Time Charter Party Main Features
Description of the vessel: It is quite common to supplement the succinct description of the vessel stated in the opening lines of a standard form charter party with ap- pended clauses listing more fully the ship’s specifications and capacities. In addition, the charterer may be provided with copies of relevant plans of the ship.
Seaworthiness and cargo worthiness of the ship: The shipowner is under an obligation to deliver the ship “in every way fitted for ordinary cargo service” (BALTIME, cl. 1). According to the New York Produce Exchange, the ship must be “ready to receive cargo with clean swept holds and tight, staunch, strong and in every way fit- ted for ordinary cargo service” (NYPE, line 41). The undertaking of seaworthiness is absolute on behalf of the shipowner.
The ship’s performance clause: A time charter contains a warranty by the owner that the ship is capable of steaming, fully laden, in good weather and smooth water at a stated speed and at a stipulated rate of bunker consumption. The speed and consumption clause is a continuing warranty; the ship must be capable of attaining her chartered speed at the time of delivery (The Apollonius, 1978). Where the ship fails to attain her chartered speed-in good weather and smooth water-during the voyage, or where the bunker
consumption is in excess of that stipulated in the charter, the ship- owners may be liable. The speed warranty applies only when the ship is loaded. In addition, if the stipulated speed is prefixed by the word about, the shipowner is generally allowed half a knot leeway on the stated figure.
The shipowner has an obligation to send the ship to the loading port within a reasonable time and perform the voyage to the place of delivery without delays. Deviations are allowed due to weather conditions and to save human life. The shipowner must have ample knowledge, abide by local and international laws and regulations, and set safety as a priority.
The shipowner incurs all the costs of all vessel-related expenses.
Time Charter Party Main Features
A Time Charter Party is a type of agreement used in the shipping industry where the shipowner leases their vessel to a charterer for a specific period of time. This type of charter is commonly used for bulk cargo and container ships. The main features of a Time Charter Party include:
- Duration: The agreement specifies the duration of the charter, which can range from a few months to several years. This period is often referred to as the “charter period” or “charter term.”
- Hire Rate: The charterer pays the shipowner a daily hire rate for the use of the vessel. This rate is typically fixed for the duration of the charter and is payable in advance, usually every 15 or 30 days.
- Delivery and Redelivery: The shipowner is responsible for delivering the vessel to the charterer at a mutually agreed location and time. At the end of the charter period, the charterer must redeliver the vessel to the shipowner at another agreed location and time.
- Ship Performance: The shipowner guarantees the vessel’s performance, including speed, fuel consumption, and seaworthiness. The charterer may be entitled to compensation if the vessel fails to meet the agreed performance standards.
- Employment of the Ship: The charterer is responsible for finding and arranging cargo for the vessel, as well as planning the vessel’s route and schedule. The charterer has considerable freedom to use the vessel within the agreed trading limits, subject to any restrictions imposed by the shipowner.
- Ship Maintenance and Repairs: The shipowner is responsible for the maintenance and repair of the vessel, including providing a competent crew. The charterer must allow time for necessary maintenance and repairs and may be responsible for additional costs if the vessel is off-hire due to the charterer’s actions or inactions.
- Bunkers (Fuel): The charterer is usually responsible for supplying and paying for fuel (bunkers) consumed during the charter period. The vessel is typically delivered with a certain amount of bunkers onboard, and the charterer must return the vessel with a similar amount at redelivery.
- Payment of Port Charges and Other Expenses: The charterer is responsible for all port charges, pilotage, towage, and other expenses related to the vessel’s operation, including cargo handling costs. The shipowner, however, remains responsible for the vessel’s insurance and crew wages.
- Off-hire: If the vessel cannot perform its duties due to a breakdown, maintenance, or other circumstances beyond the charterer’s control, the vessel may be considered “off-hire.” During off-hire periods, the charterer is not obligated to pay the daily hire rate.
- Subletting and Assignment: The charterer may have the right to sublet the vessel to a third party or assign the charter party to another company, subject to the shipowner’s approval.
- Dispute Resolution: The Time Charter Party usually includes a dispute resolution mechanism, such as arbitration or mediation, to handle any disagreements between the parties during the charter period.
