Time Charter and Ship Hire issues

Time Charter and Ship Hire issues

Although the hire period is expressly set out in the charterparty there are a number of issues which regularly fall to be determined, namely:

  1. True Extent of the Time Charter Period
  2. Legitimacy of Final Voyage Orders


1- True Extent of the Time Charter Period:

In order to determine the validity or otherwise of the charterers’ orders for a final voyage it is necessary to know whether the charter period will be extended by an additional margin. This depends on the words used by the parties to define the charter period:

• Where the charter is for a simple stated period such as six months or one year the courts will imply a reasonable margin because they recognize that it is not commercially practicable for charterers in deciding which voyages to undertake to precisely calculate the day on which the final voyage will end and the vessel will be redelivered to its owners.

• Where the charter is for a range such as three to four months a margin will normally be implied (the courts have allowed a 5-day margin on a charter which provided four to six months: see The Democritos (1976). However, if the range stated is unusually wide the courts are less likely to imply a margin because the protection to the charterer has already been built into the range.

• Where the charter provides for a particular minimum and maximum period, the court will not imply an additional margin beyond the stated maximum.

• Where the Time Charter expressly provides for a margin, for example +/-15 days the court will not imply a further margin.

2- Legitimacy of Final Voyage Orders:

• The legitimacy of final voyage orders is prima facie to be assessed at the time when the orders are to be performed. Thus if at the time they are given they appear to be legitimate in the sense that the order can reasonably be expected to allow redelivery by the end of the hire period (including any express or implied margin), the ship owners are not entitled to refuse them.

• However, if between the time of giving the final voyage order and the Shipowners performing it circumstances change, so that the order ceases to be valid, the Shipowners are not normally required to perform that voyage.

• If a charterer gives orders for a final voyage which are invalid, that is, they cannot reasonably be expected to allow redelivery by the end of the charter period (including any applicable margin), or (as above) where a valid order subsequently becomes an invalid order, the ship owners are entitled to refuse the orders and call for fresh orders for a final voyage. 

• If the Charterers fail to give valid orders and show that they do not intend to perform their obligations under the charter, for example by insisting on the invalid order, the Shipowners may treat the charter as discharged, seek other employment of the ship and claim damages from the charterers.