Types of charters. Their functions

Одесская национальная морская академия

Кафедра «Английский язык в гидрографии и морской радиосвязи»

РЕФЕРАТ

ПО АНГЛИЙСКОМУ ЯЗЫКУ

на тему

«Types of charters. Their functions»

№ зачетной книжки

студента

специальности «Менеджмент организаций»

Реферат проверил

доц./ст.преп./преп.____________________

(Ф.И.О.)

Одесса - 2010

Contents

Introduction

Types of charters. Their functions

Conclusion

Literature

Supplement 1. Used terms and phrases

Introduction

A charter party is a document of contract by which a ship-owner agrees to lease, and the charterer agrees to hire, a vessel or all the cargo space, or a part of it, on terms and conditions forth in the charter party. If permitted to do so by the terms of charter party, the may enter into subcontracts with other shippers.

The main types of charter parties are Bareboat Charter Party (sometimes called a Demise Charter). Time Charter Party and Voyage Charter Party. If your vessel is chartered it is of the utmost importance that you read the charter party carefully, especially the added clauses, until it is thoroughly understood. It is advisable to have the officers read it as a matter of information and instruction and it will do no harm to discuss it with them, especially with the chief officer.

The important clauses should be check-marked for quick reference. If any refer to dates of the notification of ETA to consignee or charterer's agent, make a note of the day the message is to be sent and be sure to send it.

Types of charters. Their functions

Bareboat Charter Party. By this type of charter, the ship-owner leases his entire vessel and the charterer has the responsibility of operating it as though it were his own vessel. As implies, the bare vessel is chartered. The ship-owner has, for the period covered by the charter party, lost control of his vessel. The charterer pays all expenses: fuel, stores, provisions, harbor dues, pilotage, etc. and employs and pays the crew. There may, however, be a clause in the charter party that the master and the chief engineer must be approved by the ship-owner. The charterer is responsible for the upkeep, preservation and safety of the vessel. Before delivery to the charterer the vessel is surveyed by representatives of both parties and the same is done on redelivery. The charter party will stipulate that the vessel must be redelivered in the same good order and condition as when delivered, ordinary wear and tear excepted. On redelivery the owner's representatives, usually the port captain and port engineer, may check the logbooks for information pertaining to groundings, striking objects and collisions.

Fuel oil in the vessel on delivery is paid for by the charterer - at the current price at the port at that time, and on redelivery, the ship-owner pays for the fuel in the vessel at the current price in the port at the time.

Voyage Charter Party. This is a charter party for the carriage of a full cargo, not for a period of time, but at a stipulated rate per ton, for one voyage only, between named ports (to be named on arrival in a given area). It is a frequently used charter party of which there are many varieties, and most commodities and trades have a particular type to suit their purposes. Shippers of large quantities of bulk cargo such as phosphate, coal, grain, etc., have charter parties with special titles such as "Fosfo", "Americanized Welch Coal Charter Party", "Baltimore Grain Charter Party", etc.

In a voyage charter party the charterer assumes no responsibility for the operation of the vessel but generally pays stevedoring expenses in and out. A statement to that effect will be included in the charter party.

The master is particularly concerned with voyage charter parties because of the laytime, dispatch and demurrage clauses and the necessity of tendering the Notice of Readiness to load or discharge. In this type of charter the charterer contracts to provide a cargo at given rate per day.

The charter is generally for bulk cargo, stipulated in tons or cubic feet, for all or part of the carrying capacity of the vessel.

Laydays. Demurrage. When the vessel `on a voyage charter' is in port, the expenses of the shipowner continue. At the same time loading or discharging is controlled by the charterer, who if not held to a definite number of days to complete this work, can make the stay in port long and expensive for the shipowner. For this reason, the charter party will specify a definite number of days for loading or discharging cargo; or it may specify a certain number of tons per day to be loaded or discharged.

The days are called laydays (or laytime) and are stipulated in the charter party as working days, weather working days, running days and excepted days.

