The payment that is due to the shipowner by the charterer in a voyage charter is called Freight payment and is expressed in dollars per ton of cargo shipped.
In the case of a time charter, the payment is called hire payment and is expressed in dollars per day.
In a voyage charter party, the owner places the ship at the disposal of the charterer to carry a fixed amount of cargo on a particular predetermined voyage and is entitled to a freight payment.
In a time charter, the owner hires the ship and its crew for a predetermined period of time for the use of the charterer and is entitled to a hire payment.
What is Freight?
The freight charged will be such that it covers the shipowner’s operating expenses, bunkers, and other costs that will be incurred on the particular voyage while allowing for a profit margin for the shipowner.
The right to receive freight is conditional upon the provision of the transportation service. Thus no freight is payable if the voyage has never begun or if the owner has not delivered goods to the destination.
Delivery of the cargo to the destination is a key characteristic of performance of the contract and has to satisfy the test laid down in Dakin Oxley (1864) by Willes CJ: “True test of the right to freight is the question whether the service in respect of which the freight was contracted to be paid has been substantially performed; and, according to the law of England, as a rule, freight is earned by the carriage and arrival of the goods ready to be delivered to the merchant, though they be in a damaged state when they arrive. If the ship-owner fails to carry the goods for the merchant to the destined port, the freight is not earned. If he carries part, but not the whole, no freight is payable in respect of the part not carried, and freight is payable in respect of the part carried unless the charter party makes the carriage of the whole a condition precedent to the earning of any freight-a case which has not within our experience arisen in practice.
When only part of goods is delivered or is delivered damaged then the question whether the contract has or has not been substantially performed is always a question of facts and the true construction of the charter party.”