively becomes the owner of the vessel for all operational and trading purposes, and thus, is responsible for the navigation, operation, repair, maintenance, insurance, and crew of the vessel.

Despite an appearance of simplicity, bareboat charters are complex agreements, and numerous problems can arise during their use. Owners and charterers should seek sound legal advice before drafting or amending a bareboat charter.

What to Expect From Your Legal Team

• We provide practical, commercial and results-driven advice on a discreet and confidential basis.
• All assignments will have a nominated lead partner who will be your dedicated point of contact.
• We will work to your agenda, timescales and budgets to achieve the best outcome.
• We would expect to be your trusted adviser during the process and our industry knowledge and reputation will facilitate a direct and open dialogue between all stakeholders.

A Layman’s Guide to Laytime, Charter party Agreement and Voyage Charter

The word “Charterer” is probably as old as the word “Ship” itself.

Do you keep hearing this word so regularly?

Well, who doesn’t?

From seafarer’s point of view, it is so much important to understand these terms.

From commercial point of view, it is the moral responsibility of the seafarers to ensure that the ship owner profits from the ship operation.

And for this reason, we must understand when and where our loyalties lies.

But sometimes it becomes difficult to get a hang of all of it.

Not anymore.

In this blog, we will discuss about the terms charterer and charter party agreement.

Concept of Charter party agreement

It is all business.

And like in all kind of business, there are at least two parties involved, one of which provide a service or product to the other for a price.

With respect to carrying the cargo onboard the ships, these two parties are,

1) Ship owner who has the ship and provide the space on the ship to carry the cargo.

2) Shipper who has the cargo and wants a ship to transport the cargo

Then where does the term charterer fits into this?

Charterer is the party that has chartered (think of simple word “hired”) the ship.

If the shipper has chartered the entire ship then shipper will also be the charterer.

In most of the cases, charterer is a kind of middle man between shipper(s) and shipowners

This is particularly the case if there are more than one shipper.

For example, if the vessel is to load 50000 tons of cargo, there could be 10 shipper, say each of them with 5000 tons of cargo.

Alone none of the shippers would want to hire the entire vessel of 50000 tons capacity for their 5000 tons of cargo.

So they contact a charterer for transporting their cargo.

The charterer’s job is to find a vessel for the cargoes they have from different shippers and maximazing the space on ship they plan to hire.

Charterers may not be the only person involved in filling the gap between shipowner and shipper.

Sometime there are some other companies or persons who help shipper, charterer and shipowner to connect with each other for a fees.

They are called “Brokers”.

So the shipper’s broker is the person or company that help shipper find a charterer for a fees called brokerage.

And charterer’s broker is the person that help charterer find a ship to hire.

The charterer may even have brokers for different purpose. For example charterer may have a broker to find a cargo for the ship they want to hire and they may have another broker to find a ship for the cargo they have in hand.

Broker or no broker, the charterer and shipowner would agree on the terms and conditions which would form “ Charter party agreement “.

Charter party agreement is a detailed document which, apart from various clauses, has informations such as

• When and where the vessel is required to be
• the freight agreed
• If the broker was used, who need to pay the brokerage fee and how much

Even though shipowners is primarily dealing with the charterer, it does not mean that the shipowner would have no relation with the shipper.

Shipper and shipowner are connected by the “carriage of cargo at sea act”, also called COGSA .

And one of the main point of it is that shipowner is required to issue bill of lading to the shipper for the cargo loaded onboard.

And with that each of the shipper have entered into an agreement with the ship owner which is called “Contract of  carriage”.

While the “charter party agreement” is a formal agreement, the contract of carriage is governed by various laws and regulations such as Hague-Visby rule .

Charter party agreement supplement the contract of carriage.

Usually you would find a mention of the charter party agreement in the bill of lading. The wording in the bill of lading could be something like this.

This shipment is carried pursuant to charter party agreement between “ Charterer’s name ” and “ Carrier’s name ” and all the terms, clauses, conditions, liberties and exceptions whatsoever contained therein are incorporated into this bill of lading.

But do the shipowners and charterers do this exercise of negotiating the format of the charter party agreement each time they do the business together.

Absolutely not. Hell, it would take a lot of time.

Instead they use pre-defined forms. These forms are developed by Independent International stakeholders such as BIMCO and INTERTANKO and are widely used in the shipping business.

There are different forms for different trades.

For example there is form  SHELLVOY 6 for use in tanker trade and then there is form AMWELSH 93 for coal dry cargo chartering.

Also if a charterer and ship owner have done the business before, they use the same charter party agreement for the future shipments too.

For this reason, many a times even for a voyage in 2019, you may find the mention of charter party dated in 2016 or even before. In the bill of lading issued even in 2019 , it may read something like,

The shipment is carried pursuant to charter party agreement between “ Charterer’s name ” and “ Carrier’s name ” dated 01 January 2016…..

Now that we understand the concept of chartering, let us understand the different ways in which the ships can be chartered.

Voyage Charter, Time charter, Demise charter

There are different ways in which a charterer can charter (Hire) the vessel.

Charterer can charter the vessel for one voyage (Voyage charter), for a particular time period (time charter) or they can hire and run the vessel as if they are the owner of the vessel (Demise or bareboat charter).

In each type of charter, charterers and shipowners have different area of responsibilities.

Each type of charter is a subject in itself. So in this blog we will explore the voyage charter.

Voyage Charter

It should be clear from the name.

Under the voyage charter, the ship is hired from the ship owner for one voyage.

One voyage could consists of multiple load ports and multiple discharge port.

The best analogy to the term voyage charter is that with hiring an Uber for a ride from one place to the other, sometimes with multiple stops in between.

So when we hire an Uber, we hire just the cab. The cab driver is still under the instructions of Uber.

Similarly, under the voyage charter, the charterer has hired the ship’s cargo space. But the Master and crew still remains under the disposal and instructions of ship owner and  ship managers.

When we hire a cab for a ride, we just pay the hire (pre-agreed or by the meter). We do not pay for or are not concerned about the fuel costs or the amount of fuel consumed.

Similarly, under the voyage charter, charterer is not concerned about the fuel consumption. The fuel costs are for the ship owners.

And when we hire an Uber, we do not pay for maintenance of the cab.

Similarly, under the voyage charter it is the ship owner who pays for the maintenance of the ship.

Whenever we have any doubt about anything under voyage charter, just think of this analogy of hiring the cab.

Most likely you will get the answer.

Laytime, Demurrage and despatch

Lord Diplock during one of the leading cases on Laytime described the voyage charter party comprising of four stages .

• Stage 1 is the loading voyage: The voyage from wherever the ship is to the loading port specified in the voyage charter party
• Stage 2 is the Loading operation: The loading of the cargo at the port of loading
• Stage 3 is the carrying voyage: The voyage from load port to the discharge port specified in the voyage charter party.
• Stage 4 is the discharging operation: The discharging of the cargo from the ship to the port of discharging as specified in the voyage charter party.

In the first and third stage, it is only the ship owner that need to perform. For example. ship owner is required to adjust the speed of the ship to arrive at the loading port within the agreed dates (Laycan).

And in the third stage, the ship owner is required to instruct the vessel to maintain the charter party speed.

However it is the second and fourth stage where most of the disputes take place.

Because in these two stages it is mutual reponsibility of the two parties to ensure that cargo loading and discharging is done without any delays.

In case of delays, each one can accuse the other for delays.

It is definately not commercially profiting for the shipowner if the voyage is extended beyond their expectations.

For example, what if the loading of the cargo took 15 days in comparison to just 2 days that shipowner had expected?

Or what if the ship could not berth at load port or discharge port for many days because of other ships ahead in line up?

Too many uncertainties.

But ship owner’s freight (and profits) cannot depend upon so many uncertainties.

So the shipowner and charterers agree on the factors like allowed number of days for loading and discharging.

In chartering terms this is called “Laydays” or “Laytime”.

The laydays is mentioned in the voyage charter party agreement between ship owner and charterer.

It could be mentioned as number of days and hours or as tons per hours or per day.

If the charterer uses more time for loading and discharging than the allowed laydays as per charter party agreement, then charterer is supposed to pay for extra time used.

The chartering term for this additional payment is “Demurrage”.

So we can say that if charterer uses more time for loading/discharging than laydays, they need to pay demurrage to the ship owner.

But if the charterer uses less time than laydays then ship owner need to pay the charterer for the time saved.

The chartering term for this is “despatch”.

Usually the agreed amount of despatch is about half of the agreed amount for demurrage.

Finally at the end of the voyage, a statement is made to shows the time saved and/or extra time taken at different ports.

Below is the simplified version of the laytime summary calculated at the end of the voyage.

This statement would also show the final amount due and to whom it is due. Means if the final amount is demurrage or despatch and how much.

Notice of readiness and statement of facts

For calculation of laytime, it is important to know when the laytime counting and calculation would start.

This information is also provided in the charter party agreement.

In most of the cases, the laytime would commence to start when the vessel has arrived at the port. In chartering term, this is called “ Arrived Ship “.

Legally, a ship is considered as an ‘Arrived Ship” only when

• Ship has arrived at the port of loading or discharging (port voyage charter) or at the designated berth (Berth Voyage charter).
• Ship is ready in all respects to commence loading (or discharging) or the cargo, and
• Master has sent the notice of readiness to the all parties concerned

The charter party agreement contains the information if the voyage charter is a port voyage charter or a berth voyage charter.

Irrespective if it is port or berth voyage charter, from the ship’s point of view it is important that the master of the vessel send the notice of readiness.

Notice of readiness need to  state that the vessel has arrived and she is ready in all respect to commence loading (or discharging ) of the cargo.

The laytime would start to commence at this time or sometimes few hours later if specifically mentioned in the charter party agreement.

Since one of the condition for the laytime to start is for the master to send the notice of readiness, it makes it so much of an important aspect.

Statement of Facts

The vessel and the master of the ship are the owner’s representative at the action site (loading port or discharging port).

Ship Owner would know only know the information that we provide them. They would use this information for calculation of any demurrage due to the charterers.

But for the correct demurrage calculation, the information we provide must be correct and we must not miss any important information such as any delays.

That make the statement of facts (commonly called SOF) an important document.

At the least, statement of facts must include

• any delays from shore side or from ship’s side and reason of delay
• any delays because of weather conditions
• Timings for the movement of the ship (such as times for anchoring, anchor aweigh, pilot onboard, NOR Tendered etc)
• Timings related to cargo operations (Commenced cargo operation and completed cargo operation

Master’s actions during voyage charter

Master and ship staff may not see the actual charter party agreement between the charterer and the ship owner.

And it is for their own benefit too.

Because there would be so many things in that which we seafarers are not concerned about.

But when the  ship is fixed for the voyage charter, master will receive “Voyage instructions” from the charterer through the ship owner’s commercial team.

The voyage instructions contains the information from the charter party agreement that requires master’s attenstion and subsequent actions.

Master must not miss the points in the voyage orders that requires his actions.

One of the way to do it is to highlight the text of the voyage instructions that require his attention for easy follow up.

Once Master reads the voyage instructions, he may come across insufficient information that need more information or clarification.

Like this one in one of the voyage orders.

Clarification must be sought from the ship operator for any of such information in the voyage orders.

After all it just takes a simple email to get everything in place.

And once everything is clear and in place, it is just about following that.

There are may be only a handful of shipowners that do not rely on the charterer to find the cargo for their vessel.

Having the vessel on charter is so common.

And vessel can be chartered in different ways. Vessel can be on a voyage charter, time charter or demise/bareboat charter.

With respect to voyage charter, master and ship staff must understand few thing

First, when is the laycan for the vessel. This is period in which vessel must arrive at the load port.

If master thinks that vessel may not be able to make it to the loadport in laycan period, the commercial operator must be informed who can then try to extend the laycan.

Second, when the notice of readiness need to be tendered.

If the voyage charter is a port charter, NOR can only be tendered when vessel is at least within the port limits. Usually in this case NOR is tendered when pilot boards the vessel.

If the voyage charter is berth charter, the NOR can only be tendered when the vessel is alongside the designated berth.

Wrong tendering of NOR can make the Notice of readiness null and void and shipowner may loose tons of money.

Lastly, the ship staff need to be make sure that a correct record of statement of facts is kept. This is the document that is used for laytime calculations .

If the charterer uses more time than agreed for loading or discharging the cargo, the ship owner is supposed to get a pre-agreed compensation called demurrage.

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About Capt Rajeev Jassal

Capt. Rajeev Jassal has sailed for over 24 years mainly on crude oil, product and chemical tankers. He holds MBA in shipping & Logistics degree from London. He has done extensive research on quantitatively measuring Safety culture onboard and safety climate ashore which he believes is the most important element for safer shipping.

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70 comments.

How i wish that our exam books were written so precisely yet so easy to understand .Thanx for all the pain you take .No amount of words would do justice to match the level of you efforts.

Thanks Alok...The readers liking it make all the hardwork worthwhile...

its amazing how you describe anything sir

what if the vessel is about to tender NOR and shipper cancels the order. what would be the penalty

Great article to understand the business with ease as an ASM candidate

Many thanks for writing such articles with such an ease of understanding sir...

Glad you liked it Sukhchain...

Another good read. Thank you for taking time to write articles. All Seafarers must understand the commercial aspects of ships. All the best and I cant wait to read the next one.

Glad you liked it Marlon...

what if the ship could not berth at load port or discharge port for many days because of other ships ahead in line up?Too many uncertainties.But ship owner’s freight (and profits) cannot depend upon so many uncertainties.So the shipowner and charterers agree on the factors like allowed number of days for loading and discharging.In chartering terms this is called “Laydays” or “Laytime” ??? Laydays refer to the time when a ship must present itself to the charter.If the vessel arrives after the laydays ,than contract can be cancelled. -Laycan. Laytime is the amount of time allowed (in hours and days)in a voyage charter for the loading and unloading of cargo.

Thanks for your input Zibi...

Laydays or "Laycan "I think is the correct term not Laytime. :)

Thanks for such simplified explanations. Sir could you please tell the few famous ship brokers names in india and worldwide.

Interocean is one of them...

Thank Captain for simple & detailed explanation. Information is really worthy .

Glad you found it useful Sajjad...

Thanks Capt. Rajeev for this good information in simple way.

Glad you liked it Dharmdeep...

Very well written capt., pls continue the good work

Thanks Capt Pereira...

This is a scholarly article Great job Captain!

Glad you liked it Tunde...

