Bunkers Under a Time Charterparty

Bunkers Under a Time Charterparty

Bunkers are one of the central commercial items in a time charterparty because they connect the ship’s daily operation with the financial division between shipowners and time charterers. Under the classic New York Produce Exchange (NYPE) Charterparty Form, the time charterers take over and pay for the bunkers remaining on board at delivery, while the shipowners take over and pay for the bunkers remaining on board at redelivery. The clause also allows the parties to state minimum and maximum quantities for delivery and redelivery, together with the price basis to be applied at each end of the charter period.

The bunker clause does not operate in isolation. It must be read together with the time charterers’ obligation to provide and pay for fuel during the charter service, the shipowners’ responsibility for navigation and seaworthiness, the delivery provisions, the redelivery provisions, and any special wording added by the parties. A dispute over bunkers may therefore concern quantity, quality, title, price, redelivery balance, the choice of bunkering port, or whether the time charterers have attempted to use the bunker clause for a purpose outside the chartered service.

Bunkers on Delivery and Redelivery of a Ship in Time Charterparty

Where a time charterparty states that the ship is to be delivered or redelivered with not less than and not more than a specified quantity of bunkers, the clause establishes the commercial balance expected by the parties. In ordinary circumstances, however, a difference between the stipulated quantity and the actual bunkers on board at delivery will not automatically give the time charterers a right to reject the ship. The critical question is whether the bunker shortage or excess makes the ship unfit for the charter service or whether the bunker clause has been expressly linked to the delivery requirements.

The decision in The North Sea is important on this point. The ship did not have the exact contractual bunker quantity on board when delivery was tendered, but the ship still had enough bunkers to sail safely and to reach the next intended port where additional fuel could be taken. The bunker clause was not treated as part of the core delivery condition of the ship. As a result, the time charterers could not cancel merely because the bunker figures did not match the delivery clause. The remedy, if any, was a claim in damages rather than rejection of the ship.

The answer may be different if the parties draft the charter so that bunker quantity is made a condition of delivery. If the bunker clause is expressly tied to the ship’s readiness, delivery condition, notice of readiness, or cancelling mechanism, a court or tribunal may construe it more strictly. The printed form should therefore not be treated as the final answer; the charter must always be read as a whole, including rider clauses, recap wording, amendments, and any agreed operational requirements.

Estimated Bunkers at Delivery in Time Charterparty

A charter may not state an exact bunker quantity, but may instead say that the ship is expected to have about a certain quantity on board at delivery. Such wording does not give shipowners complete freedom to insert any figure they wish. An estimate must be honest, and it must also be based on reasonable grounds. The responsible officers and representatives of the shipowners must use the information they have, or ought reasonably to have, when stating the expected quantity.

The Pantanassa illustrates the point. The charter described the bunkers expected on delivery as about 600 to 700 tons, but the ship was delivered with 936 tons on board. Although the figure had been inserted in good faith, it was based on erroneous information sent from the ship. The shipowners were held responsible because the estimate was not supported by reasonable grounds when the knowledge of the shipowners’ responsible personnel was taken into account.

The practical lesson is that an “expected about” bunker figure is not a casual commercial guess. The figure affects the time charterers’ immediate cash exposure at delivery and may affect voyage planning, cargo intake, trim, draft, and later redelivery economics. Shipowners should therefore ensure that delivery bunker estimates are prepared carefully and checked against reliable onboard information before the charter is fixed or delivery is tendered.

Time Charterers’ Right to Supply Fuel in Time Charterparty

Time charterers are normally responsible for providing and paying for fuel during the charter period. This does not mean that time charterers may order the ship to take bunkers for any purpose they choose. The right to provide fuel is linked to the chartered service. Time Charterers may arrange fuel reasonably required for the performance of the charter, but they cannot compel the ship to load unnecessary fuel merely to create a trading profit or manipulate the redelivery bunker account.

The Captain Diamantis is the leading example. The time charterers ordered the ship to bunker to full capacity shortly before redelivery because they had found fuel at a price lower than the price the shipowners would have to pay for bunkers remaining on board at redelivery. The ship already had enough fuel for the remaining charter service and to reach the nearest main bunkering port. The master refused the order on shipowners’ instructions, and the refusal was upheld. The time charterers’ right was limited to fuel reasonably required for charterparty purposes, not fuel taken only for commercial arbitrage.

