Charter Party Forms

General Comments on Ship Chartering

A Shipowner may engage in a ship charter with a cargo owner or an entity requiring tonnage for its operations. In this agreement, the Shipowner and the Charterer act as the contracting parties, as outlined in the Charter Party document. They typically agree on a standard Charter Party Form and modify it with additions or deletions to suit each specific Fixture. The choice of Charter Party Form depends on multiple factors such as the ship’s intended use, its type and specifics, trading possibilities and restrictions, the cargoes intended for transport, and the parties involved.

Chartering a ship implies that the Shipowner (or the Disponent Owner) commits to providing a ship for the Charterer’s use, either for a specific journey or a set duration. A Disponent Owner, who might be a person or company, controls the ship commercially without owning it. For example, a Charterer in a Bareboat Charter who assumes the role of “owner” in subsequent Time Charters or Voyage Charters is considered a Disponent Owner for those charters.

In response, the Charterer agrees to pay the predetermined Freight or Hire. Managing a ship involves various costs. These include Fixed Capital Costs for debt servicing, Fixed Operating Costs covering daily operations such as crewing, maintenance, and insurance, and Variable Voyage Costs like Fuel (Bunkers) and port charges. The shipping industry also faces distinct risks, differing when a ship is docked or at sea. In the Charter Party, the costs and risks are shared differently between the Shipowner and the Charterer, influenced by market assessments and risk allocation related to various factors, determining the charter type and Freight or Hire rates.

Today, besides individual Shipowners, many engaged in maritime transport are corporations or partnerships, often large multinational entities. It’s increasingly common for Shipowners to collaborate in various ways. For instance, they might share technical management of their vessels. This cooperation can range from basic to more significant alliances like joint ventures or pooling agreements. A notable modern trend is the division among ownership, management, operation, and trading of ships, which are distinct functions within the shipping sector. Describing ocean shipping can vary, but in chartering and Shipbroking, a key distinction lies between liner services and chartering in the Open Market, reflecting fundamentally different business models and employment types for ships.

Historically, the structure of ship ownership has evolved significantly. Previously, a Shipowner managed nearly all aspects of the shipping business, including financing, crew selection and employment, insurance, fuel, maintenance, and finding charters. Nowadays, these responsibilities are often distributed among various entities, frequently based in different countries.

Liner and Bulk Shipping from a Ship Chartering Perspective

In Liner Shipping, the Shipowner (Carrier, Ship Operator) operates a scheduled service between specified ports on a regular timetable. The Liner Operator serves as a common carrier, accepting all general cargo for transport between these ports. High operational and administrative costs have led Liner Shipping Companies to form a few strong alliances for global service delivery. It is crucial to remember that all forms of cooperation in ocean transportation are regulated by stringent anti-trust laws, enforced not just by the USA but also by EU competition authorities. Those involved in the international transport of cargo by sea must be familiar with EU competition laws, especially regarding pooling and cooperative agreements. A shipper wishing to reserve cargo space on a ship (usually a containership) contacts the line’s agent, who typically confirms the arrangement through a Booking Note (B/N). Once the cargo is ready for shipment or already loaded, a Bill of Lading (B/L) is issued on behalf of the carrier.

Bulk Shipping (Tramp Shipping) involves ships traveling between various ports depending on cargo availability. This traditional description of Bulk Shipping still applies, though the sector is diverse. The primary contract used is the Charter Party (C/P), with all terms negotiated case by case, often referencing a previous charter. Like in liner shipping, Bills of Lading (B/L) are issued when cargo is received or shipped. However, there can be discrepancies between the Bill of Lading terms and those of the Charter Party.

A key aspect of a Liner Operator’s strategy is to maintain and grow their specific trade network and tonnage to support client service and profitability. Therefore, buying and selling ships often result from new investment decisions or disinvestments tailored to the liner service. In contrast, in Bulk Shipping, buying and selling ships is more central. A Shipowner may decide to capitalize on high Freight levels or sell a ship at peak market prices. The second-hand market and the Freight Market usually correlate closely.

Liner pricing models tend to stabilize Freight Rates compared to the more volatile bulk market. In the Open Market Chartering Business, Freight is negotiated individually, yet the overall Freight market level is influential and sets the parameters. Freight level changes in bulk shipping can be rapid and significant, whereas in the liner sector, they occur more gradually. Liner Operators typically feel the impact of economic downturns later than Bulk Ship Operators, and similarly, the benefits of a market boom reach them later.

