From commercial point of view, it is the moral responsibility of the seafarers to ensure that the ship owner profits from the ship operation. And like in all kind of business, there are at least two parties involved, one of which provide a service or product to the other for a price.
For example, if the vessel is to load tons of cargo, there could be 10 shipper, say each of them with tons of cargo. Alone none of the shipper would want to hire the entire vessel of tons capacity for their tons of cargo. Sometime there are some other companies or persons who help shipper, charterer and shipowner to connect with each other for a fees.
The charterer may even have brokers for different purpose. For example charterer may have a broker to find a cargo for the ship they want to hire and they may have another broker to find a ship for the cargo they have in hand. Charter party agreement is a detailed document which, apart from various clauses, has informations such as. Even though shipowners is primarily dealing with the charterer, it does not mean that the shipowner would have no relation with the shipper.
And one of the main point of it is that shipowner is required to issue bill of lading to the shipper for the cargo loaded onboard. Usually you would find a mention of the charter party agreement in the bill of lading. The wording in the bill of lading could be something like this. But do the shipowners and charterers do this exercise of negotiating the format of the charter party agreement each time they do the business together.
Instead they use pre-defined forms. Also if a charterer and ship owner have done the business before, they use the same charter party agreement for the future shipments too.
For this reason, many a times even for a voyage in , you may find the mention of charter party dated in or even before. In the bill of lading issued even in , it may read something like,.
Now that we understand the concept of chartering, let us understand the different ways in which the ships can be chartered. Charterer can charter the vessel for one voyage Voyage charter , for a particular time period time charter or they can hire and run the vessel as if they are the owner of the vessel Demise or bareboat charter.
The best analogy to the term voyage charter is that with hiring an Uber for a ride from one place to the other, sometimes with multiple stops in between.
Concept of Charter party agreement
So when we hire an Uber, we hire just the cab. The cab driver is still under the instructions of Uber. When we hire a cab for a ride, we just pay the hire pre-agreed or by the meter. We do not pay for or are not concerned about the fuel costs or the amount of fuel consumed. Similarly, under the voyage charter, charterer is not concerned about the fuel consumption.
The fuel costs are for the ship owners. Similarly, under the voyage charter it is the ship owner who pays for the maintenance of the ship. Whenever we have any doubt about anything under voyage charter, just think of this analogy of hiring the cab. Lord Diplock during one of the leading cases on Laytime described the voyage charter party comprising of four stages.
In the first and third stage, it is only the ship owner that need to perform. For example. And in the third stage, the ship owner is required to instruct the vessel to maintain the charter party speed.
Because in these two stages it is mutual reponsibility of the two parties to ensure that cargo loading and discharging is done without any delays. It is definately not commercially profiting for the shipowner if the voyage is extended beyond their expectations.
For example, what if the loading of the cargo took 15 days in comparison to just 2 days that shipowner had expected? Or what if the ship could not berth at load port or discharge port for many days because of other ships ahead in line up?
So the shipowner and charterers agree on the factors like allowed number of days for loading and discharging. If the charterer uses more time for loading and discharging than the allowed laydays as per charter party agreement, then charterer is supposed to pay for extra time used.
But if the charterer uses less time than laydays then ship owner need to pay the charterer for the time saved. This statement would also show the final amount due and to whom it is due.
Means if the final amount is demurrage or despatch and how much. For calculation of laytime, it is important to know when the laytime counting and calculation would start. In most of the cases, the laytime would commence to start when the vessel has arrived at the port.
The charter party agreement contains the information if the voyage charter is a port voyage charter or a berth voyage charter. The laytime would start to commence at this time or sometimes few hours later if specifically mentioned in the charter party agreement. Since one of the condition for the laytime to start is for the master to send the notice of readiness, it makes it so much of an important aspect.
Ship Owner would know only know the information that we provide them. They would use this information for calculation of any demurrage due to the charterers. But for the correct demurrage calculation, the information we provide must be correct and we must not miss any important information such as any delays. Master and ship staff may not see the actual charter party agreement between the charterer and the ship owner.
One of the way to do it is to highlight the text of the voyage instructions that require his attention for easy follow up.
Once Master reads the voyage instructions, he may come across insufficient information that need more information or clarification.
Clarification must be sought from the ship operator for any of such information in the voyage orders. There are may be only a handful of shipowners that do not rely on the charterer to find the cargo for their vessel. And vessel can be chartered in different ways.
First, when is the laycan for the vessel. This is period in which vessel must arrive at the load port.
If master thinks that vessel may not be able to make it to the loadport in laycan period, the commercial operator must be informed who can then try to extend the laycan. If the voyage charter is a port charter, NOR can only be tendered when vessel is at least within the port limits. Usually in this case NOR is tendered when pilot boards the vessel. If the voyage charter is berth charter, the NOR can only be tendered when the vessel is alongside the designated berth.
Wrong tendering of NOR can make the Notice of readiness null and void and shipowner may loose tons of money. Lastly, the ship staff need to be make sure that a correct record of statement of facts is kept.
This is the document that is used for laytime calculations. If the charterer uses more time than agreed for loading or discharging the cargo, the ship owner is supposed to get a pre-agreed compensation called demurrage. Rajeev Jassal has sailed for over 20 years mainly on crude oil, product and chemical tankers.
He has done extensive research on quantitatively measuring Safety culture onboard and safety climate ashore which he believes is the most important element for safer shipping. How i wish that our exam books were written so precisely yet so easy to understand. Thanx for all the pain you take. No amount of words would do justice to match the level of you efforts. Another good read. Thank you for taking time to write articles.
All Seafarers must understand the commercial aspects of ships. All the best and I cant wait to read the next one.
Voyage Charter, Time charter, Demise charter
Too many uncertainties. Laydays refer to the time when a ship must present itself to the charter.
If the vessel arrives after the laydays ,than contract can be cancelled. Laytime is the amount of time allowed in hours and days in a voyage charter for the loading and unloading of cargo. Thanks for such simplified explanations. Sir could you please tell the few famous ship brokers names in india and worldwide. Good job, Capt.
Demise charter party agreement pdf
How easy way for explain this matter ,really very good job captain I appreciate your good effort waiting more and more. Generally the CP agreement is never sent to ship.. What is the logic behind following this and how we can ensure the NOR tendering doesn't becomes null and void.
U don't see such priceless articles often.. Good work cap. Let's make the world a better place to sail???????? To the writer of this blog- what made you write this?
Voyage, time, bareboat, and demise charter
Also your MBA, was it the distant learning one from Middlesex? On the Laytime Summary calculation, wouldn't it be correct to say that on the loading it was lost 0dh min instead of 1dm? Captain sahab, if I ever get a chance, I'll surely shake hand and say thank you, for all your efforts in simplifying the topics. Learn the difficult concepts of sailing described in a easy and story-telling way.
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