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Contract between cargo seller and buyer - Procedure for Cargo ships employment

Ships employment

The contract of sale between the seller and the buyer of the goods is separate from the contract of carriage which one party or the other, or a third party (such as a freight forwarder), will make with the carrier.

Sale of goods contracts

Goods are most often carried by sea as a result of a sales contract (or sale of goods contract) made between the seller and buyer. The contract of carriage, which is separate, comes about as a result of this sales contract.
UK sales are subject to the provisions of the Sale of Goods Act 1979, as amended. This Act sets out an unpaid
seller’s rights, one of which (in section 44) is the right of stoppage in transit.
Contracts for the sale of goods usually include provisions covering three important points:

• the time or circumstances of the passing of title (i.e. ownership) of the goods from seller to buyer;
• the time when payment becomes due; and
• the time when the risk (of loss or damage) passes from seller to buyer.

These points are normally addressed in international sale of goods contracts by incorporation of one of a set of mutually-agreed standard trade terms named INCOTERMS

Ships employment -Contractual relationships

In connection with the cargo ship’s employment, contractual relationships will exist between:

i) the ship’s owner and any ship manager employed (embodied in a ship management contract);

ii) the ship’s owner, manager or operator and any charterers (charter party);

iii) the head charterer and any sub-charterer (charter party);

iv) the ship’s owner, manager or operator and a shipbroker who fixes the ship’s employment;

v) the buyer and seller of each consignment of goods carried on board (sale of goods contract);

vi) an exporter and any freight forwarder hired to arrange for the delivery of goods;

vii) the legal carrier and each shipper of goods on board (contract of carriage);

viii) the ship’s owner, manager or operator and each port agent appointed by him;

ix) the ship’s owner, manager or operator and various other parties whose services are used during a voyage such as chandlers, equipment suppliers, repairers, tugowners, pilotage authorities, port authorities, stevedoring companies, etc. (contract for services);

x) a shipowner and each passenger (contract of passage).

A “charter” is a contract for the hire of a vessel, aircraft, bus, etc. for a specified journey or an agreed period of time. In a maritime context, charters include:

i) contracts for carriage of specified quantities of cargo in specified vessels between specified ports (i.e. voyage charters); and
ii) contracts for hire of specified vessels, including:

a. time charters; and
b. bareboat charters (also known as “demise charters”).

Owners’ Responsibility

Owners will usually accept liability only where the loss, damage or delay has been caused by the improper or negligent stowage of the goods (unless the stowage is performed by shippers or charterers or their stevedores or servants), or by personal want of due diligence on the part of the owners or their manager to make the vessel in all respects seaworthy and to secure that she is properly manned, equipped and supplied, or by the personal act or default of the owners or their manager.

Contracts of affreightment in cargo ships employment

In modern shipping parlance, a contract of affreightment (often abbreviated to “COA”)

i) is essentially a contract to satisfy a long-term need for transport, most often for iron ore and coal in bulk.

ii) is an agreement between a charterer and a shipowner, disponent owner or carrier for the carriage of a specified (and often large) quantity of specified goods between specified places, over a specified (and usually long) period of time, by vessels of a type and size stipulated by the charterer, but which are nominated by the owners. (In a charter for consecutive voyages, by contrast, the carrying ship is named.) The vessels may be chartered. The goods to be carried and the total period are clearly defined, but the shipment dates may be approximate, often giving an even spread of shipments over the period (which may, for example, be 12 months). A stated minimum quantity must usually be loaded each voyage, with a “more-or-less” margin at the option of either the charterers (MOLCO) or the owners (MOLOO).

iii) may be based on a standard charter party as the main COA document, with a number of rider clauses added, or on a main COA document (such as BIMCO’s VOLCOA form) supplemented by separate voyage charter parties relating to each voyage made under the COA.

iv) may be used by an operator who has no fleet of his own and who charters ships in for each voyage.

v) is the type of contract on which a very large ore carrier or Capesize bulk carrier is likely to be employed .