While there are clear distinctions between Liner Shipping and Bulk Shipping sectors, modern shipping has seen increased specialization of ships, which limits the interchange of tonnage between these sectors. Consequently, Freight Rate fluctuations in one market generally do not affect the other.

Types of Charter

1- TIME CHARTER
2- VOYAGE CHARTER
3- CONSECUTIVE VOYAGE CHARTER (CONSEC)
4- CONTRACT OF AFFREIGHTMENT (COA)
5- BAREBOAT CHARTER
6- SLOT CHARTER

Different methods and principles underpin various chartering or sea transport commitments, including cargo bookings with liner ships (not traditionally classified strictly as chartering):

• Usage of the ship from a capacity standpoint

Charter types also vary based on how much of the ship’s capacity is utilized. A Charterer might lease the entire ship, obligated to supply a full and complete cargo within the ship’s capacity. If an entire ship Charterer is not available, the Shipowner might allocate different sections of the cargo space to various Charterers, each possibly using specific parts of the ship or certain cargo holds, known as Space Charter or Slot Charter. In the Open Market, the most common charters involve leasing the entire ship. Conversely, in liner operations, the Shipowner typically commits to transporting specific items like machinery or coffee among various other cargoes, usually in containers, representing general cargo transport.

• Chartering ships in the Open Market under a Charter Party arrangement contrasts with liner services that use a Booking Note.

The primary distinction lies between the routine Liner Shipping, where the Liner Operator acts as A Common Carrier accepting all cargo for the designated routes, and the non-routine Bulk Shipping (Tramp Shipping), where Shipowners seek optimal employment for their ships based on type, current location, and Freight Market conditions. In Liner Shipping, cargo transport terms are specified in the Booking Note, and the contract of carriage is usually the Bill of Lading (B/L). In contrast, Bulk Shipping conditions are detailed in the “Charter Party.”

• Fixed sum versus payment for time utilized

In the liner sector, owners typically receive fixed remuneration, potentially adjusted for cost variations. Charter agreements fall into two broad categories: project-based, where owners are paid a Fixed Sum for a specified task, and time-based, where payment depends on the duration of the Charterers’ use of the ship or a part of it. Fixed sums may be outright, like USD 1,500,000, or calculated, like USD 39 per ship’s cubic meter of cargo space. Project-based agreements include Voyage Charters and liner services, while time-based agreements encompass Time Charters and Bareboat Charters, with Contracts of Affreightment (COA) representing a key hybrid form.

• Use of the Ship from a Functional Perspective

Under a Voyage Charter, the Shipowner maintains operational control and Commercial Management of the vessel, responsible for all Voyage Expenses (Variable Expenses), such as fuel (bunkers), port charges, canal dues, additional insurances, etc., in addition to the Daily Running Costs (Fixed Costs). The Charterer’s costs typically involve expenses related to the cargo. Costs for loading and unloading are allocated between the Shipowner and the Charterer according to the terms agreed on a case-by-case basis. For instance, under FIO (Free In Out) terms, the Charterer covers the costs associated with the loading and unloading of the cargo. When the Charterer oversees cargo-handling operations, they also take responsibility for the efficiency of these processes and for the duration the ship remains in port. The Charterer might also be liable for any damage to the cargo during loading and unloading.

The specifics of the relationship between the Shipowner and the Charterer are outlined in the Voyage Charter Party. This document lists the names of the Shipowner and Charterer, the ship involved, the ship’s size, the cargo to be transported, and the loading and unloading locations, among other details. It includes a clause on the Freight to be paid (amount, timing, and method of payment) as well as provisions regarding Laytime and Demurrage. The costs and risks are shared between the Shipowner and Charterer. As the Shipowner covers operational and commercial costs, the agreement typically specifies a limited number of chargeable items related to cargo, such as loading and unloading costs, certain extra insurance fees, and liabilities for cargo or ship damage. The Charter Party may also address cost and risk allocation for unforeseen events.

The discharging port may not be nominated in the Voyage Charter Party; if this is the case, the Charterer reserves the right to direct the ship to a specific discharging port later within a defined range. A fundamental aspect of the charter is that the nominated ship is made available to the Charterer. It is common for the specific ship not to be nominated at the charter’s inception but described only by type, with the actual ship nominated later. Additionally, the Shipowner often retains the right to substitute a ship, and sometimes there is even an obligation to do so.

