In the old days, the most prolific time charterers were the liner companies. In those days, before the days of containerization, liner companies used time chartering to supplement their fleets of ships when demand in the general cargo market exceeded liner companies’ own fleet capacity. In those days, the BIMCO adopted BALTIME charter was most popular among shipowners and charterers. That sector of the shipping 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 (NYPE or Produce 46). New York Produce Exchange Form has been revised since 1946, but charterers still prefer to stay with NYPE 1946 version. Despite the fact that in 1981 an updated version was compiled and called the ASBATIME. ASBATIME is not the most used charter-party form.
Objective of a time charter is to transfer the commercial direction of the ship to the charterer while still leaving the technical control with shipowner.
In time charter-party forms names of the parties (charterers and shipowners) and the ship are similar to a voyage charter-party forms but the first difference is the inclusion in the ship’s particulars of a speed and bunker (fuel) consumption. Cost of bunker (fuel) is the charterer’s largest item of expenditure after the ship hire itself and bunker (fuel) is a vital component of the time charter-party (agreement). Second vital component of the time charter-party is the duration of the ship charter. Duration of the ship charter can be set out in months even years or may be for a trip charter when the areas of delivery and redelivery will be entered with an approximation of the time likely to be involved.
In voyage charter-party forms, name of the loading port is specified. On the other hand, in time charter-party forms, 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…..’.
In time charter-party forms, 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 shipowner does not want to load on ship. There may be some ports which shipowner does not want to call due to political reasons. Provisions which shipowner will continue to provide and provisions which are for the charterer to furnish are clearly set out in time charter-party forms.
Bunker (fuel) is a major item and it is important for the charterers to pay for the bunker (fuel) they take over on delivery (Remain on Board – ROB) and for the shipowners to do the same on redelivery. Crucial clause stating the daily rate of hire with the stipulation that it shall be paid semi-monthly in advance.
In time charter-party forms, one condition relating to hire payment gives shipowner the right to withdraw ship from the charterer’s service if the hire payment is not punctually made. In the old days, shipowners have been known to withdraw ships away to take advantage of an improved chartering market when the hire has been delayed by no more than a day due to a holdup in the banking system. Nowadays, time charter-party forms are included a technicality clause so that the charterer is given a little time to rectify such a delay in the banking system.
In time charter-party forms, like voyage charter-party forms, there is a clause stipulating when time shall commence to count. Not such a problem-prone area as it is in the voyage chartering but still important to give the charterer a few hours to take commercial control of the ship.
In time charter-party forms, like voyage charter-party forms, there is a laydays/cancelling clause.
In time charter-party forms, a distinctive clause, off-hire clause which suspends hire payments for any time the ship is not available to the charterer such as temporary technical break down in short period charter. However, on a long period charter, 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 shipowner’s account while the ship is off-hire.
Other clauses in time charter-party forms are fairly straight forward. Entire wording of charter-party forms must be read very carefully and pay particular attention to those clauses, which clearly describe the manner in which the master (captain) of the ship has to comply with the instruction of the charterer. A quite balancing act for a master (captain) on time charter. Master (captain) has to co-operate fully with the charterer without ever losing sight of his primary loyalty to shipowners. Basic elements of a time charter include:
- Names of the parties (charterers and shipowners)
- Ship’s Name and Particulars
- Speed and Bunker (Fuel) consumption
- Duration of Time Charter
- Places of Delivery and Redelivery
- Trading area and limitations
- Rate of Hire
- Laydays/Cancelling Days