MSc Course in Ship Management

International Ship Chartering

by Professor Alkis John Corres

 SECTION ONE

CHOICE OF RULES IN THE RELATIONSHIP

BETWEEN SHIPPER AND CARRIER
 There are Rules which describe the relationship
between shipper and carrier.
There are presently three sets of Rules in existence, two of which in
force and another one expected to enter into force in the near
future. These are:
• The Hague Visby Rules (HVR) which enjoy widespread international
recognition, signed in 1924, cover 80% of global commerce.
• The Hamburg Rules (HR) which are more in favour of the
charterer/shipper side and have limited acceptance/application,
signed in 1978, cover 15% of global commerce, and
• The Rotterdam Rules (RR) which introduce some new concepts in
the relationship between the parties. The RR have been designed
with liner shipping more in mind, however theoretically there is
nothing limiting their application in the bulk trades (provided this is
reflected in a Clause Paramount).
 Brief description of the HVR

When applicable:
• The HVR apply only to international voyages i.e. the Bill of Lading
must concern the transportation of cargo to another country.
• These Rules explicitly exclude deck cargo and the carriage of living
animals.
• The Rules apply automatically in the following cases:
- When the Bill of Lading was issued in a signatory state to the HVR.
- When cargo loading takes place in the port of a signatory state,
and,
- When the two contracting parties have inserted in the Bill of Lading
a clause declaring that the contract of carriage has been made
under the HVR.
 Obligations of the carrier under the HVR

• The carrier is under obligation to provide a seaworthy and cargo-worthy

vessel on arrival to the loading port and before departure.
• According to Article IV(1) the carrier is responsible for cargo loss or
damage only in cases when he has failed his obligation to display ‘’due
diligence’’ to restore seaworthiness when lost.
• The carrier must also handle, store, transport, protect and discharge the
cargo appropriately while showing care.
• The above provision clarifies that the carrier has in fact a ‘’duty of care’’
towards the owner of the cargo in the legal sense of the term.
 Exemptions and defenses of the carrier under
the HVR
The carrier is exempt from liability in the following cases :
1. In cases of ‘’navigational fault’’ i.e. in cases of acts, omissions, or negligence
of the master, seaman, pilot or any other person appointed by the carrier in
connection with the navigation of the vessel. This exemption covers the
navigational fault only, the liability of the carrier for commercial fault
(regarding matters concerning the cargo) is not exempt.
2. Acts or omissions of the shipper or of the owner of the cargo, or their
servants.
3. Saving, or attempt to save, life and property at sea ( otherwise under
English Common Law).
4. Maritime perils beyond the usual.
5. Fire damage except if caused by the carrier’s fault.
6. Force majeure.
7. Insufficient packaging (provided the Bill of Lading bears remark)
 Exemptions and defenses of the carrier
(continued)..
8. Insufficient or faulty marks on cargo
9. Latent cargo defects not detectable by the due diligence of the carrier.
10. Acts of war.
11. Acts of state enemies and pirates.
12. Ship detention, application of restrictions by judicial or governmental
body or ship arrest as a result of court decision (in connection of the cargo
only).
13. Sanitary restrictions.
14. Strikes and lockouts, work stoppages resulting to partial or total cessation
of port operations.
15. Revolts and political upheavals (except terrorist activities).
16. Liability of the carrier for loss or damage to cargo not consequent to
carrier’s fault (however, with the burden of proof on the carrier).
 Carrier’s limitation of liability under the HVR.

• The liability of the carrier in respect of the cargo carried under the HVR is
limited to 666.76 SDR per unit or package, or 2 SDR per kilo of gross
weight, whichever is higher.
• The maximum limit is 2,000 SDR per metric ton.
• The above limitation does not apply in cases where the nature and the
value of the cargo have been advised to the carrier and the value of the
cargo is mentioned in the Bill of Lading.
• Different limitations of liability apply to containers.
• Time Bar: One year from the date of delivery of the cargo ( or from the
date it ought to have been delivered).
Brief description of the Hamburg Rules HR

A. When applicable

• When the BoL is issued in a signatory state, or if the contract is ruled by

the Hamburg Rules following agreement by the parties and duly
reflected in the C/P.
• When the port of loading, or unloading, belongs to a signatory state
(otherwise in HVR where only the port of loading counts).
• HR cover the carriage of live animals (otherwise in HVR) and also deck
cargo provided it is specifically mentioned in the BoL (HVR disallow both
of the above types of carriage).
 HR continued..

