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10 Charterparties

• Published: January 2016
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This chapter analyses charter parties-the term used to describe contracts for the use of ships in trade; it is often shortened to ‘charter’. The persons involved in a charter are the owners of the ship and the persons who require the use of the ship, the charterers. Sometimes there is a chain of charters relating to the same ship; in such a case, the first charterers will be described in the second charter as the ‘disponent’ owners while the second charterers will be called the sub-charterers. The chapter looks into the three main types of charter, namely the demise or bareboat charter, the voyage charter, and the time charter. In return for carrying the cargo, the charterers pay the owners a sum of money known as ‘freight’ which may be calculated at a given rate per tonne of the cargo carried or it may be a lump sum.

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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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Ship Chartering Process – The Ultimate guide

When a ship is taken on rent, it is known as ship chartering. Just as people take an apartment or a car for rent, some people may rent a ship based on their requirements. It could be to transport passengers or cargo.

Renting a ship is known as ship chartering and it begins with the shipowner and a second party entering into an agreement. In shipping parlance, this agreement is known as a charter party.

The party that rents out the ship is the shipowner and the second party who is taking the ship on rent is known as the charterer.

Who brings these two parties together?

Shipbrokers play an important role in bringing the right shipowner and charterer together and in finalizing the terms of the agreement between them.

Typically, someone who wants to take a ship on a lease would approach a shipbroker to find the right vessel that suits their purpose.

As we can see here, there are three parties in the process of ship chartering:

– the shipowner who owns the vessel being rented,

– the charterer who requires the ship on rent, and

– the shipbroker who has helped to bring them together.

Let us take a quick look at the roles of each of these parties.

Table of Contents

A shipowner may be an individual or an organization who owns merchant ships that are registered under their name with a ship registry. Merchant ships carry cargo or passengers for a charge.

Shipowners are usually members of the regional chamber of shipping or the International Chamber of Shipping (ICS). This global body is responsible for all regulatory and operational issues to do with shipping. Legal issues that crop up in the shipping business are also handled by the ICS.

Someone who wants to rent a ship, either to transport cargo or passengers, is called a charterer. The cargo may or may not belong to the charterer. The charterer may be transporting it on behalf of a different party.

Sometimes a charterer may take a vessel on lease and re-rent it to another party for the transport of cargo or passengers, for a profit.

The charterer plans the ship’s voyage and the arrangements for the handling of cargo during loading and unloading. As such, he is responsible for the safety of the ship, its crew, and the cargo.

The charter party is signed between the shipowner and the charterer.

Like all other brokers, shipbrokers also help to identify the right customer for a shipowner who wants to rent his ship or vice versa. For their services, they charge a fee or a commission to the shipowner. The commission may be a percentage of the total freight paid to the shipowner by the charterer.

Sometimes, a shipowner might appoint a full-time shipbroker for getting business. In the ship chartering business, it is common to find brokers who specialize in the chartering of certain types of vessels. It could be for the transportation of goods such as dry bulk, liquid bulk, etc.

A shipbroker is not liable for the ship, its operations, or the cargo that it carries. He is just the intermediary between the shipowner and the charterer.

The Institute of Chartered Shipbrokers

The Institute of Chartered Shipbrokers (ICS) founded in 1911 is a professional body that is recognized worldwide among the shipping fraternity. It was brought under the British Royal Charter in 1920.

Based in London, the Institute of Chartered Shipbrokers is considered the representative body of the many shipbrokers and ship managers on a global level. Through its various courses, it certifies qualified and experienced individuals to become professional shipbrokers.

Ship Registry

The authority or body that registers a merchant ship is known as a ship registry. It may be a government ship registry or a registry owned by private organizations such as the Lloyds Registry, Bureau Veritas, Indian Register of Shipping (IRS), etc.

Every ship has to be registered whereby it gets its nationality and confirmation of ownership. Each registered ship comes under the jurisdiction of the law of the country where it is registered, known as the flag state. Some countries or organizations may register only the ships of that particular country. Such organizations are known as National Registries.

Organizations that are open to register both national, as well as ships of other countries, are called Open Registries.

The 3 Main Types of Ship Charters

Voyage charter.

This is the most common type of ship charter. A voyage charter normally involves renting the vessel as well as its crew for a particular voyage between two or more ports. The rent will be based on the quantity or weight of the cargo that is carried on the voyage or it could be a fixed amount that is agreed upon between the parties.

Time Charter

When a ship is hired for a certain period, it is known as a time charter. As in the other types of charters, the vessel is rented along with the crew but for a stipulated period. The charter party will clearly state the terms and conditions of the voyage, the agreed period of hiring, the type of cargo to be carried, etc.

In a time charter, the charterer may pay a daily or a monthly rate based on the deadweight ton.

Bareboat Charter

In the bareboat charter, the vessel is operated and managed by the charterer’s crew and vessel management staff. The shipowner will only be looking after the ship’s technical management and matters relating to port operations.

Responsibility for the safety of the ship and all the financial settlements with outside parties will be with the charterer for the duration of the charter party. A bareboat charter is also known as a demise charter.

Charterparty

The charter party is a contract between the shipowner and the charterer. It states the responsibilities of both these parties with regard to the ship charter.

The charter party must be detailed and cover all aspects of the charter, especially points like re-renting of the vessel by the charterer, the type of cargo to be loaded on the ship, and ports of call .

In ship chartering, all the parties involved should be aware of the various details that go into the making of a successful charter party or fixture.

The shipowner, as well as the charterer, must be aware of the background of the other, their financial standing, and business reputation.

Just as the shipowner must know the type of cargo that is to be carried on the ship and its date of sailing etc. the charterer should be aware of the cargo-handling capacity of the vessel and its flag.

It would do the shipbroker good if he knew all these details before approaching a prospective client.

You might also like to read:

• Who is a Shipping Agent?
• Who is a Container Surveyor?
• Who is a Marine Surveyor – Responsibilities, Qualifications, and Skills
• Who is a Harbour Master (Port Master)?
• NOTIFY PARTY in Shipping – Everything You Wanted To Know

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About Author

Hari Menon is a Freelance writer with close to 20 years of professional experience in Logistics, Warehousing, Supply chain, and Contracts administration. An avid fitness freak, and bibliophile, he loves travelling too.

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Voyage charters – an update on the assessment of damages following repudiatory breach by charterers

Global |  Publication |  March 2016

Much has been written in recent years concerning the quantification of damages for breach of a time charter. Little has, by comparison, been written concerning the equally important quantification of damages for breach of voyage charters. The recent decision of Louis Dreyfus Commodities Suisse SA v MT Maritime Management BV, “MTM Hong Kong” [2015] EWHC 2505 (Comm) provides both a welcome addition to the body of law addressing this important point and much needed clarification of the damages available to an owner of a ship on voyage charter, following breach by a charterer.

The ship MTM Hong Kong was chartered on an amended Vegoil form for the carriage of crude/refined vegoil from one or more safe ports South America to one or more safe ports Gibraltar-Rotterdam. Prior to this charter being performed, the ship suffered a grounding in the River Congo which caused delay, the consequences of which led to the owners accepting the charterers’ repudiatory breach which brought the charter to an end.

The owners continued to direct the ship to South America in aid of a substitute charter. After a lengthy delay, a substitute charter was concluded from Argentina to Rotterdam. The substitute charter was performed and the ship completed discharge on 12 April 2011 in Rotterdam.

If the original voyage charter had been performed, the voyage would have taken 43.6 days, completing on 17 March 2011. The ship would then have carried a cargo of urea ammonium nitrate (UAN) from the Baltic to the United States, followed by a chemical cargo from the United States to Europe.

Owners’ claim

The owners claimed damages consisting of the difference between:

• the profit which the ship would have earned if not only the contract voyage but also the next two voyages (UAN to the United States and a chemical cargo back to Europe) had been performed; and
• the profit actually earned on the substitute charter to Europe.

The charterers disputed this method of calculating the owners' damages, contending that it was wrong (as a matter of law) to take into account the position up to the end of the substitute fixture which had terminated long after the charter voyage itself would have terminated. The charterers submitted that the correct approach was to apportion the earnings under the substitute charter, so as to reflect the amount earned up to the date on which performance of the voyage charter between the parties would have been completed.

Arbitration award

The arbitrators agreed with the owners. In doing so, they determined that the loss claimed had actually been suffered by the owners, that damages were to be awarded to compensate the owners and that there was no rule of law which prevented the full application of the compensatory principle by limiting damages by reference to the period when the contract voyage would have come to an end. The charterers appealed, contending that the arbitrators, in failing to award damages in accordance with the compensatory principle set out in Smith v M'Guire (1858) 3 H & N 554, made an error of law. They appealed pursuant to section 69 of the Arbitration Act 1996 .

