Charterparty

Charterparty

Shipbrokers should be familiar with the basic layout of voyage charterparty and time charterparty forms. Shipbrokers should be capable of selecting a suitable charterparty for the business. Usually, specific charterparty forms are used in certain businesses, and a shipbroker should recommend and use these if possible. Most specific charterparty forms will have stood the test of time both in practical daily usage and, as essential, in a legal dispute. Some dry-cargo charterparty forms in use today are almost decades-old. Many old dry-cargo charterparty forms have grown unsuitable for the business for which they were initially planned or the business itself has become obsolete, leading to the discontinuation of use of old dry-cargo charterparty forms. Some of the old dry-cargo charterparty forms have been updated to keep in step with contemporary shipping market developments.

Occasionally, new dry-cargo charterparty forms are published and old dry-cargo charterparty forms are revised and updated. BIMCO (Baltic International Maritime Council), ASBA (Association of Shipbrokers and Agents), FONASBA (Federation of National Associations of Ship Brokers & Agents) are active in drafting, and publishing, revising, and updating dry-cargo charterparty forms. Furthermore, some national organizations and private companies have drafted the charterparty forms for their cargoes. Generally, all the international and national organizations coordinate their activities through the Documentary Committee of BIMCO (Baltic International Maritime Council). 

A charterparty is a Contractual Agreement that is made between the Shipowner (Disponent Owner) and the Charterer. 

A charterparty documents all the facts of the agreement reached between the Shipowner (Disponent Owner) and the Charterer. A charterparty is the Memorandum of the Agreement, the contract itself may be made by word of mouth, telephone, email, or fax exchanges. Therefore, a contract can exist independently. In coaster shipping, a ship may have loaded, transported the cargo, and discharged, freight may have been settled even before the shipbroker has drawn up the Charterparty (Contractual Agreement).

In most international businesses, the availability of the charterparty may be vital for trading purposes and the release of LC (Letters of Credit). Therefore, a shipbroker should draft a charterparty as soon as possible following the successful conclusion of a chartering negotiation. Sometimes, the preparation of the charterparty indicates a mistake in the negotiating process, and the sooner such mistakes are brought out into the open and reconciled the better for all parties.

Official Charterparty Forms

Official Charterparty Forms are examined and passed by an authoritative body, such as a chamber of shipping, whilst other Charterparty Forms have not been so treated. 

BIMCO (Baltic International Maritime Council) inspects and, where possible, recommends or approves miscellaneous Charterparty Forms. Furthermore, BIMCO (Baltic International Maritime Council) drafts and issues miscellaneous shipping documents. The description of particular words of recommendation at the head of some Charterparty Forms can be defined as follows: 

Agreed: The charterparty wording has been agreed upon between an organization such as BIMCO (Baltic International Maritime Council) and a Charterers’ organization for a certain business. The printed conditions of such a charterparty can not be modified in any way without the express agreement of all the organizations drawing up the document, which is compulsory for all engaged in the special business. 

Adopted: When an organization, such as a chamber of shipping, adopts a Charterparty Form that has been agreed upon between, for example, a Charterers’ organization and BIMCO (Baltic International Maritime Council). For example, POLCOALVOY Charterparty is adopted by the General Council of British Shipping. Such an organization may also adopt a Charterparty Form that has not been agreed upon. In this case, Charterparty Form clauses may be modified by mutual consent by contracting parties in the business.

Recommended: When a Charterparty Form text is liable to alterations in negotiations, although the wording of the printed text meets with the approval of the inspecting organization, that Charterparty Form can be used as a recommended document. For example, GENCON is a Charterparty Form that is recommended by BIMCO (Baltic International Maritime Council).

Approved: Merely a term describing recommendedadopted, or agreed Charterparty Forms.

Issued: A Charterparty Form for which a group such as BIMCO (Baltic International Maritime Council) is accountable for drafting and producing for service.

Charterparty Library

Shipbrokers should establish a Charterparty Library that is full of miscellaneous Charterparty Forms. Besides blank printed Charterparty Forms, Shipbrokers should accumulate final, negotiated, and duly amended Charterparty Forms. In this manner, alterations, deletions, and additions to printed Charterparty Forms’ clauses can be scanned and lessons learned for future charter negotiations. Copies of numerous BIMCO approved Charterparty Forms can be downloaded from the BIMCO (Baltic International Maritime Council) website.

Charterparty Forms Wording

Apart from the Agreed Charterparty Forms, the wording of most Charterparty Forms is utilized simply as a basis for negotiation, and, where required, the printed text is modified, deleted, or added, to reflect the specific agreement reached. 

Usually, Charterparty Forms are added miscellaneous typed Additional Clauses (Rider Clauses or Side Clauses), after the Main Clauses. 

Addendum vs Side Letter

In some cases, an Addendum is added to the Charterparty Form. Addendum documents particular clauses that contracting parties want to keep confidential from third parties who might later refer to the Charterparty Form. For instance, the rate of freight (or hire) may be treated confidentially, with the Main Charterparty Clause referring solely to a freight (or hire) as agreed. The actual freight (or hire) figure is decided upon appearing only in an Addendum to the Charterparty Form. Therefore, Ship Agents and Third-Parties would be unaware of the freight (or hire) agreed upon. Ship Agents and Third-Parties would require just the Main Charterparty and Additional Clauses (Rider Clauses or Side Clauses) to perform their operations adequately. Ship Agents and Third-Parties would not receive the Addendum. Occasionally, an additional agreement is required after the fixture and the drawing-up of the Charterparty Form, and these following agreements are generally documented in the Addendum

A Shipbroker should refer to the number of any Additional Clauses (Rider Clauses or Side Clauses) at the foot of the Main Charterparty Form, with such wording, for instance, as “Additional Clauses 31 to 60 inclusive, as attached, are deemed part of and are incorporated into this Charterparty”. This is not necessarily the case with Addendum, nevertheless, and it may not be noticeable to those reading the Main Charterparty and Additional Clauses (Rider Clauses or Side Clauses) that another agreement has been reached. If an Addendum is drawn up, the Addendum should be recorded in Reference Numbers (Addendum Numbers) in numerical sequences.

