Charterparty Flashcards
What is a chaterparty
A Charterparty is a document containing a maritime contract where one party (a shipowner) agrees to put the entire carrying space of his vessel or part of it at the disposal of another party (a charterer) for the carriage of goods or passengers between named ports or for a stipulated period of time.
Charterparty is the anglicized designation of the Latin phrase ‘Carta Partita’ which means a paper (carta) which is parted/split (partita).
How do you fix a charterparty
The agreement by the shipowner to carry cargo by sea for the charterer is known as a contract of affreightment – which typically operates in two forms. The first – being those embodied in a Charterparty and the second being those evidenced by a Bill of Lading.
Similar to any other normal contract – we are here concerned with the ‘terms’ of the charter – but with focus on how confusion as to the terms of the Charterparty may arise and how to avoid such confusion.
What laws govern a charterparty
ü Express choice of law in the Charterparty – and where the court sits in an EU country – then see: Art. 3(1) of the Rome Convention.
ü Absence of an express choice of law in the Charterparty – the court would generally look at the circumstances as a whole to determine which country the contract is most closely connected.
What are the provisions used when the courts sits in an eu country and the main purpose is the carriage of goods
the imperfect provisions) in: Arts. 4(1), 4(4), 4(5) of Rome Convention. Furthermore, for other charters – the main purpose being – Not for the carriage of goods – and the court sits in an EU country - then see: Art. 4(2) of Rome Convention.
ü The Hague or Hague/Visby or Hamburg Rules - The Rules do not apply mandatorily to Charterparty – See: Art. V for the Hague/Hague/Visby and Art. 2(3) for the Hamburg Rules. Hence, to apply, it must be incorporated.
Whats a voyage charter
The shipowner agrees to use a named vessel to; at charterer’s instruction, carry a stated quantity and type of cargo, between at least two nominated ports which must be prospectively safe in return for an agreed price, called freight – settled either as a lump sum for the voyage or per ton of cargo. In essence, this is a geographical voyage.
Shipowner is responsible for providing competent crew and for running cost of vessel. A grace period called Laytime is provided in the charter for loading and/or discharge operations – within which time the charterer incurs no charges – but after which, charges known as Demurrage are incurred for the carrier’s benefit. See: MSC Mediterranean Shipping Company S.A. v Cottonex Anstalt [2016] EWCA.
What are the parties duties in a voyage charter party
The Shipowner:
The owner has a duty to deliver a seaworthy vessel matching the description in the charter at the stipulated time and place. Furthermore, the owner has a duty to pursue the contract voyage with reasonable dispatch and should not deviate from the contract voyage.
The Charterer:
The charterer on the other hand has a duty to nominate and use the vessel only between safe ports.
The combined duties of each of these parties have been a rich source of litigation – and we shall attempt to examine a few of them.
What is the duty to deliver a seaworthy vessel
The Charterparty will impose that duty on a shipowner. Also, English law will imply such a duty into the Charterparty. However, where the HVR is not incorporated – the owner is at liberty to exclude or limit this liability. But where the Rules are incorporated, the owner is only liable for failure of due diligence. However, he cannot escape this liability of due diligence by delegating or derogating the duty. See: The Muncaster Castle [1961], The Kamsar Voyager [2002] and The Eurasian Dream [2002]. Interestingly, the vessel or aspects of the vessel need not be seaworthy at all times!! The vessel is only required to be seaworthy for the stage of the voyage at which it is in – This is known as the Doctrine of Stages. Therefore, there is no continued duty on the owner to keep the vessel seaworthy throughout the voyage unless it is introduced into the charter by express terms – see: The Fina Samco [1995] and The Trade Nomad [1999]. Regardless of the importance of this duty, it has been held that breach of this duty is not a breach of a straightforward condition – rather it is a breach of an innominate term. – see:
The Hong Kong Fir Shipping [1961]
What is the duty to not deviate
Deviation is the unusual departure from the usual route of a contract voyage. Deviation is generally deemed a serious breach and one which can strip the owner of even the protection of all exclusion and limitation clauses and the safety net provided by his P & I Club. See: Hain v Tate & Lyle (1936).