The ship must be positioned geographically as specified by the Shipowner at the charter’s outset. Without undue delay, the ship must head to the loading port. A cancellation day is typically set for the latest permitted arrival of the ship at the loading port; if the ship does not arrive by this date, the Charterer may cancel the charter and possibly seek damages if the delay was due to the Shipowner’s negligence. The forthcoming voyage is typically scheduled for a later date. Ultimately, the Shipowner is obligated to conduct the agreed voyage or voyages promptly and without deviating from the agreed or customary route.

Deviation from the planned Voyage Route is termed Deviation. If deviation is not permitted by agreement, custom, or law, most countries’ laws impose significant liability on the owner for any cargo damage. At the loading port, the ship must proceed to the berth designated by the Charterer, provided the berth is safe. If no specific berth instructions are given, the Ship Master must choose a customary and safe berth independently.

At the loading port, the Charterer is responsible for supplying the agreed cargo, which should not be hazardous unless otherwise stated. In Voyage Charter, the cargo type is specified, and once accepted for transport by the Shipowner, it cannot later be claimed as hazardous unless changed by circumstances. Issues with dangerous cargoes are more prevalent in Liner Services and Time Charter.

The Charterer is tasked with delivering the cargo to the ship at the loading port and collecting it from the ship at the unloading port, or the Consignee, the legal Holder of the Bill of Lading (B/L), must do so. Particularly with bulk cargoes, the Charterer often agrees to cover loading and unloading costs. Commonly, Voyage Charter Parties include an FIO (Free In Out) clause, or variants like FIOS (Free In Out Stowed) or FIOST (Free In Out Stowed Trimmed), placing responsibility for these costs on the Charterer. This also implies that the Charterer is liable for any cargo damage during these operations. While the Ship Master is obliged to oversee the orderly loading and unloading, especially from a seaworthiness perspective, under an FIO clause, the Shipowner may also be liable for cargo damage under certain conditions. Conversely, Liner Terms imply that the Shipowner would handle cargo-related costs as in liner services. The use of Liner Terms is ambiguous and not typically recommended for bulk trades, except in specific instances where parties understand the implications of such cost and risk division. Furthermore, reference is also made to a similar concept in bulk shipping, the gross terms, which in the GENCON ’76 (part II, clause 5(a) “loading/discharging costs – gross terms”) allowed for loading, stowage, and unloading by the Shipowners, with Charterers responsible for bringing and collecting the cargo alongside. Under GENCON ’94, this option was removed, reflecting the usual practice where Fixtures on the GENCON form are generally on FIO terms or similar. Where the Charterer manages the loading and/or unloading, there is usually an agreement providing a specific period for these tasks, known as Laytime. Laytime reflects the fundamental concept of Voyage Charter, where the Shipowner, as the operator, is liable for any transit-related delays, while the Charterer may be responsible or partially responsible for delays during loading and unloading. If the Charterer exceeds the specified Laytime, they must compensate for the extra time used, known as Demurrage. To some extent, the Charterer might also be liable for time losses if no berth is available at the loading port or due to other delays caused by their actions or omissions. Conversely, if the Charterer saves time by completing their obligations more quickly than agreed, they may be entitled to compensation, known as Despatch or Dispatch Money, but typically only if such an arrangement has been explicitly agreed upon.

A Charterer chartering an entire ship is typically obligated to provide a full load consistent with the ship’s capacity. For this, a clause stipulating a full and complete cargo of the agreed cargoes to be delivered and loaded is employed, and correspondingly, the Shipowner is obligated to accept and transport the cargoes.

If a Lumpsum Freight payment is not made, a form of Freight compensation known as Deadfreight (DF) might be claimed by the Shipowner if the delivered cargo is insufficient or in such a condition that prevents full utilization of the ship’s capacity. This compensation is calculated based on the difference between the total Freight due if full cargo were delivered and the Freight payable for the actual quantity loaded, minus any savings from the cargo not delivered. Conversely, if the ship cannot load the agreed quantity—perhaps due to an inaccurate description or having onboard excessive fuel—a proportional Freight reduction will be applied. This situation can lead to complex evidentiary challenges.

The Charterer is responsible for delivering cargo and fulfilling their obligations and cannot claim difficulty in sourcing or making cargo available unless specifically stated in an express agreement. Some Charter Parties include exemption clauses that relieve the Charterer of this duty if obstacles affect the loading or unloading process, although the scope of these clauses can vary significantly.

