Remuneration payable to the shipowner by the charterer in time charter is called hire. In time charter, the ship is hired for a particular trip or for a period of time. The word hire itself is more conductive to rental rather than freight in voyage charter.
Ship hire payment is paid to shipowner either on a semi-monthly or monthly basis in advance.
Under time charter-party, if the ship suffers any loss of time through:
- deficiency of crew
- breakdown of engine or machinery
- other damage preventing the normal working of the ship
then the hire payments shall cease until the ship is again in an efficient state to resume the voyage. Under these circumstances, any hire prepaid would be returnable by the shipowner as it had not been effectively earned.
Usually, time charter-party state the amount of hire which must be paid. If 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 ship.
If hire is payable in advance at so much per ton on the deadweight capacity of the ship, 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 ship, the charterer can deduct a sum equivalent to the hire for the time so lost. This deduction right does not extend to other breaches or defaults of the shipowner, nor does it extend to where the captain (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 ship.
One of the crucial issues in relation to the payment of hire is the question of whether the shipowner may withdraw the ship in default of payment by the charterers. Most time charter parties contain an anti-technicality clause which provides that shipowners 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 ship. 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.