voyage charter party is

Voyage Charter : Definition & Full Guide

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

Table of Contents

What is a voyage charter.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Voyage charter party agreement example:

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

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

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

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

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

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

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

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

What are the types of voyage charter?

It can be of the following types:

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

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Charter Parties: The Complete Guide – Types & Agreements

August 21, 2023

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

Charter Parties The Complete Guide

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

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

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

Types of Charter Parties

Time charters.

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

Voyage charters

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

Bareboat charters

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

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

Charter Party Agreements

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

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

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

The Importance of Charter Parties in International Trade

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

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

Charter Parties and Bills of Lading

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

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

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

Ship Speed and Fuel Consumption in Time Charter

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

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

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

Understanding Laytime and Total Laytime

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

Key points to understand about laytime and total laytime:

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

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

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

Safe Port Requirements in Voyage and Time Charters

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

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

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

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

Key Takeaways on Charter Parties

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

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

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

Real-world Challenges with Charter Party Disputes

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

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

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

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

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

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

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

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

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

Contact us via:

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

Q1: How can ANHISA assist with charter party disputes?

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

Q2: What sets ANHISA apart from other law firms?

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

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

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

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

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

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Voyage Charter vs Time Charter

Ships, boats and other recreational vessels are owned by a large number of individuals who often purchase them as assets. They do not use these vessels for shipping goods or for ferrying passengers.

Instead, they often lend them out to third party organizations who use them for a variety of purposes. In maritime legal terms, this lending process is known as chartering. Chartering is an important concept of the global maritime trade sector, and is of different types.

This article will delve into the differences between two specific categories of charters – the voyage charter and the time charter.

What is a Charter?

A charter is an agreement between two or more groups known as charter parties, regarding the leasing of a vessel for a fixed set of conditions. The terms and conditions stipulated in the charter are binding on all the parties in the agreement and covers a wide variety of clauses and possible scenarios that may arise. It is considered to be an official document in legal aspects and is required by Admiralty Law to be drawn up in case of any form of vessel hiring or leasing.

A shipowner is the first party in the charter agreement who owns the vessel under consideration. The charterer is an individual or organization who is in need of a ship.

The charterer may have cargo that he wishes to transport, or may further lease out the vessel to third parties.

The shipbroker is a link between ship owners and charterers, and aids in finalizing the terms of the agreement. The terms of the agreement include the duration of leasing, fees, payment instalments, regulations on usage, and detailed surveyor reports on the condition of the ship.

Payment is termed as a freight rate and is remitted to the shipowner at fixed intervals decided in the agreement.

Surveyor reports are important in chartering, as they ensure that the vessel is seaworthy prior to being chartered. Similarly, on completion of a charter agreement, and before final payment formalities, another survey report is conducted to ensure that the vessel has sustained no damage during the lease period.

The charter agreement lays down the responsibilities of each group and stipulates the condition in which the vessel is to be maintained.

There are three main types of charters – voyage charter, time charter, and demise charter.

The demise charter is often known as a bareboat charter, and grants ownership or possession of the vessel to the charterer subject to certain time-bound conditions.

Terms and Features of a Voyage Charter

A voyage charter is a type of charter in which a vessel is leased out for a particular voyage. The charter agreement lists the ports of call, destination, and restrictions on cargo, if any.

Most voyage charters are undertaken by charterers who have cargo that needs to be shipped. For this, they contact ship owners through brokers and arrange a ship for a particular voyage.

Payment of voyage charters can be done in two methods – on a per-ton basis, or on a lump-sum basis .

The per-ton basis involves paying the owner for every ton of cargo or freight transported on the vessel. This is preferred when the cargo tonnage is considerably lower than the gross maximum cargo tonnage of the vessel.

On the other hand, when a higher weight of the cargo is carried, it is advisable to pay on a lump-sum basis . The shipowner must ensure that the tonnage carried on board the vessel is within the acceptable limits of the ship. This includes checking the tonnage of on-deck cargo, and the various load lines of the vessel.

There are some important terms used in a contract agreement, that lays out the time-based rules to be followed for the duration of the contract.

