Time Charter
A Time Charter can be considered an agreement for the Hire of a specific ship. In this way, it contrasts significantly with a Voyage Charter, which is an arrangement for transporting a designated cargo using a particular ship for a defined journey. The nature of a Time Charter Party as a Hire contract is evident in several aspects.
The Time Charter is the most common type of Period Charter. In this arrangement, the commercial use of the ship transfers to the Charterer for a specified duration—short, medium, or long-term. The ship’s owner continues to manage the vessel’s commercial operations (such as crewing, insurance, repairs, maintenance, supplies, stores, and lubricants), while the Time Charterer assumes responsibility for the ship’s commercial employment, including nominating ports, making trading decisions, and covering voyage and cargo-handling costs (like bunkers, port charges, canal dues, extra insurances, and Stevedore fees). However, navigation decisions remain under the authority of the Shipowner and Ship Master.
The Time Charterer is responsible for paying the agreed daily “Hire” amount per time unit (as opposed to Freight per ton of cargo in a Voyage Charter). Hire is typically paid at regular intervals—often in USD per day, payable every 15 days or monthly in advance. Instead of specifying a single voyage and a particular cargo as in Spot Charter arrangements, the Time Charter sets an agreed trading area and certain types of cargo that the ship may carry.
In Time Chartering, the Shipowners’ relationship with third parties differs from that in Voyage Chartering. The Time Charterer manages the ship’s commercial operations and maintains the primary interactions with Shippers, Receivers, and other parties. Time Charters are usually governed by a Time Charter Party agreement, with fewer standard forms compared to Voyage Charter documents. This type of charter is common both in Bulk/Tramp trading (Open Chartering Market) and in the Liner Shipping sector.
It is also noteworthy that FONASBA (The Federation of National Associations of Ship Brokers and Agents) introduced the Time Charter Interpretation Code 2000. This code provides guidance on interpreting existing Time Charter Party clauses and helps resolve disputes where the Charter Party terms are unclear or incomplete.
Ship
Description of Ship
In a Time Charter Party, the ship’s description is generally more comprehensive, detailed, and precise than in a Voyage Charter Party. Time Charterers must have complete details about the ship—including carrying capacity, cargo-handling equipment, construction, speed, fuel consumption, nationality, and more—during negotiations with the Shipowners. This information is crucial for forming an accurate assessment of the ship’s commercial value.
Unlike Voyage Chartering, where the cargo and ports are often predetermined, Time Charterers may not know the exact cargo or ports of call ahead of time. As a result, they require more thorough details about the ship. In addition to basic information (such as the ship’s name, call sign, build year, nationality, IMO number, GT and NT, draught, length, depth, number of holds/hatches, etc.), Time Charterers—especially for longer periods—frequently request a more detailed description. This often includes copies of the General Arrangement plan (GA plan) or other documents that outline the ship’s construction and specifications. Knowing the ship’s ice class and any special certificates is also important.
Ship’s Cargo Capacity in Time Charter
The ship’s cargo capacity is typically described in the same manner as in the Voyage Charter Party, most often by Deadweight (DWT) and/or Cubic Capacity (CC). In many cases, however, it’s also important to provide additional details about the ship’s cargo capabilities. For instance, it may be necessary to specify how many containers, including reefer containers, the ship can accommodate both on deck and below deck. Time Charterers generally have access to all spaces suitable for carrying cargo. As stated in the SHELLTIME 4 form (clause 10 “space available to Charterers”):
“The whole reach, burthen and decks on the ship and any passenger accommodation (including Owners’ suite) shall be at Charterers’ disposal, reserving only proper and sufficient space for the ship’s master, officers, crew, tackle, apparel, furniture, provisions, and stores, provided that the weight of stores on board shall not, unless specifically agreed, exceed (to be filled) tonnes at any time during the charter period.”
If the ship has passenger accommodations, it is often clarified whether the Time Charterers are allowed to use these spaces and, if so, what additional payment per passenger per day the owners can claim.
Since accurate information about the ship’s cargo-carrying capacity is essential for Time Charterers, the owners must declare this data as precisely as possible. If the declared capacity is incorrect, the Time Charterers may have grounds for a reduction in Hire. In cases where the discrepancy is significant, the Time Charterers may even cancel the Time Charter Party due to Misrepresentation and seek damages.
Ship’s Speed and Bunker Consumption in Time Charter
The ship’s speed and bunker (fuel) consumption often become points of contention in Time Charters. Since Time Charterers pay Hire based on time, the ship’s speed and fuel efficiency are critical factors in determining the ship’s operational and commercial potential. In most Time Charter agreements, the stated speed and fuel consumption are tied to certain weather conditions and the ship’s draught. For example, the GENTIME form (part I, box 5 “ship’s description”) specifies the baseline for speed as:
“Speed and Consumption on Summer dwt in good weather, max. windspeed 4 Bft.”
The type of bunker (fuel) used is also a key consideration. GENTIME outlines fuel specifications in part I, box 23 “fuel specifications” and part II, clause 6(d) “bunkers – bunkering.” Because ships are often instructed to sail at “economical speed” or “low speed,” it’s advisable that the Charter Party includes not only consumption at full speed but also consumption at reduced speeds.
Under English law, a Speed Clause is generally not interpreted as a Continuing Warranty unless explicitly stated in the Time Charter Party. According to established legal principles (as in The Apollonius [1978] 1 LLR 53 and subsequent rulings), the Speed Warranty is typically deemed to apply only at the time of delivery, unless the contract expressly stipulates otherwise. If a continuing performance warranty is desired, the Charter Party must include a specific clause to that effect. Absent such language, the Performance Warranty is understood to apply solely at the time of delivery into the Time Charter service. In some Time Charter agreements, the wording may specify that the ship is capable of achieving the stated speed and consumption only at the time of delivery or fixture, not throughout the charter period.
That said, the issue of a Continuous Performance Warranty remains a contentious one. Most Standard Time Charter Forms require owners to maintain the ship’s condition during the charter period, with the master obligated to prosecute voyages with Utmost Despatch (e.g., NYPE 2015, clause 6(a) “owners to provide” and clause 8(a) “performance of voyages”). These clauses suggest that the ship must maintain its warranted performance in good weather conditions for the entire duration of the charter. This principle is widely recognized under English law and is supported by the FONASBA Time Charter Interpretation Code 2000, which asserts that the speed warranty applies throughout the charter term, regardless of whether the ship is Fully Loaded, Partly Loaded, or in Ballast. The NYPE 2015 form, clause 12(a) “speed and consumption,” similarly provides:
“Upon delivery and throughout the duration of this Charter Party the Ship shall be capable of speed and daily consumption rates as stated in Appendix A in good weather on all sea passages with wind up to and including Force four (4) as per the Beaufort Scale and sea state up to and including Sea State three (3) as per the Douglas Sea Scale (unless otherwise specified in Appendix A). Any period during which the Ship’s speed is deliberately reduced to comply with the Charterers’ orders/requirements (unless slow steaming or eco speed warranties have been given in Appendix A) or for reasons of safety or while navigating within narrow or restricted waters or when assisting a ship in distress or when saving or attempting to save life or property at sea, shall be excluded from performance calculations.”
In practice, Time Charterers often prefer to have speed described as Average Service Speed or similar in the Charter Party. This approach helps ensure consistent performance expectations throughout the charter. Additionally, modern Tanker Time Charter Parties frequently adopt a methodology for speed clauses more akin to that used in Voyage Chartering. In such cases, the weather risk at sea is assigned to the Shipowners, and the speed/consumption details are outlined thoroughly, as seen in SHELLTIME 4 (clause 24 “detailed description and performance”).
When reviewing the ship’s performance, Time Charterers must examine both speed and bunker (fuel) consumption together. Speed Claims—allegations of lower-than-expected speed or higher-than-expected fuel consumption—can be complex and difficult to resolve. Given the potential for substantial financial stakes, both parties should carefully draft the relevant Charter Party Clauses.
One specific issue related to speed and fuel consumption is hull fouling. Prolonged periods of idleness, particularly in tropical regions, can cause significant bottom growth on the ship, reducing speed capabilities. Some Charter Parties include clauses to address this problem. For instance, the NYPE 2015 form includes clause 30 “BIMCO hull fouling clause for Time Charter Parties,” which offers provisions to manage hull fouling risks.
Ship’s Seaworthiness and Maintenance in Time Charter
Time Charter Parties typically include a clear requirement that the Shipowners deliver the ship in a Seaworthy condition. For example, the GENTIME form (part II, clause 11 “owner’s obligations”) states: “the Owners shall deliver the Ship . . . in a thoroughly efficient state of hull and machinery and shall exercise due diligence to maintain the Ship . . . in every way fit for the service throughout the period of the Charter Party. Thus, it’s crucial for both the Charterers and Shipowners not only that the ship is delivered as agreed and in a Seaworthy Condition, but also that it remains in excellent condition throughout the charter period. For longer-term charters, it may be beneficial to include more specific provisions in the agreement. Alongside such maintenance clauses, other terms addressing liability for damage to the ship, as well as liabilities and exceptions to liabilities, should also be considered.