B. Carrier’s liability

The liability of the carrier under the HR is increased compared to the

HVR in three ways:
• Deletion of the list of carrier’s exemptions from liability and in
particular of the navigational error,
• Extension of the time bar for charterers’ claims, and
• Transfer of the burden of proof from the charterer/ shipper to the
carrier.
 HR continued…

C. Limits of liability and time bar

• The double criterion applicable to HVR still applies here but the limits of
liability are higher ( 835 SDR per package instead of 666.67 SDR in HVR
and 2.5 SDR per kilo instead of 2.0 SDR in the HVR).
• The carrier is responsible for delays in the delivery of the cargo up to two
and a half times the freight rate for the parts of cargo in delayed delivery.
• The carrier loses his limitation of liability in cases of willful misconduct and
gross negligence with knowledge that damage might occur.
• Time bar for claims is double to that of HVR, two years instead of one,
from the date the cargo was delivered (or it ought to have been
delivered).
 The Rotterdam Rules RR
The Rotterdam Rules are not yet in force and their eventual entry into force is
expected to significantly change the legal landscape of carriage of goods
by sea.
RR are the second attempt in four decades to bring changes to the widely
adopted HVR following pressure from shippers, charterers and receivers in
view of the limited success of the HR.
The RR bring radical changes to the status of port terminals by allowing for
direct action against them. At the same time they regulate the electronic
means of e-Commerce and incorporate environmental protection
parameters.
The RR – although being more friendly to door to door transport – are not a
multimodal convention.
 RR continued..

• The RR make use of the concept of ‘’Contract of Transport’’ which makes

the use of a BoL optional.

• There is no more an obligation to issue BoLs to evidence the existence of a

contract of carriage, however BoLs will not under the RR disappear. Their
role will be separate from the contract of transport.

• The requirement under the RR is to have a ‘’Contract of Transport’’ and a

‘’document of transport’’.
 Rights and obligations of the carrier
under the RR
• In general the obligations of the carrier are more extensive and cover door
to door delivery. To this end there is a duty to receive and deliver the
goods .

• Generally the carrier is responsible/liable in case of damage occurred

whilst the goods are in his own period of responsibility, unless he can
prove that damage was not due to his own fault, or under certain
circumstances.

• The periods of responsibility under the different Rules are as follows:

 HVR: Loading – discharging
 HR : Port of loading – Port of discharge
 RR : Receipt – Delivery of the goods ( considerably wider)
 Rights and obligations of the carrier
under the RR continued..
• According to Article 12 the duty of the carrier is to take the goods to
destination.
• Under Article 13 the obligation entails the duties to “ receive, load,
handle, stow, carry, keep, care for, unload and deliver the goods’’.
• The obligation for providing a seaworthy vessel is for the entire duration of
the voyage (i.e. continuous as under English Common Law) rather than
interrupted as in the case of HVR.
• The ‘’nautical fault’’ does not exist under the RR.
• Time bar is as per HR, i.e. two years.
• Delays in transit times can lead to claims under the RR.
 Rights and obligations of the shipper
under the RR.
• Duties: To deliver the goods in good condition and provide the requisite
information concerning the goods and the draft BoL.
• Rights: To obtain a BoL once the goods have been delivered to the carrier.
• The shipper does not have the right to limit his liability but there is a
question mark regarding the substance of such a liability when – according
to the Contract of Carriage – the responsibility for the goods rests with the
carrier.
• Freight Forwarders: Are accommodated under the RR either as ‘’carriers’’
or as ‘’documentary shippers’’.
• Liability limits : are higher than both HVR and HR at SDR 875 per parcel.
One party only is entitled to give instructions to the carrier.
• Ship arrest: The ability of the shipper to arrest the ship of the carrier has
been enhanced.
 SECTION TWO

CONTRACT TERMS,
NEGOTIATIONS AND THE CONSEQUENCES OF BREACHES UNDER
THE HVR
Ship chartering is a negotiations’ based procedure
between the cargo and the ship side.

