Clauses of Time Charterparty

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Clauses of Time Charterparty

It is important that all aspects of the charterparty are understood. Certain items have a higher importance.

Shipowner - entitled to transfer the ownership of the vessel during the period of the charterparty. Usually with charterer’s consent.

Responsibility and exemption - "by want of due diligence" any claim against the shipowner for delay or loss, damage to goods or loss of freight by the charterer has to be substantiated by proof that the shipowner was negligent and did not take reasonable steps to mitigate such loss or delay.

Period of Hire - this is at the charterer's option and can occasionally be extended at the charterer's option.

Time of Delivery - the implication that the ship will proceed forthwith or without delay, to the port of loading, is not a condition. If the shipowner breaks this term of the contract, and the vessel delays before proceeding to the port of loading, the charterer is entitled to damages. Where the charter does expressly provide for the time when the charterers have to give directions for the available berth to which the vessel is to go to make her delivery, the necessary inference is that directions have to be given on arrival at the port or before arrival.

Present position - At the date of the charterparty's making or signing the position of the ship is a condition of the charterparty (Behn v. Burness 1863).

Cancelling date - The fixing of a cancelling date in a charterparty merely gives warning to the shipowner that non-arrival by that date may go to the root of the contract, so as to entitle the charterer to rescind the agreement. It does not relieve the shipowner of his primary obligation to proceed with all convenient speed to the port of loading.

Re-delivery place or range - is important to the shipowner, he will not want the vessel delayed or in a condition that requires time wasting repairs. The location for re-delivery is usually decided with a view to subsequent charters, and a breach of such a clause entitles the shipowner to claim damages.

State on re-delivery -Where damage, in excess of " fair wear and tear", has been inflicted on the ship, the owner is entitled damages, though he cannot insist on the charterer effecting the repairs before re-delivery, he can claim for loss of profit while she is being repaired.

Final Voyage -A charterer will be in breach if he sends the ship on a voyage which he does not reasonably expect to finish after the stated period. If the charterer sends the vessel on her last voyage at a time when there is no expectation that she will be re- delivered within a reasonable time of the end of the period of the charterparty, and she is re-delivered late, he is guilty of a breach of contract. Where the charter period is for a stated time e.g. 3 or 6 months, without an expressed additional allowance, the court may imply a reasonable allowance because of the impossibility of calculating exactly when a voyage will end. If the charterer sends the vessel on a voyage which it is reasonably expected will be completed by the end of the charter period, the shipowner must obey the directions. If she is delayed by causes for which neither party is responsible, hire is payable at the charter rate until re-delivery, even though the market rate may have gone up or down.

Cancelling - The cancelling clause exists so that the charterer has the option, under the terms of the contract, to repudiate in certain circumstances. A cancelling clause is a forfeiture clause and "so not to be applied lightly". The shipowner is under a duty to send the vessel to the port of loading even though it is impossible for her to get there by the cancelling date, If he does not do so, the charterer can sue for any damage which may have resulted. Expenses incurred due to non-arrival of the vessel can be claimed by the charterer from the shipowner. There is no contractual right to rescind a charterparty unless and until the date specified in the clause has been reached.

Nationality of a vessel - is a warranty and a change in circumstances which result in the registered nationality of the ship altering is a breach of contract for which the charterers may obtain damages.

Class - is a condition at the time of making the charter, a breach of which entitles the charterer to treat the contract as discharged. The loss of class during the period of the charter may have been caused by unseaworthiness, or some other breach of the shipowner's obligation, for which the charterer would have a remedy.

Bunker Fuel - used by the vessel must comply with the owner’s requirements, subject to costs being borne by the owner for more expensive grades. If the price of bunkers is not mentioned, it is implied that both parties must pay a reasonable price, i.e. the market price.

Permanent bunkers - all ships carrying a minimum amount bunkers as a safety precaution, this small quantity of oil will be carried on board at all times and will thus reduce the cargo carrying capacity of the vessel.

Bunkers on re-delivery - this enables the shipowner to keep within the prescribed safety limits with regard to bunkers on board at all times.

Gross/Net Tonnage - The volume of the total under deck space and the volume of the cargo carrying capacity. Capacity for a particular cargo and registered tonnage are conditions of the contract where the charterer has undertaken to load a full cargo. Otherwise it is not and may not even amount to a warranty if it is irrelevant.

Speed - capability in knots and the consumption of fuel. A statement in the charterparty of the ship's speed amounts only to a promise that the ship, at the time of making the charter, is capable of the stated speed and not that she will continue to be capable of it throughout the charterparty.

Condition of Vessel - there is in time charters, an implied undertaking of seaworthiness at the beginning of the time of the period of hire. Unseaworthiness by itself does not entitle the charterer to repudiate the contract. He can only do so if the delay in putting the defects right is such as to amount to a frustration of the charterparty.

Cargo exclusion - disallows the charterer from carrying all types of commodities, though it will normally exclude only dangerous and noxious substances. The charterers must provide for shipment, cargo in the condition and of the kind usually shipped at the port in question or cargo of a kind described in the charterparty. If the charterparty merely describes the cargo to be carried as "lawful merchandise", the charterers must provide cargo which may be lawfully shipped from the port of loading and lawfully carried to and discharged at the port ordered by the charterers.

