Charter party vessels &

contracts terms n conditions

By;
Hardik gohel (31914)
Darshil khapandi(31919)
Rahul khudai(31920)
Jaydev oza(31930)
Sumit malamdi(31957)
 Agenda
• Meaning
• Types of charter party
• Types of clauses in contract of charter party
• Chartering Terms & conditions
• Example of charter party
contract
 What is charter party vessel?
• A charterparty (sometimes charter-party) is a
maritime contract between a shipowner and a
"charterer" for the hire of either a ship for the
carriage of passengers or cargo, or a yacht for
pleasure purposes.
• There are mainly two parties involve
1. Ship-owner
2. charterer
Types of charterparty

Time charter

Voyage charter

Demise charter
 Time charter
• hiring for specific period of time
• the owner manages the vessel
• the charterer selects the ports and directs the vessel where to go.
• The charterer pays for all fuel the vessel consumes, port charges,
commissions, and a daily hire to the owner of the vessel
• For fixed time.
• Sometimes, ship owners such as COSCO, MOL and Maersk Line will time
chartered additional vessels from the other ship owners such as Kong-
based ship owner Seaspan Corporation, over a period of 5 to 12 years.
• This type of charter party is normally use for project basis, whereby the
charterer can easily scale up or down their capacity, depending on the
number of projects handle.
 Voyage charter
• hiring of a vessel and crew for a voyage between a load port and a
discharge port.
• The charterer pays the vessel owner on a per-ton or lump-sum basis.
• The owner pays the port costs (excluding stevedoring), fuel costs and
crew costs. The payment for the use of the vessel is known as freight.
• A voyage charter specifies a period, known as laytime, for loading and
unloading the cargo
• If lay time is exceeded, the charterer must pay demurrage. If lay time is
saved, the charter party may require the ship-owner to pay despatch to
the charterer.
• In container shipment, goods are shipped either in full container load
(FCL) or less container load (LCL). There are 2 types of standard
container: 20 foot container and 40 foot container.
 Demise charter
• an arrangement for the hiring of a vessel whereby no administration or technical
maintenance is included as part of the agreement.
• The charterer obtains possession and full control of the vessel along with the legal and
financial responsibility for it.
• The charterer pays for all operating expenses, including fuel, crew, port expenses and P&I
and hull insurance. In commercial demise chartering,
• a subtype of bareboat chartering, the charter period may last for many years and may end
with the charterer acquiring title (ownership) of the ship.
• In this case, a demise charter is a form of hire-purchase from the owners, who may well
have been the shipbuilders. Demise chartering is common for tankers and bulk-carriers.
• Mediterranean Shipping Company (MSC) is the world's second-largest shipping line in
terms of container vessel capacity, operating 471 container vessels with an intake capacity
of 2,435,000 TEU. Not all the container vessels owned by MSC, as some of the vessels are
bareboat chartered. For example, MSC bareboat chartered a total of 5 vessels (MSC Yashi
B, MSC Madhu B, MSC Nitya B, MSC Shuba B, the MSC Shreya B) from Seaspan
Corporation. In the bareboat agreement
Types of clauses in contract of charter party

Bunker clause

Ship clause

Lighterage clause

Ice clause

Ready berth clause

Negligence clause
 Bunker clause
• bunker clause stipulates that the charterer shall accept
and pay for all fuel oil in the vessel's bunkers at port of
delivery and conversely, (owners) shall pay for all fuel oil
in the vessel's bunkers at port of re-delivery at current
price at the respective ports.
• It is customary to agree upon a certain minimum and
maximum quantity in bunkers on re-delivery of the vessel.
• Since the OW Bunker test case, ship operators need to
take care to ensure that bunker supply terms are suitable.
 Ship clause

