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Charter Parties: The Complete Guide – Types & Agreements

August 21, 2023

Looking for a comprehensive guide to charter parties? Our page covers all types and agreements, distinguishing us from the competition.

Charter Parties The Complete Guide

Charter parties , the legal contracts for chartering vessels, are the backbone of international shipping. They define the rights and obligations of shipowners and charterers, ensuring smooth operations on voyages. Whether it’s a time charter or a voyage charter, these agreements play a crucial role in facilitating global trade for carriers.

A charter party is not just any document; it serves a specific purpose in the context of chartering. Its clauses, articles, and provisions outline the terms that govern the relationship between parties involved in maritime commerce, typically in a contract. Shipowners carefully craft these agreements, known as charterparties, to protect their interests while meeting the needs of charterers who engage their services as carriers.

Understanding charter parties is essential for anyone venturing into international shipping. From specifying the duration of the charter period to determining responsibilities during loading and unloading, every detail matters in chartering. So let’s dive into this intricate world of maritime contracts and explore how they shape our interconnected global economy, specifically in relation to carrier and specific cargo.

Types of Charter Parties

Time charters.

A ship chartering, or time charter, involves leasing a vessel from a ship owner for a specific period. This type of charter party allows the charterer, or carrier, to have exclusive use and control over the vessel during the agreed-upon timeframe. It provides flexibility as the charterer can determine the ports of call and cargo carried.

Voyage charters

Voyage charters in ship chartering involve hiring a vessel for a single journey. Unlike time charters, which focus on an extended period, voyage charters are specific to one trip. The charterer pays the ship owner for transporting goods from one port to another without long-term possession or control over the carrier.

Bareboat charters

Bareboat charters involve ship chartering by leasing a vessel without crew or provisions. In this type of arrangement, the charterer assumes complete responsibility for operating and maintaining the ship during the agreed charter party duration. The shipowner transfers possession and control to the charterer, who becomes the carrier responsible for all aspects of navigation, crewing, and provisioning.

These main types of charter parties, including time charters, voyage charters, and bareboat charters, offer different options depending on the specific needs and requirements of the charterparty, carrier, ship owner, or shipowner. Time charters provide flexibility and extended use, voyage charters focus on individual trips, while bareboat charters grant full control to the lessee. By understanding these various types, individuals and businesses can choose which option best suits their particular circumstances.

Charter Party Agreements

Charter party agreements, also known as charterparty agreements, are legally binding documents that are negotiated between shipowners and charterers. These agreements specify important terms such as freight rates, laytime, demurrage, and more. Here’s a brief overview of charterparty agreements and how they form an essential part of container shipping.

• Charter party agreements, also known as charterparty agreements, are contracts that outline the terms and conditions of the chartering arrangement for container ships. They are typically negotiated between the shipowner, who owns the vessel, and the charterer, who will be using the container ship for a specific period or voyage.
• Charter party agreements include various provisions that define important aspects for ship owners. This includes details about freight rates (the cost of hiring the vessel), laytime (the allowed time for loading and unloading cargo), demurrage (additional fees if there is a delay in cargo operations), and other relevant terms.
• Legally binding documents: Once both ship owners agree to the terms outlined in a charter party agreement, it becomes a legally binding document. This means that both ship owners are obligated to fulfill their respective responsibilities as stated in the agreement.

Charter party agreements play a crucial role in the shipping industry by providing clarity and protection for all parties involved. They ensure that both shipowners and charterers understand their rights and obligations throughout the duration of the charter. Whether it’s a slot charter (a partial space booking) or a demise charter (complete transfer of vessel control), these agreements establish clear guidelines for smooth operations.

The Importance of Charter Parties in International Trade

Charter parties play a vital role in facilitating global trade, ensuring the efficient transportation of goods by sea. These agreements establish clear responsibilities and liabilities for both shipowners and charterers, promoting smooth operations and minimizing disputes. Let’s explore why charter parties are crucial in international trade.

• Facilitate global trade by providing vessel availability : Charter parties enable shipowners to make their vessels available for hire, allowing them to meet the demand for transporting goods across borders. This availability ensures that businesses can access reliable shipping services to move their products worldwide.
• Ensure efficient transportation of goods by sea: By defining the terms and conditions of carriage, charter parties help streamline the logistics process for ship owners. They specify loading and unloading procedures, delivery timelines, and any additional requirements for cargo handling. This clarity promotes efficiency and helps avoid delays or misunderstandings during transit, benefiting both shipowners and the overall shipping industry.
• Establish clear responsibilities and liabilities: Charter parties outline the obligations of both shipowners and charterers, ensuring accountability throughout the voyage. They determine who is responsible for vessel maintenance, crew expenses, insurance coverage, and compliance with maritime regulations. Clearly defined responsibilities minimize uncertainties and protect all parties involved.

Charter Parties and Bills of Lading

A bill of lading issued under charter party terms serves as a crucial document for shipowners in the shipping industry. It provides evidence of cargo receipt and condition, making it essential for transferability and financing.

• Under voyage charters or bareboat charters, a bill of lading is often issued to acknowledge the receipt of specific cargo by the shipowner or charterer.
• This document is essential for shipowners and charterers in the shipping industry as it serves as proof that the cargo has been loaded onto the ship and is in good condition. It is particularly important for both bareboat charter and voyage charter party agreements during the specified charter period.
• Charter parties facilitate the agreement between the shipowner (or bareboat charterer) and the charterer, outlining their respective rights and responsibilities.
• The bill of lading acts as a contract between the carrier (shipowner) and the shipper (charterer), ensuring that both parties fulfill their obligations.
• For freight forwarders, having a bill of lading issued under charter party terms allows them to confidently arrange transportation for their clients’ cargo with the ship owner’s assurance.
• The bill of lading also enables financing options for shippers who may need to use it as collateral or provide proof of ownership for obtaining loans during a bareboat charter, slot charter, or voyage charter party within the charter period.
• In addition to its importance in commercial transactions, bills of lading issued under charter parties serve as critical documents for ship owners’ insurance claims related to damaged or lost cargo.

Charter parties and bills of lading are integral components within the shipping industry. They ensure smooth operations, protect stakeholders’ interests, and provide necessary documentation for various purposes.

Ship Speed and Fuel Consumption in Time Charter

Ship speed plays a crucial role in determining fuel consumption within time charter agreements. The rate at which a vessel travels directly impacts the amount of fuel it consumes during its journey. Here are some key points to consider:

• Slow steaming: Slowing down the ship’s speed can significantly reduce fuel costs. By adopting this practice, charter parties can achieve substantial savings. However, it is important to note that slow steaming also extends the duration of the voyage.
• Cost versus time: When deciding on ship speed, charter parties must strike a balance between cost reduction and voyage duration. While slower speeds may result in lower fuel consumption, they can lead to longer transit times, affecting overall efficiency and profitability.
• Fuel efficiency considerations: In time charter agreements, fuel efficiency is a critical factor that influences financial outcomes. Parties involved must carefully evaluate the impact of ship speed on fuel consumption to ensure optimal profitability.

By considering these factors, charter parties can make informed decisions regarding ship speed and its effect on fuel consumption within time charter agreements. Achieving the right balance between cost reduction and voyage duration is essential for maximizing profitability while maintaining operational efficiency.

Understanding Laytime and Total Laytime

Laytime, a crucial aspect of charter parties for ship owners, refers to the time allowed for loading/unloading cargo. It determines the financial implications for both ship owners and other parties involved. Exceeding the laytime incurs demurrage charges, resulting in additional costs for ship owners.

Key points to understand about laytime and total laytime:

• Laytime : Laytime is the agreed-upon period during which the charterer has the right to load or unload cargo. It is typically expressed in days, hours, or even minutes. The clock starts ticking once the vessel arrives at the designated port or berth.
• Demurrage : When laytime is exceeded due to delays caused by either party, demurrage charges come into play. Demurrage refers to the money the charterer paid to compensate for the extra time taken beyond the agreed-upon laytime. This ensures that shipowners are compensated for any lost time and potential revenue.
• Financial Implications : Understanding laytime is essential because it directly impacts both parties’ financial interests. For shipowners, shorter laytimes result in quicker turnaround times and increased efficiency. On the other hand, charterers aim to maximize their use of laytime while avoiding demurrage costs.

By comprehending these concepts related to laytime and total laytime, ship owners and other parties involved in charter parties can effectively manage their operations while minimizing potential financial risks.

Remember: Promptly completing loading or unloading operations within the agreed-upon timeframe helps avoid unnecessary expenses and contributes to smoother logistics processes for all stakeholders involved in the ship charter, slot charter, voyage charter party, and charter party chain.

Safe Port Requirements in Voyage and Time Charters

Voyage charters require the charterer to transport cargo from one port to another by ship. In these agreements, it is crucial for the charterer to ensure that the chosen ports for cargo operations meet certain safety requirements. Similarly, time charters impose an obligation on the charterer to nominate safe ports throughout the duration of the agreement.

The selection of a safe port is crucial for ships due to the potential risks involved. Safety concerns encompass navigational hazards, ship security measures, and infrastructure conditions. By considering these factors, charter parties can mitigate dangers and ensure smooth ship operations.

Here are some key points regarding safe port requirements for ships in both voyage and time charters.

• Charterers must carefully evaluate the safety aspects of each port before initiating cargo operations on their ship.
• When entering a voyage charter party, it is essential to consider navigational hazards such as shallow waters, narrow channels, or unpredictable weather conditions that may be encountered during the ship’s journey.
• Security measures at ports are crucial in safeguarding cargo, whether on a ship or on land, from theft or any other criminal activities.
• The responsibility to nominate safe ship ports lies with the charterer throughout the duration of the contract.
• It is essential for charterers to stay updated on any changes in safety conditions at nominated ports to ensure their ships’ safety.
• Regular communication between all parties involved in the ship ensures that any safety concerns related to the ship are promptly addressed.

Key Takeaways on Charter Parties

Charter parties are critical legal instruments in the maritime industry. They establish rights, obligations, and liabilities between parties involved in international shipping. Here are some key aspects to consider:

• Lesson: Charter parties serve as a vital framework that ensures smooth operations within the maritime sector.
• Aspects: These agreements cover various aspects, including vessel specifications, cargo details, and the duration of the charter.
• News: Staying informed about recent developments and changes in charter party regulations is crucial for all parties involved.
• Details: The terms and conditions outlined in charter parties provide specific details regarding payment terms, insurance requirements, and dispute resolution mechanisms.
• Act: Charter parties act as binding contracts that protect the interests of both shipowners and charterers.
• Fortior: By clearly defining responsibilities and obligations, these agreements fortify relationships between shipowners, charterers, and other stakeholders.

Charter parties play an instrumental role in facilitating international trade by ensuring the efficient transportation of goods across borders. As these agreements govern vital aspects of maritime operations, it is essential for all parties to familiarize themselves with their provisions. Understanding the intricacies of charter parties can help mitigate potential disputes while fostering mutually beneficial relationships within the global shipping community.

Real-world Challenges with Charter Party Disputes

Legal professionals play a crucial role in resolving charter party disputes, which can be complex and challenging. These disputes often arise from breaches of the terms outlined in the charter party agreement. Arbitration is frequently employed as an alternative to court proceedings to settle such disagreements.

The involvement of legal professionals is essential due to the intricate nature of charter party disputes . Breaches of contract terms can lead to various issues, including financial costs, risks, and responsibilities for both parties involved. Here are some examples that highlight the complexities faced in this industry:

• Maintenance Responsibility: Disagreements may arise.
• Demise Charter Issues: A demise charter involves transferring full control and possession of a vessel to another party. However, conflicts may occur regarding the condition or performance of the vessel during this arrangement.
• Country-Specific Practices: Different countries have their own regulations and practices concerning charter parties, leading to potential clashes between international parties.

Arbitration is commonly utilized to settle these disputes outside of traditional court processes. This alternative dispute resolution practice offers several advantages:

• Confidentiality: Arbitration provides a more private setting compared to court hearings.
• Expertise: Parties involved can select arbitrators with specialized maritime law knowledge or specific aspects of their cases.
• Flexibility: The arbitration process allows for tailor-made procedures that suit the unique circumstances of each dispute.

At ANHISA, we have established ourselves as trusted lawyers and counsels for shipowners and charterers involved in charter party disputes. Our extensive experience in practical cases has allowed us to successfully advise and resolve complex situations, such as indemnification requests by shipowners due to early termination breaches.

We understand the importance of finding amicable solutions that benefit all parties involved. However, when negotiations fail, our team at ANHISA is well-equipped to guide shipowners through the arbitration process, ensuring their claims are properly represented.

Our expertise goes beyond shipping knowledge; we possess the technical know-how and strategic insights required to meet our clients’ expectations. With a strong foundation in shipping practice and a track record of working with international and local clients, we are committed to providing efficient, reliable, and personalized service for all your charter party disputes.

If you require assistance in resolving any charter party dispute, do not hesitate to reach out to us for a consultation. We are here to help.

Contact us via:

• Mr. Dang Viet Anh
• Email: [email protected]
• T: +84 28 5416 5873
• M: +84 983 467070

Q1: How can ANHISA assist with charter party disputes?

At ANHISA, we offer comprehensive legal counsel and guidance throughout the process of resolving charter party disputes. From negotiation strategies to arbitration representation, we ensure that our clients’ interests are protected.

Q2: What sets ANHISA apart from other law firms?

ANHISA’s unique advantage lies in our deep-rooted expertise in shipping practice combined with years of experience working with international and local clients. Our team possesses the technical knowledge and insights necessary to navigate complex charter party disputes effectively.

Q3: Can ANHISA help with both voyage and time charter disputes?

Yes, our expertise covers both voyage and time charter disputes. Regardless of the type of charter party involved, we have the knowledge and experience to provide tailored solutions for our clients.

Q4: How long does resolving a charter party dispute typically take?

The duration of resolving a charter party dispute can vary depending on the case’s complexity and the parties’ willingness to reach a settlement. At ANHISA, we strive to expedite the process while ensuring thorough representation for our clients.