The authorities on damages for repudiation of a voyage charter

In Smith v M'Guire, the court directed the measure of damages in the following terms:

… the legal damage was the loss which had arisen from the breach of the contract; that from the amount of the freight which the ship would have earned if the charter-party had been performed, there ought to be deducted the expenses which would have been incurred in earning it, and also any profit which the ship earned between the expiration of the lay days and the time when the employment of the ship under the charter-party would have ended. 1

The Court in MTM Hong Kong stated that the Smith v M'Guire measure represents the prima facie measure of damages for loss of the profit which would have been obtained by a shipowner from performance of the repudiated charter. It reflects the compensatory principle and the related principles of causation and mitigation. In most cases it would not be necessary (and wrong) to look beyond the damages resulting from the application of the prima facie measure. The Court, however, reasoned that the Smith v M'Guire measure is only the prima facie measure and, under appropriate facts, it may be necessary to depart from it in order to give full effect to the compensatory principle (see The Elbrus [2010] 2 Lloyd's Rep 315). The Court went on, however, to note that:

It is hard to imagine circumstances where the owners’ damages for loss of the profit which would have been obtained from performance of the repudiated charter could exceed the net freight (and if applicable demurrage) which would have been earned if that charter had been performed. An owner cannot lose more by way of lost profit from a charterer's repudiation than the freight (and any demurrage) which he would have earned by performing the charter. In that sense the net freight and demurrage represent a cap on the owners' damages. That is not because of any rule of law but simply because of the nature of the loss. 2

The position is different if the owner suffers a different kind of loss or, in other words, a loss which is something different from loss of the profit which would have been obtained from performance of the repudiated charter. In such a case there is no general reason why such a different loss should not be recoverable in damages in addition to damages for loss of the profit from performing the charter subject to the principles of causation, mitigation and remoteness. Failure to consider such a loss would, the Court reasoned, be contradictory to the compensatory principle.

In applying the principles to the facts the Court found:

Performance of the contract voyage would not only have enabled the owners to earn the freight payable under the voyage charter, but would have positioned the vessel in Europe without delay, ready to take advantage of the higher freights available in the North Atlantic market. The consequence of the charterers' repudiation was therefore twofold. The owners lost the charter freight and had to make do with the lesser freight earned under the Glencore charter. But they also suffered a delay in repositioning the vessel in Europe and thereby lost the benefit of the two transatlantic voyages which, on the arbitrators' findings, the vessel would have been able to perform in about the same time as was taken up by actual performance of the Glencore fixture. These were two distinct heads of loss, both of which were caused by the charterers' breach. 3

On this basis, the Court found that there was no reason why damages for the consequence of the ship’s delay in returning to the North Atlantic market should not be awarded in addition to the loss of the profit which would have been earned from performing the contract voyage.

Specific criticisms by charterers

The following four specific criticisms were made by the charterers and responded to by the Court:

• The arbitrators misapplied the compensatory principle. To this the Court responded: … the Smith v M'Guire measure does not represent compensation for losses other than loss of the profit which would have been earned from performing the contract voyage. It does not represent compensation for losses such as those which the owners sustained here. 4
• The arbitrators’ reasoning failed to keep distinct the loss which the owners had suffered and the steps taken by them in mitigation. To this the Court responded: Once the two kinds of loss for which the arbitrators were awarding compensation are recognised, it is apparent that (broadly speaking) the losses suffered consist of the net freight which would have been earned under both the contract voyage and the two follow-on transatlantic voyages, against which credit needs to be given for the net freight earned in mitigation under the Glencore charter. 5
• In extending the calculation of loss beyond the date when the contract voyage would have terminated, the arbitrators became involved in a comparison of what the ship actually did and what she would have done if the contract had been performed which was too speculative to provide a secure foundation for the award of damages. To this the Court responded: In some cases this would probably be a valid criticism … The arbitrators found that it was possible to make firm findings as to what this particular vessel would have done if the contract had been performed, given the trading options open to her and the market conditions prevailing at the time. They have found also that the actual and notional performance converged. Thus, after performing the UAN and chemical cargo voyages, the vessel would have been back in Europe at about the same time as she did in fact complete discharge under the Glencore fixture. There was, therefore, no need for calculations extending into the distant future, let alone to the end of the vessel's working life. 6
• The award was contrary to the allocation of responsibility under a voyage charter where charterers did not accept responsibility for losses after the period when the contract voyage would have been completed. To this the Court responded: In principle, loss which is caused by the breach and which is not too remote, i.e. which is within the reasonable contemplation of the parties, should normally be recoverable. There is nothing in the award to suggest that this normal position should not apply here. 7 Similarly, if the argument is put in terms of remoteness, there are no findings to suggest that the loss suffered was beyond the reasonable contemplation of the parties. This is not surprising as there was no issue of remoteness in the arbitration, but the onus was on the charterers at least to raise the issue. 8

The decision in MTM Hong Kong has reinforced the principle set out in Smith v M'Guire , while acknowledging the deficiency in that it limits the assessment of damages when the compensation principle can be expected to extend further. In this, the Court has helpfully split damages between the two heads of loss which an owner can (potentially) recover, being (i) those recoverable under Smith v M'Guire , and (ii) those recoverable as consequential losses and which extend beyond the end of the charter period.

While the decision is a helpful clarification on the jurisprudence governing recovery of damages for termination of voyage charterers, it is nonetheless very fact dependent and consequently will continue to cloud certainty governing the assessment of damages for breach. The decision does not, however, disturb the approach the English courts will take when applying the compensatory principle, as the leading case in this area remains the Golden Victory [2007] UKHL 12.

"MTM Hong Kong” [2015] EWHC 2505 (Comm), para. 24.  

"MTM Hong Kong” [2015] EWHC 2505 (Comm), para. 60.

"MTM Hong Kong” [2015] EWHC 2505 (Comm), para. 65.

"MTM Hong Kong” [2015] EWHC 2505 (Comm), para. 69.

"MTM Hong Kong” [2015] EWHC 2505 (Comm), para. 70.

"MTM Hong Kong” [2015] EWHC 2505 (Comm), para. 71.

"MTM Hong Kong” [2015] EWHC 2505 (Comm), para. 74.

"MTM Hong Kong” [2015] EWHC 2505 (Comm), para. 75.

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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.

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  maritime law virtual database, charterparties.

Karim’s Ltd v Feeders Seafood Ltd [1995] FJHC 136; Hbc0555d.94s (10 August 1995)

Charterparties- Withdrawal of vessel for breach of contract by charterer- Injunction to prevent forfeiture not available to charterer because charter transfers no interest in the vessel to charterer but is merely a contract of service

The plaintiff chartered a vessel from the defendant. There was a disagreement on the contract and the defendant withdrew the vessel. The defendant sued for breach of contract. Among other complaints, the defendant claimed that the plaintiff had not insured the vessel and was behind in its monthly payments required by the charter party. The plaintiff counter sued for damages and losses resulting from the breach of contract and forfeiture of the vessel. The plaintiff (charterer) in this proceeding applied to the court for an injunction to restrain the defendant from selling, leasing or chartering the vessel, or for an Order for immediate return of the vessel to the plaintiff pending the hearing between the parties on the breach of contract action. DECISION: Application dismissed. HELD: The equitable injunctive relief against forfeiture is narrow in scope. In the case of a charter party the withdrawal of the vessel is not truly a forfeiture because the charter transfers no interest in the vessel to the charterer but is merely a contract of service. As such, the plaintiff has suffered only the loss of a contractual right and that alone is not enough to raise an equity in the plaintiff’s favour. To grant an injunction prohibiting withdrawal would be tantamount to an Order for specific performance which is generally refused in contract. The plaintiff had failed to insure the vessel as provided by the contract. That constituted a breach so serious that withdrawal of the vessel was the only way that the defendant could protect its position from substantial losses.

Karlander v Eriama Shipping Co. Ltd. [1965] PGSC 23; [1965-66] PNGLR 213 (17 April 1966)

Charterparties- Withdrawal of vessel for breach of contract by charterer-charterer’s default- damages are difference between lost hire less profits earned after withdrawal

The plaintiff vessel owner sought arrears under a charter party as well as damages for breach of the charter. The defendant charterer had failed to make advance payments for hire as agreed in the charter party. The plaintiff withdrew the vessel from the service of the defendant. It attempted, but failed to find alternate charters for the vessel but arranged voyages for the vessel until it was sold. The plaintiff claimed to be entitled to damages being the difference between the hire as provided in the charter party less the profits earned after its withdrawal up until the sale of the vessel. DECISION: Plaintiff entitled to claim HELD: The clause which entitles the ship owner to withdraw the ship on default by the charterer on the payment for hire cannot be treated as cutting down the right of the owner to treat the contract at an end, and to recover damages based on the charterer’s repudiation of the charter. The plaintiff had lost the benefit of the hire for the remaining period of the charter party and was therefore entitled to the difference between hire less the profits earned after the withdrawal.