Laytime refers to the time that a charterer is allowed to complete the loading and unloading process at a port of call. Since the owner pays duties and berthing charges at the port, they expect the charterer to hasten the process.

In case the charterer exceeds the laytime laid out in the contract, he is obliged to pay a penalty known as demurrage . This covers the extra costs incurred by the shipowner owing to the delay by the charterer.

On the other hand, if the ship is able to complete the loading and unloading operations before the stipulated time, the charterer can claim payment of a despatch from the owner. This is often seen as an incentive for charterers to complete the port operations as soon as possible.

In voyage chartering, the shipowner undertakes payment of fuel, operation, and employment-related costs. It is their responsibility to hire the officers and other crew members for the voyage either from a pool of individuals working for them, or using brokers as middlemen to source mariners and seafarers.

In addition, the owner must also pay costs such as berthing and loading operations. Any equipment used must also be paid for by the owners.

To recoup these costs, the owners charge a higher rate from the charterer. In general, charterers transporting a one-off consignment prefer voyage charters despite the high cost. This is because they are not tied down to the contract for a long period of time.

Simply put, a voyage charter involves a charterer hiring a vessel for the purpose of a single voyage, in which the route and ports have been pre-determined. The responsibility of duty and other payments along with recruitment is handled completely by the shipowner, while the cargo is the sole responsibility of the charterer.

Terms and Features of a Time Charter

A time charter is a time-bound agreement, as opposed to a voyage charter. The shipowner leases a vessel to a charterer for a fixed period of time, and they are free to sail to any port and transport any cargo, subject to legal regulations.

Although the charterer controls the ship, the maintenance of the vessel still falls under the purview of the owner. They are responsible for ensuring that the vessel meets internationally accepted maritime standards, throughout the course of the agreement. They regularly employ marine surveyors to prepare reports on the seaworthiness of the vessel and make repairs as and when required. The owner will face legal action in case the vessel is found to have some major problem.

The time charter agreement can span anywhere from a few days to a few years. This is a long-term agreement that works on a single rate of payment known as the freight rate.

Payment is to be remitted every quarter and does not fluctuate under ordinary circumstances.

In time chartering, the charterer is responsible for selecting a crew, paying charges that arise during the voyages, and arranging for provisions to ensure smooth operations at every port of call. They must intimate the planned route to the owners in advance. The payment is calculated on a per-day basis, with penalties added at a later time. The cost of fuel, provisions etc. are to be covered by the charterer, while the owner will handle all maintenance-related costs.

The charterer often does not sail on the vessel and provide instructions to the master of the vessel in their stead. This includes permissible cargo, route and ports, required charter speed etc.

Unlike voyage charters that use a rigid payment calculation, there are several provisions for unforeseen delays in time charters.

Since payment is on a daily basis, the charterer may be delayed for a certain reason, and these are covered in the agreement.

Time not included in the final payment is known as off-hire hours . For instance, if a vessel is slowed down because of poor weather that could not have been predicted, the extra time spent is not included in the final time count.

Similarly, if some form of damage occurs and repairs need to be carried out, the duration is considered to be off-hire . Certain clauses can be inserted in the agreement, that allows for a fixed number of off-hire hours. Beyond this, the charterer is charged for delays.

Briefly put, a time charter involves leasing a vessel for a fixed period, on a per-day rate, where the charterer is free to use the vessel. The owner only looks after maintenance-related cost.

Clauses are inserted to protect the charterer from having to pay for hours that were spent due to events that could not have been foreseen.

How to Choose a Charter Type

Voyage and time charters are very different, in their intended use and service conditions. Knowing when to choose each type of charter can go a long way in meeting expectations of the charterer and shipowner.

A voyage charter is preferred in cases where the charterer only needs the vessel for specific voyages that may arise for different reasons. This could be the case when there is an occasional cargo to transfer.

An occasional cargo commonly springs up during sudden surges in demand, when the supply services are down. Thus, companies that may deal in other commodities may enter the cargo industry for that period of time, in order to make a profit.

