The amount of time the ship is expected to be in port, mainly for loading and discharging the cargo, is agreed upon, and this is known as laytime. Should the ship be delayed in port due to lack of cargo or other causes that could reasonably be said to be the charterer’s responsibility, then the shipowner may be entitled to claim compensation in the form of ‘demurrage’, which is payable by the charterer, who is in breach of the charterparty terms and is therefore under an obligation to compensate the owner. Demurrage is the payment of liquidated (pre-arranged) damages for keeping the ship in port for loading or discharging purposes for a longer period than the agreed time. Demurrage rates are based on the vessel’s Daily Running Cost or the Time Charter Equivalent. If the ship finishes earlier than expected, the shipowner pays ‘Despatch’ to the charterer at a daily rate which is usually half the equivalent daily rate for demurrage but this only applies in dry cargo chartering. Note that there is no Despatch in tanker chartering. The owner always remains the carrier and when the master signs the bills of lading, they are signed on behalf of the owner. This means that in the event of any claims for shortages or other discrepancies in the cargo, the owner is responsible and not the charterer. The exception to this is when the bill of lading states that certain cargoes are carried, for example, “on deck at charterer’s risk”
What is Laytime? What is Laytime’s Commercial Purpose? Laytime is the amount of time which the owner and charterer agree it will take to load and discharge the cargo carried on board the vessel. When negotiating a charterparty, the owner will calculate how much freight they require to compensate them for performing the voyage. A key factor is how long the voyage will take to perform, that is, the approach voyage, loading, the carrying voyage and discharging. An owner usually has no control over the loading and discharging, and therefore the charterer will accept an obligation to load and discharge the cargo within a fixed time called laytime. The commercial purpose of lay time is, therefore, to compensate the owner for the time spent by the charterer loading and discharging the cargo over which the owner has no control. If, for example, the owner had calculated his freight on the basis that time spent loading and discharging would take three days, but the charterer in fact spent 10 days, the owner would have made no profit (and would have probably made a loss) from the employment of the vessel for that voyage.