CHARTERING

THERE ARE 4 TYPES OF CHARTER PARTIES:

1.      VOYAGE CHARTER: VESSEL CHARTERED FOR A PARTICULAR VOYAGE.

2.      TIME CHARTER: VESSEL CHARTERED FOR A SPECIFIC PERIOD OF TIME.

3.      DEMISE – BAREBOAT CHARTER: CHARTERER RUNS THE SHIP AS HIS OWN SHIP.

4.      CONTRACT OF AFREIGHTMENT: IS CARGO RELATED.

COMPARISON BETWEEN VOYAGE CHARTER, TIME CHARTER AND DEMISE CHARTER

	VOYAGE CHARTER	TIME CHARTER	DEMISE CHARTER
1	BUNKERS – OWNERS	CHARTERERS	CHARTERERS
2	LUB OIL – OWNERS	OWNERS	CHARTERERS
3	F.W. – OWNERS	OWNERS	CHARTERERS
4	H & M INSUR - OWNERS	OWNERS	OWNERS
5	P & I INSUR – OWNERS	OWNERS	CHARTERERS
6	D/DOCK, REPAIRS, MAINTENANCE – OWNERS	OWNERS	CHARTERERS
7	PORT DUES – OWNERS	CHARTERERS	CHARTERERS
8	CANAL DUES – OWNERS	CHARTERERS	CHARTERERS
9	STEVEDOR COST – MAY BE BY OWNERS/CHARTERERS OR SHIPPERS	CHARTERERS	CHARTERERS
10	COMMUNICATION – OWNERS	TO BE SPLIT BETWEEN OWNERS AND CHARTERERS	CHARTERERS
11	OPERATIONAL CONTROL – ONWERS	OWNERS	CHARTERERS
12	COMMERCIAL CONTROL – OWNERS	CHARTERERS	CHARTERERS
13	COMMERCIAL COST – OWNERS	CHARTERERS	CHARTERERS
14	RIGHT OF REMOVAL OF SENIOR OFFICERS – OWNERS	CHARTERERS	CHARTERERS
	VOYAGE CHARTER	TIME CHARTER	DEMISE CHARTER
15	APPOINTMENT OF OFFICER AND CREW – OWNERS	OWNERS	CHARTERERS
16	DETERMINATION OF SAFE PORT – OWNERS	CHARTERERS	CHARTERERS
17	SAFE CARGO – OWNERS	CHARTERERS	CHARTERERS
18	ANY SALVAGE MONEY BELONGS TO OWNERS	OWNERS AND CHARTERERS HAVE EQUAL SHARE	CHARTERERS
19	OWNER IS LIABLE TO DAMAGE TO MARINE ENVIRONMENT	OWNERS	CHARTERERS
20	SHIP NAME, PAINT ETC ACCORDING TO OWNERS	OWNERS	CHARTERERS
21	FREIGHT IS PAID AT DESTINATION, ADVANCE FREIGHT MAY BE PAID	IN ADVANCE	IN ADVANCE
22	IN CASE THE CHARTERER SHORT LOAD THE SHIP HE HAS TO PAY FOR DEADFREIGHT	NO SUCH PROVISION	NO SUCH PROVISION
23	LAYTIME CALCULATIONS ARE DONE FOR DEMURRAGE AND DISPATCH PAYABLE	NO SUCH CALCULATIONS	NO SUCH CALCULATIONS
24	THE SHIPOWNER HAS A LIEN ON THE CARGO FOR HIS HIRE MONEY.	THE SHIPOWNER HAS A LIEN ON THE CARGO FOR HIS HIRE MONEY.	NO SUCH PROVISION
25	THERE ARE NO PROVISIONS OF OFF HIRE ONCE THE SHIP IS CHARTERED	IN CASE OF BREAKDOWN OF VESSEL’S EQUIPMENTS THIS CAN BE DONE.	NO SUCH PROVISION

