Chapter 5: Charter parties Flashcards
(41 cards)
What is a charterparty?
A charterparty is a legal contract between a shipowner and a charterer that sets out the terms under which a vessel is hired. There are three main types: a voyage charterparty, where the ship is hired for a specific trip and payment is made as freight; a time charterparty, where the ship is hired for a set period and paid for through daily hire; and a bareboat charterparty, where the charterer takes full control of the vessel, including crewing and operations.
The charterparty includes key details such as vessel information, cargo, route or duration, payment terms, and responsibilities for costs and operations. It ensures both parties understand their rights and obligations and helps avoid disputes during the vessel’s use.
Who covers costs in a time, voyage and bareboat charter?
Types of Charterparties:
Voyage Charterparty
The charterer hires the vessel for a specific voyage between ports.
Payment is made as freight for the cargo carried.
The shipowner is responsible for the operation and costs of the ship.
Example: Transporting 20,000 tons of coal from Australia to China.
Time Charterparty
The charterer hires the vessel for a set period of time.
Payment is made as hire, usually per day.
The charterer controls the vessel’s employment (where it goes) but the owner still manages the crew and operations.
Example: A container line charters a ship for 6 months to run a service between Europe and Africa.
Bareboat (or Demise) Charterparty
The charterer takes full control of the vessel, including crewing and management.
It is like leasing the ship with no strings attached.
Payment is also in the form of hire.
Example: A ship finance company leases a vessel to a shipping company long-term.
Why is it important that a port agent understands charterparties?
It is important that a port agent understands charterparties because these contracts directly affect how a vessel is operated, what services are required in port, and who is responsible for costs and decisions. For example, in a voyage charter, the shipowner covers most port expenses, while in a time charter, the charterer might bear these costs. The port agent needs to know this to correctly invoice the right party and coordinate services accordingly. Charterparty terms also dictate timing (such as laytime and demurrage), which impacts berth planning, loading operations, and reporting. If a vessel is delayed or arrives early, the agent’s ability to act appropriately and advise stakeholders depends on understanding these clauses. Misunderstanding charter terms could lead to disputes, financial loss, or operational inefficiencies.
What is a a real-life example of why a port agent must understand a charterparty?
A bulk carrier arrives at the Port of Santos, Brazil, under a voyage charterparty to load 30,000 metric tonnes of soybeans. The charterparty states that laytime starts at 1300 hours if Notice of Readiness (NOR) is given before noon, and specifies a laytime allowance of 5 days. Any time beyond that results in demurrage at USD 10,000 per day.
The port agent, upon the vessel’s arrival at 1130 hours on a Thursday, ensures the NOR is tendered immediately, triggering laytime to start at 1300 hours the same day. However, loading is delayed due to a dispute between the terminal and the cargo supplier. By the time the cargo operations are complete, the vessel has used 6 days of laytime.
Because the agent understood the charterparty terms, they:
- Ensured timely NOR submission to start the laytime as early as possible,
- Tracked laytime usage accurately,
- Advised the shipowner that 1 day of demurrage (USD 10,000) was due from the charterer,
- Included laytime calculations in the Statement of Facts to support the claim.
Had the agent misunderstood the laytime clause or delayed the NOR, the shipowner might have lost the right to claim demurrage — a significant financial loss.
What are the 2 main ways in which a ship can be chartered?
- Voyage Charter
In this arrangement, the ship is hired for a single voyage between specified ports to carry a specific cargo. The shipowner manages the vessel, including the crew, maintenance, and voyage expenses (except cargo handling costs, depending on the agreement). The charterer pays freight, usually based on the amount of cargo loaded.
Example: A grain trader charters a bulk carrier to transport 50,000 tonnes of wheat from Argentina to Egypt.
- Time Charter
In a time charter, the ship is hired for a specific period of time, not just for one voyage. The shipowner still manages the vessel and crew, but the charterer controls the commercial operations, like deciding the routes and cargo (within agreed limits). The charterer pays hire on a daily or monthly basis and usually covers fuel (bunkers) and port charges.