National Trading Corporation Ltd v Huggett [1999] FJHC 6; Hba0011j.98s (19 February 1999)

Charterparties-implied warranty of seaworthiness at the commencement of the voyage- boat owner must indemnify charterer for repairs.

The first Defendant, the charterer was held to be liable to the Plaintiff for the repairs to the boat engine. The first Defendant was to be indemnified by the 2d Defendant, the owner of the vessel. The 2d Defendant appealed the findings. The vessel’s engine had broken down and had to be towed in while on the charter. HELD: Appeal dismissed DECISION: The ordinary rule is that there is an implied warranty that the ship is seaworthy at the commencement of the voyage. There was nothing in the Charter to exclude or limit this rule. The fault in the engine which caused the break-down existed when the vessel started and therefore the vessel was not seaworthy for the voyage.

Premier Makira/Ulawa Province v Universal Graphics & Designs Ltd [1996] SBHC 18; HC-CC 107 of 1996 (15 April 1996)

Charterparties- Withdrawal of vessel for breach of contract- non punctual payment of hire fees may be excused where the charterer has a counterclaim against the owner of the vessel- interlocutory withdrawal of vessel not granted until rights determined

The plaintiff had filed a writ of summons claiming that the defendant was in arrears of hire fees for the vessel for 2 ½ months accruing in a charterparty. The plaintiff sought the fees owing and return of the vessel. The defendant counter claimed for money owed by the plaintiff to the defendant for spare parts and mechanical work done at the beginning of an earlier charter. The sum claimed by the defendant exceeded the accrued arrears under the charterparty. Before the action was heard, the plaintiff sought interlocutory relief in the form of orders to prevent the defendant from removing the vessel from Honiara, and the return of the vessel. DECISION: interlocutory injunction refused HELD: The primary purpose of an interlocutory injunction is to preserve the status quo until rights have been determined in the case. The court must consider if monetary damages will be adequate compensation in the event that the plaintiff’s interlocutory relief is refused and the plaintiff succeeds in obtaining a final permanent injunction; or if the interlocutory relief is granted and the defendant succeeds at final determination. The court found that the charterer has leeway to pay off the default arrears before the owner withdraws the ship under the charterparty, and the defendant’s counterclaim may qualify for the ‘special circumstances’ where the non punctual payment of hire may be excused.

State v Hung Kuo Hui [2006] FJHC 113; HAC40.2004 (24 February 2006)

Charterparties- Charterer guilty of illegal fishing- vessel forfeited with no requirement to name owner as party

The defendant company was Fijian owned and operated. The defendant company and captain were found guilty of illegal fishing in Fijian territorial waters. The state sought forfeiture of the vessel as part the penalty. The vessel was chartered from a company in Taiwan. DECISION: order for forfeiture granted HELD: The court found that the illegal fishing was blatant and repeated in spite of warnings. The penalties were meant to be harsh. It was not necessary to add the owner of the vessel as a party. Owners and charterers should be aware of the law and the penalties.

Yap v MV Cecilia I [2005] FMSC 41; 13 FSM Intrm. 403 (Yap 2005) (19 September 2005)

Charterparties- Pollution offences alleged against charterer and owner of vessel- Court gains no personal jurisdiction over vessel owner on basis of bareboat charter

There were 5 causes of action all based on a central allegation that the vessel had on numerous occasions discharged petroleum based effluent. The vessel was under a bareboat charter between the defendant owner and the defendant charterer. The defendant owner served a motion to dismiss for lack of personal jurisdiction on the basis that he had no control over the vessel and he lacked the minimum contacts with the forum sufficient to subject to the court’s jurisdiction. DECISION: Motion granted HELD: Under a demise or bareboat charter the charterer takes complete control of the vessel, mans it with its own crew and is treated by law as its legal owner. The charterer is potentially liable for collision, personal injury to master, crew and third parties, pollution damages, and for the loss or damage to the chartered vessel. Vessel owners normally have no personal liability but the vessel may be liable in rem. As such, the existence of the bareboat charter did not bring the owner into the court’s jurisdiction either on the basis of ‘doing business’ provision of the long arm statute, or under the provision based on the operation of the vessel within territorial waters.

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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 Charters – Laytime and Demurrage

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• Contracts and clauses
• BIMCO clauses

Liberty and Deviation Clause for Contracts of Carriage 2010

• Voyage charter

BIMCO Liberty and Deviation Clause for Contracts of Carriage 2010

(a) The Vessel shall have liberty to sail with or without pilots, to tow or go to the assistance of vessels in distress, to deviate for the purposes of saving life or property, and for any other reasonable purpose, which term shall include but not be limited to calling at any port or place for bunkers; taking on board spares, stores or supplies; repairs to the vessel necessary for the safe continuation of the voyage; crew changes; landing of stowaways; medical emergencies and ballast water exchange.

(b) If the Charterers requests any deviation for the Charterers' purposes and the Owners consent, such consent to be at the absolute discretion of the Owners, the Charterers shall indemnify the Owners against any and all claims whatsoever brought by the owners of the cargo and/or the holders of Bills of Lading against the Owners by reason of such deviation.

(c) Prior to giving any such consent the Owners may, at their option, require to be satisfied amongst other things that the Charterers has sufficient and appropriate P&I Club cover and/or if necessary, other additional insurance cover, in respect of such a requested deviation,

(d) This Clause shall be incorporated into any sub-charter and any bill of lading issued pursuant hereto.

Explanatory notes

BIMCO has recently conducted a review of the various Liberty and Deviation clauses that appear in BIMCO charter parties to update the wording to reflect current commercial and P&I Club practice.

As it currently stands the English law position on deviation is at odds with commercial practice and the application of liberty and deviation clauses often causes confusion among owners and charterers. Liberty and deviation clauses were originally introduced to provide for a liberty to deviate for the purpose of obtaining bunkers (in addition to deviation for the purposes of saving life and property permitted under common law); however, over time other types of deviation have become accepted practice.

BIMCO has decided to consolidate the liberty and deviation clauses found in various BIMCO documents and bring them up to date to reflect the current nature of deviations – such as crew changes, ship safety inspections and water ballast exchanges, as well as other contemporary issues requiring the ship to deviate.

A fundamental aspect of any deviation provisions is that when given effect it does not compromise P&I cover. In this respect the International Group of P&I Clubs has been consulted extensively during the review and a representative of a well-known P&I Club was actively involved in the drafting process.

P&I Clubs are often approached by their members asking whether their cover might be compromised irrespective of the breadth of the liberty and deviation clause in their contract, in case the deviation is determined by a court not to be reasonable. In particular, a P&I Club often finds that they have to determine whether they will carry the risk or whether specific additional insurance cover should be arranged for the shipowner. Of major importance to a P&I Club in making a decision on cover is the owners’ appropriate notice of the intended deviation and the subsequent discussion with the owners on whether additional insurance will be required.

The following explanatory notes summarise the key features of the Liberty and Deviation Clause:

Sub-clause (a) The opening sentence of Sub-clause (a) begins with customary liberties in respect of which the owners do not normally have to consult their P&I Club for advice on cover, such as going to the assistance of vessels in distress and for the purposes of saving life and property. This is consistent with Article 4, Rule 4 of the Hague/Hague-Visby Rules. The Sub-clause goes on to deal with providing liberties for “any reasonable purpose” and gives a non-exhaustive list of examples of the types of common deviations that might be considered “reasonable” for the purposes of this clause.

It is important to note that the incorporation of this Clause does not mean that any of the “reasonable” deviations referred to are necessarily covered – it is essential that members check with their P&I Clubs to ensure that they have cover in place for the intended deviation for the avoidance of doubt.

The term “reasonable” is used in the same context as “any reasonable deviation” in Article 4, Rule 4 of the Hague/Hague-Visby Rules. In the event of a dispute, what will be considered a “reasonable deviation” will be determined by the courts; but the courts will be guided by indications of what is reasonable or not. As an example, a four day deviation to make a crew change for simple economic purposes (i.e., to save on air fares) may not be considered “reasonable” in the context of this Clause.

Sub-clause (b) Sub-clause (b) deals with situations where the charterers request the owners to deviate for the charterers’ purposes. It is important to observe that the owners are not obliged to give their consent to such requests for deviation from the charterers. If the owners agree to the charterers’ request to deviate, the charterers are required to indemnify the owners against any claims by cargo owners and/or bill of lading holders as a result of making the deviation.

Sub-clause (c) Sub-clause (c) provides an additional optional qualification for Sub-clause (b) whereby the owners, prior to agreeing to a deviation under Sub-clause (b), can if they so wish require the charterers to demonstrate that they have sufficient and appropriate P&I Club cover or other additional insurance for the requested deviation for charterers’ purposes. If the deviation is “reasonable” then it is fundamentally a P&I liability; therefore if it was not “reasonable” then an additional insurance needs to be taken out on the back of the P&I cover.

