Charterparty Additional Clauses (Rider Clauses)
It is most unlikely that a charterparty would be agreed without any Additional Clauses, known as Rider Clauses, being added.
Additional Clauses (Rider Clauses) always take precedence over the Printed Clauses in the Charterparty.
Although these clauses may be drafted by the owner or the shipbroker to cover a particular situation, there are a number of Recognized Clauses available. The advantage of using such clauses is that they are well known and their meaning is usually understood. This presents less risk of a dispute than would be the case if the clause has to be specially drafted.
INTERTANKO provide a book containing a large number of such clauses. The use of Recognised Clauses is more common with tanker chartering than dry cargo chartering. An important use for these clauses is in a situation where additional costs that are not mentioned in the charterparty document are incurred.
An example is in American Ports loading bulk cargo where the owner will want to include Dumping and Trimming costs to be paid by the charterer.
With older ships, the cargo had to be trimmed (levelled off), before the ship could proceed to sea. Although it is not as important now, these costs are frequently included in the port costs and it needs to be spelt out who is to pay for them. Other common examples are for weather delays such as the Conoco Weather Clause.
Charterparty additional clauses, also known as rider clauses, are supplementary terms that are added to a standard charterparty agreement in the shipping industry. A charterparty is a contract between the shipowner and the charterer for the hire of a vessel or space on a vessel. The standard form of a charterparty includes various terms and conditions, but in many cases, additional clauses (rider clauses) are added to tailor the contract to the specific needs of the transaction.
Here are some key aspects of these Additional Clauses (Rider Clauses):
- Customization: Rider clauses are used to customize the charterparty to the specific requirements of the shipowner and the charterer. This can include specific routes, cargo requirements, laytime, demurrage rates, and other operational details.
- Legal Compliance: They ensure compliance with international regulations and local laws. This might include clauses related to environmental regulations, safety standards, or specific legal requirements of the countries where the ship will operate.
- Risk Allocation: These clauses can also allocate risks between the parties more specifically than the standard terms. For instance, they may clarify responsibilities in case of cargo damage, delays, or force majeure events.
- Financial Terms: Additional financial terms such as payment schedules, hire rates, and insurance requirements can be detailed in rider clauses.
- Dispute Resolution: Rider clauses often include specific provisions for handling disputes, including arbitration processes and choice of law.
- Operational Details: They can include detailed operational procedures, such as cargo handling protocols, port operations, and crew management specifics.
- Insurance and Liability: Rider clauses often spell out the details of insurance coverage, including the types of risks covered, the extent of coverage, and the responsibilities of each party in the event of a maritime incident. This can include clauses related to hull and machinery insurance, protection and indemnity (P&I) coverage, and cargo insurance.
- Performance Clauses: These clauses may specify performance benchmarks for the vessel, such as speed and fuel consumption under certain conditions. They ensure that the chartered vessel meets the operational expectations of the charterer.
- Cargo-Specific Provisions: For cargoes that require special handling or conditions, rider clauses can set out specific requirements. This is common in the transport of perishable goods, hazardous materials, or oversized equipment.
- Termination and Redelivery: Additional clauses can outline the circumstances under which the charterparty can be terminated before the end of the agreed period and the conditions for redelivery of the vessel to the owner. This might include the vessel’s condition upon return, the process for final settlements, and any penalties for early termination.
- Bunker Adjustment: This is particularly relevant in long-term charters, where fluctuations in fuel prices can significantly impact operating costs. A bunker adjustment clause allows for adjustments in charter rates based on changes in fuel prices.
- Port Restrictions and Preferences: These clauses can specify any restrictions or preferences regarding the ports of call. This might be due to political reasons, port facilities, or draft limitations of the vessel.
- Crewing and Maintenance: Details regarding the crewing of the vessel, maintenance schedules, and responsibilities can also be part of the rider clauses, particularly in time charter situations where the charterer has more control over the vessel’s operation.
- Sanctions and Compliance: In today’s geopolitical climate, clauses related to sanctions and compliance with international regulations are increasingly important. These clauses ensure that the vessel does not engage in trade that could violate sanctions or embargoes.
It’s crucial for both parties involved in a charterparty to understand the implications of each rider clause and how it interacts with the standard clauses in the charterparty agreement. The negotiation and drafting of these clauses require careful consideration and often involve legal experts to ensure that the agreement is robust and clear.