Even if not explicitly stated, the Shipowner is generally expected to uphold Seaworthiness and Maintenance Duties. Under English law, a Shipowners’ Warranty of Seaworthiness is Implied unless the Charter Party explicitly states otherwise.
Trade in Time Charter
Geographical Limits in Time Charter
Both Hull Underwriters and War Risk Underwriters impose certain restrictions on the ship’s operations. In addition, Time Charter Parties often establish further limits on trading. Essentially, it is the Time Charterers who direct the ship. The GENTIME form (part II, clause 13 “Charterers’ obligations”) captures this by stating: “The Charterers shall furnish the Master with full and timely instructions.”
Such instructions must comply with the trading limits set in the Time Charter. These limits may take various forms. Shipowners generally ensure that the restrictions imposed by underwriters are incorporated into the Charter Party, often with language such as: “. . . but always within hull underwriters’ trading limits.” However, referencing Institute Navigating Limits (INL) alone may not be adequate, as underwriters often apply additional restrictions.
The War Risk Clause frequently adds another dimension, granting Shipowners and the Ship Master the “liberty to comply with any orders . . . given by any committee or person having under the terms of the war risk insurance on the ship the right to give any such orders or directions.”
Other limitations may also be included to address financial or logistical concerns. For example, Shipowners may wish to limit trading far from the home country due to increased crew costs. When the trading limits span a large area—such as “worldwide trading always within Institute Navigating Limits (INL) and excluding following countries . . .”—Shipowners might seek a written commitment from Time Charterers to have the ship visit the home country or nearby countries once or twice a year for crew changes, drydocking, and other maintenance. A clause could state: “Ship to call China twice a year evenly spread.”
Political Factors can also influence trading restrictions. Some countries impose bans on ships that have previously traded with certain nations or are owned or controlled by certain parties. To preempt potential issues, trading exclusions can be agreed upon in the Time Charter Party.
A best practice when drafting geographical limits is to avoid ambiguous terms like “Mediterranean” or “St. Lawrence in season.” Instead, clearly list included or excluded countries or define specific geographical boundaries. If “in season” is used, it’s helpful to specify the exact timeframe.
It’s important to note that geographical abbreviations often play a key role in chartering communications. Internationally recognized geographical shorthand, such as “ARA: Amsterdam – Rotterdam – Antwerp” or “Continent: (geography) ports from Bordeaux in south to Hamburg in north, including both and Rouen,” are commonly found in the glossary and can facilitate clear understanding.
Non-Geographical Limits in Time Charter
Even when the trades, countries, and ports fall within geographical limits, additional non-geographical restrictions on trading often apply. For instance, the following clause from GENTIME (part II, clause 2(a) “trading areas – trading limits”) states:
“The ship shall be employed in lawful trades within Institute Warranty Limits (IWL) and within the trading limits as stated in Box 13 between safe ports or safe places where she can safely enter, lie always afloat, and depart.”
This clause specifies that the ship must be engaged only in lawful trades and carry lawful cargo. In other words, the trade and cargo must comply with the laws of the loading and discharging countries, the laws of the ship’s flag state, and the laws governing the Charter Party.
Ports must be safe, and the ship must “lie always afloat” unless the parties have agreed otherwise. In some cases, agreements might allow the ship to be “always afloat or safely aground (AABSA) where it is customary for ships of similar size or draught to be safely aground.” The NYPE 2015 form (Clause 1(d) “duration/trip description”) gives Time Charterers the option to instruct the ship to load or discharge at locations where it “may lie safely aground.” However, if the designated areas or ports are not specified, the clause does not apply.
In addition to these provisions, there are often clauses that address ice and other hazardous conditions. Such clauses—commonly labeled “Excluded Ports” or something similar—may include wording like the following (LINERTIME 2015, clause 17 “excluded ports”):
“The Ship not to be ordered to nor bound to enter:
(a) any place where fever or epidemics are prevalent or to which the Master, Officers and Crew by law are not bound to follow the Ship;
(b) any ice-bound place or any place where lights, lightships, marks and buoys are or are likely to be withdrawn by reason of ice on the Ship’s arrival or where there is risk that ordinarily the Ship will not be able on account of ice to reach the place or to get out after having completed loading or discharging. The Ship not to be obliged to force ice, nor to follow ice-breakers when inwards bound. If on account of ice the Ship Master considers it dangerous to remain at the loading or discharging place for fear of the Ship being frozen in and/or damaged, he has liberty to sail to a convenient open place and await the Charterers’ fresh instructions. Detention through any of above causes to be for the Charterers’ account.”
The first part of this clause aims to protect the crew from exposure to fevers and epidemics. The second part is an ice clause, clearly designed to prevent the ship from encountering dangerous ice conditions. Additionally, the War Clause may impose further restrictions on the Time Charterers’ use of the ship for commercial purposes.
Breaking of Trading Limits in Time Charter
If the Time Charterers intend to send the ship to ports or areas beyond the Charter Party’s trading limits, they must first obtain permission from the Shipowners, who may, in turn, need approval from the Insurance Underwriters.
Some Time Charter Parties include language such as: “the Charterers have the right to break ship’s trading limits provided they pay the extra insurance premiums.” However, from the Shipowners’ perspective, this is not acceptable, as they cannot give the Time Charterers a blanket authorization to exceed the Trading Limits. Instead, underwriters must be consulted each time the issue arises, and a special agreement should be negotiated between the Charterers and Shipowners. Such agreements must consider not only the Extra Insurance Premiums (EIP) but also potential delays and risks of physical damage to the ship.
Requirements of the Trade in Time Charter
Time Charterers often include clauses that ensure they can use the ship within the trading limits without disruptions. For example, a typical clause might state:
“Owners to ensure both that the Ship is provided with such technical equipment and certificates, and that the terms and conditions on which the Master, Officers and Crew are engaged are such, as are necessary to avoid any delay or hindrance with respect to the use of the Ship within the trading limits.”
Such provisions can present challenges for Shipowners, particularly when new regulations come into effect. A common solution is for Shipowners and Time Charterers to agree that the Shipowners’ responsibilities will be limited to the rules and regulations in force at the time the Time Charter Party is signed.
Trip Time Charter (TCT)
When a ship is chartered for a specific trip on a time basis, it’s referred to as a Trip Time Charter or Time Charter Trip (TCT). This hybrid arrangement combines elements of both Voyage Chartering and Time Chartering. To convert a typical Time Charter into a Time Charter Trip, the Charter Party may include a clause like:
“One Time Charter voyage with loading 1 or 2 ports in Sweden and discharging 1 or 2 ports in Brazil. Redelivery on dropping outward pilot2 at last discharging port. Total period estimated to 30 days.”
NYPE 2015 (clause 1(a) “duration/trip description”) reflects the flexibility for the parties to specify whether the contract covers a defined time period or a single trip.
When deviating from standard Time Charter principles, the parties should carefully review other clauses in the Charter Party and adjust them as needed to maintain a cohesive contract. For instance, many Standard Time Charter Party forms contain clauses allowing the Shipowners to claim additional Hire if the ship is not returned on time. Such wording is not suitable for a Trip Time Charter and should be revised. An example would be stating that the charter Hire applies for 30 days only, with the Shipowners entitled to the market rate thereafter if it exceeds the agreed Time Charter Rate.
Sometimes, a Charter Party may include both regular trading limits and a Time Charter Trip (TCT) description. For example:
“World-wide trading within Institute Navigating Limits (INL),”
combined with:
“One Time Charter Trip (TCT) from Argentina to one or two ports in China.”
Ballast Bonus (BB)
It is generally beneficial for Time Charterers if the ship can be delivered to a location where it is ready for immediate loading. Likewise, Shipowners benefit from redelivery at a location where they can promptly secure another cargo or charter at favorable rates. For this reason, the delivery and redelivery locations often factor into the economic calculations and influence the Hire.
In some cases, instead of adjusting the Hire based on delivery and redelivery positions, Shipowners and Time Charterers agree on a Ballast Bonus (BB) payment. For example, if a ship is scheduled to discharge its final cargo under the Time Charter at port A, the Time Charterer may wish to redeliver it there as well. If it is not possible to find a new cargo at port A and the nearest available cargo is at port B—eleven days’ steaming away—the Shipowner must account for the steaming time and bunker (fuel) consumption from port A to port B when calculating the Time Charter’s overall cost.
This can be handled in various ways. One approach is to continue the charter until the ship arrives at port B. Alternatively, the parties may agree to redeliver the ship at port A and provide a lump sum compensation—a Ballast Bonus (BB)—to cover the estimated steaming time and bunker costs from port A to port B. This Ballast Bonus (BB) may also be factored into the Hire for the Time Charter Period.
The primary advantage of a Ballast Bonus (BB), whether paid as a lump sum or included in the Hire, is that it releases both the Shipowners and Time Charterers from obligations and liabilities during the period covered by the Ballast Bonus (BB) Voyage. For instance, the Time Charterers are not responsible for port safety or channel conditions and bear no financial risk if the ship is delayed due to bad weather, pilot strikes, or similar issues. Meanwhile, the Shipowners retain the freedom to decide how to proceed with the ship without any obligation to direct it to port B.