Sub-clause (d) Sub-clause (d) is an essential feature of the Clause and requires it to be incorporated into all subcharters and bills of lading. This has been done to ensure consistency and a proper chain of responsibility. This issue is of particular importance in the context of contracts of affreightment.

However, as noted above, this revised Liberty and Deviation Clause comes with the caveat that incorporating the clause into a contract of carriage does not guarantee P&I Club cover in respect of the specified events. P&I Clubs will determine whether there is cover on a case by case basis as is the current position.

Finally, it should be noted that this Clause is designed for use in voyage charter parties and bills of lading. Although the Clause may be fairly easily adapted for time charters, it is BIMCO’s intention in the near future to develop a suitable purpose-made wording for incorporation into time charter parties.

Originally published in BIMCO Special Circular No. 2, March 2010 - Liberty and Deviation Clause for Contracts of Carriage

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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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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 assist in winning court cases and arbitrations in London. My specialization includes Gafta and FOSFA arbitrations, as well as maritime law (shipping).

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Provisions of Voyage Charterparties

An agreement by the shipowner to provide a ship and a statement of her position, her capacity and status on the Register of a Classification Society. In relation to the preliminary voyage, the port of loading to which the vessel will proceed, and a promise by the shipowner that the vessel will proceed with reasonable despatch.

• Representations by the shipowner in relation to the condition of the vessel, that is, tight, staunch, and in every way fitted for the voyage .
• A promise by the shipowner to carry the goods to their destination, or as close as can reasonably be reached.
• A promise by the charterer to provide a full cargo.
• A promise by the charterer to pay freight and a method by which freight is to be calculated.
• A list of excepted perils
• Provisions governing the way in which cargo is to be loaded and discharged and also the period of time to be allowed for loading and discharge and, if applicable, the rate of demurrage.
• Cancelling Clause giving the charterer the right to cancel the contract in the event of non arrival of the ship by a certain date.
• Paramount Clause incorporating the Hague or Hague-Visby Rules.
• The Amended Jason Clause.
• Both to Blame Collision Clause.
• Law and Jurisdiction Clause , generally providing for arbitration in London in accordance with the LMAA Rules and, ideally, setting out the mechanism for the appointment of each party’s arbitrator and a default provision in the event of one party failing to appoint. Shipbroker’s commission.
• Cesser Clause.
• War Clause.
• The incorporation of the York Antwerp Rules in relation to General Average.
• Provision in relation to the Ship Master signing Bills of Lading (B/L).

Provisions of Voyage Charterparty

Voyage charterparties are agreements between a shipowner and a charterer, where the shipowner agrees to carry goods from one port to another in return for a freight fee. Below are some of the standard provisions commonly included in voyage charterparties:

• Parties Involved : The agreement should clearly specify the identities of the shipowner and the charterer.
• Description of the Vessel : The contract will specify the details of the ship, including its name, weight, and any unique features that might impact the cargo’s transportation.
• Loading and Discharging Ports : The contract must specify where the cargo is to be loaded and where it is to be discharged.
• Cargo Description : The contract should detail the type and amount of cargo to be carried.
• Freight Rate : The contract will specify the rate of freight, either on a per-ton basis or for the entire cargo.
• Laytime and Demurrage : This refers to the time allowed for loading and discharging cargo. If this period is exceeded, the charterer must pay demurrage fees.
• Notice of Readiness (NOR) : The time when the vessel is ready to load or discharge cargo. The NOR triggers the start of laytime.
• Free Pratique : This is a license given by a port’s health authorities to a ship, indicating that it is free from contagious disease. A vessel usually cannot begin loading or discharging until it has obtained free pratique.
• Loading and Discharging Methods : The charterparty will specify who will be responsible for loading and discharging, and the methods to be used.
• Payment Terms : The agreement will specify when and how the charterer will pay the freight.
• Cargo Damage : The agreement will outline the shipowner’s responsibilities regarding any damage to the cargo during transit.
• Safe Port/Safe Berth Warranty : The charterer often gives a warranty that the ports selected for loading and discharge are safe.
• Force Majeure Clause : A provision that releases both parties from liability if certain events beyond their control (like war or natural disasters) prevent the contract from being fulfilled.
• Dispute Resolution : The contract will specify how disputes between the parties will be resolved, such as through arbitration or in a particular jurisdiction’s court.
• War Risks and Ice Clauses : These clauses may relieve the shipowner from liability for losses caused by war or ice conditions.
• Bills of Lading : The contract should stipulate the conditions under which the carrier will issue bills of lading, which are essential documents in international trade.
• Deviation Clause : This clause allows the vessel to deviate from its course for reasonable purposes, like saving life or property at sea.
• Stowage and Segregation : The agreement will specify the details related to stowage and segregation of goods, if necessary. This could be important for the transport of certain types of commodities, like chemicals or hazardous materials.
• Cancellation Clause : This clause allows the charterer to cancel the charterparty if the vessel is not ready to load by a specified date.
• Lien Clause : The shipowner often reserves the right to a lien on the cargo for unpaid freight, demurrage, or other charges.
• Exception Clause : This includes exceptions where the shipowner is not liable for loss or damage to the goods, such as act of God, act of war, fire, etc.
• Indemnity Clause : The charterparty may include an indemnity clause where one party agrees to indemnify the other for specific types of losses or damages.
• Both-to-Blame Collision Clause : This is a standard clause in most voyage charterparties, stating that if both ships are to blame in a collision, the cargo owners will have to contribute to the shipowner’s liability towards the other ship.
• Salvage and General Average : The agreement will define the parties’ rights and obligations in case of salvage or declaration of general average, an ancient principle of maritime law where all stakeholders in a sea venture proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency.
• Redelivery Clause : This stipulates the condition in which the vessel should be returned to the shipowner.
• Sanctions Clause : This relatively recent addition deals with compliance with international sanctions, ensuring that neither the vessel nor the cargo will violate any applicable sanctions regimes.
• Port Charges : The charterparty should outline who will be responsible for bearing any port charges incurred during loading and unloading operations.
• Despatch Money : In some instances, if the loading and/or discharging of the cargo is completed faster than the agreed laytime, the shipowner might have to pay despatch money to the charterer.
• Clean on Board Clause : In some cases, the charterer may require that the vessel is cleaned prior to loading the cargo.
• Prohibition Clause : The charterparty may include restrictions on certain actions by the shipowner or charterer. For example, it may prohibit the shipowner from using the ship for any purpose other than transporting the agreed-upon cargo during the period of the charter.
• Ice Clause : If the voyage is going to take place in a region where ice is common, there might be a specific clause that determines the responsibilities and risks associated with ice. This might include additional costs, rerouting decisions, and potential damages.
• Insurance Clause : The agreement should stipulate which party is responsible for insuring the vessel, cargo, and third-party liabilities. It will also specify the extent of the cover required.
• Ad Valorem Bill of Lading : In case the value of the goods being shipped is declared to be higher than the customary value, the shipowner may need to take out additional insurance to cover the potential additional liability.
• U.S. Trade Clause : If the ship is to visit U.S. ports, there may be additional clauses to comply with U.S. laws and regulations, such as the U.S. Carriage of Goods by Sea Act (COGSA) or the Jones Act.
• Himalaya Clause : This clause extends the defenses and limits of liability that the carrier has under the charterparty to the crew, agents, and any independent contractors involved in the shipment.
• Lighterage Clause : If lighters (barges) are to be used in the loading or discharging operations, a lighterage clause will outline the parties’ responsibilities and liabilities in this respect.

These are just some of the standard provisions included in a voyage charterparty, but every contract will vary depending on the specific needs and negotiations of the parties involved. Always consult with a maritime lawyer when entering into a voyage charterparty to ensure that your interests are protected.

What are the Main Clauses of Voyage Charterparty?

A voyage charter party is a contract for the hire of a ship for a specific voyage between the ship owner and the charterer. Some of the main clauses in a typical voyage charter party include:

• Parties: This clause identifies the shipowner and the charterer.
• Ship Details: Describes the ship, including its name, flag, gross and net tonnage, speed, fuel consumption, etc.
• Freight Rate: Details of the freight rate and terms of payment are usually included in this clause. It might also include provisions about when and how the payment should be made.
• Cargo: Details about the cargo to be loaded, including the type, quantity, and any special handling instructions.
• Loading and Discharging Ports: Specifies the port or ports where the cargo will be loaded and discharged. This clause often also details who pays for port fees and how long the ship is allowed to spend at each port (known as laytime).
• Laytime and Demurrage: Laytime is the amount of time agreed upon between the shipowner and charterer for loading and unloading of the cargo. If the loading or unloading takes longer than the agreed time, demurrage fees may be charged by the shipowner.
• Notice of Readiness (NOR): This clause contains provisions about when and how the shipowner should notify the charterer that the ship is ready to load or discharge cargo.
• Safe Port Warranty: The charterer usually warrants that they will only order the ship to safe ports, where the ship can safely reach, lie, and depart from.
• Deviation: This clause describes whether the ship is allowed to deviate from the planned route and under what circumstances.
• Liabilities and Indemnities: A description of the liabilities and responsibilities of both the shipowner and the charterer, and under what circumstances one party must indemnify the other.
• General Average: This clause relates to an ancient principle of maritime law in which all parties in a sea venture proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency.
• War Risks and Sanctions: This clause covers the potential risks associated with the voyage if it includes areas of conflict, as well as any sanctions that might apply.
• Dispute Resolution: This clause specifies how disputes will be resolved, often stipulating arbitration in a particular location.