If the charterer loads or discharges his cargo in less time than the number of laydays allowed, he earns dispatch money at much a day or part of a day saved. If he takes longer to load or than the number of laydays allowed, he must pay demurrage at so much a day.

Both dispatch and demurrage may be the cause of much disagreement and argument in which the vessel's logbook can play an important part.

An equally important clause is the demurrage clause which states that if the charterer does not complete loading or discharging in the laydays allowed by the charter party, he must pay for the delay at the stipulated sum per day. Unless otherwise provided in the charter party, demurrage starts from the time loading discharging should have been completed. All days are counted, whether or not cargo is worked, including Sundays, holidays and days not worked due to bad weather or other reasons. Once a vessel is on demurrage, it runs consecutively unless otherwise provided in the charter party.

A chartering broker may be described as an intermediary between the shipowner and the merchant or the cargo owner. His knowledge must be extensive in order that he may cope with all requirements of his business; he must have a sound knowledge of shipping law, geography, port information, charges throughout the world, facilities at different places, distances between ports, and countless other matters. It also stands to reason that he must be of the strongest character.

He acts between a shipowner who has tonnage idle, and a cargo owner who has a cargo which he wishes to be transported. He engages space for cargo and arranges the whole of the business details between the principals, receiving for his services the commission agreed under such an arrangement.

When he fixes a contract of this nature it is known as a charter-party, of which there are three classes: voyage, time, and bareboat or demise. The charter party is a contract of affreightment, and for voyage charters is an agreement for the carriage of goods from one specific port to another, the owner of the vessel receiving freight for the cargo carried. In the case of time and demise charters, both of these contain a contract whereby the vessel is actually hired for a specific period of time, during which period the charterer has the freedom, within the stipulations of the charter-party conditions, of using the vessel for what purposes he may wish. In a demise charter the ownership to all intents and purposes changes hands for the period of the contract. The payment in this case is for the hire of the vessel, and an agreed amount is paid per month or per day for the use of the vessel.

While in the case of bill of lading shipments standard rates are charged, the rates for chartered ships fluctuate according to the state of the market, it being the tendency for rates to be high during busy periods, when tonnage is scarce, and low in slack times when idle ships are plentiful.

The arrangement of a charter-party is known as “fixing” a charter and when this is completed the vessel is termed “fixed”.

Before proceeding to describe the contents of a charter-party and the meaning of clauses, there are several types of “days” which are mentioned in chartering, and definitions of these are:

Laydays - days agreed for loading and discharge. They may be separated into days for loading and days for discharge, or if agreed a total taken for the two operations, when days are then known as reversible laydays. This is the time allowed under the charter-party, and a note of the agreed number of days will be shown in the charter-party.

Weather working days - days for loading and discharge when the weather permits. Where weather working days are allowed, and work is commenced, time ceases to count if the work is held up owing to bad weather, or if weather makes the possibility of a start impracticable for the day. This applies only when work would otherwise be carried on.

Running days - consecutive days, counting all days. Saturdays, Sundays, Bank Holidays, etc, the same.

Working days In England a day of eight hours constitutes a working day, therefore a 24 hour day would be considered as three working days (if work is continuous), but in foreign countries this would alter according to the number of hours which constitute a working day in such places.

“Days” It cannot be strongly enough emphasized that many troubles arise through careless wording of what is meant by “days” in a charter-party . It must be specified exactly how they are to count.

Before fixing a charter-party the essential details that are required to be known are:

- Draught of vessel.

- Size of holds (in order to be sure of the space available for cargo).

- Particulars of derricks and/or cranes on the ship. Their position and individual lifting capacity.

- Bunker capacity.

- Fuel consumption.

- Rate of loading and discharge and approximate weight to measurement of cargo.

- Loading and discharge ports.

- Date of readiness.

For all charter-parties the following clauses are essential.

- Title of contracting parties. Names of the charterer and owner of the ship.