What is Rider Clause in Charter Party?
Standard form charterparties, long recommended by shipowners’ Protection and Indemnity (P&I) Associations, have been a staple in the shipping industry due to their court-tested clauses in resolving disputes. Despite their widespread use, some of these standard documents may not reflect the latest developments in shipping. For instance, the New York Produce Exchange form, first published in 1913 and last revised in 1946, is outdated compared to more recent variants like the ASBATIME 1981.
Both shipowners and charterers often find it necessary to modify these standard forms to meet their specific requirements. This is where “Rider Clauses” come into play. These are additional terms that either replace or augment the original clauses in the standard document. These Rider Clauses are akin to the “flesh” of the contract, adding substance to the basic “skeleton” of fundamental contractual obligations and rights provided by the standard form.
In situations where a Rider Clause contradicts a pre-printed clause, the Rider clause typically takes precedence. This is because a typed Rider clause more accurately reflects the parties’ intentions as negotiated. However, it’s not uncommon for standard clauses to be so extensively modified in many fixtures that the final charterparty bears little resemblance to its original form. Some charterparties include a specific clause stating that “Rider Clauses . . . as attached hereto are incorporated in the Charter”, followed by a “Rider of Suggested Additional Clauses” (ASBATIME).
For example, the GENCON 1976 voyage charterparty provides space for adding special provisions. Parties can insert statements like “Rider Clauses Numbers 18 to 47 both inclusive, as attached hereto, are deemed to be fully incorporated in this Charterparty” (the standard GENCON charterparty contains 17 clauses). Here, entire printed clauses may be overridden by a typed note: “See Clause,” signifying the replacement by relevant Rider Clauses.
How to incorporate Additional Clauses (Rider Clauses) into Charter Party?
Incorporating Additional Clauses, or Rider Clauses, into a charter party requires a careful and structured approach to ensure that the contract is legally binding and reflects the agreement accurately. Here are the steps and considerations involved in this process:
- Identify the Need for Additional Clauses: Before drafting or incorporating any additional clauses, it’s essential to understand the specific needs of both parties involved in the charter party. This could include special requirements related to the cargo, route, operational procedures, legal compliance, financial terms, and risk management.
- Drafting the Clauses: The actual drafting of the additional clauses is a critical step. It’s often done by legal professionals who specialize in maritime law and charter party agreements. The language should be clear, precise, and unambiguous to avoid misunderstandings or disputes later on.
- Review and Negotiation: Both parties should carefully review the proposed additional clauses. This stage often involves negotiations, as each party will have its interests and concerns. The goal is to reach a mutually agreeable set of terms that are fair and balanced.
- Legal Review: Once the clauses are drafted and agreed upon in principle, a legal review is advisable. This review ensures that the clauses are enforceable, compliant with relevant laws and regulations, and consistent with the overall charter party agreement.
- Incorporation into the Charter Party: The additional clauses are then formally incorporated into the charter party. This is usually done in one of two ways:
- As an Addendum: The rider clauses can be included as an addendum to the standard charter party agreement. This addendum is attached to the main contract and is referenced within the body of the standard agreement.
- Integrated within the Contract: Alternatively, the additional clauses can be integrated directly into the body of the charter party, interspersed with the standard clauses as appropriate.
- Reference and Cross-Checking: It’s important to reference each additional clause appropriately within the main contract. Cross-references should be checked for accuracy to ensure that the entire document is coherent and consistent.
- Signing and Exchange: The final step is the formal signing of the charter party by both parties. This is often done in counterparts, with each party retaining a signed copy. The exchange of signed documents solidifies the agreement and its terms, including the additional clauses.
- Record-Keeping and Distribution: Finally, proper record-keeping is essential. Copies of the signed charter party, including the additional clauses, should be distributed to all relevant parties, such as agents, brokers, and legal advisors.
Throughout this process, it’s crucial to maintain open communication between the parties and their respective legal advisors. This ensures that the additional clauses are not only legally sound but also practically applicable to the specific charter party arrangement.
We kindly suggest that you visit the web page of BIMCO (Baltic and International Maritime Council) to learn more about Charterparty Additional Clauses (Rider Clauses) to obtain the original Charter Party forms and documents. www.bimco.org