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Voyage Charter vs Time Charter

Ships, boats and other recreational vessels are owned by a large number of individuals who often purchase them as assets. They do not use these vessels for shipping goods or for ferrying passengers.

Instead, they often lend them out to third party organizations who use them for a variety of purposes. In maritime legal terms, this lending process is known as chartering. Chartering is an important concept of the global maritime trade sector, and is of different types.

This article will delve into the differences between two specific categories of charters – the voyage charter and the time charter.

What is a Charter?

A charter is an agreement between two or more groups known as charter parties, regarding the leasing of a vessel for a fixed set of conditions. The terms and conditions stipulated in the charter are binding on all the parties in the agreement and covers a wide variety of clauses and possible scenarios that may arise. It is considered to be an official document in legal aspects and is required by Admiralty Law to be drawn up in case of any form of vessel hiring or leasing.

A shipowner is the first party in the charter agreement who owns the vessel under consideration. The charterer is an individual or organization who is in need of a ship.

The charterer may have cargo that he wishes to transport, or may further lease out the vessel to third parties.

The shipbroker is a link between ship owners and charterers, and aids in finalizing the terms of the agreement. The terms of the agreement include the duration of leasing, fees, payment instalments, regulations on usage, and detailed surveyor reports on the condition of the ship.

Payment is termed as a freight rate and is remitted to the shipowner at fixed intervals decided in the agreement.

Surveyor reports are important in chartering, as they ensure that the vessel is seaworthy prior to being chartered. Similarly, on completion of a charter agreement, and before final payment formalities, another survey report is conducted to ensure that the vessel has sustained no damage during the lease period.

The charter agreement lays down the responsibilities of each group and stipulates the condition in which the vessel is to be maintained.

There are three main types of charters – voyage charter, time charter, and demise charter.

The demise charter is often known as a bareboat charter, and grants ownership or possession of the vessel to the charterer subject to certain time-bound conditions.

Terms and Features of a Voyage Charter

A voyage charter is a type of charter in which a vessel is leased out for a particular voyage. The charter agreement lists the ports of call, destination, and restrictions on cargo, if any.

Most voyage charters are undertaken by charterers who have cargo that needs to be shipped. For this, they contact ship owners through brokers and arrange a ship for a particular voyage.

Payment of voyage charters can be done in two methods – on a per-ton basis, or on a lump-sum basis .

The per-ton basis involves paying the owner for every ton of cargo or freight transported on the vessel. This is preferred when the cargo tonnage is considerably lower than the gross maximum cargo tonnage of the vessel.

On the other hand, when a higher weight of the cargo is carried, it is advisable to pay on a lump-sum basis . The shipowner must ensure that the tonnage carried on board the vessel is within the acceptable limits of the ship. This includes checking the tonnage of on-deck cargo, and the various load lines of the vessel.

There are some important terms used in a contract agreement, that lays out the time-based rules to be followed for the duration of the contract.

Laytime refers to the time that a charterer is allowed to complete the loading and unloading process at a port of call. Since the owner pays duties and berthing charges at the port, they expect the charterer to hasten the process.

In case the charterer exceeds the laytime laid out in the contract, he is obliged to pay a penalty known as demurrage . This covers the extra costs incurred by the shipowner owing to the delay by the charterer.

On the other hand, if the ship is able to complete the loading and unloading operations before the stipulated time, the charterer can claim payment of a despatch from the owner. This is often seen as an incentive for charterers to complete the port operations as soon as possible.

In voyage chartering, the shipowner undertakes payment of fuel, operation, and employment-related costs. It is their responsibility to hire the officers and other crew members for the voyage either from a pool of individuals working for them, or using brokers as middlemen to source mariners and seafarers.

In addition, the owner must also pay costs such as berthing and loading operations. Any equipment used must also be paid for by the owners.

To recoup these costs, the owners charge a higher rate from the charterer. In general, charterers transporting a one-off consignment prefer voyage charters despite the high cost. This is because they are not tied down to the contract for a long period of time.

Simply put, a voyage charter involves a charterer hiring a vessel for the purpose of a single voyage, in which the route and ports have been pre-determined. The responsibility of duty and other payments along with recruitment is handled completely by the shipowner, while the cargo is the sole responsibility of the charterer.

Terms and Features of a Time Charter

A time charter is a time-bound agreement, as opposed to a voyage charter. The shipowner leases a vessel to a charterer for a fixed period of time, and they are free to sail to any port and transport any cargo, subject to legal regulations.

Although the charterer controls the ship, the maintenance of the vessel still falls under the purview of the owner. They are responsible for ensuring that the vessel meets internationally accepted maritime standards, throughout the course of the agreement. They regularly employ marine surveyors to prepare reports on the seaworthiness of the vessel and make repairs as and when required. The owner will face legal action in case the vessel is found to have some major problem.

The time charter agreement can span anywhere from a few days to a few years. This is a long-term agreement that works on a single rate of payment known as the freight rate.

Payment is to be remitted every quarter and does not fluctuate under ordinary circumstances.

In time chartering, the charterer is responsible for selecting a crew, paying charges that arise during the voyages, and arranging for provisions to ensure smooth operations at every port of call. They must intimate the planned route to the owners in advance. The payment is calculated on a per-day basis, with penalties added at a later time. The cost of fuel, provisions etc. are to be covered by the charterer, while the owner will handle all maintenance-related costs.

The charterer often does not sail on the vessel and provide instructions to the master of the vessel in their stead. This includes permissible cargo, route and ports, required charter speed etc.

Unlike voyage charters that use a rigid payment calculation, there are several provisions for unforeseen delays in time charters.

Since payment is on a daily basis, the charterer may be delayed for a certain reason, and these are covered in the agreement.

Time not included in the final payment is known as off-hire hours . For instance, if a vessel is slowed down because of poor weather that could not have been predicted, the extra time spent is not included in the final time count.

Similarly, if some form of damage occurs and repairs need to be carried out, the duration is considered to be off-hire . Certain clauses can be inserted in the agreement, that allows for a fixed number of off-hire hours. Beyond this, the charterer is charged for delays.

Briefly put, a time charter involves leasing a vessel for a fixed period, on a per-day rate, where the charterer is free to use the vessel. The owner only looks after maintenance-related cost.

Clauses are inserted to protect the charterer from having to pay for hours that were spent due to events that could not have been foreseen.

How to Choose a Charter Type

Voyage and time charters are very different, in their intended use and service conditions. Knowing when to choose each type of charter can go a long way in meeting expectations of the charterer and shipowner.

A voyage charter is preferred in cases where the charterer only needs the vessel for specific voyages that may arise for different reasons. This could be the case when there is an occasional cargo to transfer.

An occasional cargo commonly springs up during sudden surges in demand, when the supply services are down. Thus, companies that may deal in other commodities may enter the cargo industry for that period of time, in order to make a profit.

This can also happen when the charterer has already pressed into service their own fleet of vessels, which forces them to hire a ship from a third party so that they may undertake a single voyage.

Voyage chartering can be tricky for inexperienced charterers, since the matter of the crew and equipment must be handled correctly.

Most owners make arrangements to look after these requirements, but it is mostly based on goodwill. Having a shipbroker negotiate the terms can be very helpful in ensuring that the occasional charterer is not inconvenienced by having a ship without a crew to man it.

A time charter is more commonly used by more experienced chartering firms when there is a long-term requirement for a vessel. Instead of having to specify the ports and routes undertaken by the vessel in the charter agreement, the charterer simply hires the boat for a fixed period of time and takes complete control over the vessel in all but name.

As they are free to sail to any destination with any group of crew and officers, it is beneficial to companies that already deal in shipping. For instance, if a ship is decommissioned or is sent in for repairs, the company needs to be able to procure a vessel for the duration of that period.

Instead of having to book a ship every time they wish to undertake a voyage, they use time charters. Thus, for the duration of the agreement, they will have possession of the vessel and are free to use it, within the purview of the law. This is especially useful since such a charterer will often already have a crew ready to take over the hired vessel.

Another major factor that sways the decision to pick either a voyage or time charter is the finances of the shipping industry. Voyage chartering is considered to be a volatile market since there is no assurance of leasing a boat on completion of an existing contract. Since it is only applicable for a single voyage, the overall volatility of the voyage charter is high.

However, charterers prefer voyage charters for the reason that they can always get a more competent rate from other ship owners. In other words, the owners are at the mercy of the chartering sector.

So, most ship owners prefer time charters, as it guarantees financial returns for a fixed period of time, at a fixed rate. This offers some protection against rapid fluctuation of the chartering rates. However, charterers do not prefer this contract, as it ties them down at a single rate for an extended period.

A one-off charterer always goes for a voyage charter, while a regular charterer prefers time charters. Shipowners are often directly approached by charterers, instead of having marine brokers. Thus, one must have an overall look at various factors influencing the shipping sector, prior to choosing between a voyage and time charter.

Overall Comparison

Table of responsibilities.

You may also like to read –

• 8 Main Factors that Affect Ocean Freight Rates
• What is the Difference between Lay days and Lay time?

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About Author

Ajay Menon is a graduate of the Indian Institute of Technology, Kharagpur, with an integrated major in Ocean Engineering and Naval Architecture. Besides writing, he balances chess and works out tunes on his keyboard during his free time.

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A Layman’s Guide to Laytime, Charter party Agreement and Voyage Charter

The word “Charterer” is probably as old as the word “Ship” itself.

Do you keep hearing this word so regularly?

Well, who doesn’t?

From seafarer’s point of view, it is so much important to understand these terms.

From commercial point of view, it is the moral responsibility of the seafarers to ensure that the ship owner profits from the ship operation.

And for this reason, we must understand when and where our loyalties lies.

But sometimes it becomes difficult to get a hang of all of it.

Not anymore.

In this blog, we will discuss about the terms charterer and charter party agreement.

Concept of Charter party agreement

It is all business.

And like in all kind of business, there are at least two parties involved, one of which provide a service or product to the other for a price.

With respect to carrying the cargo onboard the ships, these two parties are,

1) Ship owner who has the ship and provide the space on the ship to carry the cargo.

2) Shipper who has the cargo and wants a ship to transport the cargo

Then where does the term charterer fits into this?

Charterer is the party that has chartered (think of simple word “hired”) the ship.

If the shipper has chartered the entire ship then shipper will also be the charterer.

In most of the cases, charterer is a kind of middle man between shipper(s) and shipowners

This is particularly the case if there are more than one shipper.

For example, if the vessel is to load 50000 tons of cargo, there could be 10 shipper, say each of them with 5000 tons of cargo.

Alone none of the shippers would want to hire the entire vessel of 50000 tons capacity for their 5000 tons of cargo.

So they contact a charterer for transporting their cargo.

The charterer’s job is to find a vessel for the cargoes they have from different shippers and maximazing the space on ship they plan to hire.

Charterers may not be the only person involved in filling the gap between shipowner and shipper.

Sometime there are some other companies or persons who help shipper, charterer and shipowner to connect with each other for a fees.

They are called “Brokers”.

So the shipper’s broker is the person or company that help shipper find a charterer for a fees called brokerage.

And charterer’s broker is the person that help charterer find a ship to hire.

The charterer may even have brokers for different purpose. For example charterer may have a broker to find a cargo for the ship they want to hire and they may have another broker to find a ship for the cargo they have in hand.

Broker or no broker, the charterer and shipowner would agree on the terms and conditions which would form “ Charter party agreement “.

Charter party agreement is a detailed document which, apart from various clauses, has informations such as

• When and where the vessel is required to be
• the freight agreed
• If the broker was used, who need to pay the brokerage fee and how much

Even though shipowners is primarily dealing with the charterer, it does not mean that the shipowner would have no relation with the shipper.

Shipper and shipowner are connected by the “carriage of cargo at sea act”, also called COGSA .

And one of the main point of it is that shipowner is required to issue bill of lading to the shipper for the cargo loaded onboard.

And with that each of the shipper have entered into an agreement with the ship owner which is called “Contract of  carriage”.

While the “charter party agreement” is a formal agreement, the contract of carriage is governed by various laws and regulations such as Hague-Visby rule .

Charter party agreement supplement the contract of carriage.

Usually you would find a mention of the charter party agreement in the bill of lading. The wording in the bill of lading could be something like this.

This shipment is carried pursuant to charter party agreement between “ Charterer’s name ” and “ Carrier’s name ” and all the terms, clauses, conditions, liberties and exceptions whatsoever contained therein are incorporated into this bill of lading.

But do the shipowners and charterers do this exercise of negotiating the format of the charter party agreement each time they do the business together.

Absolutely not. Hell, it would take a lot of time.

Instead they use pre-defined forms. These forms are developed by Independent International stakeholders such as BIMCO and INTERTANKO and are widely used in the shipping business.

There are different forms for different trades.

For example there is form  SHELLVOY 6 for use in tanker trade and then there is form AMWELSH 93 for coal dry cargo chartering.

Also if a charterer and ship owner have done the business before, they use the same charter party agreement for the future shipments too.

For this reason, many a times even for a voyage in 2019, you may find the mention of charter party dated in 2016 or even before. In the bill of lading issued even in 2019 , it may read something like,

The shipment is carried pursuant to charter party agreement between “ Charterer’s name ” and “ Carrier’s name ” dated 01 January 2016…..

Now that we understand the concept of chartering, let us understand the different ways in which the ships can be chartered.

Voyage Charter, Time charter, Demise charter

There are different ways in which a charterer can charter (Hire) the vessel.

Charterer can charter the vessel for one voyage (Voyage charter), for a particular time period (time charter) or they can hire and run the vessel as if they are the owner of the vessel (Demise or bareboat charter).

In each type of charter, charterers and shipowners have different area of responsibilities.

Each type of charter is a subject in itself. So in this blog we will explore the voyage charter.

Voyage Charter

It should be clear from the name.

Under the voyage charter, the ship is hired from the ship owner for one voyage.

One voyage could consists of multiple load ports and multiple discharge port.

The best analogy to the term voyage charter is that with hiring an Uber for a ride from one place to the other, sometimes with multiple stops in between.