On the other hand, a Side Letter is an alternative to an Addendum for recording contracts that both parties consider too sensitive for general perusal, such as the ensuring by one company of a sister company’s performance of the contract. A Side Letter is not quite so close to the core of the Charterparty) as an Addendum and conceivably, if legally tried, a Side Letter would not carry the weight of an Addendum.

Practically, in the ship chartering process, Shipbrokers do not draw up a charterparty from a blank form but base negotiating upon a previous fixture, altering Main Clauses and Additional Clauses (Rider Clauses or Side Clauses) alike as needed. This method is both labor-saving and practical. Furthermore, this method delivers evidence to Shipowners and Shipbrokers that previously encountered unattractive clauses have been settled by other Shipowners.

In some cases, when chartering business is sub-let by a head charterer, the sub-charterer may be limited to negotiating precisely based on the head-charterparty, using solely identical clauses with the Main Charterparty. This type of Charterparty is called Back-to-Back Charterparty.

Each Charterparty Form may differ in some particular characteristics, some Charterparty Forms incorporate peculiarities not seen in other Charterparty Forms. The Charterers have to be aware of the catches and benefits of major Charterparty Forms. Shipbrokers should inform their Principals of the catches and benefits when executing chartering negotiations.

During chartering negotiations, Charterparty Forms’ printed sections may be deleted or amended. Chartering negotiations are always subject to the relative strengths of the Shipowners (Disponent Owners) and the Charterers. Although Shipowners (Disponent Owners) or the Charterers may be completely aware of the possible pitfalls of a particular Charterparty Clause, it may not be possible to change the Charterparty Clause favorably if the other party is negotiating from a position of strength. 

Furthermore, depending upon the particular circumstances of the voyage under negotiation, certain wordings may reasonably have a smallish effect. For another voyage under negotiation, the wording agreed upon may make a major difference. Shipbrokers and Principals should be aware of common Charterparty Forms’ wordings and alterations thereto that serve advantageously. 

Drawing Up Charterparty

When chartering negotiations leading to a shipping fixture have been completed, Charterer’s Shipbroker should draw up the charterparty.

Charterer’s Shipbroker should amend the printed clauses where necessary. Furthermore, Charterer’s Shipbroker should add Additional Clauses (Rider Clauses or Side Clauses) and Addendum according to negotiated terms. Charterer’s Shipbroker should avoid duplication and the inclusion of irrelevant and unnecessary clauses which are liable to creep in if the fixture is based upon a completed charterparty drawn up on a previous occasion. However, nothing should be deleted, inserted, or altered without the agreement of the Shipowner’s Shipbroker. Charterer’s Shipbroker should incorporate the text of all clauses agreed upon. For instance, if protective clauses are incorporated, such as the Both to Blame Collision Clause, it is not sufficient to express that it is deemed to be incorporated. Both to Blame Collision Clause must be incorporated in written form.

Ideally, before any Principal signs a Charterparty Form, Charterparty Form should be reviewed by all concerned parties to verify their agreement with the contents. Furthermore, it is also a mannerly action. Nevertheless, when the parties are scattered across the world, this is impractical and time-consuming. A fixture may have been completed verbally or in a series of emails, and the Charterparty’s existence or otherwise does not alter that agreement. However, Charterparty’s main function is to factually record an agreement in an effortlessly read document, to avoid later misunderstandings or poor memory. Therefore, Charterparty’s early production is the most feasible action.

Charterer’s Shipbroker promptly draws up the Charterparty and either submits the same to his principal or signs on his principal’s behalf under authority so to do, before despatching the half-signed original to the Shipowner’s Shipbroker. Charterer’s Shipbroker should retain Charterparty Copies for his own and his Principal’s use. Any errors which the Shipowner’s Shipbroker finds upon checking the Charterparty should be discussed with the Charterer’s Shipbroker and, if necessary, rectified. When the Charterparty factually incorporates all that has been agreed, the Shipowner’s Shipbroker should arrange for his Principal to sign or should himself sign under appropriate authority. Shipowner’s Shipbroker should deliver whatever Charterparty Copies are required by the miscellaneous parties to the Charterparty, the Original Charterparty usually being possessed by the Shipowner.

Online Charterparty Form Editors can draft charterparties effortlessly. Software and Online Charterparty Form Editors are especially useful in busy offices and have dramatically shortened the time taken to produce a final charterparty.

BIMCO (Baltic International Maritime Council) has created an internet-based charterparty editor, called BIMCO’s Idea. Templates of BIMCO (Baltic International Maritime Council) approved Charterparty Forms are saved in central storage, whereas edited Charterparty Forms are saved in a private area only available to subscribed BIMCO members. BIMCO’s Idea secures the integrity of the original BIMCO Charterparty Forms and authorizes new Charterparty Forms to be added rapidly. User edited Charterparty Forms are dispersed by e-mail to the relevant parties. BIMCO’s Idea has a great advantage over the old computer-based BIMCO Charterparty Editor. BIMCO’s Idea may be accessed by users from any computer.

Signing Charterparty Forms

Shipbrokers must be careful when and if signing on behalf of the Principals to indicate the means of that authority. For example:

By email authority from
HandyBulk LLC, Panama
For and on behalf of
New York Shipbrokers, New York
(As Agents or Brokers Only)
Charlie Fletcher, Director

It is essential to incorporate the wording: “As Agents or Brokers Only”, to show apparently that the role of New York Shipbrokers is not that of the Principal. Consequently, with such a suitable signature, a Shipbroker will not be held personally liable for the execution of the contract unless there is a clause or wording in the Charterparty expressly indicating that the Shipbroker is a Principal.

Addendum and Side Letters should be treated in the same manner as Charterparty Forms, being signed by both Shipowners (Disponent Owners) and Charterers parties, or their brokers, in the style defined above.

Original Charterparty Forms

When documentary credits (LC: Letter of Credit) are concerned, it may become essential to produce two or more Original Charterparty Forms. In such circumstances, each Original Charterparty Form should bear its proper titles, such as First Original Charterparty, Second Original Charterparty, and Third Original Charterparty.

 

Voyage Charterparty 

Voyage Charterparty covers the most considerable proportion of any fixtures placed on the ship chartering market, despite the trend in recent years for charterers to take more ships on Time Charter Trip (TCT) terms than was once the case.