Example: An oil company time-charters a tanker for 6 months to transport petroleum products between various Mediterranean ports.
Why is a voyage charter of more interest to a port agent than a time charter, and when is a time charter relevant to the agent?
from a port agent’s perspective, the voyage charter is generally of more direct operational relevance than a time charter, because the agent is actively involved in each port call during that single voyage. They coordinate port services, monitor cargo operations, track laytime for demurrage or despatch, and manage communications between the shipowner, charterer, and terminal.
In contrast, during a time charter, the vessel may visit many ports over a long period, but the agent’s involvement is less charter-specific, as cargo and operational planning is largely handled by the charterer. However, the agent becomes important at two key points:
On-Hire Survey (Start of Charter):
The agent may assist in arranging the on-hire survey, which records the vessel’s condition and onboard bunkers when the charter begins. This protects both parties by establishing a baseline.
Off-Hire Survey (End of Charter):
At the charter’s end, the off-hire survey checks the vessel’s condition and remaining bunkers. The agent may coordinate this too, ensuring accuracy in reports that affect final settlements.
In summary:
Voyage charter = constant agent involvement in operations and charter terms.
Time charter = minimal involvement, except at the start and end for surveys and handover procedures.
What is a real-life-style example that illustrates the port agent’s role in both a voyage charter and the start/end of a time charter?
A bulk carrier named MV Baltic Wind arrives at the Port of Rotterdam under a voyage charter to load 30,000 MT of coal. The port agent is heavily involved — arranging pilotage, berthing, coordinating with stevedores, monitoring loading operations, ensuring that cargo documents are prepared, and keeping a close watch on laytime calculations to avoid demurrage claims.
Three months later, the same ship is time-chartered by a trading company for six months. When MV Baltic Wind arrives at Port of Gibraltar to commence the time charter, an on-hire survey is arranged — the port agent coordinates the surveyor’s boarding, provides local logistical support, and ensures that bunker quantities and vessel condition are properly recorded.
At the end of the charter, the vessel calls again at Gibraltar, and the off-hire survey is carried out to assess the ship’s condition and remaining fuel. The port agent again supports this process, facilitating the inspection and reporting.
This shows that in a voyage charter, the agent is actively involved in the cargo operation and charter obligations. But in a time charter, the agent’s role is focused on the on-hire and off-hire points, where accurate reporting is crucial for settlement and liability purposes.
At what stage is a port agent involved? do they know beforehand? when do they receive instructions?
A port agent typically becomes involved well before the vessel arrives at the port. Their role begins once they are appointed or nominated by the shipowner, charterer, or ship manager, as specified in the charter party or voyage instructions. This appointment is usually communicated through a Notice of Appointment or Port Call Instructions, which the agent receives days or even weeks in advance. The instructions include essential details such as the vessel’s ETA, cargo to be handled, special operational requirements, and the services needed during the port call.
Once appointed, the port agent enters the preparation stage, where they begin making all necessary arrangements for the vessel’s arrival and operation in port. This includes booking a berth, coordinating with port authorities, arranging pilotage and towage, and securing stevedores for cargo operations. If any surveys are needed — such as on-hire, off-hire, bunker, or draught surveys — the agent ensures they are scheduled and the relevant parties are notified. The agent also prepares all inward clearance documentation in advance to avoid delays on arrival.
During the vessel’s port stay, the agent enters the operational phase of their duties. They monitor cargo operations, maintain constant communication with the ship’s master, local authorities, and service providers, and respond to any issues or unexpected developments. The agent also tracks laytime (especially important for voyage charters) and ensures all reporting requirements are fulfilled.
Finally, as the vessel prepares to depart, the agent handles clearance formalities, ensures all required surveys (like off-hire or final draught surveys) are completed, and submits final reports and documentation. Their role is critical to ensuring that contractual obligations are met and that all parties — including the shipowner, charterer, and cargo interests — are kept informed and satisfied with the port call.