VOYAGE CHARTER

1.      SAFE PORT / BERTHS: IT IS THE CHARTERERS RESPONSIBILITY TO MAKE SURE THAT THE PORT / BERTH IS SAFE FOR THE VESSEL. THE VESSEL SHALL BE DIRECTED TO SAFE PORTS / BERTHS WHERE SHE MAY LIE SAFELY AFLOAT (OR, IF AGREED, SAFELY AGROUND)(NAABSA-NOT ALWAYS AFLOAT BUT SAFELY AGROUND). A PORT IS CONSIDERED SAFE IF A VESSEL CAN, WITHOUT SOME EXTRA-ORDINARY INTERVENING EVENT, REACH IT, ENTER IT, STAY IN IT AND LEAVE IT IN A SAFE MANNER WITH THE EXERCISE OF GOOD NAVUGATION AND SEAMANSHIP. NAABSA CLAUSE APPLIES ONLY WHEN THE VESSEL IS STATIONARY ie AT ANCHOR OR AT BERTH.

2.      DEMURRAGE: IF A VESSEL IS DELAYED IN PORT BEYOND THE STIPULATED LAYDAYS. CHARTERERS PAY A PENALTY TO THE OWNERS FOR THAT MANY DAYS. THIS IS KNOWN AS DEMURRAGE.

3.      DISPATCH: IF THE VESSEL COMPLETES CARGO EARLIER THAN THE LAYDAYS THEN THE OWNERS PAY A BONUS TO THE CHARTERERS, THIS IS KNOWN AS DISPATCH.

4.      DEADFREIGHT: WHEN THE CARGO THAT HAS BEEN STIPULATED IN THE CONTRACT IS NOT LOADED THEN THE DIFFERENCE BETWEEN THEM IS KNOWN AS DEADFREIGHT. ‘S ACCORDINGLY THE FREIGHT WILL BE DEDUCTED FROM THE OWNER’S OR CHARTERER’S ACCOUNT DEPENDING UPON WHOM THE PENALTY OCCURS.

5.      NEW AMMENDED JASON CLAUSE: THIS CLAUSE WAS BROUGHT UP DUE TO THE DIFFERENCE IN RULES BETWEEN THE US LAWS AND BRITISH LAWS. BRITISH LAW STATES THAT IN CASE OF A LOSS ARISING DUE TO THE FAULT OF THE MASTER OR CREW IN NAVIGATION OR MANAGEMENT, THE SHIP OWNER SHALL NOT BE HELD RESPONSIBLE BUT CAN DECLARE A GENERAL AVERAGE. THE US LAW OPPOSES THIS SAYING THAT WHY SHOULD OTHERS PAY FOR A MISTAKE DONE BY THE OWNER’S SERVANT. THUS SHIP-OWNERS TRADING TO US STARTED TO PUT A CLAUSE IN THE C/P THAT THE SHIP-OWNER COULD RECOVER A GENERAL AVERAGE IF DUE DILIGENCE HAS BEEN EXERCISED. THE VALIDITY OF THIS CLAUSE WAS CHALLENGED BY THE US COURTS FOLLOWING THE ACCIDENT OF A VESSEL NAMED JASONM THUS IS WAS CALLED AS JASON’S CLAUSE. AFTER A NUMBER OF SUBSEQUENT DECISIONS CERTAIN CHANGES WERE MADE AND IT WAS THEN CALLED AS THE NEW JASON CLAUSE. IT STATES THAT IN THE EVENT OF ANY LOSS RESULTING FROM ANY CAUSE FOR WHICH THE CARRIER IS “NOT RESPONSIBLE BY STATUTE, CONTRACT OR OTHERWISE” A GENERAL AVERAGE SHALL BE CONTRIBUTED BY THE CARGO-INTERESTS. IT FURTHER ADDS THAT IF A SALVING SHIP IS OWNED / OPERATED BY THE CARRIER, SALVAGE SHALL BE PAID FOR AS FULLY AS IF THE SALVING SHIP BELONGED TO STRANGERS.

