Voyage Charter
Voyage Charter Definition
A Voyage Charter, also commonly called a Spot Charter, is a chartering arrangement under which a ship is fixed to perform one specific voyage between agreed ports or port ranges. In its simplest form, the Shipowner undertakes to provide a named ship, load an agreed quantity of cargo, carry that cargo from the loading port to the discharging port, and deliver it in accordance with the terms of the Voyage Charter Party. In return, the Voyage Charterer pays Freight, which is usually calculated by reference to the quantity of cargo carried, although it may also be agreed as a lump sum or by another commercial formula.This form of charter is one of the core structures used in Bulk/Tramp Trading (Chartering Market). It is especially common in dry bulk, tanker, gas, project cargo, and other trades where cargoes are fixed voyage by voyage and ships are employed according to market demand. By contrast, Voyage Chartering is rarely used in the Liner Shipping Market. Liner Carriers normally operate scheduled services with fixed sailing patterns and carry many different cargo consignments under Bills of Lading (B/L), Sea Waybills, or booking confirmations. These liner services are usually performed by ships owned by the Liner Carrier or chartered on a period basis from Shipowners.
Under a Voyage Charter, the Shipowner normally retains operational control and Commercial Management of the ship for the voyage. The Shipowner is responsible for navigating, crewing, maintaining, and operating the ship, as well as arranging the voyage in accordance with the Charter Party. The Shipowner also usually bears the principal Variable Voyage Expenses, including bunkers or fuel, port charges, canal dues, pilotage, towage, agency fees, additional insurances where applicable, and other costs necessary to perform the agreed voyage. In addition, the Shipowner continues to bear the Daily Running Costs (Fixed Costs) of the ship, such as manning, maintenance, repairs, stores, classification expenses, Hull and Machinery Insurance (HMI), Protection and Indemnity Insurance (P&I), and technical management.
The Charterer’s financial responsibility under a Voyage Charter is generally focused on cargo-related matters, unless the Charter Party provides otherwise. These may include loading costs, discharging costs, trimming, stowage, cargo taxes, cargo dues, terminal costs, or other expenses connected directly with the cargo. The exact allocation depends on the negotiated loading and discharging terms. For example, under FIO, FIOS, or FIOST terms, the Charterer may assume responsibility for loading, discharging, stowage, and trimming costs. Under other arrangements, some or all of these costs may remain for the Shipowner’s account.
A Voyage Charter Party must therefore deal carefully with the main commercial and operational elements of the voyage. These include the description of the ship, the cargo, the loading port or range, the discharging port or range, the Laycan, Freight, payment terms, Laytime, Demurrage, Despatch if agreed, cargo-handling obligations, safe port and safe berth responsibilities, Bills of Lading (B/L), exceptions, liability, force majeure-type events, war risks, ice, strikes, and dispute resolution. Depending on the cargo, route, ports, market conditions, and counterparties, additional clauses may become essential during negotiations between Shipowners and Charterers.
Description of Ship
In most Voyage Charter Parties, a particular ship is identified at the time of fixing. The Charter Party will usually state the ship’s name, IMO (International Maritime Organization) number, call sign, year of build, flag or nationality, deadweight, gross tonnage, net tonnage, and sometimes speed and consumption details. The level of detail required depends on the commercial circumstances. Some cargoes, ports, terminals, canals, bridges, rivers, or seaways require very precise technical information before the Charterer can assess whether the ship is suitable for the intended employment.The nature of the cargo is a major factor in determining which ship particulars must be disclosed. A cargo such as grain may require clean and suitable holds, proper ventilation, and adequate cubic capacity. Heavy minerals, steel products, or project cargo may require sufficient deadweight, tank top strength, gear capacity, hatch dimensions, and stowage suitability. Liquid cargoes may require appropriate tanks, coatings, pumps, heating coils, stripping systems, and cargo compatibility. Therefore, the description of the ship is not merely administrative; it is a commercial and legal statement of the ship’s ability to perform the agreed voyage.
The ship’s draught, length overall, beam, air draught, and maneuvering characteristics may be critical in restricted ports, river passages, narrow seaways, canals, locks, bridges, or areas with overhead power lines. Cargo-handling equipment is equally important. Winches, cranes, grabs, derricks, pumps, hoses, ramps, hatch covers, and other equipment may determine whether the ship can load and discharge efficiently. The number of holds and hatches, the type and condition of hatch covers, the size of hatch openings, and the design of ramps or cargo spaces can directly affect loading speed, discharge speed, terminal acceptance, stowage planning, and overall voyage economics.
Certain cargoes require specialized equipment. Reefer cargoes may require refrigeration plant and temperature-monitoring systems. Some cargoes may require CO-equipment, ventilation systems, inert gas systems, heating arrangements, or special monitoring. In oil and product tanker trades, pumping capacity is particularly important because discharge time may depend on the ship’s pumps, pipeline system, stripping capability, cargo temperature, shore receiving capacity, and terminal procedures. If the ship’s pumping performance is overstated, disputes may arise over delay, Demurrage, or operational loss.
Both Shipowners and Charterers should identify all relevant information concerning the ship and cargo that is necessary for proper voyage estimation, logistical planning, cargo handling, and risk assessment. If the ship has any unusual feature, limitation, defect, equipment restriction, port limitation, class condition, or operational characteristic that may affect performance, the Charterer should be informed before the Fixture is concluded. Similarly, if the cargo has unusual properties, such as high moisture content, dangerous characteristics, special stowage needs, contamination risk, heating requirements, or terminal restrictions, the Shipowner should be informed before agreeing to carry it.
Specification of Ship’s Cargo Carrying Capacity
The accurate specification of the ship’s cargo carrying capacity is one of the most important parts of a Voyage Charter Party. Cargo capacity determines whether the ship can lift the agreed quantity, whether Freight can be earned as expected, and whether the Charterer can satisfy the underlying sales contract. Capacity may be described in several ways, but the most common references are Deadweight Cargo Capacity (DWCC) and Cubic Capacity.Deadweight Capacity refers to the ship’s total weight-carrying ability and is normally measured in metric tons. Deadweight Capacity (DWT) includes not only cargo, but also bunkers or fuel, fresh water (FW), stores, lubricants, crew effects, spare parts, and other consumables carried on board. To make clear that the figure includes all such weights, the expression “all told†is sometimes used. This produces the term Deadweight All Told (DWAT). By contrast, Deadweight Cargo-Carrying Capacity (DWCC) refers more specifically to the weight available for cargo after deducting bunkers, fresh water, stores, and other non-cargo weights required for the voyage.
The distinction between Deadweight Capacity (DWT), Deadweight All Told (DWAT), and Deadweight Cargo Capacity (DWCC) is commercially important. GENCON ’94 refers to Deadweight All Told (DWAT) in Part I, Box 7, and Part II, Clause 1, while GENCON ’76 used the expression Deadweight Cargo Capacity (DWCC) in the corresponding provisions. The difference in wording may affect how the parties understand the quantity of cargo the ship can actually load. If the Charterer expects a certain cargo intake, but the ship has insufficient cargo capacity after allowing for bunkers, water, stores, draft limits, and safety margins, disputes may arise over Deadfreight (DF), Freight reduction, or damages.
When Deadweight Capacity (DWT) is stated in the Charter Party, Shipowners cannot simply bunker the ship in any quantity they choose if doing so reduces the cargo intake below what the Charterer is entitled to expect. The bunkers, fresh water (FW), stores, and other consumables on board must be reasonable for the voyage, including an appropriate safety reserve. If excessive Bunkers on Board (BOB) prevent the Charterer from using the ship’s agreed carrying capacity, the Shipowner may be liable for the consequences. These may include a reduction in Freight, reimbursement of additional transport costs, Deadfreight disputes, or claims arising from short shipment.
The risk may be even greater where the cargo is perishable, seasonal, sale-contract-sensitive, or subject to strict shipment deadlines. If part of the cargo cannot be loaded because the ship has arrived with excessive bunkers or insufficient available deadweight, the Charterer may suffer loss under the sale contract, additional storage costs, replacement shipment expenses, or cargo deterioration. For this reason, the bunker planning and cargo intake calculation should be considered together before the ship is presented for loading.
Both Deadweight All Told (DWAT) and Deadweight Cargo Capacity (DWCC) are connected with the ship’s load lines, draught, freeboard, seasonal zones, port restrictions, and water density. A ship may have a theoretical summer deadweight, but the actual cargo intake may be reduced by draft limitations at the loading port, discharging port, river passage, canal, berth, or fairway. Fresh water allowance, dock water density, tidal conditions, under-keel clearance, and trim requirements may also affect the final cargo quantity that can be safely loaded.
The ship’s Cubic Capacity (CC) is particularly relevant for dry cargo ships. It is commonly described as Grain Capacity and Bale Capacity. Grain Capacity refers to the volume available for free-flowing bulk cargoes that can fill spaces between frames and structural members, such as grain, phosphates, fertilizers, or similar uniform dry bulk cargoes. Bale Capacity refers to the space available for packaged cargoes such as boxes, cartons, bales, bags, pallets, or general cargo that cannot fill every small space in the hold. For this reason, Grain Capacity is usually higher than Bale Capacity.
Cubic Capacity becomes decisive where the cargo is light but bulky. A ship may have enough deadweight to carry a cargo by weight, but insufficient cubic space to accommodate the full quantity. Conversely, a heavy cargo may reach the ship’s deadweight limit long before the holds are full. The cargo’s stowage factor therefore matters. A low stowage factor cargo, such as iron ore, may be weight-limited, while a high stowage factor cargo may be space-limited. Voyage estimation must take both weight and cubic capacity into account.
Both Deadweight Cargo Capacity (DWCC) and Cubic Capacity (CC) are often qualified by the word About. However, the use of “about†does not give Shipowners complete freedom to provide inaccurate figures. It allows only a reasonable commercial tolerance, depending on the nature of the figure, the circumstances of the Fixture, and the reliance placed on the description. If the stated capacity is materially inaccurate and the Charterer suffers loss as a result, the Shipowner may still face liability. The ship’s Deadweight Cargo Capacity (DWCC) remains a crucial figure in Voyage Estimation, Freight calculation, cargo intake planning, and the commercial evaluation of the proposed Fixture.
Voyage
Nomination of Ports – Rotation
Loading and discharging places in a Voyage Charter Party may be described in several different ways, depending on the commercial agreement, the cargo program, and the degree of flexibility required by the Charterers. The Charter Party may name an exact berth, a named port, a wider geographical range, or a combination of several ports and berths. The wording used is important because it determines who has the right to nominate the final place of operation and who bears the risk if the nominated place is unsuitable, delayed, restricted, or unsafe.- Fixed Berth, for example, “1 Safe Berth (SB) at Istanbulâ€;
- Fixed Port, for example, “1 Safe Port (SP) New Yorkâ€;
- Fixed Area, for example, “1 Safe Port (SP) / 1 Safe Berth (SB) Germanyâ€;
- Port or an Area for order, for example, “ARAGâ€;
- Multiple Berths and/or Ports, for example, “Berth 2 at Constanta and 1 Safe Berth (SB) Varna.â€
“Loading Ports to be nominated by Charterers latest when the ship is passing Canakkale,â€
or
“Discharging Port to be nominated by Charterers latest at commencement of loading.â€
If no express nomination deadline is included, Charterers must still nominate the port or ports within a reasonable time so that the ship is not exposed to unnecessary waiting, uncertainty, or Deviation. Late nomination may lead to extra steaming, additional bunkers, missed berthing opportunities, port delay, or disputes over damages. Where the Charter Party allows more than one loading or discharging port, Shipowners frequently try to include wording requiring the ports to be called “in geographical rotationâ€. This prevents unnecessary backtracking and helps preserve the voyage estimate on which the Freight was fixed.