• In a similar way to Marine Insurance negotiations, the display of ‘’good

faith’’ from both sides is a prerequisite.
• Negotiation revolves around the terms of a standard charterparty form
chosen by the parties.
• The parties have the right to add, delete, or modify the original provisions
to suit their requirements.
• When negotiations are completed – the fixture is outright – the chartering
contract goes ‘’on subjects’’ for final approval usually from the charterer’s
side. Subjects must be lifted within certain date, otherwise there is no
deal.
• The parties must be aware there are rules by custom on conduct which
have taken the form of Court decisions.
 Charterparties contain two basic categories of
terms, express and implied, which are both valid.

• Express are called the written terms referenced in the charterparty.

• Implied are called the terms which are not written but considered to be
mutually known, understood and accepted by the contracting parties.

• For example the need for the vessel offered to be in a seaworthy condition
on arrival and before sailing is an implied term.
 Charterparty terms can be distinguished according of the
severity of consequences of breaching them in the
following three categories..

• Representations
• Warranties
• Conditions

Representations: These are statements made during the course of

negotiations and it is important these are true. In case found to be untrue
there are two possibilities. If made without intention to mislead and/or by
mistake the representer must compensate the other party for any
damages it may have suffered. If, on the other hand, the representation
was made intentionally we have a case of misrepresentation which is
serious enough to give the right to the other party to declare the contract
null and void. For example, the owners may have described their vessel as in very good
condition after extensive repairs. If found that no such repairs had taken, place the owners
may be found to have intensionally misrepresented the case and the charterer may choose
to rescind the contract.
 Warranties and Conditions

• Warranties: are usually given concerning the performance of a vessel or

certain details of the fixture. The breach of a warranty gives the right to
the injurious party to claim compensation but it does not give it the right
to cancel the contract. Typical cases of breach of warranties are the speed of the vessel
and its fuel consumption. The Courts have also found a delayed redelivery of a vessel from
Time Charter to be a breach of a warranty.
• Conditions: The breach of a condition is a very serious matter as it gives
the right to the injured party, not only to cancel the contract but also to
claim compensation for damages. Court decisions have confirmed that:
• the flag and class of the vessel,
• the date of sailing from the port of loading,
• the position of the ship at the date of signing the charterparty,
• the carrying capacity of the vessel and
• its readiness to load within the agreed dates

..belong in this category of terms.

 To somewhat blur the picture there is also
another category of terms.
• These are called ‘’innominate terms’’ indicating that the degree of
graveness of consequences in case of a breach can be either that of a
warranty, or that of a condition.
• In practice the outcome of such a case depends on the severity of damage
inflicted on the injured party by the breach. Classic example of an
innominate term is seaworthiness, i.e. the lack thereof.
• In such cases the claimant can either seek compensation for the damages
suffered as a result of the breach ( i.e. like a breach of a warranty), or
rescind from the contract claiming at the same time compensation for the
damages incurred (i.e. like a breach of a condition).
• The judgment in such cases rests with the Court, or the Arbitration Court,
dealing with the issue.
 The fundamental implied obligations of the
contracting parties are as follows..
The carrier
• Is under obligation to provide a seaworthy vessel, suitable in all respects
for the loading and transportation of the cargo mentioned in the
charterparty.
• He is also obliged to execute the voyage without any undue delay , and..
• ..not to deviate from the proper route unjustifiably.

The charterer on the other hand is obliged to

• refrain from loading dangerous cargo on the vessel without due notice to
the master, and..
• ..to indicate a safe port for the discharge of the cargo (should that become
necessary as a result of conditions rendering the original port of discharge
unsafe, or for any other reason).
 The meaning of the word ‘’seaworthiness’’ is generally wider
than the common understanding of the word suggests.