For example, if a vessel is beginning a time charter at Gibraltar, the port agent may be instructed two weeks in advance to arrange on-hire and bunker surveys, berth booking, and coordination with local surveyors. From that moment until departure, the agent acts as the central point of contact, ensuring the vessel is ready to begin the charter smoothly.
who are BIMCO and why do they create standard charterparties and what are some relevant examples
BIMCO (Baltic and International Maritime Council) is the world’s largest international shipping association, representing shipowners, operators, and managers. Founded in 1905, BIMCO aims to promote fair and efficient shipping by providing services such as creating standard charterparties. These standard contracts help shipowners and charterers agree on clear, consistent terms for different types of shipping agreements.
BIMCO creates standard charterparties to reduce ambiguity and ensure that both shipowners and charterers operate under a common set of agreed-upon terms. Standardizing these contracts helps avoid disputes and misunderstandings by clearly defining the rights, responsibilities, and liabilities of both parties involved. It also streamlines the negotiation process, saving time and resources for all stakeholders in the shipping industry.
The BIMCO Voyage Charterparty (GENCON):
One of the most widely used contracts for voyage charters, it is used for the transportation of bulk cargo. It sets out the obligations for loading, transporting, and unloading cargo, as well as specifying laytime, demurrage, and other important terms.
The BIMCO Time Charterparty (NYPE 1946):
This standard time charter agreement is one of the most popular in the market for time charters, where the vessel is leased for a specific period. The contract specifies the ship’s hire rate, the duration of the charter, and the responsibilities for maintenance, repairs, and operating costs.
The BIMCO Bareboat Charterparty (BMLA):
A bareboat charter involves leasing a vessel without crew, which allows the charterer to operate the ship independently. The BMLA contract outlines the terms under which the vessel is provided to the charterer for a specified period.
The BIMCO COA (Contract of Affreightment):
A COA is used for longer-term agreements that cover the transportation of multiple cargo shipments. It’s a flexible contract that provides a framework for transporting cargo over a series of voyages, ensuring long-term relationships between shipowners and charterers.
What should the port agent be able to recognise when looking at a voyage charterparty and for what will it be used?
When a port agent looks at a voyage charterparty, they should be able to recognize key details that help them understand the responsibilities, timelines, and operational requirements associated with the vessel’s port call. These include:
- Cargo Details: The type, quantity, and loading/unloading instructions for the cargo.
- Laytime and Demurrage: The agreed period for loading/unloading (laytime) and penalties (demurrage) for delays beyond this period.
- Port Instructions: Specific ports and terminals where loading and unloading will occur, and any special port requirements.
- Loading and Discharge Ports: Clear information on where the vessel is expected to load and discharge the cargo.
- Freight Rate: The payment terms for the transport of the cargo, including the rate and any additional costs.
- Notice of Readiness (NOR): When the ship can begin loading or unloading and when the laytime starts.
The port agent uses the voyage charterparty to:
- Coordinate port services such as berth booking, stevedoring, and customs clearance.
- Ensure the vessel’s operations are within the agreed laytime and avoid costly delays or demurrage.
- Communicate the vessel’s obligations and rights with local port authorities, terminal operators, and other service providers.
- Ensure compliance with the terms outlined in the charterparty during the vessel’s stay at the port.
In summary, the port agent uses the voyage charterparty to facilitate smooth operations, avoid delays, and ensure all contractual obligations are met during the vessel’s port visit.
Explain the loading place and cargo clause - why is it important to a port agent?
The Loading Place and Cargo Clause in a voyage charterparty is a critical element that specifies the exact location where cargo is to be loaded onto the vessel. This clause details the port, terminal, or specific berth where loading will take place, and it may also include additional specifications, such as the use of particular facilities or equipment. This information is important because it ensures that both the shipowner and the charterer have a clear understanding of where and how the cargo will be loaded, which helps to avoid misunderstandings and disputes during the loading process.
