JND322 - Section 4 - Charter Parties

JND322 – Shipping Business and Law
4. Charter Parties
The Australian Maritime College
Semester 2 - 2023
4. Charter Parties
Contents:
▪ What is a Charter Party?
▪ Types of charter party
▪ Voyage charter
▪ Time charter
▪ Demise/Bareboat charter
▪ On/Off hire surveys

▪ Shipbrokers
▪ Common Clauses
▪ Laytime/Demurrage/Despatch/Dead freight
▪ Terms of Loading the cargo
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Parts of Sextant: Index Mirror
4. Charter Parties
Chartering:
▪ Chartering is a regular activity within the shipping industry. It is a term used to define
the process of renting a ship, through an agreement between the shipowner and a
renting party, known the charterer, and mostly intermediated by a third party, either
a freight forwarder or a shipbroker.
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4. Charter Parties
Chartering:
▪ In some cases, a charterer may own cargo and employ a shipbroker to find a suitable
ship to deliver the cargo for a certain agreed price, called freight rate. Freight rates in
such cases may be decided on a per-ton basis over a certain route or alternatively
may be expressed in terms of a total sum - normally in U.S. dollars - per day hire for
the agreed duration of the charter.
▪ A charterer can also be a party without a cargo, who takes a vessel on charter for a
specified period from the owner and then trades the ship to carry cargoes at a profit
above the hire rate, or even makes a profit in a rising market by re-letting the ship out
to other charterers.
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4. Charter Parties
What is a Charter Party?
▪ A charter party is the contract drawn out covering the terms and conditions of
employment of the ship, between the party who rents the ship (charterer) & the ship
owner (S/O)
▪ Depending on the type of ship and the type of charter, normally a standard contract
form called a charter party is used to record the exact rate, duration and terms agreed
between the parties.
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4. Charter Parties
What is a Charter Party?
▪ A Charter Party covers the use of the entire ship, rather than paying for the use of
some space within that ship
▪ There are time-tested standard forms of charter parties (many of them devised by
BIMCO) – that has withered many court rulings, and any potential ambiguity removed.
▪ The content of charter parties is often open to commercial negotiations.
▪ Master must have copy of the charter party – to comply with its conditions.
▪ Master’s duty for ensuring safety of ship comes first & then the duty to shipowner
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4. Charter Parties
Types of charter party
There are 4 basic types of charter party:
▪ A Bare Boat or Demise charter
▪ Time charter
▪ Voyage charter (Referred to as Tramping)

▪ Contract of Affreightment (COA)
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4. Charter Parties
▪ Demise (or bare-boat) charter – It’s like hiring a self-driven car for a week
▪ Time charter – It’s like hiring a car with a driver to go various places for a day
▪ Voyage charter – It’s like hiring a taxi for a defined trip
▪ Contract of Affreightment – It’s like hiring a car with a driver on a long-term basis, just for
picking you up from home and dropping off to office, on daily basis.
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4. Charter Parties
Employment of a Ship
Employment of the ship by the shipowner can take many forms:
➢ On a Liner Trade
➢ On a Voyage Charter
➢ On a Time Charter
➢ On a Demise Charter
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4. Charter Parties
Liner Trade Employment
▪ Normally this is done when there is a fleet of ships, regularly engaged in a particular trade.
▪ Remuneration: Freight earnings depends on the kind and quality of cargo.
▪ Expenses: All operational expenses are borne by the ship owner.
▪ The ship owner advertises sailing schedule which gives ship’s name, ETA, Ports, closing Dates, Sailing
to, ETD etc.
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4. Charter Parties
Voyage charter (Also referred to as Tramping)
▪ Ship is hired to carry the charterer's cargo between specified ports for one or more voyages
▪ Shipowner pays all costs and receives the freight (payment for carriage of cargo) at a rate per ton
▪ If the charterer fails to load full then he agrees to pay ‘dead freight’ for the balance space.
▪ Shipowner appoints the Master and Crew & pays their costs, maintenance, bunkers & insurance
▪ Voyage charter may be entered into between a demise or time charterer and a shipper.
▪ A Charterer may or may not be the shipper.
▪ The Shipowner will be the ‘carrier’ in the c/p.
The voyage Charter Party will have many details, for example:
▪ The time for arrival at the loading port
▪ The cancelling date if the ship is running so late that the charter will lapse
▪ The time allowed for loading and discharging
▪ Who arranges and pays for the loading/discharging etc.
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4. Charter Parties
Voyage charter
▪ The freight rate varies with the type of cargo carried/duration & length of voyage
▪ Charter party may make provision for a proportion of advance payment of freight
▪ Usually charter party will be for the carriage of a full cargo; Thus, if charterer fails to load full, he pays dead freight
▪ Special arrangements exist for calculating freight of oil and product tanker cargoes
▪ Sold/resold several times during a loaded voyage, discharge port is changed
▪ Difficult to nominate freight rates for every possible voyage in C/P