So when we hire an Uber, we hire just the cab. The cab driver is still under the instructions of Uber.

Similarly, under the voyage charter, the charterer has hired the ship’s cargo space. But the Master and crew still remains under the disposal and instructions of ship owner and  ship managers.

When we hire a cab for a ride, we just pay the hire (pre-agreed or by the meter). We do not pay for or are not concerned about the fuel costs or the amount of fuel consumed.

Similarly, under the voyage charter, charterer is not concerned about the fuel consumption. The fuel costs are for the ship owners.

And when we hire an Uber, we do not pay for maintenance of the cab.

Similarly, under the voyage charter it is the ship owner who pays for the maintenance of the ship.

Whenever we have any doubt about anything under voyage charter, just think of this analogy of hiring the cab.

Most likely you will get the answer.

Laytime, Demurrage and despatch

Lord Diplock during one of the leading cases on Laytime described the voyage charter party comprising of four stages .

• Stage 1 is the loading voyage: The voyage from wherever the ship is to the loading port specified in the voyage charter party
• Stage 2 is the Loading operation: The loading of the cargo at the port of loading
• Stage 3 is the carrying voyage: The voyage from load port to the discharge port specified in the voyage charter party.
• Stage 4 is the discharging operation: The discharging of the cargo from the ship to the port of discharging as specified in the voyage charter party.

In the first and third stage, it is only the ship owner that need to perform. For example. ship owner is required to adjust the speed of the ship to arrive at the loading port within the agreed dates (Laycan).

And in the third stage, the ship owner is required to instruct the vessel to maintain the charter party speed.

However it is the second and fourth stage where most of the disputes take place.

Because in these two stages it is mutual reponsibility of the two parties to ensure that cargo loading and discharging is done without any delays.

In case of delays, each one can accuse the other for delays.

It is definately not commercially profiting for the shipowner if the voyage is extended beyond their expectations.

For example, what if the loading of the cargo took 15 days in comparison to just 2 days that shipowner had expected?

Or what if the ship could not berth at load port or discharge port for many days because of other ships ahead in line up?

Too many uncertainties.

But ship owner’s freight (and profits) cannot depend upon so many uncertainties.

So the shipowner and charterers agree on the factors like allowed number of days for loading and discharging.

In chartering terms this is called “Laydays” or “Laytime”.

The laydays is mentioned in the voyage charter party agreement between ship owner and charterer.

It could be mentioned as number of days and hours or as tons per hours or per day.

If the charterer uses more time for loading and discharging than the allowed laydays as per charter party agreement, then charterer is supposed to pay for extra time used.

The chartering term for this additional payment is “Demurrage”.

So we can say that if charterer uses more time for loading/discharging than laydays, they need to pay demurrage to the ship owner.

But if the charterer uses less time than laydays then ship owner need to pay the charterer for the time saved.

The chartering term for this is “despatch”.

Usually the agreed amount of despatch is about half of the agreed amount for demurrage.

Finally at the end of the voyage, a statement is made to shows the time saved and/or extra time taken at different ports.

Below is the simplified version of the laytime summary calculated at the end of the voyage.

This statement would also show the final amount due and to whom it is due. Means if the final amount is demurrage or despatch and how much.

Notice of readiness and statement of facts

For calculation of laytime, it is important to know when the laytime counting and calculation would start.

This information is also provided in the charter party agreement.

In most of the cases, the laytime would commence to start when the vessel has arrived at the port. In chartering term, this is called “ Arrived Ship “.

Legally, a ship is considered as an ‘Arrived Ship” only when

• Ship has arrived at the port of loading or discharging (port voyage charter) or at the designated berth (Berth Voyage charter).
• Ship is ready in all respects to commence loading (or discharging) or the cargo, and
• Master has sent the notice of readiness to the all parties concerned

The charter party agreement contains the information if the voyage charter is a port voyage charter or a berth voyage charter.

Irrespective if it is port or berth voyage charter, from the ship’s point of view it is important that the master of the vessel send the notice of readiness.

Notice of readiness need to  state that the vessel has arrived and she is ready in all respect to commence loading (or discharging ) of the cargo.

The laytime would start to commence at this time or sometimes few hours later if specifically mentioned in the charter party agreement.

Since one of the condition for the laytime to start is for the master to send the notice of readiness, it makes it so much of an important aspect.

Statement of Facts

The vessel and the master of the ship are the owner’s representative at the action site (loading port or discharging port).

Ship Owner would know only know the information that we provide them. They would use this information for calculation of any demurrage due to the charterers.

But for the correct demurrage calculation, the information we provide must be correct and we must not miss any important information such as any delays.

That make the statement of facts (commonly called SOF) an important document.

At the least, statement of facts must include

• any delays from shore side or from ship’s side and reason of delay
• any delays because of weather conditions
• Timings for the movement of the ship (such as times for anchoring, anchor aweigh, pilot onboard, NOR Tendered etc)
• Timings related to cargo operations (Commenced cargo operation and completed cargo operation

Master’s actions during voyage charter

Master and ship staff may not see the actual charter party agreement between the charterer and the ship owner.

And it is for their own benefit too.

Because there would be so many things in that which we seafarers are not concerned about.

But when the  ship is fixed for the voyage charter, master will receive “Voyage instructions” from the charterer through the ship owner’s commercial team.

The voyage instructions contains the information from the charter party agreement that requires master’s attenstion and subsequent actions.

Master must not miss the points in the voyage orders that requires his actions.

One of the way to do it is to highlight the text of the voyage instructions that require his attention for easy follow up.

Once Master reads the voyage instructions, he may come across insufficient information that need more information or clarification.

Like this one in one of the voyage orders.

Clarification must be sought from the ship operator for any of such information in the voyage orders.

After all it just takes a simple email to get everything in place.

And once everything is clear and in place, it is just about following that.

There are may be only a handful of shipowners that do not rely on the charterer to find the cargo for their vessel.

Having the vessel on charter is so common.

And vessel can be chartered in different ways. Vessel can be on a voyage charter, time charter or demise/bareboat charter.

With respect to voyage charter, master and ship staff must understand few thing

First, when is the laycan for the vessel. This is period in which vessel must arrive at the load port.

If master thinks that vessel may not be able to make it to the loadport in laycan period, the commercial operator must be informed who can then try to extend the laycan.

Second, when the notice of readiness need to be tendered.

If the voyage charter is a port charter, NOR can only be tendered when vessel is at least within the port limits. Usually in this case NOR is tendered when pilot boards the vessel.

If the voyage charter is berth charter, the NOR can only be tendered when the vessel is alongside the designated berth.

Wrong tendering of NOR can make the Notice of readiness null and void and shipowner may loose tons of money.

Lastly, the ship staff need to be make sure that a correct record of statement of facts is kept. This is the document that is used for laytime calculations .

If the charterer uses more time than agreed for loading or discharging the cargo, the ship owner is supposed to get a pre-agreed compensation called demurrage.

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About Capt Rajeev Jassal

Capt. Rajeev Jassal has sailed for over 24 years mainly on crude oil, product and chemical tankers. He holds MBA in shipping & Logistics degree from London. He has done extensive research on quantitatively measuring Safety culture onboard and safety climate ashore which he believes is the most important element for safer shipping.

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70 comments.

How i wish that our exam books were written so precisely yet so easy to understand .Thanx for all the pain you take .No amount of words would do justice to match the level of you efforts.

Thanks Alok...The readers liking it make all the hardwork worthwhile...

its amazing how you describe anything sir

what if the vessel is about to tender NOR and shipper cancels the order. what would be the penalty

Great article to understand the business with ease as an ASM candidate

Many thanks for writing such articles with such an ease of understanding sir...

Glad you liked it Sukhchain...

Another good read. Thank you for taking time to write articles. All Seafarers must understand the commercial aspects of ships. All the best and I cant wait to read the next one.

Glad you liked it Marlon...

what if the ship could not berth at load port or discharge port for many days because of other ships ahead in line up?Too many uncertainties.But ship owner’s freight (and profits) cannot depend upon so many uncertainties.So the shipowner and charterers agree on the factors like allowed number of days for loading and discharging.In chartering terms this is called “Laydays” or “Laytime” ??? Laydays refer to the time when a ship must present itself to the charter.If the vessel arrives after the laydays ,than contract can be cancelled. -Laycan. Laytime is the amount of time allowed (in hours and days)in a voyage charter for the loading and unloading of cargo.

Thanks for your input Zibi...

Laydays or "Laycan "I think is the correct term not Laytime. :)

Thanks for such simplified explanations. Sir could you please tell the few famous ship brokers names in india and worldwide.

Interocean is one of them...

Thank Captain for simple & detailed explanation. Information is really worthy .

Glad you found it useful Sajjad...

Thanks Capt. Rajeev for this good information in simple way.

Glad you liked it Dharmdeep...

Very well written capt., pls continue the good work

Thanks Capt Pereira...

This is a scholarly article Great job Captain!

Glad you liked it Tunde...

Good job, Capt. Jassal! These mandatory intricacies of ship's business & chartering are excellently presented. Organized and laid out as you have, this blog subject does a great service to anyone who longs to learn more about it & be more familiar with the clauses, details & positions (which is probably everyone, right?) -- including this marine cargo surveyor!

Glad you liked it Capt Edward...

Many thanks

Thanks Rafik...

sir plz explain magnetic compass

I will do that in a different blog...

Once again thank you very much.

Thanks Raju...

Informative Awaiting next one regarding time charterers

Will write on Time chartering too...

many thanks for this jobs cap

How easy way for explain this matter ,really very good job captain I appreciate your good effort waiting more and more

Thanks Ahmed...

sir waiting for your blog on purging and gas freeing cargo tanks

Very nicely explained and written good effort

Very nice explanation capt,

Generally the CP agreement is never sent to ship..and hence for tendering NOR what criteria(LOCATION) shall be followed as Master will not be aware if the C/P is voyage or Port C/P .These days Master tender NOR on arrival and then they keep re tendering every 24 hrs or at important events like POB, or All Fast.What is the logic behind following this and how we can ensure the NOR tendering doesn't becomes null and void. really APPRECIATE YOUR GREAT EFFORTS

if the vessel arrived at the agreed laycan and gave a valid NOR tendered and waited for almost 5 days before berthing, then while berthing the vessel had an accident and the owner requsted a new laycan, the question here is, does cancelling the old laycan result in canceling the demurrage fees caused by it?

When a vessel suffers breakdown typically NOR becomes invalid as the vessel was not in all respects ready to load her cargo.

U don't see such priceless articles often.. Good work cap. Let's make the world a better place to sail????????

To the writer of this blog- what made you write this? IT IS FANTASTIC. Well done. Also your MBA, was it the distant learning one from Middlesex?

On the Laytime Summary calculation, wouldn't it be correct to say that on the loading it was lost 0d-12h-24 min instead of 1d-00-24m?

Captain sahab, if I ever get a chance, I'll surely shake hand and say thank you, for all your efforts in simplifying the topics

can you advise for the following : in case a vessel is on Voyage Charter, and during loading or discharging alongside berth, there is a rainy period, so the daytime for this period should be NOT TO COUNT, correct??? cause there is the terms "weather permitting".

Great article sir......waiting for more.....

Hi. How does the shipbroker locate a suitable ship to transport the cargo?

Good day! You have mentioned different stages of voyage charter. May I ask what are the different stages of Time Charter and Bareboat Charter? Thank you in advance.

Nice blog...pleasure to read

I love your write up. Please, keep exposing our mind to the rudiments of shipping business.

Sir, in voyage charter party at what time and place charter party agreement will start? After ship arriving on laycan days or after giving notice of readiness? And notice readiness when we can give? Is there any specific time only we can give NOR?

I have a question, How to calculate the freight for a Multiport voyage. for example, there is a Cargo loaded from the country (C) and need to discharge its half portion in other countries multiple ports (A) & (B). For single port discharge, the cost is 8$ in port A and in Port B 11$, but the agent says he could fulfill this in 10$ for both ports. Now my question is how is he calculating the freight 10$ for Multiple port ?

Thank you sir for this great effort helping a lot for phase2 law preparation

Hi Sir! I am so pleased to have found your blog, it is absolutely helpful. if it is not too much to ask, do you have a quote sample for time and voyage charter? and the stardard terms and conditions? sorry if I am asking too much. thank you

Excellent blog about chartering service. This blog cleared my doubt about chartering service for ship

could you please advise that how long a shipowner should wait cargo to load on board (if cargo not ready) and no any specific clause written on voyage cp

Hi, Capt Jassal, I find every write up on any marine subject is excellent and easy to understand for students. I highly appreciate the contents of your blog. Regards Capt MK Srivastava , Ex-DPA, The SCI Ltd.

Wonderfully explained

While the blockchains themselves are secure, the applications running on the blockchain may not be. These applications interact with the blockchain through smart contracts, but just like any other software, bugs in the code can lead to security vulnerabilities. For this, we need to involve the auditors who conduct security audits on the smart contract. Smart Contract Audit helps you find hidden exploits and eventually reduce the risk and provide you an extra layer of security. Bug-free code is nice to have in other types of software, in blockchain applications, it is essential.

Dear Capt Rajeev Jassal, with interest i have seen your blog however the title struck me a bit - A Layman's Guide to Laytime - this sounds very familiar, if not accurate, with the dissertation i wrote for the ICS, Institute of Charterers Shipbrokers London, who hold copyright on this. Kindly amend the title of your blog to avoid confusion in the industry as to whom the readers take their information from. With best regards, Erwin de Zwarte, FICS

sir will you pls write on paramount clause , new jasson clause , cesser clause and both to blame collision clause

Such a great explanation! Thank you so much!

This article is a big help for those individuals that are trying to expound their knowledge in shipping. I much appreciated because at present i am taking my master's degree in ship management. Thank you...

Wow, so clearly written that I didn't have to read it twice to understand! Why don't our text books/ Oral notes be like this?! Thank you so much Capt. Jassal.