Also, even where there is a liberty clause in the charter purportedly giving the owner permission to deviate – the courts have opted for a narrow interpretation of such clauses – see: The Irbensky Proliv [2005]. Furthermore, where the HVR is incorporated into the charter, the combined effect of Arts. IV(4) and III(8) – limits the use of such liberty clauses only to reasonable deviation. See: The Al Taha [1990].
What is the duty to nominate a safe port
If the port is unsafe at the time of arrival, then the charterer has a duty to nominate another safe port.
Safety here means that the vessel must be able to reach, use and depart from the port by simply exercising competent navigation and seamanship.
Where the owner accepts a nomination and proceeds to an unsafe port – he can reject it before reaching the port – see: Mid-West Shipping v Jute [1971]. However, if the vessel reaches the port and tenders a Notice of Readiness (to load or offload), then the owner cannot complain of a bad or invalid nomination. See: The Chemical Venture [1993].
What is a time charter
The owner is responsible for the nautical and technical operation of the ship while the time charterer is responsible for the commercial operation of the ship. Hire commences when owner delivers the vessel to the charterer at the agreed place and ends when the charterer re-delivers the vessel back to the owner.
It is the re-delivery of the vessel that triggers legal issues. Where use of vessel is paid for on time basis, charterers tend to want to over maximize its use – by trying for one last voyage (often in a rising hire market) – even when the voyage is unlikely to be completed within agreed time in charter.
How do parties agree for a duration of a charter
what is the duration of the charter? – The practice is for parties to agree a fixed time with some leeway e.g. ‘a period of 3 years, 30 days MOLCOP – where this is agreed – then 3 years + 30 days is the cut of point after which the charterer is in breach – see: The Peonia [1991]. Where the parties have agreed no leeway e.g. ‘a period of 3 years’ or where they have agreed ‘a period of 6-12 months’ – the court will imply a reasonable leeway time – see: The Democritos [1976].
As the charter draws to a close, the charterer is likely to give one last order to employ the vessel.
ü But what is the legal position if following the last order means the vessel is unlikely to be redelivered within agreed contract time?
ü Also, is the giving of this last order a breach?
What is the trip charter
The Trip Charter
This is a hybrid of the voyage and time charter features. Here, the contract is for one trip (voyage) – however – owner’s remuneration is by way of hire rather than freight. The trip must be completed within the agreed time otherwise the vessel becomes off hire and attracts charges rather than demurrage.
What is the contract of affreightment
The cargo owner or charterer makes available a specified amount of cargo and the shipowner has a duty to deliver the whole cargo to the nominated ports – using a vessel of his choice and regardless of the number of trips the vessel makes – provided the delivery is completed within the agreed time.
What is the demise or bareboat charter
Under a bareboat charter, or demise charter, the owners promise is nothing more than to deliver a bare vessel with no crew or stores – hence the name bareboat charter. The charterer is responsible for employing crew and paying for fixed and operating costs. Hence, why this type of charter is more aptly described as a contract for the lease of a vessel rather than for the carriage of goods. Thus, for all practical purposes, the charterer becomes the disponent owner of the vessel for the duration of the charter.
What is a bill of lading
The Bill of Lading is a negotiable instrument (i.e. transferrable from one buyer to another by endorsement because of the words ‘to order’) issued by the shipowner (through the Master) in respect of goods placed onboard his vessel. From the shipowner’s perspective, it does two things – firstly, it acknowledges that the goods in respect of which the Bill is issued has been placed in his care. Secondly, it will normally acknowledge the (apparent) condition of the goods placed in his care.
However, the Bill of lading serves three primary functions but depending on the terms of the sale contract and whether the Bill of Lading is in the hands of a charterer or non-charterer indorsee – the bill can serve all or some of its three functions.
