Charter Party Basics

Charter Party Basics:

As a contractual document, a charter party is comprised of a main body, possible additional or rider clauses, and appendixes if necessary. Certain provisions of charter party contracts may be termed conditions, whereas others take the form of so-called warranties. Conditions represent fundamental terms of the charter party whose nonperformance may allow the other party to terminate the contact. The most common conditions include the ship’s whereabouts at the time of the char- ter party agreement, the time for sailing to the loading port, the ship’s nationality, and the ship’s capacity for the specific cargo. The charterer may require other terms to be included as conditions, such as the ship’s age and ship classification (class). Warranties primarily cover the ship’s performance criteria and the way of compensating the owner or charterer in the event of default. Warranties include the ship’s speed, the fuel remaining on board on delivery, the rates of loading/discharging of the ship in port, pollution and other environmental influences emanating from the ship, characteristics of the cargo, and the behavior of the crew as far as safety matters are concerned. Other provisions may be classified as intermediate terms; these may take the form of a condition or warranty on a case-by-case basis.

Apart from the express terms of the charter party contract, each party undertakes certain implied obligations. For instance, the charterer undertakes not to place the ship and its crew in danger, not to load dangerous or illegal cargoes, and not to instruct the master to deviate from the ship’s planned route unless there are bad weather conditions and to save life at sea. In addition, the charterer has the responsibility to perform the voyage without delays, to have a thorough knowledge of international as well as local laws and regulations that may influence the voyage, and to set safety as a priority. A charter party contract may be dissolved altogether at the occurrence of a radical change of conditions that is unexpected or risky and makes the performance of the contract impossible. For instance, a permanent loss of the ship would lead to the frustration of the charter party contract as the commercial object of the charter is made impossible. Claims for compensation may be brought by the charterer if the shipowner deviates from the implied terms or the warranties that relate to the ship’s performance. The owner, on the other hand, may claim compensation for delays during loading/unloading or deviations from the loading/unloading rate that has been agreed in the firm offer. Other claims may be brought for pollution damage and cargo shortage. How compensation will be effected is again included in the charter party clauses.