▪ Rates are linked to Worldscale (New Worldwide Tanker Nominal Freight Scale) - controlled by a panel of brokers
▪ Worldscale is based on a standard ship with standard speed, fuel consumption, port turnaround time, etc. on
any of about 60,000 tanker routes
▪ Worldscale takes into account port and canal fees, other variables
▪ Freight rates for a particular ship can then be quoted as a factor of "Worldscale”
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4. Charter Parties
Voyage charter
▪ The Shipowner’s Obligations:
▪ To provide a seaworthy ship at start of voyage
▪ To bring the ship to the agreed loading port at the agreed time
▪ To load the agreed cargo, carry the cargo to the agreed discharge port, discharge the cargo
▪ The Charterer’s Obligations:
▪ To provide the agreed cargo
▪ To load within the agreed time
▪ To pay the agreed freight at the agreed time

▪ Shipowner Remuneration:
▪ Freight earned in carrying the cargo
▪ Charterer Remuneration:
▪ If also the shipper - profit is the difference between the price pays for the cargo and the price sells for, less
the expenses
▪ If not the shipper - difference between the chartered freight and the BL freight
▪ Standard Voyage C/P forms examples: GENCON, AUSWHEAT, NORGRAIN
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4. Charter Parties
Voyage charter
A Voyage Charter Party should essentially have below details specified:
- The time of arrival at the loading port when the ship comes “on hire”.
- The cancelling date if the ship is running so late that the charter will lapse.
- The time allowed for loading and discharging.
- Who arranges and pays for the loading/discharging.
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4. Charter Parties
Time charter
▪ Ship is hired to carry the charterer’s cargo for a particular period of time (often between 1 and 10 years)
▪ Charterer trades the vessel in the manner they require (commercial operation), while shipowner retains
the technical operation
▪ Sometimes the ship may be sub-let on a voyage charter or sub charter
▪ Ship-owner provides the ship and the crew; and pays crews wages, stores, repairs and insurance
(operating costs)
▪ Charterer pays for the fuel, port and stevedoring charges (voyage costs)
▪ Crew over time is sometimes met by charterer, sometimes the ship owner, depending on the reason for
the over time
▪ Standard T/C format examples: NYPE, SUPPLYTIME, BALTIME
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4. Charter Parties
Time charter
▪ Master:
▪ Manages ship under terms of charter party, execute voyage efficiently
▪ Still responsible for the safe operation of the ship
▪ Still responsible to the owner to ensure that the charterer does not use the vessel in a way that may damage
or endanger the vessel
▪ Give customary assistance to the charterer
▪ Follow the charterer’s orders regarding the employment of the ship, dealing with agents etc.
▪ May reject charterer’s instructions if believes they will compromise the safety/seaworthiness of the vessel
▪ Keep logs, stevedoring damage reports etc.
▪ Balance - takes orders regarding employment of the vessel from the charterer, but not regarding the
navigation or safety of the vessel
▪ Charterer:
▪ Payment of hire (ship ‘rental fee’) is the charterer’s primary obligation - payable as per the charter party
terms at a specified daily, weekly or monthly rate or at a rate per DWT ton of ship
▪ The charter rate is payable regardless how much cargo is carried
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4. Charter Parties
Comparison voyage v time chartering
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4. Charter Parties
Demise/Bareboat charter
▪ Bare-boat and demise charter - both are long term time charters, generally 10 years plus
▪ S/O may lease a bare ship to a charterer, often for the majority of the ship’s life
▪ Remuneration is paid by charterer to the ship owner at negotiated intervals per summer dead-weight
▪ The charter’s remuneration will be the freight and the hire earned
▪ Many commercial reasons for using a demise/bareboat charter rather than building own ship
▪ Sometimes used by government departments, banks, national industries, large shipping companies
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4. Charter Parties
Demise/Bareboat charter
The major difference between demise & other charters is that here the charterer is considered as 'despondent’ or