This can also happen when the charterer has already pressed into service their own fleet of vessels, which forces them to hire a ship from a third party so that they may undertake a single voyage.

Voyage chartering can be tricky for inexperienced charterers, since the matter of the crew and equipment must be handled correctly.

Most owners make arrangements to look after these requirements, but it is mostly based on goodwill. Having a shipbroker negotiate the terms can be very helpful in ensuring that the occasional charterer is not inconvenienced by having a ship without a crew to man it.

A time charter is more commonly used by more experienced chartering firms when there is a long-term requirement for a vessel. Instead of having to specify the ports and routes undertaken by the vessel in the charter agreement, the charterer simply hires the boat for a fixed period of time and takes complete control over the vessel in all but name.

As they are free to sail to any destination with any group of crew and officers, it is beneficial to companies that already deal in shipping. For instance, if a ship is decommissioned or is sent in for repairs, the company needs to be able to procure a vessel for the duration of that period.

Instead of having to book a ship every time they wish to undertake a voyage, they use time charters. Thus, for the duration of the agreement, they will have possession of the vessel and are free to use it, within the purview of the law. This is especially useful since such a charterer will often already have a crew ready to take over the hired vessel.

Another major factor that sways the decision to pick either a voyage or time charter is the finances of the shipping industry. Voyage chartering is considered to be a volatile market since there is no assurance of leasing a boat on completion of an existing contract. Since it is only applicable for a single voyage, the overall volatility of the voyage charter is high.

However, charterers prefer voyage charters for the reason that they can always get a more competent rate from other ship owners. In other words, the owners are at the mercy of the chartering sector.

So, most ship owners prefer time charters, as it guarantees financial returns for a fixed period of time, at a fixed rate. This offers some protection against rapid fluctuation of the chartering rates. However, charterers do not prefer this contract, as it ties them down at a single rate for an extended period.

A one-off charterer always goes for a voyage charter, while a regular charterer prefers time charters. Shipowners are often directly approached by charterers, instead of having marine brokers. Thus, one must have an overall look at various factors influencing the shipping sector, prior to choosing between a voyage and time charter.

Overall Comparison

Table of responsibilities.

You may also like to read –

• 8 Main Factors that Affect Ocean Freight Rates
• What is the Difference between Lay days and Lay time?

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About Author

Ajay Menon is a graduate of the Indian Institute of Technology, Kharagpur, with an integrated major in Ocean Engineering and Naval Architecture. Besides writing, he balances chess and works out tunes on his keyboard during his free time.

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Great article that provides lots of fundamental knowledge! Kudos to the author, thank you!

@Edward: Glad you liked it 👍

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

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

Do you keep hearing this word so regularly?

Well, who doesn’t?

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

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

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

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

Not anymore.

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

Concept of Charter party agreement

It is all business.

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

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

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

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

Then where does the term charterer fits into this?

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

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

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

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

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

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

So they contact a charterer for transporting their cargo.

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

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

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

They are called “Brokers”.

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

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

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

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

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

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

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

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

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

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

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

Charter party agreement supplement the contract of carriage.

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

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

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

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

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

There are different forms for different trades.

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

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

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

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

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

Voyage Charter, Time charter, Demise charter

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

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

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

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

Voyage Charter

It should be clear from the name.

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

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

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

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

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

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

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

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

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

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

Most likely you will get the answer.

Laytime, Demurrage and despatch

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

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

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

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

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

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

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

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

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

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

Too many uncertainties.

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

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

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

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

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

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

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

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

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

The chartering term for this is “despatch”.

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

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

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

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

Notice of readiness and statement of facts

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

This information is also provided in the charter party agreement.

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

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

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

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

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

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

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

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

Statement of Facts

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

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

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

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

At the least, statement of facts must include

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

Master’s actions during voyage charter

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

And it is for their own benefit too.

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

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

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

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

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

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

Like this one in one of the voyage orders.

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

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

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

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

Having the vessel on charter is so common.

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

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

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

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

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

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

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

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

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

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

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About Capt Rajeev Jassal

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

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70 comments.

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

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

its amazing how you describe anything sir

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

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

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

Glad you liked it Sukhchain...

