Cargo ships delivery conditions in a time charter agreement

Cargo ships delivery conditions in a time charter agreement

Time charter employment

A time charter - is a contract for the hire of a named vessel for a specified period of time. - may be thought of as equivalent to the hire of a chauffeur-driven car (the ship’s crew being “the chauffeur”).

Delivery conditions

A time-chartered vessel goes “on hire” when she is delivered to the charterers at the agreed place and time, is fully at the charterer’s disposal and is in a fit condition for the employment contemplated.

Acceptance of delivery may be contingent on the passing of a condition survey carried out by the charterer’s surveyors, particularly where the charterers are an oil company and the vessel is over a certain age. In addition, in almost every case, an on-hire survey or delivery survey will be required.

Time of delivery

Delivery will either be “spot” (i.e. immediate) or between stated laydays for presentation of the vessel. If the vessel is not presented by the final layday (i.e. the “cancelling date”), the charterers have the option of cancelling the charter.

If the vessel cannot be delivered by the cancelling date, the charterers may be required by the charter party terms to declare within a stated period after receiving notice of the delay whether they will cancel or take delivery.

When the vessel is delayed on a positioning/delivery voyage, the master should adopt the same procedure as in similar circumstances on a preliminary voyage under a voyage charter (see H06f.1), i.e. he should continue with all despatch to the agreed delivery place, checking the charter party for a Cancelling Clause or any instructions and keeping the charterers and the owners informed.

Place of delivery

One of a number of types of delivery arrangement may be agreed in a time charter party:

• The ship may be delivered at the final discharge port under her previous employment. Unless she also loads at that port, she may have to make a ballast passage to a loading port; the ballast passage costs would be for the time charterer’s account.

• Even where the vessel has already left her final discharge port under her previous employment, the parties may agree to commence the hire retrospectively at that port.

• The vessel may be delivered on arrival at a loading port, the owners having paid the costs of any ballast passage to that port. (In this case they would ensure that the rate of hire compensated them for those costs.)

• The hire may commence at the time when the vessel passes a particular geographic position during her passage between the final discharge port under the previous employment and the first loading port under the new time charter, or at some particular time during that voyage, such as 72 hours before arrival at the loading port. This is a compromise between other arrangements.

• The vessel may deliver at a loading port following a ballast voyage, the costs of which are paid by the charterers to the owners as a “ballast bonus”.

Delivery will be made either when the ship is in a named geographical location (e.g. “passing Cape Passero” or “passing The Skaw”) or at a specified event (e.g. “taking inbound pilot New York” or “t.i.p. New York”, or “dropping outward pilot Hong Kong” or “d.o.p. Hong Kong”). Time charters often commence with a ballast voyage to a loading port, so that “dropping outward pilot......” at the last discharging port is frequently agreed as the place for delivery.

Bunkers on delivery

A Bunker Clause will usually require a certain quantity of fuel to be on board at delivery, with approximately the same quantity to be on board at redelivery, and in any case enough to reach the next bunkering port.
The charter party will provide for cash settlement of the balance, so that in effect the charterers buy all bunkers remaining on board at delivery from the owners and sells bunkers r.o.b. at redelivery back to the owners.

On-hire survey and Delivery Certificate

There will usually be an agreement that there will be an on-hire survey or delivery survey to establish:

• bunkers remaining on board (r.o.b.), in order to determine the quantity the charterers will have to pay the owners for;
• the general condition of the vessel; and
• that tanks or holds are fit for the carriage of the contemplated cargoes.

Holds of a dry cargo vessel must be dry and swept clean, etc., and tanks for oil or chemicals must pass survey and be certified fit.
The surveyor will note any existing damage in holds/tanks, etc.
The on-hire surveyis usually to be carried out by jointly-approved surveyors, paid for 50/50 by the owners and the charterer. Time spent on the survey is normally at the owners’ risk, i.e. the vessel is not on-hire until passing of the survey.
A Delivery Certificate should be issued by the surveyor to confirm the date and time of hand-over, bunkers r.o.b. (and perhaps boiler water r.o.b.), and the condition of holds or tanks. The certificate should be attached to the survey report and is a vital document for the assessment of hire payments due and the commencement of various charterer’s liabilities.
The on-hire survey should not be confused with the condition survey that may be required by a prospective charterer, particularly where this is an oil company or in the case of older tonnage.

Redelivery conditions

A time-chartered vessel goes “off hire” when she is redelivered to her owner. A Redelivery Clause will normally be found in a time charter party.

Under most time charter parties the vessel must be in the same good order at redelivery as when delivered (fair wear and tear excepted). An off-hire survey is required to determine the extent of any damage done during the period of hire. The charterers will normally be liable for the cost of repairs.

The vessel may be redelivered “clean” or “dirty”. If the charterers are given the option of redelivering the vessel “dirty”, a sum in compensation to the owners will be provided for in the charter party.

Time of redelivery

It may be agreed that redelivery will be between certain stated hours, e.g. 0900-1800 (or 1400 on Saturday) - and not on a Sunday or holiday. The charterers may be required to give the owners not less than 10 days notice.

A time charterer may want to delay redelivery when freight rates are high, while the owners may be content with a late redelivery when freight rates are low, if the hire negotiated was better than the equivalent freight rate.

Redelivery must be made between agreed dates and may occur at a named geographical location or at a specified event, as with delivery, or there may be an agreed range of ports or places, perhaps not north or south of a specified latitude, etc., within which the charterers may redeliver the vessel.

Place of redelivery

The place and time for redelivery of the ship to the owner will be specified in the charter party, and various types of arrangement may be made, as for delivery.

Redelivery at an ice-free port or place, or a port chosen from a range of ports within stated geographical limits, may be provided for.

Bunkers on redelivery

A Bunker Clause will usually require a certain quantity of fuel to be on board at delivery, with approximately the same quantity to be on board at redelivery, and in any case enough to reach the next bunkering port.
The charter party will provide for cash settlement of the balance, so that in effect the charterers buy all bunkers remaining on board at delivery from the owners and sells bunkers r.o.b. at redelivery back to the owners.

Off-hire survey and Redelivery Certificate

The charterers must normally re-deliver the vessel in the “same good order as when delivered to the charterer, fair wear and tear excepted......” In the event of redelivery not being in the same good order and condition, the charterers would be liable for the cost of repairs. If the charterers are given the option of redelivering the vessel “dirty”, a sum in compensation to the owners will be provided for.

The off-hire survey will normally be carried out by an independent surveyor to ascertain the extent of damage done during the charter, bunkers r.o.b., etc.. The Redelivery Clause may provide that repairs necessary to make the vessel seaworthy must be done immediately on redelivery, and any other repairs at a more convenient time, e.g. at the next drydocking.

The off-hire survey is similar in scope to the on-hire survey . Bunkers r.o.b. are measured so that they can be “bought back” by the owners. The condition of the vessel and her cargo spaces is examined for damage attributable to charterer’s operations. A Redelivery Certificate should be issued to the master.

It is normal to have on-hire and off-hire surveys carried out by independent surveyors to ascertain the extent of damage done during the charter. A Redelivery Clause may provide that repairs necessary to make the vessel seaworthy are done immediately on redelivery, and any other repairs at a more convenient time, e.g. at the next drydocking.

Related articles :

Delivery conditions in a time charter agreement

Cargo ships delivery conditions in a time charter agreement

Place of redelivery

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