Time Charter Off-hire

The Hire Period: The period of hire runs from the time the ship is delivered to the charterers to the time of her redelivery to the shipowner. The ship may come on hire immediately, or the shipowner may be required to deliver the ship within a range of dates. This is called the laycan, and the charterer is given the option of canceling the charter if the ship is not delivered on or before the stipulated dates. The duration of a time charter reflects a period of time rather than the length of single or a number of voyages or geographical rotation. Therefore, unlike a voyage charter, a time charter has stipulations for payment of hire, delivery, redelivery, and off-hire events instead of provisions for freight, laytime, and demurrage.

Hire: Hire is the payment the charterer is under obligation to pay to the shipowner. It is calculated daily and usually paid in advance, either every fifteen or every thirty days. Hire is paid from the day of delivery to the day of redelivery of the ship. The time charter party especially stipulates a time range and a geographical range when and where the vessel has to start and finish her service under the said contract, the delivery and redelivery dates, and places. The time charterer pays for bunkers, so bunker volumes are recorded on both delivery and redelivery dates with further proportional settlement. In some instances, hire, unlike freight, might be subject to equitable set-off.

Off-hire: All-time charters have an off-hire clause, under which the charterer is entitled to cease the payment of hire because he or she has been deprived of the use of the ship through no fault of his or her own. The off-hire clause provides that the ship comes off-hire when one of many listed incidents occur whereby the charterer is deprived wholly or partially of the efficient use of the ship. The list of incidents that trigger the off-hire clause generally includes a breakdown of machinery, damage to hull, deficiency or default of men or stores, dry docking or other necessary measures to maintain the efficiency of the ship. The list may be extended to cover, for example, “other accident” (BALTIME) or “any other similar cause preventing the full working of the vessel” (NYPE). The rule may come into effect when a delay continues for more than twenty-four hours (BALTIME). Once the threshold is exceeded, the whole period of the delay is time off-hire. (Thus, with a delay of thirty hours under a Baltime charter party, the whole of the thirty hours is off-hire).
It is quite common in warm tropical waters for marine growth to accumulate on the ship’s plating, which can lead to underperformance in terms of speed and consumption of bunkers. The underperformance together with time lost and expenses incurred to clean the hull of the ship can lead to deprivation of the efficient use of the ship, for which the shipowner is liable.

One unfortunate event that can occur at sea is piracy. If the charterer and the shipowner want to treat the event of piracy as an off-hire event, they must express it with a specific clause in the charter party. Even if the charter party stipulates that the vessel will be off-hire due to ‘any other cause’, this will not include the event of piracy. However, if it stipulates ‘any other cause whatsoever’ piracy may be included (The Saldanha, 2010).