This does not remove the time charterers’ ordinary discretion. In normal trading, time charterers may choose bunker quantities, bunker stems, and bunker ports with a wide commercial margin, provided the arrangements are connected with the employment of the ship and do not endanger safety, seaworthiness, cargo intake, or proper performance of the charter.

Property in Bunkers During the Time Charter

Because time charterers provide and pay for fuel during the time charter, and because they take over and pay for bunkers on delivery, the usual position under the New York Produce Exchange (NYPE) Charterparty Form is that bunkers belong to the time charterers during the charter period. The shipowners have physical possession of the bunkers on board the ship, but possession does not normally make the bunkers the shipowners’ property. The shipowners hold them in the practical sense required for operating the ship.

The Span Terza confirmed that time charterers’ property in bunkers continues during the charter. At ordinary redelivery, the bunker clause transfers the remaining bunkers to the shipowners, who must pay for them according to the charter. The commercial purpose is straightforward: time charterers pay for the fuel they receive at delivery and consume or supply during employment; shipowners pay for what they receive back when the ship returns from the chartered service.

Difficulty arises where the charter ends otherwise than by ordinary redelivery. If the time charterers cancel under a contractual right before redelivery, property in the bunkers may remain with the time charterers. The shipowners may remain bailees of the fuel, but their contractual right to retain possession may end. If cancellation or termination occurs while the ship is at sea or while cargo remains on board, terms may need to be implied to allow the shipowners to use bunkers reasonably required to complete immediate operational obligations.

The Eurostar shows that the transfer of bunker property is not automatic where contractual redelivery has not occurred. In that case, the ship was laid up unrepaired and off hire at the end of the charter period, and the time charterers were prevented from redelivering the ship in the contractual way. The remaining bunkers did not pass to the shipowners merely because the charter period had expired.

Termination Clauses and Bunker Ownership in Time Charterparty

Different charter forms may produce different bunker ownership consequences on early termination. Clause 15 of the Shelltime 4 form is more explicit than the New York Produce Exchange (NYPE) Charterparty Form because it provides for the shipowners to accept and pay for bunkers remaining on board not only at the scheduled end of the charter, but also on earlier termination. In The Saetta, that wording distinguished the case from the narrower New York Produce Exchange (NYPE) wording and allowed the shipowners to acquire the bunkers when the charter ended for non-payment of hire.

Another difficulty arises when bunker suppliers retain title to the fuel until payment and the time charterers have not paid the bunker suppliers. In such circumstances, time charterers may never have acquired title to the bunkers in the first place. If time charterers have no title, the question becomes whether shipowners can nonetheless obtain good title when the charter ends. English sale-of-goods principles may become important, and the result may depend on whether there has been a voluntary transfer by the time charterers or a termination imposed by shipowners.

In The Saetta, shipowners who used bunkers after withdrawal faced liability because the statutory requirements for obtaining good title were not satisfied. By contrast, in The Fesco Angara, early termination occurred by agreement at the time charterers’ request, and the shipowners’ claim to have acquired good title to the bunkers was upheld. These cases show that bunker title disputes often depend on the precise mechanics of termination, delivery, transfer, and payment.

Bunker Price on Delivery and Redelivery in Time Charterparty

The bunker clause usually states the price or price basis for bunkers taken over on delivery and redelivery. The printed New York Produce Exchange (NYPE) and Baltime forms invite the parties to fill in the relevant prices or current port prices. Where the charter contains no express price, the likely implied price is the market price at the relevant port at the time and place of delivery or redelivery, rather than the historical price actually paid by the party who originally bought the fuel.

The Good Helmsman supports this market-price approach. The commercial reasoning is that the receiving party takes over fuel that it would otherwise have had to buy in the market. On delivery, time charterers take over bunkers for their use during the charter. On redelivery, shipowners take over the remaining bunkers for their own subsequent use. In each case, absent express wording, the natural measure is the prevailing market price where the transfer takes place.

The parties should therefore avoid vague bunker pricing language. If they want a fixed price, a published index, a supplier invoice price, a port quotation, or a different valuation method, the charter should say so clearly. Bunker prices can move sharply, and unclear wording may create a substantial dispute at delivery or redelivery.

