#3 BIMCO Ship Management Agreement Flashcards
How do you draw up a ship management contract
with ship owner
own contract
SHIPMAN 2009 as a template when preparing a ship management contract with a new ship owner (principal)
Best Practices in Ship Management
Best practices are the guidelines and ethics that represent the most efficient course of action in a given business situation.
Companies, regulators, or governing bodies can all set best practices for businesses.
Best practices serve as a roadmap for a company on how to do business and provide the best way to deal with problems and issues that arise.
Best Practices in Ship Management
Examples
Ship managers should never conceal their agency status to third parties.
Ship management companies are to be “co-insured” with ship owners in all insurance relating to the vessels.
Standard Ship Management Agreement
(Shipman 2009)
salient features
Date of commencement of Agreement
Technical Management (State “Yes” or “No”)
Crew Management (State “Yes” or “No”)
Commercial Management (State “Yes” or “No”)
Chartering Services period
Insurance (State “Yes” or “No”)
Annual Management fee
Responsibilities of Ship Managers
Depends on the contract between the ship owner and ship
manager.
Varies from ship management company to ship management
company.
May be responsible for one or more of the following functions
namely:
Crew Management
Technical Management
Commercial Management
Commercial Department
- Is the commercial operation of the vessel.
- To provide chartering services, negotiate employment of vessel.
- Payment to owner of all charter hire and/or freight revenues
collected. - Provide voyage estimation, calculation of charter hire, freight, and
demurrage and despatch. - Issue voyage instructions.
- Appoint agents and stevedores.
- Arrange surveys associated with commercial operation.
- Monitor the vessel for delays and problems.
Operations Department
- Provide voyage estimation, calculation of charter hire, freight,
and demurrage and despatch. - Issue voyage instructions.
- Appoint agents and stevedores.
- Arrange surveys associated with commercial operation.
- Monitor the vessel for delays and problems.
- To deals with claims.
- To contract for towage and salvage.
- To sign bonds, undertakings as agent for the ship owner.
- Operate the ship efficiently.
Accounting Services
- Establish an accounting system and procedure acceptable to
owner - Supply regular reports and record on expenses and fund
received - Maintain records on cost and expenditure for proper settlement
of accounts between the parties. - Maintain records on approved and non-approved expenses.
- Keep records and supporting documents on all the expenditure
for checking by Owners.
Budget and Management of Funds
- Manager to present to owner an annual budget for the
following 12 months on the expenses required. - Annual budget to be submitted three months b4
anniversary date of the agreement or expiry of the
current budget. - Owner to approved the budget within one month of
receipt. - If no news from owner within one month, the budget is
considered approved. - Manager to request fund in writing in advance from
owner for working capital on a monthly basis. - Fund to be made available to manager within 10
running days after receipt by the Owners. - To provide report on the actual and budgeted
expenses monthly to Owner. - Managers are not required to use own funds to
finance he provision of the management services.
Responsibility of a Ship Manager
To engage ship crew on behalf of owners, including to
replace and dismiss them.
To deals with claims on behalf of the owner.
To maintain ship in class and in efficient and seaworthy
condition
To negotiate and approve repair and maintenance
contracts.
To buy stores, spares and lubricants. To employ
advisers.
To contract for towage and salvage.
To arrange insurance (if required by owner).
To provide technical and operational information as required by
owner.
To obtain owner’s approval for non-budgeted expenses.
To sign bonds, undertakings as agent for the owner.
To make all necessary arrangements for cargo care.
To arrange dry-docking and class surveys.
Not to charter the ship out.
Not to sell the ship.
Undertakings of a Ship Manager to
his Ship Owner
To maintain discipline and operational efficiency “as
per good ship management practice”.
To give access to owner’s representative to the ship
and the owner’s cabin.
To give access to the owner’s representative to the
manager’s head office.
Not to modify the ship without prior approval.
To ratify and confirm all the manager lawful actions.
To indemnify the manager against all costs and claims.
To inform the manager about Owner’s policy changes.
To issue voyage instructions.
To indemnify the manager for any action of the ship’s master
related to instructions given by the owners, charterers or their
servants.
Not to withhold permission to conform to regulatory
requirements.
Not to withhold approval of non-budgetted expense.
Reimburse all reasonable expenses incurred
Funding for Ship Managers
Owner to fund the estimated expenses monthly in
advance, 7 days before each month.
Lien on the ship’s earnings of all debts.
Relationship between a Ship Owner
and a Ship Manager
If ship manager fails to effect the contract, there is a breach of
contract. Ship manager may be liable in damages.
Must comply with owner’s lawful instructions except illegal act.
Exercise care and due diligence. Not to do so is a breach of
implied duty.
Cannot delegate to another party unless approved by the
owner.
Avoid conflict of interest. In doubt, to get permission from owner
if serving more than one owner.
Keep confidential information even after the
contract expires.
No secret profit or bribe.
Keep proper accounts.
Manager’s right against owner
Indemnity from the owner against all expenses
or losses incurred
Cannot claim remuneration other than what
has been agreed.
Lien on money belonging to the owner
principal
Owner is a disclosed principal where the third party is aware of
owner’s existence.
Owner is an undisclosed principal if third party is unaware of
owner’s existence.
If owner is disclosed, he can enforce the contract against third
party.
If owner is undisclosed,
Third party is not bound to accept instructions from owner.
If third party paid money to the manager who then
absconded, owner is powerless to recover money from the
third party.
If an undisclosed owner pays money to his manager who
absconded with the money meant for the third party, the third
party can still recover the amount from the owner provided he is
able to identify the undisclosed owner.
Ship manager is not a party to the contract he has
made with a third party on the owner’s behalf as his
agent.
Sign as ‘agent for and on behalf of XYZ Company’.
Owner disclosed and named.
Claims
Shipman clause 18
Cargo damage
Insurance department and P&I club
Wrong initial response/Non-response
Hasty admission of fault can result in losses not
recoverable even from insurance.
Delay in handling or responding is also not
encourage.
Hague Rules 1 year.
Obtain a writ to arrest the ship.