effective owner of the ship. Whether the charter is really a demise charter can only be determined by looking at the
terms of the charter party, rather than it being stated expressly. In both Demise and Bare boat charter, the charterer
has the possession and the control of the ship.
Demise charter
▪ Charterer acts as if they own the vessel
▪ In general charterer maintains, operates and crews the ship, and pays for insurance (may be exceptions; e.g.,
occasionally S/O pays hull insurance)
▪ The master is responsible and reports to the charterer rather than the owner
Bareboat Charter
▪ Occasionally the S/O reserves the right to appoint or approve the vessels senior officers may make it into a
bare-boat charter
▪ Effectively a very long-time charter where the charterer takes care of all expenses, but the S/O still has the legal
responsibility of the vessel
▪ Charterer remains responsible for all the costs just as in a demise charter 19
4. Charter Parties
Demise/Bareboat charter – Division of Expenses
Owner’s Account
▪ Depreciation
▪ Hull Insurance (unless otherwise agreed with the Charterer)
▪ Survey expenses prior to delivery
▪ Brokerage (if applicable)
Charterer’s Account
▪ Crew wages
▪ Maintenance and Repair
▪ Stores, Spares, Provisions, Bunkers, Fresh water
▪ Canal Dues
▪ Stevedoring, Overtime, Hold Cleaning
▪ Commissions and Beverages on Sub-charterers
▪ All claims against the ship for cargo loss or damage
▪ Agency charges
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4. Charter Parties
Demise/Bareboat charter – Standard Forms
▪ There is only one standard form of bareboat charter party used to any great extent and that is the
BARECON form designed by BIMCO.
▪ A close examination of this form shows up the fact that there are a number of clauses, which are
commonly found in time charter parties. In particular, the clauses relating to delivery, cancelling, trading
limits, surveys, inspections, hire, redelivery, general average, war, commission and law and arbitration
would be equally effective if used in a time charter party.
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4. Charter Parties
Carriage of Affreightment (COA)
▪ Contract of affreightment is a generic term which covers all contracts for the carriage of goods by
sea (both charter parties and bills of lading are contracts of affreightment).
▪ It is also used in a more limited sense where it means a contract, by which the shipowner promises
to satisfy the charterer’s need for transport capacity over a certain period of time, often one year
or several years.
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4. Charter Parties
Carriage of Affreightment (COA) - Advantages
▪ The advantage of such a contract to the shipowner is the security of employment of his vessel for
the duration of the contract. This is especially valuable if the shipowner considers that freight rates
are about to fall.
▪ But the charterers may also be able to obtain financial advantage (security of transportation) in the
event that market freight rates rise once they have committed shipowner or operator on the
contract.
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4. Charter Parties
Characteristics of Contract of Affreightment
▪ Contract of affreightment can often be closely related to the characteristics of a voyage charter.
▪ The length of the chartering period is decided based on the total quantity of cargo to be transported
▪ Cargoes carried under COA are usually bulk dry/liquid cargoes
▪ The risk of delay in sailing should be borne by the shipowner

▪ The freight should be calculated based on the quantity of cargo transported
▪ The partition of cost of loading and/or discharge is usually as same as that of voyage chartering.
The GENCOA is BIMCO's standard contract of affreightment, and is usually used for dry bulk cargoes
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4. Charter Parties
Comparison of cost distribution of different forms of Charter Parties

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4. Charter Parties
On/Off hire surveys
▪ Generally used for time charters
▪ Often done in dry dock
▪ On hire survey conducted before the charterer takes ‘delivery’ of ship
▪ Off hire survey conducted at end of charter, before ship ‘re-delivered’ to shipowner
▪ Similar to the entry and exit inspections when you rent a house
▪ Surveyors representing the owner and the charterer will examine whole ship
▪ List of all visible damage missing equipment etc.