A vessel can be unseaworthy for a variety of reasons involving, but not limited to, the
following:
• Ship safety including aspects of technical safety ( hull and/or machinery aspects
including equipment onboard)
• Legal and administrative efficiency ( i.e. compliance with international and national
legislation, flag bylaws etc)
• Sufficient supplies (fuel, stores, provisions, fresh water and spare parts) for the
execution of the voyage.
• Appropriate manning according to flag requirements with duly certified officers
according to international requirements, and
• Suitable spaces onboard for the safe storage of the cargo during voyage (cargo
worthiness).

Lack of any of the above can lead to un-seaworthiness claims by various parties.
Attention I drawn on the last bullet where unsuitable cargo loading spaces can lead not
only to the rejection of the vessel/ cancellation of the C/P but also to claims for
consequential damages.
In contrast to English Common Law provisions which demand the
vessel to be in seaworthy condition throughout the voyage, the
HVR allow for an interrupted obligation of the owners.
• The Hague Visby Rules (Carriage of Goods by Sea Act in the UK) have
replaced the above onerous obligation of the owners with the duty to
display ‘’due diligence’’ for maintaining the vessel in seaworthy condition.
• According to these provisions a ship must be in seaworthy condition on
arrival at the loading port and before departure ( for the loaded leg of the
voyage), therefore the obligation is not continuous anymore but
interrupted.
• In case of an event rendering the vessel unseaworthy the owners are
under obligation to display ‘’due diligence’’ to restore the vessel to
seaworthy condition.
• As previously said breaches to the innominate term ‘’seaworthiness’’
require arbitration or Court interpretation regarding the severity of
consequences for the owners.
 Any reference to court decisions raises the
question of the ‘’burden of proof’’.
• Interestingly there are more parties than the charterers which may
become involved in seaworthiness – related claims ( e.g. shippers,
receivers, cargo interests, P+I clubs etc).
• As a general rule the burden of proving the lack of seaworthiness will be
for the party claiming the un-seaworthiness of the vessel.
• In doing so the claiming party must a. Prove the un-seaworthiness, b.
Prove the extent of damages it has suffered as a result and also c. Prove
the causal relationship between the lack of seaworthiness of the vessel
and the damages incurred.
• The owners, on the other hand, will have to prove in Court that they have
exercised ‘’due diligence’’ in their efforts to restore the vessel in
seaworthy condition.
 SECTION THREE

REASONABLE DISPATCH, DEVIATION AND SOME

OBLIGATIONS ON THE SIDE OF THE CHARTERER
UNDER THE HVR
 The obligation of the owners to execute the voyage
with ‘’reasonable dispatch’’.
• According to English Common Law voyage delays related to vessel repairs
following weather damage and delayed sailing due to unusually adverse
weather conditions are considered as reasonable and will not trigger
claims under this heading.
• Under the HVR reasonable is considered any delay in the execution of the
voyage as a result of actions which would take an average, prudent ship
owner on the same ship and voyage acting under the same circumstances.
• It is evident the judges in this occasion are given the widest possible
discretion, bound only perhaps by previous court cases.
• As in the cases of seaworthiness, voyage delays are also innominate terms
requiring court interpretation regarding the extent of consequences for
the owners.
 Deviation from the ‘’proper’’ route is only
allowed under HVR when found ‘’reasonable’’.
• In theory ‘’ proper route’’ is the one described in the C/P which in practice
is seldom – if ever - the case.
• Thus one is lead to the ‘’usual route’’ i.e. the one mentioned in maritime
guides and publications. Failing that, one is left with the direct
geographical route.
• Only intentional deviation qualifies as deviation from the voyage route
thereby suggesting that unintended deviations do not count as such.
• Under the HVR deviations from the route are justified provided they fall in
one of the following two cases: A. Saving of life at sea, or attempted saving
of life or property, and B. Whenever such deviation is reasonable.
• The reasonableness of such a deviation will always be judged by the court
as the consequences of unjustified deviation are considerable.
 Consequences of unjustifiable deviation.