Bunker Quality

The quality of bunkers supplied by time charterers is closely connected with the time charterers’ duty to provide fuel during the charter service. Although the bunker clause itself may focus on quantity and price, the wider charter obligation requires time charterers to provide fuel suitable for the ship’s engines and auxiliaries. Where the charter specifies grades, viscosity, sulphur content, ISO standards, or other technical specifications, time charterers must comply with those requirements.

Defective bunkers may cause engine damage, increased consumption, loss of speed, filter problems, purifier issues, delay, deviation, or off-specification disputes. The modern form of the New York Produce Exchange (NYPE) Charterparty Form addresses this more expressly by requiring charterers to supply bunkers suitable for the ship’s engines and auxiliaries and conforming to agreed specifications. If time charterers supply unsuitable bunkers, shipowners may claim for engine damage, loss of time, increased consumption, reduced speed, or other consequences depending on proof and causation.

At the same time, shipowners and the master must act prudently once a bunker quality problem is suspected. Proper sampling, testing, segregation, fuel management, and prompt notification may be decisive. A shipowner who burns suspect fuel without reasonable investigation may face difficulty recovering all resulting damage even where the bunkers were off specification.

Choice of Bunkering Ports under Time Charter

Because time charterers provide and pay for bunkers, they ordinarily have the right to choose the ports at which the time-chartered ship will bunker. This right is not limited by what may be usual in a particular trade or area. In The Hill Harmony, Lord Hobhouse made clear that the provision of bunkers is the charterers’ responsibility and that charterers may give orders as to the bunkering ports to be visited.

The time charterers’ right is still subject to the charter as a whole. Bunkering orders must be consistent with the trading limits, safe port and safe berth obligations, lawful employment, voyage orders, and the ship’s operational requirements. A bunkering call cannot be used to impose an unsafe or uncontractual voyage on the ship, nor can it be used merely to create a bunker trading advantage unrelated to the charter service.

U.S. Law Treatment of Bunkers in Time Charterparty

Under U.S. law and arbitration practice, it is common for the charter to specify the price payable for bunkers at delivery and redelivery. Where the New York Produce Exchange (NYPE) Charterparty Form applies, the general approach is that bunkers are valued at the current market price at the time and place of delivery or redelivery unless the parties have agreed another price mechanism. This remains commercially sensible even where the actual purchase price paid by the supplying party differs from the current market price.

U.S. materials also treat bunker quantity issues as part of the wider allocation of responsibility between shipowners and time charterers. Time Charterers supply and pay for bunkers, but the master remains responsible for determining what quantity is safely and properly required for the voyage ordered. If the master miscalculates and the ship loses time because she must deviate for fuel, time charterers may not be responsible where they supplied the quantity requested. Conversely, if time charterers oversupply or undersupply bunkers contrary to the charter requirements, damages may follow depending on the facts.

On bunker quality, U.S. decisions place heavy emphasis on proof. Shipowners alleging engine damage from defective bunkers must show not only that the bunkers were off specification or contaminated, but also that the fuel caused the particular damage claimed. Evidence from samples, testing, engine records, consumption history, fuel treatment records, and expert analysis will usually be essential. In some cases, responsibility may be apportioned where defective bunkers contributed to damage but ship management, delayed testing, or imprudent fuel use also played a role.

Commercial Importance of the Bunker Clause in Time Charterparty

The bunker clause may look mechanical, but it has major financial and operational consequences. It affects the cash settlement at delivery, the time charterers’ cost of performing the charter, the shipowners’ recovery at redelivery, the ship’s safe range, cargo intake, speed performance, and the parties’ rights if the charter ends early. A short printed clause can therefore produce complex disputes when bunker prices move, fuel quality fails, title is retained by suppliers, or redelivery does not occur in the ordinary way.

Careful drafting is the best protection. The charter should state the delivery and redelivery bunker quantities, tolerance, price, grade, specification, sampling procedure, payment timing, effect of early termination, responsibility for off-specification bunkers, and any special rules for excess or short bunkers. Clear wording reduces the risk that a bunker issue will become a larger dispute over delivery, redelivery, hire, damages, title, or performance.