Demurrage and Dispatch

Demurrage

If charterers fail to complete the loading or discharging cargo operations within the agreed period of laytime, charterers are in breach of the Charterparty and charterers will be required to pay Liquidated Damages to the shipowner in respect of the breach.

Liquidated Damages are calculated on the basis of the time spent in excess of the agreed lay time and are called Demurrage. Demurrage is intended to reflect the daily running cost of a ship, including port bunker consumption and reasonable profit.

In demurrage, general rule is once on demurrage, always on demurrage which means if a ship is on demurrage, no laytime exceptions such Sundays and holidays can be deducted from the computation of demurrage. Once lay time has been fully used, demurrage should run continuously, day and night, weekend and working period, with no interruptions until cargo work is completed.

However, the Charterparty may expressly provide that certain periods of time lost, such as by breakdown or inefficiency of the ship, shall not count for demurrage.

Usually, address commission (ADDCOM) and brokerage commission are deductible from Demurrage Payment.

Dispatch

Shipowner may include an incentive clause in the charter party whereby if the charterer completes the loading and discharge in a shorter period than is agreed, then charterer may be entitled to receive Dispatch Money.

Usually, rate at which dispatch is paid is usually Half the Demurrage Rate. No Address Commissions (ADDCOM) or brokerages are payable on Dispatch Money.