For the port agent, this clause is particularly important because it guides many of the logistical and operational aspects of the vessel’s port call. The port agent must coordinate with the terminal operators and port authorities to ensure the ship is directed to the correct berth or loading facility, as outlined in the charterparty. Additionally, if the clause specifies particular requirements, such as special handling equipment or conditions for cargo loading, the port agent needs to ensure that these are available and arranged in advance.
The Loading Place and Cargo Clause also influences the vessel’s schedule. If the clause stipulates a specific loading window, the port agent must work to ensure the vessel is at the right location during that time frame. Delays in loading or incorrect handling can lead to demurrage, which is costly for the shipowner or charterer. Furthermore, the port agent must confirm that the cargo complies with all local regulations and that the necessary paperwork, such as cargo manifests, is prepared and accurate.
How is NAABSA related to the loading place and cargo clause?
The NAABSA clause impacts how a port agent coordinates the vessel’s operations, particularly the loading or discharging of cargo. If the charterparty contains a NAABSA clause, the agent needs to ensure that the vessel can safely reach the designated berth or loading area, even if the location is not always afloat. For example, this could mean that the ship is moored on a sandbank or shallow area where it’s only accessible at certain times of day when the tide is high.
In this situation, the port agent must work closely with the port authorities and terminal operators to verify that the berth is accessible and that the ship will not face any difficulties or delays due to the location. Additionally, the port agent will need to monitor the tidal conditions and ensure that the vessel is safely aground as per the terms of the contract.
For the Loading Place and Cargo Clause, the agent will need to ensure that the ship is directed to the correct location specified in the charterparty, even if the location is subject to tidal variations. Understanding the NAABSA condition is crucial for the port agent to effectively manage the vessel’s arrival and operations, ensuring smooth loading or discharging without delay or damage to the vessel.
In summary, the NAABSA clause is important because it defines a specific type of berth condition in which the vessel is allowed to load or discharge cargo while aground but safely moored. The port agent’s role is to manage the logistics of this arrangement, ensuring that all conditions are met, and the vessel can safely perform the required operations without encountering issues related to tides or safety.
Explain the loading rates found in charter parties
In a charterparty, the loading rate refers to the speed or rate at which cargo is loaded onto a vessel. It is a crucial aspect of the agreement as it helps define how long the loading process will take and what costs or penalties may apply if the operation is delayed. The loading rate can be expressed in different terms depending on the type of cargo, the vessel, and the port. It is typically outlined in the charterparty under the laytime clause, which determines how much time the charterer has to load the cargo without incurring additional costs.
What are the types of loading rates?
Per Day Rate:
Per Hour Rate:
Weather Working Day (WWD)
Tonnage per Berth or Shift:
Explain the per day rate
This is one of the most common ways to specify loading rates in a charterparty. It is typically expressed in metric tonnes per day (e.g., 5,000 MT/day), which means the ship is expected to load a specific number of tonnes of cargo each day. If the loading rate is 5,000 MT/day, the ship should load 5,000 tonnes of cargo within a 24-hour period. If the loading is completed faster than the agreed rate, the charterer may earn despatch (a reward for early completion), but if the loading exceeds the allowed laytime, the charterer may be charged demurrage (a penalty for delay).
Example: A voyage charter may specify a loading rate of 5,000 MT/day, and if loading takes longer than expected, the shipowner may charge the charterer for demurrage.
Explain the per hour rate
In some cases, the loading rate may be specified in terms of tonnes per hour, rather than per day. This is less common but can be used for specific cargo types or operations that require more precise measurements.
Example: A charterparty might specify that 200 tonnes should be loaded every hour, which could apply to a bulk cargo operation in a high-capacity terminal.
Explain the weather working day (WWD)
Sometimes, loading rates are expressed in weather working days. This means the ship will only load during favorable weather conditions (e.g., during the day when the weather allows for safe operation). This can lead to variations in the total number of days required for loading, depending on weather conditions.
Example: If the loading rate is set at 5,000 MT per weather working day, the ship may only load cargo during the hours when the weather permits, and any time lost due to bad weather would not count as part of the agreed laytime.
