SHIPBROKING

AND
CHARTERING
PRACTICE
By

LARS GORTON
Professor of Banking Law at the University of Lund
Professor Adjunct of International Business Law,
Stockholm School of Economics

PATRICK HILLENIUS
Shipbroker

ROLFIHRE
Advocate

ARNESANDEVARN
Shipping Consultant

SEVENTH EDITION

informa
LONDON
2009

CONTENTS

PAGE

Preface
Introduction
List of Figures
Bibliography

v
vii
xix
xxi

CHAPTER 1. THE FREIGHT MARKET

The dry cargo market
The bulk and 'tweendecker market
The container market
The ro/ro market
The liner market
The small ship market
Special markets
Heavy-lift carriers
Barges and pontoons
Tugs
The tanker market
The "combos"
The reefer market
The car carrier market
The passenger market
The sale and purchase market
Freight derivatives

CHAPTER 2. THE STATE OF THE MARKET

1
2
2
4
5
6
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10
10
12
13
13
14
17

CHAPTER 3. SHIPOWNING CONDITIONS AND MARKET ACTIVITIES 23

Materials administration in shipping

26

CHAPTER 4. INFORMATION CHANNELS

29

Information network and exchange

Order
Positions
Market reports
Freight negotiations

29
29
31
32
32

xii

CONTENTS

General information
Information centres
The Baltic Exchange
Institute of Chartered Shipbrokers
BIMCO
Information network
Information coverage
Means of communication
The time factor
.J he role of the broker and the agent
Shipbrokers
Sale and purchase broker
Port agents
Liner agents
Brokers and agents connected with owners
Brokerage
Insurance for intermediaries

33
33
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37
39
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47

CHAPTER 5. MARKETING

49

Attitudes in negotiation
Marketing and relation to the customer
Organization of a shipping office

49
50
54

CHAPTER 6. SALES CONTRACT, CARRIAGE AND BILL OF LADING

57

Sales contract, financing, carriage

The sales contract is the basic agreement in the export transaction
Incoterms
"The sea transport chain"
Risk, cost and liability distribution between the different parties
The Incoterms 2000
EXW (ex works)
FCA (free carriernamed point)
.
FAS (free alongside ship)
FOB (free on board)
CFR (cost and freight)
CIF (cost, insurance and freight)
CPT (freight or carriage paid tonamed place)
CIP (freight or carriage and insurance paid tonamed place)
DAF (delivered at frontier)
DES (delivered ex ship)
DEQ (delivered ex quay)
DDU (delivered duty unpaid) and DDP (delivered duty paid)
Certain summing up comments
Documentary credit
How the documentary credit works
The documents
The bill of lading
The bill of lading as a document of title
"Clean" bills of lading

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CONTENTS
Documentation in modern transportation
The new infrastructure
The electronic document
Summing up of the role of transport documents and multimodal transport
Relationship between carriage of goods by sea and other means of transport
Transport documents
The function of the bill of lading as evidence for the receipt of the goods
The bill of lading as evidence for the quantity and condition of the
goods
The bill of lading as proof of delivery of the goods in conformity with the
** contract of sale
. '
Mandatory content of a bill of lading
"Weight unknown" and "said to contain" clauses
Importance of the receipt function for the consignee
The bill of lading as evidence of the contract of carriage with the carrier
Bankability of transport documents
Issues regarding the interfaces between the laws of carriage and sales
The carrier's liability
Liability for cargo under charterparties
Carrier liability Conventions
The compulsory nature of the liability rules
The scope of application of the Conventions
The liability system
Cargo claims and time limits
Limitation of liability
.
Shipowners' liability as regards inspection and description of the goods
Some basic features of the Hamburg Rules
The date of the bill of lading
Substitute documents
Liability against third party
Cargo insurance and P&I
UCP and the bill of lading

xiii
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97

CHAPTER 7. CHARTER FORMS

101

General remarks about chartering

Liner shipping and tramp shipping
Chartering documents
The charterparty
Different types of chartering
Voyage charter
Consecutive voyages
,
Time charter
Bareboat charter
Quantity contracts
Space (slot) charter
Management agreements
Cost elements in chartering
"Charter chains"

101
102
104
105
107
111
114
115
118
119
120
121
124
126

'

CHAPTER 8. FREIGHT CALCULATIONS

129

Voyage calculation
Income

130
130

xiv

CONTENTS

\
>
!

The ship's name

Period of time
Intended voyage
Commodity and stowage factor
Cargo quantity
'Costs
Notations
Calculations
Summing up and conclusions
Special calculations
"* Particular factors in connection with consecutive voyages and marginal calcu.. . lations
* Liner calculations
Reefer calculations
Calculation and time charter
Tanker calculations
Reporting

131
131
131
131
134
135
145
145
146
148
148
148
149
149
150
151

CHAPTER 9. CHARTERING ROUTINES

The period of investigation
Voyage charter
Time charter
Liner booking
.
The reaction of the shipowner
r ,;
The period of negotiation
Main terms
Details
.
Constructing the document
The period of follow-up
Brokers' obligations
Special chartering routines
Sale/purchase routines
Sale/purchase events and market practices
Some routines in negotiations
Sale/purchase with employment
Bareboat charter with purchase option
Hire-purchase agreement
Sale with charter-back

157
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159
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160
161
161
168
169
170
170
171
172
172
173
174
174
175
175