- War and Political Risks: The Time Charter Party typically includes clauses addressing war and political risks that may affect the vessel’s operations. These provisions outline the parties’ rights and responsibilities in the event of war, hostilities, or political unrest in the trading area.
- Ice Clauses: In case the vessel is required to operate in areas prone to ice, the agreement may include ice clauses. These clauses outline the charterer’s obligations to provide icebreaking assistance or pay additional compensation for ice-related delays and the shipowner’s responsibility to ensure the vessel is ice-classed and adequately equipped.
- Pollution and Environmental Compliance: The Time Charter Party often contains provisions related to pollution and environmental compliance. The charterer is generally responsible for any pollution caused by the vessel’s operations, while the shipowner is responsible for ensuring that the vessel complies with all relevant environmental regulations.
- Safety Management: Both the shipowner and the charterer have responsibilities for ensuring the safety of the vessel and its crew. The Time Charter Party may include specific safety management requirements, such as compliance with the International Safety Management (ISM) Code and the International Ship and Port Facility Security (ISPS) Code.
- Inspection and Survey: The charterer has the right to inspect the vessel periodically to ensure it meets the agreed performance standards and complies with applicable regulations. The shipowner is responsible for arranging and paying for any necessary surveys and certifications.
- Termination: The Time Charter Party may include provisions for early termination by either party under specific circumstances, such as the vessel’s total loss, prolonged off-hire periods, or breaches of the agreement. Termination clauses may also outline compensation or penalties payable by the terminating party.
- Force Majeure: A force majeure clause is typically included in the Time Charter Party to protect both parties from liability for events beyond their control, such as natural disasters, strikes, or governmental actions. This clause outlines the parties’ rights and obligations in the event of a force majeure event.
- Liens: The Time Charter Party may contain provisions granting the shipowner a lien over the cargo or the charterer’s sub-freights to secure payment of any outstanding hire or other amounts due from the charterer.
- Governing Law and Jurisdiction: The Time Charter Party will usually specify the governing law and jurisdiction for the agreement, which determines the legal framework and dispute resolution venue for any disputes arising under the contract.
These are the main features of a Time Charter Party. By understanding and addressing these aspects, both the shipowner and the charterer can ensure a successful and profitable chartering relationship.
Main Features of NYPE (New York Produce Exchange)
The New York Produce Exchange (NYPE) is one of the most widely used time charter forms in the dry cargo sector. The NYPE form was originally developed in 1913 by the New York Produce Exchange, with several revisions made over the years, the most recent being the NYPE 2015. The NYPE time charter form is a standard contract that sets out the terms and conditions governing the charter of a vessel for a specific period. Here are the main features of the NYPE time charter form:
- Hire and Payment: The NYPE form specifies the daily hire rate to be paid by the charterer to the shipowner for the use of the vessel. Payments are usually made in advance, with the hire rate typically expressed in U.S. dollars per day.
- Duration: The NYPE form sets out the charter period, which can range from a few months to several years. The charter period may be expressed as a firm duration or as a range with minimum and maximum durations, allowing for some flexibility in the charterer’s operations.
- Ship Delivery and Redelivery: The NYPE form provides for the delivery and redelivery of the vessel, specifying the agreed location and time frame for these events. The charterer takes control of the vessel upon delivery and is responsible for returning the vessel to the shipowner at the end of the charter period, in the same condition as at delivery, except for ordinary wear and tear.
- Ship Trading Limits: The NYPE form outlines the trading limits within which the charterer is permitted to employ the vessel. These limits may be geographical (e.g., certain regions, countries, or ports) or operational (e.g., restrictions on cargo type, draft, or other vessel characteristics). The charterer must comply with these limits and ensure that the vessel’s employment does not violate any applicable laws, regulations, or sanctions.
- Ship Performance: The NYPE form includes clauses related to the vessel’s performance, such as speed and consumption guarantees. The shipowner warrants that the vessel will perform in accordance with these guarantees, and any deviations may result in claims for underperformance or off-hire periods.