Depending on the situation, a Ballast Bonus (BB) may be paid by either the Shipowners or the Time Charterers, at delivery or redelivery.
Cargo in Time Charter
Type and specification of cargo in Time Charter
Apart from trading limits, the main restriction on the Time Charterers’ freedom to direct the ship lies in the types of cargo permitted onboard. The kind of ship primarily determines the cargo it can carry. Some vessels are designed exclusively for a single type of cargo, and this should be clearly stated in the Time Charter Party. Other ships may accommodate a limited variety of cargoes, and the Time Charter Party should specify these as well. However, many ships are built for diverse cargoes, and in these cases, Time Charter Parties typically use phrases like “lawful merchandise non-injurious to the ship” or “ordinary dry cargo non-injurious to the ship.” This general description contrasts with Voyage Charter Parties, where the cargo description is more central and detailed.
Excluded cargo in Time Charter
In some instances, the general cargo description effectively excludes certain cargoes. For example, if the accepted cargo is described as “lawful merchandise non-injurious to the ship,” then all unlawful or damaging cargoes are automatically prohibited. In addition, Printed Charter Party Forms often include clauses that specify excluded cargoes. For example, GENTIME part II, clause 3, titled “cargo – restrictions and exclusions,” provides a clear list of prohibited items.
Time Charter Period
Length of Time Charter Period
Time Charter Parties typically include a clause outlining the agreed length of the Time Charter Period, commonly referred to as the “Flat Period.” The traditional approach involves fixing a specific duration. For example, GENTIME clause 1 begins, “the Owners let and the Charterers Hire the Ship for the period/trip(s) stated in Box 6,” with Box 6 referring to the “Period of Charter.”
Alternatively, the agreement may specify that the ship will undertake one or more Fixed Voyages, as seen in Trip Time Charter (TCT) arrangements. Determining the exact redelivery date can be challenging, so Time Charter Parties often build in some flexibility.
The flat period and redelivery date are frequently expressed using terms like “ABOUT.” Sometimes, the contract specifies a flat period or a redelivery date with the addition of “± 15 days in Charterers’ Option” or similar language. Other combinations or stipulations may also appear.
The meaning of “ABOUT” depends on various factors, particularly the length of the “Flat Period” or the voyages covered by the Time Charter Period.
When Time Charterers have an optional right to extend the charter period, this option typically benefits only the Charterers. If market Hire rates drop during the charter, the Time Charterers may decline the extension, leaving Shipowners to find new employment for the ship. Charterers might seek another ship—or even the same one—at a lower Hire rate than the original contract. On the other hand, if market rates rise, the Time Charterers are likely to use their option, allowing them to retain the ship at a below-market rate.
Significant differences between market Hire and contract Hire often lead to disputes over the Time Charter Period’s length. If the contract Hire is higher than the market rate, Time Charterers may aim to redeliver the ship as soon as possible. Conversely, if the contract Hire is lower than the market rate, Time Charterers may seek to keep the ship for as long as they can.
Time Charter Overlap/Underlap – Last Voyage
Sometimes the ship is redelivered to the Shipowners earlier or later than the agreed redelivery date or period. An Underlap occurs when the ship is returned early, while an Overlap happens when it is returned late.
Shipowners cannot refuse the ship if Time Charterers redeliver it before the agreed date, even though this constitutes a Breach of Charter Party by the Time Charterers. However, Shipowners must mitigate their loss by seeking alternative employment for the ship. If alternative employment yields less revenue, the Shipowners may claim compensation from the Charterers. The method for calculating such compensation is not always straightforward. When Time Charterers plan the Last Voyage under a Time Charter Party, they must ensure the ship can be redelivered as agreed. Given the difficulty of accurately predicting the exact redelivery time, Time Charter Party forms often include a clause covering the last voyage. For instance, the GENTIME form (part II, clause 4(d) “Redelivery – Last Voyage”) provides:
“The Charterers warrant that they will not order the Ship to commence a voyage (including any preceding ballast voyage) which cannot reasonably be expected to be completed in time to allow redelivery of the Ship within the period agreed and declared as per clause 1(a). If nevertheless such an order is given the Owners shall have the option; (i) to refuse the order and require a substitute order allowing timely redelivery; or (ii) to perform the order without prejudice to their rights to claim damages for breach of charter in case of late redelivery. In any event, for the number of days by which the period agreed and declared as per clause 1(a) is exceeded, the Charterers shall pay the market rate if this is higher than the rate stated in Box 24.”
This clause entitles the Shipowners to the market rate for any Overlap Period if the market rate exceeds the Time Charter Party rate. If the market rate is lower, the original rate applies during the Overlap Period. However, this clause does not grant Time Charterers the right to extend the Time Charter Period. This issue is also relevant for Time Charter Trips (TCT).
Extension of Flat Period due to off-Hire periods in Time Charter
Unless explicitly stated in the Time Charter Party, Time Charterers cannot extend the Flat Period due to Off-Hire Periods. If such a clause is included, it is advisable to specify the latest time by which the Time Charterers must notify the Shipowners of their intent to extend the Time Charter Period. Additionally, the Hire rate for the extended period should be clearly defined, along with whether any Off-Hire during the extension would justify further extension.
Delivery and Redelivery of Ship in Time Charter
The Time Charter Period begins with the ship’s delivery to the Time Charterers and ends with its redelivery. The Time Charter Party must address various issues related to delivery and redelivery.
In GENTIME (part II, clause 1(b) & 1(c) “period and delivery – delivery place & delivery time”), the delivery of the ship is described as:
“(b) Delivery Place: The Owners shall deliver the Ship to the Charterers at the port or place stated in Box 8 or a port or place within the range stated in Box 8.
(c) Delivery Time: Delivery shall take place no earlier than the date/time stated in Box 9 and no later than the date/time stated in Box 10. Delivery shall be effected at any time day or night, Saturdays, Sundays and holidays included.”
The GENTIME form also outlines the ship’s redelivery by the Charterers to the Shipowners, as follows (part II, clause 4(a), 4(b) & 4(c) “redelivery – redelivery place – acceptance of redelivery – notice”):
“(a) Redelivery Place: The Charterers shall redeliver the Ship to the Owners at the port or place stated in Box 17 or a port or place within the range stated in Box 17, in the same order and condition as when the Ship was delivered, fair wear and tear excepted.
(b) Acceptance of Redelivery: Acceptance of redelivery of the Ship by the Owners shall not prejudice their rights against the Charterers under this Charter Party.
(c) Notice: The Charterers shall give the Owners not less than the number of days notice stated in Box 18 indicating the port or place of redelivery and the expected date on which the Ship is to be ready for redelivery.”
Additionally, there are clauses related to ship delivery, such as GENTIME part II, clause 1(d) “period and delivery – cancellation”:
“Cancellation: Should the Ship not be delivered by the date/time stated in Box 10 the Charterers shall have the option to cancel the Charter Party without prejudice to any claims the Charterers may otherwise have on the Owners under the Charter Party. If the Owners anticipate that, despite their exercise of due diligence, the Ship will not be ready for delivery by the date/time stated in Box 10, they may notify the Charterers in writing, stating the anticipated new date of readiness for delivery, proposing a new cancelling date/time and requiring the Charterers to declare whether they will cancel or will take delivery of the Ship. Should the Charterers elect not to cancel or should they fail to reply within two (2) working days (as applying at the Charterers’ place of business) of receipt of such notification, then unless otherwise agreed, the proposed new cancelling date/time will replace the date/time stated in Box 10. This provision shall operate only once and should the Ship not be ready for delivery at the new cancelling date/time the Charterers shall have the option of cancelling this Charter Party.”
When shall the ship be delivered and redelivered in Time Charter?
If the ship arrives at the delivery port before the agreed Layday, the Time Charterers are not required to accept delivery until that date. Conversely, if the ship arrives after the agreed delivery date, the Charterers may cancel the Time Charter Party and may also claim Damages in certain circumstances. Time Charter Parties often allow some flexibility for the redelivery period. However, if the Time Charterers return the ship late, the Shipowners may seek compensation. This depends on the terms of the Time Charter Party, the applicable law, and the reasons for the delay. If the Time Charterers knew or should have known at the time of ordering the last Voyage that they would be unable to return the ship on time, the Shipowners have a stronger case for claiming damages. If the delay is caused by factors beyond the Charterers’ control and without their negligence, the situation becomes more complex.
Many Time Charter Parties specify that delivery and redelivery must occur during weekdays and office hours. It is advisable to confirm whether Universal Time Coordinated (UTC) or Local Times (LT) will be used for these timing arrangements.
Where shall the ship be delivered and redelivered in Time Charter Party?
The location for delivery and redelivery can range from a specific port to a broader area or range, such as “ship to be delivered and redelivered in the Continent.” When only a general area is specified, the Shipowners typically choose the delivery place, while the Time Charterers select the redelivery port.
Delivery and redelivery do not necessarily occur while the ship is in Port. Time Charter Parties often include clauses like:
“Ship to be delivered (redelivered) on dropping outward pilot at x-town.”
However, such wording can create complications in situations involving both port and river pilots.
In what condition shall the ship be delivered and redelivered in Time Charter Party?