Freight is typically paid upon cargo delivery unless agreed otherwise. However, prepayment clauses are prevalent, and Freight is ultimately settled and paid only for the cargo that is discharged at the end of the voyage. If the ship is lost or fails to reach its destination, the Anglo-American legal principle dictates that no Freight is due. However, in some jurisdictions, the Shipowner may claim a proportionate Freight if the cargo has been partly transported towards its destination. To secure the Shipowner’s right to Freight, the Freight Prepaid Clause is often modified to state: “Freight shall be considered as fully earned upon shipment and non-returnable in any event, whether the voyage is completed or not, and irrespective of the loss of the ship and/or cargo.”

If Freight is not earned and paid at the time of loading, the Shipowner may require security for the due Freight payment. Once the cargo is loaded onboard, the Shipowner physically possesses property belonging to the Charterer (if the Charterer owns the cargoes). Generally, it appears that the Shipowner is entitled to a lien on the cargoes. If such a Lien exists, the Charterer remains liable for payment, as the Shipowner may refuse to unload and deliver the cargo at the destination unless the receiver settles the outstanding amount.

3- CONSECUTIVE VOYAGE CHARTER (CONSEC)

Consecutive Voyage Charters are specialized forms of Voyage Charters where a ship is engaged for multiple sequential voyages. The Charter Party may specify a certain number of Consecutive Voyages or define a Period of Time during which as many voyages as possible will be completed. Similar to a Time Charter or a Contract of Affreightment (CoA), this arrangement provides that the ship will be at the Charterer’s disposal for a set period. Consequently, consecutive Voyage Charters blend elements of both Voyage and Time Charters, classifying them as hybrid charter types.

In a standard consecutive Voyage Charter, a specific ship is chartered under one Charter Party to travel loaded from the loading port to the discharging port, return in ballast, and repeat the process until all agreed cargo is delivered. Voyages are conducted under Voyage Charter terms, with Freight paid per voyage based on the amount of cargo transported in USD per ton, and Laytime calculated at both loading and discharge ports. The risk and cost responsibilities in a Consecutive Voyage Charter differ significantly from those in a Time Charter or a CoA, with structural differences due to the time factor affecting both costs and income. To safeguard the Shipowners’ interests, Consecutive Voyage Charter Parties often include clauses for fuel, price escalation, currency fluctuations, and other long-term cost factors.

This charter method is favored for transporting large cargo volumes but lacks the flexibility of a CoA, which allows any ship meeting specified criteria to perform the voyages, potentially leading to higher Freight rates due to non-earning ballast legs. Consecutive Voyages might involve a set number of short-distance round trips. While these charters can resemble long-term Time Charters, they avoid some disadvantages for Charterers, such as the obligation in a Time Charter to pay Hire regardless of falling market rates. In contrast, a Consecutive Voyage Charter offers more flexibility, with Freight paid per voyage reflecting current market rates.

In this hybrid charter scenario, both the owner and the Charterer must carefully negotiate Freight and Demurrage rates to prevent potential abuses of the Charter Party terms, such as a Charterer opting to keep the ship idle on low-cost Demurrage rather than initiating a new voyage.

4- CONTRACT OF AFFREIGHTMENT (COA)

The Contract of Affreightment (COA) is another hybrid charter, incorporating elements from both Voyage and Time Charters. It is sometimes referred to as a Quantity Contract or Volume Contract, reflecting its purpose: to meet the Charterer’s transport needs over a set period, typically ranging from one to several years. These contracts are often structured within liner operations. Under a COA, the individual ship’s importance is secondary to the requirement that the Shipowner fulfills transport obligations with a specified type of tonnage, which could include chartered vessels from another Shipowner or Ship Operator.

This form of contract, akin to a Requirement Contract or Service Contract, does not ensure a specific quantity of cargo from Charterers or shippers. Instead, Shipowners agree to provide tonnage as needed based on a notification and nomination system. Shipping companies without their vessels might operate these services by chartering in tonnage to complete the specified voyages. The COA’s voyages may be executed with the Shipowner’s chosen tonnage within the contractual framework, ensuring that the head owner’s shipowning position remains unaffected, bound only by the transport agreement with the Charterer.