- Ship Maintenance and Repairs: The NYPE form stipulates that the shipowner is responsible for maintaining the vessel in a seaworthy condition, including the provision of necessary repairs, maintenance, and dry-docking. The charterer is usually responsible for the costs of running the vessel, such as bunkers, port charges, and crew wages.
- Off-Hire: The NYPE form contains provisions for off-hire periods, during which the charterer is not required to pay hire due to the vessel’s inability to perform its contractual obligations, such as breakdowns, accidents, or other unforeseen events. The off-hire clause sets out the specific circumstances under which the vessel is considered off-hire and the procedures for calculating and reporting off-hire periods.
- Bunkers (Fuel): The NYPE form addresses the responsibility for bunkers, with the charterer generally being responsible for providing and paying for bunkers during the charter period. The form also provides for the adjustment of bunkers upon delivery and redelivery, with the charterer reimbursing the shipowner for any remaining bunkers onboard at the time of redelivery.
- Ship Subletting and Assignment: The NYPE form includes provisions that allow the charterer to sublet or assign the vessel to third parties, subject to the shipowner’s consent. This enables the charterer to sub-charter the vessel to other charterers or operators in order to maximize the vessel’s utilization and revenue potential.
- Liens: The NYPE form provides for the shipowner’s right to exercise a lien on the cargo or sub-hire in the event of non-payment by the charterer
- Indemnity and Insurance: The NYPE form contains indemnity clauses, under which the shipowner and charterer agree to indemnify each other for losses or liabilities arising from their respective contractual obligations. The charterer is usually responsible for cargo insurance, while the shipowner is responsible for hull and machinery insurance, as well as protection and indemnity (P&I) insurance covering third-party liabilities.
- War Risks and Force Majeure: The NYPE form includes clauses related to war risks and force majeure events, which outline the parties’ rights and obligations in the event of war, hostilities, or other unforeseen circumstances beyond their control. These provisions may allow for the termination or suspension of the charter, or the vessel’s diversion to a safe port in the event of such risks.
- Termination and Breach: The NYPE form sets out the grounds for termination of the charter and the consequences of breach by either party. These may include the shipowner’s right to withdraw the vessel and terminate the charter if the charterer fails to pay hire, or the charterer’s right to terminate the charter if the shipowner fails to maintain the vessel’s seaworthiness or performance.
- Dispute Resolution: The NYPE form contains dispute resolution provisions, which outline the agreed method for resolving disputes between the parties, such as arbitration or litigation. The form also specifies the governing law and jurisdiction applicable to the charter agreement.
- Amendments and Additional Clauses: The NYPE form is often amended or supplemented by additional clauses agreed upon by the parties, which can be tailored to their specific needs and preferences. These may include provisions related to cargo handling, laytime and demurrage, bunker price adjustments, anti-corruption compliance, or environmental regulations, among others.
- Compliance with Laws and Regulations: The NYPE form requires both parties to ensure compliance with all applicable national and international laws, regulations, and industry standards during the charter period. This includes, but is not limited to, safety regulations, environmental regulations (such as emissions and ballast water management), port and customs requirements, and maritime security regulations (such as the International Ship and Port Facility Security Code).
- Crew and Manning: Under the NYPE form, the shipowner is responsible for providing a competent, qualified, and properly certificated crew to man the vessel. The crew is responsible for the safe and efficient operation of the vessel during the charter period. The shipowner is also responsible for ensuring that the crew complies with all applicable laws, regulations, and industry standards related to their employment, training, and welfare.
- Stevedoring and Cargo Handling: The NYPE form typically places responsibility for stevedoring and cargo handling on the charterer. This includes the loading, stowage, securing, and discharging of cargo, as well as any necessary lashing or unlashing. The charterer must ensure that all cargo handling operations are performed safely, efficiently, and in compliance with applicable laws, regulations, and industry standards.
- Notices and Reporting: The NYPE form sets out requirements for notices and reporting between the parties during the charter period. This may include regular updates on the vessel’s position and performance, notifications of anticipated delays, and reports of any incidents, accidents, or other issues affecting the vessel or its operations.
- Inspections and Surveys: The NYPE form may include provisions for inspections and surveys of the vessel during the charter period, to verify compliance with applicable laws, regulations, and industry standards, or to assess the vessel’s condition and performance. The shipowner and charterer may agree on the timing, scope, and procedures for such inspections, as well as any necessary follow-up actions or rectifications.