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

Glad you liked it Marlon...

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

Thanks for your input Zibi...

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

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

Interocean is one of them...

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

Glad you found it useful Sajjad...

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

Glad you liked it Dharmdeep...

Very well written capt., pls continue the good work

Thanks Capt Pereira...

This is a scholarly article Great job Captain!

Glad you liked it Tunde...

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

Glad you liked it Capt Edward...

Many thanks

Thanks Rafik...

sir plz explain magnetic compass

I will do that in a different blog...

Once again thank you very much.

Thanks Raju...

Informative Awaiting next one regarding time charterers

Will write on Time chartering too...

many thanks for this jobs cap

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

Thanks Ahmed...

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

Very nicely explained and written good effort

Very nice explanation capt,

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

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

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

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

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

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

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

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

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

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

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

Nice blog...pleasure to read

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

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

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

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

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

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

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

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

Wonderfully explained

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

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

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

Such a great explanation! Thank you so much!

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

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

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

thanks alot of info keren bgt

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

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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.

Voyage Charter vs Time Charter – Everything You Need to Know

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

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

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

What is a Charter?

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

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

Voyage Charter

What is a voyage charter.

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

Features/Terms

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

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

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

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

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

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

Pros & Cons

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

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

Time Charter

What is a time charter.

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

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

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

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

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

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

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

How to Choose a Charter Type

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

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

Charter Cost

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

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

Ongoing cost

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

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

Flexibility

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

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

Contract Length

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

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

Convenience

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

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

FAQs About Voyage Charter and Time Charter

What are BIMCO Sanctions Clause for Voyage Charter Parties 2020?

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

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

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

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

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

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

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

Why do ship owners prefer voyage charter over time charter?

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

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

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

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

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

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Charter Parties

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

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

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

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

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

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

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

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

The Contract

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

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

Typical Areas of Dispute

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

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

Misrepresentation

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

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

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

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

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

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

Temporary Interference with Charterer�s Use of the Vessel

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

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

Safe Port and Safe Berth Provisions

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

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

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

Demurrage and Detention

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

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

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

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

Subcharters

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

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

Liability of the Owner for Damage or Loss of Goods

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

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

Arbitration Clauses

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

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voyage charter party

Definition of voyage charter party

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“Voyage charter party.” Merriam-Webster.com Dictionary , Merriam-Webster, https://www.merriam-webster.com/dictionary/voyage%20charter%20party. Accessed 2 May. 2024.

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Pros and Cons of Voyage Charter

Voyage Charter Pros

Voyage Charter provides a flexible means by which a ship can be provided for the carriage of a specific cargo between two specific ports. To this extent it will provide cover for a cargo interest’s short-term requirement to move cargo from X to Y.

Additionally, a shipowner can provide short-term employment for the ship by engaging them on voyage charters.

Many shipowners operating fleets of ships will employ ships in this way in order to balance their portfolio of work. A number of ships from the fleet will be operated on long-term time charters to provide a steady income stream for the shipowners.

The remaining proportion of the fleet will be employed on Voyage Charters in order to allow the shipowners to benefit from fluctuations in the market price for ships caused by shortages of ships.

In this way Voyage Charters provide a flexible solution to the intrinsically variable demands of shipping.

A voyage charter is a type of charter party in the shipping industry where a shipowner agrees to transport a specific quantity of cargo for a set price from one or more ports to one or more destinations. Like any contractual arrangement, voyage charters come with their own set of advantages and disadvantages:

Pros of Voyage Charter

• Defined Costs for Charterers : In a voyage charter, the cost of transporting goods is agreed upon in advance. This allows the charterer to know the exact cost of transportation, aiding in budgeting and financial planning.
• No Ship Operating Costs for Charterers : The shipowner bears all the operating costs of the ship, including fuel, crew, maintenance, and insurance. This is beneficial for the charterer as they are not exposed to these variable expenses.
• Efficiency in Cargo Transportation : Voyage charters are often the most efficient way to transport large quantities of cargo over long distances, making them ideal for bulk and commodity shipments.
• Flexibility in Cargo Handling : The charterer has some flexibility in specifying loading and unloading procedures, which can be tailored to the nature of the cargo.
• Market Opportunities for Shipowners : Voyage charters allow shipowners to capitalize on favorable market conditions, setting higher freight rates when demand is high.
• No Long-Term Commitment for Charterers : Voyage charters are typically for a single voyage, offering charterers flexibility without the need for a long-term commitment, as opposed to time charters which can last for several months or years.
• Market Insight for Shipowners : Engaging in various voyage charters can provide shipowners with valuable insights into different cargo markets and trade routes, which can inform future business decisions.
• Profit Maximization for Shipowners in High-Demand Periods : During periods of high demand, shipowners can capitalize by negotiating higher freight rates, maximizing their profit potential.

Cons of Voyage Charter

• Market Risk for Shipowners : The shipowner bears the risk of fluctuating market conditions. If the market rate for freight falls below the agreed-upon charter rate, the shipowner cannot benefit from the lower prices.
• Risk of Delays for Shipowners : The shipowner is exposed to the risk of delays due to loading and unloading operations, bad weather, or port congestion, which can increase operational costs.
• Limited Flexibility for Shipowners : Once a voyage charter is agreed upon, the shipowner has limited flexibility in employing the ship for other opportunities until the charter is completed.
• Potential for Cargo-Specific Issues for Charterers : If the cargo requires special handling or is subject to market fluctuations, the charterer might face challenges in timing and cargo readiness.
• Demurrage and Dispatch : If the loading or unloading takes longer than agreed (laytime), the charterer is typically liable to pay demurrage charges. Conversely, if operations are completed in less time, the charterer may receive dispatch money, but this is less common.
• Dependency on Ship’s Performance : The charterer’s operations are heavily dependent on the ship’s performance and punctuality, which they do not control.
• Operational Restrictions for Charterers : The charterer has limited control over the operational aspects of the ship, such as speed and route, which can impact the timing and efficiency of the cargo delivery.
• Risk of Freight Rate Fluctuations for Charterers : If the market freight rate falls after entering into a voyage charter, the charterer may end up paying more than the current market rate for the transportation.
• Potential Liability for Cargo Damage : In some cases, the charterer might be responsible for any damage to the cargo during loading or unloading operations, which could incur additional costs.
• Bunker Fuel Price Variability for Shipowners : The cost of bunker fuel, which is a significant operational expense, can fluctuate, impacting the profitability of the voyage for the shipowner, especially if not properly hedged or accounted for in the charter party agreement.
• Administrative and Coordination Efforts : Voyage charters often require significant administrative and coordination efforts, including contract negotiation, cargo scheduling, and liaison with port authorities.
• No Guarantee of Future Business : For shipowners, each voyage charter is a standalone agreement, which means there is no guarantee of continuous business once a voyage is completed.

While voyage charters offer a clear and straightforward way to transport goods, they also carry specific risks and limitations for both shipowners and charterers. The choice between a voyage charter and other types of charters, like time or bareboat charters, depends on the specific needs, risk tolerance, and operational preferences of the parties involved.

What are the benefits of Voyage Charter?

The benefits of a voyage charter, where a shipowner agrees to transport a specified amount of cargo for a charterer from one point to another for a predetermined rate, are numerous for both parties involved. Here are some key benefits:

Benefits for the Charterer

• Predictable Costs : The cost of transportation is fixed and agreed upon in advance, allowing the charterer to budget transportation expenses accurately.
• No Operating Costs : The charterer is not responsible for the operating costs of the ship, such as fuel, crew, and maintenance. This reduces financial risk and administrative burden.
• Suitable for Single or Occasional Shipments : Voyage charters are ideal for businesses that do not require regular shipments, offering a flexible and cost-effective solution for occasional transport needs.
• Flexibility in Cargo Management : Charterers can specify loading and unloading procedures to suit their cargo, ensuring optimal handling and safety.
• Reduced Liability : The charterer’s liability is generally limited to the cargo and operations at the port, reducing broader operational risks.