Good job, Capt. Jassal! These mandatory intricacies of ship's business & chartering are excellently presented. Organized and laid out as you have, this blog subject does a great service to anyone who longs to learn more about it & be more familiar with the clauses, details & positions (which is probably everyone, right?) -- including this marine cargo surveyor!

Glad you liked it Capt Edward...

Many thanks

Thanks Rafik...

sir plz explain magnetic compass

I will do that in a different blog...

Once again thank you very much.

Thanks Raju...

Informative Awaiting next one regarding time charterers

Will write on Time chartering too...

many thanks for this jobs cap

How easy way for explain this matter ,really very good job captain I appreciate your good effort waiting more and more

Thanks Ahmed...

sir waiting for your blog on purging and gas freeing cargo tanks

Very nicely explained and written good effort

Very nice explanation capt,

Generally the CP agreement is never sent to ship..and hence for tendering NOR what criteria(LOCATION) shall be followed as Master will not be aware if the C/P is voyage or Port C/P .These days Master tender NOR on arrival and then they keep re tendering every 24 hrs or at important events like POB, or All Fast.What is the logic behind following this and how we can ensure the NOR tendering doesn't becomes null and void. really APPRECIATE YOUR GREAT EFFORTS

if the vessel arrived at the agreed laycan and gave a valid NOR tendered and waited for almost 5 days before berthing, then while berthing the vessel had an accident and the owner requsted a new laycan, the question here is, does cancelling the old laycan result in canceling the demurrage fees caused by it?

When a vessel suffers breakdown typically NOR becomes invalid as the vessel was not in all respects ready to load her cargo.

U don't see such priceless articles often.. Good work cap. Let's make the world a better place to sail????????

To the writer of this blog- what made you write this? IT IS FANTASTIC. Well done. Also your MBA, was it the distant learning one from Middlesex?

On the Laytime Summary calculation, wouldn't it be correct to say that on the loading it was lost 0d-12h-24 min instead of 1d-00-24m?

Captain sahab, if I ever get a chance, I'll surely shake hand and say thank you, for all your efforts in simplifying the topics

can you advise for the following : in case a vessel is on Voyage Charter, and during loading or discharging alongside berth, there is a rainy period, so the daytime for this period should be NOT TO COUNT, correct??? cause there is the terms "weather permitting".

Great article sir......waiting for more.....

Hi. How does the shipbroker locate a suitable ship to transport the cargo?

Good day! You have mentioned different stages of voyage charter. May I ask what are the different stages of Time Charter and Bareboat Charter? Thank you in advance.

Nice blog...pleasure to read

I love your write up. Please, keep exposing our mind to the rudiments of shipping business.

Sir, in voyage charter party at what time and place charter party agreement will start? After ship arriving on laycan days or after giving notice of readiness? And notice readiness when we can give? Is there any specific time only we can give NOR?

I have a question, How to calculate the freight for a Multiport voyage. for example, there is a Cargo loaded from the country (C) and need to discharge its half portion in other countries multiple ports (A) & (B). For single port discharge, the cost is 8$ in port A and in Port B 11$, but the agent says he could fulfill this in 10$ for both ports. Now my question is how is he calculating the freight 10$ for Multiple port ?

Thank you sir for this great effort helping a lot for phase2 law preparation

Hi Sir! I am so pleased to have found your blog, it is absolutely helpful. if it is not too much to ask, do you have a quote sample for time and voyage charter? and the stardard terms and conditions? sorry if I am asking too much. thank you

Excellent blog about chartering service. This blog cleared my doubt about chartering service for ship

could you please advise that how long a shipowner should wait cargo to load on board (if cargo not ready) and no any specific clause written on voyage cp

Hi, Capt Jassal, I find every write up on any marine subject is excellent and easy to understand for students. I highly appreciate the contents of your blog. Regards Capt MK Srivastava , Ex-DPA, The SCI Ltd.

Wonderfully explained

While the blockchains themselves are secure, the applications running on the blockchain may not be. These applications interact with the blockchain through smart contracts, but just like any other software, bugs in the code can lead to security vulnerabilities. For this, we need to involve the auditors who conduct security audits on the smart contract. Smart Contract Audit helps you find hidden exploits and eventually reduce the risk and provide you an extra layer of security. Bug-free code is nice to have in other types of software, in blockchain applications, it is essential.

Dear Capt Rajeev Jassal, with interest i have seen your blog however the title struck me a bit - A Layman's Guide to Laytime - this sounds very familiar, if not accurate, with the dissertation i wrote for the ICS, Institute of Charterers Shipbrokers London, who hold copyright on this. Kindly amend the title of your blog to avoid confusion in the industry as to whom the readers take their information from. With best regards, Erwin de Zwarte, FICS

sir will you pls write on paramount clause , new jasson clause , cesser clause and both to blame collision clause

Such a great explanation! Thank you so much!

This article is a big help for those individuals that are trying to expound their knowledge in shipping. I much appreciated because at present i am taking my master's degree in ship management. Thank you...

Wow, so clearly written that I didn't have to read it twice to understand! Why don't our text books/ Oral notes be like this?! Thank you so much Capt. Jassal.

It’s a great and useful piece of info. I’m happy that you just shared this useful info with us. Please stay informed like this. Thank you for sharing. Here’s another informative content on Common Law Separation Agreement , may find more details here.

thanks alot of info keren bgt

Sir u r the best , undoubtedly . The confidence which i gain every time when ever I read your blog is just unspeakable and it sharpens my knowledge every single time. A teacher like you is what this shipping industry needs and I am glad to find the perfect one . Every time when ever I am in doubt I refer to your blogs and it works miracle .....thanks a ton to you sir .....simply great.

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Time charter and voyage charter: general guide

This is an introductory article on time charters and voyage charters.

There are three main types of charters in shipping:

Voyage charter

• Time charter.
• Bareboat charter (demise charter).

Charters are often compared to taxis because it is the most straightforward analogy to understand.

Let’s begin with an example:

Sergey orders an Uber to get to work. Sergei pays the price based on distance and traffic jams. He does not pay for gas and does not pay the driver’s wage. If the car waits longer than 3 minutes for Sergey, he pays for the wait time. If the driver breaks the traffic rules, Sergey will not be held responsible (but his boss can reprimand him for being late).

Let’s consider this example in the context of a voyage charter:

Poseidon chartered a vessel to carry 15,000 tons of wheat from Varna to Barcelona. The freight rate is $30 per tonne. The loading and unloading rate is 5,000 tons per working day. The demurrage rate is $2,000 per day.

Now let’s break down the example into components:

• Port of loading and discharge. A charterparty may indicate more than one port.
• The charge for the carriage is the freight. Freight is often calculated per tonne of cargo, although it can also be fixed.
• Time for loading and discharge – laytime. Usually stated as a loading/unloading rate per day.
• Wait time – demurrage.

The shipowner is responsible for the actions of the master and crew. The shipowner may not only be the registered owner of the vessel but also, for example, the time charterer or bareboat charterer.

In a voyage charter, the shipowner pays for bunker, master and crew wages, port charges, and other expenses related to the vessel. These costs are included in the freight rate. The shipowner also bears the cost of repairs to the vessel.

The primary responsibility of the charterer under a voyage charter is to provide the cargo and pay the freight. The shipowner takes care of everything else.

Time charter

A time charter is a car hire with a driver. Back to Sergey:

Sergey went on a business trip to London for a fortnight. He has no time to explore the city, so he has rented a car with a driver. Sergey pays by the day, regardless of the frequency and length of his trips. He also pays for petrol and paid parking. Sergey does not pay the driver’s wage and does not pay traffic fines.

In a time charter, the vessel is not chartered to carry specific cargo from point “A” to point “B”. It’s chartered for a specific period of time. The shipowner provides and pays for the master and crew, as well as the insurance costs for the vessel. As with a voyage charter, the shipowner is responsible for their actions.

A time charterer has more responsibility:

• Instead of the freight for the carriage, the charterer pays hire, a fixed fee for the use of the vessel. As a rule, hire is paid monthly or semi-monthly.
• The charterer pays for bunker, port charges, loading and unloading costs, agency services, etc.

There is no laytime and demurrage in a time charter, as the charterer uses the vessel at his own discretion.

Main terms of a voyage charter and a time charter

There are two types of terms in a charterparty: implied and express. Implied terms automatically apply to all charterparties as a matter of fact or law, even if they are not mentioned in the charter. The express terms are the terms of the charterparty.

Implied terms

There are five main implied terms:

• The shipowner shall provide a seaworthy vessel at the commencement of the voyage.
• The vessel shall proceed with reasonable despatch.
• There should be no unjustifiable deviation.
• Not to ship dangerous goods without notice.
• To nominate safe ports of loading and discharge.

This list is not exhaustive.

Time charter terms

Main terms of a time charter:

• Period of hire
• Trading limits – the geographical limitations in which the charterer is allowed to use the vessel.
• Provisions for the place and manner of delivery of the vessel to the charterer and redelivery to the shipowner
• Laydays/Cancelling – charterer’s ability to terminate the charter if the vessel is not delivered by the agreed date
• Hire rate and payment procedure
• Off-hire – cases where the charterer does not pay the hire because the vessel cannot be used (e.g. due to a breakdown)
• Quantity and payment of bunker fuel
• Cargo allowed for carriage
• Excluded cargo – cargo that the shipowner prohibits carrying on the vessel
• Speed and bunker consumption
• Provisions on the allocation of liability between the charterer and shipowner

Bareboat charter

This article does not cover bareboat (demise) charters, but getting back to Sergey, a bareboat charter is a hire car without a driver. You can read more about bareboat charters here .

English solicitor. I help to win courts and arbitrations in London. I specialise in Gafta and FOSFA arbitrations and maritime law (shipping). Also interested in English cryptocurrency disputes.

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Main Features of Voyage Charterparty

Shipowner undertakes certain obligations:

The shipowner must undertake certain obligations before and during the performance of the voyage charter:

1. Provide an accurate description of the ship. 2. Provide a ship that is seaworthy and cargo worthy. 3. Perform and incur the costs of a ballast voyage. 4. Make the ship available at the port of loading (arrived ship). 5. Perform the carrying voyage with reasonable dispatch. 6. Not to deviate unless for the purpose of saving life or property at sea. 7. Arrive at the port of discharge (arrived ship) and have the ship ready for discharging operations. 8. Deliver the cargo.

Charterer undertakes certain obligations:

1. Provide an accurate description of the cargo. 2. Nominate safe ports/berths so that the vessel can proceed for loading and discharging operations. 3. Provide the amount of the said cargo as agreed in the time period stipulated and of the quality stated. 4. Bring the cargo alongside. 5. Perform loading and discharging operations within the stipulated laytime. 6. Pay the freight and other mainly cargo-related costs.

Breach of any of these obligations does not give the shipowner the right to rescind the charter but does allow him or her to sue for damages, unless such breach is of a frustrating character.

During the loading and discharging window, it is the responsibility of the shipowner to make the ship available at the agreed port. If the ship does not arrive within the stipulated time frame, then the charterer has an absolute right to cancel the charter party. The charterer does not have the right to cancel until the canceling day has been reached. The ship must load/discharge in accordance with the terms agreed.

The responsibility of the charterer to furnish the agreed cargo is absolute. The charterer may be excused of his or her responsibility to provide a cargo in the presence of intervening events that would make the agreement illegal or due to an act of God, prior to the ship being placed on demurrage. The charterer must provide all the means that were agreed upon for the safe loading and discharge of the ship.

Responsibilities in Voyage Charter and Time Charter

What are the costs paid by the shipowner and charterer in a voyage charter.

In a voyage charter, the shipowner and charterer each have specific costs and responsibilities they are expected to bear. Here’s a breakdown:

Costs Paid by the Shipowner:

• Vessel Operating Costs : This includes costs related to running the ship itself, such as crew wages, maintenance, insurance for the vessel, and other related expenses.
• Bunker Fuel : The shipowner is typically responsible for supplying the vessel’s fuel, unless the charter party agreement stipulates otherwise.
• Port Charges : This includes charges incurred in the ship’s home port or any other port where the ship stops for reasons other than loading or unloading cargo (e.g., for bunkering or maintenance).
• Agency Fees : Fees payable to agents who act on behalf of the shipowner.
• Cargo Handling Costs : In some voyage charter agreements, the shipowner might bear the costs of loading or unloading cargo. However, this can vary based on the specific terms of the charter party agreement.

Costs Paid by the Charterer:

• Freight : This is the primary cost for the charterer, which is essentially the payment to the shipowner for transporting the cargo from the load port to the discharge port.
• Loading and Unloading Costs : Unless otherwise stipulated in the charter party agreement, the charterer typically pays for costs related to loading and unloading the cargo at the respective ports.
• Port Charges : Costs related to using port facilities at the loading and discharge ports are often borne by the charterer.
• Agency Fees : The charterer pays fees to agents acting on their behalf in the load and discharge ports.
• Demurrage or Despatch : If the loading or unloading takes longer than the agreed laytime, the charterer pays demurrage, which is a penalty for delays. Conversely, if the process is faster than the stipulated laytime, the shipowner may owe the charterer despatch, a reward for quick turnaround.
• Bunker Fuel (in some cases) : If the charter party agreement specifies, the charterer may be responsible for supplying or paying for a portion of the vessel’s fuel.
• Cargo Insurance : The charterer is usually responsible for insuring the cargo against potential damage or loss during the voyage.
• Any Additional Costs Due to Charterer’s Instructions : If the charterer gives special instructions that result in additional expenses, like a change in the destination port or a delay, the charterer would usually bear these costs.

It’s essential to note that the specific division of costs can vary depending on the terms negotiated in the charter party agreement. Always refer to the charter party contract to determine the exact responsibilities of each party.

In a voyage charter, Shipowners retains the operational control of the vessel and pays all the operating costs (crew, bunker, freshwater, lubricants, port charges, ship insurances, taxes, canal costs etc.). If the Voyage Charterparty is based on FIOS (Free In Out Stowage) basis, Charterers pay cargo handling (loading and unloading expenses). Usually, in a voyage charter, Charterers’ pays the costs and charges relating to the cargo.

What are the Main Features of Voyage Charterparty?