5- BAREBOAT CHARTER

A Bareboat or Demise Charter significantly differs as it essentially leases the ship from the Shipowner to the Charterer without crew. The Charterer assumes nearly all the Shipowner’s operational and managerial roles, except for Capital Costs, taking on both commercial and operational responsibilities, including crewing, maintenance, insurance, and repairs.

Historically uncommon, the Bareboat Charter has become more frequent in recent decades due to shifts in trading and investment patterns. Occasionally, what is technically a Bareboat Charter includes a purchase option, used strategically to circumvent taxation. Typically covering extended periods, these charters are often linked with Ship Management Agreements and may include a buy option at or during the charter’s term.

Often serving as a form of ship financing, Bareboat Chartering allows the Shipowner to invest surplus capital while enabling the Charterer, who lacks such resources, to use the ship commercially. This arrangement is akin to Financial Leasing, involving a three-party relationship where the current ship owner sells the ship and remains the financier, a Mortgagee (Bank) approves the charter, and the Charterer, initially renting the ship, ultimately acquires it by executing the “Option to Buy” at the charter’s end.

Factors like maritime policies might promote the use of Bareboat Charters despite potential issues related to the ship’s nationality, manning regulations, and more.

6- SLOT CHARTER

Slot Charter is not a typical form of ship chartering. In Liner Shipping, it is usual for a shipper or forwarding agent to Hire a specific segment of a ship’s capacity or to secure the first option on a portion of a ship’s capacity. Based on such agreements, a Liner Operator can offer liner services without using any of its owned or time-chartered vessels.

In 1993, BIMCO (Baltic and International Maritime Council) introduced a standard document called SlotHire, designed around the concept of the Charterer hiring a set number of “slots” from the Shipowner or Ship Operator, where a “slot” is defined as “the space on board the ship necessary to accommodate one TEU.” This document was specifically created for container ships.

This arrangement, also referred to as “Space Charter,” predates the issuance of SlotHire. It involves the Shipowner leasing a specified area of the ship or a defined portion of the ship’s capacity, such as slots, area, volume, weight, or meters of rail, to the Charterer.

Compensation to the Shipowner may be based on the capacity booked or used, and calculated per voyage or per unit of time, as agreed between the parties. In SlotHire, the payment is based on “Hire Per Voyage” for the capacity booked, regardless of how much is actually utilized.

A crucial issue is determining whether the Shipowner or the Time Charterer is liable as the Carrier towards the Cargo Owners. This depends on the structure of the Charter Party. Typically, the Time Charterer, acting as “Disponent Owner,” books cargo transport under his own name and thus serves as the “Contracting Carrier”. Furthermore, the Bill of Lading (B/L) is usually issued in the Time Charterer’s name using his forms. The “Identity of Carrier Clause” varies in B/L forms, and each situation must be evaluated individually to determine liability towards the Cargo Owner, whether it’s the Time Charterer (Disponent Owner), the Shipowner, or both. In SlotHire, the resolution is that Shipowners are held accountable under the Hague-Visby Rules without any additional clauses for sharing liability.

Given the Shipowner’s limited knowledge about the cargo, it’s crucial that the contract specifies acceptable cargo types. In SlotHire, the Shipowner has the right to be informed about the cargo and, if necessary, to inspect the containers.

In some instances, Charterers may manage loading and unloading as they would under a Time Charter; however, with multiple Charterers often involved, it’s more typical for the cargo to be delivered to a terminal where Liner Operators handle the loading and unloading processes.

Space charter is not limited to liner trades but is also used to complement the regular transportation requirements of industrial carriers, such as large forestry companies. If an industrial company has ships under Time Charter but lacks enough cargo to fill them, they might arrange for a forwarding agent to space charter the unused capacity, acting as Disponent Owner or similar towards the Cargo Owners.

SHIP CHARTERING DOCUMENTS

The primary documents that dictate the commercial and legal relationships between parties involved in shipping include Charter Parties and Bill of Lading (B/L). Additional documents such as Booking Notes, Delivery Orders, and Mate Receipts (MR) are also crucial. Furthermore, cargo manifests, invoices, customs declarations, and other documents are necessary for various authorities. For instance, it is typical for the Bill of Lading (B/L) to be issued in three originals along with several copies. Export transactions typically involve substantial paperwork, although there have been initiatives to streamline these processes, such as adopting digital solutions.

Generally, oral agreements are binding; however, in international charter transactions, the parties often prepare a written document, specifically a Charter Party, to ensure there is evidence of the agreement.

