Charterparty Protecting Clauses

It is usual for a voyage charter-party form to conclude with certain standard Protecting Clauses.

Protecting Clauses have been devised and recommended by organizations protecting the shipowner’s interests. The most common of Protecting Clauses are:

1. P&I (Protection and Indemnity) Bunkering Clause
2. Both to Blame Collision Clause
3. New Jason Clause
4. Ice Clause
5. War Risks Clauses

—

1- P&I (Protection and Indemnity) Bunkering Clause

The P&I (Protection and Indemnity) Bunkering Clause is a provision in a Charterparty that addresses the liabilities, responsibilities, and insurance coverage related to the bunkering process. Bunkering is the supply of fuel to a vessel, which can involve several risks, such as environmental pollution, personal injuries, and property damage. This clause ensures that both parties, the shipowner and the charterer, understand their obligations and are adequately protected during bunkering operations.

A typical P&I Bunkering Clause may include the following elements:

1. Responsibilities: The clause should clearly outline each party’s responsibilities during the bunkering process. This may include the charterer’s obligation to provide suitable and compliant fuel, and the shipowner’s responsibility to ensure that the vessel is properly equipped and maintained to receive and store the fuel.
2. Quality and Quantity: The clause should specify the required quality and quantity of fuel to be supplied, as well as any relevant industry standards, such as ISO 8217. This helps prevent disputes over fuel specifications and potential damage to the vessel’s machinery.
3. Bunker Suppliers: The clause may require the charterer to use reputable and approved bunker suppliers to ensure the quality and safety of the supplied fuel. It can also provide guidelines for the selection and vetting of suppliers.
4. Bunkering Procedures: The clause should outline the proper procedures for bunkering operations, including communication, coordination, and safety measures. This ensures that both parties adhere to best practices and minimize the risk of accidents or incidents.
5. Insurance: The clause should specify the minimum P&I insurance coverage required for the vessel during bunkering operations. This typically includes coverage for pollution liability, personal injury, and property damage. It ensures that both parties are protected from potential financial and legal liabilities arising from bunkering incidents.
6. Indemnity: The P&I Bunkering Clause should include an indemnity provision, which protects each party from any claims, losses, or damages arising from the other party’s negligence, breach of contract, or willful misconduct during bunkering operations. This helps allocate liability and financial responsibility fairly between the shipowner and the charterer.
7. Reporting and Notification: The clause may require both parties to promptly report any bunkering incidents, accidents, or non-compliance with applicable laws and regulations. This ensures that any issues are promptly addressed and mitigated to minimize potential liabilities.

Incorporating a well-drafted P&I Bunkering Clause in a Charterparty helps manage the risks associated with bunkering operations and ensures that both the shipowner and the charterer are adequately protected. It provides a clear framework for the parties to adhere to best practices and fosters a mutually beneficial relationship.

 

2- Both to Blame Collision Clause

The Both to Blame Collision Clause is a provision included in a Charterparty or a bill of lading that addresses the allocation of liability and financial responsibility in the event of a collision between two vessels where both are found to be at fault. This clause aims to protect the interests of both the shipowner and the charterer, as well as the cargo interests, by fairly distributing the liability arising from such incidents.

A typical Both to Blame Collision Clause may include the following elements:

1. Allocation of Liability: The clause should clearly stipulate that if both vessels involved in the collision are found to be at fault, each vessel will be held responsible for the damages incurred in proportion to their respective degrees of fault. This ensures that the liability is fairly distributed between the parties involved.
2. Indemnity: The clause may include an indemnity provision, which protects each party from any claims, losses, or damages arising from the other party’s negligence, breach of contract, or willful misconduct in relation to the collision. This helps to allocate financial responsibility fairly between the shipowner, the charterer, and any third parties, such as cargo interests.
3. Cargo Interests: The Both to Blame Collision Clause should also address the rights and obligations of the cargo interests in case of a collision. The clause may stipulate that the cargo interests will indemnify the shipowner and/or the charterer for any losses or damages suffered as a result of their cargo being aboard the vessel during the collision.
4. Insurance: The clause should specify the minimum insurance coverage required for the vessel, including hull and machinery, protection and indemnity, and cargo insurance. This ensures that both parties are protected from potential liabilities arising from a collision where both vessels are at fault.
5. Claims Handling: The Both to Blame Collision Clause may outline the process for handling claims and disputes arising from such collisions, including the requirement to notify the relevant parties, the submission of necessary documentation, and the resolution of disputes through arbitration or litigation.
6. Governing Law: Specifying the governing law and jurisdiction for the Both to Blame Collision Clause provides legal certainty and clarity, ensuring that both parties understand their rights and obligations under the contract in the event of a collision where both vessels are at fault.