Benefits for the Shipowner

• Profit Opportunities : During periods of high demand, shipowners can negotiate favorable freight rates, maximizing their earnings.
• Market Exposure : Engaging in various voyage charters exposes shipowners to different markets and cargo types, diversifying their business experience and opportunities.
• Utilization of Ship : Voyage charters allow for the effective utilization of the ship, ensuring it generates income rather than remaining idle.
• Control Over Ship Operations : Shipowners retain control over the operation and navigation of the ship, allowing them to manage their fleet efficiently.
• Flexibility in Fleet Management : After the completion of a voyage charter, the shipowner is free to engage the ship in other charters or operations, maintaining flexibility in fleet management.

General Benefits

• Simplicity : Voyage charters are often straightforward and easier to negotiate and manage compared to more complex chartering arrangements like time charters.
• Clear Terms : The contract terms, including the freight rate, ports of loading and discharge, and laytime, are clearly defined, reducing the potential for disputes.
• Market Insights : For both parties, engaging in voyage charters can provide valuable insights into market trends, rates, and operational best practices.

Voyage Charters offer financial predictability and operational flexibility, making them an attractive option for both charterers and shipowners. The specific benefits can vary based on the nature of the cargo, market conditions, and the strategic objectives of the parties involved.

What are the advantages of Time Charter?

A time charter is a type of chartering agreement in the shipping industry where a charterer rents a ship for a specified period of time, with the shipowner still responsible for the ship’s operation and maintenance. This arrangement offers several advantages for both the charterer and the shipowner:

Advantages for the Charterer

• Operational Control : The charterer gains operational control over the ship for the charter period, including deciding the routes and cargoes, which offers greater flexibility in logistics and trade opportunities.
• Fixed Hire Rate : The charterer pays a fixed daily or monthly hire rate, making budgeting and financial planning more predictable.
• No Long-Term Capital Commitment : Charterers can secure the use of a ship without the capital investment required to purchase a ship, optimizing their capital allocation.
• Adaptability to Market Conditions : Time charters allow charterers to respond quickly to market changes by repositioning ships to more profitable routes or cargoes.
• Reduced Risk : Since the shipowner is responsible for the ship’s operation and maintenance, the charterer has reduced exposure to operational risks.
• Efficiency in Cargo Operations : Time charters are efficient for businesses with regular shipping needs, avoiding the need to negotiate separate voyage charters for each shipment.

Advantages for the Shipowner

• Stable Income : Time charters provide a steady, predictable income over the charter period, which can help in financial planning and securing loans.
• Reduced Marketing Effort : The shipowner doesn’t need to find new cargoes for each trip, as the charterer is responsible for cargo arrangements.
• Utilization of Fleet : Time charters help ensure that the ship is actively employed for a longer duration, reducing idle time.
• Operational Oversight : The shipowner retains control over the crew and the technical management of the ship, ensuring that standards are maintained.
• Flexibility in Fleet Management : After the expiration of the charter, the shipowner can reposition the ship for other opportunities, including other time charters or spot market voyages.

General Advantages

• Risk Distribution : Risks are distributed between the shipowner and the charterer, with each party bearing the risks associated with their responsibilities.
• Market Adaptability : Both parties can benefit from the flexibility to adapt to market conditions – the charterer through operational control and the shipowner through stable, long-term contracts.
• Long-Term Relationships : Time charters often foster long-term business relationships between shipowners and charterers, leading to future business opportunities.

Time Charters offer a balance of benefits for both parties, providing operational flexibility and market adaptability for charterers, and financial stability and reduced marketing efforts for shipowners. This makes them an attractive option for businesses with regular shipping needs and shipowners seeking stable, long-term engagements.

Why do Shipowners prefer Voyage Charter over Time Charter?