Explain the tonnage per berth or shift rate
Some charterparties may specify loading rates in terms of the number of tonnes that can be loaded per berth or shift. This is commonly used for specialized cargoes or ports with certain constraints.
Example: A charterparty may specify that loading is to take place at a rate of 1,000 tonnes per shift, with the “shift” being a defined work period at the port.
Why are the loading rates important?
Laytime Calculation: The loading rate is a key factor in calculating the laytime—the total time allowed for loading the cargo without incurring extra charges. Laytime is usually agreed upon between the shipowner and the charterer, and the rate determines how much time will be required to complete loading.
Financial Implications: Loading rates directly affect the financial outcome of the voyage. If the cargo is loaded faster than the agreed rate, the charterer may benefit from despatch. On the other hand, if the cargo loading exceeds the agreed rate or takes longer than the allowed laytime, the charterer may face demurrage charges.
Port Efficiency: The loading rate can also reflect the efficiency of the port and cargo handling facilities. Ports with better infrastructure and technology can often load cargo at a faster rate, which benefits the charterer and reduces costs.
Disputes: Loading rates are a source of potential disputes between shipowners and charterers. Disagreements may arise over whether the agreed loading rate was met or whether any delays were the fault of the port, the shipowner, or the charterer.
Explain the term laydays
Laydays refer to the period within which a ship must load or discharge cargo as agreed in a charterparty. It usually starts once the vessel is ready to load or discharge, confirmed by the Notice of Readiness (NOR). Laydays are typically given as a range of dates (e.g., June 1st to June 5th). If loading or unloading is not completed within this period, the charterer may face demurrage charges (a penalty for delays) for extra time. For example, if a ship is ready on June 1st and the laydays end on June 5th, but loading finishes on June 7th, the charterer would have to pay demurrage for the two extra days. Laydays are essential for port agents to track and manage, ensuring operations are completed on time and avoiding penalties.
Explain the cancelling date
[Another term for the cancelling date is “latest arrival date” or “laycan” (laydays and cancelling date). The term “laycan” combines both the laydays (the range of dates the ship can load) and the cancelling date (the final date the vessel must arrive or be ready to load).]
The cancelling date in a charterparty is the latest date by which a vessel must be ready to load or discharge cargo. If the ship is not ready by this date, the charterer has the right to cancel the contract without penalty. The cancelling date is typically agreed upon in the charterparty and provides a final deadline for the vessel’s availability. For example, if the cancelling date is set for June 10th and the vessel is not ready by that date, the charterer can choose to cancel the agreement. This gives both parties clarity and security about the timing of the cargo operation.
What is the cost of loading and discharge clause?
The Cost of Loading and Discharge Clause in a charterparty specifies which party—the shipowner or the charterer—will bear the costs associated with loading and unloading the cargo at the port. This clause is important because loading and discharge operations incur various expenses, such as port charges, stevedoring fees, and the use of port facilities.
Why is the Cost of Loading and Discharge Clause important to the ship agent?
The Cost of Loading and Discharge Clause is important to the ship agent because it determines who is responsible for the costs of loading and unloading the cargo. This helps the agent plan and coordinate port services, such as stevedoring and port charges, based on whether the shipowner or charterer is responsible. It ensures the agent manages financial arrangements correctly, avoids disputes, and ensures smooth operations at the port. Knowing this clause allows the agent to handle payments, allocate resources, and communicate expectations clearly.
Why might a charterer need the shipowner to instruct the master to regularly give notice of expected arrival time at the load and discharge ports?
Charterers require shipowners to instruct the master to provide regular updates on the vessel’s expected arrival time (ETA) at loading and discharge ports to ensure smooth coordination of port logistics, including berth allocation, cargo handling, and labor arrangements. These notices help the charterer plan efficiently, avoid costly delays or demurrage, and fulfill contractual obligations stated in the charterparty. Timely ETA updates also allow adjustments for unforeseen delays such as weather or congestion, ensuring operational flexibility and minimizing disruptions to the supply chain.
