Port Charterparty

Port Charterparty: Port Charterparties are the most commonly used form of charterparty and virtually all charterparties in the tanker market are port charters. Although we are dealing here with a port charter, where the berth is free and the ship berths on arrival, the arrival voyage does not end until the ship has berthed. It is at this point the ship is an ‘arrived ship’. Where the ship does not berth on arrival, for example, because of congestion on the berths, bad weather, tides, unavailability of tugs etc., under a port charterparty the agreed destination and the place that the NOR can be tendered is when the ship has arrived at the ‘appropriate place’ within the port.

Many disputes have arisen over where the appropriate place is for a port when the ship has to wait for a berth. An important case on this subject is the Johanna Oldendorff (1973) 2 LLR 285 where it was decided that, if a ship is not able to proceed directly to the berth, she will still have arrived at her agreed destination under a port charterparty if: a. she has reached the usual waiting area for ships within the port, and b. she is at the immediate and effective disposal of the charterers.

If a ship is within the port, but not at the usual waiting place, she may still be an ‘arrived ship’ if, at the place where she is, she is at the immediate and effective disposal of the charterers. If the ship is waiting at some other place in the port then it will be for the owner to prove that she is as fully at the disposal of the charterers as she would have been if in the vicinity of the berth for loading or discharge. There are still some arguments as to what ‘within the port’ means in practice, for example, the legal port limits, the customary anchorage, etc.

In some ports, the port area is not clearly defined. Where there is no legal definition of the port boundary, the applicable test will be to ask whether she is in an area within which the port exercises authority. However, if the ship has been refused permission and ordered to wait outside the port by the port authority she is not an ‘arrived ship’. In the Johanna Oldendotff case, the House of Lords thought that the area within which the port regulates movement and conduct would be a good guide. The court took trouble to suggest that the physical or pilotage limits of the port would not necessarily be the port limit. The court wanted to avoid strict legal definitions, and avoid argument by adopting the meaning of ‘port’ which the users of the port would give it. In practice, this definition led to arguments when port limits were unclear and usual anchorages were far from the berth.

In the Maratha Envoy (1977) 2 LLR 301, the House of Lords confirmed that the ship must anchor within the port. In this case, the ship anchored at the Weser Lightship waiting to discharge at Brake – it was held that the ship had not arrived at the port.

This case was further complicated by the fact that the ship twice left the anchorage and proceeded to Brake and, as anchoring at Brake was not permitted, she returned to the Weser anchorage each time – the act of moving to Brake did not make the ship an ‘arrived ship’ because to be an ‘arrived ship’ the ship must be waiting at the end of her voyage.

Therefore, at common law, if the usual anchorage is outside the port limits, then the ship will not have arrived. The owner should be aware of the ports where this will affect laytime starting, for example, Hull, where the usual anchorage is at Spurn Head, some 20 miles from the port. Without inserting an express provision in the charterparty confirming that the ship is deemed to have arrived at the port when she anchors at Spurn Head, laytime would not commence, and the owner would bear the cost of the time lost waiting at Spurn Head. This principle was upheld in the case of The Agamemnon (TA Shipping Ltd v Comet Shipping Ltd [1998]) where a NOR given at South West Pass, at the mouth of the Mississippi, was invalid for the port of Baton Rouge, some 170 miles upriver, where the ship had been fixed to load. In looking at the second part of the Johanna Oldendotfftest for arrival, that is, the ship must be at the ‘immediate and effective disposal’ of the charterers, we shall see that this can often give rise to disputes because this phrase was not clarified in detail in this case.

There is a presumption that a ship waiting at the place where waiting ships usually lie will be deemed to be at the immediate and effective disposal of charterers and it is for charterers to prove to the contrary. If the ship is waiting  for a berth somewhere other than the usual waiting place, then the owner must show that the ship is at the immediate and effective disposal of the charterers.

It should be noted that if the charterers are unable to use the ship because of external factors such as congestion in the port (with no berth being available) or fog or bad weather (preventing the ship sailing from the usual waiting area to an available berth), she will still be at the immediate and effective disposal of the charterer. Therefore, the charterers bear the risk of these external factors.

Dock Charterparty:  In a dock charterparty the agreed destination is a dock and the ship is an ‘arrived ship’ when she passes the dock gates. This type of charterparty is rare.

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Port Charterparty Vs Berth Charterparty

A charterparty is a contract between the shipowner and the charterer, which defines the terms and conditions for the use of a ship for the transport of goods. It’s important to note the differences between a port charterparty and a berth charterparty, as they represent two different types of agreements.