• Under English Common Law unjustifiable deviation is considered as

fundamental breach of the contract of carriage.

• That means that the carrier cannot benefit from limitation of liability
provisions in the contract.

• Under the HVR in cases where the charterer has rescinded the contract of
carriage demanding compensation, the carrier may claim reasons to avoid
liability under IV.2, or to limit such liability under IV.5 or claim a time bar
of such claims once one year has passed.
 Liability of the charterer from undeclared
loading of dangerous cargo.

Definition: Dangerous cargo is considered :

• A. Cargoes mentioned in the IMDG Code of the IMO,
• B. Cargo than can be a hazard for other cargoes onboard the vessel and
• C. Cargo that can lead to a prohibition to sail or to the arrest of the vessel.
The liability of the charterers to advise the carrier about their intention to
load dangerous cargo on the ship is strict and absolute and any breaches
lead to consequences of breach of a condition.
The carrier, once advised, has the option to either refuse loading the
dangerous cargo on the vessel, or to request from the charterer- or take
himself – protective measures which will render the carriage of the cargo,
safe.
 Charterer’s duty to nominate safe port

• Breach of this obligation has the consequences of a breach on a warranty.

• Whether a port is safe for a specific vessel to enter is often a matter of
prevailing conditions. This means there are no ports which are always
safe, as weather conditions play an important part. Examples of an unsafe
port can be as follows:
a) Icebound port.
b) Strong side winds (usually for large ships).
c) Unreliable passage and port depth data.
d) Non-availability of tugs with appropriate power for the vessel size.
e) Political risks, upheavals.
f) Port where discharging the specific cargo is prohibited (e.g no low-flash
port).
SECTION FOUR

VOYAGE CHARTERS
 The main forms of ship charter are the
following..

• Voyage charter: Is the contract of carriage of cargo by a certain vessel

under specific terms within agreed days for loading (laycans).

• Time charter: Is the charter contract under which a vessel is chartered for
a specific time period under specific terms.

• Bareboat charter: Is also a form of a time charter whereby the bareboat

charterer assumes the role and duties of a shipowner (i.e. both the
technical and the commercial management of the vessel).

• Contract of Affreightment: Is the agreement for the carriage of high

volumes of transportation within a certain time period with fixed freight
rates for the destinations involved.
 The four stages of a ship voyage are as
follows..
• The preliminary voyage, or ballast voyage, i.e. the voyage needed in
order that the vessel arrives at the loading port within the agreed dates.

• The loading operation, i.e. the stage during which the charterer/shipper
has to load the vessel with a full and complete cargo usually plus or minus
5%. (Failure to comply with this obligation leads to the obligation to pay Deadfreight i.e.
freight for the cargo which was not loaded).

• The loaded voyage stage , and

• The discharging operation in one or more ports where any deviation from
the contractually agreed laytime will be monitored and dealt with (in way
of demurrage, or dispatch) .
 Main characteristics of a Voyage Charter

• It is the simplest and the most frequent type of ship charter whereby the
charterer pays the freight rate (usually per ton, or lumpsum) and
demurrage (only in cases where the contractually agreed laytime is
exceeded).
• The ship owner pays for all the expenses of the voyage including bunkers
and agency charges.
• Freight is payable before, or after cargo loading.
• Freight is usually prepaid during cargo loading, upon sailing from the load
port, or a few days after sailing.
• Freight can also be paid later before breaking bulk (BBB), during
discharging, or within a specified number of days after discharge.
 Voyage charter in a nutshell
• The C/P specifies the arrival of the fixed ship within specific laydays. In
case the ship arrives to the loadport late – and the charterers feel unable
to grant an extension – the charterers have the right to declare the
contract null and void.
• The vessel tenders a Notice of Readiness (NOR) on arrival which should
trigger the boarding of cargo surveyors to verify the suitability of the ship’s
cargo spaces for the cargo to be carried.
• Upon surveyor’s satisfaction and issuance of a certificate the charterers
must normally accept the NOR.
• After NOR is accepted the pilot boards the vessel for berthing .
• Time starts to count according to the individual C/P provisions only after
NOR is accepted by the charterers.
• In all cases the time taken for the vessel to sail from the roads to the berth
allocated does not count as laytime (it is considered part of the voyage).
 Voyage charter in a nutshell continued..
• With the term ‘’laytime’’ the C/P makes reference to the agreed time
during which the charterer must complete the loading and unloading
operations of the vessel.
• In case laytime is exceeded the charterer is in breach and is under
obligation to pay demurrage i.e. extra charges for keeping the vessel
occupied beyond the agreed time.
• The daily rate for demurrage is specified in the C.P. No proof of any
damages is necessary for a demurrage claim.
• In case laytime is not used in its entirety, in dry cargo only, the owners may
be obliged to pay ‘’dispatch’’ money to charterers for freeing the vessel
earlier.
• Customarily Dispatch=1/2 Demurrage
 Freight payment in Voyage Charters