Shipowners may prefer voyage charters over time charters for several reasons, each linked to the specific characteristics of voyage charters and the strategic and financial priorities of the shipowner. Here are some of the key reasons:

• Higher Potential Profit in Favorable Markets : In a strong freight market, voyage charters can offer higher earning potential per voyage compared to the steady, but possibly lower, daily rates of time charters. This is particularly true when freight rates are rising, as shipowners can capitalize on higher market rates.
• Control Over Ship Operations : In a voyage charter, the shipowner retains control over the ship’s operation, including navigation and management. This allows them to maintain their operational standards and practices, which can be important for maintaining the ship’s condition and performance.
• Flexibility in Market Engagement : Voyage charters offer the flexibility to engage the ship in different markets and trade routes. After the completion of a voyage, the shipowner can reassess the market and choose the next charter based on the most favorable conditions, without being tied to a long-term commitment.
• No Dependency on Charterer’s Cargo Operations : In a time charter, the ship’s profitability is linked to the charterer’s ability to find and manage cargo effectively. In a voyage charter, the shipowner is not dependent on the charterer’s cargo operations, reducing the risk of inefficiencies or delays caused by the charterer.
• Risk of Market Downturn : While voyage charters expose shipowners to market fluctuations, some owners might prefer this over locking in a potentially lower long-term rate in a time charter, especially if they anticipate an upturn in the market.
• Reduced Credit Risk : Voyage charters typically involve shorter engagements with charterers and quicker payment terms. This reduces the credit risk associated with the charterer compared to longer time charter commitments.
• Easier Budgeting for Operational Costs : Since the shipowner is responsible for the ship’s operating costs in a voyage charter, they can more directly control and budget these expenses, as opposed to relying on the charterer’s management in a time charter.
• Lump Sum Payments : Some voyage charters involve lump-sum payments, which can be advantageous for cash flow management for the shipowner.
• Market Insights : Engaging in different voyage charters provides valuable insights into various cargo markets and trade routes, which can inform future business strategies.

However, it’s important to note that the preference for voyage charters over time charters can vary depending on the shipowner’s business model, risk tolerance, market conditions, and specific operational preferences. While some owners prefer the potential higher earnings and control of voyage charters, others might favor the stability and predictability of revenue from time charters.

Why do Charterers prefer Voyage Charter over Time Charter?

Charterers may prefer voyage charters over time charters for several reasons, mostly related to the specific benefits and characteristics of voyage charters that align with the charterers’ logistical needs, financial objectives, and risk management strategies. Here are some key reasons for this preference:

• Cost Predictability : In a voyage charter, the cost of transporting goods is fixed and agreed upon in advance. This allows charterers to know the exact cost of transportation, aiding in budgeting and financial planning.
• No Operational Responsibilities : The charterer is not responsible for the ship’s operational costs and management in a voyage charter. This includes crew wages, ship maintenance, and insurance, reducing the administrative burden and operational risks for the charterer.
• Ideal for Single or Specific Shipments : Voyage charters are particularly suitable for businesses that do not have regular shipping needs but require transportation for specific, occasional shipments.
• Reduced Capital Commitment : Since voyage charters are typically for single voyages, they require less commitment of financial resources compared to the potentially longer-term and more costly time charters.
• Avoidance of Market Fluctuations : Charterers are not exposed to fluctuations in charter rates once the voyage charter rate is agreed upon. This can be particularly advantageous in volatile markets.
• Flexibility in Cargo Handling : Charterers can have more say in specifying loading and unloading procedures in voyage charters, ensuring that these operations are tailored to the nature of the cargo.
• No Risk of Ship Underperformance : In voyage charters, the charterer is not affected by the risk of ship underperformance in terms of speed and fuel consumption, as these aspects are the shipowner’s responsibility.
• Simplicity and Convenience : Voyage charters are often more straightforward and easier to arrange and manage compared to the more complex and ongoing commitments of time charters.
• Less Liability for the Ship : The charterer’s liability is usually limited to the cargo and the operations at the port, and does not extend to the broader operations and maintenance of the ship.
• Suitable for Specific Trade Routes or Cargoes : For businesses that deal with specific trade routes or specialized cargoes, voyage charters offer the precision and customization needed for such operations.

The preference for voyage charters by charterers is largely driven by the cost predictability, reduced operational responsibilities, and suitability for specific or occasional shipping needs. However, the choice between voyage and time charters ultimately depends on the specific requirements, financial considerations, and risk appetite of the charterer.