It’s a great and useful piece of info. I’m happy that you just shared this useful info with us. Please stay informed like this. Thank you for sharing. Here’s another informative content on Common Law Separation Agreement , may find more details here.

thanks alot of info keren bgt

Sir u r the best , undoubtedly . The confidence which i gain every time when ever I read your blog is just unspeakable and it sharpens my knowledge every single time. A teacher like you is what this shipping industry needs and I am glad to find the perfect one . Every time when ever I am in doubt I refer to your blogs and it works miracle .....thanks a ton to you sir .....simply great.

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Charter Party Agreements

Img is one of the only law firms in the pacific northwest that focuses on both the transactional side and the litigation side of charter party agreements..

Different charter parties impose different obligations, exclusions, and limitations between each entity. For this reason, both shipowners and charterers should consider seeking sound and practical legal advice before drafting, amending or complementing any time charter, voyage charter, or bareboat charter party. During a contentious charter party dispute, shipowners and charterers should be especially aware of their legal exposures and contractual liabilities.

With experience in bareboat, time and voyage charters, contracts of affreightment and slot charters, dry bulk and containerized cargoes, oil, gas and products, IMG regularly acts on behalf of the region’s largest shipowners and charterers. Indeed, our expertise in transactional and contentious charter party matters gives us an invaluable perspective – we can foresee the problems that might arise and take steps to avoid them. Need help understanding your legal rights in a charter party contract? IMG can help.

or call   (206) 707-8338 to speak to a legal expert.

Bareboat Charters – What you need to know

Strapped for capital but want to expand your fishing fleet?  Bareboat charters can be a great financial alternative, provided you understand your liability.  

Frequent Charters We Advise Upon

Time Charters

Time chartering is a complex business. The shipowners give the time charterers substantial control over the commercial operation of the vessel in exchange for the regular payment of hire. While this arrangement suggests that the shipowners have transferred much of the potential operational risk to the charterers and that the charterers can do more or less what they like with the ship, such an initial impression on behalf of the time charterer is both deceptive and dangerous.

If you would like clarification of your rights and liabilities as either a time charterer or a shipowner, IMG can help.

Voyage Charters

Voyage charters are the most commonly used charter party agreement. Under a voyage charter, a ship owner and a charterer enter into a contract whereby the vessel will carry cargo between two points. The voyage can be a single trip or multiple trips, provided that the charterer has absolutely no operational control over the vessel while it is being operated. Any delays during the loading and unloading of the cargo, as well as any delays during the seagoing part of a voyage, generally fall onto the vessel owner. Many charterers prefer this allocation of risk.

Bareboat Charters

A bareboat charter is the simplest type of charter party agreement. Under a bareboat charter (a.k.a. “demise charter”), the charterer effectively becomes the owner of the vessel for all operational and trading purposes, and thus, is responsible for the navigation, operation, repair, maintenance, insurance, and crew of the vessel.

Despite an appearance of simplicity, bareboat charters are complex agreements, and numerous problems can arise during their use. Owners and charterers should seek sound legal advice before drafting or amending a bareboat charter.

What to Expect From Your Legal Team

• We provide practical, commercial and results-driven advice on a discreet and confidential basis.
• All assignments will have a nominated lead partner who will be your dedicated point of contact.
• We will work to your agenda, timescales and budgets to achieve the best outcome.
• We would expect to be your trusted adviser during the process and our industry knowledge and reputation will facilitate a direct and open dialogue between all stakeholders.

Voyage Charter vs Time Charter – Everything You Need to Know

Voyage Charter vs Time Charter – Everything you need to know.

One of the biggest questions facing a charterer is whether to opt for a voyage charter or a time charter. Evaluating voyage charter vs time charter can be a complex process, but we’ve broken everything down on this page, making it easier for charterers to decide which type of vessel chartering is best for them.

1. What is a Charter? 2. What is a Voyage Charter? 3. Voyage Charter Features/Terms 4. Voyage Charter Pros & Cons 5. What is a Time Charter? 6. Time Charter Features/Terms 7. Time Charter Pros & Cons 8. How to Choose a Charter Type 9. Charter Cost 10. Ongoing Cost 11. Flexibility 12. Contract Length 13. Convenience 14. FAQs About Voyage Charter and Time Charter 15. Conclusion

What is a Charter?

A voyage charter and a time charter are two options commonly found in the chartering business. A voyage charter is when the charterer leases a vessel for a specific voyage, such as Dubai to Singapore, while a time charter is a type of lease that allows the charterer use of the vessel for a specific period of time.

As you might imagine, there are many differences between these two types of charters, and both vessel chartering options have their own pros and cons. Keep on reading this page about voyage charter vs time charter to find out which of the two options will be most suitable for your ship chartering requirements.

Voyage Charter

What is a voyage charter.

A voyage charter is a type of ship chartering that sees the charterer agree to lease the vessel for one specific voyage. So, for example, the agreement might be for the charterer to gain use of the charter ship for a journey from Dubai to Dover.

Features/Terms

As just mentioned, a voyage charter is when a charterer leases a vessel for one voyage. Before the charter contract is signed, the parties will agree on the end destination, any ports of call, and whether there will be any restrictions on cargo. Once signed, the charterer must not deviate from any of these agreements.

The terms and conditions of the charter agreement will also stipulate the laytime permitted. The laytime refers to the amount of time it takes for the vessel to be loaded and unloaded. As the ship owner pays for all costs at the port, they need this process to be as quick as possible. If the charterer exceeds the agreed time, they must pay demurrage to the ship owner. Conversely, the ship owner will usually refund some money if the loading and unloading is quicker than stipulated.

But who is responsible for what costs? Well, with a voyage charter, nearly all costs are covered by the ship owner. These include costs relating to staffing, berthing, loading, unloading, and fuel. They cover these costs by charging the charterer a fee for leasing the vessel.

The amount of money paid by the charterer can be determined in two ways. The most common way to pay is on a per-ton basis. As the name implies, this sees the charterer paying a set price for every ton of cargo they transport. This is preferred by charterers when the amount of cargo they’re transporting is significantly less than the vessel’s gross maximum cargo tonnage.

The other payment type is a lump sum – one payment that allows the charterer to transport as much cargo as they want to. It is the ship owner’s responsibility to ensure the cargo weight does not exceed the gross maximum tonnage of the vessel. This type of payment is preferred by charterers when they’re carrying a higher weight of cargo.

This type of vessel chartering is generally preferred by charterers. This is because it often has more competitive prices, plus they are not tied down to any long-term commitments.

Pros & Cons

Pro: Charterer not liable for any costs, except initial charter fee Pro: Incentives to complete port operations quickly Pro: No need to find a crew Pro: No long-term contract

Con: Lack of flexibility for charterer Con: Higher initial charter fee

Time Charter

What is a time charter.

A time charter is a type of vessel chartering that sees the charterer lease the ship for a set period of time. So, they might lease the ship for two months, during which time they have the flexibility to choose their own routes and destinations.

Before anything is signed, the ship owner and the charterer will agree the exact period of time the lease will run for. Unlike with voyage charters, the two parties will not need to agree on ports of call and destinations, as the charterer has complete discretion over this.

With a time charter, the ship owner does not cover all costs. Instead, the charterer must pay for fuel and supply costs, as well as the cost of cargo operations. However, the charterer won’t have to pay such a large charter fee, which balances things out somewhat. The owner is still required to pay for the crew and ongoing maintenance, and also must ensure the vessel meets all necessary maritime safety standards.

It is generally the case that the charterer will pay for hire in advance, on a per-day basis. Payment is not usually made in one lump sum, with the charterer instead paying the lease charge in set instalments, which are usually quarterly. It’s important to note that, should the ship be held up in unforeseen circumstances, such as inclement weather, the lost time – referred to as off-hire hours – will not usually be charged for, although if too many off-hire hours are accrued, the charterer might end up being liable.

Ship owners generally prefer their vessels to be leased on a time charter. This is because time charters guarantee income for a long period of time, giving the ship owner increased security.

Pro: Guarantees charterer access to a vessel Pro: Initial lease cost is lower Pro: More flexibility for the charterer

Con: Several ongoing costs to pay Con: Tied down to long-term contract

How to Choose a Charter Type

We’ve discussed voyage charter vs time charter above, looking at the various pros and cons of each. But which should you choose when looking to charter a ship?

Well, this really depends on your requirements. We’ve broken things down into five sections – charter cost, ongoing costs, flexibility, contract length, and convenience – and will let you know which of the ship chartering options is better for each one.

Charter Cost

When it comes to the initial cost of chartering a ship, it’s nearly always going to be cheaper to go with a time charter. This is because the ship owner will be more amenable to a lower price, as they know you’ll be hiring the vessel for longer. What’s more, you, and not the ship owner, will be expected to cover other costs, pushing the initial price down further.

So, if you’re looking for the lowest possible upfront cost, the best option is a time charter. However, remember that other costs will also need to be paid.

Ongoing cost

If you choose to take out a time charter, you will have to pay several costs, including fuel and supply costs. With voyage charters, the only significant cost payable is the initial charter – all other major expenses are covered by the ship owner.

Therefore, if you want the lowest possible ongoing costs, the clear winner is the voyage charter. However, the upfront cost will be more expensive than a time charter.

Flexibility

Those who sign up for a voyage charter are limited in their movements, as they will have already agreed a set route with the ship owners. Those who have taken a time charter have far more freedom, as they can choose where to go throughout their charter.

This clearly means that those looking for more flexibility should opt for a time charter, as there are no limitations on route, ports of call, and destinations.

Contract Length

With a time charter, you’re tied into a long contract, committing you to ongoing payments. Voyage charters, on the other hand, only last for the duration of the voyage, meaning voyage charters are generally much shorter than time charters.

This all means that those looking for the shortest contract should opt for a voyage charter. However, if you know you’ll constantly need an available vessel, the long contract of a time charter could be more suitable.

Convenience

There will be no need to hire and pay a crew when opting for either the time charter or the voyage charter. It’s only bareboat charters that require the charterer to hire and pay their own crew. However, the ongoing costs associated with time charters can be inconvenient.

Overall, voyage charters are the more convenient of the two options, as there’s no need to organise payment for such things as port costs and fuel. However, both options are generally far more convenient than a bareboat charter.

FAQs About Voyage Charter and Time Charter

What are BIMCO Sanctions Clause for Voyage Charter Parties 2020?

These are intended to help in two scenarios. Firstly, if one of the signatories of the agreement gets sanctioned, the other signatories will be able to end the contract and claim damages. Secondly, when the trade or activity is subject to or becomes subject to sanctions, the ship owners can refuse to perform their contracted duties.

What is the difference between bill of lading and charter party vs time and voyage charter?

A charter party is an agreement between charterer and ship owner to lease a ship. A bill of lading is an agreement that legally obligates the charterer to carry cargo that has been loaded aboard the ship.

A time charter is a type of vessel chartering whereby the ship owner leases the ship for a set length of time. A voyage charter is a type of vessel chartering whereby the ship owner leases the ship for the duration of a specific voyage.

What are the duties and responsibilities of the ship owner and charterer under a time charter and voyage charter party?

Under a voyage charter, the ship owner assumes almost all responsibility, including hiring and paying crew, and paying for all significant costs associated with the journey. The charterer simply has to pay the ship owner a fee to secure their vessel.

With time charters, ship owners must still hire and pay staff. However, most other significant costs associated with a voyage, such as fuel and port fees, must be paid by the charterer.

Why do ship owners prefer voyage charter over time charter?

Quite simply, they don’t. Ship owners usually prefer time charters, as they ensure that their ship is guaranteed to be chartered for a longer period, generating income throughout.

Voyage charters are short, meaning the ship owner must continually find new charterers to lease the vessel to – something that isn’t always possible. When a new charterer can’t be found, the ship owner loses money.

Please note that charterers are required to take out insurance for both types of charter, to cover them against damage, injury, marine salvage , and more.

Those looking for short-term charters are best served by opting for a voyage charter, as these don’t require a long contract to be signed. They do have a higher initial cost, but this is offset by the fact that no other significant fees need to be paid.

However, those who know they’ll regularly require the use of a vessel might be better off with a time charter, as these see vessels leased for a long period of time. During this time, the vessel can be used to travel anywhere, without restriction. Time charters cost less upfront, but require the charterer to pay various other costs, such as the cost of fuel and port fees.

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Types of Charter Agreements: Time, Voyage, and Bareboat

Types of Charter Agreements: Time, Voyage, and Bareboat. In the intricate web of the maritime industry, charter agreements are the threads that connect shipowners and charterers, facilitating the movement of goods across the world’s oceans. These agreements come in various forms, each tailored to specific needs and circumstances. Among the most common types of charter agreements are time charters, voyage charters, and bareboat charters. In this article, we will delve into the details of these three fundamental charter types, exploring their characteristics, benefits, and when to use them.

1. Time Charter:

A time charter agreement is a widely employed arrangement in the maritime industry. In this type of charter, the shipowner leases their vessel to the charterer for a defined period, typically ranging from a few months to several years. During the charter period, the charterer gains operational control of the vessel, including selecting the ports of call and determining the cargoes to be transported.

Key Aspects of Time Charters:

– Operational Control:  While the charterer assumes operational control, the shipowner retains ownership of the vessel. The shipowner provides and maintains the crew, and the charterer is responsible for covering the vessel’s operating expenses, including crew wages, fuel, and maintenance.

– Flexibility: Time charters offer flexibility to both parties. Charterers can adapt to changing market conditions and cargo requirements, while shipowners can secure steady revenue over the charter period.

– Revenue Structure: The charterer pays the shipowner a fixed daily rate, known as “hire,” for the vessel’s use. This rate is typically negotiated and agreed upon in advance. The charterer may also pay additional voyage-related expenses.

– Types of Cargo: Time charters are suitable for various types of cargo and are often used for transporting bulk commodities, such as coal, grains, and minerals, as well as containerized goods.

2. Voyage Charter

A voyage charter agreement, as the name suggests, is focused on a specific voyage or journey. In this arrangement, the shipowner provides the vessel to the charterer for a single voyage, from a designated port of loading to a port of discharge. Voyage charters are ideal for one-time cargo movements or irregular routes.