- Bills of Lading: The NYPE form includes provisions related to the issuance and management of bills of lading for cargo carried under the charter. The shipowner is responsible for providing a master’s bill of lading, which serves as a receipt for the cargo and evidence of the contract of carriage. The charterer may also issue their own bills of lading, subject to the shipowner’s approval, and must ensure that all such documents accurately reflect the details of the cargo and comply with applicable laws, regulations, and industry standards.
- Laytime and Demurrage: Although the NYPE form is a time charter, it may still include provisions related to laytime and demurrage, particularly if the charterer is responsible for cargo handling operations. Laytime refers to the time allowed for the charterer to complete the loading or discharging of cargo, while demurrage is the compensation payable by the charterer to the shipowner for any delays beyond the agreed laytime. The NYPE form may specify the laytime allowed for each port, as well as the demurrage rate and any applicable exceptions or exemptions.
- Performance Claims: The NYPE form includes provisions to address performance claims that may arise during the charter period. Performance claims typically relate to disputes over speed and consumption guarantees, as well as off-hire periods. The form may outline the procedures for making and settling performance claims, such as the submission of supporting documentation, the involvement of independent experts or surveyors, and the application of dispute resolution mechanisms.
- Charter Party Guarantee: In some cases, the NYPE form may require the charterer to provide a guarantee, usually in the form of a parent company guarantee or a bank guarantee, to ensure their performance under the charter. This guarantee serves as a security for the shipowner, protecting them against the risk of the charterer’s default or insolvency.
- Charterer’s Agents: The NYPE form may include provisions related to the appointment and management of charterer’s agents at the various ports visited by the vessel during the charter period. The charterer’s agents are responsible for coordinating port calls, cargo handling operations, and other local arrangements on behalf of the charterer. The shipowner and charterer may agree on the scope of the agents’ authority, as well as any applicable fees, expenses, or liabilities.
- Cargo Claims: The NYPE form may address the handling of cargo claims that may arise during the charter period, such as loss, damage, or delay to the cargo. The form typically allocates responsibility for such claims between the shipowner and charterer, depending on the cause of the claim and the parties’ respective obligations under the charter. The form may also outline the procedures for notifying, investigating, and settling cargo claims, as well as the involvement of insurance and indemnity arrangements.
- Ship’s Description and Class: The NYPE form usually contains a detailed description of the vessel being chartered, including its name, flag, ownership, dimensions, tonnage, and other relevant particulars. The form also specifies the classification society and class notation applicable to the vessel, as well as any additional certifications or endorsements required by applicable laws, regulations, or industry standards.
- Intermediaries and Brokers: The NYPE form may acknowledge the involvement of intermediaries or brokers in the negotiation and conclusion of the charter, as well as any commissions or fees payable to such parties. The shipowner and charterer may agree on the terms of the brokers’ engagement, including their roles, responsibilities, and remuneration.
- Confidentiality: The NYPE form may include confidentiality provisions, which require the parties to keep the terms and conditions of the charter, as well as any sensitive commercial or operational information, confidential during the charter period and beyond. These provisions are intended to protect the parties’ interests and maintain the integrity of their business relationships.
- Anti-Corruption Compliance: The NYPE form may incorporate anti-corruption clauses, which require the parties to comply with all applicable anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act or the U.K. Bribery Act. These clauses are aimed at promoting ethical business practices and preventing corruption in the shipping industry.
Understanding these additional aspects of the NYPE time charter form helps shipowners and charterers to navigate the complexities of the dry cargo charter market effectively. By being familiar with these features, parties can tailor their charter agreements to their specific needs while ensuring compliance with applicable laws, regulations, and industry standards. This knowledge also enables them to mitigate risks, resolve disputes, and ultimately achieve successful outcomes in their chartering activities.
Where can I find a Time Charter Party Form?
We kindly suggest that you visit the web page of BIMCO (Baltic and International Maritime Council) and ASBA (Association of Ship Brokers and Agents) to obtain the original Charter Party forms and documents. www.bimco.org and www.asba.org