Chartering Process Negotiations

Negotiations will normally start with an offer. The offer becomes null and void if the other party has failed to respond within a fixed time limit. If there is response to the particular offer, then the negotiations begin; they may involve a series of offers and counteroffers. In response to an of- fer, a party may accept it, reject it, reject it (decline) and make a new offer, or make a counteroffer, having accepted some parts of the offer. Once a firm offer has been made, all subsequent counteroffers should be prefixed in one of four ways:

1) “We decline Owner’s/Charterer’s offer and offer instead … ” This indicates that the offer received is rejected in its entirety and a new offer is put forward for consideration.
2) “We accept Owner’s/Charterer’s last offer, except … ” This is a counteroffer in which the receiver accepts certain points (listed under “accept”) but rejects (and counterproposes) on the points listed under “reject.”
3) “We repeat our last.” This is a restatement of the previous communication.
4) “We repeat our last, except … ” This is in fact a new offer signifying the rejection of the proposal received. The new offer may contain terms that would be more likely to be accepted by the other party, bearing in mind the negotiations that have taken place and the other party’s statements.When negotiations have reached the firm stage, the two parties are committed to their negotiations and cannot make offers or enter into negotiations with the same subject matter with other parties. Once the negotiations are completed and an agreement is reached, a so-called recap is drawn up. This is essentially a document detailing the terms agreed as well as the charter party form that will be used. The agreement is not completed until any conditions known as subjects have been satisfied. There is no agreement until all subjects have been lifted. Subjects can include various conditions:

• Subject details. This indicates that although the main terms have been agreed, details are still pending and will be finalized upon the drawing up of the charter party contract.
• Subject stem (subject to enough merchandize). The charterer needs to confirm that the proposed cargo is available for shipment, loading berth is available on the proposed dates, and that the vessel is acceptable to shippers.
• Subject receivers’ approval. The charterers need to confirm that the cargo and the proposed vessel are acceptable to the receivers.
• Subject charterers’ BOD approval to be lifted. The board of directors of the charterers may need to give their approval. The charterer’s BOD may also wish to check the vessel’s record and performance before final approval.
• Subject owners’ BOD approval to be lifted. The board of directors of the shipowners may need to give their approval. The owner’s BOD may also wish to check the background of the charterers before giving final approval.
• Subject to owner’s/charterer’s full approval of the proforma charter party dated … ; with logical amendments thereto.

When a fixture is completed, a message confirming the agreed terms is prepared by the brokers and sent to both parties. The message includes all the details and the wording of the contract and is termed the recap. The preparation of the charter party itself will follow, again prepared by the brokers and usually signed by the principals or the brokers acting as agents.