General Voyage Charterparty Clauses

1. Preamble
2. Cargo Description – Cargo Quantity
3. Loading Places
4. Loading Port Orders – Port Rotation
5. Discharging Places
6. Discharge Orders – Port Rotation
7. Laydays and Cancelling Day (LAYCAN)
8. Freight
9. Cost of Loading/Discharging
10. Notice of Readiness (NOR) /Time Counts
11. Loading/Discharging rates
12. Excepted Periods
13. Demurrage/Despatch
14. Notices
15. Ship’s Gear
16. Grab Discharge – Stevedore Damage
17. Overtime
18. Shifting – Seaworthy Trim
19. Cargo Separation – Tallying
20. Dues and Taxes
21. Ports Agents
22. Bills of Lading
23. Cargo Lightening
24. General Average (GA)
25. Strikes
26. Exceptions
27. Commissions (Brokerages)
28. Protection Clauses
29. Lien
30. Ice
31. War Risks
32. Signature
       

Voyage Charterparty Clauses

Most general-purpose Voyage Charterparty Forms’ Clauses resemble each other. We will examine the MULTIFORM Charterparty (Multi-Purpose Charterparty 1982/1986).

1- Preamble: In the preamble of most Voyage Charterparty Forms the Place/Date of the Charterparty, Names/Domiciles of Contracting Parties, Name and Brief Description of the Vessel is incorporated. 

Place: The place where a Charterparty is considered to have been produced may govern the law which is to be applied to that Charterparty in the event of a disagreement. Therefore, if the place is London, English Law may prevail. Generally, the place can be represented as where the contract is produced, the domicile of the Charterer’s Shipbroker, not necessarily the domicile of the Principals. Furthermore, a Charterparty should incorporate an Exclusive Jurisdiction Clause, such as “English Law is to apply”.

Date: The date of the fixture negotiations are completed, with all subjects are lifted, when all negotiating formalities are finalized.

Names and Domiciles of Contracting Parties: The names of the Shipowner (Disponent Owner) and Charterer, and their Domiciles, full styles are incorporated. 

Name and Brief Description of the Vessel:  MULTIFORM Charterparty (Multi-Purpose Charterparty 1982/1986) permits for a comprehensive ship description in the Main Charterparty (Printed Part of the Charterparty Form) than many other Charterparty Forms. The position of the vessel at the time the Charterparty is negotiated is also vital as this governs the vessel’s possible readiness to load. The courts give significant importance to the precision of information about expected readiness to load and any significant error in the expressed position of the vessel can be assessed as misrepresentation. This could be treated as a Breach of Condition entitling the Charterer to void the Charterparty. 

In the absence of precise stipulation, the ship is obliged to steam to the loading port with Reasonable Despatch. LAYCAN (time between layday and canceling day) is to protect the Shipowner against unexpected delays and if the Shipowner has been irresponsible or deliberately misleading in the expected readiness of the vessel, the Charterer would be entitled to claim damages for any loss attributable to the unnecessary delay. The Charterer would not be entitled to revoke the Charterparty unless the result of the breach was such as to frustrate the entire object of the Charterparty.

Condition of Vessel: Shipowner (Disponent Owner) ensures that a vessel is in a fit condition safely and properly to undertake the contractual voyage.

2- Cargo Description – Cargo Quantity: Cargo details and nature of the cargo to be carried, such as in bulk, baled, bagged, etc. SF (Stowage Factor of the cargo, such as approximately 65 cubic feet per metric tonne). Minimum/Maximum quantity or cargo size margins and in whose option, such as 100,000 metric tonnes, 10% more or less in the owner’s option (MOLOO) are incorporated into Charterparty.

3- Loading Places: Names of Loading Ports/Places and/or Range of Ports, such as ARAG (Amsterdam-Rotterdam-Antwerp-Gent range). The number of Safe Berths (SB)/ Safe Anchorages (SA) Charterers allowed to operate at each Place/Port; whether the ship has to remain Always Afloat (AA) or NAABSA (Not Always Afloat But Safely Aground). Maximum/Minimum available drafts are incorporated into Charterparty.

4- Loading Port Orders – Port Rotation: This clause can be extremely critical, since additional steaming can be involved, adding to Shipwner’s costs. Furthermore, this clause can be extremely critical for the Charterer to negotiate loading in a certain Port Rotation so that ship availability matches cargo availability.

5- Discharging Places: Names of Discharging Ports/Places and/or Range of Ports, such as ARAG (Amsterdam-Rotterdam-Antwerp-Gent range). The number of Safe Berths (SB)/ Safe Anchorages (SA) Charterers allowed to operate at each Place/Port; whether the ship has to remain Always Afloat (AA) or NAABSA (Not Always Afloat But Safely Aground). Maximum/Minimum available drafts are incorporated into Charterparty.

6- Discharge Orders – Port Rotation: This clause can be particularly vital, since additional steaming can be involved, adding to Shipwner’s costs. Furthermore, this clause can be especially crucial for the Charterer to negotiate to discharge in a certain Port Rotation so that discharging operations are arranged accordingly.

7- Laydays and Cancelling Day (LAYCAN): The spread of dates during which a ship is to present herself at the loading port. LAYCAN (spread of dates) should be incorporated into Charterparty, as well as conditions under which the Charterparty can be canceled if the ship is unable to meet LAYCAN (spread of dates).

8- Freight: The amount and currency of freight; to whom, where, and when payable. The risk of the ship and/or cargo loss on a voyage about freight should be expressly incorporated into Charterparty, such as whether freight is deemed earned as cargo is loaded or upon delivery of the cargo.

9- Cost of Loading/Discharging: Who is going to appoint and pay for cargo handling at each port must be incorporated into Charterparty

10- Notice of Readiness (NOR)/Time Counting: Notice of Readiness (NOR) is an essential clause in the calculation of Laytime. Notice of Readiness (NOR) must be incorporated into Charterparty.

11- Loading/Discharging Rates: The speed at which cargo-handling operations are to be executed is a critical clause in the calculation of Laytime. Loading/Discharging Rates must be incorporated into Charterparty.