It’s important to note that these clauses can vary depending on the specific contract, as charter parties can be customized to the unique needs of the charterer and shipowner.

What are the obligations of a Voyage Charterer?

The obligations of a voyage charterer refer to the responsibilities and duties that the charterer undertakes when entering into a voyage charter contract. A voyage charterer is a party that hires or charters a vessel for a specific voyage or a series of voyages. Here are some common obligations of a voyage charterer:

• Payment of freight: The charterer is obligated to pay the agreed-upon freight or hire charges for the use of the vessel. This payment is typically based on the cargo quantity, the distance traveled, or a fixed rate per day.
• Cargo handling and stowage: The charterer is responsible for ensuring proper loading, stowage, and discharge of the cargo. They must provide accurate cargo details to the ship’s master and ensure compliance with relevant safety and security regulations.
• Cargo documentation: The charterer must prepare and provide all necessary documentation related to the cargo, such as bills of lading, cargo manifests, and customs documentation. These documents are crucial for the shipment and must accurately reflect the cargo’s nature, quantity, and other relevant details.
• Compliance with laws and regulations: The charterer must comply with all applicable laws, regulations, and international conventions related to the shipment of goods. This includes complying with customs procedures, trade sanctions, and any other legal requirements in the ports of loading and discharge.
• Nomination of loading and discharging ports: The charterer is responsible for nominating the ports of loading and discharging within the agreed geographical limits. The charterer should provide the vessel with accurate and timely information about the nominated ports and any specific requirements or restrictions associated with them.
• Safe and efficient voyage: The charterer has an obligation to ensure the vessel’s safe and efficient voyage. This includes providing accurate information about the cargo, its handling requirements, and any special considerations for the voyage. The charterer should also coordinate with the vessel’s master and provide necessary assistance to ensure the smooth execution of the voyage.
• Cargo insurance: Unless otherwise agreed, the charterer is responsible for arranging and paying for cargo insurance coverage for the duration of the voyage. This insurance typically covers risks such as loss, damage, or theft of the cargo during transit.
• Demurrage and despatch: Demurrage refers to the additional compensation payable by the charterer to the shipowner if there are delays in the loading or discharging operations beyond the agreed time. The charterer is responsible for avoiding demurrage charges by efficiently coordinating the cargo operations. Conversely, if the charterer completes the loading or discharging operations ahead of the agreed time, they may be entitled to despatch money, which is a form of compensation from the shipowner.
• Compliance with environmental regulations: The charterer must adhere to environmental regulations and ensure that the cargo comply with relevant environmental standards. This includes compliance with international conventions such as the International Convention for the Prevention of Pollution from Ships (MARPOL) and taking appropriate measures to prevent pollution during the loading, transportation, and discharge of the cargo.
• Payment of additional costs: The charterer may be responsible for additional costs incurred during the voyage that are not included in the original freight charges. These costs could include expenses related to bunkering (fuel), port fees, pilotage, tug assistance, or any other agreed-upon charges. The charterer should reimburse the shipowner for these costs as per the terms of the charter contract.
• Communication and coordination : The charterer is responsible for maintaining effective communication and coordination with the ship’s master, the shipowner, and any other relevant parties. This includes promptly providing necessary information, responding to inquiries, and ensuring smooth collaboration throughout the voyage.

These obligations may vary depending on the specific terms and conditions outlined in the voyage charter contract. It is crucial for both the charterer and the shipowner to clearly define their respective obligations in the contract to avoid any misunderstandings or disputes.

Typical Provisions found in a Voyage Charter Agreement for a Cargo Ship

Defining voyage charter provisions

A comprehensive dry cargo voyage charter agreement typically includes provisions encompassing the fundamental aspects outlined below. These provisions may vary in name or be indicated by numbered clauses without specific titles.

• Introduction: Identification of involved parties; vessel identification; warranty of seaworthiness; current position of the vessel; anticipated readiness date for loading; obligation to proceed to the loading port or location; identification and safety of the loading port or place; quantity and nature of the cargo to be loaded; obligation to proceed to the discharge port or place; obligation to deliver the cargo.
• Shipowners’ Responsibility: Accountability of the owners for loss, damage, or delay in delivering goods; exclusion of owner’s liability for loss, damage, or delay in delivering goods.
• Deviation: Vessel’s liberty to call at ports in any sequence; vessel’s liberty to tow and assist other vessels; vessel’s liberty to deviate for the purpose of saving lives, protecting property, or for other valid reasons.
• Freight: Rate and amount of freight payment.
• Loading/Discharging Costs: Responsibility for the expenses related to loading and/or discharging of cargo.
• Laytime: Duration of the permissible laytime; exceptions to laytime; initiation of laytime; timing and method of issuing notice of readiness.
• Demurrage: Duration of the demurrage period allowed; whether demurrage is applicable at loading and/or discharge ports.
• Lien: Whether the owners have the right to place a lien on the cargo for freight, deadfreight, demurrage, and/or damages incurred due to detention; whether the charterers are responsible for freight and demurrage expenses at the discharge port.
• Bills of Lading: Obligation of the vessel’s master to sign bills of lading.
• Laydays and Cancellation: Designated laydays; cancellation date; conditions under which charterers have the option to cancel the charter; charterers’ obligation to declare their intention to exercise the cancellation option, if applicable.
• General Average: Rules governing the settlement of any general average; cargo owners’ responsibility to contribute to the general average expenses.
• Agency: Shipowner’s or Charterer’s obligation to appoint agents at the loading and discharge ports.
• Brokerage: Amount of brokerage commission payable and the recipient(s) of the commission.
• Strikes: Allocation of liability for consequences arising from strikes or lock-outs that hinder the fulfillment of obligations.
• War Risks: Owner’s liberty to cancel the charter in the event of a war outbreak; master’s liberty to depart from the loading port before completion of loading in case of a war outbreak.
• Ice: Master’s privileges in case of inaccessibility or potential entrapment at the loading and/or discharge ports due to ice.
• Paramount Clause: Specification of the liability regime applicable to issued bills of lading.
• New Jason Clause: Protection of the owner against US lawsuits when adjusting the general average according to US law.
• Both To Blame Collision Clause: Safeguarding the shipowner against US law in collision cases.
• Law and Arbitration: Jurisdiction to which any disputes will be referred; location of arbitration proceedings; appointment of arbitrators.
• Rider Clauses: Additional clauses agreed upon between the parties, usually appended to the standard provisions.

BIMCO Just in Time Arrival Clause for Voyage Charter Parties 2021

The Just in Time Arrival Clause 2021 is intended for implementation in voyage charter agreements wherein shipowners and charterers have mutually consented to establish a just-in-time arrival system, granting charterers the authority to request shipowners to optimize the vessel’s speed to reach a specified destination at a predetermined time. This clause follows a comprehensive approach, allowing its integration into various vessel and port management frameworks worldwide. Furthermore, it can be utilized in conjunction with the BIMCO Port Call Data Exchange Clause 2021, which has been specifically developed to promote the widespread utilization of the IMO data model framework for the synchronized exchange of ship/port information.

We kindly suggest that you visit the web page of BIMCO (Baltic and International Maritime Council) to learn more about Charterparty Clauses and to obtain the original Charter Party forms and documents. www.bimco.org

What is Cancelling Clause in Voyage Charterparty?

In a voyage charterparty, a cancelling clause is a contractual provision that allows either the charterer or the shipowner to cancel the charterparty under certain specified circumstances. The cancelling clause provides a mechanism for terminating the contract before its completion, typically due to unforeseen events or changes in circumstances that make the charterparty no longer feasible or advantageous for one or both parties.

The specific conditions under which the cancelling clause can be invoked are typically outlined in the charterparty agreement. These conditions may include, but are not limited to:

• Force majeure events: If an unforeseen event occurs that is beyond the control of the parties involved and makes performance of the charterparty impossible or commercially impracticable, the cancelling clause may be invoked. Examples of force majeure events include natural disasters, war, government actions, or labor strikes.
• Delay or non-performance: If either party fails to perform their obligations under the charterparty within a specified timeframe, the cancelling clause may be used to terminate the agreement. This could be due to delays in vessel arrival or loading/unloading, failure to pay freight or hire, or breaches of other contractual terms.
• Sale of the vessel: If the shipowner sells the vessel prior to the commencement of the charterparty or during its duration, the cancelling clause may be triggered, allowing the charterer to terminate the agreement.

