Charterparty

A charterparty is a contract which is negotiated in a free market, subject only to the laws of supply and demand. While the relative bargaining strengths of the parties will depend on the current state of the market, shipowner and charterer are otherwise able to negotiate their own terms free from any statutory interference. In practice, however, they will invariably select a standard form of charterparty as the basis of their agreement, to which they will probably attach additional clauses to suit their own requirements. These standard forms have a variety of origins. Some have developed over a number of years in association with a particular trade, such as grain, coal or ore, while others have been designed by individual firms with a monopoly in a particular field, such as the transport of oil. A considerable number which have appeared during the past century, however, are the products of the documentary committees of such bodies as the United Kingdom Chamber of Shipping, the Baltic and International Maritime Conference (BIMCO) and the Japanese Shipping Exchange, on many of which both shipowner and charterer interests are represented.
The existence of these standard forms is of considerable advantage in international trade where the parties may be domiciled in different countries and their negotiations hampered by language problems. In such circumstances, parties conversant with the terms of a standard uniformity in the application of the law and its interpretation by the courts. Many of these advantages are, however, lost when in many instances the parties use the standard form merely as a framework for their contract. Depending on their relative bargaining positions, existing clauses are amended and extra clauses added until the final agreement bears little resemblance to the original form. As a result, clarity is lost and litigation encouraged.