▪ May include bunker survey/measurement of consumables
▪ Master generally signs a copy of survey report when in agreement
▪ Charterer pays for damage at off hire survey not present at on hire survey (fair wear & tear excepted)
▪ Master should report any damage incurred during the charter promptly to the charterer (and allow this
to be repaired & avoid any disputes during the off-hire survey)
▪ If damage caused by stevedores etc. give letter holding them responsible, again allowing time to rectify
the damages. 26
4. Charter Parties
Shipbrokers
▪ Charters are usually arranged by the shipbrokers
▪ Individual brokers may work in a particular trade (tanker, bulk, coastal)
▪ Firms of brokers may cover multiple trades
▪ Those representing owners circulate lists of available ships and their details (position lists)
▪ Those representing cargo interests circulate their requirements (cargo orders)
▪ Initial negotiations will settle on the main terms, then details negotiated & agreed - the ship is "fixed“
▪ The main clauses are standardised - select certain clauses, fill in the details
▪ Clauses may be varied
▪ Institute of Chartered Shipbrokers - international professional body for brokers

▪ Many brokers are also members of Baltic Exchange
▪ Baltic Exchange gathers information on rates - publishes various dry & wet bulk cargo indices
▪ There are three dry indices, which relate to ship size (e.g., Capesize, Panamax and Handymax)
▪ There are two wet indices, relating to dirty (crude) or clean (refined) liquids
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4. Charter Parties
Common C/P Clauses:
It is quite common to incorporate various clauses into a charter party. It is important that the master
understands the implications of incorporating these clauses in the CP
▪ War Risk Clause

▪ Ice Clause
▪ Clause Paramount
▪ Deviation Clause
▪ Bunker Clause
▪ Sublet Clause
▪ Cesser Clause
▪ Safe Port
▪ Always Afloat
▪ Cancelling Date
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▪ Off Hire Clause Parts of Sextant: Index Mirror
4. Charter Parties
Common C/P Clauses:
▪ War Risk Clause: Under this clause, the master shall not be required or bound to sign Bills of Lading for
any place which in his or Owners’ reasonable opinion is dangerous or impossible for the vessel to go
due to any blockade, war, hostilities, warlike situations, civil war, commotions or revolutions.
▪ Ice Clause: This clause gives protection to master on the action he may take if the ship is prevented
from entering or leaving port because of ice, or if the vessel is threatened by ice while in port.
▪ Clause Paramount: When there is no enactment of the Hague-Visby Rules in either the country of
shipment or the country of destination, insertion of this clause makes the Hague-Visby Rules
applicable to the Contract. Thus, the incorporation of a clause paramount into a time charter converts
owners’ absolute obligation of seaworthiness when the ship is delivered (under the COGSA) to an
obligation of due diligence at the beginning of each voyage under the charter.
See the below link to read more about Clause Paramount: https://www.westpandi.com/getattachment/786542da-2969-40b6-
9800-84a3e2f252a0/defence-guide_clause_paramount_4pp_v2_lr.pdf 29
4. Charter Parties
Common C/P Clauses:
▪ Deviation Clause: States precisely for what purposes a vessel may deviate. Without a deviation clause
in the charter party, (this will also be incorporated in the bill of lading in some form or other), if a
vessel deviates, it will be a breach of the charter.
▪ Bunker Clause: This clause gives the vessel the liberty to deviate to any port to take bunkers as part of
contracted voyage. The clause also stipulates that charterers shall accept and pay for the vessel’s
bunkers at port of delivery and, conversely, owners shall take over and pay for the vessel’s bunkers at
the port of redelivery at the prevailing prices at each ports.