1. Port Charterparty:

In a port charterparty, the shipowner’s liability for delay begins when the ship arrives at the port specified in the contract, even if the ship cannot berth immediately due to unavailability. Here, the ship is considered an “arrived ship” and laytime (the period agreed upon for loading and unloading without extra charges) commences when the ship is at the port, even if it is not at the berth. However, this is subject to certain conditions such as the ship being in the correct port, ready to load or discharge, and the notice of readiness (NOR) being given.

2. Berth Charterparty:

In a berth charterparty, the ship is not considered an “arrived ship” until it has reached the specific berth designated in the contract. Hence, the shipowner’s liability for delay does not begin until the ship is at the berth and the notice of readiness (NOR) is given. This means that even if the ship is at the port but the berth is not available, laytime does not commence and the shipowner is not liable for any delay.

The major difference between the two types of charterparties, therefore, lies in the point at which the ship is considered to have “arrived” and when the laytime commences. The choice between port and berth charterparty can significantly affect the obligations and potential liabilities of the shipowner and charterer. As such, it’s essential for both parties to fully understand these terms when entering into a charterparty agreement.

Port Charterparty Vs Dock Charterparty

1. Port Charterparty:

In a port charterparty, the shipowner’s liability for delay begins when the ship arrives at the port specified in the contract, even if the ship cannot berth immediately due to unavailability. Here, the ship is considered an “arrived ship” and laytime (the period agreed upon for loading and unloading without extra charges) commences when the ship is at the port, even if it is not at the berth. However, this is subject to certain conditions such as the ship being in the correct port, ready to load or discharge, and the notice of readiness (NOR) being given.

2. Dock Charterparty:

In a dock charterparty, the ship is not considered an “arrived ship” until she passes the dock gates. Hence, the shipowner’s liability for delay does not begin until the ship passes the dock gates and the notice of readiness (NOR) is given. This type of charterparty is rare in ship chartering.

The major difference between the two types of charterparties, therefore, lies in the point at which the ship is considered to have “arrived” and when the laytime commences. The choice between port charterparty and dock charterparty can significantly affect the obligations and potential liabilities of the shipowner and charterer.

 

 

What is a Port Charterparty?

What is a Berth Charterparty?

A Berth Charterparty, also known as a Berth Charter Party, is a legal contract or agreement between the owner of a ship (the shipowner) and a party or entity that wishes to hire or charter the ship (the charterer) for the use of a specific berth or dock at a port. The Berth Charterparty outlines the terms and conditions governing the ship’s use of the designated berth.

In a Berth Charterparty, the shipowner grants the charterer the right to use the ship for loading or unloading cargo at a specified berth within a port. The charterer, in return, agrees to pay the shipowner a predetermined amount of money, usually referred to as freight, for the use of the ship at the designated berth. The specific provisions and clauses within a Berth Charterparty may vary depending on the negotiated terms and requirements of the charter.

The Berth Charterparty typically includes important details such as the names and addresses of the shipowner and charterer, a description of the ship, the specific berth or dock allocated for the charter, the duration of the charter period, the freight rate or hire payment terms, laytime provisions, responsibilities for fuel and port expenses, loading and unloading procedures, cargo handling arrangements, insurance requirements, and any additional terms and conditions deemed necessary by the parties.

The purpose of a Berth Charterparty is to establish a clear understanding of the rights, obligations, and liabilities of both the shipowner and the charterer regarding the ship’s use at the designated berth. It ensures that the ship is efficiently utilized for cargo operations, and it provides a framework for resolving disputes or unforeseen circumstances that may arise during the charter period specifically related to the use of the berth.

What is the difference between Port Charterparty and Berth Charterparty?

Charterparty is a legal term in maritime law, referring to the contract between the owner of a ship and the charterer. The contract stipulates the hiring or leasing of the ship and includes all the conditions for the transport of goods, passengers, or for other uses. Charterparties can come in various forms, including voyage, time, and demise or bareboat charters.

Two key types of charterparties are Port Charterparties and Berth Charterparties. Here’s a brief explanation of each:

1. Port Charterparty: In a port charterparty, the shipowner agrees that the ship will arrive at a specified port by a specified date to load or discharge cargo. However, the exact berth (or specific location within the port) where the ship will dock to load or discharge cargo is not specified. The ship is considered an “arrived ship” (and thus ready to load or unload cargo) when it reaches the customary anchorage area of the specified port, regardless of whether it has been assigned a berth.
2. Berth Charterparty: In a berth charterparty, the contract specifies not only the port but also a particular berth within that port where the ship will dock to load or discharge cargo. The ship is not considered an “arrived ship” until it has reached the specified berth, which means that laytime (the period during which the charterer is allowed to load or discharge cargo without paying additional charges) does not commence until the ship is in its berth and ready to load or unload.

