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Cargo ships employment -Defining various charter party clauses

Demurrage clause

voyage charter party will usually incorporate clauses covering the basic provisions for loading and discharging costs .

If cargo operations onboard a general purpose dry cargo vessel are completed after expiry of the laytime, there is a breach of contract for which the charterers would be technically liable for damages. Owners and charterers will often find themselves in this situation, and to avoid the expense and unpleasantness of legal proceedings, liquidated damages, termed demurrage, normally become payable by the charterers to the owners for each day, or part of a day, that the ship is detained beyond the time of expiry of laytime.

Demurrage is defined in the Voyage Charter Party Laytime Interpretation Rules 1993 as “an agreed amount payable to the owners in respect of delay to the vessel beyond the laytime, for which the owners are not responsible. Demurrage shall not be subject to laytime exceptions.”

Demurrage will only be payable if provided for in a clause in the charter party, e.g. a Demurrage Clause or Demurrage/Despatch Money Clause. The demurrage rate, which is normally quoted in US Dollars, will normally be a daily rate that will at least cover the owners’ costs of keeping the ship in the port. Demurrage is normally paid per running day, i.e. without exclusion of any Sundays, holidays, or bad weather, strikes, etc., occurring during the detention period - hence the well-known expression “once on demurrage, always on demurrage”.

Some charter parties, e.g. GENCON, provide for a specified maximum number of days allowed on demurrage, which if exceeded will allow the shipowner to claim for his actual losses caused by the delay, i.e. damages for detention, which, if awarded by an arbitrator or court, will normally be more punitive than demurrage. An owner would have a claim for damages for detention where, for example, an extended delay in port on one charter prevented him from taking up a second charter on which his ship had been fixed on the assumption that she would be available.

Despatch clause

If cargo operations are completed before expiry of the laytime, a monetary reward, termed despatch or despatch money, is normally payable by the owners to the charterer.

Despatch money or despatch is defined as an agreed amount payable by the owners if the vessel completes loading or discharging before the laytime has expired.

Despatch will only be payable if provided for in a charter party clause (e.g. a Demurrage/Despatch Money Clause). Some charterparties stipulate “free dispatch”, meaning that the owners will not pay any dispatch money if time is saved.

The daily despatch rate, which is normally quoted in US Dollars, is traditionally half the agreed demurrage rate, the reasoning being that while early completion of cargo may give the owners an opportunity to complete the voyage early and fix the vessel on another charter, the charterers may also benefit from early berthing of the next due vessel.

If despatch is payable for all time saved, the laytime exclusions (for weather stoppages, etc.) are not taken into account after the completion of cargo. If despatch is payable only for working time saved, laytime exclusions must be taken into account.

Defining a deviation clause

Deviation clause is a standard protecting clause giving the vessel the liberty to call at any port or ports in any order, for any purpose, to sail with or without pilots, to tow and/or assist vessels in all situations, and also to deviate for the purpose of saving life and/or property.

A P&I Bunker Deviation Clause is a form of deviation clause recommended by the P&I clubs which allows the vessel to deviate off the contract route in order to load bunker fuel without breaching the contract. Bunkers are often cheapest at ports near oil producing centres, and the shipowners may wish to take advantage of the vessel’s proximity to such a port so as to have sufficient bunkers on board for a future voyage (e.g. the ballast voyage following discharge of the present cargo).

Cargo retention Clause

Tanker charter parties often contain a clause making the owner bear the risks of any difference between the cargo quantity stated in the bill of lading and the actual quantity discharged, where less.

Such a clause will usually provide that if any cargo remains onboard on completion of discharge, the charterer will have the right to deduct from freight an amount equal to the value of the cargo alleged to remain on board plus the amount of freight due on that quantity of cargo, provided that the volume of cargo remaining onboard is “pumpable” as determined by an independent surveyor. The meaning of the word “pumpable” has been the subject of numerous legal disputes.

Cesser and Lien Clause

Where the charterers are not the owners of the goods but is acting only as an agent or broker for the loading of another party’s goods, he will probably be anxious to ensure that his liability for the cargo ceases once it is loaded.

This is usually expressed in a Cesser Clause stating that “...charterers’ liability will cease on shipment of cargo and payment of freight, deadfreight and demurrage”, i.e. sums incurred at the loading port. The shipowner, however, will not want to find himself without a remedy for any breach of contract or damage done to his vessel after the charterer’s liability has ceased, and will want legal recourse against another party, who will usually be the receiver of the goods. Therefore, if a Cesser Clause is incorporated in the charter party, a Lien Clause will also be included giving the owners the right to retain possession of the goods at the discharge port until outstanding debts are paid.

The two clauses are often combined in a Cesser and Lien Clause. The relief given to the charterers from their obligations only operates to the extent that outstanding sums can be recovered at the discharge port. The owners must proceed against the receiver first, but the charterers will remain liable for sums which cannot be recovered from the receiver.

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