It’s important to note that the specific language and conditions of the cancelling clause can vary from one charterparty agreement to another. Parties involved in a voyage charterparty should carefully review and understand the terms of the cancelling clause to ensure they are aware of their rights and obligations in the event of contract termination

What is Paramount Clause in Voyage Charterparty?

In the context of a voyage charterparty, a paramount clause refers to a contractual provision that establishes the primacy of certain international conventions or laws over the terms and conditions of the charterparty itself. The purpose of the paramount clause is to ensure that the rights, obligations, and liabilities of the parties to the charterparty are subject to the applicable provisions of these conventions or laws.

Typically, the paramount clause incorporates by reference the provisions of specific international conventions that govern the carriage of goods by sea, such as the Hague Rules, the Hague-Visby Rules, or the Hamburg Rules. These conventions provide a standardized framework for the rights and responsibilities of the carrier and the cargo owner during the transportation of goods by sea.

By including a paramount clause, the charterparty recognizes that the terms of the international convention prevail over conflicting provisions within the charterparty. This helps to ensure uniformity and consistency in the interpretation and application of the contractual terms, especially in cases where the charterparty may be silent or ambiguous on certain matters.

It is important for the parties involved in a voyage charterparty to carefully review and understand the implications of the paramount clause, as it establishes the legal framework that governs their rights and obligations during the voyage.

The paramount clause is a significant provision in a voyage charterparty because it ensures that the parties are subject to the internationally recognized rules and regulations related to the carriage of goods by sea. These rules are designed to protect the interests of both the carrier and the cargo owner and provide a level playing field for all parties involved in maritime trade.

The specific international conventions referred to in the paramount clause may vary depending on the charterparty and the trade route involved. For instance, the Hague Rules, which were first introduced in 1924, established a set of standard provisions governing the rights and obligations of carriers and shippers in most international maritime transactions. The Hague-Visby Rules, adopted in 1968, built upon the Hague Rules and added additional protections for cargo owners. The Hamburg Rules, adopted in 1978, further expanded the rights of cargo owners and introduced more favorable terms for them.

The paramount clause incorporates the provisions of these conventions into the charterparty, making them an integral part of the contractual agreement between the parties. This means that any disputes or claims arising from the voyage will be interpreted and resolved in accordance with the relevant convention.

By adhering to the international conventions, the paramount clause helps to promote consistency and predictability in the interpretation and application of the charterparty terms. It ensures that the parties are aware of their rights and obligations and have recourse to established legal principles in case of any disputes.

It is important to note that while the paramount clause incorporates the provisions of the international conventions, it does not necessarily include all the clauses and conditions within those conventions. The charterparty may still contain additional clauses that are not covered by the paramount clause. Therefore, it is crucial for the parties to carefully review the entire charterparty to understand the full extent of their rights and obligations.

In summary, the paramount clause in a voyage charterparty establishes the supremacy of specific international conventions over the terms and conditions of the charterparty. It ensures that the parties are subject to internationally recognized rules and provides a framework for resolving disputes and determining liabilities in relation to the carriage of goods by sea.

What is Both to Blame Collision Clause in Voyage Charterparty?

In voyage charterparties, the “Both to Blame Collision Clause” is a contractual provision that addresses the allocation of liability in the event of a collision between the chartered vessel and another ship. It is also known as the “York-Antwerp Rules 1994 Clause.”

The clause is designed to determine the extent of liability for a collision and the apportionment of damages between the parties involved, specifically the shipowner and the charterer. It aims to provide a fair and equitable distribution of responsibility based on the degree of fault or negligence exhibited by each party.

Under this clause, if both the chartered vessel and the other ship are found to be at fault for the collision, the damages and liabilities resulting from the collision will be shared between the shipowner and the charterer in proportion to their respective degrees of fault. The specific allocation is determined based on the circumstances of the collision, including the extent of negligence or fault attributable to each party.

It is important to note that the Both to Blame Collision Clause may not apply in cases where one party can be held solely responsible for the collision, such as instances of willful misconduct or gross negligence.

The inclusion of this clause in a voyage charterparty helps to establish a fair mechanism for allocating liability in collision scenarios, promoting transparency and minimizing disputes between the parties involved.

The Both to Blame Collision Clause is a standard provision that is commonly included in voyage charterparties, which are contracts for the hire of a vessel for a specific voyage. The clause is typically based on the York-Antwerp Rules, which are widely recognized and accepted international rules governing the allocation of liability in maritime collisions.

The purpose of this clause is to provide a balanced approach to determine the liability and share the financial consequences of a collision between the chartered vessel and another ship. By using a proportionate allocation of liability, the clause aims to avoid situations where one party bears the entire burden of the damages resulting from the collision.

Under the Both to Blame Collision Clause, if both the chartered vessel and the other ship are found to have contributed to the collision through their respective negligence or fault, the damages and liabilities are shared between the shipowner and the charterer. The specific proportion of liability is determined based on the degree of fault attributed to each party, often taking into account factors such as the actions or omissions leading to the collision, adherence to navigational rules, and any other relevant circumstances.

By applying the Both to Blame Collision Clause, the financial consequences resulting from the collision are distributed more fairly between the shipowner and the charterer. This encourages both parties to exercise due diligence in the operation of the vessel and promotes a shared responsibility for safe navigation and collision avoidance.

It’s worth noting that the exact wording and application of the Both to Blame Collision Clause may vary depending on the specific terms agreed upon in the voyage charterparty. It is always advisable for parties involved in chartering arrangements to carefully review and understand the provisions of the contract, seeking legal advice if necessary, to ensure they are aware of their rights and obligations in case of a collision.

What is Law and Jurisdiction Clause in Voyage Charterparty?

In a voyage charterparty, the “Law and Jurisdiction Clause” is a contractual provision that determines the governing law and the jurisdiction in which any legal disputes arising from the charterparty will be resolved. This clause helps to establish the legal framework within which the parties’ rights, obligations, and potential disputes will be interpreted and addressed.

The Law and Jurisdiction Clause typically specifies two important aspects:

• Governing Law: This part of the clause determines which country’s laws will be applied to interpret and govern the charterparty. It establishes the legal system and principles that will be used to interpret contractual terms, resolve disputes, and determine the rights and liabilities of the parties involved. The chosen governing law is often based on the preferences and interests of the contracting parties.
• Jurisdiction: This aspect of the clause determines the jurisdiction or legal forum where any disputes arising from the charterparty will be resolved. It designates the court or arbitration tribunal that has the authority to hear and decide on the legal issues brought forward by the parties. The chosen jurisdiction is typically influenced by various factors, including the location of the vessel, the residence or place of business of the parties, and the legal expertise available in a particular jurisdiction.

The Law and Jurisdiction Clause is crucial in voyage charterparties as it provides certainty and predictability in case of disputes. By clearly stating the governing law and jurisdiction, the clause helps avoid conflicts and confusion regarding the applicable legal principles and the appropriate forum for dispute resolution.

It is important for parties entering into a voyage charterparty to carefully consider and negotiate the Law and Jurisdiction Clause. They should assess the potential risks and benefits associated with different governing laws and jurisdictions to ensure that the chosen provisions align with their interests and provide an efficient and effective mechanism for resolving disputes. Legal advice from maritime lawyers may be sought to ensure that the chosen law and jurisdiction are appropriate for the specific circumstances of the charterparty.

What is Cesser Clause in Voyage Charterparty?

In the context of a voyage charterparty, a “Cesser Clause” is a contractual provision that defines the circumstances under which the charterer’s responsibilities and liabilities cease. It outlines the conditions under which the charterer’s obligations to pay freight and hire come to an end.

Typically, a Cesser Clause states that the charterer’s obligations cease upon the completion of the agreed voyage or when the vessel reaches a specific destination. Once these conditions are met, the charterer is no longer liable for payment of freight or hire. The purpose of the Cesser Clause is to establish a clear point at which the charterer’s financial obligations are terminated.

It’s important to note that the specific details and wording of a Cesser Clause can vary depending on the terms negotiated between the parties involved in the charterparty agreement. Therefore, it is advisable to carefully review the exact language and provisions of the charterparty contract to understand the precise implications of the Cesser Clause in a particular agreement.

The Cesser Clause also addresses the termination of the charterer’s responsibilities beyond the payment of freight or hire. It typically specifies that once the obligations under the charterparty cease, the charterer is released from any further liability for expenses, such as port charges, fuel costs, or other expenses incurred during the voyage.

Furthermore, the Cesser Clause often includes provisions related to the transfer of responsibility for cargo. It may state that once the cargo is discharged from the vessel at the agreed destination, the charterer’s liability for the cargo also ceases. This means that any risks, losses, or damages to the cargo that occur after delivery are no longer the charterer’s responsibility.