Unless the Charter Party provides otherwise, or unless a special trade custom applies, Charterers normally have both the right and the obligation to nominate the berth where the ship will load or discharge. However, that right is not unlimited. Charterers cannot nominate a port or berth that falls outside the contractual description or exposes the ship to unacceptable danger. Shipowners are not automatically bound to obey every instruction if the nominated place is unsafe, inaccessible, prohibited, or inconsistent with the Charter Party. Most Voyage Charter Parties therefore require nominated ports and berths to be Safe (Safe Berth and Safe Port). Many forms also include an Ice Clause and a Near Clause to deal with specific access problems, seasonal risks, or physical obstacles.
Safe Port (SP), Safe Berth (SB), Always Afloat (AA)
Most Charter Parties require Charterers to nominate only safe ports and safe berths. The word “Safe†does not refer only to obvious physical dangers such as heavy swell, strong currents, poor holding ground, defective fenders, inadequate dolphins, exposed quays, or insufficient water depth. It may also include political violence, warlike operations, strikes, civil unrest, piracy, sanctions-related risks, port authority restrictions, poor navigational systems, or other conditions that may expose the ship to danger.In many charters, the safe port and safe berth obligation is expressly stated. A classic definition of a Safe Port (SP) was given by Sellers LJ in The Eastern City [1958] 2 Lloyd’s Rep. 127:
“… a Port will not be safe unless, during the relevant period, the particular ship can reach it, use it, and return from it without, in the absence of some abnormal occurrence, being exposed to danger that cannot be avoided by good navigation and seamanship.â€
This definition shows that safety must be considered in relation to the particular ship and the relevant period of the call. A port may be safe for one ship but unsafe for another because of draft, length, beam, maneuverability, gear, cargo, flag, crew, equipment, or operational limitations. A port may also be safe at one time but unsafe later because of weather, congestion, military activity, ice, breakdown of navigational aids, or changes in port conditions.
A clause requiring Charterers must nominate Safe Ports (SP) and Safe Berths (SB) does not remove the Shipowner’s or Ship Master’s responsibility to consider whether the nominated place is safe in practice. The Ship Master remains responsible for navigation and must exercise proper seamanship. At the same time, Charterers are not always absolute insurers of safety in every possible circumstance. The dividing line between the Charterers’ nomination obligation and the Shipowner’s duty to investigate can be difficult to draw, and disputes often depend heavily on the facts and the applicable law.
As a general principle, the earlier the Shipowners and Ship Master know the intended port or berth, the more opportunity they have to investigate and assess its suitability. If a specific port or berth is agreed during Chartering Negotiations and inserted into the Charter Party, Shipowners may have limited grounds for later claiming that Charterers are responsible if the place proves unsafe, particularly if the relevant danger could reasonably have been assessed before fixing. Conversely, if Charterers nominate a port or berth only after the Fixture, and that place proves unsafe, Charterers may be more exposed to claims because Shipowners had little or no influence over the selection.
The Ship Master’s decision to proceed to a nominated port or berth does not necessarily waive the Shipowners’ right to Claim Damages from Charterers. If the port or berth was contractually required to be safe and later proves unsafe, Charterers may remain responsible even if the Ship Master made an excusable error of judgment in attempting the call. The practical question will often be whether the danger was avoidable by good navigation and seamanship, whether the danger was abnormal, and whether the Shipowner or Ship Master had sufficient knowledge to refuse the order before damage occurred.
Safe port and safe berth disputes are often complex because they involve questions of causation, evidence, burden of proof, port conditions, navigation, weather, local practice, and expert opinion. In addition to safety, many Charter Parties state that the ship must remain always afloat. This is commonly expressed through Always Afloat (AA) wording. However, in some trades and ports, the parties may agree that the ship may “lie safely aground†(AA, AAAA, and NAABSA). NAABSA wording is particularly important where local port practice allows ships to rest on the ground safely at certain berths, but such wording must be used only where the ship is suitable and the bottom conditions are safe.
Near Clause
Shipowners are generally responsible for bringing the ship to the agreed loading or discharging place. However, unexpected physical, legal, or navigational obstacles may prevent the ship from reaching the exact place named in the Charter Party. To protect Shipowners in such situations, Voyage Charter Parties often include a “Near Clauseâ€. In GENCON ’94, Part II, Clause 1, the preamble provides in part:“The said Ship shall, as soon as her prior commitments have been completed, proceed to the loading Port(s) or place(s) stated in Box 10 or so near thereto as she may safely get and lie always afloat . . .â€
Similar wording normally applies to the discharging port. The purpose of the Near Clause is to protect Shipowners where an obstacle arises after the Chartering Negotiation and Fixture and prevents the ship from safely reaching the exact agreed place. If the clause applies, Shipowners are not required to take the ship closer to the nominated port or berth than the ship can safely reach while remaining Always Afloat (AA). The clause therefore operates as a practical qualification on the obligation to proceed to the named place.
The operation of the Near Clause depends on the structure of the Charter Party. Where a specific port or berth is named in the contract, Shipowners may be expected to assess in advance whether the ship can safely reach that place. Where Charterers are given a range and later nominate a port or berth from within that range, Charterers carry a greater responsibility to nominate a place that is suitable for the ship. The allocation of risk therefore depends on whether the location was agreed from the outset or selected later by Charterers.
Shipowners cannot usually rely on the Near Clause simply because reaching the port has become inconvenient or more expensive. If the normal route is obstructed but another reasonable route is available, Shipowners may still be required to proceed, even if the alternative route involves additional cost or time, unless the Charter Party provides otherwise. Similarly, the Near Clause will not normally assist where the obstruction is only Temporary and can be waited out within a commercially reasonable period. The clause is designed to address real inability to reach the agreed place safely, not ordinary delay or commercial inconvenience.
Ice Clause
In trades where ice may affect the voyage, especially during particular seasons or in high-latitude regions, the Charter Party should contain a clear and comprehensive Ice Clause. Ice can prevent the ship from reaching the loading or discharging port, delay cargo operations, damage the hull, propeller, rudder, sea chests, or machinery, and expose the ship to additional insurance conditions. Ice risk can also create disputes over whether the ship must wait, deviate, proceed to an alternative port, or cancel the voyage.Hull Underwriters define geographical trading limits for ships by reference to ice, weather, and navigational conditions in different regions. Shipowners cannot safely agree to ports or trading zones that fall outside permitted insurance limits (INL: International Navigation Limits) without checking whether additional insurance, special permission, or amended cover is required. If trading beyond the International Navigation Limits is possible only with extra insurance or special approval, Shipowners should proceed carefully and ensure that responsibility for additional premiums, delay, deviation, and risk is clearly allocated in the Charter Party.
The Near Clause may provide some assistance where ice prevents the ship from reaching the named port, but it is not sufficient on its own. Ice creates special problems that require specific wording. A proper Ice Clause should address what happens if ice exists before arrival, develops during the voyage, blocks the port after the ship has arrived, prevents safe loading or discharge, delays departure, or exposes the ship to risk after cargo has been loaded. It should also consider whether the Ship Master may refuse to enter or remain in an ice-affected area and whether Charterers must nominate an alternative safe and ice-free port.
Key considerations that should be addressed in the Ice Clause include:
- whether the Shipowner or Ship Master may refuse to proceed to a port, berth, roadstead, river, canal, or area affected by ice;
- whether Charterers must nominate an alternative safe and ice-free port if the original port is inaccessible;
- whether the ship may leave the port before completion of loading or discharge if ice conditions become dangerous;
- who bears the cost of delay, waiting time, deviation, additional bunkers, icebreaker assistance, tug assistance, port dues, and additional insurance;
- whether Laytime, Demurrage, or time on Hire continues to count during ice-related delay;
- whether the ship is required to follow convoy, icebreaker, port authority, coast guard, or class instructions;
- whether cargo may be loaded or discharged at an alternative port and who pays the additional transport costs;
- whether cancellation rights arise if ice prevents performance for a defined period;
- whether the ship must have ice class, winterization equipment, special certificates, or particular technical capability for the agreed trade;
- how the Ice Clause interacts with safe port, safe berth, Near Clause, War Risk Clause, insurance clause, Laytime clause, and deviation provisions.
- Are Shipowners required to permit the ship to force ice, break ice, or follow an icebreaker?
- In what circumstances may Shipowners refuse to proceed to a particular port, berth, channel, river, or area, or order the ship to leave before loading or discharging has been completed, in order to avoid the danger of being trapped by ice?
- If the ship is forced to leave the loading port after loading only part of the cargo because of ice risk, are Shipowners entitled to full Freight, reduced Freight, or Freight only on the quantity actually loaded?
- If the ship cannot reach the originally nominated discharging port because of ice, who has the right to decide where and how the cargo on board should be discharged or otherwise dealt with?
- Who bears the financial consequences of delays caused by ice, ice warnings, ice restrictions, or ice-related dangers at the loading port, during the sea passage, or at the discharging port?
- Who is responsible for additional insurance premiums, icebreaker charges, tug assistance, deviation costs, and any ice-related damage to the ship?
GENCON Ice Clause
GENCON ’94, Part II, Clause 18, contains a Printed Ice Clause known as the “General Ice Clause.†The clause is divided into separate provisions for the Port of Loading and the Port of Discharge. Each part deals with different stages of the voyage. One section addresses ice or ice risk affecting the port before the ship arrives. Another section deals with ice conditions arising after the ship has reached the port. A further section addresses additional consequences connected with loading, discharging, alternative ports, departure, and related operational issues. GENCON ’94 also removed the unusual wording found in GENCON ’76, which stated that the ice clause did not apply in the spring.The structure of the GENCON Ice Clause reflects the practical reality that ice can affect the voyage at different moments and with different legal consequences. If ice prevents the ship from reaching the loading port before arrival, the Shipowner may require protection against being forced into danger. If ice develops after arrival, the question may become whether the ship must remain in port, whether loading or discharging should continue, whether the ship may leave for safety, and who pays for resulting delay or extra costs. If ice prevents access to the discharging port after the cargo has been loaded, the parties must know whether the cargo can be discharged at an alternative port and how additional expenses are to be allocated.
Where Ice-Class Ships are specifically chartered for voyages where ice is expected, traditional ice clauses may not be suitable. Ice-class ships are designed and built to operate in ice conditions within their class limits, and the commercial purpose of the Fixture may be to trade in areas where ordinary ships would not safely operate. In those circumstances, the parties often exclude ordinary ice wording and instead draft special Tailor-Made Clauses that reflect the ship’s ice class, route, season, local icebreaker arrangements, insurance conditions, port authority requirements, and the level of risk agreed by the parties.
BIMCO (Baltic and International Maritime Council) last revised its Ice Clauses in 2005 and introduced a standard clause for Voyage Charter Parties known as the BIMCO Ice Clause for Voyage Charter Parties. The revision was necessary because earlier ice clauses did not deal adequately with important operational questions, especially whether a ship could be required to force ice or follow icebreakers. The updated clause also aimed to protect Shipowners from the risks of encountering ice during the approach voyage, not merely after arrival at the port. A key feature of the revised wording is that the ship is not required to force ice. However, the ship may reasonably be expected to follow icebreakers where other ships of similar size, class, and construction are doing so in comparable conditions.
This distinction is important. Forcing ice may expose the ship to structural damage, machinery damage, propeller damage, rudder damage, hull pressure, delay, and loss of insurance protection if the voyage exceeds the ship’s class or underwriters’ permissions. Following an icebreaker, by contrast, may be part of normal safe navigation in some ice-affected trades if ships of similar capability are moving under official guidance. The clause should therefore balance the Shipowner’s right to protect the ship with the Charterer’s interest in completing the cargo movement where safe and customary ice-navigation support is available.
Sea Voyage
In some Fixtures, the Charter Party expressly states the route that the ship must follow. For example, the contract may provide: “Singapore to Hamburg via Cape of Good Hope (COGH).†If the route is specified in this way, the Shipowner or Ship Master cannot choose a different route, such as the Suez Canal, unless the Charter Party permits the change or the parties later agree to it. The stated route becomes part of the contractual voyage and may affect Freight, bunkers, insurance, delivery timing, emissions calculations, cargo planning, and the commercial risk assumed by both parties.If the Charter Party does not specify the route, the Ship Master will normally follow the usual and customary route, or one of the recognized alternative routes, for that trade. The usual route is assessed by reference to navigation practice, safety, distance, weather, war risks, piracy risks, canal availability, seasonal conditions, traffic separation schemes, port requirements, and commercial reasonableness. The Shipowner is not normally free to select a longer or commercially convenient route if doing so would amount to an unjustified departure from the contractual voyage.