The primary difference between the two lies in the level of specificity regarding the location for cargo operations and when the ship is considered “arrived,” which affects the calculation of laytime. In general, berth charterparties tend to be more precise and place more emphasis on the ship’s readiness to commence cargo operations.

 

Port Charterparty Vs Berth Charterparty Case

In the legal case of Novologistics Sarl v Five Ocean Corporation (referred to as “the Merida”), which was subject to an appeal from an arbitration conducted solely on the basis of documentary evidence, the English High Court imparted valuable guidance on discerning whether a voyage charterparty, incorporating both provisions for a safe berth and a safe port, can be classified as a berth or port charter.

The “Merida” was chartered for a voyage to transport a partial cargo of steel plates from Xingang to Cadiz and Bilbao. Upon the ship’s arrival at the loading port at 04:00 on March 10, 2007, a Notice of Readiness was tendered. Loading commenced on March 30 when the ship was alongside.

The charterparty contained, among other provisions, the following stipulation:

“one good and safe charterers’ berth terminal 4 stevedores Xingang to one good and safe berth Cadiz and one good and safe berth Bilbao”

(referred to as the “Opening Term”)

Clause 2

[1] The ship shall load at one good and safe port/one good and safe charterers’ berth in Xingang and discharge at one good and safe port/one good and safe charterers’ berth in Cadiz and at one good and safe port/one good and safe charterers’ berth in Bilbao.

[2] Shifting from anchorage/warping along the berth at the port of loading and at the port of discharge shall be at the owners’ expense, while all time utilized shall be considered as lay time.

The owners contended that the charter constituted a port charterparty. Consequently, after arriving at Xingang and tendering the Notice of Readiness, the charterers had purportedly accepted the risk that any delay incurred while waiting for a berth due to congestion would be their responsibility. On these grounds, the owners claimed demurrage in the amount of US$502,267.24.

Conversely, the charterers argued that the charter was a berth charterparty, meaning that the Notice of Readiness could not be tendered until the ship had actually berthed.

The initial dispute presented to the arbitrators concerned the determination of whether the ship qualified as an “arrived ship” for the purpose of calculating laytime and whether the owners were entitled to claim demurrage based on the assumption that the charter constituted a port charterparty. The arbitrators focused on Clause 2 and concluded that the intention of 2[1] was to qualify the wording in the Opening Term, indicating a port charter. Additionally, they inferred from the language in 2[2] that it must be interpreted as a port charter since it stipulated that shifting time from anchorage to the berth would be considered laytime. Bearing this in mind, the arbitrators maintained that the Master possessed the authority to validly tender a Notice of Readiness upon arrival, as had indeed transpired. Hence, the charter was determined to be a port charterparty, and the owners’ demurrage claim prevailed.

Subsequently, the charterers lodged an appeal, contending that the arbitrators had misinterpreted 2[2] by considering its language to be appropriate for a berth charter. Alternatively, if this interpretation was erroneous, they argued that the clause was neutral. Furthermore, the charterers posited that the Opening Term, which defined the contractual destination, should take precedence over 2[1] in the event of any inconsistencies.

Mr. Justice Gross carefully evaluated the arguments put forth by both parties and, in arriving at his decision, examined several relevant authorities[1] that explored the language and construction of the contractual destination in the charter.

Notably, Gross J considered the ruling of Lord Diplock in E.L. Oldendorff v Tradax Export (The Johanna Oldendorff) [1974] AC 479, which specifically addressed the “adventure contemplated by a voyage charter.” Lord Diplock identified the four sequential stages of a voyage charter and emphasized that the discharge port serves as the geographical and temporal endpoint where the voyage stages conclude and the loading/discharging operation begins (Schofield – Laytime and Demurrage, 5th Edition). Applying this logic to the case of the “Merida,” the reference to Xingang in the Opening Term did not imply that the port itself was the specified contractual destination. The precise wording was “good and safe charterers’ berth… Xingang,” thus indicating that the charterers possessed the explicit right to nominate the berth at Xingang.

Based on this aspect alone, the conclusion was reached that this was indeed a berth charterparty. However, prior to delivering the judgment, Clause 2 required careful consideration.