What is the difference between Time Charter and Voyage Charter?

Time charter and voyage charter are two principal types of charter parties used in the shipping industry, and they differ significantly in terms of structure, responsibilities, and financial arrangements. Here’s a comparative overview:

Time Charter

• Duration-Based Agreement : In a time charter, the ship is chartered for a specific period. The charterer pays for the hire of the ship over this period, regardless of the number of voyages made.
• Charterer’s Control and Flexibility : The charterer has greater control over the ship’s operation, including its routes and cargoes, within the agreed limits of the charter.
• Shipowner’s Responsibilities : The shipowner is responsible for the ship’s operation and maintenance, including crewing, insurance, and repairs.
• Payment Structure : Payment is made on a per-day basis (hire rate), and the charterer is responsible for the fuel costs (bunker) and port charges.
• Risk Distribution : The charterer bears the commercial risks (such as cargo delays), while the shipowner bears the operational risks (such as mechanical failures).

Voyage Charter

• Trip-Specific Agreement : In a voyage charter, the agreement is for a specific voyage or series of voyages. The ship is chartered for the transportation of cargo from one or more load ports to one or more discharge ports.
• Shipowner’s Control : The shipowner controls the ship’s operation, including its navigation and management.
• Fixed Freight Rate : The charterer pays a lump sum or a rate per ton for the cargo transported. This rate is fixed regardless of the voyage duration.
• Shipowner’s Expenses : The shipowner pays for the ship’s operating costs, including fuel, crew, and maintenance.
• Risk Distribution : The shipowner bears most risks, including voyage duration and operational costs, while the charterer is primarily responsible for loading and unloading the cargo within the agreed laytime.

Key Differences

• Control and Flexibility : In a time charter, the charterer has more control and flexibility in employing the ship, while in a voyage charter, the shipowner has more control over the ship’s operation.
• Payment Structure : Time charters involve a day-rate payment model, while voyage charters involve payment based on cargo quantity or a lump sum for the journey.
• Duration of Agreement : Time charters are for a set period, whereas voyage charters are for one or more specific voyages.
• Risk and Responsibility : In time charters, operational responsibilities and some risks are with the shipowner, while commercial risks are with the charterer. In voyage charters, the shipowner assumes most of the operational and voyage risks.

Choosing between a time charter and a voyage charter depends on factors like the charterer’s need for flexibility, the duration of the requirement, cost considerations, and risk appetite. Each type offers different advantages and suits different shipping needs.

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Welcome to Coastal Sailing Charters, where unforgettable sailing adventures await you! Embark on an extraordinary voyage along the Ventura County Gold Coast and Channel Islands aboard our 2021 Beneteau Oceanis 35.1. Our sailing experiences include thrilling Coastal Adventures, Sunset Cruises, expert Sailing Instruction, and Personalized Charters. With a maximum of 6 passengers, our yacht features twin steering stations, a swim platform, and an open cockpit, ensuring a comfortable and rewarding sailing experience. Join us and discover the beauty of Coastal Sailing like never before! …

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My family and I, including our two young children, have sailed numerous times with Captain Tim on Ohana Ka Mua. We've had a fantastic time and always felt safe, we even got to see dolphins playing along the bow of the boat, which was such a treat for all! Tim is a top notch skilled sailor, with years of experience. I have even taken a few sailing lessons from him, and he is an incredible teacher. Ohana Ka Mua itself, is a breathtaking boat; Tim and his wife keep it immaculate. So whether you are looking for a relaxing sail with lunch and some wine, looking for a unique way to celebrate a special occasion, planning a family day out on the water, or looking for sailing lessons... This is it! Thanks Coastal Sailing! We are looking forward to our next our next day out on the water.

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TANKERVOY 87 is a tanker voyage charter party. INTERCONSEC 76 contains additional clauses for use in relation to tanker consecutive voyages. The latest edition of this document is TANKERVOY 87.

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Who is Alex P Taylor? ‘Below Deck' Season 11's seventh primary charter guest calls himself ‘Nacho King'

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