A voyage charterparty is a contract between a shipowner and a charterer for the use of a vessel to carry cargo on a specific voyage or voyages in exchange for freight. The main features of a voyage charterparty include:

• Parties Involved : The agreement will clearly specify the shipowner and the charterer.
• Description of Vessel : Details of the vessel such as its name, flag, deadweight, tonnage, and other relevant particulars.
• Cargo : A clear description of the cargo, including type, quantity, quality, and the stowage factor.
• Loading and Discharging Ports : The agreement should state the ports of loading and discharge. It may also specify any additional ports the vessel may be ordered to during the voyage.
• Laytime : This represents the time allowed to the charterer to load and/or discharge the cargo. It can be expressed in running days or weather working days (WWD). If the charterer exceeds this time, they are liable to pay demurrage.
• Freight : The amount to be paid for the carriage of the cargo. This can be based on a rate per ton, per cargo, or for the entire voyage.
• Demurrage and Despatch : Demurrage is a compensation payable by the charterer if they exceed the laytime for loading or discharging. Despatch, on the other hand, is a reward payable by the shipowner to the charterer if the operations are completed within a shorter time than the laytime.
• Notice of Readiness (NOR) : The captain or ship’s agent gives this notice to the charterer when the ship is ready to load or discharge. The laytime generally starts after this notice has been accepted.
• Safe Port Warranty : This ensures that the ship will be directed only to safe ports where it can safely lie always afloat.
• Freight Payment Terms : Conditions under which the freight is to be paid, which can be in advance, upon loading, or after discharge.
• Cargo Handling : Specifies who (between the shipowner and charterer) will be responsible for and bear the costs of loading and discharging the cargo.
• Exceptions and Limitations : Any exceptions or limitations of the shipowner’s liability will be stated, such as those arising from perils of the sea, acts of God, wars, strikes, etc.
• Bunkers and Provisions : Details on how bunkers (fuel) and provisions will be provided and who will bear the cost.
• Agency Appointments : Details on who will appoint and pay for the agents at the loading and discharging ports.
• War Risks and Ice Clauses : Provisions regarding what happens if there’s a war or if the vessel encounters ice.
• General Average : Provisions that deal with situations where a voluntary sacrifice is made (like jettisoning cargo) to save the vessel. It dictates how such costs or losses will be apportioned between the shipowner and charterer.
• Arbitration and Law Clause : In case of any dispute, this clause outlines the process of arbitration and the governing law to resolve the matter.
• Cesser and Lien Clause : This clause can be important in a voyage charterparty. The cesser clause signifies that once freight is paid, the charterer’s liability ceases, and thereafter, any claims related to the cargo are against the shipper or consignee. The lien clause gives the shipowner a lien on the cargo for claims like unpaid freight.
• Both to Blame Collision Clause : If a collision occurs involving the chartered vessel and another, and both are to blame, this clause helps in apportioning the damages between the charterer and shipowner.
• Deviation Clause : This addresses any deviation the vessel might take from its specified voyage route. A deviation might be necessary for the safety of the vessel or its cargo. The clause will outline under what circumstances a deviation is allowed and how it impacts freight rates and delivery timelines.
• Bills of Lading : The relationship between the charterparty and the bill of lading is crucial. This provision explains how bills of lading will be issued, their terms, and how they relate to the charterparty terms.
• Liberty Clauses : These grant the shipowner certain liberties, such as the ability to call at any port for bunkers, to sail without pilots, or to tow or be towed.
• U.S. Clause Paramount : In charterparties involving U.S. ports, this clause ensures that the Carriage of Goods by Sea Act (COGSA) will apply while the cargo is in the custody of the shipowner, overriding any other contract terms.
• Himalaya Clause : A standard clause in shipping, it seeks to extend the defenses and limits of liability that are available to the carrier (shipowner) under the charterparty or bill of lading to other agents, servants, or independent contractors involved in the shipment.
• Clean Ballast Clause : For vessels returning in ballast (without cargo), this clause states that only clean ballast, not oil, will be used, which has environmental implications.
• Last Voyage Clause : This pertains to situations where the chartered vessel is on its last voyage before being sold, scrapped, or redelivered. The clause may set forth conditions to protect the charterer’s interests, such as ensuring the voyage is completed in a timely manner.
• Performance Claims : Procedures and timelines for raising claims related to the performance of the voyage, such as the speed and consumption of the vessel, are often outlined to ensure that disputes are raised and addressed promptly.
• Redelivery Clause : This defines the conditions under which the ship is to be returned to the shipowner at the end of the charter. It might specify the location, condition of the vessel, and provisions/bunker levels.
• Breach and Termination : Provisions detailing what constitutes a breach of the charterparty by either party and the consequences of such a breach, including potential termination and damages.

Voyage charterparties are intricate and tailored to the needs of the specific parties and voyage involved. When entering into such an agreement, both parties typically consult with legal and maritime experts to ensure their interests are properly protected and the terms are clear and enforceable. Voyage charterparties can be complex, and the above are just some of the primary features. Each charterparty can have unique clauses based on the specific agreement between the shipowner and the charterer.

Voyage Charter Parties typically encompass the following principal stipulations:

• The nature of the consignment to be transported is predetermined.
• The ports of call have been established beforehand.
• The onus of providing directives to the captain falls upon the Shipowner, rather than the Charterer.
• Should liner terms, such as an all-encompassing freight rate, be settled upon, the shipowner assumes the mantle of responsibility for the embarkation, arrangement, and unloading of the cargo.
• Conversely, under FIOS (Free In Out Stowage) terms, the charterer is entrusted with the duties of loading, arranging, and offloading the consignment.

For dry cargo, the quintessential Voyage Charter Party is the Gencon Charter Party. In contrast, within the realm of tanker commerce, Charter Parties predominantly derive from the Asbatankvoy Charter Party.

In voyage chartering, the shipowner assumes the financial burden of fuel, operational, and employment-associated expenses. It falls upon their shoulders to enlist the officers and auxiliary crew for the journey, whether from their cadre of loyal staff or through intermediaries to procure skilled mariners and seafarers.

The Voyage Charter Party delineates an agreement for the transport of a complete consignment, not defined by a duration but rather at a predetermined rate per ton, exclusively for a singular voyage, between specified ports that are to be determined upon reaching a designated region.

Consignors dealing with substantial volumes of bulk commodities such as phosphate, coal, and grain often engage in charter agreements bearing distinct titles, for instance, “Fosfo”, “Americanized Welch Coal Charter Party”, or the “Baltimore Grain Charter Party”. Within the confines of a voyage charter party, the charterer is absolved from any obligation pertaining to the vessel’s operations, yet customarily bears the cost of stevedoring both during embarkation and disembarkation.

What Elements Govern the Selection Between Voyage and Time Charter?

The subject has been rigorously deliberated upon and stands as a quintessential strategic choice for both Shipowners and Charterers. Principal elements influencing such judicious determinations encompass market capriciousness, the presence of cargo, vessel reorientation, and fiscal considerations.

Such considerations mould anticipations from both factions, mirroring within market oscillations and, fundamentally, upon the freight tariffs. A scantiness of vessels invariably augments freight charges, whereas diminished cargo demand diminishes them. This dynamic is colloquially referred to as the spot market.

The parties’ discernment of market trajectories becomes instrumental when discerning between a voyage or a Time Charter (TC). In this vein, with aspirations to circumvent pronounced volatility or regulate expenditures, they might contemplate anchoring the vessel on a Time Charter (TC).

Frequently, an extended  Time Charter (TC) becomes an integral component of a fiscal arrangement accompanying the vessel’s acquisition. That is to articulate, the fiscal and operational stewardship of the fleet significantly influences such determinations.

Charterers, desiring to commandeer a vessel or an armada for tailoring their cargo transportation requisites, and wishing to eschew the acquisition and operational expenses of the vessel, will advocate for the Time Charter (TC)alternative. Consequently, the Time Charter (TC) paradigm emerges as a lucrative venture, devoid of any asset encumbrance for the Charterers.

What is a Voyage Charterparty?

A “Voyage Charterparty” is a type of maritime contract between the shipowner and the charterer. In this agreement, the shipowner agrees to transport a specified quantity of goods from one port to another for a fixed price per ton or on a lump-sum basis. The shipowner retains control over the vessel’s navigation and operations, while the charterer simply uses the vessel to transport their cargo.

Here are some key characteristics of a Voyage Charterparty:

• Nature of Contract : The agreement is based solely on the voyage, and the shipowner is paid freight based on the quantity of cargo loaded or as per the agreed terms.
• Cargo : The charterer agrees to provide a specific quantity of cargo, and the shipowner commits to transport this cargo to the designated destination.
• Freight : The payment made by the charterer to the shipowner is called ‘freight’. This can be based on the weight or volume of the cargo or sometimes as a lump sum for the entire voyage.
• Laytime : This term refers to the amount of time agreed upon between the parties for loading and unloading the cargo at the respective ports. If the charterer exceeds this time, they may have to pay “demurrage” (a penalty) to the shipowner. Conversely, if loading or unloading is completed before the laytime expires, the shipowner might have to pay “despatch” (a reward) to the charterer.
• Voyage Details : The agreement will outline specific details regarding the voyage, including the ports of loading and discharge, route to be taken (if specified), and any other necessary provisions.
• Risks and Costs : In a voyage charter, the shipowner typically bears the running costs of the vessel (like wages, fuel, etc.), while the charterer is usually responsible for port charges and other expenses related to loading and unloading.

Voyage Charterparties are commonly used for the transportation of bulk cargoes like grains, coal, oil, and minerals. However, it’s essential for both parties to outline the terms clearly to avoid disputes and misunderstandings.

What is a Voyage Charter in Ship Chartering?

Voyage Charter Definition: The voyage charter epitomizes an accord, termed a voyage charter party, drawn between the vessel proprietor and the charterer. In this pact, the shipowner pledges to convey a stipulated volume of cargo aboard a designated vessel, embarking on a singular odyssey from a specified port, let’s refer to it as Port A, culminating at another, Port B, all within a predetermined time frame.

A Voyage Charter in ship chartering is one of the primary methods of hiring a ship. Here’s a detailed explanation:

Voyage Charter:

In a voyage charter, the shipowner agrees to transport a specified quantity of cargo from one port to another (or between a range of ports). The charterer pays the shipowner on a per-ton basis or as a lump sum for the entire voyage. The shipowner covers all the operational expenses of the voyage, such as fuel, port charges, and crew wages.

Key features of a voyage charter:

• Charter Party Agreement: A voyage charter is typically formalized through a charter party agreement, which is a legal document detailing the rights and obligations of both the shipowner and charterer. This document will specify cargo details, freight rate, laytime (the allowed time for loading and unloading), and any demurrage or despatch terms (penalties for delays or incentives for early operations, respectively).
• Freight Rate: The charterer pays the shipowner based on the amount of cargo transported (e.g., per ton) or sometimes as a lump sum for the entire voyage. This freight rate is agreed upon beforehand and is a significant term in the charter party.
• Obligations of the Shipowner: The shipowner’s primary responsibility is to provide a seaworthy ship, cover all voyage expenses, and ensure the cargo is transported from the loading to the discharge port. If the vessel fails to meet certain agreed-upon criteria or schedules, the owner may be liable for damages.
• Obligations of the Charterer: The charterer is responsible for providing the agreed cargo in a ready state for loading and unloading within the specified laytime. If the charterer exceeds the laytime, they might have to pay demurrage, a penalty for delaying the ship.
• Duration: The duration of a voyage charter is typically for a single voyage, though sometimes it can be for a round trip or a series of voyages. Once the cargo is delivered, and all obligations are met, the charter typically concludes.

Voyage charters are commonly used in bulk cargo transportation, like coal, grain, and ore, where specific quantities need to be moved from one place to another. They are distinct from time charters, where the ship is hired for a specific period, and the shipowner gets paid based on the time, rather than the quantity of cargo moved.

Who is a Voyage Charterer?

A Voyage Charterer is a person or company that charters a ship (or a portion of it) for a specific voyage or journey, as opposed to a specific period. In a voyage charter, the shipowner remains responsible for managing and operating the ship, including covering operating costs such as fuel, crew, maintenance, and port charges. The charterer simply pays a freight rate, usually per ton of cargo, for the specified journey.

Here’s a breakdown of the relationship:

• Shipowner : Owns the vessel and is responsible for all operational matters such as fuel, crewing, and maintenance. They are paid a freight charge by the charterer for the transportation of the goods.
• Voyage Charterer : Contracts with the shipowner to transport a specific cargo from one port to another (or possibly multiple ports). They do not take on the responsibilities of managing or operating the ship; they merely pay for the space or weight of the cargo they are transporting on that specific voyage.

The specifics of the arrangement, such as freight rates, laytime (the time allowed for loading and unloading cargo), demurrage (penalties for delays beyond the laytime), and other details, are typically outlined in a voyage charter party, which is a legal agreement between the shipowner and the charterer.

This type of arrangement is commonly used for cargoes that are not regularly shipped, or for shipments where time charter (renting a vessel for a set period) or bareboat charter (renting a vessel without crew or provisions) is not suitable or economical.

What is the Freight in Voyage Charter Party? 

In the context of maritime shipping, the “Voyage Charter Party” refers to a contract in which the shipowner agrees to carry a specific cargo from one point to another for a predetermined price or rate. In such an agreement, the payment made by the charterer to the shipowner for the transportation of cargo is known as “freight.”

Here’s a breakdown of key points about freight in a voyage charter party:

• Definition : Freight is the compensation payable by the charterer to the shipowner for the transportation of goods from the loading port to the discharge port.
• Basis of Freight : In a voyage charter, freight can be calculated on various bases such as per ton, per cubic meter, per cargo piece, or on a lump-sum basis for the entire voyage.
• Payment : The terms of freight payment are agreed upon in the charter party. It might be payable in advance, upon loading, upon discharge, or after the cargo reaches its destination.
• Deadfreight : If the charterer fails to supply the agreed-upon quantity of cargo, the charterer might still be liable to pay for the unused space, depending on the terms of the agreement. This compensation is known as “deadfreight.”
• Laytime and Demurrage : The charter party will specify a given time (laytime) for loading and unloading cargo. If the charterer exceeds this time, they may be liable to pay a penalty called “demurrage” to the shipowner. Demurrage rates and conditions will be specified in the agreement.
• Freight Deductions : Sometimes, there may be deductions from the freight for various reasons, such as short landing of cargo, damage, or other agreed terms.
• Freight Agent : In some cases, the shipowner might employ an agent at the port of discharge to collect the freight. This agent ensures that the freight is paid before the cargo is released to the charterer or receiver.
• Lien on Cargo : If the charterer defaults on the payment of freight, the shipowner generally has a lien on the cargo, meaning they can retain the cargo until the freight is paid.

A voyage charter party can be quite intricate, with various clauses and conditions tailored to specific transactions. The terms regarding freight are crucial, as they outline the fundamental commercial basis of the agreement. If you’re entering into such a charter or need a deeper understanding of specific clauses, consulting with a maritime lawyer or specialist would be advisable.