Trade limits - can be specified in a time charter, and when they are, there must be a clear definition as to the area covered. The charterparty may state that the charterer has the privilege of breaching the trading limits by paying an extra insurance premium.

Load/Discharge - all ports attended during the charter are to be good and safe, where the vessel can "safely lie always afloat" (unless otherwise provided in the charterparty), this phrase is concerned with the marine characteristics of the place and is not to be confused with a "safe port".

Safe Port: a port will not be safe unless, in the relevant period of time, the particular ship can reach it, use it, and return from it without, in the absence of some abnormal occurrence, being exposed to damage which cannot be avoided by good navigation and seamanship.

Charter Hire - is normally agreed on a contractual basis, where no sum has been agreed, the hire must be equitable, or sometimes the rate is calculated according to a standard scale like the International Tanker Nominal Freight Scale. A charterer may set off certain claims against hire, even where the contract does not expressly give him the right to do so. If the shipowner wrongly and in breach of contract deprives the charterer for a time of the use of the vessel, the charterer can deduct a sum equivalent to the hire for the time so lost. Hire is only interrupted by the occurrence of some event which takes the ship off hire under a charter clause or the contract is frustrated.

Hire payment - The charterer is liable to pay hire in advance. The charterparty will state the currency to be used in accounting e.g. Sterling or US Dollars.

Off-hire clause - since it operates for the benefit of the charterer, will be construed in favour of the shipowner if it's meaning is not clear. The clause provides that in the event of time being lost in circumstances which prevent the working of the vessel for more than 24 hours, payment of hire shall cease until she is again efficient to resume service. If the time lost exceeds 24 hours, hire is not payable in respect of the first 24 hours. If a vessel breaks down and puts into a port for repairs, she is off hire, but hire will be payable again when she is fit to sail again from that place, and not from the time she reaches the location of her break down. Hire recommences as soon as the ship is able to resume service though she is not then in the same geographical position and though in effect the charterer has to pay twice for the same part of the voyage.

Place of Arbitration - in most charterparties is affected through London or New York, with organizations like the London Maritime Arbitrators Association (LMAA) or law courts like the Commercial Division of the High Court of Justice.

Lien- the right to hold property until a debt is paid off.

Salvage - the act of, and the money paid for, saving property of a ship and/or cargo, it is a contractual agreement and in time charters the award is normally paid equally to the shipowner and the charterer.

Additional Clauses - The additional clauses are agreed by the parties to the contract and are normally appended as type written sheets to the signed charterparty.

Voyage Charterparty

Contract for the use of the ship, on a voyage or series of voyages, in carrying goods to be shipped by the charterer, or in his name. The charterer agreeing to pay for the ship either in proportion to the goods carried, or a lump sum for the voyage, or in proportion to the time occupied. Contracts similar to i), but by which liberty is given to the charterer to use the ship for the purpose of taking goods of other shippers, and to require the master to give bills of lading for goods so shipped. A company needs a ship for a very limited period to carry a one-off large amount of cargo between two specific areas. In this case their need is satisfied by a voyage charter from a port of loading to a port of discharge. The shipowner retains full control and has full liability for his ship.

The voyage charterparty is a contract to carry specified goods on a defined voyage between two named ports. The remuneration of the shipowner from a voyage charterparty is Freight, calculated according to the quantity of cargo loaded or carried, or sometimes lump sum freight for the complete voyage. In the tanker trade freight is usually calculated on Worldscale. To assist the shipowner in maximizing the benefit of the voyage all voyage charterparties have certain attributes that are based on the need to:

· reduce time delays that are a result of the action or inaction of the charterer;

· charterer not being ready for the ship;

· loading/discharge difficulties or delays;

· tardiness in releasing a loaded ship;

· provide a secure place to load or discharge the ship;

· to provide the agreed amount of cargo.

Reducing Time Delays. The most obvious way of ensuring that time delays are kept to a minimum is to put a financial obligation on the charterer for avoidable idleness on his part. This must not be viewed as a penalty, more as "liquidated damages" (Hardley v. Baxendale 1854). So that both parties to the contract know what is expected of them regarding the duration of the voyage, the voyage charterparty will include detail provisions for:

· how much time is to be spent loading and unloading

· when the agreed time should begin to count

· who has responsibility for what delay

· the amount of money due to the shipowner for delay or the bonus payable to the charterer for finishing before the allotted time.

Variations of voyage charterparties can include:

1. Gross Form, where the shipowner pays all the cargo costs

2. Free In and Out, where the charterer pays loading and discharging expenses

3. Port, dock and berth charters determine the commencement of laytime and where the vessel can be considered an arrived ship.

The fundamental aspect of a voyage charterparty is that since the freight payable is not dependent on the duration of the voyage but on the amount of cargo carried, it is the shipowner not the charterer that bears the cost of any delays, and it is incumbent on the charterer to provide the agreed amount of cargo.

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