Key Aspects of Voyage Charters:

– Single Voyage: Unlike time charters, which cover an extended period, voyage charters are limited to a single voyage. Once the cargo is delivered, the charter agreement is completed.

– Freight Charges: The charterer pays freight charges based on the cargo’s weight or volume and the distance traveled. The shipowner remains responsible for all operating costs.

– Flexibility: Voyage charters offer flexibility to charterers, allowing them to choose specific vessels and routes for each voyage based on market conditions and cargo requirements.

– Cargo Variety: Voyage charters are commonly used for transporting a wide range of cargo, from raw materials to finished goods. They are particularly useful for cargo with specific loading and discharge locations.

3. Bareboat Charter (Demise Charter)

A bareboat charter, also known as a demise charter, represents a unique arrangement in which the charterer gains complete control and responsibility for the vessel. In this type of charter, the shipowner effectively transfers ownership to the charterer for the duration of the agreement.

Key Aspects of Bareboat Charters:

– Full Control: The charterer assumes full operational control of the vessel, including crewing, maintenance, and navigation. The shipowner is no longer involved in the vessel’s day-to-day operations.

– Ownership Transfer: During the charter period, the vessel is treated as if it were owned by the charterer. This includes registering the vessel under the charterer’s flag.

– Purchase Option: Bareboat charter agreements often include an option for the charterer to purchase the vessel at the end of the charter period. This option provides a clear path to ownership for the charterer.

– Specialized Use: Bareboat charters are common for specialized vessels, such as offshore platforms, drilling rigs, and research vessels.

Choosing the Right Charter Type:

Selecting the appropriate charter type depends on several factors, including the nature of the cargo, the duration of the transportation need, and the desired level of control. Time charters provide flexibility and steady revenue, voyage charters are ideal for one-time shipments, and bareboat charters offer full control and potential ownership.

In the dynamic world of maritime commerce, understanding these charter agreements is crucial for shipowners, charterers, and maritime professionals to make informed decisions that align with their specific goals and operational requirements. Each charter type serves a unique purpose, contributing to the intricate tapestry of global trade and logistics.

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Voyage Charter: Freight and Lien

• First Online: 02 September 2021

Cite this chapter

• Arun Kasi 2  

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This chapter analyses freight and lien in voyage charterparties. The distinction between freight and hire is observed. The different bases of freight calculation such as on a lump sum, deadweight and quantity loaded or discharged are introduced.

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See Thomas v Harrowing Steamship Co [1913] 2 KB 171 (EW CA), speech of Kennedy LJ.

Shell International Petroleum Co Ltd v Seabridge Shipping (The Metula) [1978] 2 Lloyd’s Rep 5 (EW CA).

AIC Limited v Marine Pilot Limited (The Archimidis) [2008] EWCA Civ 175, [2008] 2 All ER (Comm) 545, [2008] 1 Lloyd’s Rep 597 (EW CA).

(1986) 2 Com Cas 55 (EW CA).

(1897) 2 Com Cas 84, 13 TLR 183 (EW HC).

Only then. In Ocean Projects Inc v Ultratech Pte Ltd [1994] 2 SLR 369 (SG CA), there was no contract between the disponent shipowner and the cargo interest, as the disponent shipowner carried the goods by an agreement between it and a freight forwarder. Hence, the shipowner was not able to claim quantum meruit freight from the cargo interest, when the freight forwarder went into liquidation and the freight was not paid. For more detailed facts of this case, see chapter 4.2.1.1 ‘Freight Forwarder’s Bill’/chapter 13.7.1.

Stevens v Bromley & Sons [1919] 2 KB 722, 88 LJKB 1147, 14 Asp MLC 455, 24 Com Cas 254, 121 LT 354, 35 TLR 594 (EW CA).

Batis Maritime Corporation v Petroleos Del Mediterraneo SA (The Batis) [1990] 1 Lloyd’s Rep 345 (EW HC).

Hopper v Burness (1876) 1 CPD 137, 45 LJQB 377, 3 Asp MLC 149 (EW HC); Hunter v Prinsep (1808) 10 East 378, 103 ER 818 (EW Court of King’s Bench): the question is if there was a ‘new bargain’.

See chapter 13.1.5.

Ellis Shipping Corporation v Voest Alpine Intertrading (The Lefthero) [1991] 2 Lloyd’s Rep 599 (EW HC).

[1916] 2 KB 624 at 627 (EW HC).

Brown v Gaudet (Cargo ex Argos) (1873) LR 5 PC 134, 42 LJ Adm 1, 1 Asp MLC 519, 21 WR 420, 28 LT 77, [1861–73] All ER Rep Ext 1057 (PC).

Black v Rose (1864) 2 Moo PCCNS 277, 10 Jur NS 1009, 2 Mar LC 89 (PC on appeal from Ceylon); Paynter v James (1867) LR 2 CP 348, 2 Mar LC 450 (EW Court of Common Pleas).

Ritchie v Atkinson (1808) 10 East 295, 103 ER 787 (EW Court of King’s Bench).

Asfar v Blundell [1896] 1 QB 123 (EW CA); Montedison SpA v Icroma SpA (The Caspian Sea) [1979] 3 All ER 378, [1980] 1 WLR 48, [1980] 1 Lloyd’s Rep 91 (EW HC).

Eg. China Offshore Oil (Singapore) International Pte Ltd v Giant Shipping Ltd (The Posidon) [2001] 1 Lloyd’s Rep 697 (EW HC); Pentonville Shipping Ltd v Transfield Shipping Inc (The Johnny K) [2006] EWHC 134 (Comm), [2006] 1 Lloyd’s Rep 666 (EW HC); AIC Limited v Marine Pilot Limited (The Archimidis) [2008] EWCA Civ 175, [2008] 2 All ER (Comm) 545, [2008] 1 Lloyd’s Rep 597 (EW CA).

These are examples only and charterparties may provide for the freight to be earned at other points of time.

(1854) 23 LJ Ex 169, 9 Exch 444, (1854) 156 ER 189 (EW Court of Exchequer Chamber).

[2016] EWHC 2223 (Comm) (EW HC).

Vagres Compania Maritima SA v Nissho-Iwai American Corporation (The Karin Vatis) [1988] 2 Lloyd’s Rep 330 (EW CA).

(1877) 25 WR 305 (EW HC).

Robinson v Knights (1873) LR 8 CP 465 (EW Court of Common Pleas).

See chapter 13.4.2.1.

[1891] 1 QB 742, 60 LJQB 621 (EW CA).

[1893] 2 QB 518, 63 LJQB 128, [1891–94] All ER Rep Ext 1551 (EW CA).

Compania Naviera General SA v Kerametal Ltd (The Lorna I) [1983] 1 Lloyd's Rep 373 (EW CA).

See Asfar v Blundell [1896] 1 QB 123 (EW CA).

See Allison v Bristol Marine Insurance Co (1876) 1 App Cas 209, 3 Asp MLC 178, [1874–80] All ER Rep 781 (UK HL).

Aries Tanker Corpn v Total Transport Ltd (The Aries) [1977] 1 All ER 398, [1977] 1 WLR 185, [1976] 2 Lloyd's Rep 256 (UK HL).

Dakin v Oxley (1864) 15 CBNS 646, 33 LJCP 115, (1864) 143 ER 938 (EW Court of Common Pleas); Henriksens Rederi A/S V Thz Rolimpex (The Brede) [1973] 2 Lloyd’s Rep 333 (EW CA). The rule was also in practice in Singapore, as seen from Skibs A/S Trolla And Skibs A/S Tautra v United Enterprises & Shipping (Pte) Ltd (The Tarva) [1973] 2 Lloyd’s Rep 385 (SG HC).

Colonial Bank v European Grain & Shipping Ltd (The Dominique) [1989] 1 Lloyd’s Rep 431 (UK HL).

See Great Indian Peninsula Rly v Turnbull (1885) 5 Asp MLC 465, Cab & El 595, 33 WR 874, 53 LT 325, 1 TLR 570 (EW HC).

Aries Tanker Corpn v Total Transport Ltd (The Aries) [1977] 1 All ER 398, [1977] 1 WLR 185 (UK HL).

Article III(6).

[1901] AC 462 (UK HL).

[1913] 2 KB 171 (EW CA), affirmed by the House of Lords in [1915] AC 58 (UK HL).

Skibs A/S Trolla And Skibs v United Enterprises & Shipping (Pte) Ltd (The Tarva) [1983] 2 Lloyd’s Rep 385 (SG HC).

See Hunter v Prinsep (1808) 10 East 378, 103 ER 818 (EW Court of King’s Bench).

(1868) 4 CP 138 (EW HC).

See Compania Naviera General SA v Kerametal Ltd (The Lorna I) [1983] 1 Lloyd's Rep 373 (EW CA).

[1896] 1 QB 123 (EW CA).

Montedison SpA v Icroma SpA (The Caspian Sea) [1979] 3 All ER 378, [1980] 1 WLR 48, [1980] 1 Lloyd’s Rep 91 (EW HC).

SS Athamas (Owners) v Dig Vijay Cement Co Ltd (The Athamas) [1963] 1 Lloyd's Rep 287, 107 Sol Jo 315 [1963] (EW CA).

(1877) 2 QBD 423 (EW CA).

Cf Dahl v Nelson, Donkin & Co (1881) 6 App Cas 38 at 44–45, 50 LJ Ch 411, [1881–85] All ER Rep 572 (UK HL), speech of Lord Blackburn.

The Galam (Cargo ex) (1863) Brown & Lush 167, 2 Moo PCCNS 216, (1863) 33 LJ Adm 91 (PC).

A bond by which cargo to be discharged is given in security for a loan.

This means the shipowner has two persons to hold liable for the freight, i.e. the charterer and the bill of lading holder.

‘Freight prepaid’ statement is more common with time charters than voyage charters.

Compania Comercial y Naviera San Martin SA v China National Foreign Trade Transportation Corporation (The Constanza M) (HC) [1980] 1 Lloyd's Rep 505 (EW HC).

[1905] 2 KB 92 (EW HC).

Tradigrain SA and Others v King Diamond Marine Ltd (The Spiros C) [2000] All ER (D) 979, [2000] 2 Lloyd's Rep 319 (EW CA).

Dommett v Beckford (1833) 5 B & Ad 521.

As thought in Ngo Chew Hong Edible Oil Pte Ltd v Scindia Steam Navigation Co Ltd (The Jalamohan) [1988] 1 Lloyd’s Rep 443 (EW HC).

India Steamship Co v Louis Dreyfus Sugar Ltd (The Indian Reliance) [1997] 1 Lloyd’s Rep 52 (EW HC).

[1997] 2 Lloyd’s Rep 641 (EW CA).

Oriental Maritime Pte Ltd v Ministry of Food, Government of the People's Republic of Bangladesh (The Silva Plana, Bahamastars and Magic Sky) [1989] 2 Lloyd's Rep 371 (EW HC).

See Sections 2(d) and 10 (para 1) of the Indian Contract Act 1872/Malaysian Contracts Act 1950.

Action SA v Britannic Shipping Corpn Ltd (The Aegis Britannic) [1987] 1 Lloyd's Rep 119 (EW CA).

As opposed to general lien. See chapter 13.4.3.

Cl. 21 of the ASBATANKVOY form states “the lien shall continue after delivery of the cargo”. However, the effectiveness of this clause is dubious as it may not be legally possible for the shipowner to have a lien when it has lost the possession.

Hingston v Wendt (1876) 1 QB 367 (EW HC).

See Kirchner v Venus (1859) 12 Moo PC 361, 14 ER 948. 7 WR 455, 5 Jur NS 395 (PC); Allison v Bristol Marine Insurance Co  (1876) 1 App Cas 209[1874–80] All ER Rep 781 (UK HL).

The Galam (Cargo ex) (1863) Brown & Lush 167, 2 Moo PCCNS 216, (1863) 33 LJ Adm 91 (PC). See chapter 13.4.3 for a detailed discussion of this case.

The Exeter Carrier Case (1743) 2 Ld Raym 867. Note the general rule that a lien at common law can only be created by the owner of the goods or by his express or implied authority: see Buxton v Baughan (1834) 6 C & P 674, 172 ER 1414 (EW Court of Exchequer); Pennington v Reliance Motors Ltd [1923] 1 KB 127 (EW HC). A bareboat charterer or a mortgagee in possession of the ship will usually have such authority to create lien at least in the ordinary course of trading: See Williams v Allsup (1861) 10 CB NS 417, 142 ER 514 (EW Court of Common Pleas): mortgagee of a ship may validly create a lien in favour of repairer for repairs performed to keep he seaworthy; see also Green v All Motors Ltd [1917] 1 KB 625 (EW CA); Ablemarle Supply Co Ltd v Hind [1928] 1 KB 307 (EW CA), involving repairers’ lien over car under hire-purchase against the financier-owner, held in favour of the repairer.

Miramar Maritime Corpn v Holborn Oil Trading Ltd (The Miramar) [1984] AC 676, [1984] 2 All ER 326, [1983] 2 Lloyd’s Rep 319 at 324 (EW HC).

Steelwood Carriers Inc of Monrovia, Liberia v Evimeria Cia Naviera SA of Panama (The Agios Giorgis) [1976] 2 Lloyd’s Rep 192 (EW HC). Cf Aegnoussiotis Shipping Corpn of Monrovia v A/S Kristian Jebsens Rederi of Bergen (The Aegnoussiotis) [1977] 1 Lloyd’s Rep 268 (EW HC).

Section 2(1) of the UK Carriage of Goods by Sea Act 1992/UK Bills of Lading Act 1855 (now repealed). See chapter 2.2.10.1.

[1994] 2 SLR 369 (SG CA).

In the USA.

In Malaysia.

Prior to making the final decision, the court made an interim order for release of the cargo to the respondents subject to the respondent furnishing a banker's guarantee for any lien claim.

I.e. Contract between the disponent shipowner and the freight forwarder.

Santiren Shipping Ltd v Unimarine SA (The Chrysovalandou Dyo) [1981] 1 All ER 340, [1981] 1 Lloyd’s Rep 159 (EW HC).