CHAPTER 10. GENERAL LEGAL POINTS OF VIEW

177

Some general remarks on contract law

The parties
Maritime law and legislation
Court and arbitration proceedings
Arbitration
Arbitration or court procedure
Evidence
Construction and interpretation of charter agreements
The design of the charterparty
The offer and the making of the contract

177
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183
184
184
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185

'

CONTENTS

xv

"Subject" problems
Problems of interpretation
i
CHAPTER 11. COMMON CLAUSES AND CONCEPTS

186
191

Preamble
The parties to the contract
The identity
Substitution of owner or charterer
The^essel
Nomination, identity and substitution
Vessel's trading limits
The concept of seaworthiness
Lay/Can^
"Lay""
"Can"
The war clause,
War cancellation clauses
War risk clauses
War clauses in voyage charters and time charters
Effect of cost variations on the contractual relationship
Currency clauses
Escalation clauses
Other clauses dealing with change of costs
The arbitration clause
,:
Time limits
Exception clauses
Signing of the agreement
Maritime liens
Arrest of vessels
General average
Collision
Towage and salvage
Towage
Salvage
.
BIMCO standard ISM clause

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220

CHAPTER 12. THE VOYAGE CHARTERPARTY

223

The vessel
'
Description of the vessel
Specification of cargo capacity
The voyage
Nomination of portsrotation
Safe port, safe berth, always afloat, etc.
The near clause
The ice clause
The sea voyage
Deviation
The cargo
Type and specification
Cargo quantity

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227
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195

CONTENTS
The freight
Definition
Fixing of the freight
When is the freight earned and payable? Freight risk
Deadfreight
Payment of freight
Brokerage
Security for payment of freight
Loading and discharging
-r Allocation of costs
Securing and lashing of cargo
Laytime
Arrived ship
Notices, notice time and readiness
Time allowed
Fixed time
Time noKfixed
Reversible time
Crude oil washing (COW) and disposal of residues
Time counting and exceptions
Once on demurrage, always on demurrage
Demurrage and damages for detention
Payment of demurrage
Despatch money
Influence of other clausesseveral charterer's
Routines and allocation of costs
ETA notices
Allocation of costs
Harbour dues
Freight taxes
. Strike clauses
Agents
Cesser and lien
Is the cesser clause justified and valid?
Exercising of lien
Collecting by owners from receivers
Cargo liability
Owners' liability for cargo when both a voyage charterparty and a bill of
lading are involved
Liability as against cargo owners
Cargo retention clauses
Redress
Damage to the vessel

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252
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253
253

CHAPTER 13. THE TIME CHARTERPARTY

255

The vessel
Description of the vessel
Cargo capacity
Speed and bunker consumption
Maintenance

255
255
258
258
261

CONTENTS
The trade
Geographical limits
Non-geographical limits
Breaking of trading limits
Requirements of the trade
Trip time chartering
Ballast bopus
The cargo
Type and specification
Excluded cargo
The periodThe length of the period
Overlap/underlaplast voyage
Extension of the flat period due to off-hire periods during the charter
Delivery and redelivery
When shall the vessel be delivered?
Where shall the^essel be delivered?
In what condition" shall the vessel be delivered and redelivered?
Allocation of costs at delivery and redelivery
The hire and payment of hire
Fixing of the' hire
Payment
Late paymentowners' security
Deductions from hire
Payment of last instalment of hire
"
Off-hire
The off-hire claim
The grounds for off-hire
The threshold rule
The loss of time
The loss of money
Deduction of off-hire
Other obligations during off-hire periods
Insurance for loss of hire
/
Damages and pre-termination of the charter
Routines and allocation of costs
Directions and instructions to the vessel: log books
Master's position
Customary assistance: overtime
Allocation of costs
Information
Cargo liability
Liability to cargo owners
Allocation of liability between owners and charterers
Damage to the vessel
Damage caused by bad weather, collision and grounding
Damage caused by fuel oil
Damage caused by cargo
Other damage
Repair of damage
Protective clauses

xvii
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CONTENTS

CHAPTER 14. THE VOLUME CONTRACT OF AFFREIGHTMENT

293

Why a volume contract of affreightment?

Terminology
Charterer's point of view
Owner's point of view
Definition of contract of affreightment
Examples
Characteristics and definition of the contract of affreightment
Legislation
T h e . documents
Intercoa 80
Volcoa and Gencoa
General
The contract period
Some different ways to agree about the period
Commencement and termination of the period: borderline between part
periods ; V
Premature termination of the period and interruptions
The cargo
Type of cargo
Total quantity of cargo
Quantity fixed or not fixed: 1A or IB
Charterer's obligation to offer cargo: 2A or 2B
Owner's obligation to carry cargo: 3A or 3B
Overlifting and shortlifting
Final shipment
The vessels
The nomination of vessels
Interest is gradually concentrated on a named vessel
The programme and the nomination procedure
The individual clauses
Brokers

293
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297
298
298
298
299
299

CONCLUDING REMARKS

313

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306
311
311

APPENDICES
Appendix
Appendix
Appendix
Appendix
Appendix
Appendix
Appendix
Appendix
Appendix
Appendix
Appendix
Index

I. Gencon
II. Gentime
III. Conlinebill
IV. New York Produce Exchange Form 1993
V. Shelltime 4
VI. Shellvoy 5
VII. Letter of creditthe function of the bill of lading
VIII. Saleform 1993
IX. Voylayrules 1993
X. Baltic Code 2000
XI. FONASBA Time Charter Interpretation Code 2000

315
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329
331
347
361
373
375
383
387
391
395