Time Charter Vs Voyage Charter

Time charters can vary in length from a few days to many years. A ship can undertake one voyage (often on what is called a trip-time charter) or many of varying lengths and in differing conditions. How then, is performance to be measured in these widely divergent circumstances? The short answer is to look at what the charterparty says. In most time charters there will be a specific clause setting out how the calculations are to be performed. In many standard tanker charters these provisions are in the printed form; in dry cargo charters they are very frequently an additional or special clause. An example of a clause from a Beepeetime form that was considered in
‘The Gas Enterprise’ [1993]. For the purpose of assessing the performance of the vessel, the average speed and bunker consumption of the vessel shall be calculated upon the distance made, the time taken and the quantity of bunkers consumed by the vessel on each sea passage as ordered to be performed by the Charterers …. If during any passage reviewed … the average speed of the vessel is less than or exceeds the average speed based upon Charterers’ instructions to the Master from time to time during the passage then the resulting loss or saving in time … and in the case of loss of time the resulting time shall become payable by Owners to Charterers …. the case concerned the application of the good weather provisions but this is a good example of a clause which deals with performance on a voyage basis. In the case of Didymi Corporation v Atlantic Lines & Navigation [1987 the court was again considering the effect of good weather provisions but this time in relation to a time-based assessment, the relevant part of the performance clause reading: “the speed and consumption, as guaranteed by the Owners … will be reviewed by Charterers at the end of the duration of this Charter Party, and if it is found that the vessel has failed to maintain as an average during the period of the Charter Party the speed and/or consumption stipulated above, the Charterers shall be indemnified by reduction of hire ….” The calculation required all periods of performance to be taken into account to produce the average and then for that to be applied across the whole period of the charter. Finally, in ‘The AI Bida’ [1986] 1 Lloyd’s Rep 142 and [1987]  a case which went to the Court of Appeal, there was a distinction made between the calculation of the speed and that of the consumption. While the initial description gave straightforward speed and consumption figures an additional clause provided that the speed was: “guaranteed sea speed on a year period abt. 15.5 knots” There was not an equivalent provision in relation to consumption. The court found that whilst the speed was to be computed as an average over yearly periods the consumption figures were to be taken on a voyage by voyage basis. The result was that, whilst the owners had the benefit of periods when the vessel performed at higher speeds because of the averaging, only the voyages where there was over-consumption were counted in assessing the charterers’ claims because it was only on these passages that the owners were in breach of their obligations. For owners it is usually helpful to have a period calculation of performance, particularly in longer charter periods, as this will even out problems such as voyages performed prior to hull painting and minor difficulties with engine performance. For charterers a voyage by voyage basis can be more favorable although the relevant clause must be carefully worded to ensure that owners do not have the benefit of setting off any better performance on individual voyages.