Regardless of the route selected, the Ship Master retains authority to make changes that are reasonably necessary for the safety of the crew, ship, cargo, and other persons on board. The Ship Master may alter course to avoid heavy weather, navigational danger, war risk, piracy risk, ice, collision risk, mechanical emergency, medical emergency, or other serious danger. At the same time, the Ship Master is expected to perform the voyage with proper speed and efficiency. As a general rule, and as an implied obligation in many Charter Parties, the Ship Master must prosecute the voyage with Utmost Despatch.
Deviation
The term Deviation is most commonly used to describe a geographical departure from the agreed, usual, or customary route of the voyage. If the ship leaves the expected route without contractual or legal justification, the Shipowner may be in breach. However, Deviation is not limited only to geographical movement. The concept may also extend to non-geographical conduct that changes the nature of the contractual adventure, such as unjustified stoppage, unreasonable slow-steaming, unauthorized delay, improper cargo handling, or conduct that exposes the cargo to risks outside those contemplated by the contract. For that reason, defining Deviation with complete precision can be difficult.The distinction between Lawful Deviation and Unlawful Deviation is commercially and legally important. A Deviation made to avoid danger to the crew, ship, or cargo, or to save life or property at sea, is normally treated as lawful if it is reasonable in the circumstances. The assessment of reasonableness must consider the interests of both Shipowners and Charterers, as well as the interests of cargo owners where Bills of Lading (B/L) have been issued. A Deviation may be justified if the ordinary route becomes unsafe, if assistance is required at sea, or if a real emergency makes departure from the route necessary.
Most Voyage Charter Party forms contain a printed Deviation Clause. This is sometimes called a “Scope of Voyage†Clause, a term also commonly used in Bills of Lading (B/L). GENCON ’94, Part II, Clause 3, retains the same wording as GENCON ’76 and provides:
“The ship has liberty to call at any Port or Ports in any order, for any purpose, to sail without pilots, to tow and/or assist ships in all situations, and also to deviate for the purpose of saving life and/or property.â€
Deviation Clauses are generally drafted for the benefit of Shipowners, but courts and arbitrators may interpret them narrowly, particularly where cargo interests are affected. A broad liberty to call at ports or deviate may not give the Shipowner unrestricted freedom to change the voyage for purely commercial reasons. If the Shipowner wants a clear right to Deviate for a particular purpose, that purpose should be expressly identified during negotiations and stated clearly in the Charter Party. General wording may not be sufficient where the proposed Deviation is unusual, commercially significant, or increases the risk to cargo.
When bunker prices rise sharply or bunker availability becomes uncertain, special Bunker Deviation Clauses may become important. These clauses may give Shipowners the right to Deviate to obtain bunkers or to call at a particular bunkering port. Some clauses also permit the ship to proceed at reduced speed in order to conserve fuel or manage bunker consumption. Such clauses must be drafted carefully because slow-steaming or bunkering Deviation may affect arrival time, Laycan, cargo delivery schedules, temperature-sensitive cargo, charter performance, and Freight economics. It should also be remembered that re-routing solely for crew changes is generally treated as an Unlawful Deviation unless expressly permitted by the relevant contract and transport documents.
Unlawful Deviation is a Breach of Charter Party. Depending on the seriousness of the breach and the applicable law, Charterers may claim damages and, in some cases, may have the right to cancel or treat the Charter Party as repudiated. The consequences may be even more serious where Bills of Lading (B/L) have been issued. Under standard Bill of Lading (B/L) terms and common P&I (Protection and Indemnity) Club rules, Unlawful Deviation may prejudice or invalidate the Shipowner’s liability cover. This is because cargo insurers and P&I Clubs treat unauthorized Deviation as a major alteration of the agreed risk.
It is therefore essential to distinguish between the Charter Party relationship and the Bill of Lading (B/L) relationship. Even if the Charter Party contains a Liberty Clause permitting Deviation for bunkering, that liberty may not automatically protect the Carrier against cargo interests under the Bill of Lading (B/L). The cargo owner, or the lawful Bill of Lading (B/L) holder at the relevant time, may need to consent to the Deviation unless the Bill of Lading (B/L) itself contains wording that clearly permits it. Without such permission or contractual authority, the Deviation may be unlawful against cargo interests, and P&I cover may be placed at risk.
Where Deviation is contemplated for reasons such as bunkering, safety, port substitution, canal closure, war risk, piracy, ice, rescue operations, medical evacuation, repairs, or crew matters, the parties should review the Charter Party, Bills of Lading (B/L), insurance terms, cargo requirements, and applicable law before proceeding. If necessary, the Shipowner may need Deviation Insurance or special agreement from cargo interests. In modern chartering, Deviation remains one of the most sensitive issues because it can affect route, time, cost, cargo risk, insurance, contractual liability, and the Carrier’s ability to rely on protective clauses.
Cargo
Type, Specification, and Condition of Cargo
The cargo description is one of the most important elements of a Voyage Charter Party. Once Shipowners have agreed during the Chartering Negotiations and the Fixture to carry a particular cargo, they are normally obliged to perform that carriage in accordance with the agreed terms. For that reason, Shipowners must obtain sufficient information from Charterers, Shippers, or other cargo interests to decide whether the cargo is suitable for the ship, whether the ship can carry it safely, and what costs, risks, and operational requirements may arise during loading, carriage, and discharge.The level of cargo detail required depends on the nature of the commodity and the trade. Some cargoes are well known in the market and may require only a brief commercial description, especially where both parties regularly handle the same commodity. Other cargoes require much more detailed information, including physical characteristics, chemical properties, moisture content, temperature requirements, stowage factor, contamination risk, ventilation needs, hazardous properties, handling instructions, segregation requirements, and special loading or discharging procedures. The more unusual, sensitive, hazardous, or technically demanding the cargo is, the more precise the description must be.
If the cargo presented for loading does not correspond with the description given in the Charter Party, Shipowners may be entitled to claim compensation for the consequences. Where the difference is minor, the remedy may be limited to additional costs, delay, or operational expenses. Where the discrepancy is substantial and the cargo is materially different from what was agreed, Shipowners may have stronger remedies, including refusal to load, cancellation of the Charter Party, or a claim for loss of Freight, depending on the wording of the contract and the applicable law.
Where the cargo is described broadly as General Cargo, the Charter Party should include appropriate Special Clauses dealing with Dangerous Goods. A “Dangerous Cargo Clause†is commonly used to limit the Shipowners’ obligation to carry hazardous cargoes and to require Charterers to provide full and accurate cargo information well before loading begins. Such information should include the cargo’s dangerous properties, packing, labeling, documentation, segregation requirements, emergency procedures, and compliance with applicable regulations. Without clear disclosure, the ship, crew, other cargoes, ports, and third parties may be exposed to serious risk.
Oil products and chemical cargoes require particular care because cargo handling may involve complex safety, temperature, compatibility, and contamination issues. The Carrier must understand the cargo’s characteristics, loading and discharging requirements, fire and explosion risks, vapor risks, tank coating compatibility, pipeline requirements, pumping limitations, and any precautions needed to protect tanks, coatings, pumps, valves, and cargo systems. These concerns are most obvious in refined oil products and chemicals, but they may also arise with crude oil cargoes. Some crude oils may become hazardous if spiked with naphtha to improve flow. Others may be highly sulphurous, corrosive, waxy, or difficult to pump in cold conditions.
Temperature management can be especially important. In cold climates, the parties must consider whether the ship’s heating coils are capable of maintaining the required cargo temperature and whether significant quantities of Bunker (Fuel) will be needed to maintain or raise that temperature. Heating obligations can affect voyage economics, Laytime, discharge performance, cargo quality, bunker consumption, and the ship’s future employment. If the tanks, pipelines, or pumps are exposed to cargoes requiring high temperature control or special cleaning, the next voyage may also be affected.
A recurring issue concerns whether Shipowners are required merely to maintain the cargo temperature or actively increase it. SHELLVOY 6, Part II, Clause 27, “heating of cargo,†follows the principle that Shipowners must use their best efforts to comply with Charterers’ request for temperature adjustment, while Charterers are responsible for the additional Bunkers (Fuel) consumed. Delay caused by such heating normally counts against Laytime. This type of clause shows why cargo heating should not be treated as a minor operational matter. It can create significant cost, delay, fuel consumption, and performance issues if not addressed clearly in the Charter Party.
Cargo Quantity
The quantity of cargo to be loaded must be defined clearly for the benefit of both Charterers and Shipowners. Freight is often calculated by reference to the quantity of cargo carried, so Shipowners need certainty that at least a minimum quantity will be provided. Charterers also need the quantity stated accurately because the Shipowners’ acceptance of that quantity may allow Charterers to claim damages if the ship cannot load the agreed amount due to lack of capacity, excessive bunkers, draft restrictions, or other matters for which Shipowners are responsible.Cargo quantity may be expressed in different ways. Many Voyage Charter Parties require Charterers to load a Full and Complete Cargo. This means that Charterers must provide as much cargo as the ship can reasonably and safely carry, using the ship’s full deadweight capacity for Heavy Cargo or its cubic capacity for Light Cargo. The meaning of a full and complete cargo therefore depends on the cargo’s weight, stowage factor, cubic volume, draft restrictions, load line limits, port limitations, and the ship’s actual available carrying capacity.
Other common quantity descriptions include “x tons,†“about x tons,†“between x and y tons,†“between about x and about y tons,†or “not less than x tons.†The word “About†gives a margin of flexibility, but the extent of that margin depends on the cargo, trade, quantity, commercial practice, and the wording of the Charter Party. A tolerance of around 5% is often treated as a common commercial allowance, but this should not be assumed where precision is important. If the parties intend a specific tolerance, the Charter Party should state it expressly.
Where a quantity tolerance is agreed, the Charter Party should also identify which party has the option to determine the final cargo quantity. This may be expressed as “in owners’ option (OO),†“in master’s option,†or “in charterers’ option (CHOPT).†The party holding the option may have a commercially significant advantage, particularly where Freight rates, cargo availability, draft limitations, or market conditions change. If it is essential that the ship must not load above or below a particular quantity, the Charter Party should state this clearly, and special instructions should be sent to the Ship Master and Agents before loading begins.
When cargo quantities are stated during Chartering Negotiations, in the Charter Party, or in voyage instructions, the type of ton must be identified. It is not sufficient to state “10,000 tons†without clarifying whether the reference is to metric tonnes, metric tons, or long tons. This distinction can materially affect Freight, cargo intake, stowage planning, and documentation. It is equally important when using the Stowage Factor (SF), which expresses the volume occupied by one ton of cargo. The Stowage Factor (SF) may be calculated on the basis of long tons or metric tonnes, and the parties must ensure that the unit used is consistent throughout the voyage calculation and Charter Party.
Freight
Freight is defined as:“Freight is the reward payable to the carrier for the carriage and arrival of the goods in a merchantable condition, ready to be delivered to the merchant.â€
Fixing of the Freight
Freight may be fixed in several different ways depending on the trade, cargo, ship type, route, and commercial agreement. One common method is to calculate Freight by reference to cargo quantity, for example “X USD per metric tonne†or “X USD per ctn,†where ctn means carton. In dry bulk and many breakbulk trades, Freight is frequently expressed per metric ton or per long ton. In other trades, Freight may be calculated by cubic measurement, package, unit, or another agreed measurement.
Freight may also be agreed as a fixed sum regardless of the exact cargo quantity. This is known as Lump Sum Freight. Lump Sum Freight can be useful where the parties want commercial certainty or where cargo quantity may vary within an agreed range. A related method is to calculate Freight by reference to the size of the ship, such as “X USD per Deadweight Ton.†This approach is sometimes used in quantity contracts or cargo programs where different ships may perform different voyages and the actual ship may not be known when the contract is first concluded.
