NYPE Specific Clauses
Where the charter is for a stated flat period of time, such as six months or two years without qualification, the courts generally take the view that time is not of the essence of the contract and are prepared to imply a reasonable and commercially acceptable margin of error, usually in the region of 4 to 5 per cent, which amounts to two weeks on a 12-month charter.
An alternative approach is preferred by US arbitrators who apply the so-called overlap/underlap rule in deciding whether the charterer is entitled to send the ship on a final voyage under the charter. Under this rule the charterer may, in a choice between underlap and overlap, select whichever of the two alternatives brings the time of redelivery nearer to the end of the charter period.
“About” in Charterparty
The insertion of the word “about” before the charter period, as in the New York Produce Exchange (NYPE) form, is taken as an express incorporation of the otherwise implied reasonable allowance. In many cases, however, express provision is made for a specified leeway in the charter clause itself. Clauses of this type take a variety of forms such as “a period of 6 months, 20 days more or less in charterer’s option” or “minimum 11/maximum 13 months”. Such clauses are regarded as fixing the maximum permissible tolerance, and the charterer who redelivers the ship outside these limits will be regarded as in breach of contract.
Alternatively, further leeway may be afforded by an estimate drafted in the form, ‘duration about 11/12 months without guarantee’. Liability for any overrun beyond the 12 months will depend on whether or not the original estimate was made in good faith and on reasonable grounds. In contrast it is open to the parties, by express words or by implication, to make time of the essence of the contract. Thus in Watson v Merryweather, where the charter provided for “redelivery to owners between 15 and 31 October”, it was held that this clause made time of the essence with the result that failure to redeliver the ship on 31 October amounted to a breach of contract. It is believed that the deliberate deletion of the word ‘about’ before the stated charter period in the NYPE form will, by implication, have a similar effect. Where the ship is returned to the owner before the expiry of the stated minimum period of hire, it would appear that the charterer is not entitled to a refund but must pay the full hire for the agreed period. If such early redelivery be regarded as a breach of contract, then it is arguable that the owner is under a duty to mitigate his loss by rehiring the ship should this be commercially possible within the balance of the charter period.
There are, however, dangers in adopting such a course of action as is exemplified in The Zenovia. The last permissible redelivery date for the ship was 22 November but, towards the conclusion of the charter, the owners were given a 30-day approximate notice of redelivery on 6 November. As the result of the speedy completion of the last voyage it was found possible, on a rising market, to fit in an extra voyage before the contractual redelivery date, whereupon the charterers gave the owners a revised redelivery date of ‘about 20 November.’ The owners argued that, on the basis of the earlier redelivery date, they had concluded a new fixture and that the charterers were not entitled to change the redelivery date. They accordingly withdrew the ship from the charter on 2 November. The trial judge, Tomlinson J, held that the owners were liable in damages for wrongful repudiation of the contract. On the facts, he was not prepared to imply a term that the charterers would do nothing to prevent the earlier redelivery date being met, nor did he consider that there was a clear and unequivocal promise sufficient to raise an estoppel.
The insertion of the word “about” in a Charterparty
The insertion of the word “about” in a charterparty is used to provide a certain degree of flexibility and to account for potential uncertainties that may arise during the performance of the charterparty. The word “about” can be used in various contexts within the charterparty, including the following:
- Ship Delivery Date: When “about” is used in reference to the delivery date, it allows for a degree of flexibility in the actual delivery of the ship. This can accommodate potential delays due to unforeseen circumstances, such as weather conditions or port congestion. Example: “The ship shall be delivered to the Charterers on or about the 30th of June.”
- Cargo Quantity: The use of “about” in reference to the quantity of cargo can provide flexibility for slight variations in the actual amount of cargo loaded or discharged. Example: “The Charterers agree to load a cargo of about 100,000 metric tons of grain.”
- Ship Speed and Consumption: When “about” is used in relation to the ship’s speed and consumption, it accounts for potential variations in performance due to factors such as weather, sea conditions, and the ship’s condition. Example: “The ship shall maintain a speed of about 13 knots and consume about 25 tons of fuel per day.”
The inclusion of the word “about” in a charterparty serves to provide a degree of flexibility for both parties involved, allowing for some tolerance in the face of uncertainties or discrepancies that may arise during the course of the charter. However, it is important to note that this flexibility is typically limited to reasonable and customary variations, and any significant deviation from the agreed terms may still be subject to dispute or legal action.
NYPE Specific Clauses
The New York Produce Exchange (NYPE) Time Charter is a widely used standard form for time charter agreements in the shipping industry. The New York Produce Exchange (NYPE) Time Charter contains specific clauses that address the rights, responsibilities, and obligations of both the charterer and the shipowner. Some of the key New York Produce Exchange (NYPE) Time Charter specific clauses include:
- Ship Hire and Payment Clause: This clause establishes the daily hire rate, the currency in which the payment will be made, and the payment terms. It may also specify consequences for late payment or non-payment and the shipowner’s right to withdraw the ship in case of non-payment.
- Ship Delivery and Redelivery Clause: This clause outlines the location, time, and procedures for the delivery and redelivery of the ship, including the required notices, inspections, and potential penalties for late redelivery.
- Ship Trading Limits and Safe Port Warranties: The New York Produce Exchange (NYPE) Time Charter specifies the geographic limits within which the ship may trade during the charter period, as well as the charterer’s responsibility to nominate safe ports for the ship to call at.
- Ship Off-hire Clause: This clause details the circumstances under which the ship is considered off-hire, such as breakdowns, dry-docking, or inspections, and the consequences for the payment of hire during off-hire periods.
- Bunker (Fuel) Clause: The New York Produce Exchange (NYPE) Time Charter includes provisions for the supply, payment, and consumption of bunker fuel during the charter period. It may also outline the procedures for taking bunkers on board and measuring their quantity.
- Shipowners’ Lien on Cargo: This clause provides the shipowner with a lien on the cargo for any unpaid hire, freight, or other amounts due under the charterparty.
- Indemnity Clause: The New York Produce Exchange (NYPE) Time Charter contains an indemnity clause that addresses the charterer’s and shipowner’s respective responsibilities for losses, damages, or liabilities arising from their respective breaches of the charterparty.
- War Risks and Piracy: The New York Produce Exchange (NYPE) Time Charter includes provisions addressing the ship’s operations in areas exposed to war risks or piracy and the responsibilities of the parties in such situations.
- Ship Speed and Performance Warranties: The New York Produce Exchange (NYPE) Time Charter typically contains warranties regarding the ship’s speed and consumption, allowing for some tolerance for factors such as weather, sea conditions, and the ship’s condition.
- Arbitration and Dispute Resolution: The New York Produce Exchange (NYPE) Time Charter provides for arbitration as the preferred method of dispute resolution, specifying the arbitration venue and the applicable rules governing the arbitration process.
These specific clauses in the New York Produce Exchange (NYPE) Time Charter Form serve to define the rights, responsibilities, and obligations of both the charterer and the shipowner during the charter period, ensuring a comprehensive and balanced framework for the time charter agreement. To download a copy of New York Produce Exchange (NYPE) Time Charter Form, please check www.bimco.org