When delivered to the Charterers, the ship must be seaworthy and meet the contractual specifications. For example, the charter may require:
“. . . she being in every way fitted for ordinary dry cargo service with cargo holds well swept, cleaned and ready to receive cargo before delivery under this charter.”
For redelivery, the following type of clause may apply:
“. . . the ship to be redelivered on the expiration of the charter in the same good order as when delivered to the Charterers (fair wear and tear excepted). . . .”
If no damage occurs during the charter, these provisions ensure that the ship is ready for immediate commercial trading upon delivery to the Time Charterers and also when redelivered to the Shipowners.
A common point of contention is the state of the cargo holds at redelivery. Time Charterers sometimes request clauses such as (NYPE 2015 part of clause 10(a) “rate of Hire; hold cleaning; communications; victualing and expenses”):
“Unless otherwise mutually agreed, the Charterers shall have the option to redeliver the Ship with unclean/unswept holds against a lump sum payment of . . . in lieu of hold cleaning, to the Owners (unless Ship lost).”
Such clauses can be problematic for Shipowners. They cannot reliably estimate the time and labor needed to clean the ship’s holds and might lose valuable time if they are unable to prepare the ship for the next charter during a Ballast Voyage. From the Shipowners’ perspective, it is preferable to address such Lump Sum arrangements once the ship is at the Redelivery Port and the next charter is known.
Allocation of costs at delivery and redelivery of the ship in Time Charter
When the ship is delivered under a Time Charter Party, certain costs—such as Variable Costs for bunkers (fuel), harbour dues, and agency fees—shift from the Shipowners to the Time Charterers. At redelivery, responsibility for these costs reverts to the Shipowners.
Special Survey Reports, including on-Hire and off-Hire Surveys, are typically used to determine the allocation of these costs. These reports document the exact delivery and redelivery times, as well as the quantities of fuel on board. They also record any damage and the overall condition of the ship. Such Damage Reports often play a crucial role in discussions about liability for damages during and after the charter period.
Time Charterers and Shipowners may conduct separate surveys, but it’s common for them to arrange a joint survey conducted by an Independent Surveyor. Both parties must agree on who bears the cost and whose time will be used for the survey. For example, alternative clauses might state:
“Unless otherwise mutually agreed the Owners and Charterers shall each appoint surveyors for the purpose of determining the condition of the Ship at the time of delivery and redelivery hereunder. Surveys whenever possible to be done during service, but if impossible any time lost for on-Hire survey to be for Owners’ account and any time lost for off-Hire survey to be for Charterers’ account,” or “A joint survey at delivery to be arranged by Owners and effected in their time. A joint survey on redelivery to be arranged by Charterers and effected in their time. Costs for both surveys to be shared equally.”
Regarding bunkers (fuel), the Time Charter Party should specify the prices for delivery and redelivery. For instance, NYPE 2015 (part of clause 9(a) “bunkers – bunker quantities and prices”) includes this provision:
“The Charterers on delivery, and the Owners on redelivery or any termination of this Charter Party, shall take over and pay for all bunkers remaining on board the Ship as hereunder. The Ship’s bunker tank capacities shall be at the Charterers’ disposal. Bunker quantities and prices on delivery/redelivery to be (agreed prices to be inserted).”
Alternatively, a clause could stipulate:
“The Charterers shall not take over and pay for bunkers Remaining On Board at delivery but shall redeliver the Ship with about the same quantities and grades of bunkers as on delivery. Any difference between the delivery quantity and the redelivery quantity shall be paid by the Charterers or the Owners as the case may be. The price of the bunkers shall be the net contract price paid by the receiving party, as evidenced by suppliers’ invoice or other supporting documents.”
When delivery or redelivery occurs at the quay, responsibility for harbour dues shifts between the parties during the ship’s port call. This can make it challenging to determine how these costs should be split. To address this, many Time Charter Parties include specific clauses. For example, the LINERTIME and BALTIME forms state (see LINERTIME 2015, part II, clause 5 “Time Charterers to provide”):
“The Charterers to pay all dock, harbour, light and tonnage dues at the ports of delivery and re-delivery (unless incurred through cargo carried before delivery or after re-delivery).”
Hire
Hire refers to the financial payment made by the Time Charterers to the Shipowners for the use of the manned and equipped ship. Generally, Hire is payable from the moment the ship is delivered to the Time Charterers until it is redelivered to the Shipowners at the end of the Time Charter Period. However, under specific conditions outlined in “Off-Hire” or “suspension of Hire” Clauses, Time Charterers may be exempt from paying Hire.
Fixing of Hire
Hire can be calculated in several ways, such as “X US Dollars per 30 days,” “X US Dollars per day,” or “X US Dollars per 30 days and deadweight ton (DWT).” The chosen method often depends on the ship type and the trade.
It is advisable to avoid expressing Hire as per month, which typically means a calendar month. The varying lengths of months (28 to 31 days) can cause discrepancies in daily Hire rates and complicate off-Hire calculations. Instead, it’s preferable to specify Hire in a way that maintains a consistent daily rate throughout the Time Charter Period. If monthly payments are agreed, they are commonly calculated and payable “per month of 30 days.”
Payment of Hire
In GENTIME, the procedure for Hire payment is described as follows (part II, clause 8(b) “Hire – payment”):
“Payment of Hire shall be made in advance in full, without discount every 15 days to the Owners’ bank account designated in Box 25 or to such other account as the Owners may from time to time designate in writing, in funds available to the Owners on the due date.”
In Time Chartering, Hire is paid in advance, unlike Voyage Chartering, where the Shipowners typically receive their Freight after the voyage is completed and the cargo is ready for delivery. Time Charterers pay in advance because, unlike Voyage Chartering, Shipowners in Time Chartering cannot rely on a Lien over the cargo to secure payment.
Common payment periods are 15 or 30 days, although other arrangements are sometimes used. For example, NYPE 2015 (clause 11(a) “Hire payment – Payment”) specifies that payment must be made “15 days in advance,” a frequent practice in shorter Time Charters.
It is important not to confuse payment intervals with the periods for which Hire is calculated. If Hire is calculated for 30-day periods and paid in advance, the payment date may vary, but the amount remains consistent (excluding deductions for off-Hire). Conversely, if Hire is agreed to be paid “monthly in advance” at a set daily rate, the payment date will remain fixed, but the amount will differ depending on the number of days in the month.
Late Payment of Hire and Shipowners’ Security in Time Charter
Hire is payable in advance. If Charterers make late or insufficient payments, the Shipowners are entitled, under English law and most Time Charter Party forms, to cancel the Time Charter Party. For example, GENTIME (part II, clause 8(c) “Hire – Default”) states:
“In default of punctual and regular payment of the Hire the Owners shall have the right to withdraw the Ship without prejudice to any other claim the Owners may have against the Charterers under this Charter Party.”
This strict wording allows the Shipowners to cancel the charter even for a minor payment default. The purpose of this clause is to protect Shipowners against insolvent or unwilling Time Charterers. However, in practice, the clause often fails to provide the intended protection, especially once cargo is loaded. After a Bill of Lading (B/L) is issued, the Shipowners have a legal obligation to the Bill of Lading (B/L) Holder to complete the transportation. Without a Lien over the Freight Payable under a sub-charter, the Shipowners may be required to deliver the cargo without receiving any payment from the Time Charterer.
Disputes over the right to cancel for payment default have led to conflicting case law. Shipowners may lose their cancellation rights if they have previously accepted late payments without protest. Furthermore, a small default in payment may not justify cancellation if past payments were made correctly. It is therefore crucial for Shipowners to always Protest when payments are late or when Unauthorized Deductions are made from the Hire. Failing to do so may establish a precedent that could limit their rights in future payment disputes.
Hire is typically paid via banks, and payment is often considered complete only when the funds reach the Shipowners’ bank. Banking delays are common, so many Time Charter Parties include a “Non-Technicality Clause” or “Anti-Technicality Clause” to prevent Shipowners from canceling due to minor technical delays. Such clauses generally require Shipowners to notify Charterers of late payments or contested amounts and provide Charterers with additional time to resolve the issue before cancellation. For example, GENTIME (part II, clause 8(c) “Hire – Default”) includes the following provision:
“Where there is a failure to make punctual and regular payment of Hire due to over- sight, negligence, errors or omissions on the part of the Charterers or their bankers,
the Owners shall give the Charterers written notice of the number of clear banking days stated in Box 26 (as recognized at the agreed place of payment) in which to rectify the failure, and when so rectified within such number of days following the Owners’ notice, the payment shall stand as regular and punctual. Failure by the Charterers to pay Hire within the number of days stated in Box 26 of their receiving the Owners’ notice as provided herein, shall entitle the Owners to withdraw the Ship without further notice and without prejudice to any other claim they may have against the Charterers.
Further, at any time after the period stated in Box 26, as long as Hire remains unpaid the Owners shall, without prejudice to their right to withdraw, be entitled to sus- pend the performance of any and all of their obligations hereunder and shall have no responsibility whatsoever for any consequences thereof in respect of which the Charterers hereby agree to indemnify the Owners. Notwithstanding the provisions of Clause 9(a)(ii), Hire shall continue to accrue and any extra expenses resulting from such suspension shall be for the Charterers’ account.”
