Charter Parties

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Charter Party (C/P) : 

A C/P is defined as a contract between a ship-owner and charterers for the use of a ship or her cargo spaces,

These are of three types :

a) Voyage Charter party,  

b) Time Charter party, and  

c) Demise Charter party or Bare-boat Charter party.

Voyage Charter party : 

1. It is a contract to carry specified quantity of cargo (normally full cargo) by a named vessel between a named ports at an agreed freight rate.

2. The ship owner remains responsible for the operations of the ship and the cost involved but the charterer sometimes pays for the stevedoring rates.

3. The contracts are normally drawn up using standard charter party forms amended as required by alternations and additional clauses by the brokers representing each party. The additions are called ‘rider clauses’ or ‘side clauses’. And the two parties are referred to as owners and charterers. If the owners are not the actual owners but a party already hiring ship from another party then they are called ‘Disponent Owners’.

4. Charterers normally make arrangement for bringing cargo forward and for payment of all discharging and loading cost in which case, C/P terms are called FIO (Free In and Out).

Time Charter party :

1. It is a contract for the hire of a named vessel for a specified period of time.

2. The Charterer agrees to hire from the owners a ship which is generally named of their required specifications for a period of time stated subject to agreed exclusions.

3. The period of Time Charter may be one voyage (Trip Charter) or upto several years (period charter).

4. The charterers may use the vessel for any voyage that he wants within the trading area agreed in C/P.

5. The Charterer pays for the ” commercial expenses” of the ship i.e. manning, repairs, maintenance, stores, master / crew wages, hull & machinery insurance. provisions etc.

6. The time charterers usually use their own stationary, fly their own flag and paint their own colours on the ship.

7. C/P contains a description of the ship including its speed and fuel consumption. In case of non-performance with these specifications, the owner has to forfeit a part of his hire charges.

8. In case the ship is unable to maintain the warranted speed or bunker consumption as per C/P as a result of heavy weather or any other cause, it should be clearly substantiated by entries in the log book.

9. Off-hire Clause : This gives the circumstances in which the payment of hire stops during time lost to the charterer. Normally this comes into effect after the vessel has been unavailable for a stated period of time. e.g 24 hrs & 48 hrs.  e.g – Machinery breakdown, crew strikes, dry-docking etc…

10. A dry dock clause makes the ship available to the owner without cargo, after a stated period of notice. During the dry-docking, the ship is off-hire.

11. Deviation clause – If deviating for owners purpose, e.g – landing sick seamen, repairs, dry-docking etc. The vessel is off-hire from the moment of the deviation until she is ready to resume service in a position as favorable to the charterers as before.

12. Charterers are expected to re-deliver the vessel in the same good order as when delivered to the charterer, fair wear and tear expected. In case this is not so then the charterer is liable for the cost of its repairs. A Charterer can be given the option of ‘redelivery dirty’ in which case a compensation will be paid to the owners.

13. An on-hire survey and a re-deliver survey are held before hire and before re-delivery respectively.

14. The master is usually required to sign the Bill of Lading as presented to him by the charterer or the charter party may give the charterer the right to sign them on his behalf.

15. Stevedore damages clause also called ‘ Grab Damage Clause ‘, This clause describes the methods of survey to be held in case of damage caused to the vessel by the Stevedores and how payment for repairs is to be made.

Bare-Boat Charter party :

1. It is a leasing arrangement between the charterer and the actual owner in which the charterer operates the ship as if it is his own for an agreed period.

2. The master and the crew are employed by the charterer and they are responsible to him as if he were the owner.

3. Most often it is in the form of the BARECON standard charter party form.

4. May have a purchase option at the end of the contract.

5. Only capital cost are for the owners account. The charterer has a commercial and technical responsibility of the vessel and all costs, except the capital cost.

Note – A Charterer of a Bare-Boat charter party if he has the infrastructure to commercially and technically operate the ship but does not have the capital necessary to actually own the ship.

Contract of Affreightment (COA) :

1. The main purpose of a contract of affreightment (COA) is to oblige a carrier to lift a fixed or determinable quantity of cargo of a specified type over a given period of time. 

2. Usually, the COA is not limited to one particular vessel, but operates as a series of voyage charters. 

3. Freight is payable on the quantity of cargo transported and the carrier bears the risk of delay en route.

4. Given the long term nature of the contract, a COA is almost always tailor made to meet the specific needs of the parties concerned. These parties are the shipper or buyer of the cargo who is often motivated by requiring certainty for the costs of transportation, and the ship-owner who is concerned with providing assured long term employment and flexibility for his owned or chartered in tonnage. 

5. COAs enable the ship-owners to be flexible and allow the vessels to be fitted into a pattern of trade that maximises laden as against ballast distances and allows such arrangement to be concluded at very competitive rates of freight.

6.  COAs contain very few standardised terms, other than the individual voyage charter terms that govern each lifting once the vessel has been tendered for loading.  The least standardised part of the contract will be the shipping programme and nomination provisions, and it is these provisions that are the most abused or contested over the period of a lengthy COA.

7. It is also called “Tonnage Contract”.

8. Loading dates are specified and punctual performance is very necessary.

9. Each individual shipment is normally subject to the terms of a conventional charter party.

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