Time Charter Party

Before the days of containerisation, the most prolific time charterers were the liner companies – many of them UK based – which used time chartering to supplement their fleets of ships when demand in the general cargo market exceeded their own resources. In those days the BIMCO adopted ‘Baltime’ charter was most popular. That sector of the market has long gone and for a variety of reasons the most popular time charter form now is probably the New York Produce Exchange Form, commonly known as either the NYPE or ‘Produce 46’. The number incidentally refers to the fact that this form has not been revised since 1946, but such is the conservatism of the chartering market that charterers still prefer to stay with it. This despite the fact that in 1981 an updated version was compiled and called the ‘Asbatime’. Although this is not the most used form, its straightforward clauses and comparatively recent compilation makes it more convenient for the study of generalities of a time charter. As was mentioned earlier in this lesson, the objective of a time charter is to transfer the commercial direction of the ship to the charterer while still leaving the technical control with its owners. Having worked your way through a voyage charter you will find no difficulty in your study of the wording of the ‘Asbatime’. You will note that the names of the parties and the ship are similar to a voyage form but the first difference is the inclusion in the ship’s particulars of a speed and fuel consumption. As the cost of fuel is the charterer’s largest item of expenditure after the hire itself, this is a vital component of the agreement. The duration of the charter comes next. This can be set out in months (even years) or
may be for a ‘trip’ when the areas of starting and finishing will be entered with an approximation of the time likely to be involved. Then instead of a loading port there is a place of delivery with again the stipulation that the ship be ‘…tight, staunch, strong and in every way etc…..’. While the intention is to pass the commercial control of the ship to the charterer there may well be some dangerous or otherwise unpleasant commodities, which the owner does not want, put into his ship. Just as there may be places which (usually for political reasons) the owner does not want his ship to visit and provision is made to prohibit these. Those things, which the owner will continue to provide, and those things which are  for the charterer to furnish are clearly set out. Again because bunker fuel is a major item, it is important for the charterers to pay for the fuel they take over on delivery and for the owners to do the same on redelivery. Then the all-important clause stating the daily rate of hire with the stipulation that it shall be paid semi-monthly in advance. Somewhat illogically the place of redelivery is interposed between the rate of hire and the terms of payment. One harsh condition relating to hire payment gives the owner the right to withdraw his ship from the charterer’s service if the hire payment is not punctually made. In the past, owners have been known to whip their ships away to take advantage of an improved market when the hire has been delayed by no more than a day due to a holdup in the banking system. It is usual, nowadays, to include a ‘technicality’ clause so that the charterer is given a little time to rectify such a situation. Like the voyage charter there is a clause stipulating when time shall commence to
count. Not such a problem-prone area as it is in the voyage world but still important to give the charterer a few hours to take over the reins, so to speak. Again like a voyage charter, there is a laydays/cancelling clause. An important point that has to be covered is that of suspending hire payments for any time the vessel is not available to the charterer; the ‘off-hire’ clause. The usual reason for a ship to go off-hire is some temporary technical break down. On a long period
charter, however, the ship may have to go off-hire in order to keep up to date with routine maintenance. The off-hire clause covers all of this including the consumption of bunker fuel reverting to owner’s account while the ship is off-hire. The other clauses are fairly straight forward ranging as they do from what happens in the event of a war down to the charterer’s right to paint his own colours on the funnel so long as he repaints it at the end of the charter. Read the entire wording carefully and pay particular attention to those clauses, which clearly describe the manner in which the master (captain) of the vessel has to comply with the instruction of the charterer. It is quite a balancing act for a captain on time charter. He has to co-operate fully with the charterer without ever losing sight of his primary loyalty to his owners. To summarise, the basic elements of a time charter include:

  • Date
  • Names of the parties
  • Ship’s name and particulars
  • Speed and fuel consumption
  • Duration
  • Places of delivery and redelivery
  • Trading area/limitations
  • Rate of hire
  • Laydays/Cancelling
  • Commissions