Hire

In the case of time charter parties, the remuneration payable to the shipowner by the charterer is called hire by which means the vessel is hired for a particular trip or for a period of time. The word hire itself is more conductive to rental rather than freight; but it is normal that this mode of payment will be paid either on a half monthly or monthly basis in advance. The charter party on a time basis will stipulate that should the vessel suffer any loss of time through deficiency of crew, breakdown or machinery or other damage preventing the normal working of the vessel, then the hire payments shall cease until the vessel is again in an efficient state to resume the voyage. Under those circumstances, any hire prepaid would be returnable by the shipowner as it had not been effectively earned. The charter party will usually state the amount of hire which must be paid. Where there is a difference between local time at the port of delivery and that at the port of redelivery, the shipowners are entitled to claim hire only in respect of the actual period which has elapsed from the moment of delivery of the vessel. Where hire is payable in advance at so much per ton on the deadweight capacity of the vessel, there is an implied obligation on the shipowner to inform the charterer correctly as to the deadweight capacity. If the shipowner wrongly and in breach of the charter party deprives the charterer for a time of use of the vessel, the charterer can deduct a sum equivalent to the hire for the time so lost. It should be noted that this right does not extend to other breaches or defaults of the shipowner, nor does it extend to where the Master has failed to keep accurate logs and to disclose them to the charterer, nor where there has been a breach of the shipowner’s duty as a bailee of the bunkers to use them in accordance with the charterer’s orders. The reasoning for this is that none of these breaches actually affect the use of the vessel. One of the most important issues in relation to the payment of hire is the question of whether the shipowner may withdraw the vessel in default of payment by the charterers. Most time charter parties will contain an ‘anti-technicality’ clause which provides that the owners should give the charterers a certain period of notice in order to rectify the cause for delay of payment before exercising the right of withdrawal of the vessel. This subject has been discussed in the previous lesson. Anti-technicality clauses were introduced because of the number of cases where shipowners, in times of market booming, took advantage of a few hours delay in hire payment to withdraw in order to take advantage of the higher market.