Introduction to charteringIntroduction to chartering

Chartering is nothing but an Chartering is nothing but an engagement of a fleet for engagement of a fleet for transportation of goods or passenger transportation of goods or passenger traffic. traffic.

Way back in the 17th century, ship's Way back in the 17th century, ship's captains met merchants in coffee captains met merchants in coffee houses/pubs of those days houses/pubs of those days bargaining and haggling for cargoes. bargaining and haggling for cargoes. London being the hub of all shipping London being the hub of all shipping activities including chartering.activities including chartering.

definitiondefinition

Chartering, is bringing together an owner Chartering, is bringing together an owner of a vessel, which he seeks to let on hire of a vessel, which he seeks to let on hire or for which he seeks an employment or for which he seeks an employment andand an owner of goods, a merchant- an owner of goods, a merchant-shipper or a charterer who needs a ship shipper or a charterer who needs a ship for carriage of goods by sea, into a for carriage of goods by sea, into a contractual relation and commitment, contractual relation and commitment, setting forth their respective duties and setting forth their respective duties and obligations as terms and conditions obligations as terms and conditions under which they remain legally bound under which they remain legally bound with legal consequences. with legal consequences.

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The instrument or document of the The instrument or document of the contract is called a "Charter-Party" contract is called a "Charter-Party" and a "Charter party" is defined as a and a "Charter party" is defined as a CONTRACT OF AFFREIGHTMENT. CONTRACT OF AFFREIGHTMENT. Thus, there must be a contract and Thus, there must be a contract and there must also be an affreightment.there must also be an affreightment.

CHARTERING MODECHARTERING MODE

Voyage CharterVoyage Charter Time CharterTime Charter Bareboat Charter Bareboat Charter

Voyage CharterVoyage Charter In a voyage charter a ship owner places In a voyage charter a ship owner places

his vessel at the disposal of the his vessel at the disposal of the charterer for loading a full/part cargo as charterer for loading a full/part cargo as agreed from a port or two for discharge agreed from a port or two for discharge at one or two ports, as named or at one or two ports, as named or nominated in the Charter Party.nominated in the Charter Party.

It can be for one single voyage or a It can be for one single voyage or a series of voyages - consecutive voyages.series of voyages - consecutive voyages.

owner gets freight per weight tonne of owner gets freight per weight tonne of cargo actually loaded on board the cargo actually loaded on board the vessel.vessel.

Generally freight is paid on "right & true Generally freight is paid on "right & true delivery".delivery".

Time charterTime charter

Where a charterer hires a vessel for Where a charterer hires a vessel for a period, say, 3 months or one year, a period, say, 3 months or one year, the vessel is said to be on time-the vessel is said to be on time-charter. The owner gets an agreed charter. The owner gets an agreed "Hire" per day or per dead weight "Hire" per day or per dead weight tonne (DWT) per month on her tonne (DWT) per month on her summer loadline. This hire is payable summer loadline. This hire is payable in advance. in advance.

time-charterertime-charterer The vessel will be required to be delivered The vessel will be required to be delivered

and redelivered at agreed places. Subject and redelivered at agreed places. Subject to satisfactory "On hire" surveyto satisfactory "On hire" survey

a delivery certificate will be signed in token a delivery certificate will be signed in token of the vessel having been placed at the of the vessel having been placed at the disposal of the time-charterer. The charter disposal of the time-charterer. The charter hire will commence to count thereafter.hire will commence to count thereafter.

On expiry of the time-charter period, the On expiry of the time-charter period, the vessel will be again subject to "Off Hire" vessel will be again subject to "Off Hire" survey and a "Re-delivery" certificate will survey and a "Re-delivery" certificate will have to be signed by the parties whereby have to be signed by the parties whereby the vessel will revert to her original the vessel will revert to her original owners.owners.

"On hire" and "Off-hire" surveys help "On hire" and "Off-hire" surveys help establish that the condition of the establish that the condition of the vessel at the time of delivery and re-vessel at the time of delivery and re-delivery is practically unchanged and delivery is practically unchanged and remains the same barring ordinary remains the same barring ordinary wear and tear.wear and tear.

On time chartered vessel, the On time chartered vessel, the charterer will have to bearcharterer will have to bear

the cost of bunkers,the cost of bunkers, port disbursements including agency port disbursements including agency

commission and brokerage,commission and brokerage, stevedoring-loading-discharging,stevedoring-loading-discharging, dunnage,dunnage, cleaning holds or in lieu of payable to cleaning holds or in lieu of payable to

owners as agreed.owners as agreed. For the owner's account will be officer's/crew For the owner's account will be officer's/crew

wages, stores and provisions, ship wages, stores and provisions, ship maintenance depreciation etc. maintenance depreciation etc.