It is evident that both Time Charterers and Shipowners must exercise caution. Time Charterers should ensure that Hire payments are remitted well in advance of the due date to reduce the risk of cancellation. Shipowners, on the other hand, should seek legal advice before canceling for payment default, as a wrongful cancellation may entitle the Time Charterers to claim damages.
In addition, Time Charter Parties often include a “Lien Clause” that may read as follows (SHELLTIME 4, clause 26 “lien”):
“Owners shall have a lien upon all cargoes and all Freights, sub-Freights and demurrage for any amounts due under this charter; and Charterers shall have a lien on the ship for all monies paid in advance and not earned, and for all claims for damages arising from any breach by Owners of this charter.”
The purpose of this clause is to safeguard the Shipowners against Insolvent Time Charterers. However, its practical utility is often limited. Typically, the cargo onboard the ship does not belong to the Time Charterers, and the Shipowners are obligated under the Bill of Lading (B/L) to deliver the cargo to the Bill of Lading (B/L) Holders. Once the Shipowners have commenced loading the cargo, their responsibilities to the Cargo Owners generally require them to complete the voyage and deliver the cargo, even if the Time Charterers fail to pay the Hire.
With respect to “sub-Freights belonging to the Time Charterers and Bill of Lading (B/L) Freights,” it can be challenging for Shipowners to obtain the necessary details to inform the Bill of Lading (B/L) Freight Payer of their lien over the sub-Freight. In many cases, the sub-Freight (or Bill of Lading (B/L) Freight) has already been prepaid, leaving the owners without any security.
The issue of late or non-payment of Hire and the Shipowners’ right to Withdraw the ship is a major topic covered in the FONASBA Time Charter Interpretation Code 2000.
Deductions from Hire in Time Charter
When paying Hire in advance, Time Charterers often seek to make deductions for off-Hire that occurred in previous periods, cash advances from agents to the master, disbursements on Shipowners’ account, Planned off-Hire such as drydocking, and other monetary claims they may have against the Shipowners. Since payment default can give Shipowners grounds to cancel the Time Charter, it’s crucial for Time Charterers to rely on a clause that permits these Deductions or to obtain the Shipowners’ approval before making them. The extent to which Time Charterers can deduct amounts without prior consent from owners or without explicit provisions in the Time Charter Party is not clearly defined.
Payment of last instalment of Hire in Time Charter
Since the final Hire period is often shorter than the usual Full Hire payment cycle, and because Time Charterers frequently have a claim against the Shipowners for Bunkers Remaining on Board (BOB) at redelivery, Time Charter Parties frequently include a “last Hire payment clause.” An example clause (GENTIME, part II, clause 8(e) “Hire – redelivery adjustment”) might state:
“Should the Ship be on her voyage towards the port or place of redelivery at the time payment of Hire becomes due, said payment shall be made for the estimated time necessary to complete the voyage, less the estimated value of the fuels remaining on board at redelivery. When the Ship is redelivered to the Owners any difference shall be refunded to or paid by the Charterers as appropriate, but not later than thirty days after redelivery of the Ship.”
Off-Hire in Time Charter
As mentioned earlier, the general rule is that Time Charterers must pay Hire from the ship’s delivery to the Time Charterers until its redelivery to the Shipowners at the end of the agreed Time Charter Period. The Time Charterers normally bear the financial risk for delays caused by factors such as bad weather, pilot strikes, or Stevedore strikes during the charter period. However, if the ship is delayed under certain conditions defined in the Time Charter Party—typically related to the crew or the ship itself—the Time Charterers may be entitled to compensation through an “Off-Hire Clause” or “Suspension of Hire Clause.” Examples of such clauses appear in GENTIME (part II, clause 9 “off-Hire”), SHELLTIME 4 (clause 21 “off-Hire”), and NYPE 2015 (clause 17 “off-Hire”).
Time Charterers can claim off-Hire only if the delay stems from a reason specified in the Off-Hire Clause or recognized under applicable law. Off-Hire is akin to Liquidated Damages (e.g., demurrage), meaning it represents a pre-agreed compensation amount between the Shipowners and Time Charterers. The compensation is based on the Hire amount, and Time Charterers are not required to prove their actual losses. Even if the Time Charterers’ losses exceed the agreed Hire, they are limited to the pre-agreed compensation. Conversely, if the actual loss is less, Time Charterers still receive compensation based on the Hire. One distinctive feature of off-Hire is that Time Charterers may deduct it from Hire without a Breach of Charter Party or Negligence by the Shipowners. However, if the Shipowners are in Breach of Charter Party or their crew has been Negligent, Time Charterers may have the right to choose between claiming damages, off-Hire, or both.
Off-Hire Clauses sometimes include a specific provision regarding “detention for Charterers’ Account.” For example, LINERTIME 2015 (part II, clause 14(B) “suspension of Hire etc. – detention for Charterers’ account”) states:
“In the event of the Ship being driven into port or to anchorage through stress of weather, trading to shallow harbours or to rivers or ports with bars or suffering an accident to her cargo, any detention of the Ship and/or expenses resulting from such detention to be for the Charterers’ account even if such detention and/or expenses, or the cause by reason of which either is incurred, be due to, or be contributed to by, the negligence of the Owners’ servants.”
This provision does not address situations where the ship’s operations are hindered by Time Charterers’ Breach of the Time Charter Party. In such cases, the Shipowners should not bear the consequences. This can be resolved in different ways: the ship may remain on-Hire, or it may go off-Hire with the Shipowners compensated through damages. The distinction can be significant if, for example, the Charterers carry insurance covering liability for hull damage. Such insurance might reimburse Charterers for damages, but not for Hire costs during a period when the ship is hindered under a “Detention for Charterers’ Account” Clause.
Off-Hire Claim in Time Charter
When determining whether a ship qualifies for off-Hire and preparing an Off-Hire Claim, the following questions must be addressed:
• Is the reason for the delay listed as a ground for off-Hire in the clause or under applicable law?
• Is there a “threshold rule” that applies to the situation?
• How much time has been lost?
• What are the monetary losses?
• What amount should be deducted for off-Hire?
Before examining these questions, it’s important to note that if the Time Charterers are responsible for the delay, they typically cannot claim off-Hire compensation from the Shipowners—even if the delay would otherwise fall under the off-Hire clause (as in LINERTIME 2015 clause 14(B)).
Grounds for off-Hire in Time Charter
The first step is to confirm that the cause of the delay is covered by the Off-Hire Clause in the Charter Party. Some Time Charter Parties include more extensive grounds than others.
When English law governs the Charter Party, the Off-Hire Clause is often interpreted narrowly. In other legal systems, such as Scandinavian law, the clause is seen more as a general principle supplemented by maritime code provisions. As a result, Time Charterers are generally less likely to receive off-Hire compensation under English law than under Scandinavian law or other systems.
Threshold Rule in Time Charter
If the delay falls within the scope of the Off-Hire Clause, the next step is to determine if a threshold exists and whether it applies.
Many Standard Time Charter Party forms set thresholds, specifying that Time Charterers are only entitled to Off-Hire if the ship is hindered or prevented for more than a certain number of hours (usually 12 or 24 Hours). For example, BALTIME 1939 (revision 2001, part II, clause 11 “suspension of Hire etc.”) includes a 24-hour threshold, while NYPE 2015 does not include such a provision favoring the Shipowners.
Under BALTIME’s threshold rule, the hindrance must continue for a specified number of consecutive hours. For instance, if a main engine problem causes the ship to steam at half speed for 30 hours, the 24-hour threshold does not bar off-Hire, even if the total time lost is only 15 hours.
The BALTIME Off-Hire Clause sets a threshold rather than a deduction or deductible. If the ship stops for 35 hours due to an engine breakdown, the off-Hire period is 35 hours—not 35 less 24 hours. Some Time Charter Party forms have thresholds for certain delays but not for others.
For example, LINERTIME 2015 (part II, clause 14(A) “suspension of Hire etc.”) includes a threshold for certain delays (the number of hours must be agreed in box 31) but does not apply a threshold for winch breakdowns. LINERTIME 2015 (part II, clause 14(A) “suspension of Hire etc. – winch breakdown”) provides:
“In the event of a breakdown of a winch or winches, not caused by carelessness of shore labourers, the time lost to be calculated pro rata for the period of such ineffi- ciency in relation to the number of winches required for work. If the Charterers elect to continue work, the Owners are to pay for shore appliances in lieu of the winches, but in such cases the Charterers to pay full Hire. Any Hire paid in advance to be adjusted accordingly.”
The threshold rule often leads to disputes and raises questions about its fairness. Since Time Charterers pay Hire in exchange for the use of the ship, it is not immediately clear why they should pay for periods when the ship cannot be used due to breakdowns or other issues on the Shipowners’ side.
Loss of Time in Time Charter
The next step is to determine the loss of time. Time Charterers are not always entitled to Off-Hire for every moment of lost time. For example, GENTIME (part II, clause 9(a) “off-Hire – inability to perform services”) specifies that the ship is Off-Hire only when it is “unable to comply with instructions of the Charterers.” Thus, if the instruction is simply to Await Orders, the ship may still be considered On Hire even if the main engine is temporarily out of order.