In addition to defining the conditions for the termination of the charterer’s obligations, the Cesser Clause may also outline the consequences of non-compliance with the agreed terms. It could specify that if the charterer fails to fulfill their obligations, the Cesser Clause will not come into effect, and the charterer remains liable for any outstanding payments or other obligations.

It’s worth noting that the Cesser Clause is just one component of a voyage charterparty agreement. This type of agreement covers various aspects, including the rights and responsibilities of both the owner of the vessel (shipowner) and the charterer, the duration of the charter, freight rates, laytime, demurrage, and other important terms and conditions.

As with any contractual provision, it is crucial for both parties involved in the voyage charterparty to carefully review and understand the Cesser Clause, along with the entire agreement, to ensure compliance and avoid any misunderstandings or disputes regarding the termination of the charterer’s obligations. Consulting legal professionals or maritime experts is advisable to ensure clarity and accuracy in interpreting the specific provisions of the Cesser Clause within a given charterparty contract.

What is War Clause in Voyage Charterparty?

In a voyage charterparty, a “War Clause” is a contractual provision that addresses the implications and responsibilities of the parties involved in the charterparty agreement in the event of war or warlike hostilities. It aims to establish the rights, obligations, and potential adjustments that may arise when war-related circumstances impact the voyage or the performance of the charterparty.

The War Clause typically outlines the actions that should be taken by both the shipowner and the charterer in the event of war or the outbreak of hostilities. It may include provisions such as:

• Right to Evade: The War Clause might grant the shipowner the right to deviate from the agreed voyage and take alternative routes or make necessary diversions to avoid areas or ports affected by war or hostile activities. This provision allows the shipowner to prioritize the safety of the vessel, crew, and cargo.
• Suspension of Obligations: The War Clause may stipulate that the charterer’s payment obligations, such as freight or hire, are suspended during the period of war or hostilities. This recognizes that the ability to perform the charterparty as originally agreed may be significantly impacted during times of conflict.
• Termination of the Charterparty: The War Clause could specify that either party has the right to terminate the charterparty if the war or hostilities persist for an extended period. This termination clause allows the parties to dissolve the contract if the circumstances make it impractical or impossible to continue with the agreed voyage.
• Adjustments in Laytime and Demurrage: If war-related events delay the loading or unloading of the cargo, the War Clause may address the adjustments to laytime (the agreed time for loading/unloading) and demurrage (the compensation payable for exceeding the laytime). These adjustments recognize that war or hostilities may result in disruptions to the cargo operations.
• Insurance Requirements: The War Clause may specify the insurance coverage that the shipowner and the charterer must maintain to protect against war risks. This could include obtaining additional war risk insurance or adjusting the existing insurance policies to cover potential losses or damages caused by war or hostilities.
• Force Majeure: The War Clause might incorporate force majeure provisions that outline the rights and obligations of the parties in the event of war or hostilities. Force majeure refers to unforeseen circumstances beyond the control of the parties that prevent them from fulfilling their contractual obligations. The clause may address issues such as delay, suspension, or termination of the charterparty due to force majeure events caused by war.
• Communication and Notices: The War Clause may require the parties to promptly notify each other of any war-related events, such as the outbreak of hostilities, blockades, or embargoes. This ensures that both parties are aware of the situation and can take appropriate actions as specified in the clause.
• Arbitration or Dispute Resolution: In the event of disputes arising from the interpretation or application of the War Clause, it may outline the method of dispute resolution, such as arbitration or mediation. This provides a mechanism for resolving conflicts between the shipowner and the charterer concerning war-related issues.

It is crucial for both parties to thoroughly understand and negotiate the specific terms of the War Clause in the voyage charterparty agreement. This ensures that they are adequately protected and prepared for any war-related events that may impact the performance of the charterparty. Given the complexity of such provisions, seeking legal advice and guidance from maritime professionals is advisable to ensure that the War Clause effectively addresses the risks associated with war or hostilities and protects the interests of the parties involved.

It is important to note that the specific wording and provisions of the War Clause can vary between charterparty agreements. Therefore, it is essential to carefully review the exact language of the contract to understand the precise implications and responsibilities of the parties in relation to war or hostilities. Legal professionals or maritime experts can provide guidance in interpreting and negotiating the War Clause to ensure that the charterparty agreement adequately addresses the risks associated with war-related events.

What is BIMCO Piracy Clause in Voyage Charterparty?

The BIMCO Piracy Clause, developed by the Baltic and International Maritime Council (BIMCO), is a contractual provision that addresses the risks and responsibilities related to piracy attacks in voyage charterparty agreements. It specifically focuses on the obligations of the shipowner and the charterer in navigating high-risk areas and mitigating the impact of piracy on the voyage.

The BIMCO Piracy Clause typically includes the following key elements:

• Routing and Precautions: The clause may require the shipowner and the charterer to collaborate and agree on the routing of the vessel through areas prone to piracy. It may also specify the precautions and protective measures to be taken, such as the use of onboard security personnel, increased vigilance, and adherence to industry best practices for piracy prevention.
• Compliance with Industry Guidelines: The clause may reference internationally recognized guidelines and recommendations, such as those issued by the International Maritime Organization (IMO), the industry-led Best Management Practices (BMP), or specific regional authorities. These guidelines provide comprehensive advice on piracy prevention and response measures, and compliance with them is typically expected by the BIMCO Piracy Clause.
• Reporting Obligations: The clause may impose reporting obligations on the shipowner and the charterer regarding any piracy-related incidents or suspicious activities encountered during the voyage. This ensures that relevant information is promptly shared and appropriate actions can be taken to safeguard the vessel, crew, and cargo.
• Security Costs: The BIMCO Piracy Clause may address the allocation of costs associated with implementing additional security measures. It may specify whether these costs are to be borne by the shipowner or the charterer and provide guidance on the reimbursement process.
• War Risks Insurance: The clause may require the shipowner and the charterer to maintain appropriate war risks insurance coverage that includes piracy-related risks. This ensures that both parties are adequately protected financially in the event of piracy incidents.
• Alternative Route or Cancellation: The BIMCO Piracy Clause may provide provisions for alternative routes or the option to cancel the voyage altogether in the event of an escalation of piracy threats or a specific piracy incident. This allows the parties to assess the risks and make informed decisions regarding the safety and feasibility of continuing the voyage.
• Piracy Response and Cooperation: The clause may require the shipowner and the charterer to cooperate and coordinate their efforts in responding to piracy incidents. This includes promptly reporting incidents to relevant authorities, providing necessary information and support to facilitate response operations, and complying with any directives or instructions issued by the designated response agencies.
• Piracy-related Costs and Delays: The BIMCO Piracy Clause may address the allocation of costs and potential delays resulting from piracy incidents. It may specify which party bears the financial responsibility for additional expenses incurred, such as insurance deductibles, crew compensation, or vessel repairs. Additionally, the clause may provide guidance on laytime and demurrage adjustments if piracy-related events cause delays in loading or discharging the cargo.
• Termination of Charterparty: In extreme cases where piracy poses an ongoing and significant risk to the vessel, crew, or cargo, the clause may include provisions for the termination of the charterparty. This allows either party to dissolve the agreement if the circumstances make it impractical or unsafe to continue with the voyage.
• Indemnification and Liability: The BIMCO Piracy Clause may outline the indemnification and liability obligations of the shipowner and the charterer in relation to piracy incidents. It clarifies the extent of responsibility and potential claims that may arise from piracy-related losses, damages, or injuries.

It is crucial for both parties to thoroughly review and understand the specific terms of the BIMCO Piracy Clause in the voyage charterparty agreement. This ensures that they are adequately prepared to address piracy risks, comply with industry standards, and respond effectively in the event of piracy incidents. Given the complex nature of piracy-related issues, seeking legal advice and guidance from maritime professionals is advisable to ensure that the BIMCO Piracy Clause is appropriately incorporated and addresses the specific risks and responsibilities associated with piracy in the charterparty agreement.

It is important to note that the specific wording and provisions of the BIMCO Piracy Clause can vary between charterparty agreements, as it can be adapted and tailored to meet the specific needs and circumstances of the parties involved. Therefore, it is essential to carefully review the exact language of the clause within the contract to understand the precise obligations and responsibilities related to piracy mitigation and response. Consulting legal professionals or maritime experts is advisable to ensure that the BIMCO Piracy Clause is effectively incorporated into the voyage charterparty agreement and provides the necessary safeguards against piracy risks.

What is BIMCO Sanctions Clause in Voyage Charterparty?

The BIMCO Sanctions Clause in a Voyage Charterparty is a contractual provision that addresses the impact of sanctions imposed by governments or international organizations on the performance of the charterparty. BIMCO, the Baltic and International Maritime Council, is a prominent international shipping association that develops standard contracts and clauses widely used in the maritime industry.