6.      WAR RISK CLAUSE: USUALLY, THE VESSEL’S HULL AND MACHI NERY ARE INSURANCED AGAINST RISK OF WAR. BUT IF THE VESSEL IS TO TRADE IN AN AREA WHERE ACTUAL WAR MAY HAVE BROKEN OUT OR WHERE THERE IS A RISK OF WAR THEN THE OWNERS / MASTER HAVE THE OPTION TO DECLINE TO PROCEED TO THAT PORT OR IF ALREADY IN THAT PORT TO LEAVE IT IMMEDIATELY. IF THE OWNERS / MASTER DO CONSENT TO PROCEED TO THAT PORT OR REMAIN IN THAT PORT THEN THE CHARTERERS WILL HAVE TO PAY FOR THE ADDITIONAL INSURANCE PREMIUM AGAINST WAR-RISKS.

7.      DEVIATION CLAUSE: THIS CLAUSE GIVES THE VESSEL LIBERTY TO PROCEED TO OTHER PORTS FOR BUNKERING (IN CASE OF VOYAGE C/Ps) TO SAIL WITH / WITHOUT PILOTS, TO TOW AND BE TOWED, TO ASSIST VESSELS IN DISTRESS AND TO DEVIATE FOR THE PURPOSE OF SAVING LIFE AND PROPERTY.A

8.      BOTH TO BLAME CLAUSE: AS PER THE U.S. RULES IF THERE IS A COLLISION BETWEEN SHIP A AND B SUCH THAT BOTH VESSELS ARE TO BLAME FOR THE COLLISION THEN THE CARGO OWNER OF SHIP A CAN RECOVER IN FULL AGAINST SHIP B REGARDLESS OF THE DEGREE OF FAULT / BLAME. SHIP B CAN IN TURN RECOVER THE SUM FROM SHIP A TO THE EXTENT OF THE FAULT OF SHIP B. BUT AS PER THE A SHIP-OWNER HAS NO LIABILITY FOR ANY LOSS OF CARGO ARISING OUT OF A ERONOUS / NEGLIGENT NAVIGATION. THE U.S. LAW THUS CREATES AN ANOMALOUS SITUATION. IF SHIP A IS SOLELY TO BE BLAMED FOR A COLLISION THEN SHE HAS NO LIABILITY TO THE CARGO OWNER BUT IF BOTH ARE TO BE BLAMED THEN HE IS INDIRECTLY LIABLE TO CARGO OWNERS BY THE VIRTUE OF HIS LIABILITY TO SHIP B. TO OVERCOME THIS PROBLEM A “BOTH TO BLAME COLLISION CLAUSE” IS INSERTED IN THE C/Ps. THE OBJECT OF THIS CLAUSE IS THAT THE OWNERS OF SHIP A CAN RECOVER SUCH SUM FROM THE CARGO OWNERS WHICH THEY MAY HAVE PAID TO SHIP B. LIKE THE NEW JASON CLAUSE THIS CLAUSE IS ALSO INVOKED WHEN A U.S. COURT IS INVOLVED.

9.      GENERAL ICE CLAUSE: THIS CLAUSE GIVES THE OWNERS AN OPTION TO WAIT OUTSIDE AN ICE-BOUND PORT UNTIL THE PORT IS OPEN. IT IS UPON THE DISCRETION OF THE MASTER AND THE OWNERS TO PROCEED TO THAT PORT. AN ICE-BREAKER ATTENTION SHOULD BE AVAILABLE AT SUCH PORTS.

IF THE VESSEL IS NOT ABLE TO ENTER SUCH PORT DUE TO ICE, THEN N.O.R. WHICH IS GIVEN MUST BE TREATED AS COMMENCEMENT OF LAYTIME EVEN THOUGH THE VESSEL IS OUTSIDE PORT LIMITS.