▪ Sublet Clause: Charterer may sub-let the Vessel but shall always remain responsible to Owner for due
fulfilment of the original Charter Party.
▪ Cesser Clause: This clause states that “charterers' liability will cease on shipment of cargo and
payment of advance freight, dead-freight, and demurrage”, i. e., sums incurred at the loading port.
(Usually, this type of clause is agreed upon in exchange of the shipowner's lien on the cargo for any
unpaid freight, demurrage and other charges at the discharge port and the general average)
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4. Charter Parties
Common C/P Clauses:
▪ Safe Port: The safe-berth clause provides that the vessel shall load and discharge only at a safe port as
designated by the Charterer, provided the Vessel can proceed thereto, lie at, and depart therefrom
always safely afloat, any lighterage if required being at the expense, risk and peril of the Charterer. (If a
ship arrives at a port or berth which the master believes to be unsafe, but still presents a ‘Notice of
Readiness’, can be construed as evidence of not rejecting the berth on the ground of safety)
▪ Always Afloat: Always Afloat Always Accessible (AAAA) is a charter party term, which means that the
charterer is only allowed to utilize the vessel at locations where it will not be aground (always float) and
can be reached at any point in time (always accessible), regardless of tidal flows or any other
circumstances.
▪ Cancelling Date: Cancelling clauses are inserted for the benefit of the charterers. It gives charterers the
right to cancel the C/P if the vessel does not arrive at the specified destination by the agreed date and
time. It does however not give charterers the right to claim damages unless the C/P expressly says so.
▪ Off Hire Clause: The purpose of inserting an off-hire clause is to relieve the charterer of having to pay
hire in circumstances where the use of the ship is compromised in some ways, and without any need to
prove breach of charter by the owner. Parts of Sextant: Index Mirror
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4. Charter Parties
Common C/P Clauses:
▪ Safe Port: The safe-berth clause provides that the vessel shall load and discharge only at a safe port as
designated by the Charterer, provided the Vessel can proceed thereto, lie at, and depart therefrom
always safely afloat, any lighterage if required being at the expense, risk and peril of the Charterer.
▪ Always Afloat: Always Afloat Always Accessible (AAAA) is a charter party term, which means that the
charterer is only allowed to utilize the vessel at locations where it will not be aground (always float) and
can be reached at any point in time (always accessible), regardless of tidal flows or any other
circumstances.
▪ Cancelling Date: Cancelling clauses are inserted for the benefit of the charterers. It gives charterers the
right to cancel the C/P if the vessel does not arrive at the specified destination by the agreed date and
time. It does however not give charterers the right to claim damages unless the C/P expressly says so.
▪ Off Hire Clause: The purpose of inserting an off-hire clause is to relieve the charterer of having to pay
hire in circumstances where the use of the ship is compromised in some ways, and without any need to
prove breach of charter by the owner.
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4. Charter Parties
Laytime/Demurrage/Despatch/Dead freight
There are 4 stages of a Voyage Charter Party:
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4. Charter Parties
In the first stage, the ship owner is required to deliver the ship at the load port within
the agreed dates (Laycan).
In the third stage, the ship owner is required to instruct the ship to maintain the
charter party speed.
In stages two and four, both the ship owner and the charterer are mutually responsible
to ensure that cargo loading and unloading can take place without any delays. Towards
this, they agree on factors like allowed number of days for loading and discharging,
known as Laydays or Laytime.
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4. Charter Parties
Dead freight, laytime, demurrage, and despatch are few terms used as part of voyage
charters
Dead freight
▪ Tonnage to be transported is usually defined within a set of limits, e.g., 15,000 tonnes
+/- 3%.
▪ This final quantity is the amount of tonnage on which the freight is earned
▪ If charterer does not produce the quantity of cargo agreed - shipowner has reduced
freight/income
▪ Most voyage charters state that tonnage shortfall must be paid for by charterer at rate
known as dead freight rate
▪ Dead freight rate is normally lower that the actual freight rate 35
4. Charter Parties
The Laytime may be specified as number of days and hours or alternatively, as tons per
hours or per day. If the charterer uses up more time for loading or discharging than the
allowed laydays, he pays ‘Demurrage’ for the excess time used.
But if he uses lesser time than specified in the c/p, the ship owner needs to pay for the
time saved, which is called ‘Despatch’. Usually, the despatch rates will be half of the
agreed rate of demurrage.
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4. Charter Parties
Exceptions: Certain days may be excluded from laytime under the charter party:
SHEX Sundays and Holidays Excluded

SSHEX Saturdays, Sundays and Holidays Excluded
FHEX Fridays and Holidays Excluded
UU Unless used
SATPMSHEEXUU Saturday Afternoon, Sundays and Holidays Unless Used
EIU Except If Used
▪ Bunkering time etc. may be excluded