In the tanker market, especially in the carriage of crude oil and refined petroleum products, spot Freight is commonly fixed by reference to the Worldscale System. Worldscale provides a standardized reference system that allows tanker Freight to be quoted as a percentage of a published flat rate for a particular route. However, not all tanker-related trades use Worldscale. Gas carrier Freight is often quoted in dollars per cubic metre, while chemical tanker Freight is commonly quoted in dollars per ton. The method chosen must match the cargo, trade, ship type, and market practice.
Where Freight is calculated “per ton,†the Charter Party must specify whether the ton is a metric tonne, metric ton, or long ton. Failure to define the unit may create disputes, especially in international trades where different measurement systems are used. The unit of measurement also affects bills of lading, cargo invoices, Letters of Credit (L/C), stowage calculations, and Freight invoices.
Disputes may also arise over whether Freight should be calculated on the intake quantity, the delivered quantity, the Bill of Lading (B/L) quantity, shore figures, ship figures, gross weight, or net weight. Unless the Charter Party or trade custom provides otherwise, Freight is generally calculated on gross weight rather than net weight. As to intake and delivered quantity, the traditional English law principle is that Freight is payable only on cargo that has been shipped, carried, and delivered. This means Freight may be calculated on the lower of the shipped quantity and the delivered quantity if there is a shortage during transit. Because this issue can produce serious commercial consequences, modern Charter Parties often state expressly which quantity and measurement basis will be used for Freight calculation.
Freight clauses should also identify when Freight is earned and when it is payable. Freight may be payable on signing Bills of Lading (B/L), on completion of loading, on sailing, on arrival, on right and true delivery, or within a defined number of banking days after a specified event. Shipowners often seek wording stating that Freight is “fully earned upon shipment, non-returnable, ship and/or cargo lost or not lost.†Charterers may prefer payment terms linked to delivery or documentary completion. The agreed wording affects cash flow, credit risk, cargo claims, and the allocation of risk if the voyage is interrupted or the ship or cargo is lost.
Because Freight is the financial foundation of the Voyage Charter, it must be drafted with precision. The clause should identify the rate, currency, unit of calculation, cargo quantity basis, payment date, payment place, bank charges, deductions, taxes, commission, non-returnability, and any adjustments for bunkers, currency, waiting, or additional costs. Clear Freight wording reduces the risk of later disputes and ensures that both Shipowners and Charterers understand the commercial value of the Fixture from the beginning.
Freight Risk – When Is the Freight Earned and Payable?
The basic principle in Voyage Chartering is that Freight is earned when Shipowners have completed the agreed carriage and are ready to deliver the cargo to the receiver at the contractual destination. In practical terms, the Ship Master is expected to deliver the cargo and receive Freight as part of the same commercial exchange. If Shipowners fail to deliver the cargo for any reason, they may lose the right to Freight. This is known as Freight Risk, meaning the risk that Shipowners may be unable, either wholly or partly, to complete the transportation and therefore may not earn the Freight. If the ship and cargo are lost and the ship is declared a total loss before delivery, Shipowners are not normally entitled to Freight, even if the ship was close to the destination.Under this general rule, where only part of the cargo is delivered at the Port of Destination (Short Delivery, Shortage), Shipowners are usually entitled only to proportionate Freight on the cargo actually delivered. If the cargo arrives damaged, Freight may still be payable if the cargo remains “in a merchantable condition†and continues to be commercially recognizable as the same cargo. For example, where cars are carried, Shipowners may still be entitled to Freight for damaged cars if the vehicles remain cars and retain commercial value. If the damage is so severe that the cargo has effectively lost its original identity, the right to Freight may be affected.
The Shipowners’ right to collect Freight must be distinguished from their possible liability for cargo damage. Even where Charterers or cargo interests have a claim against Shipowners for damaged cargo, this does not automatically give Charterers the right to deduct that claim from Freight. Under English law, Freight is generally payable in full, and counterclaims for cargo damage or other matters must usually be pursued separately. Tanker Voyage Charter Parties often take a different commercial approach, and deductions from Freight may be permitted where the Charter Party contains specific clauses allowing such deductions.
Where Lump Sum Freight has been agreed, Shipowners may be entitled to Full Freight even if only part of the cargo reaches the destination, depending on the wording of the Charter Party and the nature of the loss. However, if the whole cargo is lost, the ordinary rule remains that Freight is not payable unless the contract contains wording shifting that risk to Charterers. If cargo is delivered to the wrong place, Shipowners are not normally entitled to Freight under English law. Some legal systems may recognize a form of Distance Freight, calculated by reference to the proportion of the voyage actually performed, but this is not the general English law position. To earn Freight under the ordinary rule, Shipowners must arrange for the cargo to be carried to the correct contractual destination.
These traditional rules are frequently modified by express Charter Party wording. Voyage Charter Parties often include clauses such as “Freight Earned And Payable Upon Shipment, Ship And/Or Cargo Lost Or Not Lostâ€. This type of clause transfers much of the Freight Risk from Shipowners to Charterers by making Freight earned at the loading port. Once cargo is shipped, Freight becomes payable and non-returnable even if the ship, cargo, or part of the cargo does not later reach the destination. Such wording is important for Shipowners because it protects cash flow and reduces the risk of losing Freight after the voyage has begun.
Where Freight Risk remains with Shipowners, they may protect themselves through special Freight Risk Insurance. This insurance can cover the loss of Freight where cargo is lost or the voyage cannot be completed because of an insured event. It is closely connected with “Loss of Earnings†or loss-of-hire style insurance, which protects Shipowners against income loss resulting from physical damage to the ship in specified circumstances. However, Freight Risk Insurance does not protect Shipowners against all financial risks. In particular, it does not usually cover the risk that Charterers are insolvent, unwilling to pay, or unable to transfer funds because of banking restrictions.
Deadfreight (DF)
When Charterers fail to provide the agreed quantity of cargo for loading, Shipowners may be entitled to compensation for the Freight that would have been earned on the missing cargo. This compensation is known as “Deadfreight (DF)â€. Deadfreight (DF) is normally calculated by taking the Freight that would have been payable on the short-shipped quantity and deducting any expenses that Shipowners saved because that cargo was not loaded, carried, or discharged.Deadfreight (DF) is closely connected with the Charterer’s obligation to provide a full and complete cargo or the minimum cargo quantity stated in the Charter Party. If the ship has available capacity and Charterers fail to use it, Shipowners lose earning opportunity. However, Shipowners must be able to prove that the ship had unused capacity and that the short shipment was caused by Charterers’ failure to provide cargo, rather than by limitations of the ship, draft restrictions, excessive bunkers, port conditions, or other matters for which Shipowners may be responsible.
To protect a Deadfreight (DF) claim, Shipowners or the Ship Master should take several practical steps before the ship leaves the loading port. First, Shipowners should obtain a clear declaration from Charterers confirming that no further cargo will be supplied. A statement from Shippers alone may not be sufficient because Charterers may later argue that they could have arranged additional cargo if they had been contacted before sailing. The declaration should therefore come from Charterers or from a party with clear authority to speak on Charterers’ behalf.
Second, the ship’s remaining cargo capacity should be established before departure. This may require an inspection or calculation by an Independent Surveyor, covering both deadweight capacity and cubic capacity. The surveyor’s evidence may later be essential to show that the ship could have carried more cargo and that the short shipment was not caused by the ship’s own limitations. The calculation should take account of draft, load line, water density, trim, bunkers, fresh water, stores, stowage factor, and any port or berth restrictions.
Third, if Shipowners wish to preserve the possibility of exercising a lien against the cargo or receiver for Deadfreight (DF), an appropriate remark should be inserted in the Bills of Lading (B/L). The remark should record the short shipment and identify the Shipowners’ Deadfreight (DF) claim. Without such a remark, it may be more difficult to enforce a lien against cargo interests, especially where the Bill of Lading (B/L) has been transferred to a receiver or third-party holder who was not directly involved in the Charter Party.
A difficult practical issue arises when Charterers do not confirm that no more cargo is available, but cargo also does not arrive at the ship. Shipowners must then decide whether to keep the ship waiting or order the ship to sail. If Demurrage is being paid regularly and at a commercially adequate level, the problem may be less serious. However, if the Demurrage Rate is low, payment is deferred until after the voyage, or Shipowners suspect that Charterers may be insolvent or unwilling to pay, the position becomes more risky. In such circumstances, leaving the port too early may expose Shipowners to a claim, while waiting too long may cause serious financial loss. Shipowners should therefore obtain legal advice before instructing the ship to depart where the position is unclear.
Payment of Freight
The time when Freight is payable is not always the same as the time when Freight is legally earned. A Charter Party may state that “Freight is earned upon shipmentâ€, while also providing that Freight is payable before discharge begins, before release of cargo documents, or “Before Breaking Bulk (BBB)â€. The distinction is important. A clause dealing with when Freight is earned determines whether Shipowners keep the Freight if the voyage fails. A clause dealing with payment determines when Charterers must actually transfer the money.In some trades, Charterers or Shippers may request that the Bills of Lading (B/L) be marked “Freight Prepaidâ€. This wording can have serious legal and commercial consequences because it represents to Consignees, banks, and third-party holders that Freight has already been paid. If such a request is made, the Shipowners should insist that Freight must be paid in full before the Bills of Lading (B/L) are issued and handed over to the Shippers. If Shipowners release Freight Prepaid Bills of Lading (B/L) before receiving payment, they may lose practical leverage and may find it difficult to recover Freight later.
The Freight Payment clause should be drafted with precision. It should state the currency of payment, the due date, the triggering event for payment, the bank name, account number, payment location, method of transfer, responsibility for bank charges, and whether payment must be received in cleared funds before a particular event occurs. International bank transfer charges can be substantial, and delays may arise because of intermediary banks, currency controls, sanctions checks, compliance reviews, or public holidays. The Charter Party should therefore state clearly which party bears transfer costs and whether deductions are permitted.
An example of a Freight Payment structure can be found in SHELLVOY 6, Part II, Clause 5, “Freight.†This clause is connected with Clause 10, “Charterers’ failure to give orders,†and addresses the Shipowners’ right to terminate the Charter Party if Charterers fail to make required payments. The wording provides:
“Charterers shall pay the full amount due within 14 days after receipt of Owners’ demand. Should Charterers fail to make any such payments, Owners shall have the right to terminate this Charter by giving written notice to Charterers or their agents.â€
This type of clause gives Shipowners a contractual remedy where Charterers fail to pay sums due. However, the right to terminate must be exercised carefully and strictly in accordance with the Charter Party wording. Wrongful termination may itself amount to a breach of contract. Shipowners should therefore ensure that the demand is properly made, the amount is due, the time period has expired, and the notice requirements have been followed before terminating.
Payment problems may also arise where countries impose restrictions on international money transfers. In some jurisdictions, transferring Freight, Demurrage, or other sums abroad may be delayed, restricted, or subject to local approval. These difficulties may be especially serious in relation to Demurrage, because the amount may not be known until after completion of loading or discharge, and Charterers may then face practical or regulatory obstacles in making payment. A careful Shipowner should investigate payment restrictions, banking channels, sanctions exposure, and currency transfer rules before concluding the Fixture.
In Tanker Charter Parties, additional Freight-related issues may arise in connection with oil residues, remaining cargo on board, slops, ROB quantities, cargo retention, and pollution-prevention requirements. Clauses such as SHELLVOY 6, Part II, Clause 40(4), “Oil Pollution Prevention/Ballast Management,†may contain provisions relevant to these matters. Tanker Freight calculations can therefore involve not only the main cargo quantity but also residues, retained quantities, discharge performance, documentation, and cargo-handling obligations. Clear payment wording reduces the risk of later disputes over Freight, deductions, Demurrage, retained cargo, and related tanker voyage claims.
