Contract between shipowner and charterer -Nature of a time charter

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Contract between shipowner and charterer -Nature of a time charter

Defining a time charter

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”).

i) 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. The hire period may be the duration of one voyage (a “trip charter”) or anything up to several years (“period charter”).

ii) The shipowner is responsible for vessel’s running expenses, i.e. manning, repairs and maintenance, stores, master’s and crew’s wages, hull and machinery insurance, etc. He operates the vessel technically, but not commercially. The owners bear no cargo-handling expenses and do not normally appoint stevedores.

iii) The charterers are responsible for the commercial employment of the vessel, bunker fuel purchase and insurance, port and canal dues (including pilotage, towage, linesmen, etc.), and all loading/stowing/trimming/discharging arrangements and costs. They direct the ship’s commercial operations, but not her daily running and maintenance. The charterers normally appoint stevedores and nominate agents.

iv) There may be an agreement between the parties for an extra payment (of perhaps several hundred US$) to be made by the charterers each time the ship’s crew sweep and/or wash down the holds of a dry cargo ship.

v) A Directions and Logs Clause requires the charterers to provide the master with all instructions and sailing directions, and the master and chief engineer to keep full and correct logs accessible to the charterers or their agents, so that they can monitor the vessel’s efficiency. Stevedoring damage notification forms, and log extracts (or “abstracts”) will usually be required to be sent to the charterers.

vi) Time charterers are normally allowed to fly their own house flag and, at their own expense, paint their own colours on the funnel and/or sides.

Cargo ships employment for time charter

A time charter party usually incorporates a clause defining the ship’s permitted employment or trade limits. Typically, the charterers may employ the vessel only in lawful trades, carrying lawful merchandise, using only “good and safe ports or berths” and sometimes safe anchorages where the vessel can lie always safely afloat within the agreed trading limits.

The charter party should always be checked for trade limits. Some countries, areas and ports (e.g. Israel, Persian/Arabian Gulf, Cuba, Vietnam, Kampuchea, North Korea, Lebanon, Angola, Namibia, Syria, Libya, Somalia, Ethiopia and South Africa) may be excluded from the permitted trading area. “Worldwide within Institute Warranty Limits” is a common term describing agreed trading areas (the “Institute” being the Institute of London Underwriters). “Institute Warranty Limits” is sometimes abbreviated as “IWLs”.

Guarantees may be required from owners that the vessel has not traded to certain countries since a particular date , since the discovery of a past visit to a particular country may cause problems for the ship in another country.

The charter party should be checked for cargo exclusions. At common law, the charterers are under an implied obligation not to load any dangerous cargoes, but most charter parties state that the charterers may load certain dangerous goods if various statutes and regulations (e.g. the IMDG Code) are complied with. Usually, the vessel will be allowed by her owner to carry any “lawful merchandise” with the exception of certain excluded commodities which may be injurious to the ship, e.g. “bulk asphalt, pitch or tar, livestock, logs, acids, scrap, sulphur, petroleum coke, explosives, fishmeal and nuclear materials”.

Lightening at sea is not normally allowed without permission of underwriters (since this is usually outside terms of the Hull and Machinery policy).

The charterers are responsible for the vessel’s commercial employment and direct her commercial operations, e.g. by giving instructions as to the sailing itinerary and cargo to be loaded.

The Master shall perform the voyages with due despatch, and shall render all customary assistance with the Vessel’s crew and equipment. The Master shall be conversant with the English language and (although appointed by the Owners) shall be under the orders and directions of the charterers as regards employment and agency but the Master shall have the right to reject charterers’ orders and/or directions as to the employment of the vessel where, in his sole discretion, he considers that these may compromise the safety and/or seaworthiness of the vessel, such right of the Master to be exercised in good faith; and the charterers shall perform all cargo handling, including but not limited to loading, stowing, trimming, lashing, securing, dunnaging, unlashing, discharging, and tallying, at their risk and expense, under the supervision of the Master.

Although he is a servant of the the owners, the master is always under the time charterer’s orders as far as the employment of the vessel and agency matters are concerned. He must accordingly prosecute the voyage with utmost despatch and give the charterers “customary and reasonable assistance” with the crew and ship’s equipment.

The charter party may require the owners to investigate complaints by the charterers regarding the master or officers, and replace them if requested.

Related articles :

Delivery conditions in a time charter agreement

Contract between shipowner and charterer -Nature of a time charter

Machinery system main info pages