▪ Charter party may state that if work actually proceeds during an excepted period, then it
must count for the purpose of computing lay time 37
4. Charter Parties
Reversible and Averaged Laytime:
▪ Reversible - loading and discharging time calculated together with a total amount of allowed time stated
▪ Averaged - loading and discharging time allowed for and calculated separately but any time saved on one
can be offset against time lost in the other
Running days: Consecutive calendar days which follow each other, immaterial whether a holiday or not, &
immaterial of the number of hours of work per day
Working days: A day on which work is normally done. Immaterial of the number of hours work is done per
day. The difference from the running day is that this system doesn’t count non-working days (like holidays)
Weather working days: Similar to working days but any interruption due to bad weather is excluded if it
happens within the normal working time
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4. Charter Parties
Cargo Quantity
▪ The quantity of cargo is often expressed to give the ship some discretion e.g., “20,000 MT 5% MOLOO
(more or less owner’s option)”
▪ Less common is to give the charter’s option (e.g., 20,000 MT 5% MOLCHOPT)
▪ If the figure is fixed the abbreviation will be 20,000 MT MINMAX (meaning, no more, no less)
Laycan
▪ The period during which the shipowner may and must tender notice of readiness to the charterer
▪ It is expressed as two dates (e.g., laydays 2 May cancelling 10 May)
▪ Charterer is not obliged to accept notice of readiness or commence loading until the first of these dates
(even if the ship arrives early)
▪ Charterer may have the option of cancelling the charter if the ship arrives after the second of the dates,
known as cancelling date
Laydays
▪ The term sometimes used for indicating the period of time between thePartslaycan
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dates
of Sextant: Index Mirror
4. Charter Parties
Commencement of Laytime will be calculated based on 3 conditions (dependant on charter party details)
1. Vessel must be an arrived ship.

▪ The vessel must arrive before the cancellation date.
▪ Within the port limits or on the berth.
2. Vessel must, in all respects, be ready to load. i.e.,

▪ Cargo gear must be rigged and ready for use (if required)
▪ Holds must be clean, dry, dunnaged and fumigated (if required)
▪ Survey certificates (grain, reefer, etc.) obtained
(Contd…)
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4. Charter Parties
3. A notice of readiness must be served on the charterer or their agents
▪ When the vessel has arrived and is ready to load, the master can serve the Notice of Readiness (which will include
the date & time
▪ The NOR must then be accepted (signed) by the charterer
▪ Master must keep a duplicate
▪ In some trades it is usual to list on the amount of cargo the vessel can load (within the limits stated in the c/p) on
the NOR
When all the 3 conditions are met, the laytime will start as dictated by the charter party:
⁻ For e.g., 3 hours after the NOR is served, or once vessel made all fast etc.
⁻ If time of commencement of laytime not stated, justifiable assumption is that laytime commences when the cargo
work commences
WIPON (Whether in port or not), WIBON (Whether in berth or not) etc. are terms used in relation to when a notice
of readiness may be tendered 41
4. Charter Parties
Statement of Facts:
An abstract from the port operations log signed by all parties concerned which has the main
events taken place with times
Laytime Statement:
It is a statement prepared showing the calculation of the laytime, despatch and demurrage
based on the “Statement of facts”.
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4. Charter Parties
Methods of computing Laytime:
Three basic methods are utilised, namely:
• Running days.
• Working days.
• Weather working days.
Exceptions: (for Sunday, holidays, time lost for bad weather, time used for bunkering and
time lost for machinery breakdowns) may be applied to the calculations using the three
basic methods. For e.g., a c/p may state that if work actually proceeds during an excepted
period, then it must count for the purpose of computing laytime.
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4. Charter Parties
Running days:
Consecutive calendar days to count, which follow each other, immaterial whether a
holiday or not, and also immaterial of the number of hours of work per day.
Working days: (Also called ‘working day of 24 consecutive hours’)
A day on which work is normally done. Immaterial of the number of hours work is done
per day. The difference from the running day is that this system doesn’t count non-
working days (like holidays)
Working days of 24 hours:
The calendar days taken to complete 24 of normal working hours. If a port works
normally only 4 hrs a day, it will take 6 calendar days to make a “working day of 24 hrs”
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4. Charter Parties
Weather Working days:
It is similar to working days but any interruption time due to bad weather is excluded if it
was within that normal working time.
For e.g., Say a port works from 0900 hrs – 1700 hrs and it rained between 0500 hrs to
0600 hrs, then the rain is immaterial because it was not within the working time.
But if it rained from 1000 hrs to 1200 hrs then the time of 2 hrs is to be considered and
excluded from the total counting time
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4. Charter Parties
Weather Working days of 24 hours:
An artificial day is made up of 24 working hours. If working for 8 hours a day then 3 days
would make up 1 day of laytime, but with laytime suspended for stoppages due to bad
weather in working hours. It is a working day of 24hrs of good weather.
If a port works from 0000 – 2400hrs and it didn’t rain – then the whole day is taken as a
“weather working day of 24hrs”. If it rained for 2hrs then the time not to count as
worked is 2/24 x 24= 2. Let’s say a port working hours is from 0800 – 1700 and it rained
for 2 hrs in between. Then the working time not to count is 2/9 x 24.
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4. Charter Parties
Terms of Loading the Cargo
Who will arrange & pay for the cargo to be loaded and discharged? This will be as
agreed in the charter party;
FIO Free in and out
FIOS Free in and out and stowed
FIOST Free in and out and stowed and trimmed
Here, "Free" means free of cost to the ship; i.e., Charterer (or shipper/receiver) will be
responsible for the cost of stevedoring etc. & this also covers any damages done by the
stevedores during loading and discharging.
The Incoterms are accronyms coined by the International Chamber of Commerce (ICC) to define the responsibilities of
sellers and buyers, for the sale of goods in international transactions.
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4. Charter Parties
Laytime Calculations: Ex 12(a – c) p.762
1. A C/P provides for 8,575 tonnes of cargo to be loaded at 1,250 tonnes per weather working day (S. &
H.E.). Laytime to commence 24 hours after written notice has been given by the master to the
charterer’s agents during office hours on any day (S. & H.E.) that the vessel is ready to receive cargo,
whether in berth or not. Time is not to count between 1 p.m. Saturday and 7 a.m. Monday, or
between 1 p.m. on the last working day preceding a holiday and 7 a.m. on the first working day after
such holiday. Demurrage, if incurred, is to be paid at 2,500 $ per day and pro rata, and despatch
money at 1,250 $ per day and pro rata for all time saved. Notice was served at 1.30 p.m. on
Wednesday, 4th November, and loading commenced at 3 p.m. on the same day. Friday, 13th
November, was declared a public holiday. Bad weather prevented work being done from 9 a.m. to
11.30 a.m. on 10th November and again from 2 p.m. to 4 p.m. on 18th November. Loading was
complete and Bills of Lading were signed at 11.10 a.m. on 19th November. Give a statement of the
laytime and the amount of demurrage or despatch money payable.
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4. Charter Parties
Laytime Calculations:
1. Number of laydays allowed = 8575/ 1250 = 6.86 days = 6d 20h 38m
Day Date Remarks Hours to count Total time to count Time on demurrage
Wed 04 Nov 1330 NOR Issued; 1500 Loading Commenced Nil Nil Nil
Thu 05 Nov 1330 Time begins to count 10 30 10 30 Nil
Fri 06 Nov 24 00 01 10 30 Nil