IF THE CHARTERERS DO NOT AGREE TO THIS THEN THEY HAVE AN OPTION TO SEND THE VESSEL TO SOME OTHER DISCHARGE PORT PROVIDED THAT IF THE EXTRA DISTANCE IS MORE THAN 100NM THEN THE VESSEL IS TO RECEIVE EXTRA FREIGHT. THIS IS KNOWN AS CENTROCON CLAUSE. IF IN A LOAD PORT, IT STARTS TO SNOW DURING LOADING OPERATION AND ICE STARTS TO ACCUMULATE THEN THE MASTER CAN SAIL OUT OF THE PORT AND WAIT FOR CHARTERERS INSTRUCTIONS OUTSIDE THE PORT. THE CHARTERER CAN THEN ASK THE VESSEL TO PROCEED TO DISCHARGE PORT WITH WHATEVER CARGO IS ONBOARD OR CAN SEND HER TO SOME OTHER PORT FOR LOADING PROVIDED THAT IF THE EXTRA DISTANCE SAILED IS MORE THAN 100NM THEN THE FREIGHT APPLICABLE WILL BE PAID BY THE CHARTERER, THIS IS KNOWN AS GENCON CLAUSE. IF THE CHARTERER DOES NOT AGREE TO ANY OF THE ABOVE THEN THE C/P CAN BE CANCELLED BY THE OWNERS AND THE CHARTERERS WILL BE LIABLE TO OWNERS FOR ABY EXPENSES.

10.  EXCEPTION CLAUSE: WHEN CLAUSE PARAMOUNT OR HAGUE / HAGUE VISBY RULES ARE INCORPORATED IN THE C/P THEN EXCEPTION CLAUSES ARE SUPERFLUOUS. OTHERWISE EXCEPTION CLAUSE IS INCLUDED IN THE C/P. THIS CLAUSE STATES THAT THE VESSEL WILL NOT BE HELD LIABLE TO CHARTERERS OR CARGO OWNERS FOR ANY LOSS ARISING DUE TO THE FOLLOWING REASON, PROVIDED THAT THE VESSEL EXERCISES DUE DILIGENCE.

1.      ACT OF GOD,

2.      PERILS OF THE SEA,

3.      NEGLIGENCE OF MASTER / MARINER / PILOTS ETC.

4.      FIRE,

5.      JETTISONING,

6.      PIRACY,

7.      BARRATORY (INQUILLAB)

8.      INHERENT VICE,

9.      SHIFTING OF BUNKER / STORES CAUSING DAMAGE TO THE SHIP.

11.  INDEMNITY CLAUSE: THE MASTER SHALL BE UNDER THE ORDERS AND DIRECTION FROM THE CHARTERERS AND THE CHARTERER AGEES TO INDEMNIFY THE OWNERS OF ANY CONSEQUENCES OR LIABILITIES ARISING FROM THE MASTER OR OFFICERS SIGNING THE B/L OR OTHER DOCUMENT. THE MASTER IS STILL RESPONSIBLE TO THE OWNER FOR THE SAFENAVIGATION OF THE SHIP AND SAFE STOWAGE AND CARRIAGE OF CARGO. THIS CLAUSE ALSO GIVES THE CHARTERERS THE RIGHT TO CHANGE ANY OF THE SHIP’S OFFICER OR ENGINEER INCLUDING THE MASTER OF THE SHIP.

12.  P & I BUNKERING CLAUSE: GIVES LIBERTY TO THE SHIP TO DEVIATE FOR TAKING BUNKERS FROM A PLACE WHERE BUNKER COSTS ARE LESS. IT ALSO ALLOWS THE SHIP TO TAKE FULL ROUNDTRIP BUNKERS. FILLING BUNKERS IS ADVANTAGEOUS FOR BOTH OWNERS (WHO MAY SAVE ANOTHER BUNKER CALL) AND CHARTERERS (WHO MAY HAVE FREIGHT CHARGES ON THE HOMEWARD VOYAGE REDUCED AS A RESULT OF OWNERS SAVING).