12- Excepted Periods: Times when cargo handling usually does not take place and will not count in the calculation of laytime unless cargo operation is carried out during such times “when only time actually used shall count”. Excepted periods as abbreviated SHEX (Sundays and Holidays Excluded) which laytime does not count. No excepted periods as abbreviated SHINC (Sundays and Holidays Included) which laytime does count.

13- Demurrage/Despatch: Daily amount of demurrage (liquidated damages) payable by the Charterer in case the ship is detained in port beyond the maximum allowed laytime. Despatch is the compensation disbursed to Charterers provided the Charterparty includes a stipulation to this effect if the loading or discharging operations are completed within the laytime allowed by the Charterparty, that is before the agreed laytime has expired. In other words, Despatch Money is the opposite of Demurrage. Demurrage and Despatch Money must be incorporated into Charterparty.

14- Notices: A Ship Master must give comprehensive notices of a ship’s ETA (Expected Time of Arrival) at the loading port, failing which the Shipowner may face a penalty in the form of additional laytime permitted to the Charterer. Notice periods are incorporated into Charterparty.

15- Ship’s Gear: This clause stipulates that the ship’s gear will be maintained to a high standard and specifies what happens in the event of gear breakdown resulting in additional expense. Furthermore, the number Ship’s Gear and SWL (Safe Working Load) is incorporated into Charterparty.

16- Grab Discharge/Stevedore Damage: Shipowners usually ensure that the ship is fitted for grab discharge and formalities should be set out if a ship suffers damage during the cargo-handling operations. Oftentimes, Ship Masters are instructed to notify Charterers or Stevedores in the event of damage to the Ship’s Gear or Equipment, even though this may not be discovered until over stowed cargo is unloaded at ports of discharge. 

17- Overtime: Which party pays the overtime after regular working hours.

18- Shifting – Seaworthy Trim:  Which party is going to disburse shifting costs, if any, between berths, furthermore whether time so used for shifting is to count as laytime. The ship is to be left in safe seaworthy condition between ports. It is crucial to incorporate in a clause of this nature that it is up to the Ship Master to determine whether a ship is in Safe Seaworthy Trim or not. The silence of the Charterparty on the Safe Seaworthy Trim issue may lead to an eventual dispute.

19- Cargo Separation – Cargo Tallying: When a ship is to carry miscellaneous parcels of cargo, it may not be possible for all separations between the separate parcels to be Natural Separation. Natural Separation is separating the cargoes by bulkheads and/or, in the case of tweendeckers, by tweendecks. Shipowners (Disponent Owners) and Charterers must decide on how parcels loaded in the same hold are to be separated, such as separated by polyethylene sheeting or by tarpaulins. Furthermore, Shipowners (Disponent Owners) and Charterers must agree on who is to supply and pay for the Cargo Separation. Cargo Tallying as the cargo is loaded or discharged is oftentimes a pricey operation. If Cargo Tallying is not carried out conscientiously, considerable cargo claims can materialize for alleged short delivery, bad condition, etc. Which party is responsible for the remuneration of Tally Clerks must be incorporated in the Charterparty.

20- Dues and Taxes: This clause stipulates which party to the Charterparty is accountable for taxes that may be levied against the Ship, Cargo, and Freight.

21- Port Agents: Reference should be made as to which of the parties is responsible for the nomination of Port Agents. Port Agents remain the servant of the ship, and the Shipowner (Disoponent Owners) remains responsible for disbursing the port costs and the agency fee. However, the appointment of an efficient Port Agent is also critical to the Charterer, who will need to feel secure in the knowledge that a reasonable liaison is being kept between the Port Agent and the Shipper. Therefore, Charterers primarily negotiate that they have the right to nominate the Port Agents that will be appointed by the Shipowner.

22- Bills of Lading (B/L): Bills of Lading (B/L) provisions should be incorporated in all Voyage Charterparties.

23- Cargo Lightening: If cargo lightening is required, a comprehensive clause covering all aspects of this occasionally tricky operation should be negotiated. Cargo Lightening clause should be incorporated in the Charterparty.

24- General Average: General Average Clause stipulates, if any General Average (GA) occurs, where General Average (GA) is to be adjusted and disbursed, irrespective of the ports of call concerned. Furthermore, the General Average Clause stipulates the laws relating to General Average (GA) thereat such as the York-Antwerp Rules. Furthermore, if a cargo involves voyages to/from the United States or the US-based Principals, the New Jason Clause be incorporated into the Charterparty, dealing with General Average law and practice for adjustments made in the United States.

25- Strikes: Shipowners (Disponent Owners) and Charterers have risks and liabilities in the event of a strike. Miscellaneous Strike Clauses exist, some Strike Clauses are more detailed than others. MULTIFORM Charterparty (Multi-Purpose Charterparty 1982/1986) repeats the Strike Clause from the GENCON Charterparty, notorious for its confusing wording and very much in Shipowner’s favor. 

26- Exceptions: The rights of Shipowners (Disponent Owners) and Charterers to cancel the charterparty in case of events making its performance practically impossible such as Acts of God or Force Majeure.

27- Commission (Brokerages): This clause stipulates the amount and to whom commissions (brokerages) are payable. Generally, commissions (brokerages) are payable on Freight, Deadfreight, and Demurrage. There are no commissions (brokerages) on Despatch Money. 

28- Protecting Clauses: A set of Protecting Clauses normally incorporated in the printed form of a Charterparty or as Additional Clauses (Rider Clauses or Side Clauses). New Jason Clause is incorporated into the Charterparty when the cargo or ships involves voyages to/from the United States or the US-based Principals. Nevertheless, there are other Protecting Clauses such as:

Clause Paramount: Clause Paramount incorporates Hague/Visby Rules into the Charterparty and Bills of Lading (B/L) issued under Charterparty. Hague/Visby Rules govern the rights and obligations of the carrier. A suitable amendment should be made to the older Charterparty Forms to ensure that the latest Hague/Visby Rules apply.