Sat 07 Nov Time not counted after 1300 13 00 01 23 30 Nil
Sun 08 Nov Time not counted Nil 01 23 30 Nil
Mon 09 Nov Time not counted before 0700 17 00 02 16 30 Nil
Tue 10 Nov 0900 – 1130: Bad weather stoppage 21 30 03 14 00 Nil
Wed 11 Nov 24 00 04 14 00 Nil
49
4. Charter Parties
Day Date Remarks Hours to count Total time to count Time on demurrage
Thu 12 Nov Time not counted after 1300 (Day prior Holiday) 13 00 05 03 00 Nil
Fri 13 Nov Time not counted – Public Holiday Nil 05 03 00 Nil
Sat 14 Nov Time counted only between 0700 to 1300 06 00 05 09 00 Nil
Sun 15 Nov Time not counted Nil 05 09 00 Nil
Mon 16 Nov Time not counted before 0700 17 00 06 02 00 Nil
Tue 17 Nov Lay time expires at 1838 hrs 18 38 06 20 38 00 05 22

Wed 18 Nov 1400 – 1600: Bad weather stoppage 01 00 00
Thu 19 Nov Loading completed – 1110 hrs. 00 11 10

B’s/L signed
Total time on demurrage = 01d 16h 32m
Demurrage payable for 01d 16h 32m @ 2500$ per day = 4222.222 $ (Ans.)
Note: The fact that work was prevented by bad weather for 2 hours on 18th November has no bearing on the
amount of demurrage payable, as the lay days had already expired. Parts of Sextant: Index Mirror
50
4. Charter Parties
2. If in the previous example, the following modifications are done:
- Loading rate = 1000 tonnes per working day of 24 consecutive hours (S. & H.E.).
- 13th November is not a holiday.
- Laytime to begin 24 hours after NOR is given or whenever loading begins, whichever is earlier.
- Loading completed, and B’s/L signed at noon on 13th November.
Give a statement of the laytime and calculate the amount of demurrage or despatch money payable.
Answer:
Total time saved = 03d 04h 48m