The Sanctions Clause is designed to protect the interests of both the owners and charterers in the event that sanctions are imposed during the course of the charterparty. It provides a mechanism to deal with situations where the performance of the contract becomes illegal or prohibited due to the application of sanctions.

The clause typically specifies that if, during the charter period, the vessel becomes subject to sanctions that prevent its intended use or operation, both parties have the right to terminate the charterparty without penalty. The termination can be exercised by either the owners or charterers, depending on the specific wording of the clause.

The clause also addresses the financial implications of sanctions. It may state that, upon termination, the charterers are responsible for paying any outstanding amounts due to the owners up until the termination date, while the owners are obliged to refund any prepaid hire or other sums that the charterers have paid but are no longer applicable due to the termination.

The BIMCO Sanctions Clause aims to provide a fair and balanced approach for both parties in dealing with the impact of sanctions during a voyage charterparty. However, it is essential to consult the specific language of the clause in the charterparty to fully understand its terms and conditions, as variations and modifications may exist depending on the version or edition used.

In addition to addressing the termination and financial aspects, the Sanctions Clause may also outline the obligations of the parties regarding the vessel’s employment during a sanctions event. For example, it may require the charterers to take immediate steps to discharge any cargo subject to the sanctions or to divert the vessel to a safe port if the original port of call becomes inaccessible due to sanctions.

Furthermore, the clause often includes provisions regarding the allocation of costs and expenses incurred as a result of the sanctions. This can include costs associated with deviation, additional insurance, or legal fees. The allocation of such costs may vary depending on the specific wording of the clause, and parties are encouraged to negotiate these aspects beforehand to ensure a clear understanding.

It’s important to note that the BIMCO Sanctions Clause serves as a starting point for parties entering into a voyage charterparty. It provides a standard framework for addressing sanctions-related issues, but it is not a substitute for legal advice. Parties should carefully review the clause and consider seeking legal counsel to ensure that their specific circumstances and concerns are adequately addressed.

The BIMCO Sanctions Clause has become increasingly important in recent years due to the expansion of sanctions regimes by various countries and international bodies. These sanctions can have significant implications for the maritime industry, impacting vessel operations, trade routes, and commercial relationships. By incorporating the Sanctions Clause into their charterparty agreements, parties can proactively address potential disruptions and mitigate risks associated with sanctions-related events.

It is worth mentioning that BIMCO regularly updates its standard clauses to reflect changes in regulations and industry practices. Therefore, it is advisable to refer to the latest version of the BIMCO Sanctions Clause or consult with legal experts to ensure compliance with current requirements.

In conclusion, the BIMCO Sanctions Clause in a Voyage Charterparty provides a contractual framework for dealing with the impact of sanctions on the performance of the charterparty. It addresses termination rights, financial obligations, cargo discharge or diversion requirements, and cost allocations, aiming to provide a fair and balanced approach for both owners and charterers in navigating sanctions-related challenges in the maritime industry.

What is New Jason Clause in Voyage Charterparty?

New Jason Clause is included in the most of the bill of ladings. The purpose of New Jason Clause is to highlight the fact that no matter what, the General Average (GA) would apply to the charterparty. As per Rule D of the York Antwerp Rules, irrespective of the party at fault that led to an incident, General Average (GA) would apply. However, certain jurisdictions, such as the United States, have legislation that prohibits the application of General Average (GA) in situations where the fault lies with the navigational actions of the ship’s crew members.

Inclusion of New Jason Clause in the Bill of Lading protects the shipowners by having the General Average (GA) in these cases too.

The New Jason clause states that

“In the event of accident, danger, damage or disaster before or after the commencement of the voyage resulting from any cause whatsoever, whether due to negligence or not, for which, or for the consequence of which, the carrier is not responsible by statute, contract or otherwise, the goods, shippers, consignees or owners of the goods shall contribute with the carrier in general average to the payment of any sacrifices, losses or expenses of a general average nature that may be made or incurred and shall pay salvage and special charges incurred in respect of the goods.

If a salving ship is owned or operated by the carrier, salvage shall be paid for as fully as if the said salving ship or ships belonged to strangers. Such deposit as the carrier or his agents may deem sufficient to cover the estimated contribution of the goods and any salvage and special charges thereon shall, if required, be made by the goods, shippers, consignees or owners of the goods to the carrier before delivery

The New Jason Clause necessitates the contribution of the cargo owner to the General  Average (GA). The cargo owner is obligated to bear the expenses incurred due to the shipowner’s (carrier’s) negligence. In such circumstances, the New Jason Clause should be included in the Bill of Lading (B/L).

The concept of General Average (GA) entails the equitable distribution of losses or damages sustained by both the shipowner and the cargo owner.

Hence, the New Jason Clause safeguards the interests of shipowners in instances where damage is caused by the carelessness of the shipowner or the crew.

Before the enactment of the Harter Act in 1893, shipowners received no recompense from cargo owners for losses resulting from the ship owner’s negligence. To establish a mechanism through which the negligent shipowner could recover in General Average (GA), shipowners incorporated a clause into their Bill of Lading. This clause stipulated that recovery would be allowed when the ship was released from claims under the Harter Act and had undergone a diligent process. Subsequently, the carrier immunities were revised in the Carriage of Goods by Sea Act of 1936, incorporating the new Jason clause.

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Official blog of Swansea University's IISTL, where we keep you up to date with the latest maritime and commercial legal news.

BIMCO. Three new Emissions Transfer Scheme Clauses for Voyage Charters.

To complement its 2022 Emissions Trading Scheme Allowances Clause for time charterers, on 8 December 2023, BIMCO released three ETS clauses for voyage charters.

As with the 2022 time charter clause, the clauses seek to place all the costs of incurring liability for emissions allowances onto the voyage charterer.  This can be done as follows: 

– by including them in the freight rate, under the ETS – Emission Scheme Freight Clause for Voyage Charter Parties 2023 , or

– by requiring payment of a surcharge for payment of emission allowances under the voyage with owners remaining responsible for surrendering the appropriate number of emissions allowances under the ETS  – Emission Scheme Surcharge Clause for Voyage Charter Parties 2023 , or

– by the voyage charterer transferring emission allowances to the owners for the voyage and the owners remaining contractually responsible for surrendering the appropriate number of emission allowances in accordance with the applicable Emission Scheme. ETS – Emission Scheme Transfer of Allowances Clause for Voyage Charter Parties 2023 .

Of course, charterers may not be willing to accept a transfer of emissions allowance costs in their fixtures. In the case of a time charter, account needs to be taken of the ‘pass-through’ in Directive 2023/959, amending the ETS Directive, and Regulation 2023/957.

Article 3gc of the 2023 ETS Directive, requires Member States to “take the necessary measures to ensure that when the ultimate responsibility for the purchase of the fuel and/or the operation of the ship is assumed by a different entity than the shipping company pursuant to a contractual arrangement, the shipping company is entitled to reimbursement from that entity for the costs arising from the surrender of allowances.”.

Unless the time charter incorporates a clause such as  BIMCO’s  Emission Trading Scheme Allowances for Time Charterparties Clause 2022 which places all emissions costs on the time charterer, time charterers planning to employ the vessel in the EU may want to include a  form of “circular indemnity” clause in their fixture. The owner would warrant that the ‘shipping company’ under Directive 2023/959 will not make a claim against the time charterer under any legislation of a Member State providing for reimbursement of costs arising from the surrender of allowances, pursuant to Article 3gc of Directive 2023/959. Further, in the event of any judgment in favour of the shipping company that is made against the time charterer in respect of the costs arising from the surrender of emissions allowances by the courts of any EU Member State, the shipowner will indemnify the time charterer in respect of all resulting costs of such a judgment.

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Professor Simon Baughen

Professor Simon Baughen was appointed as Professor of Shipping Law in September 2013 (previously Reader at the University of Bristol Law School). Simon Baughen studied law at Oxford and practised in maritime law for several years before joining academia. His research interests lie mainly in the field of shipping law, but also include the law of trusts and the environmental law implications of the activities of multinational corporations in the developing world. Simon's book on Shipping Law, has run to seven editions (soon to be eight) and is already well-known to academics and students alike as by far the most learned and approachable work on the subject. Furthermore, he is now the author of the very well-established practitioner's work Summerskill on Laytime. He has an extensive list of publications to his name, including International Trade and the Protection of the Environment, and Human Rights and Corporate Wrongs - Closing the Governance Gap. He has also written and taught extensively on commercial law, trusts and environmental law. Simon is a member of the Institute of International Shipping and Trade Law, a University Research Centre within the School of Law, and he currently teaches at Swansea on the LLM in:Carriage of Goods by Sea, Land and Air; Charterparties Law and Practice; International Corporate Governance. View all posts by Professor Simon Baughen

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