Dainford Navigation Inc v PDVSA Petroleo SA (The Moscow Stars) [2017] EWHC 2150 (Comm), [2017] 1 Lloyd’s Rep 409 (EW HC).

See Castleton Commodities Shipping Co Pte Ltd v Silver Rock Investments (The Clipper Monarch) [2015] EWHC 2584 (Comm), [2016] 1 Ll L Rep 1 (EW HC) for another instance of order for sale of cargo liened by the shipowner, where the ship was waiting outside the Chinese territorial waters with the liened cargo.

Feoso (Singapore) Pte Ltd v Faith Maritime Co Ltd (The Daphne L) [2003] SGCA 34 (SG CA).

As last amended in 2018.

See Arun Kasi, Arbitration : Stay of Court Proceedings and Anti-Suit Injunctions , Malaysia, CLJ Publication, 2014.

Section 10 of the Malaysian Arbitration Act 2005.

See Dainford Navigation Inc v PDVSA Petroleo SA (The Moscow Stars) [2017] EWHC 2150 (Comm), [2017] 1 Lloyd’s Rep 409 (EW HC).

(1858) El Bl & El 353, 120 ER 540 (EW Court of Exchequer Chamber), affirmed by the House of Lords in (1860) 8 HL Cas 338, [1843–60] All ER Rep 844 (UK HL).

Metall Market OOO v Vitorio Shipping Co Ltd (The Lehmann Timber) [2013] EWCA Civ 650, [2014] QB 760 (EW CA).

Dry Bulk Handy Holding Inc and Another v Fayette International Holdings Ltd and Another (The Bulk Chile) [2013] EWCA Civ 184, [2013] 2 Lloyd’s Rep 38.

Dry Bulk Handy Holding Inc and Another v Fayette International Holdings Ltd and Another (The Bulk Chile) [2013] EWCA Civ 184, [2013] 2 Lloyd’s Rep 38.

[1993] 1 SLR 980 (SG CA).

At the instance of an application by the shipowner for summary judgment.

Doctrine of privity of contract.

To whom no bill of lading has been issued by the shipowner, hence no contractual nexus between them.

Western Bulk Shipowning III A/S v Carbofer Maritime Trading ApS (The Western Moscow) [2012] EWHC 1224 (Comm), [2012] 2 All ER (Comm) 1140, [2012] 2 Lloyd’s Rep 163 (EW HC).

In England and Wales, under CPR 35. In Malaysia and Singapore, under Order 17 of the respective Rules of Court.

Itex Itagrani Export SA v Care Shipping Corp (The Cebu) (No. 2) [1990] 2 Lloyd’s Rep 316 (EW HC).

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Kasi, A. (2021). Voyage Charter: Freight and Lien. In: The Law of Carriage of Goods by Sea. Springer, Singapore. https://doi.org/10.1007/978-981-33-6793-7_13

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Time Charter vs. Voyage Charter: Everything You Need to Know

Navigating maritime logistics demands a robust understanding of chartering options—each type has unique implications for operational strategy and financial outcomes.

Choosing between a time charter and a voyage charter isn’t merely a logistical decision; it’s a strategic one that impacts cost, control, risk management, and operational flexibility.

In this article, we delve deep into the two main types of charters – a time charter and a voyage charter – exploring their advantages and disadvantages, and offering a comparison between the two.

The goal of this article is to:

• equip you with the essential knowledge to navigate these choices 
• ensure that your chartering decisions align seamlessly with your business objectives and market conditions 
• enhance your company’s competitive edge in the global marketplace.

But before going any further, it’s important to understand the terms used by the industry. Here are the most common: 

Time Charter

A time charter   grants the charterer the use of a vessel and its crew for a specified period from a shipowner. The ship owner and the charterer will agree on the exact period the lease will run for. 

However, the two parties will not need to agree on ports of call and destinations, as the charterer has complete discretion over this. The charterer can direct the vessel’s movements and cargo operations within agreed and imposed contractual limits. 

The shipowner retains responsibility for the vessel’s operational aspects, including maintenance (ensuring the vessel meets all necessary maritime safety standards), and crewing, but the charterer must pay for fuel and supply costs, as well as the cost of cargo operations and port charges. 

This arrangement is akin to leasing a car, where the lessee drives but doesn’t worry about long-term maintenance. For example, a charterer might lease the ship for six months, during which time they have the flexibility to choose their routes and destinations.

Ship owners generally prefer their vessels to be leased on a time charter. This is because time charters guarantee income for a long period, giving the ship owner increased security.

Voyage Charter

A voyage charter focuses on the transportation of a specific cargo on a single voyage between designated ports.

The most common way to pay for this type of charter is on a per-ton basis. As the name implies, this sees the charterer paying a set price for every ton of cargo they transport and is preferred when the amount of cargo they’re transporting is significantly less than the vessel’s gross maximum cargo tonnage.

The second most common payment method is a lump sum – one payment that allows the charterer to transport as much cargo as they wish. It is the ship owner’s responsibility to ensure the cargo weight does not exceed the gross maximum tonnage of the vessel. This type of payment is preferred by charterers when they’re carrying a higher weight of cargo.

Under this contract, the ship owner is tasked with delivering the cargo and handling all nuances of the voyage itself. Nearly all costs are covered by the ship owner and include costs relating to staffing, berthing, loading, unloading, and fuel. They cover these costs by charging the charterer a fee for leasing the vessel.

Before the charter contract is signed, the parties will agree on the end destination, any ports of call, laytime, and whether there will be any restrictions on cargo. The ship owner pays for all costs at the port of call. If the charterer exceeds the agreed time, they must pay demurrage to the ship owner.

This type of vessel chartering is generally preferred by charterers. This is because it often has more competitive prices, plus they are not tied down to any long-term commitments

Voyage and Time Charters

There are other definitions which are useful to understand.

Charter party

Central to these contracts is the charter party —the formal agreement that stipulates the specific terms, conditions, and obligations agreed upon by the ship owner and the charterer. 

This document is crucial as it governs what each party is responsible for, including costs, risks, and how disputes are resolved.

Freight Rates

Freight rates, a critical element of the contract, determine the cost associated with transporting cargo and are influenced by various market conditions and ship specifications.

These rates not only affect the profitability of a voyage but also influence global trade patterns.

Cost Analyses

Cost analysis in this context involves evaluating the expenses related to different chartering options to determine the most cost-effective approach. 

This analysis is essential for chartering managers and financial analysts who aim to optimize operational costs against market conditions. 

The Statement of Facts (SoF) is an important maritime document that logs vessel activities while in port. It includes times of arrival and departure, cargo handling details, and records of any delays or incidents, providing a factual foundation for operational and legal evaluations.

Freight and Charges

Lastly, understanding freight & charges—the costs incurred during the shipment of cargo—is vital. These charges can vary widely depending on the route, type of cargo, and specific terms of the charter party.

Once again, the use of historical data from SoFs can assist in providing clarity and transparency on these fees.

Advantages and Disadvantages of a Time Charter

Time chartering presents a unique set of advantages and disadvantages that vessel chartering managers, operations VPs, and demurrage cost analysts must weigh carefully when strategizing for optimal operational flexibility and cost efficiency.

Advantages:

• Flexibility in Operations : Time charters offer charterers significant control over the vessel’s employment, including the types and routes of cargoes, as well as one of the most important: access to a vessel. This flexibility is invaluable for adapting to changing market conditions or specific logistical requirements. Using no-code workflows to streamline processes and voyage turnaround simulators can support maritime operations and greatly improve flexibility.
• Cost Predictability : With a fixed daily hire rate, companies can better forecast and manage their shipping expenditures. This predictability aids in budgeting and financial planning, reducing the unpredictability associated with fluctuating freight rates in spot market dealings.
• Reduced Exposure to Market Volatility : During periods of market volatility, time charter arrangements protect the charterer from soaring freight rates, as the hire rate remains constant regardless of market conditions.

Disadvantages:

• Long-term Commitment : One of the primary drawbacks of time charters is the requirement for a longer-term commitment to a vessel. This can be a double-edged sword, especially if market rates fall below the agreed hire rate, potentially leading to higher-than-market operational costs.
• Operational Costs and Risks: While the shipowner handles maintenance and crewing, the charterer is responsible for costs related to the voyage, including fuel, port charges, and other variable expenses. 

Charterers should employ proactive cost tracking, negotiate favorable fuel clauses, utilize cost-efficient routing software, and maintain transparent communication with shipowners about anticipated expenses and operational strategies.

For example, a well-prepared and accurate Statement of Facts (SoF ) can provide detailed information about the events that occurred during the time a vessel spent at port.

However, when the opportunity to properly analyze the SoF has not been made available, disputes over ambiguous statements may arise.

On one side, charterers will try to leverage the delays that happened to decrease demurrage. Shipowners, on the other hand, may challenge a charterer’s laytime statement based on the events that are available in the SoF.

Time charters often include terms for demurrage (charges when the charterer uses the vessel beyond the agreed period) and dispatch (rewards for completing operations early). The SoF provides the necessary data to calculate these charges or rewards accurately, documenting the exact time spent during loading and unloading.

• Lesser Control Over Maintenance : Charterers have limited control over the maintenance and condition of the vessel, relying on the shipowner to maintain standards. Poor maintenance can affect cargo schedules and overall shipping efficiency.

Maintenance of the vessel can also have a direct effect on the charterer due to new emissions regulations. 

Keeping track of current changes in maritime emissions regulations is a challenging task. With so many initiatives and new norms being implemented, trying to provide frameworks to capture and report on emissions, makes the topic extremely complex for operators, shipowners, and commodity manufacturers.

Advantages and Disadvantages of Voyage Charter

Voyage charters represent a different approach compared to time charters, focusing on specific trips rather than extended periods. This method suits operations that require precise cargo deliveries without long-term ship commitment, but it also carries its own set of pros and cons.

• Direct Cost Association : The major appeal of voyage charters lies in their direct cost association with individual voyages. The charterer is not liable for any costs, except the initial charter fee, and is not responsible for finding a crew. Charterers pay per trip, making it easier to allocate costs directly to specific cargoes or projects. 
• No Long-Term Commitment or Contract: Unlike time charters, voyage charters do not require a long-term commitment to a vessel, providing flexibility to switch between ships and routes as dictated by cargo needs or market conditions.
• High Control Over Cargo Operations : Charterers maintain extensive control over the loading and unloading processes, ensuring that handling aligns with their standards and schedules. This is particularly beneficial for sensitive or high-value cargoes. 
• Vulnerability to Market Fluctuations : While time charters protect against market volatility, voyage charters expose charterers to fluctuating freight rates. During peak times, costs can escalate significantly, affecting overall profitability and a lack of flexibility for the charterer.
• Inconsistent Costs (and higher initial costs): The costs in voyage charters can vary widely from one trip to another, influenced by factors like fuel prices, port fees, and canal dues. This inconsistency makes budgeting and financial planning more complex.

For example:

a. Exceeding laytime – the time allowed for loading and unloading cargo at ports – can lead to demurrage charges. Having a well-prepared SoF ensures that the arrival, cargo operations, and departure times are documented, which are key data points for laytime calculations.

b. New emissions regulations leading to the use of specific fuels or ship adjustments may soon be passed on to charterers via higher freight costs. For many ships, technical modifications may be the only realistic way to attain the required certifications and to be under the emissions limit, impacting the commercial operation of the vessel.

• Dependency on Ship Availability : Charterers are at the mercy of market availability. During periods of high demand, finding suitable vessels can be challenging and more expensive, potentially leading to delays and increased operational risks.

How to Choose Between Time Charter and Voyage Charter: Factors to Consider

Choosing between a time charter and a voyage charter is a strategic decision that hinges on several criteria to be weighed carefully to align with organizational objectives and the dynamic nature of the maritime industry.

Here we present six criteria that every chartering manager or analyst should consider.

• Duration and Frequency of Cargo Needs

Consider the length and frequency of your shipping needs. 

Time charters are more suitable for longer and more regular shipping requirements, providing stability and predictability. These agreements are signed only for a limited period, without providing any specified route to the other party. Throughout this charter period, the Charterer can use the vessel for trading on the recognized trade routes without restrictions. 

On the other hand, voyage charters are ideal for single, occasional, or irregular shipments. These contracts are signed for carrying a particular quantity of goods on the preset by the two parties. They also are obliged to carry the stated commodity onboard between pre-decided ports only. After the said trip is completed, the contract is automatically terminated.

• Market Conditions and Freight Rate Volatility

The current and anticipated market conditions play a crucial role. In a volatile market with rising freight rates, a time charter might lock in a more favorable rate for a longer period. 

Conversely, in a stable or declining market, voyage charters might offer more cost-effective and flexible options.

• Operational Control

Evaluate the level of control you need over the vessel’s operation. 

Time charters offer more control over the vessel’s itinerary and operations, beneficial for complex logistics operations.

Voyage charters provide control over the cargo but less so over the vessel’s operations.

• Financial Planning, Profitability, and Budget Constraints

Assess your financial flexibility

Time charters require a substantial and consistent financial commitment, which is predictable but potentially higher in the long term. 

Time charters provide more predictable cash flow due to fixed daily hire rates, which can be advantageous in a volatile market as they protect against rate increases. 

However, they may result in negative cash flow if the market rates decrease significantly below the charter rate agreed upon, as the charterer still must pay the fixed rate.

Voyage charters , while potentially more variable in cost, do not require long-term financial commitments and can be adjusted according to budgetary needs. The absence of a long-term commitment allows companies to avoid the financial drain of a non-performing asset, which is possible in a time charter if market conditions worsen. 

Typically, payments in voyage charters are tied to specific milestones, such as loading or unloading completion, which can help in planning cash flow. 

• Cargo Specificity and Handling Requirements

Consider the nature of the cargo. Special handling requirements, sensitivity, and value of the cargo might dictate the need for more direct control over handling processes, favoring voyage charters.

• Risk Tolerance

Finally, analyze your company’s risk tolerance. 