However, Time Charterers may argue that the ship should be ready for immediate departure at all times, including when awaiting orders, and thus consider it Off-Hire as long as the main engine is non-operational.
Another important scenario involves a ship that experiences an engine breakdown in the Black Sea and is towed to Istanbul for repairs. The question arises: does the ship go On Hire as soon as the engine is repaired, or are the Time Charterers entitled to Off-Hire until the ship returns to the position it held when it went Off-Hire? To address this, Time Charterers often prefer to include a “put back” clause, such as the one found in NYPE 2015 (part of clause 17 “off-Hire”):
“Should the Ship deviate or put back during a voyage, contrary to the orders or directions of the Charterers, for any reason other than accident to the cargo or where permitted in Clause 22 (Liberties) hereunder, the Hire to be suspended from the time of her deviating or putting back until she is again in the same or equidistant position from the destination and the voyage resumed therefrom.”
The extent to which consequential loss of time qualifies as Off-Hire is often unclear. For example, if the ship was Off-Hire in port awaiting crew (due to a deficiency of men) and then, once the crew is onboard, departure is delayed because of a tug strike that began during the Off-Hire period, it is uncertain whether this subsequent delay also counts as Off-Hire. Determining the answer depends on the wording of the Off-Hire Clause and the applicable law.
NYPE 2015 (clause 38 “slow steaming”) also addresses situations where the ship operates at reduced speed. According to NYPE 2015 (last part of clause 17 “off-Hire”), when time is lost due to slow steaming caused by a defect, breakdown, or similar issue, that lost time must be deducted from Hire. Furthermore, any bunkers (fuel) consumed by the ship while Off-Hire, as well as the cost of replacing those bunkers, are for the Shipowners’ Account and are deducted from Hire.
Deduction of off-Hire in Time Charter
Once the loss of time has been established, it must be converted into monetary terms. This process is straightforward when Hire is calculated per day, per 30 days, or similar intervals. However, when Hire is expressed “per month,” the calculation can be more complex, as the daily Hire rate (which may vary) must first be determined.
Because default in payment of Hire can give the Shipowners the right to cancel the Time Charter Party, Time Charterers must thoroughly review their legal position before making any Off-Hire deductions.
Other Obligations During Off-Hire Periods in Time Charter
When the ship is Off-Hire for an extended period, questions often arise regarding the extent of the Time Charterers’ obligations under the Time Charter Party during those Off-Hire Periods. For example, are the Time Charterers required to cover the cost of bunkers (fuel) consumed or harbour dues incurred during the Off-Hire period?
Legally, it appears clear—particularly under English and US law—that unless the Time Charter Party specifically states otherwise, the Time Charterers’ other obligations remain in effect during Off-Hire Periods. However, in practice, Time Charterers generally do not pay for bunkers (fuel) during these periods. To formally establish this, the phrase “whilst on Hire” is often included at the start of a clause such as “Time Charterers to provide” (GENTIME, part II, clause 13 “Charterers’ obligations”).
Insurance for Loss of Hire in Time Charter
Long Off-Hire periods can be devastating, especially for Shipowners who operate only one or a few ships. These Shipowners should consider obtaining Loss of Hire Insurance or Loss of Earnings Insurance, which provides coverage when the ship goes Off-Hire due to a breakdown or other emergency.
Traditional Loss of Hire Insurance typically covers time lost due to the same types of incidents that are insured under the ship’s Hull Insurance. This means that time lost because of strikes is not covered, though Shipowners may choose to arrange separate Strike Insurance for additional protection.
Damages and Pre-termination of Time Charter
When a chartered ship proves to be substandard, Time Charterers can face serious challenges. If the ship suffers frequent technical difficulties and breakdowns, or is often prevented from performing its service for other reasons, the Time Charterers may be entitled to compensation under the Off-Hire Clause. However, consequential damages and costs are generally not covered.
If the ship’s condition is particularly poor, it may become difficult—or even impossible—for the Time Charterer to use it effectively. One way for Time Charterers to safeguard themselves is to request a Performance Guarantee from the Shipowners, included in the Charter Party. Drafting such a guarantee can be challenging, as good performance depends not only on technical reliability, but also on maintenance, manning, and the capability and willingness of the Shipowners, Ship Master, officers, and crew to provide optimal service.
The primary issue with performance guarantees is that Shipowners are often reluctant to accept such obligations.
While a performance guarantee gives the Charterers strong protection and the ability to cancel the Charter Party if the ship fails to meet agreed operating standards, this cancellation option is generally unacceptable to Shipowners and their financial institutions.
Considering the matter of ship’s poor performance, the following are some of the key questions and issues that arise for Time Charterers when they seek to Claim Damages (beyond Off-Hire) or wish to terminate the Time Charter Party before the flat period ends. Only a few potential legal arguments Time Charterers might use to assert ship’s Poor Performance are highlighted below:
• Misdescription of the ship (i.e., the ship does not match the description provided by the owners during Chartering Negotiations and stated in the Charter Party).
• The ship is not maintained or kept in line with its initial description.
• The ship fails to be delivered or maintained in a seaworthy condition as stated or implied in the Charter Party.
• The ship’s Ship Master, officers, and crew lack the formal or practical competence needed to handle the ship, its equipment, and its cargo.
Routines and Allocation of Costs in Time Charter
This section places greater focus on relevant clauses within the Time Charter Party.
1- Ship Master’s Position in Time Charter
Under a Time Charter, Ship Master holds a pivotal role, as he must follow instructions from both the Shipowner and the Time Charterer. Representing two opposing parties, Ship Master is tasked with safeguarding the interests of both.
While Ship Master receives Employment Instructions from the Time Charterers and is expected to comply, he is not obligated to follow all orders under every circumstance. Ship Master must prioritize the safety of the crew, the ship, and the cargo, as well as the interests of Shipowners and other third parties. If, in Ship Master’s well-founded judgment, the Time Charterers’ orders endanger the crew, ship, cargo, or other property, he is both entitled and required to reject those orders. In such a situation, Ship Master must communicate with both Time Charterers and Shipowners to find a resolution without provoking disputes among the parties.
If Ship Master does not receive clear and acceptable orders from the Time Charterers and Cargo Owners, he should default to the orders from Shipowners, provided those orders ensure safety. Many Time Charter Party Forms include a clause addressing situations in which Time Charterers are dissatisfied with Ship Master, officers, or crew. For example, some clauses may mirror the wording in NYPE 2015, clause 8(b) “Performance of Voyages,” while other forms have stricter provisions that compel Shipowners to replace the Ship Master.
Whether explicitly stated or implied in the Charter Party, Ship Master is obligated to prosecute the voyage with Utmost Despatch. Since Time Charterers pay per time unit, any delays typically result in reduced revenue. During the voyage, Ship Master must take the fastest safe route. Upon nearing the port, all documentation should be ready to prevent delays, and Ship Master should oversee loading and discharging operations to achieve the Quickest Possible Despatch. Ship Master must also work cooperatively with Time Charterers and their Agents, offering the necessary information and assistance.
2- Directions and instructions to the ship in Time Charter
All Time Charter Parties include Employment Clauses such as NYPE 2015, clause 8 “performance of voyages,” which states:
“(a) Subject to Clause 38 (Slow Steaming) the Master shall perform the voyages with due despatch and shall render all customary assistance with the Ship’s crew. The Master shall be conversant with the English language and (although appointed by the Owners) shall be under the orders and directions of the Charterers as regards employment and agency; and the Charterers shall perform all cargo handling, including but not limited to loading, stowing, trimming, lashing, securing, dunnaging, unlashing, discharging, and tallying, at their risk and expense, under the supervision of the Master.
(b) If the Charterers shall have reasonable cause to be dissatisfied with the conduct of the Master or officers, the Owners shall, on receiving particulars of the complaint, investigate the same, and, if necessary, make a change in appointments.”
Since the Time Charterers have commercial use of the ship, the Ship Master receives all employment instructions and directions from them rather than from the Shipowners. The Ship Master is responsible for keeping accurate and complete voyage logs as requested by Time Charterers or their Agents.
The Ship Master must also provide Time Charterers with copies of log-books, port sheets, weather reports, and reports on the ship’s speed and bunker (fuel) consumption, as these documents are vital for the Time Charterers’ dealings with sub-Charterers, shippers, and receivers, as well as their relationship with the Shipowners.
3- Customary Assistance and Overtime in Time Charter
Most Time Charter Party Forms require the Ship Master to provide customary assistance with the ship’s crew. This concept is often the subject of discussion and disagreement between Charterers and Shipowners.
In general, Customary Assistance means that the Ship Master and crew must offer the same level of support to Time Charterers as they would to Shipowners if they were trading on their own account. This includes typical hold cleaning after discharging without extra charge to Time Charterers, as well as rigging and opening and closing hatches before, during, and after loading and discharging. While the obligation to provide customary assistance isn’t limited to tasks that can be completed without crew overtime, Time Charterers must recognize that cleaning and rigging may cause some delays. If Time Charterers wish to avoid delays by employing additional shore labor, those costs are generally for their account. Likewise, when local regulations or customs prevent the crew from performing these tasks, the expense of stevedores or extra labor also falls to the Time Charterers.
