Computation of Time Under a Time Charterparty

Computation of Time Under a Time Charterparty

The computation of time under a time charterparty is a practical but commercially important issue. Hire is earned because the time charterers have the use of the ship for a period of time, and that period begins on delivery and ends on redelivery. The difficulty appears when delivery and redelivery take place in different time zones. In that situation, the parties may disagree whether hire should be calculated by the real elapsed period during which the ship has been on charter, or by comparing the local clock time at the delivery place with the local clock time at the redelivery place.

The issue is not merely arithmetical. A difference of several hours can produce a material hire adjustment, especially where the daily hire rate is high. The point may also affect off-hire calculations, final hire statements, bunker reconciliation, and the financial closing of the charter. For that reason, careful drafting is valuable. A charterparty that states clearly whether the parties intend to use local time, Greenwich Mean Time, UTC, or another agreed standard will avoid uncertainty at the end of the charter.

Hire Runs From Delivery Until Redelivery under Time Charterparty

Under the traditional New York Produce Exchange (NYPE) wording, hire commences from the day of delivery and continues until the hour of the day of redelivery. The commercial idea is straightforward: the time charterers pay for the period during which the ship is made available for their employment. The phraseology may refer to a calendar month, a part of a month, a day, or a part of a day, depending on the form and the amendments made by the parties.

Where delivery and redelivery occur in the same time zone, the calculation is normally simple. The dispute arises when the ship is delivered in one place and redelivered in another, so that the local time at redelivery is ahead of or behind the local time at delivery. If local time is used at both ends without adjustment, the final calculation may add or subtract hours that did not represent real service under the charter.

Elapsed Time and Local Time in Time Charterparty

Elapsed time means the actual passage of time between delivery and redelivery. It asks how long the ship was truly on hire, measured by a single time standard. Local time compares the clock time recorded at the delivery port with the clock time recorded at the redelivery port. The two methods may produce the same result if both ports are in the same time zone, but they may produce different results where the charter spans long-distance trading.

The commercial attraction of elapsed time is that it reflects the real period during which the time charterers had the benefit of the ship. The owner receives hire for the time actually supplied, and the time charterers pay for the time actually used. This approach avoids a windfall to either side merely because the ship moves eastward or westward before redelivery.

The local-time approach has a different logic. It treats the charter documents and the ship’s operations as tied to the local times recorded at the places where delivery and redelivery occur. That method may be easier to apply if the charter uses local notices and local port records, but it can distort the economic result when the time-zone difference is large.

The English Law Approach: The Arctic Skou

The leading English authority is The Arctic Skou. The charter was on a New York Produce Exchange form, but the printed references to hire payable per calendar month and part of a month had been replaced by references to hire payable per day and part of a day. The court held that hire should be calculated by elapsed time rather than by local time.

The reasoning was strongly commercial. In a time charter, the central question is how long the ship has been on hire. The court considered that a time charterer would ordinarily expect to pay for the period during which the ship was actually at its disposal, while an owner would expect remuneration for that same real period. Clear language would be required before the parties could be taken to have intended a calculation based on unadjusted local times at different places.

The court also considered the wording that hire should continue until the hour of the day of redelivery. That language was not treated as a direction to use the clock time at the redelivery port in isolation. It was read as identifying the actual time when redelivery occurred. The amended wording of the charter, particularly the use of daily rather than calendar-month hire, supported an elapsed-time calculation.

Unamended NYPE (New York Produce Exchange) Charterparty Wording

The Arctic Skou involved an amended form, and that leaves a possible argument where the printed New York Produce Exchange wording remains unamended. The traditional reference to hire payable per calendar month may be said to point less directly toward precise elapsed hours, because a calendar month is not a fixed number of days in the same way as a 30-day period.

Even so, the stronger modern view is that an English court is likely to begin from the commercial premise that hire under a time charter is payment for actual time on hire. Unless the charter contains clear words requiring local-time calculation, elapsed time is likely to be preferred. That approach gives effect to the ordinary commercial purpose of a time charter and avoids artificial gains or losses caused only by movement between time zones.

NYPE 93 and GMT Adjustment

The 1993 revision of the New York Produce Exchange form removes much of the uncertainty. It provides that, for hire calculations, times are to be adjusted to GMT. This wording gives the parties a single reference point and prevents the local-time problem from arising. By reducing delivery and redelivery times to one time standard, the parties can calculate the exact period on hire without adding or subtracting hours simply because of geographical position.

Although modern practice may now use UTC terminology in some contracts and operational systems, the commercial function is the same. The parties choose one neutral time standard and apply it consistently. Where the contract contains such a provision, the accounting should follow it strictly.

U.S. Law: Computation of Time Under a Time Charterparty and Different Line of Authority

U.S. law has not always followed the same path. A number of U.S. decisions and New York arbitration awards have treated local dates and local times at the delivery and redelivery places as the ordinary basis for calculating the duration of a charter. Under that approach, if the parties intended GMT or another universal time standard to apply, they should have said so expressly in the charterparty.

This local-time view appears in decisions such as The Fernglen and The Bordatxoa, where the reasoning emphasized the local clock at each end of the charter unless the contract provided otherwise. Some awards also treated the striking out of GMT wording as a strong indication that the parties did not intend a universal time adjustment.

However, U.S. authority is not uniform. Other arbitration decisions rejected the local-time approach and preferred elapsed time because it better reflects the period during which the ship was actually in the time charterers’ service. Awards such as The Pacglory, The Packing, The Constellation, and The North Hills illustrate the contrary reasoning. The practical objection to unadjusted local time is that two ships delivered at the same place and used for the same real period could produce different hire results merely because one was redelivered across the Pacific in a different time zone.

Fractional Periods and Off-Hire Calculations in Time Charterparty

The same problem may arise when calculating fractional parts of a hire period or when measuring off-hire. The underlying question remains the same: how long was the ship actually earning hire, and how long was she not available for the chartered service? A clause that converts days into fractions of a 30-day month, or otherwise prescribes a calculation method, should be applied according to its wording.

Where the charter supplies a clear method for fractional periods, that method should govern both final hire accounting and interruptions in service, unless another clause changes the result. If the clause is ambiguous, the tribunal must decide whether the commercial scheme points toward elapsed time, local time, or a fixed contractual method.

Practical Drafting Lessons

The safest approach is to draft the time-calculation clause expressly. The parties should state whether delivery, redelivery, off-hire, hire payments, and final hire adjustments are to be calculated by UTC, GMT, local time, ship’s time, or another nominated standard. They should also ensure that the clause is consistent with any payment schedule, off-hire clause, final bunker statement, and redelivery notice provision.

Ambiguity is particularly risky in long-haul trades, Pacific crossings, and charters where delivery and redelivery are likely to take place in widely separated regions. A few hours may not matter in a low-value charter, but in a high-rate market the same difference can produce a substantial dispute. The problem is easily avoided by precise wording.

Conclusion

Computation of time under a time charterparty is ultimately an allocation of hire for the real period of service. English law leans toward elapsed time unless the charter clearly indicates otherwise, while U.S. decisions show a divided approach, with many authorities applying local time in the absence of express wording. Modern drafting, especially under NYPE 93, solves the issue by requiring a common time standard. Clear language remains the best protection against final hire disputes.