13.  CESSER CLAUSE: A CESSER CLAUSE IS GENERALLY INSERTED WHEN THE CHARTERER IS ALSO THE SHIPPER AND WISHES TO ENSURE THAT TE CHARTERER’S RESPONSIBILITY CEASES ON COMPLETION OF LOADING. THUS TRANSFERRING LIABLITY OF DISCHARGE PORT DEMURRAGE TO THE RECEIVERS. IN SUCH CASE THE CHARTERER CUM SHIPPER SETTLES LOAD PORT DEMURRAGE / DISPATCH. THE CARRIER THEN HAS THE RIGHT TO EXERCISE LIEN OVER THE CARGO AT DISCHARGE PORT. THIS CLAUSE DOES NOT RELIEVE THE CHARTERER FROM CONTRIBUTING TOWARDS SALVAGE OR GENERAL AVERAGE IN CASE OF ANY INCIDENT.

14.  LIEN: A SHIP-OWNER HAS THE RIGHT TO EXERCISE POSSESSORY LIEN ON THE CARGO FOR FREIGHT BUT NOT FOR CHARTER HIRE (IN CASE OF TIME CHARTER) OR FOR DEADFREIGHT, DEMURRAGE AND DETENTION (IN CASE OF VOYAGE CHARTER). BY INSERTING A SUITABLE CLAUSE, THE SHIP-OWNER ACQUIRES A CONTRACTUAL RIGHT TO EXERCISE LIEN IN RESPECT OF CHARTER HIRE, DEMURRAGE OR DETENTION AND DEADFREIGHT.

15.  ARBITRATION CLAUSE: IN ORDER TO AVOID EXPENSIVE LITIGATION MOST OF THE C/P CONTAINS AN ARBITRATION CLAUSE, SO THAT DISPUTES CAN BE SETTLED THROUGH ARBITRATION. THE CLAUSE MAY PROVIDE FOR THE NOMINATION OF A SINGLE ARBITRATOR OR BOTH PARTIES TO HAVE SEPARATE ARBITRATORS AND FOR THE TWO TO APPOINT AN UMPIRE IN THE EVENT OF THEIR DISAGREEMENT.

16.  CANCELLATION DATE: WHEN A CHARTERPARTY IS FIXED, IT IS REQUIRED FOR THE VESSEL TO ARRIVE AT THE LOAD PORT BEFORE A CANCELLATION DATE OTHERWISE THE CHARTER HAS THE AUTHORITY TO CANCEL THE CONTRACT. IF THE VESSEL ARRIVES BEFORE A STIPULATED DATE, AND BE READY TO LOAD CARGO IN ALL RESPECTS, THE LAYDAYS MAY NOT START UNTIL AFTER A STIPULATED DATE.

17.  LAYDAYS OR LAYTIME: WHEN A VESSEL ARRIVES AT A LOAD PORT OR BERTH (AS IS AGREED IN THE CHARTER PARTY), AND IS READY TO RECEIVE THE CARGO, ANY DELAYS IN LOADING ARE GENERALLY AGREED TO BE ON THE CHARTERER’S ACCOUNT. THIS IS DONE BY AGREEING THE PERIOD OF LAYTIME OR LAYDAYS WITHIN WHICH THE CARGO WILL BE LOADED ON THE VESSEL WITHOUT ANY EXTRA PAYMENY OTHER THAN THE AGGRED FREIGHT. LAYTIME OR LAYDAYS CAN BE VARIABLE, FIXED OR CALCULABLE DEPENDING ON THE PORT. IF THE VESSEL TAKES MORE TIME TO LOAD, THE CHARTERERS HAVE TO PAY A DEMURRAGE TO THE SHIP-OWNERS. IF THE VESSEL IS LOADED BEFORE THE EXPIRY OF LAYTIME, SHIP OWNERS WILL PAY A DISPATCH TO THE CHARTERERS. IF DUE TO SOME REASONS, THE LAYTIME HAS EXPIRED AND NO CARGO IS COMING FOR QUITE SOME TIME AFTER THAT, THE SHIP OWNER IS ENTITLED TO CLAIM ACTUAL LOSS CAUSED BY THE VESSEL’S DETENTION AND MAY ALSO BE ENTITLES TO RESCIND THE CONTRACT IF THE DETENTION CONTINUES FOR AN INAPPROPRIATE PERIOD.