During the voyage, the Ship Master and crew should, at no additional cost, oversee the cargo and perform any necessary additional lashing or securing. However, Time Charterers cannot typically demand that the crew, without additional pay, undertake shifting and restowing of large quantities of cargo.
For practical reasons, Shipowners and Time Charterers sometimes reach more detailed agreements about hold cleaning. For instance, they might stipulate that all hold cleaning is for the Time Charterers’ Account and must be done by shore labor if the Ballast Voyage is shorter than a certain number of days. On longer Ballast Voyages, the cleaning may be done by the crew.
Regarding overtime for officers and crew, several approaches are used. Sometimes the Hire includes officer and crew overtime, while in other cases Time Charterers pay an additional monthly lump sum for overtime. Both methods are generally more practical than maintaining a separate record of overtime to be charged to Time Charterers’ accounts, as doing so would increase the administrative workload for both the crew and the offices of Shipowners and Time Charterers.
4- Allocation of costs in Time Charter
Shipowners are responsible for providing the ship to the Time Charterers and, during the time charter period, covering the costs of manning, insurance, maintenance, and other operational expenses. Conversely, the Time Charterers bear the costs of bunkers (except for lubricating oil, which typically falls under the Shipowners’ Account), harbour dues, pilotage, cargo handling (loading/discharging), and other expenses related to the ship’s Commercial Use.
Time Charter Parties typically include clauses that delineate the obligations of each party. These clauses, often titled Obligations and Requirements, tend to be more detailed in modern Time Charter agreements than in older forms. However, it is impossible to account for every potential cost in a Time Charter Party. As a result, disputes frequently arise over the responsibility for certain expenses.
Generally, costs that are compulsory in a port are considered to be the Time Charterers’ Responsibility, as these costs directly result from their instructions to the ship. The Shipowners have no choice but to pay these costs when the ship is directed to a particular port. For other costs that are not mandatory and not clearly assigned to either party, the matter must be discussed on a case-by-case basis. For additional insight into these clauses, Shipbrokers may consult GENTIME (part II, clauses 11–16), NYPE 2015 (clauses 6–7), and SHELLTIME 4 (clauses 6–7).
Certain costs, such as watchmen and garbage disposal fees, often lead to disputes. Agency Fees also frequently cause disagreements. Typically, Agency Fees are the responsibility of the Time Charterers. Most Time Charterers understand that they must provide a basic level of service from Agents at no additional cost to the Shipowners. However, if the Agency Fees are specifically tied to expenses that are the Shipowners’ Responsibility, such as manning or maintenance, Time Charterers are usually less willing to pay. To clarify these situations, Time Charterers sometimes include language like:
“Whilst on Hire the Charterers to pay for . . . agencies (unless attributable to maintenance and manning of the Ship or otherwise for the benefit solely of the Ship, Master, Crew or the Owners). . . .”
5- Information in Time Charter
To facilitate better coordination and planning, both Shipowners and Time Charterers generally have a duty to keep each other informed about the ship’s future schedules. Shipowners rely on these schedules to organize crew changes, order spare parts, and plan other operational requirements. Similarly, Time Charterers need advance notice of the Shipowners’ plans for drydocking and other maintenance to align their operations accordingly.
Cargo Liability in Time Charter
In Time Chartering, as in Voyage Chartering, Time Charterers and Shipowners may allocate cargo liability as they see fit. However, because the Bill of Lading (B/L) is involved, the legal complexities can become significant. Typically, Cargo Owners claim under the Bill of Lading (B/L), and two main questions arise:
Who—Shipowners, Time Charterers, or both—is liable to the Cargo Owners?
How should the liability ultimately be divided between Time Charterers and Shipowners?
1- Liability to Cargo Owners in Time Charter
Cargo liability is one of the main risks for Time Charterers under Time Charters. Depending on the terms of the Time Charter Party and the applicable law, a Time Charterer might be considered the legal “Carrier” of the cargo in cases of loss or damage. This potential liability arises in two key ways. First, the Time Charterer may be directly liable to Cargo Owners if they issued their own Bill of Lading (B/L) or if, under relevant laws (based on where the accident occurred, where the ship trades, or the terms of the Bill of Lading (B/L)), the Time Charterer is deemed the Carrier.
Second, a Time Charterer may be indirectly liable for cargo damage if they are required to indemnify Shipowners or Disponent Owners or sub-Charterers under a charter contract or a Booking Note. For example, Time Charterers may have to compensate Shipowners for cargo damage caused by poor stowage or defective lashing or securing performed by the Time Charterers’ stevedores. Similar risks are borne by Voyage Charterers under FIOS terms.
Even if Time Charterers have a clear right to indemnity for cargo damage from the Shipowners, Disponent Owners, or sub-Charterers, they remain exposed if those parties are insolvent or if the claim cannot be enforced.
If Time Charterers issue their own Bill of Lading (B/L), the carriage contract is usually between the Charterers and the Shippers. In this case, the terms on the Bill of Lading (B/L) must clearly identify the Carrier. If, however, the Bill of Lading (B/L) is issued on the owners’ form, particularly without any reference to the ship being time-chartered, the contract of carriage may be deemed to exist between Shipowners and Shippers.
Older Bill of Lading (B/L) forms often included Identity of Carrier or Demise Clauses, which specified that the Shipowner was the Carrier.
An Identity of Carrier provision, such as in CONLINEBILL 1978, clause 17, might state:
“The Contract evidenced by this Bill of Lading is between the Merchant and the Owner of the ship named herein (or substitute) and it is therefore agreed that said Shipowner only shall be liable for any damage or loss due to any breach or non-performance of any obligation arising out of the contract of carriage, whether or not relating to the ship’s seaworthiness. If, despite the foregoing, it is adjudged that any other is the Carrier and/or bailee of the goods shipped hereunder, all limitations of, and exonerations from, liability provided for by law or by this Bill of Lading shall be available to such other.
It is further understood and agreed that as the Line, Company or Agent who has executed this Bill of Lading for and on behalf of the Master is not a principal in the transaction, said Line, Company or Agent shall not be under any liability arising out of the contract of carriage, nor as Carrier nor bailee of the goods.”
A Demise Clause, by contrast, might state:
“If the ship is not owned or chartered by demise to the company or line by whom this Bill of Lading (B/L) is issued, the Bill of Lading (B/L) shall take effect as a contract with the Shipowner or Demise Charterer as the case may be as principal made through the Agency of the said company or line who act as agents only and shall be under no personal liability whatsoever in respect thereof.”
Under such clauses, liability for cargo under the Bill of Lading (B/L) is attributed to the ship’s owners (the Performing Carrier) rather than to the Time Charterers (the Contractual Carrier). It’s important to note that these clauses have been ruled invalid in numerous jurisdictions, meaning the Time Charterers may ultimately be held liable. However, under English law, these clauses are generally considered enforceable.
That said, under the Hague/Hague-Visby Rules, it has been argued that such clauses qualify as non-responsibility clauses, which the Rules prohibit. The Hamburg Rules go further, assigning liability to both the Contracting Carrier and the Actual (Performing) Carrier, rendering Demise and Identity of Carrier Clauses potentially unenforceable.
Additionally, since 1994, UCP 500 (art. 23(a)) has required that the apparent Carrier be clearly identified on the Bill of Lading (B/L).
Accepting a Demise or Identity of Carrier Clause could, in some situations, lead to Breach of Letter Of Credit (L/C) requirements. This serves as another reason to avoid including these clauses. Indeed, a “Contractual Carrier” attempting to incorporate such clauses may be perceived as trying to eliminate all liability, raising concerns over their inclusion.
Even though Time Charterers may have a legal basis to deny cargo claims under the Bill of Lading (B/L) by referring to identity of carrier or demise clauses, they often handle these claims as if they are liable. This approach is especially common among large operators who use their own Bill of Lading (B/L) forms, such as in liner shipping. These operators aim to preserve good relationships with cargo owners and maintain their strong market reputation, often settling claims as though the Time-Chartered ship were their own.
Today, these clauses are viewed as outdated, confusing, and contentious. As a result, most reputable liner operators no longer include them in their Bill of Lading (B/L) terms. Modern standard Bills of Lading—such as CONLINEBILL 2000 and CONLINEBILL 2016—have shifted towards a straightforward approach. For instance, these documents now place the Carrier’s name and Principal place of business in a clearly designated box on the first page, eliminating ambiguity and misinterpretation.
Ultimately, cargo liability hinges on the identity of the Carrier. According to an analysis by Hill Dickinson, international cargo conventions define this role as follows:
- Hague/Hague-Visby Rules (art. I(a)): The Carrier is “the owner or Charterer who enters into the contract of carriage with a shipper.”
- Hamburg Rules (arts. 1.1, 10, and 11): The Carrier is “any person by whom or in whose name a contract of carriage has been concluded with a shipper,” encompassing both the “actual” and the “contractual” Carrier.
- Rotterdam Rules (art. 1): The Carrier is “a person that enters into a contract of carriage with a shipper,” with obligations extending to “performing parties” acting under the Carrier’s request or control.