Incorporating a well-drafted Both to Blame Collision Clause in a Charterparty or a bill of lading helps manage the risks associated with maritime collisions and ensures that both the shipowner and the charterer, as well as cargo interests, are adequately protected. It provides a clear framework for the parties to handle claims and disputes, fostering a mutually beneficial relationship.

 

3- New Jason Clause

The New Jason Clause is a provision included in a Charterparty or a bill of lading that addresses the allocation of liability and financial responsibility in the event of a general average act. General average is a maritime principle where, in the case of voluntary sacrifices or extraordinary expenses incurred for the common benefit of the vessel and its cargo, the costs are proportionally shared among all parties with a financial interest in the voyage.

The New Jason Clause, which originated as a response to the U.S. Supreme Court decision in the case of The Jason (1914), aims to protect the interests of both the shipowner and the charterer, as well as cargo interests, in general average situations.

A typical New Jason Clause may include the following elements:

1. General Average: The clause should clearly stipulate that, in the event of a general average act, all parties with a financial interest in the voyage, including the shipowner, the charterer, and cargo interests, will contribute to the general average expenses in proportion to their respective interests.
2. Preconditions for Contribution: The New Jason Clause usually requires that the shipowner has exercised due diligence in making the vessel seaworthy before the commencement of the voyage. This ensures that the shipowner has fulfilled their obligations and can rightfully claim contributions from other parties in a general average situation.
3. Notice and Documentation: The clause may outline the process for notifying the relevant parties of a general average act, as well as the submission of necessary documentation, such as the general average adjustment prepared by an average adjuster.
4. Security: The New Jason Clause often requires that cargo interests provide adequate security, such as a general average bond or guarantee, to cover their potential contributions to the general average expenses. This ensures that the shipowner and charterer are protected from potential financial losses arising from cargo interests’ failure to contribute.
5. Salvage and Special Compensation: The clause may also address the allocation of liability and financial responsibility for salvage and special compensation claims arising from the general average act. This helps to clarify the rights and obligations of all parties involved in such situations.
6. Governing Law and Dispute Resolution: Specifying the governing law and jurisdiction for the New Jason Clause provides legal certainty and clarity, ensuring that all parties understand their rights and obligations in a general average situation. The clause may also outline the agreed-upon method for resolving disputes, such as arbitration or litigation.

Incorporating a well-drafted New Jason Clause in a Charterparty or a bill of lading helps manage the risks associated with general average acts and ensures that the shipowner, the charterer, and cargo interests are adequately protected. It provides a clear framework for the parties to handle claims and disputes, fostering a mutually beneficial relationship.

 

4- Ice Clause

The Ice Clause is a provision included in a Charterparty or a bill of lading that addresses the risks, responsibilities, and potential liabilities associated with navigating in ice-infested waters. Ice can pose significant dangers to a vessel’s safety and operations, potentially causing delays, damage, or even grounding. The Ice Clause aims to protect the interests of both the shipowner and the charterer by establishing clear guidelines and obligations for navigating in such conditions.

A typical Ice Clause may include the following elements:

