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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 :

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.
    More .....

  3. Voyage charter advantages

  4. contract for the carriage by a named vessel of a specified quantity of cargo between named ports or places.
    More .....

  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..
    More .....

  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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