Gross J disagreed with the arbitrators’ interpretation of 2[1] since accepting their stance would nullify any meaning or purpose behind the Opening Term, fundamentally altering the intended voyage. It would have been peculiar if the owners intended to transform the charter into a port charter when the language of the Opening Term clearly denoted that the voyage charter commenced at the “charterers’ berth” – a berth charter. In fact, Gross J’s perspective, which stands as valuable guidance for future situations, was that there were no inconsistencies. He posited that 2[1] merely introduced a warranty for a safe port while reaffirming the safe berth warranty outlined in the Opening Term.

The arbitrators’ interpretation of 2[2] was also dismissed by the court. The clause was determined to have a neutral effect, serving solely to designate the party responsible for the cost and time involved in shifting and warping.

Consequently, the court allowed the charterers’ appeal, ruling that the owners’ demurrage claim must fail.

The issue of whether the port or berth was safe did not factor into the case. The crux of the matter revolved around the commencement of laytime upon arrival at the port, taking into consideration apparent inconsistencies at first glance. It is important to differentiate the safe berth/port warranty from the contractual destination where laytime begins. This decision has provided valuable guidance to owners and charterers alike in discerning whether a charter constitutes a berth or port charter.

 

 

Port Charterparty or Berth Charterparty

A Voyage Charterparty can be categorized either as a Port Charterparty or as a Berth Charterparty, contingent upon the designated destination that is agreed upon. If the destination is a specific port, then it falls under the classification of a Port Charterparty. Similarly, if the specified destination is a berth within the port, it is likely to be a Berth Charterparty.

It is crucial to determine when the ship has reached the designated destination, as this marks the condition that must be fulfilled before laytime, the allowable time for loading/unloading, begins. Typically, this is also the moment when a valid Notice of Readiness (NOR) can be presented.

To ensure procedural correctness, according to common law, the ship must submit a NOR at its first load port. In other ports, a NOR should be provided if the Charterparty requires it.

Under a Port Charterparty, the ship may submit its NOR once it has arrived within the port limits and is fully available to the charterers.

Under a Berth Charterparty, the ship may present its NOR upon arrival at the specified berth stated in the Charterparty or to be nominated later.

An example of a customary Berth Charterparty is when the destination is specified as, for instance, “one safe berth Hamburg.” This gives charterers the explicit right to designate a berth, and once they do so, this nomination becomes an integral part of the contract. The ship is considered to have arrived when it is alongside the designated berth.

From the perspective of laytime calculation, a Berth Charterparty provides an advantage to charterers, as laytime cannot commence before the ship has arrived at the berth. However, there are various C/P terms and provisions that diminish this advantage, and we will mention a few commonly used ones, which charterers can forgo, in this article:

1. “Notice of Readiness to be tendered WIBON WIPON..”
2. “Time lost in waiting for berth to count as laytime.”
3. “Berth to be Reachable on Arrival” or “Berth to be Always Accessible.”

Under a Port Charterparty, charterers still possess an implicit right to designate a berth (unless otherwise specified in the Charterparty), but in this case, the ship may submit its NOR upon arrival within the defined geographical area (within the port limits).

The primary step is to identify the type of Charterparty: Berth Charterparty or Port Charterparty.

It is not always as straightforward as it seems, as the agreed destination can be described in various ways. Here are some examples of specified destinations that may categorize the Charterparty respectively as a Berth Charterparty or a Port Charterparty :

Berth Charterparty’s:

• Berth No. 30, … (name of the port) … (a named berth)
• Petroleum jetty, … (name of the port) … (a named berth or jetty)
• One safe berth Hamburg (explicit right to nominate the berth)
• Vessel to proceed to Hamburg, one berth to be nominated by charterers (explicit right to nominate a berth)

Port Charterparty’s:

• Hamburg (a named port)
• Hamburg, to load at one safe berth (implicit right to nominate a berth, with Rotterdam remaining the contractual destination)

The final examples of each Charterparty type demonstrate that it is not always easy to determine whether a particular Charterparty should be classified as a Berth Charterparty or a Port Charterparty.

Well-drafted Charterparty destinations can minimize uncertainties and potential legal disputes.

As mentioned earlier, there are several familiar Charterparty provisions that shift the liability for delays in reaching the berth from owners to charterers. However, their meaning and effect can vary significantly. Some provisions expedite the moment when a valid Notice of Readiness can be tendered and/or accelerate the commencement of laytime. Others may give rise to a claim for detention. The cause of the delay can also influence the consequences. In most cases, such provisions impact the position under a Berth Charterparty rather than a Port Charterparty. Given the complexity of this subject, a comprehensive analysis will be presented in a subsequent newsletter.