1. Safe Navigation: The clause should stipulate that the shipowner and the master of the vessel have the discretion to determine whether it is safe to navigate in ice-infested waters, taking into account factors such as the vessel’s ice class, equipment, and the availability of icebreaker assistance.
2. Route Deviation: The Ice Clause may allow the vessel to deviate from its original route or delay its voyage to avoid ice-infested waters, without being considered in breach of the Charterparty or the bill of lading. This ensures that the vessel’s safety takes precedence over any contractual obligations.
3. Notice and Communication: The clause should outline the requirements for communication and notification between the shipowner, the charterer, and any other relevant parties in the event of a deviation or delay due to ice conditions. This ensures that all parties are kept informed and can make appropriate arrangements as needed.
4. Costs and Expenses: The Ice Clause may allocate the responsibility for any additional costs and expenses incurred due to navigating in ice-infested waters, such as increased fuel consumption, icebreaker assistance fees, or damage repairs. This helps to fairly distribute the financial burden between the shipowner and the charterer.
5. Off-hire: The clause should specify whether the vessel is considered on-hire or off-hire during any delays or deviations caused by ice conditions. This helps to clarify the charterer’s payment obligations during such periods.
6. Indemnity: The Ice Clause may include an indemnity provision, which protects each party from any claims, losses, or damages arising from the other party’s negligence, breach of contract, or willful misconduct in relation to navigating in ice-infested waters. This helps to allocate liability and financial responsibility fairly between the shipowner and the charterer.
7. Governing Law and Dispute Resolution: Specifying the governing law and jurisdiction for the Ice Clause provides legal certainty and clarity, ensuring that both parties understand their rights and obligations in ice-related situations. The clause may also outline the agreed-upon method for resolving disputes, such as arbitration or litigation.

Incorporating a well-drafted Ice Clause in a Charterparty or a bill of lading helps manage the risks associated with navigating in ice-infested waters and ensures that both the shipowner and the charterer are adequately protected. It provides a clear framework for the parties to handle potential challenges and fosters a mutually beneficial relationship.

 

 

5- War Risks Clauses

The War Risks Clauses are provisions included in a Charterparty or a bill of lading that address the risks, responsibilities, and potential liabilities associated with navigating in areas exposed to war, hostilities, or other related dangers. War risks can pose significant threats to a vessel’s safety, crew, cargo, and operations, potentially causing delays, damage, or even seizure. The War Risks Clauses aim to protect the interests of both the shipowner and the charterer by establishing clear guidelines and obligations for navigating in such conditions.

A typical War Risks Clauses may include the following elements:

1. Definition of War Risks: The clauses should clearly define what constitutes war risks, which may include war, hostilities, acts of piracy, terrorism, civil unrest, blockades, embargoes, or any other similar events that may pose a danger to the vessel, crew, or cargo.
2. Safe Navigation: The clauses should stipulate that the shipowner and the master of the vessel have the discretion to determine whether it is safe to navigate in areas exposed to war risks, taking into account factors such as the vessel’s security measures, crew preparedness, and relevant intelligence.
3. Route Deviation or Port Changes: The War Risks Clauses may allow the vessel to deviate from its original route, change its destination port, or delay its voyage to avoid areas exposed to war risks, without being considered in breach of the Charterparty or the bill of lading. This ensures that the vessel’s safety takes precedence over any contractual obligations.
4. Notice and Communication: The clauses should outline the requirements for communication and notification between the shipowner, the charterer, and any other relevant parties in the event of a deviation, delay, or port change due to war risks. This ensures that all parties are kept informed and can make appropriate arrangements as needed.
5. Costs and Expenses: The War Risks Clauses may allocate the responsibility for any additional costs and expenses incurred due to navigating in areas exposed to war risks, such as increased insurance premiums, security measures, or damage repairs. This helps to fairly distribute the financial burden between the shipowner and the charterer.
6. Off-hire: The clauses should specify whether the vessel is considered on-hire or off-hire during any delays or deviations caused by war risks. This helps to clarify the charterer’s payment obligations during such periods.
7. Indemnity: The War Risks Clauses may include an indemnity provision, which protects each party from any claims, losses, or damages arising from the other party’s negligence, breach of contract, or willful misconduct in relation to navigating in areas exposed to war risks. This helps to allocate liability and financial responsibility fairly between the shipowner and the charterer.
8. Governing Law and Dispute Resolution: Specifying the governing law and jurisdiction for the War Risks Clauses provides legal certainty and clarity, ensuring that both parties understand their rights and obligations in war-related situations. The clauses may also outline the agreed-upon method for resolving disputes, such as arbitration or litigation.

Incorporating well-drafted War Risks Clauses in a Charterparty or a bill of lading helps manage the risks associated with navigating in areas exposed to war and related dangers, ensuring that both the shipowner and the charterer are adequately protected. It provides a clear framework for the parties to handle potential challenges and fosters a mutually beneficial relationship.

