Time charters are concerned with the letting of a ship for a specific period of time normally twelve months. The time charter party contract is governed by the law of contract, and the contract is made binding after the acceptance of an offer and the agreement to all the essential terms. Under a time charter, the shipowner is contractually bound to offer the agreed services to the charterer through the use of the vessel and its crew. The ship itself is not leased to the charterer, but the charterer has the freedom, within certain expressed or implied constraints, to send the ship on specific voyages and to load cargoes of his or her own choice. Under a time charter, the shipowner and the charterer undertake a number of specific obligations respectively. For instance, the shipowner must provide an accurate description of the vessel, must ensure that the ship is seaworthy and cargo worthy, must safeguard the performance of the vessel, must deliver the vessels during the agreed and allowed time frame, must not unreasonably delay the vessel (must exercise reason- able dispatch), and must incur all the operating expenses of the ship.
Under a time charter, the charterer is also obliged to respect the period of charter and redeliver the ship within the agreed time frame. In addition the charterer must nominate safe ports for the commercial use of the vessel, carry lawful and not dangerous cargoes, and always stay within the trading limits that are stipulated (e.g., Institute Warranty Limits or International Navigable Waters). There is an absolute obliga- tion to pay hire on time (always in advance). It is also the charterers’ obligation to carry out safe loading and discharging operations.
Clauses in a Time Charter Party
A time charter party contains the following standard clauses:
l. Preamble: place, date, and name and domiciles of contracting parties
2. Vessel description
3. Duration of period/description of trip(s). The duration of a charter period should be entered with a margin (Le., fifteen days more or less charterer’s option, or molchopt). For a trip, the approximate voyage du- ration is inserted; for example, thirty days.
4. Trading Intentions/Limits. Areas of the world in which the vessel is to be employed
5. Cargo Intentions/Exclusions. Details of cargoes that can and cannot be carried
6. Vessel Condition. Undertaking by owner that the vessel is in good condition
7. Owner’s responsibilities. List of what an owner is to provide
8. Charterer’s responsibilities. List of what a charterer is to provide
9. Delivery and redelivery. Places of delivery/redelivery; laydays/cancel- ing; notices given by owners prior to delivery; notices given by charter- ers prior to redelivery
10. Bunkers. On/off-hire surveys. Charterers take over and pay the owners for the bunkers ROB upon delivery. Owners take over and pay the charterers for the bunkers ROB upon redelivery.
11. Hire. Amount, when, where, and to whom hire is payable.
12. Off-hire. Provisions leading to off-hire situations (e.g., poor performance, strike by crew)
13. Vessel performance. Poor speed and consumption performance
14. Vessel maintenance. Dry-docking clause
15. Cargo claims. Stipulates how cargo claims will be handled, usually incorporating InterClub Agreement
16. Master/officers. Duties of the master; charterers’ rights in case master/officers are not fulfilling their responsibilities toward the charterers.
17. Logbooks. The charterers appoint a specialized weather routing company to check the vessel’s performance. In the event logbooks and the independent reports disagree, the independent reports prevail,
18. Supercargo/victualling. The charterers have the right to appoint a supercargo to inspect and/or sail with the vessel at their cost and responsibility.
19. Pollution. P&I clubs provide insurance cover against oil spillages, resulting fines, and clean-up expenses.
20. Salvage. Expenses and rewards in case of salvage should be shared.
21. Laying-up. Stipulated owners and charterers provisions in case a vessel is laid-up due to lack of employment
22. Arbitration. In case of a dispute between owners and charterers.
23. Lien. Each party’s right of lien must be considered and stipulated.
24. Assignment. Charterer’s right to sublet the vessel to another charterer is stipulated.
25. Exceptions. The rights of contracting parties to cancel the charter
party in case of events that make its performance virtually impossible
26. Requisitions. Arrangements in the event a vessel be requisitioned by the flag state
27. Bills of lading. Specifies the manner in which bills of lading are to be
drawn up and signed and how they protect the owner in case of paper inconsistencies
28. Stevedore damage. Provision for notification of stevedore damages and repairs
29. Commissions. Address commission and brokerage commission
30. War risks. CONWARTIME is a standard war risks clause for time charters.
31. Protecting clauses. New Jason clause; P&I bunkering clause; clause
paramount; both to blame collision clause; ISM; ISPS
32. Signatures. No charter party is complete without the signatures of or on behalf of the parties concerned.