- Name of the vessel and warranty of seaworthiness. The warranty of seaworthiness may be in the form of the words “good ship” with the class of the vessel added, e.g. good ship called the classed 100 A1 at Lloyd's. It is well to remember that once a vessel has commenced loading the charterer cannot demand cancellation for unseaworthiness. Also, that although a ship may be 100 A1 at the start of the voyage, there is no obligation on the owners to keep this class during the period of the charterparty.

- Description of the vessel. This is only contained in the gross and net tonnage of the vessel.

- Loading and discharging ports. For a time charter this would not apply, as with a vessel being hired for a stated period there is no necessity or desire for the owner to know where the vessel is to load, and instead the time charter contains date of delivery of ship and date of redelivery, these being the two dates between which the charterer hires the vessel.

- Cargo to be carried. In a voyage charter this is stipulated together with the amount of cargo to be carried. This, again, is not necessary in a time charter, with the exception of the term “any lawful merchandise”, but the radius of trading is inserted. Radius of trading is usually very broad, and a term similar to “World-wide radius, ice bound ports excepted” may be the only reference to this point.

- Position of the vessel. For voyage charters. A statement which must be perfectly correct in detail.

If the owner states that the ship is “now at Antwerp” and it is proved later that the vessel was not at Antwerp, charterers may claim cancellation of the charter-party. In a time charter the date when the vessel will be ready and place of delivery is given in place of the above clause.

- Remuneration. For voyage charter-parties freight is paid on the amount carried, but for time charters the payment is by hire for the period of the engagement.

- Laydays and how they count. This clause applies only to voyage charter-parties, as an owner is not concerned with the time that a vessel on time charter spends in loading and discharge.

- Days of demurrage and dispatch and the rate. The preceding explanation also applies to this clause.

Should a vessel load and/or discharge in less than the prescribed time, owners of a ship pay dispatch money as a “reward” for time saved. If, on the other hand, the time allowed is exceeded, then demurrage is payable at an agreed rate to the owner as “compensation” for lost time.

- Brokerage clause. States the rate of brokerage that shall be paid.

- Lien clause. Giving owners of the vessel a right to hold cargo against payment of freight or hire.

-Exemptions from liability clause. This clause includes many occurrences from which owners claim exemption. A few of these exemptions are:

1) Act of God.

2) Barratry. Any wilful wrongdoing of the master and/or the crew without the connivance of the owners. Actions of the master or the crew without the intention to defraud owners, or actions which cannot be described as criminal, are not included under this heading.

3) Capture and seizure. Acts of taking the ship by an enemy or belligerent, or the forcible taking of the ship.

4) Queen's enemies. Opposition forces of the Crown. The ship's nationality is its flag, and this clause may be read as any enemy of the country of the ship's nationality.

5) Restraint of princes. Every case where the voyage is interrupted by the supreme power of the country, such as an embargo, or prohibition of cargo.

6) Perils of the sea.

- Average clause. This clause states that general average, if any, shall be payable according to York-Antwerp Rules. As there are four sets of rules, the 1924, 1950, 1974 and 1994 the date must follow. The rules issued later did not cancel the earlier codes, although 1974 or 1994 rules are generally adopted.

- Arbitration clause. This sets out that any disputes shall be referred to arbitrators, and gives the

conditions under which arbitration shall be carried out.

- Penalty for non-fulfillment clause. Gives the amount to be paid for default in carrying out the charter-party agreement.

- Sub-letting clause. This clause gives or refuses permission for the vessel to be sub-let, or sub chartered under the charter-party.

The time charter-party clauses usually incorporated are as follows:

- Clause as to who pays fuel and port charges. This clause stipulates that all charges including the above are to be paid by the charterer.

- Provision that time ceases on breakdown. Commonly known as the “breakdown clause”, it is inserted to adjust the hire when by reason of a breakdown the vessel ceases to operate. If by breakdown of machinery the vessel ceases to operate, the charterer is entitled to some return for lost time. The stipulation is usual for a period in excess of twenty-four hours, after which time ceases to count, and the charterer is credited with such time lost by the breakdown in his settlement for hire of the vessel.