Despatch money payable = 4000 $
51
4. Charter Parties
3. A vessel of 3348 n.t. is chartered for a full cargo to be loaded and discharged in 14 running days,
bunkering time excepted. Laytime is to commence when the vessel is on the berth and ready to load
and discharge respectively. Demurrage, if incurred is to be paid at 30 cents per net registered ton per
day and pro rata, and despatch money at half the demurrage rate for all time saved.
The Statement of facts show the following:
Thurs. 27th Aug 1030 - Vessel arrived at loading port.
1200 - On berth and ready to load.

1345 - Loading commenced.
Mon. 31st Aug Declared a public holiday; no work done.
Wed. 2nd Sept 0600 - Left loading berth to proceed to oiling berth.
0830 - Commenced bunkering.
1530 - Completed bunkering.
1945 - Made fast on loading berth and resumed loading. (Contd….)
52
4. Charter Parties
Q3 Contd…
Thurs. 3rd Sept 1630 - Completed loading; Bills of Lading signed.
1800 - Sailed from loading port.
Sun. 20th Sept 1115 - Arrived at discharging port.
Mon. 21st Sept 0500 - Berthed and ready to discharge.
0800 - Commenced discharging.
Fri. 25th Sept 1345 - Completed discharging.

1445 - Sailed from discharging port.
Draw up a statement of the laydays and calculate the amount of demurrage or despatch money payable.
Answer:
Total time saved = 03d 04h 30m

53
Despatch money payable = 1517.06 $ Parts of Sextant: Index Mirror

JND322 - Section 4 - Charter Parties

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JND322 – Shipping Business and Law

▪ On/Off hire surveys

What is a Charter Party?

What is a Charter Party?

▪ Voyage charter (Referred to as Tramping)

Employment of the ship by the shipowner can take many forms:

to, ETD etc.

▪ The Shipowner will be the ‘carrier’ in the c/p.

▪ Difficult to nominate freight rates for every possible voyage in C/P

▪ To pay the agreed freight at the agreed time

- Who arranges and pays for the loading/discharging.

would be equally effective if used in a time charter party.

Characteristics of Contract of Affreightment

▪ The risk of delay in sailing should be borne by the shipowner

Comparison of cost distribution of different forms of Charter Parties

▪ List of all visible damage missing equipment etc.

▪ Institute of Chartered Shipbrokers - international professional body for brokers

▪ War Risk Clause

the port of redelivery at the prevailing prices at each ports.

SHEX Sundays and Holidays Excluded

▪ Bunkering time etc. may be excluded

immaterial of the number of hours of work per day

1. Vessel must be an arrived ship.

2. Vessel must, in all respects, be ready to load. i.e.,

Thu 05 Nov 1330 Time begins to count 10 30 10 30 Nil

Fri 06 Nov 24 00 01 10 30 Nil

Sat 07 Nov Time not counted after 1300 13 00 01 23 30 Nil

Sun 08 Nov Time not counted Nil 01 23 30 Nil

Mon 09 Nov Time not counted before 0700 17 00 02 16 30 Nil

Tue 10 Nov 0900 – 1130: Bad weather stoppage 21 30 03 14 00 Nil

Wed 11 Nov 24 00 04 14 00 Nil

Fri 13 Nov Time not counted – Public Holiday Nil 05 03 00 Nil

Sat 14 Nov Time counted only between 0700 to 1300 06 00 05 09 00 Nil

Sun 15 Nov Time not counted Nil 05 09 00 Nil

Mon 16 Nov Time not counted before 0700 17 00 06 02 00 Nil

Tue 17 Nov Lay time expires at 1838 hrs 18 38 06 20 38 00 05 22

Wed 18 Nov 1400 – 1600: Bad weather stoppage 01 00 00

Thu 19 Nov Loading completed – 1110 hrs. 00 11 10

Total time saved = 03d 04h 48m

1200 - On berth and ready to load.

Fri. 25th Sept 1345 - Completed discharging.

Total time saved = 03d 04h 30m

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