The individual who commissions the ship is referred to as the Voyage Charterer , the remuneration is termed Freight , and the agreement is known as the Voyage Charter Party . The Freight Rate is quantified in terms of dollars per tonne of consignment or lump-sum basis.

What is the most important part of Voyage Charter Party?

The Voyage Charter Party is an agreement between the shipowner and the charterer, detailing the terms and conditions under which the vessel will transport goods from one place to another. While all aspects of this agreement are important, there are a few key sections that stand out in terms of their significance:

• Description of the Vessel : This section provides details about the ship, including its name, tonnage, and carrying capacity. It’s essential because it assures the charterer of the kind and capacity of the vessel that will be used for transportation.
• Freight Rate : This determines how much the charterer will pay the shipowner for the service. It can be based on a variety of metrics, such as per ton of cargo or for the entire voyage. This is often a focal point in negotiations.
• Loading and Discharging Ports : This section specifies where the cargo will be loaded and where it will be discharged. It sets out the obligations regarding the ports, any additional costs associated with them, and any special conditions or facilities that must be available.
• Laytime and Demurrage : Laytime is the amount of time agreed upon for loading and unloading the cargo without incurring any extra charges. If the charterer exceeds this time, they will usually have to pay demurrage, a penalty for the delay. This is critical because delays can be costly for both parties, especially the shipowner.
• Cargo Description : This section describes the type, quantity, and condition of the goods to be transported. This is fundamental as it dictates the ship’s handling requirements and can influence freight rates.
• Liabilities and Indemnities : This portion of the agreement sets out the responsibilities of each party in case of damages or losses. It’s a crucial part because it outlines the extent of liability for each party and can save both sides from potential legal disputes.
• Clauses related to Force Majeure, War, and other exceptional circumstances : These clauses provide provisions on what happens in case of unforeseen circumstances that are beyond the control of either party. This might include natural disasters, wars, or other disruptions.
• Arbitration and Governing Law : In case of a dispute, it’s essential to have a predetermined method and location for resolving disagreements. This section specifies which laws will govern the agreement and how conflicts will be handled.

In conclusion, while every part of the Voyage Charter Party plays a role in ensuring a smooth transaction between the shipowner and the charterer, the above-mentioned sections are among the most critical. It’s always advisable for both parties to seek legal counsel when drafting or entering into such agreements to ensure their interests are well protected.

The paramount elements encompass the detailed delineation of the voyage, the vessel’s dimensions and carrying capability, the nature of the cargo, the distribution of responsibilities and expenses related to loading and unloading, the delineation of freight charges, and the modalities of freight payment. Additionally, there are rules governing laytime, stipulations concerning the responsibility for cargo, and the distribution of other associated costs and uncertainties.

Under varying conditions, certain clauses and inquiries can gain precedence during dialogues between vessel proprietors and charterers. For such charters, the vessel is mandated to be situated as delineated by the owner upon the charter’s inception. Subsequently, the vessel should promptly proceed to the designated loading harbor.

Upon arrival at the loading port, the charterer is obliged to supply the pre-agreed cargo. It’s imperative that the cargo isn’t hazardous, barring any pre-established consensus. The cargo should be positioned adjacent to the vessel at the port of embarkation and retrieved directly from the vessel upon reaching the destination port.

Especially concerning bulk shipments, charterers frequently bear the costs of both loading and unloading. Terms like FIO or FOB are frequently encountered. Not uncommonly, negotiations culminate in FIOS (Free In Out Stowage) or FIOST (Free In Out Stowage Trimming) agreements.

Within voyage charters, pinpointing the discharge port within the charter party isn’t obligatory. In such scenarios, charterers retain the prerogative to later guide the vessel to a specific port of debarkation within a designated radius.

For voyage charters wherein the charterer orchestrates the loading and/or unloading, a consensus often emerges granting the charterer a specific tenure for these operations, known as laytime.

Should the charterer falter in loading and/or unloading within the designated laytime, they incur the obligation of remunerating for the additional time expended, termed as Demurrage . The axiom stands: once ensnared in demurrage, perpetually so.

Conversely, should the charterer expedite the loading and/or unloading surpassing the stipulated laytime, they may be eligible for recompense (contingent upon prior agreement), known as Despatch Money .

In the realm of voyage charters, barring instances where a lumpsum freight is compensated, vessel proprietors reserve the right to solicit freight compensation should the cargo fall short or if it’s arranged in a manner precluding optimal utilization of the ship’s space due to irregular stowage, termed as Deadfreight .

What are the Standard Voyage Charter Party Forms?

In maritime commerce, a charter party is a legal agreement between the shipowner and the charterer specifying the terms and conditions under which a vessel is chartered. Standard Voyage Charter Party Forms are standardized contracts widely recognized and used in the industry, each designed to cater to specific trading routes or particular cargo types.

Here are some of the widely recognized standard voyage charter party forms:

• GENCON – This is one of the most commonly used general cargo charter party forms.
• ASBATANKVOY – A standard oil tanker voyage charter party, introduced by ASBA (American Shipbrokers’ Association).
• SHELLVOY – Introduced by Shell, this is another widely used tanker voyage charter party.
• COAL-OREVOY – Specifically designed for shipments of coal and ore.
• GRAINVOY – A standard charter party for the shipment of grains.
• AMWELSH – The Americanized Welsh Coal Charter, used for coal cargoes from the U.S.
• POLCOALVOY – Used for coal cargoes from Poland.
• NORGRAIN – For grain shipments from North America.

It’s important to note that these standard forms often serve as a base, and the parties involved can negotiate terms and introduce addenda or riders to the form to tailor it to their specific needs.

Lastly, as the shipping industry evolves and as new types of cargo and routes emerge, new charter party forms can be developed and existing forms might be revised. Always consult current maritime legal resources or industry experts when working with these contracts.

Where can I find a Voyage Charter Party Form?

We kindly suggest that you visit the web page of BIMCO (Baltic and International Maritime Council) and ASBA (Association of Ship Brokers and Agents) to obtain the original Charter Party forms and documents. www.bimco.org   and  www.asba.org

What are the factors which influence the Freight Rate in Voyage Charter Market?

Freight rates in the voyage charter market can be influenced by a multitude of factors. A voyage charter refers to the hiring of a vessel and its crew for a specific trip between designated ports. Here are some of the main factors that influence freight rates in this market:

• Supply and Demand : This is a fundamental factor. When there is a higher demand for ships but a limited supply, the rates go up. Conversely, when there are more ships available than required, the rates tend to decline.
• Fuel Costs (Bunker Prices) : The price of fuel can greatly influence freight rates. As fuel costs increase, it becomes more expensive to operate ships, leading charterers to seek higher rates to cover their operational costs.
• Port Charges : Fees and costs associated with using ports can vary, and higher port charges can be passed on as higher freight rates.
• Route and Distance : Longer routes usually mean higher freight rates due to the increased time and fuel required.
• Type and Size of the Vessel : Different vessels have different operating costs, capacities, and functionalities. Larger vessels typically command higher rates, but their profitability can also depend on their ability to be fully loaded.
• Cargo Type : Specialized or hazardous cargo can demand higher freight rates due to the special handling, equipment, or certifications they require.
• Seasonality : Certain cargoes are seasonal. For example, grain harvest seasons can lead to higher demand for bulk carriers, pushing rates up.
• Geopolitical Events : Wars, sanctions, and other geopolitical events can disrupt shipping routes or create sudden surges in demand, influencing freight rates.
• Economic Conditions : Global economic health can influence trade volumes. During economic booms, there might be increased trade and thus higher demand for ships, while recessions might depress freight rates.
• Canal and Strait Congestion : Delays in major canals or straits, like the Suez or Panama Canals, can lead to increased costs and potentially higher freight rates.
• Weather and Environmental Factors : Adverse weather conditions, such as hurricanes or ice, can disrupt shipping routes or lead to slower transit times, impacting rates.
• Currency Fluctuations : The charter market often operates in major currencies like the US dollar. Fluctuations in currency exchange rates can affect the perceived costs and revenues for companies operating in different currencies.
• Regulations and Compliance : Stricter environmental regulations, safety standards, or other maritime rules can increase the operational costs of vessels, influencing freight rates.
• Ship Availability : Maintenance schedules, dry docking, and repair times can reduce the number of ships available in the market at any given time.
• Brokerage and Commission : The role of brokers and the commissions they command can also have an effect on the final rate.
• Insurance Costs : The costs of insuring vessels can fluctuate based on perceived risks, global incidents, and other factors. An increase in insurance premiums can push operators to increase freight rates to cover their expenses.
• Technological Innovations : The adoption of new technologies, such as fuel-efficient engines or digital navigation tools, can alter operational costs. Vessels with advanced technology may command different rates compared to older models.
• Crew Costs : Salaries, training, and other expenses related to the crew can vary based on nationality, expertise, and global economic conditions. Rising crew costs might contribute to an increase in freight rates.
• Contractual Conditions : The specifics of a charter party agreement, such as laytime terms, demurrage rates, or off-hire clauses, can influence the overall rate.
• Market Speculation : Future expectations about the market can influence current rates. If shipowners anticipate a rise in demand or foresee potential disruptions, they might adjust their rates accordingly.
• Substitute Transport : The availability and pricing of alternative transport methods, such as rail or road, can influence decisions to charter ships. If alternative transport becomes more competitive, it could pressure maritime freight rates to adjust.
• Infrastructure : The quality of port infrastructure, availability of cargo handling facilities, and efficiency of hinterland connections can all influence the desirability of certain routes and, by extension, the freight rates.
• Political Stability : The political environment of key transit or destination countries can influence freight rates. Ports in politically unstable regions might be seen as riskier, potentially commanding higher rates or, conversely, deterring business.
• Shipowner’s Financial Health : If a shipowner is experiencing financial strain, they might be willing to accept lower rates just to ensure cash flow. Conversely, financially strong owners can hold out for more favorable rates.
• Industry Consolidation : Mergers, acquisitions, and alliances in the shipping industry can affect the balance of power and influence rates. Fewer, larger players can have more leverage in setting rates.
• Environmental and Social Concerns : The growing emphasis on sustainability and corporate responsibility can influence operational decisions and rate structures, especially if eco-friendly practices or certifications can command premium rates.
• Trade Agreements and Tariffs : New trade agreements or the imposition of tariffs and duties can reshape global trade patterns, influencing the demand for maritime transport on specific routes.

The freight rate in a voyage charter market is a product of a complex interplay of numerous factors, ranging from immediate operational concerns to broader geopolitical and economic trends. Stakeholders in this market need a deep understanding of these elements to navigate effectively and make profitable decisions.

Understanding the dynamics of these factors and how they interplay is essential for stakeholders in the voyage charter market to make informed decisions and negotiate effectively.

In the realm of voyage charter commerce, the tariffs are swayed by the specific cargo. The charterer is obliged to ensure the delivery of the stipulated volume and nature of goods, in addition to attending to port levies, canal passage expenses, and specifying the territories for both initial delivery and eventual return.

Generally, a voluminous cargo garners a diminished rate per tonne compared to its smaller counterpart. Journeys through affluent ports or those necessitating canal passages invariably fetch loftier rates compared to those embarking upon modestly priced ports devoid of canal intersections.

Expeditions commencing from a precinct encompassing ports frequently used for cargo discharge, or concluding at ports typically designated for cargo loading, tend to be proffered at more economical rates. This is primarily because such voyages augment vessel utilization by mitigating the unladen segment (or ballast leg) inherent in the computation of the returning charter to a loading enclave.

How are Charter Parties negotiated?

Charter parties, the contracts for the hire or use of a ship (or a part of it), are crucial in the shipping industry. These contracts outline the terms and conditions agreed upon by the shipowner and the charterer. The process of negotiating charter parties can be complex and typically involves the following steps:

• The process usually starts when a charterer has goods to transport and contacts a shipbroker or when a shipowner’s vessel is available for hire.
• A charterer may approach several shipbrokers to find the best deal.
• The charterer or their broker sends a “fixture note” or an “offer” detailing their requirements and terms, such as type and quantity of cargo, loading and discharging ports, laytime, freight rates, and other particulars.
• The shipowner or their representative reviews the offer and either accepts it, rejects it, or makes a counteroffer with revised terms.
• Both parties discuss various terms of the charter party, from freight rates to delivery dates and laytime. These negotiations can be straightforward or may require several rounds of discussions, depending on the complexity of the terms and the market conditions.
• Brokers usually play a vital role in this process, helping both sides understand market trends, conditions, and ensuring that the terms are fair and reasonable.
• Once the main terms (like freight rate, loading/discharging ports, laycan) are agreed upon, the parties will move on to negotiate the detailed clauses. This can involve using standard form charter parties (like GENCON, BALTIME, NYPE) as a basis and then amending them to fit the specific deal.
• Once both parties have reached an agreement on all the terms, the final charter party document is drafted.
• Both the shipowner and the charterer review the final document for accuracy and completeness.
• After any necessary revisions, both parties sign the charter party, making it a legally binding agreement.
• With the charter party signed, the shipowner prepares the vessel for the voyage, and the charterer readies the cargo.
• As the voyage proceeds, any deviations from the charter party’s terms (like demurrage claims due to delays) will be noted and settled either amicably or, if necessary, through arbitration or legal means.
• Proper documentation is crucial throughout the process. This includes not only the charter party itself but also other related documents like bills of lading, letters of indemnity, notices of readiness, and so forth.

To ensure successful negotiation, both parties should have a clear understanding of their needs and the prevailing market conditions. It’s also beneficial for them to be represented by experienced brokers or lawyers familiar with maritime law and the intricacies of charter party agreements.

Charter agreements are often brokered using diverse methodologies. Instead of merely “Fixtures” or “Fixture Recapitulations” (RECAP) , these can be articulated as “articulated arrangements” or “comprehensive summaries”. Renowned charter agreements, alongside bespoke manuscript agreements, serve as bases. Conventionally, such agreements are mediated through an intricate global nexus of shipbrokers. Yet, principal parties might opt out of brokerage intervention, allowing proprietors and lessees to negotiate directly.

In the inception, proprietors and lessees may proffer “preliminary overtures”—non-committal expressions denoting an owner’s potential acceptance criteria or a charterer’s potential payment offering. Negotiations generally commence through electronic correspondence or telephonic conversations. In due course, either the vessel or its cargo may be presented as “unequivocal”. In essence, articulated arrangements materialize upon affirmation of such an unequivocal proposition.