• Freight is payable in cash.

• In the currency specified in the charterparty.

• The money must be paid into the bank account indicated by the owners at
the time specified in the C/P.

• Freight is not considered as paid unless the money is credited to the bank
account of the owners (more about this matter under the time charter
discussion later).
 There are two contracts which run in
parallel during the carriage of goods by sea.

• The first one is the chartering contract as discussed so far between

charterer and carrier which concerns the reservation of the vessel (or part
thereof) for the carriage of the cargo described in the C/P.

• The second contract is between the carrier and the receiver of the cargo
as manifested by the Bill of Lading (BoL). The BoL is proof of the type and
quantity of the cargo loaded and in some cases of the value of the cargo.

• The BoL is a title to the ownership of the cargo onboard and as such it
allows for the transfer of such ownership before cargo is delivered in a way
similar to cheques.
SECTION FIVE

TIME CHARTERS
 The basics of a time charter
• A time charter contract involves the undertaking of the time charterer to
pay during the contract period for the hire, the bunkers and the port
expenses of the vessel.

• A time charter starts (along with the obligation for freight payment) with
the delivery of the vessel – which can take place anywhere – and stops
with the redelivery – which can also take place anywhere, although many
owners prefer it to take place in a port.

• In T/C freight is always prepaid, usually two weeks or monthly, in advance.

• Upon delivery of the vessel the commercial management of the vessel is

transferred to the time charterer for the duration of the contract while
the technical management stays with the owners.
 On and Off Hire

Once the vessel is delivered into T/C and for the duration of the charter period the time
charterers are under obligation to pay hire by the due dates to the owners.

• This fundamental obligation of the charterers is suspended when events

take place preventing or limiting the use of the vessel.

• Such events are described in the C/P and can be different from one
contract to another.

• No fault on the part of the owners is necessary to trigger off-hire events.

• The key parameter in off hire is the loss of time, which is expected in
contracts where vessel remuneration is time linked.
 T/C basics continued..
• The transfer of the commercial management of the vessel to the time
charterer upon delivery means that this party acquires – in exchange for
the hire it has undertaken to pay - full control on the activity of the vessel
and freedom to order it to load and discharge wherever it requires.
• The time charterer is free to use the vessel for its own transport needs, or
to trade it as a lawful owner would in the open market, or take part in
Contracts of Affreightment (CoAs about which see later in this section).
• The vessel must be redelivered to her owners within the time prescribed
in the C/P.
• In case the time charterers wish the vessel to be redelivered earlier
(underlap) they need to inform the owners in writing and the latter are
under obligation to take the vessel back first and then discuss
compensation.
• In case the vessel’s redelivery takes place later than the contract dates
(overlap) this is considered a breach of a warranty and the daily hire of the
vessel will need to be agreed anew.
 Early and delayed redelivery in T/C
• In case of an underlap redelivery - i.e when time charterers advise owners
in writing that they wish to redeliver before the contractual date – the
owners will have to take the vessel back and try to reach a commercial
agreement for the residual part of the T/C.
• Failing this, the parties will need to take the matter to court or arbitration
procedure for a resolution of the dispute.
• In such cases the state of the relevant freight market is taken into account
(higher, lower, or the same as at the time when the vessel was chartered)
and the subsequent employment of the vessel in order to subtract such
earnings from the time charterer’s obligation to compensate.
• Similar reasoning is applicable in cases of overlap delivery where the
question arises, which must be the daily rate for the extra time take to
redeliver.
 Issues surrounding the legitimacy of the
last voyage in overlap redelivery.
• In view of serious consequences for the owners (e.g. missing the laycans
for another time charter) in cases of possible abuse of time charterer’s
right to order the vessel at will during the contractual T/C period, this
matter has a rich history of admiralty court rulings.