Security for Payment of Freight
Shipowners commonly have either a legal right, a Contractual Lien, or both, over the cargo as security for unpaid Freight and other sums due under the Charter Party. This right is commercially important because the cargo may be the most effective security available to Shipowners once the ship has loaded and the Voyage has begun. If Freight has fallen due but remains unpaid before the Bills of Lading (B/L) are issued, Shipowners and the Ship Master should ensure that an appropriate remark concerning the unpaid Freight claim is inserted into the Bills of Lading (B/L). Without such a remark, Shipowners may lose the practical ability to enforce a Lien over the cargo for amounts that had already accrued or were payable before the Bills of Lading (B/L) were issued.The wording of the Bill of Lading (B/L) is especially important because the document may later pass to a Consignee, bank, or third-party lawful holder who was not directly involved in the Charter Party negotiations. If the Bill of Lading (B/L) states or implies that Freight has been paid, or if no reservation is made in respect of unpaid Freight, the Shipowner may find it difficult to rely on the cargo as security against an innocent holder. For this reason, Freight payment provisions, lien clauses, Bill of Lading (B/L) wording, and documentary instructions should be coordinated carefully before the Bills of Lading (B/L) are signed and released.
In some transactions, Shipowners secure Freight Payment through an Irrevocable Letter of Credit (L/C). This can provide useful payment security, particularly where the Charterer is unfamiliar, the Freight amount is substantial, or the cargo trade involves payment risk. However, a Letter of Credit (L/C) may also complicate the Chartering Negotiations because the parties must agree the issuing bank, expiry date, documentary requirements, payment triggers, presentation rules, currency, banking charges, and consequences if documents are rejected. If the Letter of Credit (L/C) conditions are too strict or inconsistent with the Charter Party, payment may be delayed despite the apparent security.
Ship Brokerage
When Shipbrokers take part in Chartering Negotiations, they are normally entitled to Commission for arranging or assisting with the Fixture. Ship Brokerage is usually calculated as a percentage of Freight, Hire, or another agreed earning under the Charter Party. The precise percentage, the party responsible for payment, and the sums on which Commission is calculated should be stated clearly in the recap and in the Charter Party. If the wording is unclear, disputes may arise after the Fixture, especially where the Voyage is not performed as expected or where additional sums become payable.Shipbrokers are not automatically entitled to Commission on Demurrage (D) or Damages For Detention (DFD) unless the Charter Party expressly provides for it or the parties have agreed it separately. For this reason, Shipbrokers often try to include wording granting Commission on Demurrage (D) and Damages For Detention (DFD). This is commercially understandable because Demurrage and detention payments may be substantial, and the Shipbroker may consider them part of the earning generated by the Fixture. However, Shipowners and Charterers should make the position clear from the beginning to avoid disagreement later.
Many printed Charter Party Forms also provide some compensation to Shipbrokers if the Charter Party is cancelled, terminated, or not performed. GENCON ’94, Part II, Clause 15, “Brokerage,†contains a well-known example. One part of that wording provides:
“In case of non-execution (of the charter), at least 1/3 of the brokerage on the estimated amount of Freight shall be paid by the party responsible for such non-execution to the Brokers as indemnity for the latter’s expenses and work.â€
This wording can be difficult to apply because the phrase “the party responsible for such non-execution†may not always be obvious. For example, if Shipowners and Charterers settle a dispute by mutually agreeing to cancel the Charter Party, it may be unclear which party is responsible for the non-execution. A further difficulty is that, under English law, a Shipbroker is normally not a party to the Charter Party. This may limit the Shipbroker’s ability to bring a direct claim under the Charter Party unless the wording, agency structure, or applicable law gives the Shipbroker enforceable rights. For this reason, brokerage arrangements should be recorded expressly and should not be left to uncertain printed wording alone.
Loading and Discharging
The responsibility for arranging, performing, supervising, and paying for loading and discharging operations can be allocated in different ways under a Voyage Charter Party. This allocation is commercially significant because cargo-handling expenses at the loading and discharging ports may represent a large part of the total Voyage cost. The Charter Party must therefore state clearly whether the Shipowner, the Charterer, the Shipper, the receiver, or another party is responsible for loading, discharging, stowage, trimming, lashing, securing, tallying, dunnage, and related cargo-handling risks.GENCON ’94, Part II, Clause 5(a), “loading/discharging – costs/risks,†uses the FIOST approach. Under this structure, responsibility for cargo-handling costs and risks is placed broadly on the Charterers. The clause provides:
“The cargo shall be brought into the holds, loaded, stowed and/or trimmed, tallied, lashed and/or secured and taken from the holds and discharged by the Charterers, free of any risk, liability and expense whatsoever to the Owners. The Charterers shall provide and lay all dunnage material as required for the proper stowage and protection of the cargo on board, the Owners allowing the use of all dunnage available on board. The Charterers shall be responsible for and pay the cost of removing their dunnage after discharge of the cargo under this Charter Party and time to count until dunnage has been removed.â€
This wording places substantial responsibility on Charterers for the cargo operation. It covers not only loading and discharging but also stowage, trimming, tallying, lashing, securing, provision of dunnage, and removal of dunnage after discharge. The phrase “free of any risk, liability and expense whatsoever to the Owners†is designed to protect Shipowners from cargo-handling costs and liabilities, although the Shipowner’s fundamental obligations concerning seaworthiness and safe carriage are not eliminated entirely.
The “Gross Terms†alternative that appeared in GENCON ’76 was removed from GENCON ’94 because it is no longer widely used in modern dry cargo Voyage Chartering. Where Gross Terms are still agreed, the wording may resemble the older GENCON ’76 style:
“The cargo shall be brought alongside in such a manner as to enable ship to take the goods with her own tackle. Charterers to procure and pay the necessary men on shore or on board the lighters to do the work there, ship heaving the cargo on board.â€
Under Gross Terms, the dividing point at the loading port is when Charterers or Shippers bring the cargo alongside the ship in a position where the ship can lift it with her own tackle. At the discharging port, the dividing point is when the ship delivers the cargo alongside the receiver, but not beyond the reach of the ship’s tackle. This arrangement is also described as “From Hook To Hook (HTH)â€, meaning that Shipowners are responsible for arranging and paying for the cargo work during the Hook To Hook period.
The Gross Terms approach is common in Liner Bills of Lading (B/L), which is why it is sometimes called “Liner Termsâ€. However, the expression “Liner Terms†is imprecise and should be used with caution. Its traditional meaning is that cargo will be loaded and discharged on the same terms and conditions applied by liner ships for the same cargo in the same ports and berths. In practice, those terms can differ between ports, terminals, cargo types, trades, and liner operators. If the parties use the expression without defining it, they may later disagree over which costs and risks were included.
Under FIO Terms (Free In Out), Charterers take primary responsibility for the cost and organization of loading and discharging. Variations of FIO impose additional obligations. FIOS (Free In Out Stowed) adds responsibility for stowage. FIOSPT (Free In Out Spout Trimmed) adds spout trimming obligations. FIOST (Free In Out Stowed Trimmed) covers loading, discharging, stowage, and trimming. FIOT (Free In Out Trimmed) places trimming responsibility on Charterers. The exact meaning of each abbreviation should be understood in the context of the trade, cargo, port practice, and the detailed wording of the Charter Party.
Older clauses sometimes required Shipowners to provide winchmen, but this is uncommon in modern trades and such wording is often deleted. Today, cargo operations are frequently performed by terminal equipment, shore cranes, floating cranes, grabs, conveyor systems, pumps, port labor, or contractors appointed under local arrangements. Because cargo-handling costs can be substantial, both Shipowners and Charterers must evaluate them carefully during Chartering Negotiations. A Freight rate that appears attractive may become uneconomic if the party responsible for cargo handling has underestimated the cost, speed, labor requirements, equipment charges, or port restrictions.
Loading and discharging clauses must also allocate risk, not only cost. If cargo is damaged during loading, stowage, trimming, lashing, securing, or discharge, liability may depend on whether the operation was for Charterers’ account, whether stevedores were appointed by Charterers or Shipowners, whether the Ship Master intervened, and whether the damage affected the seaworthiness of the ship. Even where Charterers are responsible for the cargo operation, Shipowners may still have duties relating to the safety of the ship, proper supervision, stability, stress, trim, hatch cover safety, and preservation of the cargo.
The stowing, lashing, securing, and trimming of cargo are central to safe transportation and to the ship’s Seaworthiness. Even when Charterers are contractually responsible for Loading, Stowing, Trimming, Lashing, Securing, and Discharging, the Ship Master must ensure that the operations are carried out safely and properly. The Ship Master has both the right and the duty to intervene if cargo handling, stowage, trimming, lashing, or securing is performed in a manner that may endanger the crew, ship, cargo, stability, structure, or safe prosecution of the Voyage.
For this reason, FIO, FIOS, FIOST, FIOT, Gross Terms, Liner Terms, and Hook To Hook wording should not be treated as routine abbreviations. Each term changes the financial and operational balance of the Voyage Charter. The Charter Party should state clearly who appoints and pays stevedores, who supplies cargo gear or shore gear, who provides dunnage, who removes dunnage, who pays for tallying, who bears stevedore damage, how cargo claims are handled, and whether time counts during delays connected with these operations. Clear wording at the negotiation stage reduces disputes once the ship is in port and cargo operations are underway.
Laytime
According to “Laytime Definitions for Charter Parties,†Laytime is defined as “the period of time agreed between the Shipowner and Charterer during which the Shipowner will make and keep the ship available for loading or discharging without payment additional to the Freight.â€Demurrage is defined as the agreed amount payable to the Shipowner when the ship is delayed after the expiry of Laytime, provided the delay is not caused by the Shipowner. Demurrage is not affected by exceptions that interrupt or suspend Laytime unless the Charter Party expressly states that those exceptions also apply to Demurrage.
Despatch is the agreed amount payable by the Shipowner to the Charterer if loading or discharging is completed before the permitted Laytime has been fully used. Despatch is therefore the commercial opposite of Demurrage, rewarding faster cargo operations where the Charter Party provides for such payment.
Laytime and Demurrage are among the most important commercial mechanisms in Voyage Chartering. They determine how long the Charterer may use the ship for loading and discharging without paying additional compensation, and what financial consequence follows if cargo operations exceed the agreed time. Because port delays, weather interruptions, congestion, strikes, documentation problems, and operational disputes are common in shipping, Laytime and Demurrage frequently become the subject of detailed claims and arbitration.
Routines and Allocation of Costs
ETA NoticesMost Voyage Charter Parties require Shipowners to keep Charterers, Shippers, receivers, agents, and sometimes terminal operators informed of the ship’s position and estimated time of arrival (ETA) at the loading or discharging port. ETA Notices allow the cargo interests to prepare documents, arrange berth planning, organize stevedores, coordinate surveyors, prepare cargo, secure customs clearance, and schedule loading or discharging operations. Accurate communication of the ship’s expected arrival is therefore an important operational duty, even where the Charter Party does not make the ETA an absolute guarantee.
A standard ETA Notice Clause might read as follows:
“Ship Master to give telegraphic ETA-notice to Messrs. ‘X’ 96, 48, and 24 hours before ship’s estimated arrival at loading Port.â€
Unless the Charter Party clearly provides otherwise, Shipowners are not normally strictly liable merely because the ship arrives later than the ETA stated in earlier notices. If the ship is delayed by bad weather, congestion, canal delays, port authority instructions, or other circumstances beyond the Shipowner’s reasonable control, the Shipowner will not automatically be responsible for costs incurred by Shippers or receivers who arranged stevedores or terminal services based on the earlier ETA.
However, Shipowners may face liability if the ETA Notices were unrealistic when given, or if the Ship Master or Shipowners failed to update the ETA when they knew, or should reasonably have known, that the ship would arrive later than previously advised. A deliberately inaccurate ETA, careless failure to revise an ETA, or intentional delay after giving an ETA may give Charterers, Shippers, or receivers grounds to claim compensation for avoidable losses. For that reason, ETA Notices should be given honestly, reviewed regularly, and corrected promptly when circumstances change.