While no two unequivocal propositions mirror each other, it’s universally acknowledged that such a proposal encompasses the cardinal or quintessential terms of the charter agreement. Based on the charter’s nature—time-bound or voyage-centric—the unequivocal proposition commonly enumerates: the involved entities, the vessel’s designation, the stipulated hire or tariff, the charter’s tenure, prospective cargo, the laycan, locales for delivery and reacquisition, or the embarkation or disembarkation ports, ship specifications, alongside other pivotal stipulations that parties consider cardinal. These paramount terms are often dictated by the charter’s essence, the services rendered, and the cargo in question.

Customarily, both parties might concur that the impending charter agreement draws from a standardized charter template. These templates, habitually, are the brainchildren of esteemed maritime entities like BIMCO or ASBA. A few exemplars encompass the NORGRAIN voyage charter, the NYPE time charter, the BP3 Time charter, the Baltime charter, and the Asbatankvoy, to name a few.

Both parties might mutually decide that the charter template originates from a previously ratified charter, either amongst themselves or with other entities. For instance, the master charter in a consecutive charter series might serve as a precedent, with the intent being calibrated modifications to the prior contract, reflecting novel dates, remunerations, and cargo specifics.

Within the realms of typical charter negotiations, the cornerstone remains a charter template, serving as a scaffold for deliberating principal terms. Under this negotiation modality, parties seldom indulge in the exchange of exhaustive draft contracts. Instead, they primarily communicate their acceptance or refusal of terms in the template through electronic mails or other modes. Here, proprietors and lessees finalize cardinal terms via an articulated arrangement, with ancillary terms detailed either in the template or settled post hoc, perhaps the subsequent day post the acceptance of the unequivocal proposal.

Upon the culmination of the articulated arrangement and the resolution of any prevailing stipulations or conditions, it’s customary for a comprehensive summary to be drafted. This document, in essence, enshrines the mutual understanding, epitomizing the Contract. Typically, such summaries commence with declarations akin to “charterers joyfully declare the resolution of all subjects, confirming our unblemished agreement with the subsequent specifics…” or synonymous expressions. At this juncture, the vessel stands committed, sealing a legally binding charter agreement.

Periodically, a formalized charter—enriched with supplementary clauses—is crafted and disseminated. Alternatively, charters could be brokered via alternative avenues, such as through the exchange of bespoke charter agreements, especially for long-duration charters involving specialized vessels.

What is “Fixture Recapitulations” (RECAP) in Ship Chartering?

In the context of ship chartering, “Fixture Recapitulations” (often shortened to “RECAP”) refers to the summarized agreement between the shipowner and the charterer regarding the chartering of a vessel. When a ship is chartered, there are numerous terms, conditions, and details that both parties must agree upon. Once an agreement has been reached, it’s common practice to send a RECAP of the key points of the agreement to all parties involved.

Here’s a breakdown of what a typical RECAP might include:

• Vessel Details : Name of the vessel, deadweight, draft, age, flag, and other relevant specifications.
• Charterer : The party hiring the vessel.
• Owner : The party who owns the vessel.
• Cargo : Details about the type, quantity, and any special requirements for the cargo that will be carried.
• Laycan : This refers to the laydays (the period during which the charterer can make the ship available for loading) and the cancelling date (the last date by which the ship should have started its charter service).
• Loading/Discharging Ports : Details of where the cargo will be loaded and where it will be discharged.
• Rate : The agreed freight rate, which might be quoted per ton, per day, or in other units, depending on the nature of the charter (e.g., voyage charter, time charter).
• Demurrage/Despatch : The rate at which penalties are paid for delays beyond the agreed laytime (demurrage) or incentives for operations completed within a time shorter than the laytime (despatch).
• Commission : Any broker’s commission or other relevant fees.
• Special Clauses : Any additional agreements or clauses that might be specific to that particular charter, such as requirements for special equipment, insurance terms, or other considerations.
• Bunker Details : Specifications about the ship’s fuel, such as type, price, and any clauses related to bunkers.
• Duration : For time charters, the duration or period for which the ship is chartered might be included.

Once the RECAP is sent and confirmed by all parties, the formal charter party agreement, which is a more detailed and legal document, can be drawn up based on the terms in the RECAP. This ensures that there is clear communication between all involved parties and helps prevent misunderstandings.

Fixture Recapitulation (RECAP) in Ship Chartering

Engaging in negotiations demands meticulous precision and thoroughness. It is imperative that a comprehensive consensus on all facets and intricacies be established between the two main parties to bring forth a legally binding agreement.

Traditionally, Shipbrokers have maintained a chronological log of negotiations in what is termed a “day book”, serving not only as a reference to the settled stances and unresolved concerns but also as a protective measure against disputes, shielding both their and their principal’s interests. Nevertheless, with the evolution of contemporary office practices, there’s a shift towards digital mediums. Emails, instant messages, and similar modes of communication now act as modern-day analogues to the traditional day book. It is of utmost importance that such exchanges are documented and preserved for an appropriate duration, ideally until the Charterparty concludes and all affairs reach closure.

Upon arriving at a consensus, a comprehensive summary, or Fixture Recapitulation (RECAP), should be disseminated amongst all involved entities, capturing the essence of the final accord. Any oral dialogues beyond the ambit of chartering discussions, especially when a broker is executing tasks such as relaying commands to vessels, ought to be subsequently affirmed in written form to the directing firm.

When a Shipbroker, endowed with the authority to endorse a Charterparty on behalf of their principal, commits to the act, it’s crucial to acknowledge the origin of such empowerment—be it via phone, fax, or email—prefacing it with (the principal’s name) followed by “As Agents Only” . Adhering to this convention ensures that the broker remains insulated from personal accountability for contract execution. Nonetheless, should the principal’s identity remain undisclosed, even the appendage of “As Agents Only” wouldn’t exempt the Shipbroker from any contractual responsibilities.

What is Clean Fixture Recap in Ship Chartering?

Clean Recap (Clean Fixture Recapitulation) indicates that you have a valid contract. Typically you will also find “final recap” meaning all terms are agreed.

• Fixture : In shipping and chartering, a “fixture” refers to the conclusion of a charter agreement or contract between the shipowner and the charterer. Once the terms are agreed upon and both parties commit, the ship is said to be “fixed.”
• Recap : Short for “recapitulation,” a recap in the chartering context refers to a summary of the main terms and conditions of the charter party agreement. After negotiations, when the charterer and owner agree on terms, a recap is typically sent by brokers to both parties outlining the terms, conditions, and any other pertinent details.
• Clean : This could imply that the “recap” provided is free from any ambiguities, modifications, or outstanding issues. It’s a finalized, clear, and concise summary of the terms both parties have agreed upon.

“Clean Fixture Recap” i n ship chartering refer to a clear and concise summary of the main terms and conditions of a finalized charter agreement.

When does Charter Party truly materialize?

Within the bounds of English jurisprudence, an agreement is deemed established when there is unambiguous consensus on all pivotal stipulations, barring any prior mutual agreements to the contrary. A specific format is not mandated. Thus, it is frequently encountered that parties contest the juncture of a definitive accord. To delineate this juncture, one must critically interpret the preceding dialogues that heralded the purported contract. For example, if the mutual intention mandates that there exists no binding contract until the parties endorse a charterparty, such intention ought to be lucidly articulated in their epistolary exchanges. Hence, preserving meticulous records of prior transactional exchanges, encompassing memos of meetings and telephonic discussions, becomes paramount.

Equally vital is possessing an astute understanding of the legal ramifications and the appropriate usage of terms like “subject to contract”, “subject to survey (consent or approval)”, and “subject to details”, all of which contribute to the determination of the existence of an irrevocable agreement.”

Charter Party Vs RECAP

In the shipping industry, terms like “Charter Party” and “RECAP” are frequently used to refer to various aspects of ship chartering agreements. Here’s an explanation:

• Definition : A Charter Party is a legal contract between the shipowner and the charterer, specifying the terms and conditions for the rental of a vessel or a specific space on the vessel.
• Contents : The agreement typically includes details about the cargo, the route, the rate of hire or freight, laytime, demurrage, dispatch, port of loading and discharging, and other terms and conditions pertinent to the voyage.
• Time Charter : Here, the vessel is hired for a specific period. The owner provides the crew and bears all operational costs, while the charterer pays for fuel and port charges.
• Voyage Charter : The vessel is hired for a specific voyage between the designated port of loading and port of discharging. The shipowner pays for all operational expenses.
• Bareboat (or Demise) Charter : The charterer takes over the vessel, providing their crew and bearing all operational costs. It’s almost like a lease.
• Purpose : The Charter Party serves as the primary contract governing the relationship, rights, and responsibilities of the shipowner and the charterer.
• Definition : A RECAP is a brief summary or synopsis of the main points of a charter party agreement. It’s essentially a condensed form of the Charter Party.
• Contents : The RECAP captures the essential terms and conditions of the agreement, such as the name of the vessel, load and discharge ports, rate of freight, demurrage rate, laytime, etc.
• Usage : After negotiations between the shipowner’s and charterer’s brokers, once both parties agree upon the main terms, they will issue a RECAP to summarize the agreement before the formal charter party document is drawn up and signed. It’s a snapshot of the key terms that both parties have agreed upon.
• Purpose : The RECAP allows both parties to quickly review and confirm the agreed terms. It’s a tool for clarity and ensures that there are no misunderstandings when the formal Charter Party is being drafted.

While the Charter Party is a detailed formal contract between the shipowner and charterer, the RECAP is a summarized version highlighting the essential terms agreed upon during negotiations. Both documents play crucial roles in the ship chartering process.

RECAP Legally Binding like Charter Party

A RECAP (Recapitulation) is a summarized version of the main terms and conditions that the parties (usually a Shipowner and a Charterer) have agreed upon during their negotiations. While the RECAP captures the essence of the agreement and is a reflection of the intent of both parties, its legal binding nature depends on the language used and the context in which it’s created.

• Generally, for a document to be legally binding, it needs to fulfill certain elements of a contract, such as offer, acceptance, consideration, and the intent of both parties to enter into a legal relationship.
• If the RECAP is explicitly framed as a binding agreement and both parties have shown clear intent to be bound by its terms (for example, through signatures or other forms of acknowledgment), it could potentially be deemed legally binding.
• However, if the RECAP is presented merely as a summary or preliminary document awaiting the formalization of a Charter Party, without clear intent from both parties to treat it as binding, then it might not be enforceable as a formal contract.
• A Charter Party is a detailed formal contract that is explicitly intended to be legally binding. Once signed by both parties, there’s a clear expectation that all terms and conditions will be adhered to.
• RECAP, on the other hand, is a tool used primarily for clarity and quick reference. Its enforceability hinges on how it’s presented and whether the parties intended for it to be binding.
• To avoid confusion or disputes, it’s essential to clarify the intent and status of a RECAP in the negotiation process. If both parties (Shipowners and Charterers) want the RECAP to serve as a binding agreement (even if temporary before a detailed Charter Party is executed), they should explicitly state this and possibly include signatures or other forms of acknowledgment.
• Otherwise, to maintain clarity, parties should specify that the RECAP is non-binding and is subject to the execution of a formal Charter Party.

In conclusion, while a Charter Party is typically a legally binding document, the l egal status of a RECAP depends on the intent of the parties and how the RECAP is framed . Always consult with legal counsel when drafting or entering into any form of agreement to ensure that the document’s intent and implications are fully understood.

Importance of Signing Charter Party

The signing of a Charter Party is a crucial step in the realm of maritime business, particularly in the process of chartering ships. The Charter Party is a binding legal agreement between the shipowner and the charterer, outlining the terms and conditions under which a vessel is chartered. Here’s why it’s important:

• Defines Rights and Obligations : The Charter Party clearly stipulates the rights, responsibilities, and obligations of both the shipowner and the charterer. It ensures that both parties understand and are aligned with their respective roles.
• Risk Allocation : This document details who bears the risks at various stages of the voyage. For example, it outlines who is responsible for the vessel, cargo, crew, and any damages that might occur, thereby mitigating disputes down the road.
• Financial Clarity : The Charter Party provides clarity regarding the financial arrangements, including freight rates, demurrage, laytime calculations, and other payments. This prevents financial misunderstandings and disputes.
• Operational Specifications : The agreement spells out specific operational aspects, such as the type and quantity of cargo, loading and discharging ports, and deadlines for voyage completion.
• Dispute Resolution : In case disagreements arise, the Charter Party often specifies the method and venue for dispute resolution. This can be through litigation, arbitration, or any other agreed-upon mode.
• Legal Protection : Having a written and signed agreement ensures that both parties have legal recourse in the event of non-compliance or breach. The Charter Party is enforceable by law and serves as a basis for any legal action.
• Transparency : A signed Charter Party provides transparency to all involved stakeholders, ensuring that there are no hidden terms or unclear clauses. This promotes trust and smooth collaboration between the parties.
• Standardization and Customization : While many Charter Parties are based on standard forms provided by organizations such as BIMCO, they can be tailored to suit specific needs and requirements of the parties involved, ensuring a flexible yet standardized approach.
• Provision for Sub-chartering : The Charter Party might also include clauses that address sub-chartering, where the charterer can charter the vessel to a third party. This is crucial for clarity and to avoid complications in operational and financial dealings.
• Force Majeure and Other Clauses : The Charter Party will often include provisions for unforeseen events or force majeure situations, providing guidance on how various unpredictable events, like natural disasters or political unrest, should be handled.

In essence, the signing of a Charter Party is analogous to entering into any other major contract, offering protection and clarity to both parties involved. Given the vast sums of money and valuable assets (like the vessel and its cargo) at stake in maritime operations, the Charter Party’s importance cannot be overstated. It serves as the foundation upon which a successful and conflict-free chartering relationship is built.

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Voyage Charter: Laytime and Demurrage

• First Online: 02 September 2021

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• Arun Kasi 2  

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This chapter covers laytime and demurrage in voyage charterparties. The various laytime definitions such as weather working day, etc and the charterer’s obligations arising from the laytime clause are considered.

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Box 16 and cl. 6(a) and (b).

E.g. Stolt Tankers v Landmark [2002] 1 Lloyd’s Rep 786 (EW HC).

[1908] 1 KB 499 (EW CA).

[1963] AC 691 (UK HL).

Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries and Food [1963] AC 691 (UK HL).

Dow Chemical (Nederland) BV v BP Tanker Co Ltd (The Vorras) [1983] 1 Lloyd’s Rep 579 (EW CA).

Margaronis Navigation Agency Ltd v Henry W Peabody & Co of London Ltd (The Vrontados) (HC) [1965] 1 QB 300, [1964] 2 All ER 296 (EW HC).