18.  NOTICE OF READINESS: ONCE THE AMOUNT OF LAYTIME IS AGREED. IT IS NOW IMPORTANT TO KNOW WHEN THE LAYTIME ACTUALLY STARTS. A LAYTIME ACTUALLY STARTS AFTER THE ELAPSE OF A CERTAIN PERIOD (GENERALLY 24 HRS) AFTER THE VESSEL IS READY TO ALOAD CARGO IN ALL RESPECTS AND HAS TENDERED HER NOTICE OF READINESS TO THE CHARTERERS IN A WRITTEN FORMAT. A NOR WILL BE VALID ONLY IF SERVED AFTER:

1.      A VESSEL IS AN ARRIVED SHIP: IF SHE HAS ARRIVED AT AN AGREED PLACE (i.e. A PORT/BERTH ETC) AND IS AT THE EFFECTIVE DISPOSAL OF THE CHARTERERS. TO AVOID ANY DISPUTES, CHARTERPARTIES GENERALLY PROVIDE WITH CONDITIONS (GEOGRAPHICAL POSITION AND LEGAL READINESS OF THE VESSEL) TO BE MET BEFORE THE VESSEL IS CONSIDERED AN ARRIVED SHIP. THIS IS DONE BY THE USE OF WORDS SUCH AS WIBON – WHETHER IN BERTH OR NOT, WIPON – WHETHER IN PORT OR NOT, WIFPON – WHETHER IN FREE-PRATIQUE OR NOT, WCCON – WHETHER CUSTOMS CLEARED OR NOT.

2.      A VESSEL IS READY TO LOAD: TO ACCOMPLISH FOR THIS HER EQUIPMENT (PUMPS, DERRICKS, CRANES ETC) AS WELL CARGO COMPARTMENTS SHOULD BE CLEAN AND READY TO RECEIVE THE INTENDED CARGO. THE CHARTER PARTIES GENRALLY PROVIDE FOR A CHARTERER’S SURVEYOR OR AN INDEPENDENT SURVEYOR TO INSPECT THE HOLDS AND CERTIFY THEM FIT FOR RECEIVING CARGO.

19.  IF THE CHARTERER’S DO NOT ACCEPT NOR: SOMETIMES IT IS POSSIBLE THAT THE SURVEYOR REJECTS THE HOLDS/TANKS AND THE CHARTERERS DO NOT ACCEPT THE NOR. CHARTERERS GENERALLY DO THIS WHEN THE CARGO IS NOT READY AND THEY DO NOT WANT THE LAYTIME TO COMMENCE. THE MASTER MUST DEAL FIRMLY WITH THIS SITUATION, IF HE IS CONVINCED THAT HIS HOLDS/TANKS ARE READY AND IN A GOOD CONDITION AND THE CHARTERERS AND SURVEYORS HAVE INTENTIONALLY DONE THIS THEN THE MASTER MUST:

1.      POLITELY POINT OR AND PUT ON RECORDS THE TRUE STATE OF THE HOLDS OR TANKS (IF POSSIBLE TAKE PHOTOGRAPHS),

2.      POINT OUT TO THE CHARTERERS THAT IN THE FINAL ANALYSIS THE RESPONSIBILITY FOR THE RECEPTION, CARRIAGE AND DELIVERY OF THE CARGO IS HIS,

3.      CALL FOR AN INDEPENDENT SURVEYOR – PREFERABLY A P & I CLUB LOCAL CORRESPONDENT AND OBTAIN HIS REPORT (SUPPORTED BY PHOTOGRAOHS TAKEN BY THE SURVEYOR),

4.      INFORM THE OWNERS, AND

5.      ISSUE A NOTE OF PROTEST.