Time charters minimize exposure to market fluctuations but involve commitment risks . They provide more predictable cash flow due to fixed daily hire rates, which can be advantageous in a volatile market as they protect against rate increases. However, they may result in negative cash flow if the market rates decrease significantly below the charter rate agreed upon, as the charterer still must pay the fixed rate.

Voyage charters offer flexibility but expose the charterer to market rate risks and operational uncertainties. Profitability and effectiveness in managing cash flow depend on the charterer’s ability to manage and mitigate risks associated with market volatility and operational uncertainties.

By automating manual workflows with available low-code technology , companies can save and reduce risk while maintaining data integrity and real-time visibility of their voyages’ most essential KPIs. 

To reduce risk, dedicated software to automatically assign tasks and notify stakeholders prevents constant back and forth through emails or updating of spreadsheets can be implemented. Stakeholders can be given dedicated access to track their inbound shipments, schedule changes, and collect documents.

If you want the lowest possible ongoing costs, the clear winner is the voyage charter.

Why? Because they don’t require a long-term contract. They do have a higher initial cost, but this is offset by the fact that no other significant fees need to be paid, in general.

But, when it comes to the initial cost of chartering a ship, it’s nearly always going to be cheaper to go with a time charter.

A ship owner is more open to a lower price, as they know you’ll be hiring the vessel for longer. What’s more, you, and not the ship owner, will be expected to cover other costs, pushing the initial price down further. As the vessels are leased for long periods, the vessel can be used to travel anywhere, without restriction.

In making your final decision, engage with stakeholders, including operations managers, financial analysts, and logistics coordinators, to understand the full implications of each option.

Besides, using a holistic approach to evaluate these factors will guide you toward the most strategic chartering decision for your specific circumstances.

• April 30, 2024

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What is Charterparty?

International Ship Chartering was introduced by the Phoenicians, when traders chartered ships for the Mediterranean and European market. In Ancient Rome, there was a ship chartering market of sorts dealing in Egyptian grain prices on arrival at Ostia.

In other words, chartering ships is not a new concept. The important difference compared to today is that, until the late 19th century, some shipmasters often had full authority to fix cargoes and maximize earnings for the shipowners in return for a profit-share agreement.

Unusually, the shipmasters owned the ships. However, the shipmaster would conduct his negotiations in person in whatever port his ship was moored, draw up a contract with a trader, and tore the contract in half, one half for the trader, one for the shipmaster. This is the origin of the term “ Charter Party ” an anglicized version of the Latin word “ Carta Partita” , meaning  a document (Carta), which has been divided or split (Partita) . One of the halves was placed on board the ship and the other half was kept by the trader. When the ship arrived at her destination, the receiver of the cargo produced the shipper’s half of the document, thus proving that he was the legitimate owner of the goods

The tremendous growth of world trade in the 19th and 20th centuries led to faster steamships, followed by ships powered by fuel and diesel. Ships were on longer voyages away from their homeports and the shipmasters were no longer able to make their negotiations. So the shipowners employed shipbrokers to find the next cargoes and negotiate the Charter Party terms.

Charterparty  is a  contract  that incorporates the use of a ship for a  specific period  (Time Charter), or for a  quantity of cargo  to be carried from one port to another (Voyage Charter). Generally, Charter Party is a  written document  based upon one of the various  Standard Forms  devised for specific trades.

In unusual cases, shipowners and charterers may trust each other enough to work on a merely  verbal basis . Practically, all charter party forms undergo significant alteration during negotiations. A comprehensive examination of all charter party forms is impracticable but we are going to highlight the important parts of a charter party.

Ships can be chartered in two (2) basic ways:

• Time Charter : if a charterer wants to  hire  a ship for a period in which the charterer plans to operate the ship as if it were their property, the most suitable contract used will be a time charter
• Voyage Charter : if a charterer wants a  single shipment  of specific cargo, the contract will most certainly be a voyage charter. Ships that are covered under a time charter usually carry cargoes under sub-voyage charters

In the case of time-chartered ships, costs relating directly to the ship or the crew members are technically expenses of the  actual shipowner , not the time charterer.

Frequently, Voyage Charters relate to single cargoes, however, there are occasions that a ship may be chartered on  Consecutive Voyage Contracts  for a specified number of voyages or a  Contract of Affreightment (COA)  that could cover a fixed period or a fixed quantity of cargo rather than a specified number of voyages.

Due to the number of disputes that have arisen regarding misunderstandings about certain charter party common phrases, BIMCO (Baltic and International Maritime Council ) introduced  Voylay Rules , and FONASBA (Federation of National Associations of Ship Brokers and Agents) introduced  Time Charter Interpretation Code 2000 . These documents only apply if agreed to by both shipowners and charterers.

Which Charterparty?

Charterparty Bills of Lading incorporate charterparty terms to provide them with full terms and conditions. This ensures that the terms and conditions of carriage under both the bill of lading and the voyage charterparty are largely identical, so the carrier/owner does not face different potential liabilities under different contracts.

The wording of the Bill of Lading will determine which Charterparty Clauses are incorporated into the Bill of Lading . The more specific and clear the wording in the bill of lading is the less dispute there will be. The common areas of disputes are, as follows:

Which Charterparty?  If there is only one charterparty, between the shipowner and cargo owner/ charterer, then that must be the charterparty to incorporate. If there is more than one charterparty, a choice must be made. Only one charterparty’s terms can be incorporated into the bill of lading.

Where there is a chain of charterparties, it can be difficult to know which charterparty is incorporated into the bill of lading contract, if the bill of lading does not name the charterparty.

Under English law it is not necessary to name the charterparty in the bill of lading in order to incorporate its terms. The fact that parties to the bill of lading have shown an intention to incorporate the terms of some charterparty is enough.

The court has made rules, which show how the correct charterparty should be identified. The first step is to determine who is the carrier under the bill of lading . It would usually be the shipowner, though it may be a time charterer.

The next step is to ask under which charterparty is that carrier the owner? Usually, that charter-party will be incorporated, Pacific Molasses v Entre Rios (1976). It may be a time charterparty or a voyage charterparty. However, if that charterparty is a time charterparty and there is a voyage charterparty further down the chain, then the voyage charterparty will be incorporated instead .

It is the charterparty which is most appropriate to a particular voyage and the carriage of goods [as in Nanfri (1978)]. This is because a voyage charterparty is a contract of carriage and a time charterparty is a contract for the use and hire of a vessel.

A v oyage charterparty i s more likely to contain terms relevant to a bill of lading contract of carriage than a time charterparty is. However, if there is only a time charterparty then that will be the charterparty incorporated into the bill of lading. The holder of the bill of lading (quite often) and the bill of lading carrier (sometimes) may not have a copy of the charterparty referred to and incorporated into the bill of lading. However, the charterparty will still be incorporated into the bill of lading. However the parties to the bill of lading contract of carriage may not know its full terms .

Voyage Charterparty

Voyage Charterparty Forms exist in numerous versions as the shipping business attempts to keep them in line with evolving practices. But, despite this variety, there are some common topics in the Voyage Charter Party Forms:

Name and Description of the Ship:  Charter Party specifies the name of the ship and brief description of the ship such as Year of Build, Flag Country, Classification Society, Call Sign, Gross Tonnage (GT), Net Tonnage (NT), Summer Deadweight (DWT), Decks, Holds, Hatches, Grain Capacity, Bale Capacity, Length Overall (LOA), Gears and the Safe Working Load (SWL).

Loading and Discharging Location:  Charter Party specifies the loading and discharging location (port or berth) and the number of loading and discharging ports or berths. If two or more berth is specified, berth shifting expenses are usually included in the freight rate agreed. In coaster shipping, the charter party stipulates whether the ship should remain always afloat or whether a safely aground berth is allowed  NAABSA  (Not Always Afloat But Safely Aground).  Description and Amount of the Cargo  are provided under this title. 

Loading and Discharging Rates:  Charter Party stipulates loading and discharging rates in tonnes per day, on which time allowed is calculated.

Laydays and Cancelling Date (LAYCAN):  Charter Party stipulates the range of dates under which the ship must arrive and present itself ready for loading at the stipulated loading port. For example, Laycan 20/30 June. Usually, the first date is preceded by the words “laydays not to commence before 20 June” which means the charterers are  not obliged  to commence loading before that date, although shipowners and charterers may agree to do so during charter negotiations. The cancelling date (30 June) is the  latest  on which the ship is required to arrive  before midnight . Arrival after that time means the ship could be determined to be in  breach of the charter party  and the charterer then has the  option to cancel the charter party . If the ship’s late arrival could be determined to be  deliberate , that is, for the commercial advantage of the shipowner then the charterer may be  entitled to claim damages  for any loss incurred as a result of the undue delay. Charter Party Forms have a clause requiring the charterer to  declare  whether or not this option will be exercised as soon as it is clear that the ship has been delayed. Therefore, avoiding the ship having to navigate to the loading port and present itself, only to be informed it is canceled. The  Cancelling Date  is an  option to be declared  by the charterer and it is  not automatic . Furthermore, Charter Party Forms stipulate  NOR (Notice of Readiness)  which starts the time to count. 

Loading and Discharging Costs:  Charter Party stipulates whether it is the shipowner’s or the charterer’s expense for  cargo handling  at both the load and discharge ports. Special attention should be paid to whether or not the cost of any cranes or specialist services is for the account of the shipowner or the charterer.

Arrival Notices:  Charter Party stipulates that the shipmaster gives regular notices of the ship’s  Expected Time of Arrival (ETA)  at the load and discharge ports. Consequently, the charterer plans cargo loading or discharging facilities and arranges a suitable berth. Normally, ETA Notices are sent by the shipmaster to the port agent, whose duty it is to pass ETA Notices on to the charterer or charterer’s agent. Providing regular  ETA Notices  during the voyage should not be confused with giving the NOR (Notice of Readiness) which is tendered when the ship arrives at the port and the shipmaster declares that the ship is ready to commence cargo operations per the Charter Party. 

Hatch Covers:  Carter Party specifies for whose cost and time the opening and closing of cargo hatch covers will be.

Bill of Lading (B/L):  Charter Party stipulates who is entitled to sign the Bill of Lading (B/L) and under what reference the Bill of Lading (B/L) will be completed. Charter Party stipulates how the cargo loaded figures will be determined. When the Bill of Lading (B/L) is signed and stamped, the Bill of Lading (B/L) becomes a very vital and valuable document with a crucial role in trade. Bill of Lading (B/L) determines the  quantity  and  condition  of the cargo at the time of loading. Once the Bill of Lading (B/L) is signed and stamped, the statement is final except in rare legal situations. Bill of Lading’s (B/L) another major role is as a  Negotiable Document of Title . Therefore, a third party who may wish to buy the cargo has to be able to trust the quantity and description recorded in the Bill of Lading(B/L) because it is the only evidence the buyer has about the cargo. In theory, the shipmaster signs and stamps the Bill of Lading(B/L), in practice this duty is usually delegated to the agent. The agent should qualify the signature with a statement that he is signing for and on behalf of the shipmaster and shipowners of the ship. The cargo may only be delivered to the party who legitimately holds the Bill of Lading(B/L) and presents the Bill of Lading(B/L) to claim the cargo. Any deviation from this fundamental principle may only be implemented by the agent on explicit instructions from the principal.

Charterparty Abbreviations

APS (Arrival Pilot Station):  defines the point at which a ship may be delivered to a Time Charterer  on arrival .

CHOPT (Charterer’s Option):  when the charterer has an option under the charter party, for instance, for more than one berth load, or a margin on cargo intake.

DOP (Dropping Outward Pilot):  when redelivering at the end of a time charter, whereby the handover occurs after leaving from the final port. This expression ensures that the  Time Charterer pays all the costs associated with calling at the Final Port .

DLOSP (Dropping Last Outward Sea Pilot):  DOP (Dropping Outward Pilot) is modified to DLOSP (Dropping Last Outward Sea Pilot)   to avoid misunderstandings when more than one pilot is required to take the ship to sea, especially at ports where river pilots take the ship from the berth and hand over to sea pilots on passage.

DWCC (deadweight cargo capacity):  is the cargo intake tonnage the ship can get to its legal maximum draught (draft), taking into account bunkers, stores, provisions, constants.

ETA (Estimated Time of Arrival):  is   used when the ship is signifying its arrival at a port.

ETD/ETS (Estimated Time of Departure/Expected Time of Sailing):     is   used when the ship is signifying its departure from a port. 

FIO (Free In and Out):  defines that all cargo is to be loaded and discharged  free of all expense to the shipowner or carriers  but the ship will have to arrange and pay for any stowing of the cargo within the ship. In legal terms, the act of loading in  FIO (Free In and Out)  and  FOB (Free On Board)  refers to lifting as far as the ship’s rail. When the cargo has passed the ship’s rail, it becomes the ship’s  responsibility  and the goods are  shipped  so far as any Bill of Lading (B/L) is concerned. The opposite applies to the discharging operation. 

FIOS (Free In and Out Stowage):  defines that all cargo is to be loaded and stowed  free of all expense to the shipowner or carriers . Charterers also have to pay for stowing the cargo in the ship, comprising the entire operation even after passing the ship’s rail.

FIOT (Free In and Out Trimmed):  defines that all cargo is to be loaded and trimmed  free of all expense to the shipowner or carriers . FIOT (Free In and Out Trimmed) is used for bulk cargoes and indicates that charterers have to pay for trimming the cargo. Trimming is the task of leveling the pile of bulk cargo so that the bulk cargo does not remain in a cone shape.

LI (Liner In) or LO (Liner Out):  is the opposite of Free In or Free Out. The  shipowner pays  for loading or discharging the cargo. It has various combinations such as FILO (Free In, Liner Out) or LIFO (Liner In, Free Out).

Min/Max (Minimum/Maximum):  this expression is followed by many tonnes means that the cargo is a  fixed quantity  without any margin, plus or minus.

MOL (More or Less):  is used to indicate an option on cargo intake, usually stated in a percentage form. For example, 5% MOL.