Another similar decision was reached in Total Transport Corporation v Arcadia Petroleum Ltd (The Eurus) [1996] 2 Lloyd’s Rep 408 (EW HC).

(1868) LR 2 QB 566 (EW HC), affirmed by the Court of Appeal in (1868) LR 3 QB 412 (EW CA).

[2015] SGCA 37, [2015] 5 SLR 178 (SG CA).

Houlder v General SN Co (1862) 3 F&F 170.

Christensen v Hindustan Steel [1971] 1 Lloyd’s Rep 395 (EW HC).

Compania de Naviera Nedelka SA v Tradax International SA of Panama City RP (The Tres Flores) [1974] QB 264, [1973] 2 Lloyd’s Rep 247, [1973] 3 All ER 967, [1973] 3 WLR 545 (EW CA).

Cobelfret NV v Cyclades Shipping Co Ltd (The Linardos) [1994] 1 Lloyd’s Rep 28 (EW HC).

Surrey Shipping Co Ltd v Compagnie Continentale (France) SA (The Shackleford) [1978] 1 WLR 1080, [1978] 2 Lloyd’s Rep 154 (EW CA).

Transgrain Shipping BV v Global Transporte Oceanico SA (The Mexico 1) (CA) [1990] 1 Lloyd’s Rep 507 (EW CA).

Ocean Pride Maritime Ltd Partnership v Qingdao Ocean Shipping Co (The Northgate) [2007] EWHC 2796 (Comm), [2008] 2 All ER (Comm) 330 (EW HC).

Sofial SA v Ove Skou Rederi (The Helle Skou) [1976] 2 Lloyd’s Rep 205 (EW HC).

Glencore Grain Ltd v Flacker Shipping Ltd (The Happy Day) [2002] EWCA Civ 1068, [2002] 2 All ER (Comm) 896, [2002] All ER (D) 219 (Jul), [2002] 2 Lloyd’s Rep 487 (EW CA).

E.g. Pteroti Cia Nav SA v National Coal Board [1958] 1 QB 469 (EW HC); Glencore Grain Ltd v Goldbeam Shipping Inc; Goldbeam Shipping Inc v Navios International Inc (The Mass Glory) [2002] EWHC 27 (Comm), [2002] 2 Lloyd’s Rep 244 (EW HC).

It is not compulsory that the destination point stipulated in the charterparty is a port or berth. It can also be other places like a sea mooring buoy or customary anchorage.

Cl. 6(c) (para 2).

Novologistics SARL v Five Ocean Corp (The Merida) [2009] EWHC 3046 (Comm), [2010] 1 Lloyd’s Rep 274 (EW HC).

Bulk Transport Group Shipping Co Ltd v Seacrystal Shipping Ltd (The Kyzikos ) [1989] AC 1264, [1988] 3 All ER 745, [1989] 1 Lloyd’s Rep 1 (UK HL).

[1950] 2 KB 194 (EW CA).

Oldendorff (E L) & Co GmbH v Tradax Export SA (The Johanna Oldendorff) [1974] AC 479, [1973] 3 All ER 148 (UK HL).

Federal Commerce and Navigation Co Ltd v Tradax Export SA (The Maratha Envoy) [1978] AC 1, [1977] 2 All ER 849 (UK HL).

See also Federal Commerce and Navigation Co Ltd v Tradax Export SA (The Maratha Envoy) [1978] AC 1, [1977] 2 All ER 849 (UK HL).

Navalmar UK Ltd v Kale Maden Hammaddeler Sanayi Ve Ticart AS (The Arundel Castle) [2017] EWHC 116 (Comm), [2017] 2 All ER (Comm) 1033, [2017] 1 Lloyd’s Rep 370 (EW HC).

There are a few LMAA awards that recognise this proposition. See Feoso (Singapore) Pte Ltd v Faith Maritime Co Ltd (The Daphne L) [2003] SGCA 34, [2003] SLR 556 (SG CA).

Bulk Transport Group Shipping Co Ltd v Seacrystal Shipping Ltd (The Kyzikos) [1989] AC 1264, [1988] 3 All ER 745, [1989] 1 Lloyd’s Rep 1 (UK HL).

[2011] EWHC 1361 (Comm), [2011] 2 Lloyd’s Rep 278 (EW HC).

North River Freighters Ltd v HE President of India (North River) [1956] 1 QB 333 (EW CA); Ionian Navigation Company Inc v Atlantic Shipping Company SA (The Loucas N) [1971] 1 Lloyd’s Rep 215 (EW CA); Aldebaran Compania Maritime SA, Panama v Aussenhandel AG Zurich (The Darrah) [1977] AC 157, [1976] 2 All ER 963 (UK HL); Freight Connect (S) Pte Ltd v Paragon Shipping Pte Ltd [2015] SGCA 37, [2015] 5 SLR 178 (SG CA).

Agios Stylianous Compania Naviera SA v Maritime Associates International Ltd Lagos (The Agios Stylianos) [1975] 1 Lloyd’s Rep 426 (EW HC).

Government of Ceylon v Societe Franco-Tunisienne D’armement-Tunis (The Massalia) (No. 2) [1960] 2 Lloyd’s Rep 352 (EW HC).

[2011] EWHC 1165 (Comm), [2011] 2 Lloyd’s Rep 177 (EW HC).

Aldebaran Compania Maritime SA, Panama v Aussenhandel AG Zurich (The Darrah) [1977] AC 157, [1976] 2 All ER 963 (UK HL).

The House of Lords overruled The Radnor [1955] 2 Lloyd’s Rep 668 (EW CA). The Radnor treated ‘time lost’ that did not admit laytime definition and exceptions when dealing with ‘time lost’ clauses.

Huyton SA v Inter Operators SA (The Stainless Emperor) [1994] 1 Lloyd’s Rep 298 (EW HC).

Moerland (Arnt J) K/S v Kuwait Petroleum Corpn (The Fjordaas) [1988] 2 All ER 714, [1988] 1 Lloyd’s Rep 336 (EW HC).

Seatrade Group NV v Hakan Agro DMCC (The Aconcagua Bay) [2018] EWHC 654 (Comm), [2018] 2 All ER (Comm) 843 (EW HC).

Inca Compania Naviera SA and Commercial and Maritime Enterprises Evanghelos P Nomikos SA v Mofinol Inc (The President Brand) [1967] 2 Lloyd’s Rep 338 (EW HC); Nereide SpA di Navigazione v Bulk Oil International (The Laura Prima) [1982] 1 Lloyd’s Rep 1 (UK HL).

Shipping Developments Corpn v v/o Sojuzneftexport (The Delian Spirit) [1972] 1 QB 103, [1971] 2 WLR 1434, [1971] 1 Lloyd’s Rep 506 (EW CA).

Inca Compania Naviera SA and Commercial and Maritime Enterprises Evanghelos P Nomikos SA v Mofinol Inc (The President Brand) [1967] 2 Lloyd’s Rep 338 (EW HC).

Oldendorff (E L) & Co GmbH v Tradax Export SA (The Johanna Oldendorff) [1974] AC 479, [1973] 3 All ER 148 (UK HL). See Chapter  14.4.2.1 for a discussion of this case.

Nereide SpA di Navigazione v Bulk Oil International (The Laura Prima) [1982] 1 Lloyd’s Rep 1 (UK HL).

The compensation payable by the charter, rightly, will be damages for detention, which may most of the time be same as the demurrage, unless the market rates have differed since the charterparty was entered into.

Sunbeam Shipping Co Ltd v President of India (The Atlantic Sunbeam) [1973] 1 Lloyd’s Rep 482 (EW HC): the charterer had a duty to secure ‘jetty challan’ for the ship to enter the port, where that was a requirement of the port authority.

Sociedad Financiera De Bienes Raices Sa v Agrimpex Hungarian Trading Company for Agricultural Products [Appeal in The Aello] [1961] AC 135, [1960] 3 WLR 145 (UK HL).

It follows that the ship could not issue notice of readiness.

Malaysian Contracts Act 1950.

Section 68 of the Malaysian Contracts Act 1950 identically provides.

See Chapter  12.6.1 .

Cl. 6(3) (para 2).

Tidebrook Maritime Corp v Vitol SA of Geneva (The Front Commander) [2006] 2 Lloyd’s Rep 251 (EW CA), speech of Rix JL: where the charterer requires early notice of readiness, the charter sanctions early commencement of laytime.

TA Shipping Ltd v Comet Shipping Ltd (The Agamemnon) [1998] 1 Lloyd’s Rep 675 (EW HC).

Galaxy Energy International Ltd v Novorossiysk Shipping Co (The Petr Schmidt) [1997] 1 Lloyd’s Rep 284 (EW HC), affirmed by the Court of Appeal in [1998] 2 Lloyd’s Rep 1 (EW CA).

See Tidebrook Maritime Corp v Vitol SA of Geneva (The Front Commander) [2006] EWCA Civ 944, [2006] 2 All ER (Comm) 813, [2006] 2 Lloyd’s Rep 251 (EW CA); Total Transport Corporation v Arcadia Petroleum Ltd (The Eurus) [1996] 2 Lloyd’s Rep 408 (EW HC).

[2010] EWCA Civ 713, [2010] 2 Lloyd’s Rep 257 (EW CA).

See Trafigura Beheer BV v Ravennavi SpA (The Port Russel) [2013] EWHC 490 (Comm), [2013] 2 Lloyd’s Rep 57 (EW HC).

Cl. 16 of Gencon 1994 form has detailed provision dealing with strikes.

Grant & Co v Coverdale, Todd & Co (1884) 9 App Cas 470, 53 LJQB 462 (UK HL).

Navrom v Callitsis Ship Management SA (The Radauti) [1988] 2 Lloyd’s Rep 416 (EW CA).

Cl. 6(c) (para 2): “… Time used in moving from the place of waiting to the loading/ discharging berth shall not count as laytime. …”

[1925] AC 799, [1925] All ER Rep 607 (UK HL).

Gem Shipping Co of Monrovia v Babanaft (Lebanon) SARL (The Fontevivo) [1975] 1 Lloyd’s Rep 339 (EW HC).

Blue Anchor Line Ltd v Alfred C Toepfer International GmbH (The Union Amsterdam) [1982] 2 Lloyd’s Rep 432 (EW HC).

Overseas Transportation Co v Mineralimportexport (The Sinoe) [1971] 1 Lloyd’s Rep 514 (EW HC), affirmed by the Court of Appeal in [1972] 1 Lloyd’s Rep 201 (EW CA).

[1920] AC 88 (UK HL).

[2002] 1 Lloyd’s Rep 786 (EW HC).

[1927] 1 KB 879 (EW CA).

[1905] 2 QB 267 (EW HC).

Universal Cargo Carriers Corp v Citati [1957] 2 QB 401 (EW HC).

Inverkip SS Co v Bunge [1917] 2 KB 193 (EW CA).

Wilson & Coventry Ltd v Otto Thoresen Linie [1910] 2 KB 405 (EW HC).

See Chapter  13.7 .

[2003] SGCA 34 (SG CA).

Dias Cia Naviera SA v Louis Dreyfus Corpn (The Dias) [1978] 1 All ER 724, [1978] 1 WLR 261 (UK HL).

Dias Cia Naviera SA v Louis Dreyfus Corpn (The Dias) [1978] 1 All ER 724; Nippon Yusen Kaisha v Marocaine de L’Industrie du Raffinage (The Tsukuba Maru) [1979] 1 Lloyd’s Rep 459.

Rich (Marc) & Co Ltd v Tourloti Cia Naviera SA (The Kalliopi A) [1988] 2 Lloyd’s Rep 101 (UK CA).

DGC Commodities Corp v Sea Metropolitan SA (The Andra) [2012] EWHC 1984 (Comm), [2012] 2 Lloyd’s Rep 587 (EW HC).

Which is identical to Article IV(2) of the Hague/Hague-Visby Rules.

K Line PTE Ltd v Priminds Shipping (HK) Co Ltd (The Eternal Bliss) [2020] EWHC 2373 (Comm), [2020] 9 WLUK 40 (EW HC).

Part II, cl. 15(c)

National Shipping Co of Saudi Arabia v BP Oil Supply Co (The Abqaiq) [2011] EWCA Civ 1127, [2012] 1 Lloyd’s Rep 18 (EW CA).

Waterfront Shipping Company Ltd V Trafigura AG (The Sabrewing) [2007] EWHC 2482 (Comm), [2008] 1 Lloyd’s Rep 286 (EW HC).

The Petroleum Oil and Gas Corporation of South Africa (Pty) Ltd v Fr8 Singapore Pte Ltd (The Eternity) [2009] 1 Lloyd’s Rep 107 (EW HC).

Emeraldian Ltd Partnership v Wellmix Shipping Ltd (The Vine) [2010] EWHC 1411 (Comm), [2011] 1 Lloyd’s Rep 301 (EW HC).

Nolisement (Owners) v Bunge and Born [1916-17] All ER Rep 734, [1917] 1 KB 160 (EW CA).

Zim Israel Navigation Co Ltd v Tradax Export SA (The Timna) [1971] 2 Lloyd’s Rep 91 (EW CA).

[1951] 1 KB 240, [1950] 1 All ER 768 (EW HC).

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Kasi, A. (2021). Voyage Charter: Laytime and Demurrage. In: The Law of Carriage of Goods by Sea. Springer, Singapore. https://doi.org/10.1007/978-981-33-6793-7_14

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Charter Parties

A charter party is a highly standardized written document that provides the contractual arrangements for one party (the charterer) to hire the carrying capacity of a vessel, either in whole or in part, owned by another party. Generally, charter parties are subject to the rules and requirements of contract law. Charter party forms are used worldwide, and many of them have been drafted to take into consideration the specific needs of particular trades. Other charter parties are more general in form and are not adapted to a specific trade.

There are three basic types of charter parties: a voyage charter, a time charter, and a demise charter.

Under a voyage charter, the owner of the vessel agrees to carry cargo from one port to another on a particular voyage or voyages. The vessel is manned and navigated by the owner�s crew. A voyage charter may be used as a contract of affreightment�that is, for the shipper�s purpose of sending its goods from the port of origin to a port of destination. To the extent that a voyage charterer obtains only the carrying capacity of a particular vessel, the charterer is not responsible for maintenance, repairs to the vessel, or injuries to third parties arising from the crew�s operational negligence. A voyage charterer usually is not liable for expenses such as bunkers (fuel).