2- Allocation of Cargo Liability between Shipowners and Charterers in Time Charter
Time Charter Parties allow Charterers and Shipowners to freely determine how cargo liability is allocated. Certain Standard Time Charter Party Forms, like BALTIME, tend to reduce owners’ liability. For example, under BALTIME 1939 (revision 2001, part of clause 12 “responsibility and exemption”), the Shipowners are only held responsible for cargo loss or damage if it arises from their lack of due diligence in making the ship seaworthy, or from personal acts, omissions, or defaults of the Shipowners or their Ship Managers.
In some cases, Charter Parties incorporate a paramount clause that applies the Hague or Hague-Visby Rules, which can complicate the situation further, particularly when included in a Time Charter Party.
To avoid lengthy and expensive disputes over cargo claims, several P&I Clubs within the International Group of P&I Clubs (IG) have established a standardized process to fairly and efficiently apportion liability under NYPE or ASBATIME Time Charterparties. This agreement, known officially as Inter-Club NYPE Agreement,” is commonly referred to as The Inter-Club Agreement (ICA) or The Produce Formula.
Initially introduced in 1970, the Inter-Club Agreement (ICA) has since been revised multiple times (1984, 1996, 2011) and provides a framework for allocating cargo liability under Time Charter Parties or related contracts of carriage.
The current version of the Inter-Club Agreement (ICA) is automatically incorporated into the NYPE 2015 Form through clause 27 (“Cargo Claims”) unless otherwise amended. However, the ICA is not exclusive to NYPE or ASBATIME forms; it can also be incorporated into other Time Charter Party forms, such as BALTIME (even when a Paramount Clause is included).
While parties are free to incorporate the Inter-Club Agreement (ICA) into any Charter Party, they should carefully consider potential inconsistencies between the Inter-Club Agreement (ICA) and the specific Charter Party wording. Partial incorporation of the Inter-Club Agreement (ICA) is possible but not recommended. If the Inter-Club Agreement (ICA) is to be incorporated, clear and precise language should be used to specify the extent of its application. Given the importance of cargo liability apportionment—especially in long-term Time Charters—Shipowners are advised to consult their P&I Clubs for legal guidance.
Damage to the Ship in Time Charter
During the Time Charter Period, the ship is subject to Wear and Tear as well as certain risks of damage. Both Wear and Tear and damage can lead to significant maintenance and repair costs. It is therefore important to establish a clear allocation of liability. It has already been mentioned that the Shipowners are responsible for insuring the ship and maintaining her in a thoroughly efficient state in hull and machinery throughout the Time Charter Period.
The Redelivery Clause typically states that the Time Charterers must redeliver the ship “in the same good order and condition as when delivered under the charter (fair wear and tear excepted).”
In some cases, the Time Charter Party also includes a Clause specifying under what conditions the Time Charterers are liable for ship damage. However, in most instances, this determination must be made by interpreting other clauses and referring to the applicable law.
1- Ship’s Damage from Bad Weather, Collision, and Grounding in Time Charter
In general, Shipowners have limited recourse for compensation from Time Charterers for damage to the ship caused by bad weather, collision, grounding, or similar events. Only if Shipowners can demonstrate that the Time Charterers’ Breach of Time Charter Party or negligence caused the damage might they have a case for compensation. For example, if Time Charterers direct the ship to an unsafe location or port, leading to severe damage, Shipowners may seek redress.
2- Ship’s Damage from Bunkers in Time Charter
Disputes can also arise due to the fact that Time Charterers cover the cost of bunkering (fueling) while Shipowners are responsible for maintaining the ship’s operational performance to agreed standards.
Past increases in Bunker Prices have led to a side market of lower-quality bunker (fuel) oil. Traditionally, Time Charter Parties offered only brief descriptions of the fuel oil to be supplied to the ship. However, after numerous issues with substandard fuel, many Time Charter Parties now provide more detailed fuel specifications. For example, GENTIME (part II, clause 6 “Bunkers” and clause 13(b) “Charterers’ obligations – Bunker Fuel”) and NYPE 2015 (clause 9 “Bunkers”) include more precise descriptions.
NYPE 2015 specifically addresses Bunker Quality and Time Charterers’ liability for damage caused by unsuitable fuel in clause 9(d) “Bunker Quality and Liability,” which states:
“(i) The Charterers shall supply bunkers of the agreed specifications and grades: (text to be entered). The bunkers shall be of a stable and homogeneous nature and suitable for burning in the Ship’s engines and/or auxiliaries and, unless otherwise agreed in writing, shall comply with the International Organization for Standardization (ISO) standard 8217:2012 or any subsequent amendments thereof. If ISO 8217:2012 is not available then the Charterers shall supply bunkers which comply with the latest ISO 8217 standard available at the port or place of bunkering.
(ii) The Charterers shall be liable for any loss or damage to the Owners or the Ship caused by the supply of unsuitable fuels and/or fuels which do not comply with the specifications and/or grades set out in Sub-clause (d)(i) above, including the off-loading of unsuitable fuels and the supply of fresh fuels to the Ship. The Owners shall not be held liable for any reduction in the Ship’s speed performance and/or increased bunker consumption nor for any time lost and any other consequences arising as a result of such supply.”
3 – Ship’s Damage from Cargo in Time Charter
If the ship is damaged by cargo, Shipowners have two potential routes for seeking compensation from Time Charterers. First, Time Charterers may be held liable if they have loaded cargo that is generally considered “Dangerous” or is prohibited under the Time Charter Party. Many Time Charter Parties include clauses that exclude certain cargo types and prohibit cargoes likely to harm the ship.
Second, Shipowners may seek compensation if the cargo was loaded, stowed, or secured improperly, causing damage. This scenario is more complex since the master and officers typically oversee loading and securing. Determining the exact boundary between Time Charterers’ and Shipowners’ Responsibilities can be difficult, but the general trend is that Time Charterers are held accountable unless there is clear negligence by the Ship Master or officers.
4- Ship’s Damage from other Causes in Time Charter
One common source of additional ship damage is that caused by Stevedores. The extent of Time Charterers’ liability in these cases should be clearly defined in the Time Charter Party, while applicable laws provide further guidance.
Many Time Charter Parties include special clauses outlining conditions under which Time Charterers are responsible for Stevedore-caused damage. These clauses can be harsh for Shipowners, often requiring the master to notify Time Charterers immediately when damage occurs and obtain a written acknowledgment of liability from the Stevedores. As Stevedore damage might only become apparent weeks or months after it occurs, and because Stevedoring Companies rarely accept responsibility, such clauses can be problematic for Shipowners.
Despite this, the Ship Master is expected to assist Time Charterers in gathering evidence to support their claim against the Stevedores. This cooperation should be explicitly stated in the Charter Party. NYPE 2015 (part of clause 37 “Stevedore Damage”) includes provisions such as:
“Notwithstanding anything contained herein to the contrary, the Charterers shall pay for any and all damage to the Ship caused by stevedores provided the Master has notified the Charterers and/or their agents in writing within twenty-four (24) hours of the occurrence but in case of hidden damage latest when the damage could have been discovered by the exercise of due diligence. Such notice to describe the damage and to invite Charterers to appoint a surveyor to assess the extent of such damage.”
The Ship Master and officers should closely monitor loading, stowing, trimming, and discharging to prevent damage. If Stevedores fail to follow instructions from the master or officers, both the Shipowners and Time Charterers should be informed promptly. In many instances, local representatives from underwriters or P&I (Protection and Indemnity) Clubs can provide valuable assistance.
Additionally, the ship may sustain damage from pilots, tugs, or other sources during port approach or departure. Although pilots and tugs are employed and paid by Time Charterers, such damage is only attributed to Time Charterers under exceptional circumstances.
5- Repair of Ship’s Damage in Time Charter
Many Time Charter Party Forms require the ship to be redelivered in the same good order and condition as upon delivery. However, this does not necessarily prevent Time Charterers from redelivering a damaged ship without completing repairs at their expense. Generally, Shipowners cannot refuse redelivery of a damaged ship. If Time Charterers are responsible for the damage, Shipowners may instead file a claim against them for the cost of repairs and the resulting loss of time.
Protective Clauses in Time Charter
Modern Time Charter Parties often include Protective Clauses. For example, GENTIME (part II, clause 17(b) “Protective Clauses”) states:
“The Charterers warrant that Contracts of Carriage issued in respect of cargo under this Charter Party shall incorporate the clauses set out in Appendix A.”
Appendix A of GENTIME lists Protective Clauses such as the “VOYWAR 1993” war risk clause, the Paramount Clause, the General Average (GA) Clause, the Himalaya Clause, the New Jason Clause, and the Both-to-Blame Collision Clause.
The purpose of these clauses is to protect Shipowners by requiring Time Charterers to include them in subordinate agreements, such as Time Charter Parties, Bills of Lading (B/L), Sea Waybills, or similar contracts.
In practice, Time Charterers rarely verify that these clauses are included in subordinate documents, nor do Shipowners or Ship Masters typically scrutinize these contracts’ printed terms. However, if Shipowners suffer economic losses because Time Charterers fail to include the stipulated clauses, Time Charterers may be obligated to compensate Shipowners for the resulting financial damage.