Affreightment

Affreightment (from freight) is a legal term relating to shipping.

A contract of affreightment is a contract between a ship-owner and a charterer, in which the

ship-owner agrees to carry goods for the charterer in the ship, or to give the charterer the use
of the whole or part of the ship's cargo-carrying space for the carriage of goods on a
specified voyage or voyages or for a specified time. The charterer agrees to pay a specified
price, called freight, for the carriage of the goods or the use of the ship.[1]

A ship may be let, like a house, to a person who takes possession and control of it for a
specified term. The person who hires a ship in this way occupies during the specified time
the position of ship-owner. The contract under which a ship is so let may be called a
charterparty—but it is not, properly speaking, a contract of affreightment, and is mentioned
here only to clarify the distinction between a charter-party of this kind, which is sometimes
called a demise of the ship, and a charter-party that is a contract of affreightment.[1]

Rules of law

In default of express contract

Bills of lading
A bill of lading (1886)

A bill of lading is a document the master or agent for the shipowner signs (on behalf of the
master) to acknowledge the shipment of a parcel of goods, and the terms under which it is
carried.[2] The document used today first appeared centuries ago as a bill (account)
presented to shippers for all charges incurred by the cargo until properly secured on board.

In the age of sail, cargo and ships became lost more often than today. This bill proved that
cargo expenses were paid, but became mainly a proof that the cargo was really on board and
thus become a negotiable property title. Under this type of carriage, the bill of lading
assumes two main tasks, as cargo receipt and property title. In liner shipping it assumes a
triple identity: property title, cargo receipt and carriage contract. In tramp shipping, object of
this wiki entry, the carriage contract is the charter party.

Express stipulations

Charter-parties

Charter-parties are mostly - as stated earlier in this article - for either a voyage or a period of
time.

Voyage charter

A charter-party for a voyage is a formal agreement made between the owner of the vessel
and the charterers, in which they agree that the vessel will load a specific cargo at a specific
place—and the ship, once loaded will go directly to a specified place, or to a place to be
named at a specified port of call,[3] where the cargo will be delivered.

Some clauses specify the amount of freight to pay and the manner and time of payment. A
clause may specify the length of time, usually described as lay days, for loading and
discharging, and for the demurrage to pay if the vessel is detained beyond the lay days. There
is usually also a clause that requires that the merchant bear the risk and expense to bring the
cargo to the ship and collect it on delivery. Another clause specifies that the master must
sign bills of lading for the cargo, either at the same rate payable under the charter-party, or
commonly at any rate of freight (with a stipulation that, if the total bill of lading freight is less
than the total freight payable under the charter-party, the charterers pay the difference to the
master before the vessel sails). There is usually what is called the cesser clause, by which
the charterer's liability under the charter-party ceases on shipment of the cargo, the
shipowner taking a lien on the cargo for freight, dead freight, and demurrage. The charter-
party is subject to exceptions similar to those in bills of lading. Typically, other clauses
provide for commissions paid to the brokers on signing the charter-party, the address
commission paid to the agents for the Vessel at the port of discharge, and other details.[3]
Clauses in charter-parties vary, but the above outlines what is typical.

Terms of a bill of lading as to the voyage, place of delivery, exceptions, excepted perils, and
liability of the shipowner and his lien applies equally to charter-parties.[3] Other terms are
relevant here: demurrage, dead freight, and cesser, which are described below.

Demurrage is a fixed sum per day or per hour that the charterer agrees to pay for any time
that the vessel is detained for loading or discharging over the time contractually allowed—
usually described as lay days. Sometimes the number of days the vessel may be kept on
demurrage at the agreed rate is fixed by the charter-party. If no demurrage is provided for by
the charter-party, and the vessel is not loading or discharging beyond the lay days, the
shipowner can claim damages for the loss suffered by the detention of the ship.[3]

In other cases, if the vessel is detained beyond the fixed number of demurrage days, the ship
owner can recover damages for detention. Sometimes the charter-party defines no fixed time
for loading or discharging. In such cases the charter-party is obligated to load or discharge
as quickly as possible. If loading or discharging is not done in a reasonable time,[3] the
shipowner can claim damages for detention.

The rate of demurrage (if any) is generally accepted as the measure of the damages for
detention, but is not necessarily the true measure. When the claim is for detention and not
demurrage the actual loss is recoverable, which may be more or may be less than the agreed
rate of demurrage. The contract usually doesn't count Sundays and holidays as lay days—but
unless expressly stipulated, this exception does not apply after the lay days have expired.[3]

Dead freight is the amount of freight lost, and therefore recoverable by the shipowner from
the charterer as damages if a full and complete cargo is not loaded according to the charter-
party's terms.[3]

The cesser clause has come into common use because, frequently, the charterers are not
personally interested in the cargo. They may be merely agents, or may have chartered the
vessel as a speculation to make a profit upon the bill of lading freight. The effect of the
clause is that by the charterers shipping a full cargo, they fulfill all their obligations. The
shipowner discharges them from further liability and takes instead a lien on the cargo for
payment of all freight, demurrage, or dead freight that is payable. It has become established
in the construction of the cesser clause that, if the language permits it, the cesser of liability
is assumed co-extensive only with the lien given to the shipowner. In other words, the
charterers are only released from liabilities that have been replaced by a lien given to the
shipowner.[3]