A time charter is a contract for the use of the carrying capacity of a particular vessel for a specified period of time (months, years, or a period of time between specified dates). As with a voyage charter, the vessel owner under a time charter is responsible for the navigation and management of the vessel, subject to conditions set out in the charter party. The vessel�s carrying capacity is leased to the charterer for the time period fixed by the charter party, allowing for unlimited voyages within the charter period. Therefore, the vessel is under the

charterer�s orders as to ports of call, cargo carried, and other matters related to the charterer�s business. The master and crew remain employees of the owner and are subject to the owner�s orders with regard to the navigation and management of the vessel. Because a time charterer obtains only the carrying capacity of a particular vessel, the charterer is not responsible for maintenance, repairs to the vessel, or injuries to third parties arising from the crew�s operational negligence. Time charterers usually are responsible for expenses of operating the vessel.

In a demise charter, the charterer not only leases the carrying capacity of the vessel but, unlike a time or voyage charter, also obtains a degree of control over the management and navigation of the vessel. As such, the charterer becomes, in effect, the owner of the vessel pro hac vice for the duration of the charter. The test for whether a charter party is a demise charter is whether the owner has turned over to the charterer �the possession, command, and navigation� of the vessel during the period it is in effect. When a vessel with a preexisting master and crew is under a demise charter, the master and crew may remain on the vessel and operate the vessel for the charterer as a provision of such agreement. The master and crew are subject to the orders of the charterer and its agents, and they are considered its employees. Under a demise charter, an owner may also turn over the vessel to the charterer without a master and crew. A demise charter of this type is also referred to as a bareboat charter.

Under a demise charter, the legal relationship between the owner and the charterer is significantly different from that created by a time or voyage charter. Because a demise charter transfers the possession and control of the vessel to the charterer, one who takes a vessel on demise is responsible for maintenance, repairs, or damages caused to third parties by the crew�s negligent navigation of the vessel. Thus, the owner who has demised its vessel will generally not be liable in personam for the fault or negligence of the crew�the charterer will be

primarily liable. Demise charterers usually are responsible for the vessel�s operating expenses. In addition to these three types of charter parties, a number of variations have been created to accommodate containerisation and the changing nature of the shipping industry.

The Contract

Most charter party transactions use standardized printed forms. Some of the clauses contain blank spaces that require the parties to supply information. Typically the parties must specify the names of the owner and of the charterer and the amount of payment, referred to as �hire� or �charter hire.� Obviously, a voyage charter must specify the voyage to be undertaken, and a time charter must specify the length of time. In addition, a time charter requires information about the physical characteristics of the vessel and any restrictions on the use of

the vessel. The charter form also sets out standard terms and conditions that apply under the contract. Charter parties typically are negotiated contracts and, in contrast to transport pursuant to bills of lading, are often marked up�that is, provisions are added, deleted, or modified. These changes reflect the market and the relative financial strength of the owner and the charterer.

Typical Areas of Dispute

Freedom of contract is the touchstone to the resolution of charter party disputes between owner and charterer. The rules applicable to charter party disputes derive from the terms of the charter party itself and generally do not implicate public policy concerns. These are contracts between businesspersons, negotiated at arm�s length, often through intermediaries (i.e., brokers who are experts in the field). It is often assumed that the contracting parties are sophisticated and that considerations of consumer protection are absent. Confirmation of this view is the fact that key terms, such as rate of charter hire and length of charter term, are often subject to hard bargaining. This does not mean that the parties negotiate from equal positions of strength. Like other areas of commercial transactions, supply and demand may strengthen an owner�s hand when vessels are in short supply or may put charterers in a better position when there is a surplus of tonnage available in the charter market. The advantages that inhere in these circumstances are not the equivalent of overreaching.

Most terms used in standard charter parties are terms of art that have well-established and well-understood meaning within the industry. Old-fashioned as some may seem, the terms (including those described below) ought to be interpreted and applied in litigation as they are understood in the industry.

Misrepresentation

The term �misrepresentation� includes not only fraud or intentional misrepresentation but also any situation where a vessel does not conform to factual representations as stated by the owner in the charter party. Courts today take a pragmatic approach, and resolution of a dispute may hinge both on the materiality of the representation or undertaking and whether the charterer seeks damages or termination of the contract.

Size and Speed�A breach of an express warranty as to size and speed may entitle a charterer to recover damages.164 At the election of the charterer, the breach of such an express warranty may provide a basis for rescission. Rescission of the charter party is available only under circumstances where the breach is material or where it is discovered before the vessel has been accepted by the charterer.  

Seaworthiness�In general, a shipowner has a duty to ensure that his or her vessel is seaworthy and capable of transporting the cargo for which it has been chartered.166 A charter party that describes the vessel as �with hull, machinery, and equipment in a thoroughly efficient state� or �that on delivery the ship be tight, staunch, strong and in every way fitted for the service� gives rise to a warranty of seaworthiness. In the absence of an express and unambiguous stipulation or a controlling statute to the contrary, a warranty of seaworthiness will be implied by law.

The parties may stipulate that there is no warranty of seaworthiness, but such agreements are not favored168 and will be enforced only if they �clearly communicate that a particular risk falls on the [charterer].�

Breach of the warranty of seaworthiness does not by itself confer upon the charterer the right to repudiate. Repudiation by a charterer is permissible only where the breach of the owner�s undertaking of seaworthiness is so substantial as to defeat or frustrate the commercial purpose of the charter.170 This view is consistent with the modern approach that the undertaking of seaworthiness is to be treated like any other contractual undertaking. Thus, an insubstantial breach that does not defeat the object of the contract will not justify repudiation unless expressly made a condition precedent to a party�s performance of its obligations.

Likewise, the terms of the charter party must be examined carefully because the parties may have agreed to a lesser undertaking with respect to seaworthiness. For example, an owner may have expressly undertaken only to exercise �due diligence� to provide a seaworthy vessel.

Temporary Interference with Charterer�s Use of the Vessel

Charter parties commonly provide for contingencies, short of frustration, that result from the inability of the charterer to use the ship as intended. This may occur in the case of a mechanical malfunction or illness of the crew or some other factor that renders a vessel temporarily unusable. A common provision in charter parties is an �off hire� or �breakdown� clause. Under an off hire clause, a charterer�s duty to pay hire ceases in the event that it is deprived of the use of the vessel, either in whole or in part, as a result of some deficiency of the vessel, its equipment, or the crew. There are many variations in the wording of an off hire clause, and sometimes there are disputes as to the applicability of the particular clause in question.

Sometimes the inability to use a vessel is unrelated to the physical condition of the vessel itself or its crew, such as where a strike by longshoremen or government intervention prevents a vessel from sailing or from loading or discharging cargo. Other clauses in the charter party may determine who bears the risk of such events. Under a �mutual exceptions� clause, for example, if a party is prevented from fulfilling its obligations because of the occurrence of a circumstance enumerated in the mutual exceptions clause, such non-performance is not considered to be a breach of the charter party contract. �Restraint of princes� (an embargo) is usually one of the circumstances enumerated in a standard mutual exceptions clause. Thus, the action of a government that prevents an owner from fulfilling its obligation to the charterer�for example, by placing the vessel in quarantine�will excuse the non-performance of the owner. Other circumstances commonly excepted are acts of God or of public enemies.

Safe Port and Safe Berth Provisions

In time and voyage charters there are express or implied obligations that the charterer will not require the vessel to call at an unsafe port or enter an unsafe berth to load, discharge, or take on bunkers. Time and voyage charter parties usually contain a provision referred to as a �safe port/safe berth� clause that purports to place on the charterer the risks to the vessel posed by the particular ports at which the vessel will call and the berths where the vessel will lie. It is not clear whether this clause in a charter party obliges the charterer to �warrant�

the safety of ports and berths entered. A safe berth clause does not impose strict liability upon a voyage charterer, and the charterer is not liable for damages arising from an unsafe berth where the charterer has exercised due diligence in the selection of the berth. Where a time charter party includes a safe port/berth clause, the charterer warrants the safety of the berth it selects. In any event, under a safe port/berth clause the master of a vessel may refuse to proceed to an unsafe port/berth nominated by the charterer without placing the owner in breach of the charter.

Notwithstanding a safe port/berth provision, negligence on the part of the master may relieve a charterer of its liability to the extent that such negligence permits the fact finder to conclude either that the port was safe because the peril could have been avoided by prudent seamanship or that, in the case of an unsafe port, the master�s conduct was an intervening, superseding cause of the resulting damages. Obviously, not every risk taken by a master will be considered a superseding cause. If the casualty results from the combined negligence of the charterer and the vessel�s master or other agent of the owner, damages are to be apportioned according to the respective fault of the parties.

Demurrage and Detention

In a time charter, the charterer has the vessel�s carrying capacity at its disposal for a specified period of time. As such, it makes no difference to the owner whether the charterer makes efficient use of the time chartered vessel. By contrast, in voyage charters, the time during which the voyage charterer may use the vessel is measured by the length of time it takes to complete the voyage. Obviously, it is to the owner�s advantage to have the voyage completed as quickly as possible: The sooner an owner has the vessel at his disposal, the sooner he can use it for his own purposes or charter it to another person. Consequently, a frequent issue in voyage charter party disputes is the shipowner�s claim for �demurrage.�

Voyage charter parties provide a time frame for loading and unloading the vessel. Under such a provision, the charterer is allowed �laytime��a specified period (hours or days) during which it can perform its loading and unloading operations without incurring charges in excess of the agreed rate of charter hire. These clauses vary greatly. If a charterer takes longer to load or discharge cargo than is provided in the charter party (i.e., it exceeds its laytime), it will be charged an additional amount called �demurrage.� Thus, demurrage refers to the sum that a charterer agrees to pay for detaining the chartered vessel for that period of time that exceeds the laytime. It should be noted that where a charterer completes loading or unloading in a period of time less than that specified as laytime, the charterer has conferred a benefit on the owner and may be entitled to financial allowance referred to as �dispatch.�

A typical demurrage clause in a charter party specifies the amount of demurrage that must be paid and the maximum amount of time allowed for demurrage. In this respect, demurrage should be distinguished from detention. Whereas demurrage is a contractual charge imposed on the charterer for exceeding laytime, detention is a legal remedy, in the form of damages, available to the shipowner after the period during which demurrage has expired.180 Nonetheless, detention is recoverable only where the owner can demonstrate that it has sustained damages, such as an opportunity cost.

A charter party may include a clause permitting the owner to withdraw the vessel where hire payments are not made in accordance with the requirements set out in the written agreement. A shipowner may insist on strict compliance with these requirements; and where these requirements are not complied with, courts are likely to uphold the owner�s right to withdraw its vessel. Owners may not withdraw a vessel while cargo is on board.

Subcharters

The right of a charterer to sublet or subcharter a vessel depends on the wording of the charter party. Charter parties often expressly authorize a charterer to subcharter the vessel and usually specify that a subcharter arrangement does not relieve the principal charterer of its obligations to the owner under the head or primary charter party. The owner is not in privity of contract with subcharterers who may not rely on the terms either expressed or implied in the head charter

party. The head charter party may, in order to protect the owner�s right to hire, contain a provision giving the owner a lien on subfreights whereby the owner steps into the shoes of the charterer with respect to freight due the charterer from cargo interests.

Liability of the Owner for Damage or Loss of Goods

Charter parties, per se, are excluded from the terms of the Carriage of Goods by Sea Act (COGSA). Any disputes between the owner and charterer must be resolved according to the terms of the charter party.   Courts generally apply the rule of freedom of contract in the interpretation and enforcement of charter parties. This approach enables the parties to bargain freely and to include in the contract any stipulation allowed by law. As such, the parties are free to incorporate the terms of COGSA by reference into the charter party, and they frequently do. Thus, various provisions of COGSA often become terms of a charter party through contractual stipulation. The parties are, of course, free to modify, or even exclude, COGSA provisions in the contract. Such modifications are permissible as long as COGSA does not apply by operation of law.  

Even where a carrying vessel is under charter, however, there are circumstances in which COGSA is applicable as a matter of law. This occurs where the owner has issued a bill of lading to the charterer, who in turn has transferred the bill of lading to a third party, such as a consignee. These situations are discussed in the following section.

Arbitration Clauses

Most charter parties contain a clause whereby the parties agree to resolve by arbitration disputes that arise under the charter party. These provisions are enforceable and, under certain circumstances, may bind others, such as a consignee.

• Proforma Invoice
• Commercial Invoice
• Purchase Order
• Bill Of Lading
• Multimodal Bill Of Lading
• Charter Party Bill of Lading
• Freight Forwarder Bill of Lading
• Air Waybill
• Certificate of Origin
• Packing List
• Cargo Insurance Policy
• Letter of Credit
• Cash Against Documents
• Open Account
• Freight Forwarders
• Container Load Plans
• Calculating Pallet Loads
• Refrigerated Shipments
• Demurrage and Detention Charges
• Transit Times
• Cargo Inspections
• Cargo Insurance

What are the differences between voyage and time charter parties?

• BIMCHEMTIME 2005 is a standard format time charter party contract , which is created by BIMCO, is used when chartering vessels carrying chemicals in bulk.
• Gencon 94  is a standard format voyage charter party contract , which is created by BIMCO, is used when chartering vessels carrying commodity cargoes in bulk.

• Under time charter party contracts, shipowner remains responsible for the technical operation of the vessel, but commercial control of the vessel is handled by the charterer. 
• Under time charter party contracts, shipowner must cover all costs associated with crewing, maintenance of the vessel and insurance, but vessel fuel consumption and port charges will be compensated by the charterer.
• Under voyage charter party contracts both technical and commercial management handled by the shipowner.
• Under voyage charter party contracts, shipowner is not only responsible for the costs associated with crewing, maintenance of the vessel and insurance, but also pays for all the costs of the voyage, including bunkers and port charges.
• Time charter party contracts are signed for a limited period of time without dictating a fixed route to the charterer. During the charter party contract period, the charterer could operate the vessel commercially within allowed routes freely.
• Voyage charter party contracts are signed to carry specific amount of goods between pre-determined route. Under voyage charter parties shipowners carry pre-defined cargo between pre-determined ports. Once the transportation is completed, the voyage charter party contract comes to an end.
• Under time charter party contracts charterers pay daily hire to the shipowners of the vessels.
• Under voyage charter party contracts charterers are obliged to pay the freight to the shipowners. Freight is calculated either according to the quantity of cargo loaded or carried, or a lump sum freight (money paid to shipper for a charter of a ship up to stated limit irrespective of quantity of cargo).