BAREBOAT CHARTER BAREBOAT CHARTER Bareboat charter, as also known as demits Bareboat charter, as also known as demits

charter or charter by demisecharter or charter by demise vessel offered just "Bare" and charterer must vessel offered just "Bare" and charterer must

take the vessel in full control, take the vessel in full control, The charterer virtually becomes the defacto The charterer virtually becomes the defacto

owner and manages and controls the vessel. owner and manages and controls the vessel. vessel surveyed on delivery and re-delivery.vessel surveyed on delivery and re-delivery. The owner collects from the charterer a The owner collects from the charterer a

certain rate per DWT ton on summer loadline certain rate per DWT ton on summer loadline capacity per calendar month, in advance.capacity per calendar month, in advance.

The charterer has to meet all the costs and The charterer has to meet all the costs and charges. Owner has practically nil expenses charges. Owner has practically nil expenses and is not the carrier.and is not the carrier.

The details of charter partyThe details of charter party 1. Ship and the contracting parties1. Ship and the contracting parties 2.Description of cargo2.Description of cargo 3 terms of cargo3 terms of cargo

lay datelay date lay timelay time cancelling datecancelling date Loading portLoading port Discharge portDischarge port DemurrageDemurrage despatchdespatch Payment of loading and discharge expensesPayment of loading and discharge expenses

Details continuedDetails continued

Statement of facts.Statement of facts. DeadfreightDeadfreight Safe portSafe port Notice of readinessNotice of readiness Arrived ship Arrived ship

datesdates

The charter party will stipulate a The charter party will stipulate a reporting date and a cancelling date, reporting date and a cancelling date, which is known as lay days - within which is known as lay days - within which the vessel must arrive at the which the vessel must arrive at the port of loading.port of loading.

In both cases, where a vessel arrives In both cases, where a vessel arrives before the reporting date or after the before the reporting date or after the cancelling date, the charterer is not cancelling date, the charterer is not obliged to accept her.obliged to accept her.

on mutual consultation laydays can on mutual consultation laydays can be revised.be revised.

LAYDAYSLAYDAYS

Laydays are calculated by dividing Laydays are calculated by dividing the total quantity loaded or the total quantity loaded or discharged by the rate of loading or discharged by the rate of loading or discharging as stated in the Charter discharging as stated in the Charter Party agreement. Laydays represent Party agreement. Laydays represent free period allowed to commence free period allowed to commence and complete loading or discharge and complete loading or discharge by a vessel. A day is a day of 24 by a vessel. A day is a day of 24 consecutive hours. consecutive hours.

LAYTIMELAYTIME

Laytime is the time allowed to the charterer Laytime is the time allowed to the charterer by the ship owner for loading and by the ship owner for loading and discharging cargo at the loading and discharging cargo at the loading and discharging ports.discharging ports.

For any extra time taken by the charterers, For any extra time taken by the charterers, demurrage has to be paid to the ship owner.demurrage has to be paid to the ship owner.

if these operations are completed before the if these operations are completed before the expiry of the time allowed then the ship expiry of the time allowed then the ship owner pay despatch to the charterers. owner pay despatch to the charterers.

The rate of despatch is generally half the The rate of despatch is generally half the rate of demurrage. rate of demurrage.

LAYTIMELAYTIME

The periods which are excluded from the The periods which are excluded from the computation of laytime are generally computation of laytime are generally holidays (SHEX), bad weather periods and holidays (SHEX), bad weather periods and periods of strikes or lockouts.periods of strikes or lockouts.

COULD BE (SHINC)COULD BE (SHINC) There is also an accepted principle for There is also an accepted principle for

computation of demurrage - once on computation of demurrage - once on demurrage always on demurrage. In other demurrage always on demurrage. In other words, once a vessel is on demurrage then words, once a vessel is on demurrage then all periods thereafter are counted other all periods thereafter are counted other than the stoppages attributable to the ship.than the stoppages attributable to the ship.

Notice of ReadinessNotice of Readiness

Master's advice to the effect that his vessel Master's advice to the effect that his vessel has arrived at the port limits at such time has arrived at the port limits at such time and date and is ready in all respects to and date and is ready in all respects to commence loading or discharging is known commence loading or discharging is known as "Notice of Readiness". as "Notice of Readiness".

The master of the vessel will have to The master of the vessel will have to tender a "Notice of Readiness" to the tender a "Notice of Readiness" to the charterer/shipper/receiver as the case may charterer/shipper/receiver as the case may be, both at the load-port for loading and be, both at the load-port for loading and discharge port for unloading.discharge port for unloading.

NORNOR Master must serve Notice of Readiness on Master must serve Notice of Readiness on

the Charterers/ Agents/Receivers, subject to the Charterers/ Agents/Receivers, subject to the following pre requisites:-the following pre requisites:-

  Vessel must have arrived within the port Vessel must have arrived within the port limits.limits.

  Vessel must have been entered through Vessel must have been entered through the Customs.the Customs.

  Vessel must be in free Pratique .Vessel must be in free Pratique .   Vessel must be actually ready in all Vessel must be actually ready in all

respects to commence loading/or discharge.respects to commence loading/or discharge.   Notice of Readiness can be tendered during Notice of Readiness can be tendered during

official working hours only. official working hours only.