• The courts have sought ways to make sure that the order on the part of
the time charterers for the last voyage was given in belief that the vessel
would be redelivered within the contractual dates (legitimate last voyage).

• If otherwise, the last voyage is considered illegitimate taking also into

account any tolerance margin (usually 4-5%) incorporated in the contract.

• The two options lead to different possible outcomes for the owners.
 Overlap redelivery issues continued..
Legitimate last voyage order
In order that the last voyage is legitimate the time charterer must be in belief
that it will not be conducent to a delayed redelivery in three different
points in time, i.e.
• At the time when the order was given,
• At the time when the execution of the order starts, and
• During the time when this last order is executed.

• (House of Lords, The Gregos, 1994). With this court decision the phenomenon of a
last voyage order which is legitimate at the time it was given and illegitimate
during its execution is eliminated, given the impossibility of refusal to execute the
voyage on the part of the owners due to already undertaken responsibilities to
third parties via signed and released Bills of Lading.
 Owners’ options in overlap redelivery.
• In case the order of the last voyage is legitimate the owners are under
obligation to execute and the charterers must compensate the vessel with
the contractual rate until redelivery.

• This is also applicable in cases where the market rate is lower than the
contractual rate.

• In cases where the prevailing market rate is higher than the rate of the
contract the time charterers are under obligation to pay additional
compensation to the owners equal to the difference between contractual
and market rate.
 Owners’ options in overlap redelivery
continued…

In case of a illegitimate last voyage order the owners have the right to refuse
execution offering at the same time an alternative to charterers.

• If the time charterers insist on their illegitimate last voyage order the
owners can consider it as repudiatory breach of contract, proceed to a
new chartering contract and sue the charterers for damages resulting
from repudiation.
• Alternatively, the owners can agree to the execution of the illegitimate last
order demanding the contractual rate until the end of the time charter
period with additional compensation equal to the difference between
market and contract rates on top of the contractual rate for the extra time
taken (only in case the market rates are higher than the contract rates).
Owners’ right to withdraw vessel from T/C
• The Owners' have the right to withdraw the vessel for late payment of
hire, subject to giving the charterers timely notice when hire is late and
reserving their right to withdraw.
• All the owners have to prove is that hire has not been paid by the due
time - regardless of intention or negligence of the time charterers – and
that the charterers have been duly notified as above.
• Later hire payment than the due date does not correct the charterer’s
breach and consequently does not affect the owners’ right to withdraw,
except in the following two cases:
 The owners declare in writing that they consider the delayed payment as
timely and accepted, or
 There is no notice – within a reasonable time period from them to
charterers – refusing the delayed payment.
• Acceptance of part-payment of hire from the owners does not affect their
right to withdraw the vessel.
 The anti-technicality clause
• This clause aims at the protection of the charterers from errors and
omissions on their side for delayed hire payment which could easily lead
to losing the vessel under time charter possibly with serious commercial
consequences.
• According to this clause the owners undertake the obligation to notify
charterers in writing about their intention to withdraw due to non-
payment of the hire giving them time (usually 48 hrs) to proceed with the
payment, while guaranteeing that the vessel will not be withdrawn before
the date notified.
• The wording of the letter – which must not be delivered earlier than the
midnight of the due date of the payment – must make clear beyond any
doubt that the vessel will be withdrawn unless payment is received within
the notice period.
• The charterers are not under obligation to be privy of the contents of such
letter unless it is delivered during working days/hours.
 SECTION SIX