The shipowner is further secured by the stipulation that if the total freight payable under the
bills of lading is less than the full chartered freight, the difference is paid to the shipowner
before the vessel sails. Sometimes a difficulty arises, notwithstanding these precautions:
even though the charter-party gives an ample lien, the terms of the bills of lading may be
insufficient to preserve the same extensive lien as against the holder of the bills of lading.
The shippers under the bills of lading, if they are not the charterers, are not liable for the
chartered freight, but only for the bill of lading freight. Unless the bill of lading expressly
reserves it, they are not subject to a lien for the chartered freight. The master may guard
against this difficulty by refusing to sign bills of lading that do not preserve the shipowner's
lien for full chartered freight. However a difficulty often arises from an improvident clause in
the charter-party that requires him to sign bills of lading as presented. See Kruger v. Moel
Tryvan, 1907 A. C. 272.[3]

Time charter

A time charter-party is a contract between the shipowner and charterers, by which the
shipowner agrees to let and the charterers to hire the vessel for a specified term for
employment—either generally in any lawful trade or on voyages within certain limits.[4] The
time charter-party usually names a place where the vessel must be re-delivered to the owners
at the end of the term, and the freight is payable until then. The owner almost always pays
the wages of the master and crew, and the charterers provide coals and pay port charges.
The freight is usually fixed at a certain rate per gross register ton per month, and made
payable monthly in advance. Provision is made for suspension of hire in certain cases if the
vessel is disabled. The master, though usually employed by the owner, must follow the orders
of the charterers concerning use of the vessel. The charterers agree to indemnify the owners
from all liability they may be exposed to by the master signing bills of lading or otherwise
complying with the charterers' orders. The contract is subject to exceptions similar to those
in bills of lading and voyage charter-parties. This is the general outline of the ordinary form of
a time charter-party,[5] but forms and clauses can vary considerably.

Under a time charter-party, the shipowner largely parts with control of his ship. The ship is
employed, within certain limits, according to needs of the charterers. However, the shipowner
remains in possession of the vessel via his employee, the master. The master remains
responsible to the owner for the safety and proper navigation of the ship.[5]
This means that the holder of a bill of lading signed by the master without knowledge of the
terms of the time charter-party may hold the owner responsible for the contract the master
signed as an employee of the shipowner—though, in fact, in signing the bill of lading the
master acted as an agent for and at the direction of the time charterer. In the language of the
ordinary time charter-party the ship is let to the charterers—but there is no true demise,
because the vessel remains in the possession of the shipowner.[5]

Where possession of a ship given to a hirer, who appoints his own master and crew, different
considerations apply. However, though the contract by which the ship is let may be called a
charter-party, it is not truly a contract of affreightment.[5]

Customary rights

Certain rights and obligations arise out of the relationship between shipowner and cargo-
owner in cases of extraordinary peril or urgency during a voyage. Though not strictly
contractual, these are well established by the customs of merchants, and recognized by
law.[5]

When a ship carries a cargo on a voyage, the master—to some extent—represents the owners
of both ship and cargo. An emergency may require that the master, without waiting for
authority or instructions, incur expense or make sacrifices as agent—not just for his
employer, the shipowner, but also for the cargo-owner. Ship and cargo may be in peril, and it
may be necessary for the safety of both to put into a port of refuge. There it may be
necessary to repair the ship, and to land and warehouse, and afterwards re-ship the cargo.[5]

For these purposes the master is obliged to incur expense, of which some, such as the cost
of ship repairs, is for the benefit of the shipowner. Other expenses, such as warehousing fees,
are for the benefit of the cargo-owner. Yet other expenses, such as port charges incurred to
enter the port of refuge, are for the benefit and safety of both ship and cargo.[5]

In a storm at sea, it may be necessary for the safety of ship and cargo to cut away a mast or
to jettison (throw overboard) part of the cargo. In such a case the master, acting for the
shipowner or cargo-owner, as the case may be, sacrifices part of the ship or part of the cargo
to save the rest of the ship and cargo from a common danger.[5]

Voluntary sacrifices and extraordinary expenses incurred for the common safety are called
general average sacrifices and expenses. These are made good to the party who has made
the sacrifice or incurred the expense by a general average contribution, which is recoverable
from the owners of the property saved in proportion to its value. In other words, each
contributes according to the benefit received. The law that regulates the rights of the parties
in regard to such contribution is called the law of general average.[5]
However, the owner of the cargo is entitled under the contract of affreightment to the
ordinary service of the ship and crew for the safe carriage of the cargo to its destination, and
the shipowner is bound to pay all ordinary expenses incurred for the voyage. He must also
bear all losses that arise from accidental damage to the ship. However, when the shipowner
incurs extraordinary expense for the safety of the cargo, he can recover the expense from the
cargo's owner as a special charge on cargo. Also, when the shipowner incurs an extraordinary
expense or makes a voluntary sacrifice to save the ship and cargo from a common peril, he
may require the cargo owner to contribute in general average.[5]

See also

References

Sources

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Last edited 1 year ago by BobKilcoyne