When Ship Hire is Payable

When Ship Hire is Payable

The Physical Payment of Ship Hire

Time charter hire has to be transferred on time from the charterer to the shipowner, normally via a bank. The Ship Hire must be paid in advance. If the hire falls due on a bank holiday, it must be paid on an earlier day when the banks are open (see The Laconia, 1977).

If the Ship Hire is not paid on time, the Charterer is in breach of the contract and the shipowner has a case for withdrawing the vessel from the charterer’s service. However, the shipowner has to show that the charterer consistently paid late and that he or she had been consistently warned that the owner was contemplating withdrawal.

Where a ship is off-hire on the day that the payment of hire is due, the charterer is not obliged to pay until the ship comes on hire again.

When Hire Is Payable

Time starts to run when the vessel is delivered as per the terms of the charter party. For example, if a vessel is delivered at 2:00 p.m. on May 3 and payment is made monthly in advance, then the charterer has until midnight of June 3 to pay the next installment of hire (The Afovos, 1982).

In The Laconia (1977) Case, the payment was due by 3:00 p.m. on a Sunday. On the Monday morning at opening banking hours, it had still not been received by the owner’s bank. Thus payment had been made late. A late payment does not have to be deliberate and may occur because of a variety of reasons, from an oversight in the charterer’s office to a Banking Error, and Clause 9(a) of the Shelltime charter party specifies that charterers have seven days to make good the payment after receiving notice from the owners that payment is late.

It is typical to insert a side clause requiring owners to give some notice of any intention to withdraw the ship, thereby providing a grace period during which time charterers may make amends or remedy any banking error.

ASBATIME Clause 29 states: Where there is a failure to make punctual and regular payment of hire, Charterers shall be given by Owners two clear banking days, as recognized at the agreed place of payment, written notice to rectify the failure, and when so rectified within those two days following Owners’ notice, the payment shall stand as regular and punctual. Payment received by Owners’ bank after the original due date will bear interest at the rate of 0.1 percent per day which shall be payable immediately by Charterers in addition to hire.”