Under the terms of a Charter Party (C/P), the Ship Master signs the Bill of Lading (B/L) after verifying that all cargo has been loaded and the Freight has been collected, if it was agreed to be prepaid.

In Liner Shipping, the Booking Note (B/N) serves as the fundamental sea transport agreement, and the Bill of Lading (B/L) is signed by the Ship Master or Liner Agent under a standing authorization. The accuracy of cargo-related information is checked against the corresponding Mate Receipts (MR), which might include remarks about the cargo’s condition or quantity at loading.

The Cargo Manifest (CM) is a list compiled by Loading Agents, summarizing all Bills of Lading issued for a specific shipment, used by the Shipowners’ departments and external entities like authorities and port services. The Cargo Manifest may detail the shipment’s consigner and consignee, product numbers, values, origins, and destinations, serving both internal and external purposes.

The Charter Party in bulk shipping or the booking note in liner shipping represents the mutual sea transport agreement between Charterers or Shippers (who pay Freight) and Shipowners or Line Operators (who receive Freight). The Bill of Lading acts as a representation of the cargo, serving to confirm the cargo owner, receipt of cargo loaded, and proof of shipment, as well as evidence of an existing sea transport agreement (either Charter Party C/P or Booking Note B/N).

APPROVED AND PRIVATE CHARTER PARTY FORMS

Charter Parties and Bills of Lading (B/L) are typically drafted on standard forms, with BIMCO (Baltic and International Maritime Council) playing a pivotal role in developing these standardized documents, particularly for Charter Parties and Bills of Lading. BIMCO has produced a wide array of Approved Documents, categorized into Agreed, Adopted, and Recommended forms.

Both Shipowners and Charterers are well-represented within BIMCO, ensuring that these documents are considered fair, balanced, current, and universally accepted by shipping professionals.

Conversely, large shipping or industrial firms, or major shippers, often create their own Charter Party forms (Private Forms), which they use as a foundation for chartering negotiations and managing their cargo transportation. This practice is especially prevalent in tanker chartering, where oil majors utilize and adhere to their proprietary Charter Party Forms.

CHARTER PARTIES

Legal complications can arise when additional terms and conditions are integrated into Standard Charter Party Forms, necessitating deletions, adjustments, and further additions to the printed text. It is rare for parties to use a Charter Party Form without modifications. Even Private Charter Party Forms typically start with a Standard Form that has been customized with specific clauses.

Standard Charter Parties aim to streamline various commonly used clauses across different trades, reducing workload by only requiring the input of specific details such as company names, ship details, ports, cargoes, Laytime, Demurrage, notice times, and terms of Freight or Hire. Modifications to a standard Charter Party must be handled with precision to avoid ambiguities and potential disputes. Some Charter Parties are designed for use without alterations, although these tend to have limited application.

Shipbrokers often develop a routine for drafting Charter Parties, and established patterns between parties can make it challenging to introduce changes in new agreements. However, shifts in legal precedents, customs, commercial techniques, legislation, and market conditions can necessitate updates to an old Charter Party Form, including substantial Rider Clauses and Amendments.

In Chartering Negotiations, distinguishing between Main Terms and Details can be difficult. The final Charter Party reflects not only the commercial realities but also the expertise and time constraints of Shipbrokers, Charterers, and Shipowners.

Voyage Charter Parties and Time Charter Parties differ in content and structure. Voyage Charters are specific to one journey, while Time Charters pertain to the prolonged commercial use of a ship. The variety in Voyage Charters necessitates numerous Standard Forms to accommodate diverse trades and cargo types. In contrast, Time Charters have less variation and thus fewer Standard Forms.

Charter Party Forms often carry code names linked to their intended use, a common practice in BIMCO Charter Parties. For example, Polcoalvoy is a Voyage Charter designed specifically for coal trades, developed in collaboration with Polish shipping interests. Other notable BIMCO forms include Baltcon, Sovcoalvoy, Scancon, and Nuvoy. The GENCON Charter Party is a versatile form intended for general use across various trades, frequently requiring amendments to suit specific deals.

For Tanker Voyage Charters, major oil companies dominate the scene, regularly revising their own forms like Shellvoy by Shell and BPvoy by BP. These are typically offered on a take-it-or-leave-it basis. Intertanko has introduced the Tankervoy ’87, occasionally used and influenced by oil company forms. Asbatankvoy, similar to the former Exxonvoy, also sees limited use.