MOLCO (More or Less Charterer’s Option):  is used to indicate an option on cargo intake is in Charterer’s Option, usually stated in a percentage form. For example, 10% MOLCO.

MOLOO (More or Less Owner’s Option):  is used to indicate an option on cargo intake is in Owner’s Option, usually stated in a percentage form. For example, 10% MOLOO. Usually, MOLOO is favored by shipowners because it allows for alterations in the amount of bunkers and stores on board.

NAABSA (Not Always Afloat But Safely Aground):  in coaster shipping, NAABSA term allows the ship to lay aground at low tide where the seafloor conditions are suitable for a ship.

NOR (Notice of Readiness):  is tendered by the ship, usually through the agent. NOR (Notice of Readiness) declares the time and date that the ship arrived in all respects  ready  to load or discharge the cargo. NOR (Notice of Readiness) determines the  commencement of laytime  per the charter party terms.

ROB (Remaining On Board):  is used to indicate any bunkers, cargo, or freshwater remaining on board the ship either on arrival or on departure.

SHEX (Sundays Holidays Excepted):  Laytime  not  to count during Sundays and Public Holidays.

SHINC (Sundays Holidays Included):  Laytime  counts  during Sundays and Public Holidays.

SSHEX (Saturdays Sundays Holidays Excepted):  Laytime  not  to count during Saturday, Sundays, and Public Holidays.

SSHINC (Saturdays Sundays Holidays Included):  Laytime  counts  during Saturdays, Sundays, and Public Holidays.

FHEX (Fridays Holidays Excepted):  Laytime  not  to count during Fridays, and Public Holidays in Islamic countries.

SWL (Safe Working Load):  specifies the capacity of the ship’s gears, cranes, and derricks to handle the certified lifting capacity. 

TIP (Taking Inward Pilot):  the location and time at which the pilot boarded the ship inbound to port and usually used for the  start of a Time Charter . The opposite of DOP (Dropping Outward Pilot), TIP (Taking Inward Pilot) ensures that the  costs  of entering the port are for the  Time Charterer’s account .

WCCON (Whether Customs Cleared Or Not):  defines that laytime will count regardless of whether customs authority to load or discharge has been granted.

WIBON (Whether In Berth Or Not):  defines that laytime will count whether in berth or not.

WIFPON (Whether In Free Pratique Or Not):  defines that laytime will count even if the ship has still been waiting to get Free Pratique from the Health Authorities. 

WIPON (Whether In Port Or Not):  defines that laytime will count whether in port or not when the ship waits outside the port at the customary anchorage area for a free berth.

WW (Weather Working):  is used where laytime only  counts  when weather permits cargo operations.

WWWW:  is a combination of WCCON, WIBON, WIFPON, and WIPON. WWWW indicates that laytime will begin to  count , subject to the NOR (Notice of Readiness) requirements, as soon as the ship arrives at an area outside the port normally considered to be the waiting area.

An agent will frequently be dealing with the buyers and sellers of cargo and will certainly encounter other sets of abbreviations. These are sales terms and as such, are not likely to appear in a charter party. They are, however of interest to the agent because, in the absence of information from the shipowner they will often indicate likely charter party terms. It is not unknown for sales terms and charter party terms to appear contradictory, in which case the agent must seek clarification from the shipowner principal at the earliest opportunity.

Most Common International Sales Terms (Incoterms)

CFR (Cost Freight):  the seller arranges for the goods to be sold on a delivered basis to the buyer and the costs of the seaborne transportation are included.

CIF (Cost Insurance Freight):  the seller arranges to sell the goods delivered but also includes the cost of insurance on the goods while in transit.

FAS (Free Alongside):  the cargo is free to be delivered alongside the ship. Free of all costs to the shipowner or carrier but costs thereafter, loading and stowing, are for the ship’s account.

FOB (Free On Board):  the cost of loading the cargo is for the account of the shipper and not that of the carrier or consignee.

Time Charterparty

In the time charter, there has to be a ship  handover (delivery)  from the shipowner to the  time charterer  who will then become the  disponent owner  at the commencement of the time charter. Likewise, at the end of the period of the time charter, there has to be a ship  handing back (redelivery)  from the time charterer to the shipowner.

In many time charter forms, there is a wording to the effect that the ship, at the end of the period, must be redelivered from the time charterer to the shipowner  “in like good order and condition, fair wear and tear excepted” . Hence, that the condition of the ship, together with many other things, has to be settled at the commencement of the time charter and its completion. Usually, surveyors perform these inspections, termed  “On-Hire Survey”  and  “Off-Hire Survey” . Customarily, two (2) agents are employed, one representing the shipowner and the other the charterer, at the starting and finishing of a Time Charter.

Ship Delivery

It is the responsibility of the  shipowner’s agent  to bring the ship to the point at which it is agreed with the time charterer that the  hire  will commence.  Time Charter Party  stipulates where and when the ship has to be delivered, which may be at a nominated port or a specific berth. The  On-Hire Survey  will then take place there. The actual time of ship  delivery  and  redelivery  may well be at a geographical point not connected to the shore such as  DOP (Dropping Outward Pilot)  and  TIP (Taking Inward Pilot) . A time charter party may stipulate delivery to be passing a strait or even passing a particular meridian of longitude in mid-ocean. Consequently, the ship’s  logbook  sets the time of delivery or redelivery. The shipowners and charterers will have agreed where the physical inspection of the ship for the On-Hire Survey or Off-Hire Survey   has to take place. Generally, some estimations such as bunker consumption have to be agreed upon between the shipmaster and the surveyor to cover the distance between the point of survey and the point of delivery or redelivery.

On-Hire Survey or Off-Hire Survey   checks:

• overall condition of the ship’s cranes
• apparent damages at holds, hatches, or decks before the commencement of the time charter
• ROB (Remaining On Board) bunkers, freshwater, and lubricants at the commencement of the time charter
• Class Certifications and Safety Certifications are valid and in good order
• The ship is properly manned per the ship’s certification

The time charterer either appoints a  surveyor  to represent its interests or agrees to enter a  joint survey , the result of which is agreed to be binding on either side. Any hold or hatch cover damage is recorded and either rectified by the shipowner before the time charter commences or it is agreed that this damage exists and will not be held against the time charterer at any future date. Any rectification required to be carried out to make the ship fit must be done  before the time charter commences . Any time used will be for the  shipowner’s account .

The shipowner’s agent coordinates and manages the formalities and the  on-hire survey . The  on-hire certificate   (delivery certificate)  is countersigned by the shipmaster and the time charterer or time charterer’s agent. The  on-hire certificate  shows the bunkers and freshwater ROB (Remaining On Board), exceptions, time, date, place that the hire commenced. Up to the point of delivering the ship to the time charterer the shipowner’s agent is responsible for all traditional agency activities and requirements of the crew members. Furthermore, all berth costs to that point are also for the shipowner’s account. Once the ship is  delivered ,   all further costs, including the appointment of a ship agent, transfer to the time charterer. The time charterer’s agent takes over the full agency responsibility of the ship in respect of all port costs, cargo handling, and navigation orders.

Ship Redelivery

At the end of a time charter period, the ship is redelivered from the time charterer to the shipowner. The time charterer’s agent is responsible for bringing the ship to the point agreed for  redelivery  and to make the ship available for the shipowner’s inspection. The time charterer’s agent coordinates and manages the formalities and the  off-hire survey . The  off-hire certificate (redelivery certificate)  is countersigned by the shipmaster and the time charterer or time charterer’s agent. If any damage has occurred during the ship’s period on time charter, it is the time charterer’s responsibility to rectify these defects before the ship is redelivered to the shipowner or to agree on reimbursement instead of actual repairs. Repair time and costs incurred are for the  time charterer’s account . The  off-hire certificate  shows the bunkers and freshwater ROB (Remaining On Board), any over-carried damage for later repair, exceptions, time, date, and place that the location of redelivery. It is the time charterer’s agent’s responsibility to coordinate and manage an  off-hire certificate (redelivery certificate) .

The shipowner’s agent is responsible for ensuring that the ship is delivered back from the time charterer (redelivered) to the shipowner  in a like condition to the commencement of hire . The shipowner’s agent is instructed to appoint an  off-hire surveyor  who should be given a copy of the on-hire survey listing any defects that were over-carried and cannot be determined as time charterer’s damage. Any further damage that is discovered should be advised by the shipowner’s agent to the time charterer for repair. ROB (Remaining On Board) bunkers and freshwater should be determined and only when the ship is in a handover condition should the agent  accept  the  redelivery certificate  presented by the time charterer. Once the ship is redelivered, the shipowner’s agent is then responsible for all costs and operational requirements of the ship.

Printed Charterparty Forms

Printed Charter Party Forms may undergo significant alteration during negotiations because these forms are quite out of date. For instance, the Chamber of Shipping Welsh Coal Charter 1896, the most regularly used coal charter party still contains clauses that are unchanged from 1896 or even earlier. The reason why both charterers and shipowners still use the old charter party forms is that so much of the printed wording has stood the  test  of time and charterers and shipowners prefer to stay with the version they  know  rather than adopt a new form. In the grain business, conservatism tends to explain why the Baltimore Form C, first produced in 1913 and amended in 1971, is used more than the Norgrain form, first produced in 1973 and amended in 1989.

GENCON Charter Party is a standard voyage charter party, the form used for trades where no specialist form exists, is preferred to the Multiform Charter Party, even though the GENCON Charter Party has had very few changed since 1922. This compares with the Multiform, which was issued in 1982 and revised in 1986. But, it is the Multiform Charter Party that will be used as the example simply because, being more modern, the printed wording reflects present circumstances more closely. 

Charterparty and Port Agent

There are many port directories available, however, all port directories have an unavoidable time lag between compilation and publication. Consequently, the only certain way for a shipowner to obtain the  latest information  about port conditions is to consult a reputable local agent. For instance, berthing is directly affected by the ship’s draught (draft) and the depth of water available. Likewise, the relationship between  safety and draught (draft)  also arises in the discharging clause of a charter party. Although the Multiform Charter Party form favorably envisages all cargoes to be fixed on a FIOS (Free In Out Stowage) basis, in the real world there are seldom when loading or discharging costs are for the ship’s account and a shipowner wants to know what these are before they can even perform a meaningful voyage estimate, a crucial preparatory to any chartering negotiations.

BIMCO (Baltic and International Maritime Council) publishes great info about  local taxes  throughout the world, but even this booklet cannot be as up-to-date as a local agent. During the chartering negotiations, a port agent may give important advice about local regulations for opening and closing of hatch covers, local labor unions, tallying, etc. 

The port agent must be able to give a reasonably precise estimate of the ship’s likely expenses including towage, pilotage, boatmen, linemen, and also the port charges such as tonnage dues, environment dues, canal dues, and berthing dues. The ship’s agent should send proforma port DA (Disbursement Account) as soon as possible during the chartering negotiations which affect the voyage estimations and charter party. In the shortsea (coaster shipping), the margin between a profitable voyage and a loss-making one can be fine. For instance, failing to inform that a tug will be required can turn a profit into a loss for the shipowner. The port agent should at this point agree on the fee they will be charging for their services. The shipowner can add these costs with their estimated operating costs and bunkers into a voyage estimation to determine the level of freight to obtain in the chartering negotiations.

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Titan Wreck Pictured at Bottom of Ocean as Last Messages Revealed

A picture of the Titan submersible wreckage was shown at the bottom of the ocean, The Sun reported, as a hearing on the implosion revealed some of the last messages sent by the crew.

The hearing by the U.S. Coast Guard on Monday began amid an ongoing Marine Board of Investigation review of how the submersible failed last year while traveling to view wreckage of the Titanic, which sank in 1912.

Officials at the hearing also shared a visual re-creation of the implosion, which included sharing one of the last messages the submersible sent to the Polar Prince, its support ship, saying, "all good here."

On June 18, 2023, the Titan submersible operated by OceanGate Expeditions descended into the Atlantic Ocean to explore wreckage of the Titanic, which 112 years ago struck an iceberg while sailing to New York from Britain on its first voyage, killing about 1,500 people.

Officials lost contact with the submersible shortly after going underwater. It was later determined by the U.S. Coast Guard that all five on board the submersible, which carried 96 hours' worth of oxygen, had died and that the debris found was "consistent with the catastrophic loss of the pressure chamber."

The five people on the Titan who died were later identified as Captain Hamish Harding, OceanGate CEO Stockton Rush, Paul-Henri Nargeolet, Shahzada Dawood and his son, Suleman Dawood.

During the hearing, Tony Nissen, OceanGate's former engineering director, testified, saying that he felt pressure from Rush to prepare the submersible for its voyage. Nissen described Rush as a challenging boss who was heavily focused on costs and project timelines, often leading to disagreements. He said that Rush's priorities frequently shifted daily.

Nissen recalled that the Titan was struck by lightning during a 2018 test mission, which may have compromised its hull. He said he was fired in 2019, the same year he refused to allow the submersible to descend to the Titanic, telling Rush that the Titan was "not working like we thought it would."

In a statement to Newsweek , Jane Shvets, counsel for OceanGate, said, "OceanGate expresses our deepest condolences to the families and loved ones of those who died in the tragic implosion of the Titan. There are no words to ease the loss endured by the families impacted by this devastating incident, but we hope that this hearing will help shed light on the cause of the tragedy."

"OceanGate, which is no longer an operating company, having ceased all business activity shortly after the tragedy, and which has no full-time employees, is a party in interest in the Coast Guard proceeding. The Company has been fully cooperating with the Coast Guard and NTSB [National Transportation Safety Board] investigations since they began, including at the ongoing public hearing convened by the Coast Guard," the statement added.

This article includes reporting from the Associated Press.

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About the writer

Matthew Impelli is a Newsweek staff writer based in New York. His focus is reporting social issues and crime. In January 2023, Matthew traveled to Moscow, Idaho where he reported on the quadruple murders and arrest of Bryan Kohberger. Matthew joined Newsweek in 2019 after graduating from Syracuse University. He also received his master's degree from St. John's University in 2021. You can get in touch with Matthew by emailing [email protected] . Languages: English.

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