- Return of overpaid hire if vessel is lost. Essentially a time-charter clause, stating that, should the vessel be lost, hire shall cease to be chargeable, and any amount overpaid shall be returned.

- Charterer's obligation to provide master with full sailing directions. The master, in order to carry out instructions, must have full directions, and failure on the part of the charterer to supply these may entail delay and lost time.

The third list of clauses which are clauses a voyage charter may contain is:

- Limitation of liability clause. Known widely as the “cesser clause”, it stipulates that “Charterers' liability shall cease on the loading of cargo, and qualified payment of freight, dead freight and demurrage”. When the charterer has loaded the cargo and paid the charges incurred his liability ceases.

- Description of cargo. This is phrased as “The charterer shall load a full and complete cargo of ….. not exceeding ...... tons, not less than ...... tons”. A full and complete cargo may be described as a quantity sufficient to sink the vessel to her load line in excess of tackle, provisions, furniture, etc....

The two quantities are stipulations between which any amount constitutes a full and complete cargo.

- Options of other ports and cargoes. Gives permission for the vessel to carry other cargo than that fixed in the charter-party, usually, however, at the same rate of freight, and also the option of calling at other ports for loading and discharge.

The principal disputes which arise in connection with charter-party agreements are usually with reference to the meaning of clauses, and the ambiguous way in which they are drawn up. Protection and Indemnity clubs are always anxious that owners shall wherever possible fix ships upon some recognized charter-party form, in order to avoid possible extra liability.

When a printed form is adopted, however, the conditions as printed may be altered or amended to suit the circumstances of charterer or owner, in which case alterations are made to the existing print.

In these cases the written clauses and amendments always overrule the printed conditions; such alterations must, however, be made with care, as the alteration of one clause may lead to alteration through contradiction of many others.

Several points raised in connection with charter-parties are given below Always afloat. Meaning that the vessel shall remain afloat during the whole of her loading and discharge, and shall at no time rest upon the bottom of the river or dock.

“Redelivered in like good order and condition”. Charterer must redeliver the ship after the period of the time charter has elapsed in the same condition as when he accepted her, with the proviso “fair wear and tear excepted”. All damage must be repaired if it occurs whilst under charter.

Representation or misrepresentation. Occasions arise where incorrect particulars are given in the charter-party, and any claims which may arise are judged upon the extent of such representation and its effect on the contract.

In voyage charter-parties it is recognized that notice of readiness or advice to the charterer that the vessel is ready to load in accordance with the terms of the agreement shall be given. This notice must be given before the laydays start to count, and may not be given until the ship is actually ready in all respects. This means that the ship must be ready to receive the cargo, and failure to have all holds ready even though only one or two may be worked for the reception of cargo makes the vessel unready. In the case of grain charter-parties, shifting boards or alternatives, which are to prevent the grain moving on voyage, must be provided and be ready for use at the same time as the vessel, to claim perfect readiness.

Conclusion

The charterer must arrange to supply his cargo when the ship is ready to load, and any delay is for his account; when his lay days are used, demurrage is charged for any extra time incurred. Any delay which may occur outside the charterer's control, as transport to the ship, is no defense for the charterer. Should however, a strike or some change in circumstances of a like nature arise which makes the carrying out of the charter-party impossible, then the charter may be considered to be frustrated by delay.

When the charterer supplies the cargo, the master must take same on board with all reasonable speed, expressed in the term “as fast as ship can load”. The supplying of the cargo is generally considered to mean supplying the cargo alongside the ship, or within reach of the ship's gear.

All terms and conditions of bills of lading issued under a charter-party are controlled by the charterparty terms and the clauses of a charter-party overrule the terms of a bill of lading, unless bill of lading is endorsed to third party.

Literature

1) Charter party form GENCON94.

2) INCOTEMS 2010

3) Information from the internet resource wikipedia.org.

Supplement 1. Used terms and phrases

As implies - как следствие

vessel `on a voyage charter' - судно во фрахте

It also stands to reason - кроме того, само собой разумеется

he must be of the strongest character - он должен быть обладателем сильного характера