P&I (Protection and Indemnity) Bunkering Clause: P&I (Protection and Indemnity) Bunkering Clause sets out Shipowners’ rights to deviate for bunkers during the voyage under Charterparty. P&I (Protection and Indemnity) rules expressly exclude any deviation instructed by the Shipowner. A deviation may be for bunkering or crew change, but may also be for provisioning and the taking on of spares. Should the deviation for any purpose be excluded from P&I (Protection and Indemnity) Cover, the Shipowner needs cover for the risk of breaching the Bill of Lading (B/L). Nevertheless, should an emergency materializes, P&I (Protection and Indemnity) will meet the liability. The Bill of Lading (B/L) may incorporate a Bunkering Clause permitting the Shipowner to deviate for bunkering. In such cases, the Shipowner may deviate for bunkering, according to the P&I (Protection and Indemnity) Bunkering Clause, and may at the same time receive provisions and change crew. This is not considered a frustration of P&I (Protection and Indemnity) Cover. If the Bill of Lading (B/L) incorporates a Bunkering Clause allowing the Shipowner to deviate for bunkering but the Shipowner deviates exclusively for another purpose, such as provisioning or crew change, P&I (Protection and Indemnity) Cover is frustrated and Deviation Insurance is needed. Should the Charterparty incorporate a Liberty Clause, allowing to deviate for bunkering, the cover depends on the wording of the Bill of Lading (B/L). The sheer inclusion of a Liberty Clause in the Charterparty does not warrant liberty to deviate. It is the cargo owner’s (Bill of Lading Holder’s) decision, that provides permission to deviate. Without the Bill of Lading (B/L), there is no right to deviate and, therefore, P&I (Protection and Indemnity) Cover is frustrated and Deviation Insurance is required. Deviation Insurance covers the excluded cargo liability risk. The cover is based on cargo value. Deviation frustrates the Bill of Lading (B/L) and so denies the Shipowner any limitations under the rules governing the Bill of Lading (B/L) such as the Hague-Visby Rules. Any other liability during deviation is covered under the normal P&I (Protection and Indemnity) rule.

Both to Blame Collision: Both to Blame Collision Clause covers Shipowner’s rights in respect of American Law in case of collision at sea.

29- Lien and Cesser: Most charterparties include a Lien and Cesser Clause. This is a Contractual Lien Clause. A person (Shipowner) in possession of another person’s property may be retained by a person until the debt has been paid. A Cesser Clause stipulates that the Charterer’s liability for defined payments shall cease at a certain time, usually after shipment of the cargo. Usually, a Cesser Clause is agreed upon in exchange for the Shipowner’s lien on the cargo. A Lien Clause without cessation of liability is more favorable to the Shipowner. Therefore, the Shipowner should treat Cesser Clauses with vigilance and if practicable limit Cesser Clauses scope. If a Charterparty contains a Cesser Clause, then the Shipowner should make sure that the Cargo Receiver takes over the Charterer’s liability. This can be performed by assuring that the Charterparty provides for the inclusion of a clause in the Bill of Lading (B/L) making the Cargo Receiver accountable for those sums mentioned in the Cesser Clause.

30- Ice: The Ice Clause may not be required to be incorporated in a Charterparty, but where Ice Clause is required, great care should be taken over its wording. BIMCO (Baltic International Maritime Council) Ice Clause is widely used in many Charterparty Forms. The object of an Ice Clause should be to prevent a Shipowner and Ship Master from being left with no option but to try to steam to a contractual destination irrespective of ice conditions and to avoid damage.

31- War Risks: War Risks Clauses should be studied in detail as some are unfair to Charterers, others to Shipowners. Furthermore, War Risks Clauses should be patently inappropriate for the purpose intended. Some War Risk Clauses are out of date, and silent on several critical topics, one being cancellation rights in the case of an outbreak of war before or after a ship’s voyage to the loading port, or after arrival. War Risks Clauses should provide a Shipowner with the right to refuse to allow the ship and crew members to enter or to remain in a place that has become dangerous due to warlike activity. BIMCO (Baltic International Maritime Council) recommended their own Standard War Risk Clauses: Voywar 1993 and Conwartime 1993 and these express the most acceptable condition.

32- Signature: No Charterparty is complete without the signatures of Shipowners (Disponent Owners) and Charterers or on behalf of the parties concerned.

Trade Voyage Charterparty Forms

Miscellaneous Voyage Charterparty Forms are developed for different commodities such as grain, coal, fertilizers, etc. Each of these Trade Voyage Charterparty Forms has distinctive clauses that are of particular import for the commodity concerned.

Coal Charterparty Forms: The most significant Coal Charterparty Form is the AMWELSH Charterparty. As the Charterparty name implies, AMWELSH Charterparty is now the world’s main Coal Charterparty Form dealing not only with cargoes of coal from America but with coal cargoes from elsewhere such as Venezuela, Australia, etc. The latest AMWELSH Charterparty edition was revised in 1993 from the original version which, as the full Charterparty name informs us, was an adaptation of the Welsh Coal Charter 1896 and some of the wording is over a century old. In AMWELSH Charterparty Clause 11 stipulates that loading costs are payable by Charterers including loading, dumping, and spout trimming costs. Dumping is a distinctive term for the method in America of Dumping Coal from railway wagons at the loading port.

Grain Charterparty Forms: The most significant Grain Charterparty Form is the NORGRAIN Charterparty, as revised in 1989. NORGRAIN Charterparty Clauses that refer particularly to grain carriage associated difficulties: 

Clause 12: Self-Trimming – Wing Tanks
Clause 14: Cargo Separations
Clause 15: Securing of Cargo – Bag Bleeding
Clause 16: Cargo Fumigation
Clause 18: Cargo Hold Inspection

Commonly, in grain trading, the Full Freight or Substantial Percentage of the Full Freight is paid before releasing the Bill of Lading (B/L) by the Shipowner or Ship Master to the Shippers. In NORGRAIN Charterparty, 

the burden of settling the cost of loading can vary, being negotiable either for Shipowner’s Account (Gross Load) or for the Charterer’s Account (Free Load) or Nett Terms. NORGRAIN Charterparty Clause 10 (Cost of Loading and Discharging) and NORGRAIN Charterparty Clause 11 (Setevedores Costs) leave it to the parties to determine and document the result of the negotiations.