• Under this clause, the owner of the ship writes

clearly that the ship would be seaworthy at
the start of the voyage in every respect, in
other words, the ship would be appropriate to
travel to the country for which it is taken.
 Ice clause
• An ice clause is inserted in a bill of lading or a
charterparty when a vessel is bound for a port
or ports which may be closed to shipping by
ice when the vessel arrives or after the
vessel's arrival.
 Lighterage clause
• A lighterage clause is inserted into charter-
parties which show as port of discharge any
safe port in a certain range, e.g.
Havre/Hamburg range.
 Negligence clause
• A negligence clause tends to exclude
shipowner's or carrier's liability for loss or
damage resulting from an act, default or
neglect of the master, mariner, pilot or the
servants of the carrier in the navigation of
manoeuvring of a ship, not resulting, however,
from want of due diligence by the owners of
the ship or any of them or by the ship's
husband or manager.
 Ready berth clause
• A ready berth clause is inserted in a
charterparty, i.e. a stipulation to the effect
that laydays will begin to count as soon as the
vessel has arrived at the port of loading or
discharge "whether in berth or not". It
protects shipowner's interests against delays
which arise from ships having to wait for a
berth.
 CHARTERING TERMS & CONDITIONS
• BAREBOAT CHARTERER: Charterer gets the ship, its hull, and
machinery, and must hire a crew or the services of a ship
management company. By contrast, a time charterer pays for a
ready-to-go vessel.
• CHARTER PARTY: Actual document substantiating a vessel
charter. There are several standard agreements, such as box time,
or New York Produce Exchange (NYPE). Box time is favored more
than NYPE, which dates to the 1920s and contains archaic
language. Larger liner companies have their own charter parties.
Most charter parties are written, though a few are oral, generally
among parties whose business is well known to each other. By
law, a charter party is no less valid if it has been orally rendered.
• VOYAGE CHARTER: A charterer pays for use of a
vessel to carry cargo from one designated port to
another, or one port range to another. Charterer is
usually responsible for stowage, discharge of cargo,
and pays freight passed on vessel capacity or cargo
loaded. The greatest risk is that a voyage may last
longer than anticipated.
• TIME CHARTER A charterer pay for the use of a
vessel for a specified period. The charterer also
provides and pays for fuel, port charges, and
pilotage. The shipowner retains responsibility for
navigation and most operations aboard the vessel.
• PART CHARTER:Usually based on voyage charter
party model, and occur when a shipowner cannot
locate a charterer with a full load. Part charters can
work well if the cargo is too large or bulky to be
carried on a liner vessel, but too small to justify a full
vessel charter.
• RECAP The document transmitted when a fixture has
been agreed, setting forth all of the negotiated terms
and details. This is the operative document until the
charter party is drawn up.
• HIRE Charterer compensates the owner for use of a
vessel. "On hire" means the ship is in service as
contracted. "Off hire" means that the ship is
temporarily unavailable to the charterer.
• FIXTURE Conclusion of charter negotiations between
owner and charterer, when an agreement has been
reached to charter a vessel.
• DISPONENT OWNER: Name used to describe a
charterer who acts as an owner by sub-chartering a
vessel, and assuming an owner’s liability to the sub-
charterer.
• FREIGHT: Compensation paid to the owner by the
voyage charterer for use of a vessel. "This is
sometimes confusing because the same term is used
to describe the payment made by a cargo shipper to
the bill of lading issuer," said Keith Heard, an admiralty
attorney with the firm of Burke & Parsons in New York.
• FIOS (FREE IN, OUT, STOWED) :
It is most important to remember that the "Free" reference is viewed from
the Ship Owners point of view - not the Shipper’s. Some Shippers get caught
out when they read the word "Free" as they incorrectly believe that it refers
to them.
• Freight rates quoted on a FIOS basis specifically exclude all aspects relating to
cargo handling operations. The ship is only responsible for expenses arising as
a result of the ship calling into the port, i.e. tugs, pilots and light dues etc.
Another very important consideration when booking cargo on FIOS terms is
that the ship does not bear any responsibility for the speed of loading or
discharging.
• Usually the rate agreed includes a fixed "free" period of time for
loading/discharging operations, after which time a daily demurrage is
incurred.
• Obviously this is of paramount importance where port congestion or
stevedoring performance is uncertain. There are many overseas ports which
fall into this category and particularly where vessel demurrage rates can vary
significantly, depending on the size and type of ship nominated to undertake
the particular project.
• LINER TERMS - GENERAL STATEMENT :
Liner Terms is a very ambiguous statement and can be interpreted in a variety
of ways in different ports of the world and by different Ship Owners/Agents.
Personally we would prefer to clearly define the extent of responsibility when
quoting on this basis.
• LINER TERMS HOOK / HOOK :
Given that this is a notional point in chartering terms, this is best described as
the Shipper/Receiver arranging for delivery/receival of cargo to/from directly
under ships hook and the ship paying for the labour to stow the cargo in the
vessels cargo holds, as well as on-board lashing & securing and provision of
dunnage materials, and to discharge again over the ship’s side. Shore based
stevedoring aspects remain the responsibility of the shipper/receiver,
however, there are some Owners that may incorporate these costs into their
LTHH rate. Once again, ask Owners to clearly define this aspect.
• Wharfage charges/dues/taxes can be a contentious issue but are usually
considered to be for the Shippers/Receivers account and there may also be
many other statutory levies on cargo or freight that may apply. Many
Shippers/Receivers are unaware of these additional costs and do not include
them into their costing and consequently may be left with an unexpected
considerable expense at the completion of a project.
• FULL LINER TERMS :
This is somewhat a vaguer term given different port practices.
However, it generally implies that the freight amount provided
includes both shore based and on-board stevedoring,
lashing/unlashing, dunnage materials, securing/unsecuring and
all costs of presenting to/receiving the cargo from the ship’s
side; with the shippers/receivers just bearing the cost of
discharging from/reloading to the transport, along with the
usual port charges/levies/taxes etc.
• Frequently the terms are varied at different ends of the voyage
i.e. FILO (Free In/Liner Out), LIFO (Liner In Free Out) or FIFO
(Free In/Free Out) etc. To be absolutely sure of all liabilities, it is
always advisable to request that terms clearly and concisely
indicate what is/isn’t included in your particular contract - in
layman’s terms.
• Parties to Charter Party Contracts:
Charter party contracts are signed between
charterers and shipowners/ carriers. Charter party contracts are
signed before the bill of lading is issued. As a result charter
party contracts are separate documents than bills of lading.
• Understanding the Formation of a Charter Party Bill of Lading:
• A charter party bill of lading can be formed, only if a bill of
lading gives an express reference to a charter party contract on
its face. A bill of lading could give an express reference to a
charter party contract one of the ways described below: 
• If bill of lading contains a wording similar to the following:
"Issued pursuant to charter party dated.". 
• If bill of lading shows "freight payable as per charter party
dated" or similar phrase. 
• The document is entitled "Charter Party Bill of Lading",
"Congenbill 2007", "Bill of Lading to be used with charter
parties" etc...
Example of charterparty
contract
Thank you