Importance of Time and Cargo

When the shipowner and charterer have agreed on the freight rate to be paid, it becomes of paramount importance that the conditions in the charterparty regarding the times allowed for loading/discharging and the amount of cargo to be loaded, are strictly adhered to, otherwise the shipowner’s calculation will count for nothing and he would not be operating at an economic rate. To increase the charterer’s awareness of the importance of time and cargo, there are clauses included in the charterparty that state he agrees to pay (liquidated damages not penalties!) for any infringement

Demurrage: the cost per day of any extension of time above that agreed (laytime) for loading and discharging

Deadfreight: the cost applied to any shortage of cargo below the agreed figure

Despatch: repayment to shipper/charterer for releasing the ship quicker than contracted

Commencement of Laytime

It is the general rule that a vessel must be an "arrived ship" before laytime can begin to count. A voyage charterparty will normally provide for the beginning of laytime by the inclusion of an expressed clause stating when and how it should start. Whether or not such a clause is contained in a charterparty, the following requirements must be satisfied before laytime can begin to count:

· the ship must have reached the agreed destination;

· the ship must be ready to load or discharge;

· notice of readiness must be given, after arrival, to the charterers or their agents.

 

Laydays Laytime Demurrage

 

Responsibilities for delays during laytime. If disputes are to be avoided, the charterparty should indicate clearly the types of contingencies that are allowed to be written off as non-laytime. The most obvious problem will be over the definition of time. Laytime clauses use various expressions such as:

· day

· weather working day

· running day

In general, the expression "day", without further qualification, means continuous days. E.g.. Thursday to Tuesday would count as 5 days laytime (NOT LAYDAYS) on the basis of continuous days. Where there is an established custom of the port not to work Sundays, laytime will be interrupted and a Sunday would not count towards laytime. In judgement on the case of Cochran v. Retburg it was stated that if the case was decided on the legal interpretation of the clauses in isolation, the expression "days" would mean "running days" and hence include Sundays and holidays. The usage of the words in the clause was admitted in order to establish their meaning, and the term "days" was held to mean "working days", and the shipowner could not claim for the period the port's custom house was off duty and on holiday. Running hours or "running days" - is used to denote consecutive hours, by day and night, both during and out of normal working hours, or consecutive days of 24 hours (Nielson & Co v. Wait, James & Co 1885), that is days which follow one immediately after the other (Charterparty Definitions 1980). Sundays and Holidays Excepted (S&HE) - generally charterparties provide that these days do not count towards laytime, and the effect is that even if work is done on these days by arrangement, they do not count (Nelson v. Nelson 1908). Except where there is an express condition that they do count.

After laytime has begun, there may be bad weather which interrupts or prevents work, and the effect of bad weather then depends on the wording of the laytime clause, which may refer to:

· weather working days;

· weather permitting.

Weather permitting or "weather working day" is a working day that is not unavailable to work because of weather that is a day on which the weather permits the relevant work to be done, where the weather does prevent work from being carried out, that time does not count towards laytime. The calculation of laytime must take into account the type of laytime clause which applies, to decide whether a day should count as a complete day for laytime or whether the part of the 24 hours that has been affected by the weather should be omitted from the total. Questions over the responsibilities of each party to the contract over delays must be found in the charterparty. Clauses included in the text will give reference to specific instances of liability:

· Loading hold-ups due to machinery break downs could be for the ship's account (and not count towards laytime) if it is the fault of the ship's gear. Or it could count as laytime if the charterer is providing the equipment.

· Strikes in a port can be excluded from laytime calculations, whereas, strikes only affecting the ship in question could be included in the total laytime.

Demurrage. When the agreed time for loading or discharging, with allowances for weather, holidays, etc., has been used, the shipowner should be able to sail or, if discharging, is due his ship back for further employment. However, this will not always be possible because it is probable that the cargo has not all been loaded or, at the discharge port, there may still be cargo in its hatches waiting for off-loading. Therefore the shipowner should be able to obtain payment for the delay of his vessel, and conversely the charterer should be rewarded for returning the vessel to the owner before the prescribed period has ended.

The agreed additional payments for the delay are called "demurrage" and they are paid by the charterer to the shipowner on a day rate basis, with pro rata payment for parts of the day. It is the money payable to the owner for delay, for which the owner is not responsible, in loading and/or discharging after the laytime has expired.

A very important point regarding demurrage is that, when a charterer has used the laytime due for loading/ discharging all time counts from then on towards the damages, with no exceptions as to weather, Sundays, Holidays or whatever.

Despatch is the money payable by the owner of the ship to the charterer if the ship completes loading or discharging before the laytime has expired. This bonus payments is for not using all the allotted laytime. It is paid by the shipowner to the charterer as per the rates included in the charterparty. Despatch can be paid for either:

· all time saved the time saved to the ship from completion of loading/discharging to the expiring of the laytime including periods excepted from laytime.

· all laytime saved the time saved to the ship from completion of loading/discharging to the expiring of the laytime excluding any notice time and periods excepted from laytime.

(Based on: Manual on Commercial Aspects of Shipping)