Ore Charterparty Forms: The most significant Ore Charterparty Form is the OREVOY 1980 Charterparty. There are other miscellaneous Ore Charterparty Forms. C ORE 7 (Mediterranean Iron Ore Charterparty Form) has an old-fashioned wording used and the references to obsolete ports and currency which, in any case, are nowadays widely deleted, so much so that the C ORE 7 (Mediterranean Iron Ore Charterparty Form) is widely deleted main form with miscellaneous separately developed riders attached. Some Ore Charterparty Forms have punishing provisions against the Shipowner discounting time lost due to shore conflicts or breakdown. Generally, the ore is loaded in wettened shape, and weight loss during the voyage as moisture vaporizes and drains may be significant. Therefore, although the BIMCO (Baltic International Maritime Council) drafted OREVOY is not very clear on this point, it is usually the case that Charterers negotiate the right to pay freight on either:

1- Bill of Lading (B/L) Weight established at the Loading Port
2- Out-Turn Weight established at the Disching Port
3- In Lieu of Weighing (ILUW) established, for example, less half of one percent of the Bill of Lading (B/L) Weight. 0.5% ILUW B/L.

Fertilizer Charterparty Forms: The most significant Fertilizer Charterparty Form is the AFRICANPHOS 1950 Charterparty. AFRICANPHOS 1950 Charterparty Form is widely used in the major trade involved around the export of bulk phosphate rock from West Africa and North Africa. An oddity of this trade is that Loading Costs are frequently for the Shipowner’s Account as per AFRICANPHOS 1950 Charterparty Form Clause 7. AFRICANPHOS 1950 Charterparty Form Clause 8 stipulates that cargo is loaded at a Scale Rate specified by the Cargo Quantity. This is expressed as Scale Gross Load and costs are currently around US$ 2.00 per tonne loaded plus a percentage addition for VAT (Value-Added Tax). Sometimes, the Charterparty may also authorize Gross Discharge. Furthermore, AFRICANPHOS 1950 Charterparty Form Clause 8 stipulates a conventional Turn Time (TT) applicable at the loading port. Sometimes Turn Time (TT) applies also at the discharging port, AFRICANPHOS 1950 Charterparty Form Clause 18.

Other Cargoes’ Charterparty Forms: Other cargoes have specialized clauses in their Charterparty Forms:

Voyage Charterparty Codename – Trade

AFRICANPHOS – Phosphates (Charterers’ Form).
AMWELSH – Coal (Americanized Welsh Coal Charterparty)
AUSTWHEAT – Australian Wheat – (Australian Wheat Board Form)
C ORE 7 – Iron Ore (Mediterranean Iron Ore Charterparty)
FERTIVOY – Fertilizers 
GENCON – General Purpose – (BIMCO Form 1922, 1976, 1994)
GRAINVOY – Grain – (BIMCO Form)
NORGRAIN – Grain – (American Form)
NUBALTWOOD – Timber (Baltic Trade)
OREVOY – Iron Ore – (BIMCO Form)
PANSTONE – Stone – (BIMCO Form)

 

Time Charterparty

Ship Time Chartering can be sub-divided into:
1- Period Time Charter: involves months or several years 
2- Time Charter Trip (TCT): involves one or several trips

There is no Charterparty Form drafted immaculately for Time Charters Trip (TCT). Time Charter Trip (TCT) is a ship employment method that has become extremely popular in recent years. Time Charter Trips (TCT) are being negotiated on traditional Time Charter Forms and adapted slightly where appropriate.

The most considerable number of dry-cargo trips and periods are fixed based on the New York Produce Exchange (NYPE) Charterparty. New York Produce Exchange (NYPE) Charterparty was first drafted in 1913. Later on, New York Produce Exchange (NYPE) Charterparty was updated in 1921, 1931, 1946, 1981, 1993, and 2015. 

In 1981, New York Produce Exchange (NYPE) Charterparty was renamed ASBATIME Charterparty. However, by that time the New York Produce Exchange (NYPE) Charterparty 1946 version had become widely used and, to the primary printed text, many Charterers had added over the years numerous Rider Clauses (Side Clauses). 

Few charterers were scheduled to abandon New York Produce Exchange (NYPE) Charterparty 1946 version and Rider Clauses (Side Clauses), despite the availability in the ASBATIME Charterparty of a more uncluttered, more up to date Charterparty comprising many of the previous New York Produce Exchange (NYPE) Charterparty Clauses, and standard Rider Clauses (Side Clauses). 

Shipping market players remain wedded to the New York Produce Exchange (NYPE) Charterparty 1946. New York Produce Exchange (NYPE) Charterparty was revised in 1993 and renamed New York Produce Exchange Time Charter 1993 incorporating many of the Rider Clauses (Side Clauses) generally used in conjunction with the 1946 version.

General Time Charterparty Clauses

1- Preamble
2- Ship Description
3- Duration of Period – Description of Trips
4- Trading Intention – Trading Limits
5- Cargo Intention – Cargo Exclusions
6- Ship Condition
7- Shipowners’ Responsibilities
8- Charterers’ Responsibilities
9- Ship Delivery and Ship Redelivery
10- Bunkers
11- Hire
12- Off-hire
13- Ship Performance
14- Ship Maintenance      
15- Cargo Claims
16- Ship Master – Ship Officers
17- Ship’s Logbooks
18- Supercargo
19- Pollution
20- Ship Salvage
21- Ship Lay-up
22- Arbitration 
23- Cargo Lien
24- Assignment (Ship Sub-let)
25- Exceptions
26- Requisition
27- Bill of Lading (B/L)
28- Stevedoring Damage
29- Commissions
30- Protective Clauses
31- Signature

1- Preamble: Contrary to the Voyage Charterparty Form, the preamble of the Time Charterparty Form is lengthy. The preamble is taking up most of the first page of the Time Charterparty Form. The preamble covers a wide scope of topics within its text, not least the place where the contract is made, the date of the charterparty, and the names and domiciles of the contracting parties. 

2- Ship Description: Depending upon the complicatedness of the planned employment, the description of the ship may be more or less as for voyage charterparties, with the crucial addition of speed and bunker consumption. In Time Charterparty Forms, it is also important to incorporate clarification of the term good weather conditions concerning Beaufort Wind Scale and, Douglas Sea State. Furthermore, in Time Charterparty Forms, it is critical to incorporate the ship’s position and readiness.

