Charter Party By Capt Sarabjit Butalia August 2009 Type of Charter parties CHARTER PARTY Charter Party (Lat. charta partita, a legal paper or instrument, divided, i.e. written in duplicate so that each party retains half), a written, or partly written and partly printed, contract between a shipowner and a merchant, by which a ship is let or hired for the conveyance of goods on a specified voyage, or for a defined period. CHARTER PARTY A vessel might also be chartered to carry passengers on a journey. Also, a written contract between shipowner and charterer whereby a ship is hired; all terms, conditions and exceptions are stated in the contract or incorporated by reference. CHARTER PARTY Charter party is the contract between the owner of a vessel and the charterer for the use of a vessel. The charterer takes over the vessel for either a certain amount of time (a time charter) or for a certain point-to-point voyage (a voyage charter), giving rise to these two main types of charter agreement. There is a subtype of time charter called the demise or bareboat charter. CHARTER PARTY Time charter- In a time charter, the vessel is hired for a specific amount of time. The owner still manages the vessel but the charterer givers orders for the employment of the vessel, and may sub-charter the vessel on a time charter or voyage charter basis. CHARTER PARTY Voyage charter – In a voyage charter, the charterer hires the vessel for a single voyage, and the vessel's owner (or disponent owner) provides the master, crew, bunkers and supplies. Charter Party The major operation under this function is to find continued and suitable employment for the ships to maximise revenue earnings. These operations are therefore primarily concerned with finding suitable cargoes for ships irrespective of whether the ships are owned or are hired. These operations are concerned with evaluating intended voyages to maximise earning so as to pay for the cost of ship, cost of its operations and to make some profit. Charter Party There are many mutually agreed arrangements between the owners of cargo or shippers and the ship owners or ship operators for transportation of cargoes. The terms and conditions for carriage of cargo can either be on liner terms or under different charter party terms that primarily depend upon the types of ships and cargo. Charter Party Charter party is a contract between the ship- owner and the Charterer. Three important elements are; (a) Description of the ship (b) Description of the trade (c ) Description of time period Charter Party Description of the Ship The type of ship to be hired/chartered very much depends on the nature and whereabouts of the intended trade. Its normal for owners to provide all the details of the ship with a guarantee about its accuracy. An example such as Shell time and Inter tank having appropriate format which is required to contain several pages of information required ship details Charter Party Description of the Ship Many Charterers require the following plans to be supplied by the Owners; (1) General Arrangement Plan ,including loading scale (2) Detailed Cargo manifold arrangement Drawing (3) Pumping Arrangement Plan (4) Plan of Cargo Tank Ventilating System (5) Manufacturers Characteristics Curves of Pumps if centrifugal pumps are installed. Charter Party Description of the Ship Cubic Capacity Speed and Consumption Constant Weights Charter Party Description of the Ship These, apart from the name of the ship, include – year of built, flag, dead weight, maximum dimensions, maximum draught, fresh water allowance, speed, fuel consumption, cargo space in bail and grain capacities, number of hatches and holds, type and safe working load of cargo gear, compliance with international regulations for carriage of specialised cargo and such other important details relevant for the intended cargo and trade. For example some bulk cargoes may require that the holds be equipped with carbon-di-oxide fire protection system, or special requirement of cargo securing in the holds. Charter Party Description of the Ship Name of the Ship Year of Build Name and location of Owners Flag Class Call Letters GRT/NRT Summer Deadweight Fresh Water Allowance Fresh Water Allowance Charter Party Description of the Ship Cubic Capacity Speed and Consumption Constant Weights Charter Party Description of the Trade As much as Charterer is interested to know the details of the ship in the same way the Owner is interested to know about the type of trade the ship will be engaged in. Owners will negotiate an entry to that effect the berths and ports to which the vessel will trade are safe and ship will remain afloat. Charter Party Description of the Trade The Charter Party will guarantee that the vessel will trade within the Institute Warranty Limits(I.W.L)- a trading area defined by Underwriters to prevent the more serious risk of ship causality loss. The dangerous areas such as war zones and ice bound areas may be excluded from the charter party . Charter Party Description of the Trade The Charter Party shall also include certain exclusions for the cargo to be loaded such as asphalt in bulk ,pitch in bulk ,livestock explosives ,fish meal ,scrap , sulphur, and logs. In addition ,a modern phenomena often included in the cargo exclusion clause is nuclear products. Charter Party Description of the Period The period of charter commences with vessel’s delivery to the Charterers and ,like all charters with vessel’s delivery to the Charterers and like all charters, this delivery is either spot Types of Charter Parties There are two types of charters, Non-demise and Demise Charter. The charter by demise is not very frequent in normal day-to-day business but a number of ships are chartered on a so-called ‘bareboat’ basis. This kind of charter ordinarily means that the vessel is put at the disposal of a charterer with out any crew. The charterer thus takes over almost all of the owner’s functions except for the payment of the capital costs and the hull and machinery insurance premiums. Type of Charter parties Reason for Demise Charters( Bare Boat Charters) Demise charters are created not so much with a view to the carriage of goods but more as part of a complicated financing arrangement ,often with the intention that the charterer should become the owner of the ship in due course. Thus, a contract for the purchase of a ship by installments will often incorporate a demise charter into the contract. Type of Charter Parties Demise Charter A variant of this would be for a financing bank lend the funds required to buy the ship ,the bank then acquiring the ownership of the ship but demise chartering it to the borrower for the period of the loan. This would enable the bank to avoid not only the operating costs but also the liabilities which it would otherwise have to bear in relation to the operation of the ship under a mortgage. Demise charters are also concluded between two associated companies for tax or employment reasons. Type of Charter parties Charter parties other than Demise; There are two types; (1) Time Charters i.e. contracts for the use of the ship and her crew for a specified period of time within agreed trading limits as directed by the time charterer in consideration for the payment of hire; (2) Voyage Charter contracts for the use of the ship and her crew to carry an agreed cargo on an agreed voyage regardless for the payment of freight ( and possibly other remuneration such as demurrage if the loading/discharging is delayed beyond the time agreed for such operations) Type of Charter parties Voyage Charter: Voyage charter is an engagement of a vessel for a single voyage between declared ports to transport full shipload of cargo or a certain quantity of cargo. The freight is paid on per tonne of cargo (DWT) bases or on lump sum basis. The ship owner provides for all the ship’s costs with its crew, expenses for fuel, water, canal dues, port dues, loading and discharging expenses etc. in return the charterer pays him the hire charges for carrying the cargo as per described or utilised cargo capacity of the ship. Type of Charter parties Voyage Charter: To compensate for the delays that may be encountered in cargo loading/discharging operations, the ‘demurrage and despatch’ clauses for compensation to the affected parties are inserted in charter party. Type of Charter parties Voyage Charterparty List of Charterparty Clauses 1.Preamble;This can be extensive in some charterparties .In the Multiform much of what may be found in preambles of certain forms is contained in clause 1. There are two important of the brief Multiform preamble however – the place and the date of the charterparty. Type of Charter parties Voyage Charterparty List of Charterparty Clauses Place This can be important as ,in the absence of a clause to the contrary,the place where a contract is deemed to have may govern the law which is to be applied to that contract in the event of dispute. Thus if the place is London ,English Law may be very likely prevail. Type of Charter parties Voyage Charterparty Date equally important the date to be shown is that which by fixture negotiations are concluded with all subjects lifted-in other words ,when all negotiating formalities are complete. Type of Charter parties Voyage Charterparty Clause 1 ;Name and brief description of vessel The Multiform allows for a more complete vessel description in the main ,printed part of the form than many (e.g compare with AMWELSH).