From Ship Building Agreement to Ship Recycling Agreement – Part III

CHARTERPARTY

Once a ship is built and manned, the next aim would be to put it to commercial use. The main agreements which are involved are charterparty, and ship management agreement.

Charterparty is one of the most required contract in shipping business. Charterparty is nothing but a contract to rent/lease a vessel which is entered between a ship owner and charterer. There are standard forms of charterparty such as that of GENCON, BALTIME etc. These are made the basis for drafting the charterparty.

There are three types of charterparty: time charterparty, voyage charterparty and demise charter which is also known as bareboat charterparty.

Time Charterparty : In a time charterparty, a ship is chartered for a defined period of time. In this charterparty, the ship owner is responsible for the management of the ship.

Voyage Charterparty : In a voyage charterparty, the ship is chartered for a specific voyage. Like time charterparty, the ship owner is responsible for the management of the ship.

Demise Charterparty : In a demise charterparty, the owner only provides a “bare boat”. Hence, it is also known as bareboat charterparty. The vessel may be sub-chartered and the original charterer will be known as disponent owner. Section 11 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017.

Some of the common clauses are herebelow:

Port of Delivery – The charterparty will specify where and when the vessel will be delivered by the owner to the charterer.

Time of Delivery – The charterparty should state when the vessel will be delivered and from when the hire will be charged.

Time of Redelivery – The charterparty should also specify when and where the vessel, the charterer will redeliver the vessel. A delay in redelivery may incur hire as per the charterparty.

Owners to provide and charterers to provide – The charterparty must lay down the undertakings by both parties and clearly mention their responsibility. It should also mention the consequence of default.

Bunkers : The term in shipping is used to refer to fuel for the vessel. It is the Charterers’ obligation to buy bunkers required for the vessel. The charter should also return the vessel with the same amount of bunkers at the time of delivery. In the alternative, the charterer may buy the bunker remaining on board at delivery port and the owners’ may buy bunkers remaining on board at redelivery port.

Hire : Hire is the consideration paid for chartering the vessel. Owners can withdraw the vessel for default on hire payments. The hire payment can be suspended for duration for certain specified circumstances such as boiler cleaning.

Cargo Space : Agreement that entire carrying capacity of vessel will be at charterers’ disposal.

Directions and Logs : It is the resposibility of the Charter to to provide master with voyage instructions and information and the master and engineers’ responsibility to make voyage logs available to charterers and their agents.

Excluded Ports :Prohibition on charterers from ordering vessel to a place where disease is prevalent or which would be beyond the agreed limits of the Crew Agreement. This is specially relevant in charterparty that are entered during the pandemic.

Lien : The charterparty may state that the owner shall have lien on the cargo for non-payment of hire or any other dues.

Sublet : The charterparty will lay down what are the responsibilities of original charterer if the vessel is on sublet and whether the charter has right to sublet.

Cancelling : The charterparty may provide option to the charter to cancel the charterparty if the vessel is not delivered as agreed. This may be due to delay in delivery or due to seaworthiness of the vessel.

Commission : The charterparty may also mention obligation of parties to pay the charter broker.

These are some of the clauses in a charter party. The clauses in the charterparty will be different depending on the type of charterparty. Apart from these clauses, there will be clauses like boiler cleaning, master’s responsibility and obligations, boilerplate clauses etc.