3- Duration of Period – Description of Trips: In Time Charterparty Forms, the duration of a period Time Charter should be entered, concurrently with a margin, for example, “10 days more or less, in charterers’ option”. Shipowners (Disponent Owners) and Charterers can agree on a precise Redelivery Date, but in practice, this is challenging to comply with and, in the event of legal conflicts, most courts would imply a Reasonable Margin. In Time Charter Trips (TCT), an approximation of the voyage duration is stipulated such as 60 days. Approximate voyage duration is usually modified by the addition of the words All Going Well (AGW) or About (A) or Without Guarantee (WOG). Legally, About (A) is given a reasonable implication. For instance, the Actual Duration of 65 days, could be interpreted as About 60 Days. Nevertheless, Without Guarantee (WOG) means precisely that. In this case, redelivery after just 15 days is legally acceptable.

4- Trading Intentions – Trading Limits: In Time Charterparty Forms, the regions in which the ship is to be employed should be entered. For example, “trading worldwide (WW), but always within International Navigating Limits (INL)“. In 2000, the Institute of Chartered Underwriters, London revised the Institute Warranty Limits (IWL) and with effect from 1 November 2003, the limits are referred to as International Navigating Limits (INL). Furthermore, Time Charterparty Forms may stipulate a listing of nations and parts of the world particularly excluded from the permissible trading area. If there is insufficient space to type in Time Charterparty Form, it may be necessary to include the same in the Additional Clause (Rider Clause or Side Clause), using blank lines in this part of the Time Charterparty Form to refer the Shipbroker to the applicable Additional Clause (Rider Clause or Side Clause). Some Time Charterparty Forms include limitations to the effect that a ship must operate always between Safe Berths and Ports, generally Always Afloat.

5- Cargo Intention – Cargo Exclusions: Time Charterparty Forms may stipulate the details of cargoes that can and cannot be carried. Usually, Time Charter Trips (TCT) Form stipulate the actual cargo to be carried although, if Time Charter Trip (TCT) Form stipulates only Cargo Intention, Cargo Exclusions Clause must still be incorporated.

6- Ship Condition: In Time Charterparty Forms, just as for Voyage Charterparty Forms, an undertaking by the Shipowners that the ship is in good condition.

7- Shipwners’ Responsibilities: In Time Charterparty Forms, this clause lists what Shipowners have to provide.

8- Charterers’ Responsibilities: In Time Charterparty Forms, this clause lists what Charterers have to provide.

9- Ship Delivery and Ship Redelivery:  In Time Charterparty Forms, places of Ship Delivery and Ship Redelivery, Laydays/Canceling Day (LAYCAN), notices to be given by Shipowners before Ship Delivery a and by Charterer before Ship Redelivery are incorporated.

10- Bunkers: In Time Charterparty Forms, it is standard procedure for Time Charterers to take over and remunerate the Shipowners for Bunkers Remaining On Board (ROB) a ship upon Delivery on to time charter, and for Shipowners to perform likewise upon Redelivery. Bunker Quantities and Prices are being negotiated when fixing. On the other hand, on some Time Charter Trips (TCT) of short duration, this system of taking over and remunerating for Bunkers Remaining On Board (ROB) may prove unnecessarily cumbersome, and it may be agreed that Charterers provide adequate bunkers for the trip at their own expense, or that Charterers may remunerate Shipowners for solely the Estimated Quantity of bunkers required for the trip out of the Total Bunkers Remaining On Board (ROB). Balances are settled upon completion of the Time Charter Trip (TCT). Bunker Quality and Grade that must be supplied to a time chartered ship is incorporated into Time Charterparty Forms. 

11- Hire: Time Charter Hire amount, when, where, and to whom hire is payable, and arrangements for additional payments, less deductions for items such as port expenses and Cash To Master (CTM) are stipulated in this clause of Time Charterparty Forms. Furthermore, agreement for the procedure in case of late payment of hire is stipulated in this clause of Time Charterparty Forms.

12- Off-Hire: Provisions directing to off-hire situations such as Ship Poor Performance, Crew Strikes, Drydocks, Deductions from hire payments are stipulated in this clause of Time Charterparty Forms. 

13- Ship Performance: In some Time Charterparty Forms, there is no particular stipulation about ship performance. In the ASBATIME Time Charterparty, Charterers penalize the Shipowners via its Off-Hire provisions for Ship Poor Performance. However, in contrast to Tanker Time Charterparties, does not reward Charterers if the Ship Performance surpasses the contractual speed or burns less bunkers than specified. Ideally, Ship Master should be given clear instructions at the commencement of each trip as to a charterer’s Ship Performance requirements.

14- Ship Maintenance:  ASBATIME Time Charterparty limits its comments to drydocking and ship gear. In other Time Charterparty Forms, Additional Clause (Rider Clause or Side Clause) is incorporated for Ship Maintenance depending on the sophistication of the ship type and/or business concerned. For Time Charter Trips (TCT), it is customary to delete the Drydocking Clause (Ship Maintenance) and replace Drydocking Clause (Ship Maintenance) with a straightforward provision such as “no drydocking during this time charter, except in cases of emergency”.

15- Cargo Claims: In Time Charterparty Forms, Time Charterers (Disponent Owners) and Shipowners must reach an agreement on how Cargo Claims, if any, will be handled, which of the two is to handle Cargo Claims, and under which authority. ASBATIME Time Charterparty Clause 30 stipulates a brief Division of Responsibility. However, many Time Charterparty Forms incorporate Additional Clause (Rider Clause or Side Clause) of the detailed New York Produce Exchange Inter-Club Agreement. New York Produce Exchange Inter-Club Agreement sets out Time Charterers (Disponent Owners) and Shipowners. 

16- Ship Master – Ship Officers: In Time Charterparty Forms, the responsibilities of the Ship Master are specified and stipulated. Even though the Ship Master is the Shipowner’s legal servant, the Ship Master must act under the orders of the Charterers as far as the ship’s employment is concerned. Oftentimes, an Additional Clause (Rider Clause or Side Clause) lists the duties expected of a time chartered Ship’s Officers and Crew Members. Furthermore, Time Charterparty Forms stipulates the rights of Charterers when the Ship Master or Ship Officers are not carrying out the duties in a reasonable manner.

