CHARTER PARTY

Charter party:   In trumping the market conditions strongly influence the freight that has to be paid. The contract between two parties is called the charter party.

Charter parties are contracts of affreightment under which the shipowner, in return for a sum of money called the freight or charter hire aggress to carry goods in bulk by sea or provide services of a vessel for the purposes of such carriage.

There are no international conventions governing charter parties. Most countries have also not made laws for regulating chartering practices. The terms and conditions of charter parties have been evolved over a period of years in preparing with the growth of maritime commerce and the shipping industry.

Organization like the UK chamber of shipping and the BALTIC INTERNATIONAL MARITIME CONFERENCE (BIMCO) in Copenhagen have played a significant role in evolving international accepted CHARTER PARTIES. Besides such standard forms, there are also a number of private charter parties forms evolved by individual commodity producers and merchants. Thus, charter parties could vary from place to place and also from one commodity o another.

The chartered will normally employ brokers to fire a ship for the carriage of their cargoes. They may be carrying their own goods or goods of another party. They maybe a member of a consortium conference on other multi party agreement or may be outsider.

There are three important elements concerning chartering

The owner he who puts his vessel or part of the vessel at the disposal of another party for carriage of cargo.

THE CHARTERER : He who hires the vessel and pays for it

The FREIGHT : The amount of money which the charterer has to pay the owner for hiring of the vessel.

According o the contract both charterer and the owner have their own responsibilities with respect to the fired costs and the variable costs in the use of vessel. The charter party are normally claused to allow charterers to sublet the vessel in whole are impart on condition that the charterer remain responsible to the shipowner for the performance of original charter.

There are different types of charter parties

1.    Voyage Charter

2.    Time Charter

3.    Bare boat Charter

Freight:The fright is expressed as per ton loaded cargo. This is usually expresses in dollars per MT or long ton. Freight is the remuneration payable by charters to the owners for the performance of the contract and may be called charter party freight. This is normally payable in accordance with the terms of a freight clause which stipulate the amount of freight the time for payment and the method of payment.            

This is often payable under the charter party terms partially or fully in advance e.g., on loading on

Q.31    issue of Bill of Lading

Dead freight is not genuine freight but owners compensation for loss of freight, payable by charterers on a quantity of cargo short shipped i.e., a quantity they agreed upon but failed to load

3) BARE BOAT OR (DEMISE CHARTER)

A bare boat charter may also be called a charter by demise or demise charter and is often described as a type of ship financing arrangement.

-        It will be generally on the BARE CON 89 charter party form

-        It is used by owners such as banks/finance organization who may not be prepared to operate or manage ships themselves.

-        It is a contract for the lease of a ‘vessel for an agreed period’. The legal owner ship continues to vest in the owner but her physical possession, operation (including manning) and commercial exploitation are the responsibility of and are the benefit of the charterer.

-        They often have a purchaser option at the expiry of the charter period and are frequently linked to management control.

Any bills of lacking for cargo are issued by or on behalf of the charterer and not on behalf of the legal owner.

The chartered usually pay the owner a fixed hire per month in advance as detailed in agreement.

4) BILL OF LADING

The bill landing is the declaration of the master of the vessel by which the acknowledges that he received the goods on board of his ship and assures that he will carry the goods to the place of destination for delivery, in the same condition as he received them against handing of the original bill of landing. The definition of a bill of lading given in the “HAMBURG RULES” is the following.

“BILL OF LADING” means a document which evidence a contract of carriage by sea and the taking over of loading of the goods by the carrier, and by which the carrier undertakes to deliver the goods against surrender of the document.

A provision in the document  that the goods are to be delivered to the order of a named person, or to order or o bearer, constitutes such an undertaking.

The bill of lading serves as a

a) A receipt of the goods by the shipowner acknowledging that the goods of the stated species, quantity and conditions are shipped to a stated destination in a certain ship or at least received in custody of the ship owner for the purpose of shipment.

b) A memorandum of the CONTRACT OF CARRIAGE by which the master agrees to transport the goods to their destinations all terms of the contract which was in fact concluded prior to signing of the bill of loading are repeated on the back of this document

c) A document of little to the goods enabling the consigner to dispose of the goods by endorsement and delivery of the bill of lading.

LAY TIME: The lay time is the allowed time for loading and unloading of the vessel. The lay time is determined in the charter party. If this time excelled by the charterer he has to pay the owner compensation called the

DEMURRAGE: On the other hand if the ship has loaded or discharged quicker than foreseen then the owner will have o pay the charter a compensation called dispatch. Lay time consists of a specific number of days “DAYS” means a period of 24 consecutive hours running from 0000 to 2400 hrs.

DEMURAGE: Rate of amount payable per “weather working day” a portion thereof to the shipowner by the charter as penalty for the letters failure to load or discharge cargo within the lay time specified in the charter party provided however that the delay was not due to circumstances within the control of shipowner or beyond control of the chartered.

OFFHIRE:It is the responsibility of the owner to provide the vessel in a seaworthy condition for the purpose of the contract and the time of contract making. Owners usually agree to exercise due diligence to make the vessel seaworthy for each voyage during the charter period.

A term charter party usually contains an undertaking by owners to maintain the vessel in a good condition throughout the charter period and owners may be required to keep the vessel in the condition she was stated to be in when the contract was made. The term off hire means that in certain circumstances for which the charterer is not responsible, the hire will be temporarily suspended. So the hire of the vessel is suspended when the charterer cannot use the vessel for which he had hired it.

The circumstances in which “off hire” is allowed are given in the charter party.(eg- dry docking, strike of officers, crew, breakdown of machinery, to maintain efficiency of the vessel, deficiency of owner stores etc.)

The boiler and piston cleaning is included to allows owners to  carryout maintenance of machinery. This period is normally 48 hours per year. The vessel goes off hire if period of maintenance is exceeded.

If deviating for owners purpose eg-landing a sick man, repairs, dry dock the vessels will be off hire from the moment of deviation until she is ready to resume service in a position not less favourable to the charterers.

A deduction of hire is calculated on the basis of fuel used in deviation including F.O and D.O at the port deviated to.

But if deviation is for the charterer purposes eg.: stress of weather the vessel will remain on hire.