 

 

 

Protecting Clauses in Charterparty

A Charterparty is a legally binding contract between the shipowner and the charterer, outlining the terms and conditions for the use of a vessel for the transportation of goods. It is crucial to have well-drafted clauses in the Charterparty to ensure the interests of both parties are protected and potential disputes are minimized. Here are some key protecting clauses to consider:

1. Safe Port Warranty: This clause requires the charterer to nominate only safe ports for the vessel’s operations. It ensures that the ship is protected from risks related to the port’s conditions and infrastructure.
2. Laytime and Demurrage: These clauses determine the agreed period for loading and unloading cargo, as well as the financial consequences if the charterer exceeds the allocated time. This protects the shipowner from unnecessary delays and compensates for the additional expenses incurred.
3. Payment Terms: Clearly defined payment terms, including the freight rate, payment methods, and due dates, help avoid disputes over financial matters and protect both parties’ interests.
4. Performance Guarantee: This clause ensures that the vessel meets the specified performance standards, such as speed and fuel consumption. It protects the charterer’s interests by holding the shipowner accountable for any underperformance.
5. Force Majeure: This clause provides protection for both parties in the event of unforeseen circumstances or events beyond their control, such as natural disasters, political unrest, or labor strikes. It allows for the suspension or termination of the contract without penalty.
6. Indemnity: The indemnity clause protects both parties from any claims, losses, or damages arising from the other party’s breach of contract, negligence, or willful misconduct.
7. Insurance: This clause stipulates the minimum insurance coverage required for the vessel, including hull and machinery, protection and indemnity, and cargo insurance. It ensures that both parties are protected from potential liabilities.
8. Termination: Clearly defined termination provisions allow either party to end the contract under specific circumstances, such as breach of contract, insolvency, or force majeure. This protects both parties’ interests and provides a legal exit strategy.
9. Dispute Resolution: This clause outlines the agreed-upon method for resolving disputes, such as arbitration or litigation. It helps protect both parties’ interests by providing a clear and efficient process for settling disagreements.
10. Governing Law: Specifying the governing law and jurisdiction for the Charterparty provides legal certainty and clarity, ensuring that both parties understand their rights and obligations under the contract.

11. Sublet and Substitution: This clause allows the charterer to sublet the vessel or the shipowner to substitute the vessel with another suitable one, under specific conditions. It ensures flexibility for both parties while maintaining their rights and obligations.
12. Lien: A lien clause provides the shipowner with a right to claim outstanding payments against the charterer’s cargo in case of non-payment. This protects the shipowner’s financial interests and encourages timely payments.
13. Bunker Adjustment Factor (BAF): This clause addresses the fluctuating costs of fuel by adjusting the freight rate based on changes in bunker prices. It ensures that both parties share the risk of fuel price volatility and helps maintain a fair freight rate.
14. War Risk: The war risk clause outlines the procedure for navigating through high-risk areas or war zones, as well as the allocation of additional costs and responsibilities. This protects both parties from unexpected dangers and financial burdens.
15. Seaworthiness: This clause obliges the shipowner to provide a seaworthy vessel, properly equipped and maintained to safely carry the cargo. It protects the charterer’s interests by ensuring the vessel is fit for the intended voyage.
16. Bill of Lading: A clause that clearly defines the terms and conditions of the bill of lading helps avoid disputes over cargo handling, delivery, and documentation. It serves as a receipt for the cargo, a document of title, and a contract of carriage, protecting both parties’ interests.
17. Off-hire: This clause specifies the circumstances under which the vessel may be considered off-hire, such as breakdowns, repairs, or delays. It protects the charterer from paying hire for a non-operational vessel and the shipowner from unfair claims.
18. Cargo and Stowage: This clause outlines the responsibilities of both parties regarding the loading, stowage, and discharge of cargo. It helps avoid disputes over cargo handling and ensures the safe and efficient transportation of goods.
19. Pollution Liability: A pollution liability clause allocates responsibility for any pollution or environmental damage caused during the vessel’s operations. It protects both parties from potential legal and financial liabilities.
20. Confidentiality: A confidentiality clause protects sensitive information and trade secrets shared between the parties during the course of the contract. It ensures that both parties maintain confidentiality and prevents the unauthorized disclosure of proprietary information.

Incorporating these additional clauses in a Charterparty helps create a comprehensive and well-structured agreement that addresses various aspects of the shipping business. This enables both the shipowner and charterer to navigate potential risks and challenges, fostering a productive and mutually beneficial partnership.