17- Ship’s Logbooks: In Time Charter, Charterers have the right to check a Ship’s Performance by reference to a specialized Weather-Routing Company such as Fleet Weather, Oceanroute, etc. If the Ship’s Logbooks and the independent Weather-Routing Company’s reports contradict, the independent Weather-Routing Company’s reports take precedence over the Ship’s Logbooks. This is crucial in respect of Off-Hire claims and the Ship’s Performance.

18- Supercargo: Time Charterparty Forms incorporate the Charterer’s right to appoint a Supercargo and the expenses of exercising this right about meals and accommodation. Supercargo Clause stipulates the meals which are to be provided by the Shipowners and the Victualling Costs. Victualling is the term given to Meal Planning and shopping for a passage on board a vessel.

19- Pollution: Many maritime nations are becoming quite aware of the pollution of the waterways and coastlines. Shipowners must ensure that their ships comply with international and national legislation on pollution cases. The fines levied and cleaning up costs following pollution can be substantial. Therefore, Time Charterparty Form should stipulate the rights and responsibilities of the Shipowners and Charterers, as well as list the certificates that the chartered ship is anticipated to carry. Usually, P&I Clubs (Protection and Indemnity Clubs) provide Insurance Cover for entered ships against oil spillages and resulting penalties and clean-up costs. However, some maritime nations may insist that Shipowners of all ships calling at their ports deliver proof of Financial Responsibility for Pollution Liability in case of oil spillage. Generally, such evidence is in the form of a Certificate of Financial Responsibility. As a consequence, P&I Clubs (Protection and Indemnity Clubs) do not encourage maritime nations to insist on individual security demands. Instead, P&I Clubs (Protection and Indemnity Clubs) encourage dry-cargo Shipowners to get only the United States Federal Water Pollution Control Act Certificate. Additional P&I Clubs (Protection and Indemnity Clubs) assistance with certification to comply with any prerequisites of maritime nations is not feasible. Therefore, Shipowners should not agree to Time Charterparty Form Clauses that request the individual certification.

20- Ship Salvage: Time Charterparty Forms stipulate that the costs and rewards in cases of salvage should be shared.

21- Ship Lay-up: Infrequently, dry-cargo Shipowners and Time Charterers assess the risks of a ship laying up through scarcity of cargoes. For Time Charter Trips (TCT), Ship Lay-up Clause is not necessary. However, for long-term Time Charter (TC) deals, Ship Lay-up Clause should be carefully reviewed. Furthermore, most Time Charterparty Forms stipulate what happens if a ship is detained in port for periods over 30 days.

22- Arbitration: Arbitration Clause is an important part of any Charterparty. ASBATIME Charterparty Form stipulates New York as an Arbitration Jurisdiction. Oftentimes, this Arbitration Clause is either deleted or substituted by a Rider Arbitration Clause stipulating another Arbitration Center. 

23- Cargo Lien: Time Charterparty Forms stipulate that each party’s right of Cargo Lien.

24- Assignment (Ship Sub-let): Time Charterparty Forms stipulate Charterer’s right to sub-let the ship to another charterer.

25-Exceptions: The rights of Shipowners and Time Charterers to cancel the Time Charterparty (TC) in case of events making its performance practically impossible such as Acts of God or Force Majeure.

26- Requisition: Time Charterparty Forms incorporate the arrangements in the event a ship is requisitioned by the Government of the Flag State.

27- Bill of Lading (B/L): Time Charterparty Forms stipulates how Bill of Lading (B/L) are to be drawn up and signed. Furthermore, the protection for Shipowner in case of document inconsistencies.

28- Stevedore Damage: Time Charterparty Forms stipulate provision for notification of stevedore damages and repairs.

29- Commissions: Time Charterparty Forms stipulate the amount and to whom Commissions (Brokerages) are remunerated.

30- Protective Clauses: Time Charterparty Forms stipulate Protective Clauses such as Clauses Paramount, New Both to Blame Collision, and the New Jason Clause. Furthermore, there is protection for Shipowner for the ship to have miscellaneous liberties. Time Charterparty Ice Clause should prevent Ship Master from being left with no option but to steam to a contractual destination irrespective of ice conditions. 

31- Signature: Time Charterparty Form must be signed by the Shipowners and Time Charterers.

 

Time Charterparty Codename – Trade

ASBATIME – Dry Cargo (ASBA)
BALTIME – Dry Cargo (BIMCO)
GENTIME – Dry Cargo (BIMCO)
LINERTIME – Dry Cargo and Liner (BIMCO)
NEW YORK PRODUCE EXCHANGE (NYPE) – Dry Cargo (ASBA)

 

Bareboat Charterparty

Bareboat Chartering is the chartering of the ship to another party who, in turn, bears more of the functions of Shipowner than Charterer. The ship comes under the full command of the Bareboat Charterer.

Bareboat Chartering vs Demise Chartering

What is the difference between Bareboat Charter and Demise Charter?

If Shipowners lease the ship with Shipowner’s crew members it is called Demise Charter. If Shipowners lease the ship without crew members it is called Bareboat Charter.

True Shipowner transfers to the Bareboat Charterer all responsibility for operating the ship, commercial management, and in return for periodic payment of hire. Naturally, Bareboat Charter is planned for years rather than for months. Bareboat Charter is for companies that are not experienced in shipping. Some investors such as Finance Companies want to invest in a ship without the burden of organizing the ship’s day-to-day operations. Bareboat Charterer accepts the role of a Shipowner without the need of raising finance to acquire a ship.

Undoubtedly, Bareboat Chartering is a method of Ship Financing. Bareboat Charterer can register the ship under any Flag Country he chooses. To the outside world, the Bareboat Charterer of a ship is seen as the Shipowner.

BIMCO (Baltic International Maritime Council) developed two Bareboat Charterparty Forms for existing ships, with or without mortgages, BARECON A and BARECON B. BIMCO (Baltic International Maritime Council) Documentary sub-committee developed a New Bareboat Charterparty Form, incorporating the updated BARECON A and BARECON B provisions into one document the BARECON 89. BARECON 89 Bareboat Charterparty Form has self-explanatory clauses.