Allocation of Costs
Harbour DuesWhen a ship calls at a port, numerous expenses may arise. These can include pilotage, towage, mooring, unmooring, lighting, watchmen, quay dues, berth charges, port authority fees, agency expenses, waste disposal, cargo-handling charges, terminal costs, and security-related costs. The traditional allocation is relatively simple in principle: dues calculated by reference to the ship’s size, tonnage, or presence in port are normally for Shipowners’ account, while dues calculated by reference to the cargo type, cargo quantity, or cargo handling are normally for Charterers’ account, or for the account of Shippers or receivers depending on the Charter Party terms.
In practice, local port rules may not follow this contractual division neatly. Local Port Regulations may require Shipowners or the ship’s agent to pay charges that are commercially connected with the cargo or cargo operations. The Shipowner may have no practical choice but to pay the Port Authority, even if the Charter Party provides that the relevant cost is for Charterers’ account. Payment to the authority does not necessarily determine the final contractual allocation between Shipowners and Charterers. If Shipowners are compelled by local law or port practice to pay a cost that the Charter Party places on Charterers, Shipowners should be entitled to recover that amount from Charterers.
To prevent disputes, a clause such as the following may be included in the Voyage Charter Party:
“If one of the parties to this Charter Party is required to pay dues in connection with calls at any Port that, as per the terms of this Charter Party, are the responsibility of the other party, the latter shall compensate the former for such payment.â€
This type of clause is useful because it separates the question of who must pay the port authority from the question of who must ultimately bear the cost under the Charter Party. It also helps avoid arguments where the local agent, Port Authority, terminal, or customs office requires payment from one party for administrative reasons, even though the cost belongs commercially to the other party.
Freight Taxes (FT)
Many countries impose Freight Taxes or similar charges on revenue earned from the carriage of cargo by sea. Other taxes and dues may also arise in connection with loading, discharging, port calls, cargo movement, or the use of local maritime services. Shipowners and Charterers must agree on who will be responsible for these taxes, because Freight Tax can materially affect the voyage estimate and the net Freight ultimately received by Shipowners.The best practice is to investigate before fixing whether Freight Taxes, cargo taxes, port taxes, withholding taxes, or similar charges apply to the intended voyage. If the tax exposure is already known, the Charter Party should allocate it expressly. This is especially important where the loading or discharging country has specific rules for foreign Shipowners, non-resident carriers, or export cargoes. If the parties ignore the issue during negotiations, a later tax deduction or demand may create a dispute over whether the cost is for Shipowners’ or Charterers’ account.
BIMCO (Baltic and International Maritime Council) has historically provided practical information on Freight Taxes imposed in different jurisdictions. Such information can help Shipowners and Shipbrokers prepare more accurate voyage estimates and identify tax exposure before the Fixture is concluded. However, tax rules may change quickly, and local interpretation may differ from general market understanding. For that reason, it is often advisable to include a general allocation clause in addition to any specific tax wording.
A typical general provision may state:
“Taxes on Freight or Cargo to be for Charterers’ account, and taxes on Ship to be for Shipowners’ account.â€
This wording reflects a basic commercial division between taxes connected with the cargo or Freight and taxes connected with the ship itself. However, the clause should be adapted where necessary to the particular trade, country, cargo, and tax system involved. If the voyage involves countries known for complex Freight Tax rules, the parties should consider more detailed wording identifying whether withholding taxes, port levies, cargo dues, Freight taxes, customs-related charges, and government assessments are included.
Strike Clause
Strikes at loading ports, discharging ports, terminals, inland transport systems, customs offices, pilot stations, tug services, or in seaways along the ship’s route can cause serious delay and additional cost. A strike may prevent cargo from reaching the port, stop stevedores from working, close a terminal, delay customs clearance, interrupt trucking or rail operations, or prevent the ship from entering or leaving the port. For that reason, Voyage Charter Parties usually include a Strike Clause to regulate the parties’ rights and obligations when strike-related disruption affects performance.Strike Clauses can be difficult to interpret because the commercial consequences of a strike may differ depending on timing and location. A strike before loading may prevent Charterers from supplying cargo. A strike after part of the cargo has been loaded may leave the ship with part cargo on board and no clear ability to complete loading. A strike at the discharging port may delay delivery and create Demurrage exposure. A strike affecting pilots, tugs, locks, canals, or port authorities may prevent access even though stevedores and cargo interests are ready. The clause must therefore deal not only with the existence of a strike, but also with the effect of the strike on the ship, cargo, Laytime, Demurrage, cancellation rights, and alternative performance.
The general Strike Clause was revised by BIMCO in GENCON ’94 to reduce uncertainty compared with the earlier GENCON ’76 wording. Even so, Strike Clauses remain sensitive because they often determine whether delay falls on Shipowners or Charterers, whether Laytime counts, whether Demurrage is payable, and whether either party may cancel the Charter Party. The wording should therefore be reviewed carefully during negotiations rather than treated as routine printed text.
Important questions to consider when drafting or applying a Strike Clause include:
- To what extent are Shipowners entitled to compensation from Charterers for strike-related delay, and should compensation be calculated by reference to the Demurrage Rate, daily ship cost, market rate, or another agreed basis?
- Who bears consequential losses arising from the strike, such as missed cargo commitments, storage charges, substitute transport costs, loss of market, or delay to the ship’s next employment?
- What cancellation rights do Shipowners and Charterers have if the strike continues for a specified period or makes performance commercially impracticable?
- What happens if the strike begins after part of the cargo has already been loaded and further loading becomes impossible or delayed?
- Do Shipowners have the right to complete the ship with other cargo at the same port or at another port if the original cargo cannot be loaded because of the strike?
- Can Charterers order the ship to another loading or discharging port to avoid the strike, and who pays the additional cost, time, bunkers, port charges, and documentation expenses?
Agents
In Voyage Chartering, the usual commercial position is that Agents are paid by the Shipowners. The Port Agent performs a wide range of practical functions, including arranging port entry, coordinating with port authorities, organizing pilots and tugs, communicating with terminals, assisting with cargo documentation, handling port disbursements, and supporting the Ship Master during the port call. Although Shipowners normally pay the agency fee, Charterers may have the contractual right to nominate the Agents at the loading or discharging ports. This arrangement can be convenient for Charterers because nominated Agents may already be familiar with the cargo, terminal, Shippers, Receivers, and local procedures. However, it can also create difficulties for Shipowners if the Agent’s loyalty or independence becomes uncertain.Where Charterers nominate the Port Agents, Shipowners may decide to appoint an additional Agent to protect their own interests. This second Agent is often called a “Husbandry Agentâ€. A Husbandry Agent deals with matters that are primarily for Shipowners’ account, such as crew changes, crew repatriation, medical assistance, spare parts delivery, shipyard arrangements, cash to master, bunkering support, class attendance, repairs, and communication with Shipowners’ insurers or technical managers. The Husbandry Agent may also assist Shipowners where a dispute arises with Charterers, Shippers, Receivers, terminal operators, or local authorities.
If the Charterers’ nominated Agents are reputable, independent, and experienced, Shipowners may not need to appoint a separate Husbandry Agent. In many ports, established Agents act professionally for all parties and understand that their duty to the ship and Ship Master must be performed properly even where the nomination comes from Charterers. However, Shipowners should be cautious when dealing with unfamiliar Port Agents, especially where the Agent has close commercial ties with Shippers, Receivers, terminal operators, or the Charterers themselves. In such cases, the Agent may consciously or unconsciously prioritize the interests of the party that nominated the Agent, rather than protecting the position of Shipowners.
Conflicts of interest may be especially sensitive in ports where only one local agency firm is available or where the same agency group represents several different interests. A single Agent may act for Shippers, Receivers, P&I (Protection and Indemnity) Clubs, Hull Underwriters, Cargo Underwriters, terminal operators, or other local parties. If a cargo dispute, delay claim, short shipment, cargo damage issue, lien, arrest risk, or port cost disagreement arises, the Agent may be placed in a difficult position. A firm representing several parties in the same port call may struggle to remain fully impartial when those parties’ interests conflict.
For this reason, agency provisions in the Charter Party should be drafted carefully. The parties should identify who nominates the Agent, who appoints the Agent, who pays the Agent, whether Shipowners may appoint a Husbandry Agent, and whether any additional agency costs are recoverable. Shipowners should also ensure that the Agent sends accurate Statements of Facts, port cost accounts, time records, notices, and cargo documentation. In Voyage Charter disputes, the Agent’s records may become important evidence, especially in relation to Laytime, Demurrage, Notices of Readiness, berth delays, cargo operations, and local port requirements.
Cesser Clause and Lien Clause
In Voyage Chartering, some Charter Parties contain a clause designed to limit the Charterers' liability after the cargo has been loaded. This clause is traditionally known as a Cesser Clause. Its basic purpose is to provide that the Charterer’s liability ceases once the cargo has been shipped and Bills of Lading (B/L) have been signed, subject to any exceptions preserved in the wording. A typical Cesser Clause may state:“Charterers’ liability to cease when cargo is shipped and Bills of Lading (B/L) signed, except as regards payment of Freight, Deadfreight, and Demurrage (if any) at Loading Port.â€
The commercial idea behind the Cesser Clause is that, after shipment, responsibility for certain later liabilities may shift away from Charterers and toward the Cargo Owners, Shippers, Receivers, or Bill of Lading (B/L) holders. For example, Demurrage at the Discharging Port may be expected to be recovered from the cargo interest rather than from Charterers. Similarly, Demurrage (D) at the Loading Port may be directed toward Shippers where the contractual structure and documentation allow such recovery. However, this shift of liability is only commercially acceptable for Shipowners if Shipowners receive an effective alternative security right.
For this reason, a Cesser Clause is usually paired with a Lien Clause, giving Shipowners a right to retain or claim against the cargo as security for outstanding amounts. A Lien Clause may provide:
“It is also agreed that the Owners of the said ship shall reserve to themselves the right of lien upon the cargo laden on board for the recovery and payment of all Freight, Deadfreight, and Demurrage (if any).â€
In some Charter Party forms, the Cesser Clause and Lien Clause are combined in a single provision. This was the structure used in GENCON ’76, Part II, Clause 8, “Lien Clause,†which provided:
“Owners shall have a lien on the cargo for Freight, Deadfreight, Demurrage, and damages for detention. Charterers shall remain responsible for Deadfreight and Demurrage (including damages for detention) incurred at Port of Loading. Charterers shall also remain responsible for Freight and Demurrage (including damages for detention) incurred at Port of Discharge, but only to such extent as the Owners have been unable to obtain payment thereof by exercising the lien on the cargo.â€
GENCON ’94 changed this position significantly. In GENCON ’94, Part II, Clause 8, “Lien Clause,†the Cesser Clause wording was removed and the lien wording was broadened. The clause states:
“The Owners shall have a lien on the cargo and on all sub-Freights payable in respect of the cargo, for Freight, Deadfreight, Demurrage, and claims for damages and for all other amounts due under this Charter Party, including costs of recovering the same.â€
This revised wording is more favorable to Shipowners because it does not contain the same cesser language that could release Charterers from liability. It also extends the lien beyond the cargo itself to sub-Freights payable in respect of the cargo and covers a broader category of claims and recovery costs. The modern commercial approach is therefore generally to preserve Charterers’ responsibility while giving Shipowners wider security rights for unpaid sums.
Is the Cesser Clause Justified and Valid?
The Cesser Clause is widely regarded as outdated and is no longer suitable as a routine provision in modern Charter Party drafting. Charterers should not propose it lightly, and Shipowners should be cautious before accepting it. Although the clause may still appear in some modern Charter Parties, its continued use is often accidental rather than deliberate. It may be hidden inside older printed wording, carried forward from previous Fixtures, or overlooked during negotiations because the parties focus more closely on Freight, Laytime, Demurrage, loading terms, discharging terms, and cargo quantity.The danger for Shipowners is that the Cesser Clause may appear harmless until a dispute arises. Even where Shipowners and Charterers have performed several previous shipments without relying on the clause, Shipowners should not assume that the Charterers will always ignore it. If Charterers face financial difficulty, become involved in disputes with Receivers, or wish to avoid discharging port liabilities, they may examine the Charter Party closely and rely on the Cesser Clause to argue that liability has shifted away from them.