In summary :

• the owners agree to transport an agreed volume of cargo over a specified period;

• the charterers nominate cargoes and loading dates;

• the owners nominate suitable vessels.

* Note: The term “contract of affreightment” is also commonly used in maritime law textbooks for what (in view of the modern usage of COAs as described above) might be better termed a “contract of carriage by sea”.

Summarized below seagoing cargo ship various employment guide:
  1. Charty party forms

  2. defines the obligations, rights and liabilities of the shipowner and charterer. Recognised standard form (e.g. GENCON, BALTIME, NYPE)
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    Nature of a time charter
    The charterers agree to hire from the shipowner a named vessel, of specified technical characteristics, for an agreed period of time, for the charterer’s purposes subject to agreed restrictions.
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  3. Voyage charter advantages

  4. contract for the carriage by a named vessel of a specified quantity of cargo between named ports or places.
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  5. Terms of Bareboat charter and lease arrangement

  6. The vessel owners put the vessel (without any crew) at the complete disposal of the charterers and pay the capital costs, but (usually) no other costs.
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  7. Seaworthiness of vessel

  8. A vessel must be fit to encounter the “ordinary perils of the sea” (e.g. bad weather) and other incidental risks to which she will be exposed on the voyage..
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  9. International trade terms (INCOTERMS) in sea transportation

  10. INCOTERMS is a set of rules, published by the International Chamber of Commerce, for the uniform interpretation of the most commonly used trade terms used in international trade contracts.
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  11. Money transfer procedure in sea transport

  12. Money transfer system commonly used in overseas trade to enable sellers to obtain early payment, i.e. soon after shipment of the goods.
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  13. Contract between cargo seller and buyer

  14. The contract of sale between the seller and the buyer of the goods is separate from the contract of carriage which one party or the other, or a third party (such as a freight forwarder), will make with the carrier .
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  15. Parties involved in sea transportation of goods

  16. Forming links in the transport chain- Sea carrier, Freight forwarder, shipper, consignee,agent & banks
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  17. Carriage of goods by sea act 1992 (COGSA 92)

  18. Section 3 of COGSA 92 lays down guidelines establishing when liabilities under a bill of lading, sea waybill or ship’s delivery order will be transferred to a party who is not an original party to the contract of carriage (i.e. an endorsee or transferee). The party who takes or demands delivery of the goods to which a bill of lading, sea waybill or ship’s delivery order relate becomes subject to the same liabilities as the original shipper..
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  19. Laytime interpretation rules

  20. Rules, which were issued jointly by BIMCO, CMI, FONASBA and INTERCARGO, replace the Charter party Laytime Definitions 1980.
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  21. CIF ( Cost, Insurance and Freight ) used in international trade terms (INCOTERMS)

  22. “CIF” means Cost, Insurance and Freight (paid to a named place), e.g. CIF London.- is a contract based on the discharge port
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  23. FOB ( free on board ) used in international trade terms (INCOTERMS)

  24. “FOB” means Free On Board (named port of shipment), e.g. “FOB Newcastle NSW”. It is one of the most commonly used term (INCOTERMS) in sales contracts involving sea transportation of goods.
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  25. Ships employment baltic exchange

  26. Baltic Exchange members undertake to abide by a strict code of business practice, enshrined in the famous Baltic motto “Our Word Our Bond”.
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  27. Ships charter market place

  28. Most ships employed in the charter markets are dry bulk carriers, tankers, combination carriers (e.g. OBOs), or reefer vessels, although there is also a charter market for container ships and for vessels of various special purpose types
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  29. Common Chartering abbreviations

  30. Many terms commonly used by shipbrokers and others involved in ship chartering, mainly to save time and effort in communications. Shipmasters may come across many of the acronyms and abbreviations in documents relating to charters, e.g. in telexed voyage orders and market reports..
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  31. Tanker freight worldscale

  32. "Worldscale" is the code name for the “New Worldwide Tanker Nominal Freight Scale”, published by the Worldscale Association (London) Limited and the Worldscale Association (NYC) Inc
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