BIMCO has also released significant Standard Time Charter Parties like BALTIME, LINERTIME, and GENTIME. These forms are designed to be adaptable to various needs. LINERTIME was recently updated in 2015 to reflect current practices in liner Time Charters, whereas GENTIME was first introduced in 1999. The New York Produce Exchange (NYPE) is the most widely used Time Charter for dry cargo, with older versions like NYPE ’46 still prevalent despite newer editions like NYPE ’93 and NYPE 2015.

For Tanker Time Charters, companies such as BP and Shell have developed their specific forms, continually updated to reflect the latest industry standards. Intertanko previously created Intertanktime, which found limited use. Specialized ships, like Reefer Ships, often utilize private forms tailored to specific operational needs.

In terms of Bareboat Charters, BIMCO’s BARECON is the prevailing standard. For Contracts Of Affreightment (COA), standard forms like GENCOA by BIMCO dominate, alongside older documents like VOLCOA for dry bulk and INTERCOA for oil products, the latter having not gained significant traction in the market.

It is essential to recognize that the original printed text of a Charter Party often undergoes extensive modifications and additions, resulting in a document that may lack coherence and structure. This highlights the complexity and dynamic nature of legal documentation in maritime chartering.

SHIP MANAGEMENT AGREEMENTS

Instead of directly operating ships they own or charter, a shipping company might opt to engage in Ship Management Agreements to sell or buy “know-how” and services. This approach has grown in popularity due to the increasing division of the Shipowner’s responsibilities. The most commonly used standard form for these agreements is the SHIPMAN, published by BIMCO (Baltic and International Maritime Council).

A Ship Management Agreement is distinct from a traditional Chartering Agreement. It is essentially a service and know-how contract derived from an outsourcing model, where the manager provides specialized knowledge for the Shipowner’s benefit. Under this agreement, the Shipowner delegates various functions to the Ship Manager, which might include manning, insurance, and accounting, or more comprehensive roles like Crewing, Technical Management, and even Full Ship Management including Commercial Management (Chartering).

Commercial Management under such an agreement involves the ship manager making decisions on behalf of the Shipowner regarding the ship’s commercial operations and employment. The Shipowner reimburses all expenses and compensates the manager, often through a daily or monthly Ship Management Fee. This setup means the Shipowner retains commercial risk, relying on a foundation of trust between the involved parties.

Ship Management Agreements are increasingly crucial, especially in times of shipping recession when Shipowners may face bankruptcy and banks or bankruptcy receivers, lacking shipping expertise, might rely on managers temporarily. Similarly, shipyards may use managers when buyers fail to take delivery of newly built ships. During bullish market phases, new investors without in-depth shipping knowledge might also rely on managers to handle operations until they can sell their assets profitably. This arrangement can also serve as an entry point for new investors aiming to learn about shipping before taking on operational roles.

The reasons for Shipowners to outsource management services are varied, reflecting the diverse management models that exist.

Having reviewed charter types, it’s useful to consider how Commercial Management integrates within a shipping company’s broader management system.

In this setup, three main divisions of a shipowning company—financial and corporate management, operational and technical management, and Commercial Management—collaboratively contribute to the commercial outcomes. These functions might be spread across different global locations due to the international nature of shipping, exemplifying the complex financial and contractual relationships within multinational operations.

COST ALLOCATION PER CHARTER TYPE

The Commercial Management of a ship involves various costs, responsibilities, and risks, which Shipowners and Charterers need to assess and allocate before finalizing a charter agreement.

Initially, Capital Costs including returns on investment and interest on both owned and borrowed capital are considered. Then come Operating or Running Costs which cover crew wages, social benefits, maintenance, repairs, and necessary insurances like Hull and Machinery Insurance (HMI), War Risks Insurance (WRI), and Protection and Indemnity Insurance (P&I). Additionally, Voyage Costs such as fuel, port fees, and handling charges must be accounted for, alongside administrative expenses related to the business scale and the specific ship involved.

Risks such as delays due to weather, strikes, or political events, and exposure to fluctuating Freight Markets, also need clear allocation between the parties. These considerations play a crucial role in determining potential profits or losses.

Costs are categorized into Fixed Costs, which are constant regardless of the ship’s activity, and Variable Costs, which fluctuate based on the ship’s operations. While capital and operating costs are fixed, voyage costs vary with the ship’s activity. Legislation in various countries can also significantly affect ship costs.