Under English law, the principle is that a Cesser Clause is valid only to the extent that it is matched by an effective Lien Clause. This is often expressed by saying that “cesser is co-extensive with lien.†In practical terms, Charterers’ liability ceases only where Shipowners receive a legally enforceable and practically useful right to lien on the cargo covering the same liability. If the lien cannot be enforced, or if the lien does not cover the particular claim, the Charterers may remain liable. This principle prevents Charterers from escaping liability while leaving Shipowners without an equivalent remedy.
For example, if the Charter Party attempts to release Charterers from liability for discharging port Demurrage, but local law does not permit Shipowners to exercise a lien over the cargo for that claim, the Cesser Clause may not operate as Charterers intended. Similarly, if the cargo has already been delivered, transferred, discharged into inaccessible storage, or taken by a receiver beyond Shipowners’ control, the practical value of the lien may be limited. The legal validity and practical enforceability of the lien are therefore central to the effect of the Cesser Clause.
Exercising the Lien
Before Shipowners attempt to enforce a Lien over cargo, they must examine the legal and practical position in the relevant country and port. The right to lien may exist under the Charter Party, Bill of Lading (B/L), or applicable law, but this does not mean enforcement will be simple. Some jurisdictions do not recognize the particular type of lien claimed. Others recognize it in principle but require strict procedural steps before it can be exercised. In some ports, local authorities, customs rules, warehouse arrangements, or receiver rights may make enforcement difficult even where the contractual wording appears strong.Practical obstacles can be just as important as legal obstacles. If the only available storage facility, shed, silo, tank, or warehouse is controlled by the same party against whom Shipowners have a claim, enforcing the lien may become commercially difficult. Cargo may need to be discharged into storage under Shipowners’ control, but this may not be possible without local permission, customs clearance, terminal cooperation, or payment of additional charges. If the cargo is perishable, dangerous, liquid, temperature-sensitive, or difficult to store, the problem becomes even more complicated.
It is also uncertain in many cases whether Shipowners can effectively exercise a Lien by keeping the cargo on board the ship. Retaining cargo on board may delay the ship, interfere with the next employment, increase port costs, expose Shipowners to cargo deterioration claims, and create disputes with Charterers, Receivers, terminals, and port authorities. If the ship is kept idle while cargo remains on board, Shipowners may incur additional expenses that may or may not be recoverable. The commercial pressure to release the ship may therefore weaken the practical value of the lien.
In jurisdictions with less predictable legal or administrative systems, even a properly exercised lien may result in delay, expense, and uncertainty. Shipowners may still face delays and extra expenses due to bureaucratic challenges or opposition from local authorities, especially where the cargo receiver is influential locally or where port authorities are reluctant to allow cargo detention. The lien may also trigger threats of arrest, cargo claims, injunctions, customs complications, or political pressure.
Because of these risks, Shipowners should obtain local legal advice before enforcing or threatening to enforce a lien. If there is any reason to expect resistance, Shipowners should prepare well before the ship reaches the Discharging Port. This preparation may include reviewing the Charter Party and Bills of Lading (B/L), confirming whether the lien is incorporated into the Bills of Lading (B/L), notifying P&I (Protection and Indemnity) Club representatives, appointing reliable local lawyers, arranging suitable storage if required, instructing the Agent carefully, and preserving evidence of the sums due.
A lien can be a powerful security device, but only if it is both legally enforceable and practically usable. Cesser Clauses and Lien Clauses should therefore be considered together. Shipowners should avoid accepting any clause that releases Charterers from liability unless the corresponding lien gives a real and effective remedy. Charterers, for their part, should understand that a cesser provision may not protect them unless the lien is co-extensive with the liability they seek to avoid. Clear drafting and early planning are essential if these clauses are to operate fairly and commercially.
Shipowners Collecting from Receivers or Shippers
Where Shipowners are given a contractual right under the Charter Party to collect Demurrage (D) directly from Receivers or Shippers, the wording must be drafted with particular care. The clause should make clear that Charterers remain ultimately liable if Receivers or Shippers do not pay. It should also state the period within which Shipowners must first seek payment from Receivers or Shippers before turning back to Charterers for settlement. Without such wording, Shipowners may find themselves exposed to delay, non-payment, or arguments that Charterers have been released from liability.A commercially acceptable clause from the Shipowners’ perspective may be drafted as follows:
“Demurrage at discharging Port to be settled directly between Owners and Receivers, but Charterers to remain ultimately responsible. In case payment from Receivers is not effected within X days after discharging, or after invoice date, Charterers to pay Demurrage to Owners.â€
This type of clause gives Shipowners an initial route for recovering Demurrage from the party commercially connected with the discharge operation, while preserving Charterers’ final responsibility. However, Shipowners should accept such wording only where they are satisfied with the financial standing, reliability, and commercial reputation of Charterers. If payment is to be pursued from Receivers or Shippers first, Shipowners may not have an effective cargo lien as security for their claim against Charterers, particularly after the cargo has been delivered. The practical strength of the clause therefore depends not only on its wording but also on the solvency and integrity of the parties involved.
Cargo Liability
In a Voyage Charter Party, liability for the cargo as between Shipowners and Charterers is primarily a matter of contractual agreement. General contract law does not usually impose a fixed minimum cargo liability on Shipowners under the Charter Party itself. Instead, the extent of liability depends on the wording of the Charter Party, any incorporated protective clauses, the applicable law, and the interaction with international cargo liability regimes where Bills of Lading (B/L) or other transport documents are issued.The principal international cargo conventions and regimes include:
- Hague Rules
- Hague-Visby Rules
- Hamburg Rules
- Rotterdam Rules
A Paramount Clause may apply to:
- The Carrier’s (Shipowner’s) liability for cargo under the Charter Party.
- The entire Charter Party itself.
- The Bills of Lading (B/L) issued under the Charter Party.
Shipowners’ Liability When a Voyage Charter Party and a Bill of Lading (B/L) Are Involved
Under many standard Charter Parties, including forms such as GENCON, the Shipowners’ liability for cargo may be very limited as between Shipowners and Charterers. However, the practical position often changes when the Ship Master issues a Bill of Lading (B/L). The Bill of Lading (B/L) may contain a Paramount Clause, jurisdiction wording, carrier identity wording, and cargo liability provisions that expose Shipowners to greater responsibility than the underlying Charter Party. This creates an important question: Which document governs Shipowners’ liability—the Charter Party or the Bill of Lading (B/L)?The problem can be divided into two separate issues:
- To what extent are Shipowners liable to Receivers/Bill of Lading (B/L) Holders?
- If Shipowners must compensate Receivers/Bill of Lading (B/L) Holders for a liability that would not have arisen under the Charter Party, to what extent can Shipowners recover the amount from Charterers?
Liability Against Cargo Owners
Bills of Lading (B/L) commonly contain a Paramount Clause, Jurisdiction Clause, carrier identity wording, exceptions, limitation provisions, and other terms that may differ from, or even conflict with, the Voyage Charter Party. To reduce uncertainty and ensure that the Charter Party terms are brought into the Bill of Lading (B/L), Shipowners often require an Incorporation Clause. A typical clause may provide:“All the terms, conditions, clauses, and exceptions contained in Charter Party dated . . . . . . . . . . . between . . . . . . . . . . ., including the Jurisdiction Clause, are hereby expressly included in this Bill of Lading and are deemed to be incorporated herein. All the terms, conditions, clauses, and exceptions contained in this Bill of Lading – including the Paramount Clause – are null and void to such extent as they are contrary to any provisions in the said Charter Party but no further.â€
This type of Incorporation Clause is designed to make the Bill of Lading (B/L) subject to the Charter Party terms, including exceptions, jurisdiction, arbitration, lien, Demurrage, and liability provisions. However, the effectiveness of such wording is not unlimited. There may be doubt as to whether Shipowners can rely on the clause to reduce cargo liability in relation to the Consignee (who is not the Charterer), particularly where mandatory rules under the Hague Rules, Hague-Visby Rules, or similar cargo conventions impose minimum obligations on the Carrier. A clause that attempts to deprive a third-party Bill of Lading (B/L) holder of mandatory cargo protection may be ineffective to that extent.
Even so, Incorporation Clauses can be commercially useful in many situations. They may assist in Demurrage Claims, lien claims, jurisdiction or arbitration disputes, Freight disputes, and cases involving countries that have not adopted the relevant Bill of Lading (B/L) conventions. They may also help align the documentary contract with the Charter Party, reducing the risk that the Carrier faces one set of obligations under the Bill of Lading (B/L) and another under the Charter Party.
Where cargo payment is made through a Letter of Credit (L/C), documentary requirements must be considered carefully. Shipowners should ensure that the Charter Party specifies that Bills of Lading (B/L) must contain a clause referencing the Charter Party. If the banks involved in the Letter of Credit (L/C) have not been told in advance that a Charter Party Incorporation Clause will appear in the Bill of Lading (B/L), they may reject the document as non-compliant. This can delay payment for the cargo and may create pressure on the Ship Master, Shipowners, Charterers, Shippers, and Receivers to amend or replace documents after shipment.
The position is different where the Receivers are also the Charterers. In that case, the Bill of Lading (B/L) does not usually have the same independent contractual significance between those parties because the Charter Party remains the main contract governing their relationship with Shipowners. Receivers who are also Charterers generally cannot use the Bill of Lading (B/L) to escape the Charter Party terms or bring claims inconsistent with the Charter Party. However, Shipowners must remain cautious because Receivers/Charterers may transfer the Bill of Lading (B/L) to a bank, buyer, end receiver, or other third party. Once the Bill of Lading (B/L) is transferred to a lawful holder who is not bound by the Charter Party, that party may be entitled to claim under the Bill of Lading (B/L) according to its own terms and the applicable cargo liability regime.
For this reason, cargo liability should be considered at the Charter Party negotiation stage, not only after a cargo claim arises. Shipowners should ensure that the Charter Party, Bills of Lading (B/L), Paramount Clause, Incorporation Clause, identity of Carrier wording, jurisdiction clause, lien clause, and indemnity provisions are consistent. Charterers should also understand that requiring Bills of Lading (B/L) to be issued on terms different from the Charter Party may expose them to indemnity claims from Shipowners if Shipowners suffer additional liability as a result. Clear drafting protects both sides and reduces the risk of disputes between Shipowners, Charterers, Receivers, Shippers, banks, and Bill of Lading (B/L) holders.
Cargo Retention Clauses
In Tanker Voyage Charters, cargo shortage claims arise more frequently than in many dry cargo trades because liquid cargoes are affected by their physical and chemical characteristics. Oil cargoes may lose measurable quantity through evaporation, sedimentation, clingage, temperature variation, line losses, measurement differences, and unpumpable residues remaining in tanks, pipelines, or pumps. Some degree of loss is therefore commercially expected. In many oil cargo trades, an allowance of about 0.5–0.75% is commonly accepted for evaporation and unpumpable sediment, although the precise allowance should always be assessed according to the cargo type, trade custom, measurement method, terminal practice, and the wording of the Charter Party.When oil prices rise, Charterers often become more sensitive to even small cargo shortages and may seek to include Cargo Retention Clauses in the Charter Party. These clauses are intended to shift part of the cargo shortage risk onto Shipowners by allowing Freight to be calculated on the delivered quantity rather than the loaded quantity, or by allowing deductions where cargo remains on board after discharge. The commercial effect can be significant because a small percentage shortage in a high-value oil cargo may represent a large monetary claim.
Although some printed Tanker Charter Party forms do not contain a Cargo Retention Clause, such wording is frequently added as a Rider Clause. Shipowners should review these clauses carefully because a right of deduction from Freight may affect cash flow and may also interact with cargo liability defences, limitation rights, pumping clauses, ROB provisions, and measurement evidence. If Charterers are allowed to deduct from Freight automatically, Shipowners may lose practical leverage even where the shortage is caused by normal cargo characteristics, shore measurement differences, or factors outside Shipowners’ control.
