What is Demurrage?

Demurrage is the name given to the damages payable by the charterer to the owner for the charterer’s breach of charterparty in delaying the vessel beyond the agreed laytime. Demurrage is liquidated damages – that is to say that the rate per day is fixed at the time the charterparty is agreed and both parties know in advance their respective liabilities/earnings in the event of a delay. This is distinct from ‘damages at large’ which would require an owner to prove his losses. For demurrage, the owner only has to prove that the delay falls within the terms of demurrage for the relevant charterparty. The rate agreed is much like the freight rate – it will be a reflection of the running costs of the vessel and the market conditions. The demurrage rate is usually agreed in the charterparty as a daily rate. For part of a day, the rate is pro rated as, for example, in Clause 7 Gencon 94.