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• September 2012

A shipowners duty to provide a seaworthy ship under the charterparty

Saif Almobideen

It is worth noting initially that the Shipowners Duties are the Charterers’ Rights, the various duties of the Shipowners can be summarised as follows:

• To provide a seaworthy ship which complies with the charterparty description;
• To properly and carefully load, handle, stow, carry, keep, care for, discharge and deliver the cargo;
• To comply with charterers’ legitimate employment instructions;
• To prosecute voyages with reasonable dispatch

THE DUTY TO PROVIDE A SEAWORTHY SHIP:

Most of contracts of carriage “particularly charterparties” provide expressly that the ship should be seaworthy. For instance,  clause 1 of ASBATANKVOY provides that “…and being seaworthy and having all pipes, pumps and heater coils in good working order, and being in every respect fitted for the voyage…”

Notwithstanding that, other clauses in the charterparties may not mention the seaworthiness expressly but nevertheless, have the same effect. For example; clause 2.1 of BPTIME states that; “Upon delivery the vessel shall be tight, staunch and strong and in every way fit for service…”

Even if there is no express seaworthiness clause, the duty to provide a seaworthy ship is, nevertheless, implied at law.

It was provided in Kopitoff v Wilson, [ (1876)  1 QBD 602 ], that “The shipowner is, by nature of the contract, impliedly and necessarily held to warrant that the ship is good, and is in a condition to perform the voyage then about to be undertaken, or, in ordinary language, is seaworthy, that is, fit to meet and undergo the perils of the sea and other incidental risks to which she must necessarily be exposed in the course of the voyage.”

Moreover, the same was enacted at the UAE Maritime Law , Article 227 under Section 2 of Chartering the Vessel for a Voyage, which provides: “The disponent owner must put the vessel in question at the disposal of the charterer at the time and place agreed in a seaworthy condition and properly equipped in such a manner as to carry out the voyage or voyages specified in the charter-party and likewise he must keep the vessel in such condition throughout the voyage or voyages the subject of the charterparty”. In addition Article 245 Section 3 “Time Charter” and Article 253 section 4 “Bareboat Charter” of the said law, provided the same wordings of the aforesaid article.

However, the same duty to provide a seaworthy vessel was lessened for the carrier, to only provide a seaworthy vessel before and at the commencement of each voyage, as per Article 272 (1) of the said law which provides that: “1. The carrier must before setting sail and upon the commencement of a voyage use the necessary care to put the vessel in a seaworthy condition and to fit it out, man it and provision it properly. He must prepare the holds and cold rooms and other parts of the vessel to receive, carry and preserve the goods”.

What is seaworthiness?

It was stated by Channell J in McFadden v Blue Star Line, [(1905) 1 KB 697], that: “A vessel must have that degree of fitness which an ordinary careful and prudent owner would require his vessel to have at the commencement of her voyage having regard to all the probable circumstances of it…Would a prudent owner have required that it (i.e. the defect) should be made good before sending his ship to sea, had he known of it? If he would, the ship was not seaworthy…”

Accordingly, the essential standard of seaworthiness depends not only upon physical fit, but also to the nature and age of the ship, the type of the carried cargo, the manner of voyage envisaged, and all other relative conditions.

It is worth noting that the following examples would amount to unseaworthiness breach of duty;

•  An incompetent crew
• A crew which is insufficiently instructed or insufficient in numbers
• Out of date charts
• Insufficient bunkers for the voyage (depends on the type of charterparty).
• Stowage which affects the safety of the ship.
• Deficient systems ashore or on board.
• The absence of documents required by law (including local law) for the satisfactory prosecution of the contemplated voyage e.g.  a deratting certificate.
• SMS or ISPS certificates are likely to be treated in the same way; however, documents which are not required by law (e.g. ITF Blue Cards) may not render the ship unseaworthy [The Derby (1985) 2 Ll. Rep 325].

What is Uncargoworthiness?

Cargoworthiness is categorised under the seaworthiness requirements, the vessel must be in every way reasonably fit to receive and carry the contemplated cargo in order to be considered as a seaworthy vessel. It was stated as well in “The Good Friend” [ (1984) 2 Ll. Rep 586] that the ship would be considered as uncargoworthy due to the presence on board of other cargoes which may affect the potential cargo.

The same was stipulated impliedly under Article 234 of the UAE Maritime Law, which provides that; “It shall not be permissible for the disponent owner to load upon the vessel or upon the part thereof which is chartered goods which are not the charterer’s without the charterer’s consent, otherwise the freight for the goods loaded without consent shall belong to the charterer who shall also have the right to claim compensation for damages if appropriate”.

Doctrine of Stages

It is crucial to tackle the issue of Doctrine of Stages, since the voyage might be performed in stages; therefore, the shipowner’s duty is to ensure that the ship is seaworthy for/ and in each stage prior the commencement of that stage.

For instance, a ship should be considered seaworthy with regards to stage 2 of a voyage, even if she does not have enough bunkers when leaving stage 1 to complete stage 2, provided that the carrier is able to obtain further bunkers at the end of stage 1.

Unseaworthiness gives rise to civil liability only if it actually causes loss or damage, and / or addressed in the charterparty, pursuant to Article 228 of the UAE Maritime Law. Bearing in mind that if loss or damage has been caused partly by unseaworthiness and partly by some other factors for which the carrier has a defence under the contract of carriage, or the applicable regime, then the carrier is not entitled to rely on that defence unless he can prove precisely the extent of the damage/loss has been caused solely by the exempted event.[ Smith Hogg v Black Sea (1940) AC 99].

Article 228 of the UAE Maritime Law provides expressly that: “The lessor shall be liable for any damages arising to the goods received by the master on board the vessel within the provisions of the charter-party, unless it is established that the lessor fulfilled his duties referred to in the preceding and the damage did not arise from his default.” Accordingly, the aforesaid article affirms the principal that a shipowner shall not be liable to any loss or damages arise to the cargo, if so proved that he exercised his duty of providing a seaworthy ship.

When is seaworthiness relevant?

Seaworthiness timing issue is significantly relevant in the absence of express terms to the contrary, which becomes as an implied duty. Under the common law, the carrier is under a duty to provide a seaworthy ship at the commencement of the cargo loading in order to consider his vessel as a cargoworthy vessel satisfies the purpose of the charterparty, and at the commencement of the voyage to be considered as a seaworthy.

However, where there are some express terms to the contrary, the carrier’s duty will depend upon the construction of the particular term. Such duty might commence at the date of the charter, as provided for example in line 5 of NYPE, or the date of delivery into the charter (e.g. clause 2.1 of BPTIME) or, additionally, throughout the charter (e.g. clause 1 of BPVOY 4).

On the other hand, under the perspective of the UAE Maritime Law, Articles 227, 245 and 253 require the shipowner to provide a seaworthy vessel at the agreed time and location in the charterparty and shall continue throughout the voyage(s). However, with regard to the carrier, the same has a duty to provide a seaworthy vessel before and at the commencement of the voyage, pursuant to Article 272 of the aforesaid law.

How does the duty considered to be broken?

The duty to provide a seaworthy ship will be considered as breached/broken in various situations depending upon the applicable regime.

Firstly; in the absence of (a) The Hague or Hague-Visby Rules; or (b) express terms to the contrary in the charterparty; the carrier’s duty is to provide a seaworthy vessel in fact. Therefore, if the vessel is not seaworthy in fact then the  carrier shall be liable if the unseaworthiness caused loss or damage to the cargo, even if the defect was latent and not discoverable by due diligence.

Secondly; When The Hague or Hague-Visby Rules are applicable, then the severe duty aforementioned shall be replaced by a mere duty to exercise due diligence to ensure that the vessel is seaworthy before and at the commencement of the voyage, by a virtue of Article III and IV rule 1 of the Hague/ Hague Visby Rules..

Thirdly; Under the UAE Law, the shipowner’s duty is to provide a seaworthy vessel at the agreed time and location stated in the charterparty and shall continue throughout the voyage(s), and the carrier’s duty is to provide a seaworthy vessel before and at the commencement of the voyage, failure to do so by any of the concerned parties, this will establish a liability for any damages arising to the goods, unless it is established that the concerned parties satisfied the duties referred to in UAE Maritime Law and the damage did not arise from such default, as established in Article 248 of the UAE Maritime Law, which provides “1.The disponent owner shall be responsible for damage to the goods if such damage arises out of his default in carrying out his obligations”.

THE ONUS OF PROOF

In conclusion, the onus of proof with regards to loss of damage to a cargo caused by unseaworthiness is regulated by the applicable law, for instance under the common law, if the cargo claimant alleges that the loss or damage has been caused by unseaworthiness, then he has the onus of proof to establish the followings:

(i) That the vessel was unseaworthy at the beginning of the voyage; and that (ii) The loss or damage has been caused by such unseaworthiness.

Accordingly, if he proves (i) and (ii) then there is a assumption that the carrier has not exercised due diligence to make the ship seaworthy and therefore, the onus is then on him  to prove that he has in fact exercised due diligence.[ Minister of Food v Reardon Line (1951) 2 Ll. Rep 265] However, if he fails to prove the same, then the carrier will not be entitled to rely upon the exceptions given in Article IV, rule 2 of the Hague/Hague Visby Rules.

On the other hand, if the carrier succeeds in doing so, then he can rely upon the exceptions in Article IV Rule 2 to defend his liability.[ “Eurasian Dream” (2002) 1 Lloyds Rep. 719] With regards to the UAE law, the onus of proof is on the carrier (lessor), since the liability to any loss or damages arise to the cargo, is a presumed one, unless the carrier proves the contrary and his satisfaction to the obligations stipulated in the articles of the Maritime Law.

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How to Charter a Boat

If you want to sail off into the sunset, at least temporarily, you need to understand how to get aboard first.

By Lauren Sloss

This time of year, it’s an inevitable thought: Life would be that much better out on the water. Specifically, on a boat.

Even if you have neither a boat nor boating experience, it’s never been easier to make your nautical dreams come true — whether you want a day trip on your local lake or a fully staffed multiday voyage in a far-flung locale. Here are the initial questions that will help you plan an adventure on the water.

Whom are you traveling with?

Thinking about the size and dynamic of your group is an important first step, even if you are simply going on a day trip. Will children be on board? How old? What about elderly parents?

Dan Lockyer, the chief commercial officer of Dream Yacht Worldwide , strongly encourages travelers to determine group size — and, ideally, get people committed — before booking.

“The location that you want to go to, the time of year that you want to go, the type of boat that you want will entirely depend on the makeup of the group that you’re sailing with,” Mr. Lockyer said.

Do you want to captain, or do you want a captain?

Different charter companies specialize in certain locations, types of boats, itineraries and services. Some companies offer the opportunity for a “bareboat” charter, in which you rent the boat and take on the navigation and provisioning yourself, while others exclusively offer fully staffed options, including a captain and a cook.

If you want to captain the boat yourself, almost all outfits require some kind of proof of sailing or boating experience, often in line with local regulations.

Edward King, 45, an executive at a streaming company based in San Francisco, is experienced in sailing the city’s waterways. But on vacation, he said he would prefer to let a captain and crew take the lead.

Mr. King said he appreciates a captain who is familiar with both the local waters — “they’ll know how to avoid sailing into a certain sandbar,” he said, — as well as the local attractions.

In contrast, Matt Blake, 38, a software engineer based in Oakland, Calif., was eager to grow his sailing experience during a recent trip to La Paz, Mexico, with his fiancée. He hired a captain but made clear that the captain was there to help and teach.

Where do you want to go?

“Do you want something that’s more culturally oriented? Nature oriented? An adventure trip?” asked Mary Curry, the voyage product director of Adventure Life , which offers small group tours and private trips on land and on water around the world.

That answer can determine your destination. Popular cruising grounds include the Caribbean, Croatia, Alaska and French Polynesia, but the sky — or the sea — is really the limit. For help narrowing your focus, travel advisers often have relationships with charter companies or outfits around the world, and sailing publications offer recommendations.

Kyla Malkani, who has had experience with charters working as a destination wedding planner, recommends consulting the concierge of waterfront hotels, particularly for short-term or day rentals.

“A lot of times they will have either their own fleet or they will have some sort of connection at a dock,” said Ms. Malkani, 37, who is based in Washington, D.C., and is currently working as a content creator and freelance event planner.

What kind of boat?

Where you want to travel and for how long will likely determine the kinds of boats that are available to you. Crucial at this point, too, is an understanding of the boat’s layout and amenities.

“You definitely want to choose the right kind of boat,” said Ms. Malkani. “If you want more adventure, a sailboat is nice. If you’re looking for a luxury party environment, a yacht is best. And if you’re looking for something smooth, for older people or with kids, a catamaran is great.”

David Barclay is a luxury travel adviser who has also chartered boats for his own vacations.

“You want to match what the travelers want to what the boat offers,” he said.

Perhaps a group of friends might not mind a catamaran with functional but not luxurious marine bathrooms, but a multigenerational group might prefer more high-touch amenities.

When should I book?

Often, charter trips are once-in-a-lifetime experiences that require a great deal of advanced planning.

“You may have a specific place you want to go, or a specific time of year you want to travel,” said Mr. Barclay. “And some places just aren’t good at certain times of year.”

Naturally, you don’t want to be at sea in the Caribbean during hurricane season, or in the Mediterranean during winter storms. But you also might want to avoid peak cruising seasons, too.

The first three weeks of August are quite popular, said Mr. Lockyer. “If you have some flexibility and can travel in early July, you’ll get the same sort of great weather, a greater selection of boats and the anchorages won’t be as crowded.”

How much does it cost?

Charter costs are incredibly variable, dependent on all of the factors coming into play: your boat type and size, your destination, your group size, the amount of crew you’d like and the amenities on board. That said, costs could range anywhere from $2,000 for a day on a sailboat to hundreds of thousands of dollars for a multiday mega-yacht charter. Have a budget in mind when beginning your research process.

What if I didn’t plan far in advance?

While advanced planning is encouraged, and often necessary for bigger boat trips, it’s possible to book a boat last-minute.

Boatsetter , an Airbnb-like platform for boats, is a good resource for last-minute bookings, especially for day trips, and even has an Instant Book option for down-to-the-wire bookings.

“If it’s for a special event, or around major holidays, you may want to book a month or two in advance. But for general bookings, you can find options within a week or two,” said Kim Koditek, Boatsetter’s head of brand strategy and communications, of the company’s overnight offerings, which appear on their platform under the luxury yacht charters category .

Ms. Malkani has used Boatsetter for some of her charters, most of which have been booked with a specific goal in mind.

“I’m a sunset chaser,” she said. “My husband and I just really love being on the water, and we always try to squeeze in some sort of boat day activity when we’re traveling.”

For more travel advice, visit our collection of Travel 101 tips and hacks.

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