From Charterers’ perspective, it is important that any Remaining on Board (ROB) quantity is measured and verified objectively before deductions are made. The Charter Party should therefore require ROB cargo to be determined by an Independent Surveyor, preferably using recognized measurement procedures and with participation by both ship and shore representatives. Survey records, ullage reports, temperature corrections, tank inspection reports, pumpability findings, and shore figures may all become essential evidence if a dispute arises. The approach reflected in SHELLVOY 6, Part II, Clause 48, “Cargo Retention,†is generally regarded as a balanced model because it protects Charterers against unjustified retained cargo while also preserving reasonable safeguards for Shipowners.
Redress
Where Shipowners are required to pay cargo claims under a Bill of Lading (B/L) that exceed the liability they assumed under the Charter Party, English law generally recognizes that Shipowners may have a right to recover the excess from Charterers. This is especially relevant where the Bill of Lading (B/L) has been issued on terms more burdensome than the Charter Party, or where Charterers’ instructions, cargo documents, or presentation of Bills of Lading (B/L) expose Shipowners to wider liability. However, this right is often more of a Legal Right than a Real Right, because Charterers may not voluntarily reimburse Shipowners unless the Charter Party clearly requires them to do so.If Shipowners intend to preserve a clear right of recovery, they should include an express Redress Clause in the Charter Party. A traditional 1968-style Redress Clause may provide:
“If one of the parties to this Charter Party has been obliged to make payment or institute defense in respect of a claim by a third party, under a Bill of Lading (B/L) or otherwise, of a nature which, as between the parties, would have been the responsibility of the other party under the terms of this Charter Party, the latter shall indemnify the former for all loss, damage, or expenses resulting therefrom. However, the indemnity payable under this Clause in respect of discharge of such claims shall be reduced to the extent the party in question could have limited his liability if he had been held liable directly to the claimant in the jurisdiction in which the claimant proceeded against the other party.â€
This wording is designed to restore the internal balance of liability agreed between Shipowners and Charterers. If one party is forced to answer a third-party claim that, as between the parties, should have been borne by the other, the responsible party must indemnify the paying party. The limitation wording is also important because it prevents the indemnified party from recovering more than the amount for which the responsible party would have been liable if the claim had been brought directly against it.
GENCON ’94, Part II, Clause 10, “Bills of Lading (B/L),†addresses the same concern in a more specific way. The clause provides:
“The Charterers shall indemnify the Owners against all consequences or liabilities that may arise from the signing of Bills of Lading (B/L) as presented to the extent that the terms or contents of such Bills of Lading (B/L) impose or result in the imposition of more onerous liabilities upon the Owners than those assumed by the Owners under this Charter Party.â€
This clause is particularly important where Charterers or Shippers present Bills of Lading (B/L) for signature and those documents contain statements, terms, cargo descriptions, dates, quantities, or liability provisions that go beyond the Charter Party. Shipowners should not treat the signing of Bills of Lading (B/L) as a routine formality. If the Bills of Lading (B/L) impose greater obligations than the Charter Party, the indemnity wording may become essential to recovering losses from Charterers.
Damage to the Ship
If the ship is damaged by heavy weather, navigational error, cargo operations, collision, contact with buoys, quay structures, cranes, terminals, or other ships, Shipowners do not automatically have a claim against Charterers. As a general rule, Shipowners can recover compensation from Charterers only where the Charter Party expressly provides for recovery, where Charterers have breached the contract, or where Charterers, their servants, agents, contractors, or Stevedores have acted negligently, fraudulently, or outside the agreed contractual limits.The most common situations in which Shipowners may recover for damage to the ship are where:
- The damage results from an unsafe Port or Berth nominated by Charterers.
- The damage is caused by Stevedores during cargo operations.
- The cargo is inherently dangerous, harmful, corrosive, contaminating, or otherwise injurious to the ship.
- Damage Caused by Cargo
Some cargoes may cause damage gradually rather than immediately. Coal, sulphur, salt, fertilizers, concentrates, scrap, chemicals, petroleum products, and certain mineral cargoes can create corrosion, staining, heat, moisture, residues, coating damage, or contamination if the ship is not properly prepared or if the cargo is not accurately described. For this reason, cargo-related damage clauses should be supported by clear loading instructions, cleaning requirements, protective measures, ventilation instructions, temperature controls, and survey procedures where necessary.
Damage Caused by Stevedores
When Stevedores damage the ship during loading, stowage, trimming, lashing, securing, or discharging operations, liability depends first on the wording of the Charter Party. The parties must determine whether Shipowners or Charterers are responsible for cargo operations and whether Stevedores are treated as the servants, agents, or contractors of one party or the other. However, the fact that the Charter Party makes Charterers responsible for loading and discharging does not automatically mean that Charterers will be liable for every item of Stevedore damage.In many jurisdictions, Shipowners must prove negligence or fault, not merely that damage occurred during cargo operations. This can be difficult where damage is discovered later and it is unclear which port, which operation, or which Stevedore gang caused it. Hatch coamings, tank tops, ladders, frames, pipelines, grabs, hatch covers, rails, and deck fittings may be damaged during several stages of the voyage, and evidence may become uncertain if the Ship Master does not notify the damage promptly.
Poor stowage creates additional complications. Even where Charterers are responsible for stowage, the Ship Master has a continuing duty to supervise loading so far as necessary for the safety of the ship, crew, and cargo. If improper stowage affects stability, stress, trim, ventilation, cargo safety, or seaworthiness, the Ship Master must intervene. Shipowners may therefore face arguments that the Master should have detected or prevented the problem, even where Charterers arranged the cargo operations.
GENCON ’94 Stevedore Damage Clause
To deal with Stevedore damage more clearly, GENCON ’94 introduced a provision that was not included in GENCON ’76. The clause states:
“The Charterers shall be responsible for damage (beyond ordinary wear and tear) to any part of the Ship caused by Stevedores. Such damage shall be notified as soon as reasonably possible by the Master to the Charterers or their agents and to their Stevedores, failing which the Charterers shall not be held responsible. The Master shall endeavour to obtain the Stevedores’ written acknowledgment of liability.
The Charterers are obliged to repair any Stevedore damage prior to completion of the Voyage, but must repair Stevedore damage affecting the Ship’s Seaworthiness or class before the Ship sails from the Port where such damage was caused or found. All additional expenses incurred shall be for the account of the Charterers, and any time lost shall be for the account of and shall be paid to the Owners by the Charterers at the Demurrage rate.â€
This clause gives Shipowners a clearer contractual basis for recovery, but it also imposes procedural requirements. The Ship Master must notify Charterers, their agents, and the Stevedores as soon as reasonably possible. If notice is not given in time, Charterers may escape liability. The Master should also try to obtain written acknowledgment from the Stevedores. In practice, this may be difficult, but the attempt should be made and recorded. Photographs, survey reports, deck log entries, Stevedore damage reports, protest letters, and agent communications should be preserved as evidence.
The clause also distinguishes between ordinary Stevedore damage and damage affecting seaworthiness or class. Damage that affects the ship’s seaworthiness or class must be repaired before the ship sails from the port where the damage occurred or was discovered. Other Stevedore damage may be repaired before completion of the voyage, depending on the circumstances. Time lost and additional expenses are for Charterers’ account and are payable at the Demurrage rate, which gives Shipowners a contractual method of recovering delay losses.
Consecutive Voyage Charter
A Consecutive Voyage Charter is a variation of a Voyage Charter under which a named ship is fixed to perform Multiple Voyages one after another. Instead of employing the ship for a single voyage only, the Charterer secures the ship for a series of agreed voyages, usually between specified ports or within an agreed trade pattern. Each voyage may retain the basic character of a Voyage Charter, with Freight, Laytime, Demurrage, and cargo obligations applying voyage by voyage, but the repeated employment gives the arrangement some features commonly associated with Time Chartering.This is why a Consecutive Voyage Charter is often described as a hybrid form. The Shipowner normally remains responsible for operating the ship and bearing the main voyage expenses unless otherwise agreed, while the Charterer obtains repeated access to the same ship over a defined sequence of cargo movements. The structure can be useful where Charterers have a steady cargo flow but do not want to take the full time risk of a Time Charter. It can also benefit Shipowners by providing employment continuity and reducing ballast exposure between voyages.
Careful drafting is required because the parties must define how many voyages will be performed, the loading and discharging ranges, cargo quantities, nomination procedure, Freight for each voyage, Laytime and Demurrage arrangements, cancellation rights, off-schedule events, strikes, ice, war risks, and what happens if one voyage is delayed and affects the next. The Charter Party should also state whether each voyage is treated separately or whether delay, failure, or cancellation of one voyage affects the whole consecutive voyage program.
Voyage Charter and Liner Shipping
The Bulk Shipping and Liner Shipping markets differ fundamentally in structure, commercial purpose, and documentation. From a chartering and Shipbroking perspective, Bulk Shipping is generally more central because it relies heavily on individual Fixtures negotiated between Shipowners and Charterers. Liner Shipping is more service-based and usually involves scheduled operations, standardized documentation, container bookings, and many cargo customers rather than one negotiated Charter Party for one cargo.A Liner Shipping service may, in a limited sense, resemble a specialized form of Voyage Charter where transport is performed on “Liner Termsâ€, meaning that Shipowners or Liner Operators arrange and pay for loading and discharging. However, the resemblance is superficial. The market structure, contractual relationships, risk allocation, pricing method, and documentation are very different from those used in the Open Bulk Market.
One of the clearest distinctions between a Liner Shipping service and a Voyage Charter (Spot Charter) on Liner Terms is the number of customers involved. In Voyage Chartering, the Shipowner usually contracts with one Charterer for one cargo or cargo parcel on a particular voyage. In Liner Shipping, the Carrier normally carries cargo for many customers on the same ship and voyage. These customers may be described as Shippers, Merchants, Consignees, freight forwarders, or Cargo Owners.
In Voyage Chartering, the Shipowner and Charterer, often through Shipbrokers, negotiate the employment of the ship for a defined voyage and cargo. The agreement is recorded in a Voyage Charter Party, which operates as the main contract of carriage between the parties. The service is commercially tailored to the cargo movement and is often performed on a “one ship – one cargo†basis. Freight is commonly calculated in USD per ton of cargo carried, although lump sum Freight or other methods may also be used.
In Liner Shipping, the Shipowner, Carrier, or Ship Operator provides a regular service between fixed ports or port ranges, usually according to a published or planned schedule. The Liner Operator functions as a Common Carrier or service provider in many trades, carrying a wide variety of cargoes, especially containers, for numerous customers. Shippers book slots or cargo space on the service rather than negotiating a full Voyage Charter Party. Freight is generally calculated in USD per TEU, FEU, container, package, weight/measure unit, or according to tariff or service contract terms.
The contract for cargo transportation in Liner Shipping is usually arranged through the Agents of the Shipping Line, digital booking platforms, freight forwarders, or carrier sales departments. It is normally documented by a Booking Note, booking confirmation, Sea Waybill, or Bill of Lading (B/L), rather than by a Voyage Charter Party. In both Liner Shipping and Bulk Shipping, Bills of Lading (B/L) may be issued when cargo is received for shipment or loaded on board. However, in Liner Shipping, non-negotiable Sea Waybills are also common, particularly where there is no need for a negotiable document of title.
Conclusion
Voyage Charters as used in the Open Bulk Market are rarely suitable for the Liner Shipping sector. Although Liner Shipping services operate on a Voyage-by-Voyage basis in the physical sense, the commercial philosophy is different. Liner Shipping is based on regular services, multiple customers, standardized booking systems, containerized or general cargo movements, tariff or service-contract pricing, and transport documents issued to many Shippers. Voyage Chartering, by contrast, is based on negotiated employment of a ship for a particular cargo movement. For this reason, Voyage Charter Parties are generally not used in the Liner Shipping market, particularly for fully cellular containership operations.