OTHER FORMS OF SHIP CHARTER

 Bareboat charters BBC
• Bareboat charters are a relatively recent form of charter the first
application of which dates back to the year 1951 when the Federal
Republic of Germany allowed for the first time registration of a foreign flag
vessel in the German registry on condition it was chartered by a German
company or citizen for a specific period of time.
• Bareboat charters are a sub- category of time charters where the time
charterer assumes both the commercial and the technical management of
the vessel for the duration of the contract.
• The important difference with a time charter is the limited incidence of
off-hire events as the same party – the bareboat charterer – is also
responsible for technical management issues.
• Bareboat charters are widely used by financing institutions in cases of Sale
and Leaseback and Hire Purchase as they allow banks to remain legal
owners of the asset (vessel) while the bareboat charterers assume the role
of a disponent owner.
 BBC continued..
• In order that bareboat arrangements become possible both registries –
the one from which the ship comes and the other to which the ship goes
to – must comply with the provisions of the United Nations Convention on
Conditions for Registration of Ships (1986), Article 12.
• More specifically, the registry of origin must allow for ‘’bareboat out ’’ –
i.e. its own registered vessels to be able to enter for a specific time period
into another registry – while the receiving registry to allow for ‘’bareboat
in’’ i.e. the acceptance of vessels from other registries for a specific time
period.
• International law clearly demands that every ship is under obligation to fly
one flag, therefore there must be a written agreement between
originating and receiving registries before the transfer takes place.
• All open registries and a limited number of national registries have
incorporated bareboat registry arrangements in effort of enhancing their
commercial flexibility.
 BBC continued…
• Entry into a bareboat registry takes effect on basis of a bareboat charter
in the name of the bareboat charterer and it does not require a deletion
certificate from the registry of origin.
• In fact from the time when the vessel enters into the bareboat registry of
a certain country and raises its flag it assumes all rights and obligations
under the legal system of the country, except for matters concerning the
ownership of the vessel and securitization of debt (such as mortgages).
• While on bareboat charter the vessel can be sold by its original owners to
another party without any consequences regarding the bareboat contract
on condition that such change of ownership is reported in writing to the
bareboat registry of the receiving state.
• A bareboat charter ends naturally when the contract period is over and it
is not renewed and when the time period for which the originating
registry has given its consent is over.
• It can also theoretically end at any time if the originating registry repeals
its consent for the specific charter.
 Contracts of Affreightment CoA

• The main purpose of a Contract of Affreightment (CoA) is to oblige one or more

carriers to lift a fixed or determinable quantity of cargo of a specified type over a
given period of time to specific destination(s).
• Usually, the CoA is not limited to one particular vessel, but operates as a series of
voyage charters. Freight is payable on the quantity of cargo transported and the
carrier bears the risk of delay en route.
• CoAs in essence involve two promises. The shipper promises to provide a certain
overall quantity of cargo over a period of – usually – one year, and the carrier(s)
promise to transport that cargo to the agreed destination(s) within the contract
period at the predetermined freight rates.
• CoAs protect shippers from freight market rises without the risks of a time charter
while providing large volumes of cargo to carriers.
 CoAs continued…
• According to Steamship Mutual:’’ Given the long term nature of the
contract, a COA is almost always tailor made to meet the specific needs of
the parties concerned. These parties are the shipper or buyer of the cargo
who is often motivated by requiring certainty for the costs of
transportation, and the ship-owner who is concerned with providing
assured long term employment and flexibility for his owned or chartered
in tonnage.
• COAs enable the ship-owners to be flexible and allow the vessels to be
fitted into a pattern of trade that maximizes laden as against ballast
distances and allows such arrangement to be concluded at very
competitive rates of freight.
• As a result, COAs contain very few standardized terms, other than the
individual voyage charter terms that govern each lifting once the vessel
has been tendered for loading.
• The least standardized part of the contract will be the shipping
programme and nomination provisions, and it is these provisions that are
the most abused or contested over the period of a lengthy COA.’’