Period of Grace

Where Hire is payable: Just as for voyage chartering and the payment of freight, time charter hire has to be transferred in good time from the bankers of a charterer to the bank account of a shipowner. If this hire does not arrive in time, then technically the charterer is in breach of the contract and the shipowner has a case for withdrawing his vessel from the charterer’s employ. In fact, it is not as simple as that because, in a legal sense, the shipowner has to show that the charterer consistently paid late and had been consistently warned that the owner was contemplating withdrawal. One has to realise that for every defaulting charterer who misbehaves because of stringent financial problems, there may, at certain stages of the freight market, be a shipowner who is anxious to find any excuse to withdraw his ship from a timecharter commitment at a low rate of hire to take advantage if possible of higher freight and hire levels elsewhere. The object of a well-drafted time charterparty should be to as far as possible remove any temptation for potential miscreants to misbehave. Whilst hire is to be paid and received by the shipowner’s bank in advance at agreed intervals, and the time charterparty should clearly state this, so it has to be realised that inevitably banks will occasionally accidentally delay transfers of moneys or misroute same. Thus it is typical to insert a side clause requiring owners to give some notice of any intention to withdraw their vessel, thereby providing an opportunity for time charterers to make amends or to remedy any banking error – e.g. a ‘period of grace’. In fact the ASBATIME includes a suitable optioned clause in clause 29 of that charterparty.