Exam 1

Question 1

Chartering

Answer 1

When someone who needs a ship or space on a ship contracts with a shipowner for that space.
The term charter party came from the Latin phrase Carta Partita which means “divided document”

Question 2

DNRVAOCLONL

Answer 2

discountless nonrefundable vessel and or cargo lost or not lost

Question 3

FIOS L/S/D

Answer 3

free in/out and stowed ; lash, secure and dunnage

Question 4

FLT

Answer 4

full liner terms

Question 5

FILO

Answer 5

free in liner out

Question 6

LIFO

Answer 6

liner in free out

Question 7

BASIC RESPONSIBILITIES OF ALL BROKERS

Answer 7

To act strictly in accordance with authority given by the Principal
To exercise due diligence and skill in the execution of the assigned functions
To communicate all pertinent information to his Principal which might affect the Principals attitude in the negotiation
To render when requested strict account of any monies handled on behalf of the Principal (this has become less common, although the Broker still typically checks on status of bank wire transfers)
Not in any way to work for or further the interest of the other party to the deal

(BROKER WORKS FOR PRINCIPAL)

Question 8

CHARTERING BROKER AUTHORITY

Answer 8

!!The Charter Broker acts on the strict authority of his Principal!!
If a Broker concludes business that is clearly executed with the authority, of his principal, then the principal is legally bound
If the Broker exceeds his authority, the principal clearly is not bound by the result. The Broker could be held liable to an injured party
Thus it is very important, as a Broker, to always know the limits of your granted authority. This is especially important as regards freight rates or hire
It is important to remember that a Broker is merely a conduit of information and advice. You give your principal as much information as you have, but the final decision is completely up to the principal.

Question 9

AGW-WOG-WP-UCE or

Answer 9

All going well - without guarantee - weather permitting - unforeseen circumstances expected or fluid

Question 10

Subjects

Answer 10

Most of these are the details contained in all Charter Party agreements but not main negotiated terms.
Terms falling into this category are subject to Time Bar.
Typical “Subjects” are:
Subject Details
Subject Stem
Subject Board of Directors Approval
Subject Management Approval
Subject Supplier Approval of Nomination
Subject Owner’s Approval of Charterer
Subject Open/Unfixed

Question 11

What are the major societies today?

Answer 11

Lloyd’s Register (London)
American Bureau of Shipping (New York)
Bureau Veritas (Paris)
DNV GL (Norway-Germany)
Nippon Kaiji Kyokai (Tokyo)
They are completely independent of the insurance industry and the countries in which they reside
They carry out and supervise the annual and “special” surveys (4-5yrs)

Question 12

Length-over-all (LOA)

Answer 12

The linear distance from the most forward point of the stem to the aftermost point of the stern (important for potential business).

Question 13

Extreme breadth

Answer 13

The linear distance from the most outboard point on one side to the most outward point on the other side. This includes any projections on the ship’s side.

Question 14

Draft

Answer 14

The depth of the ship below the waterline measured vertically to the lowest part of the hull. (NAABSA - not always afloat but safely aground)

Question 15

Air Draft

Answer 15

The vertical distance from the vessel’s waterline to the highest fixed point on the ship, typically a signal mast on the top of the bridge. (important when traveling across bridges for the height, most newer bridges are tall enough to accommodate ships)

Question 16

WLTHC (Water Line To Hatch Coaming)

Answer 16

Height of the vessel’s hatch coamings above the waterline. (start from the bow when numbering hulls)
Needed to determine if vessel can fit under intended Id or discharge equipment, if shore equipment will be used

Question 17

Off Hire

Answer 17

The vessel itself is not in the condition expected for which it’s to sail (declares the vessel as off hire due to whatever the reason, the ship must be in class or it cannot sail)

Question 18

LNG Characteristics

Answer 18

(liquified natural gas)
Consists primarily of methane which has a boiling point of -162 deg C.
Carried fully refrigerated at -162 dec C, in large insulated tanks. It cannot be liquified with pressure alone
The vessels have a high cubic capacity with relatively little draft
The vessels did not typically have reliquefaction equipment, so they usually had fairly quick running speeds. Newer vessels are being outfitted with liquefaction equipment
Some “boil off” occurs and is used as fuel for the vessel

Question 19

Broker Negligence

Answer 19

Misrepresentation of creditworthiness
Misrepresentation of the vessel’s description or capacity
Failure to pass on firm offers
Passing on ETA for a voyage charter in bad faith or without qualification
Failure to pass load port nominations or redelivery notices
Failure to pass on demurrage claims or comply with time bars on submitting claims
Failure to lift subjects in time. In a volatile market this is worse
Overvaluation in financing on S&P deals

Question 20

Duties and Responsibilities of Owner

Answer 20

To make the vessel in all respects seaworthy and to secure that she is properly manned, equipped and supplied
The Owner must also arrange to have the vessel delivered or made ready for loading/discharging at the proper place and time in accordance with the Charter Party (laycan)
It is CRUCIAL that Owners know background, past performance history and the financial positions of potential Charterers (ie. Enron, Andre)

Question 21

Duties and Responsibilities of Charterer

Answer 21

In a voyage charter, the Charterer must be ready to either start loading or discharging operations when the vessel is properly tendered, by the Owner
In the case of a time charter, the Charterer must be ready to take delivery of the vessel at the time and place stipulated in the charter.
Is is becoming increasingly important that Charterers have the same understanding of Owners, before concluding business with them

Question 22

DOP vs APS

Answer 22

DOP = delivery dropping outward pilot station (at last port of discharge from previous voyage)
APS = Arrival pilot station (at new port)
Important Point: these are time charter terms not voyage charter terms

Question 23

What makes a successful ship broker

Answer 23

Integrity and ethics makes a successful ship broker. A broker can only function effectively if he has the trust of the concerned parties and more broadly, his concerned market. Accuracy is absolutely essential, but so is imagination and creativity

Question 24

Broker

Answer 24

An agent who arranges marriages
An agent who negotiates contracts of purchase and sale

Question 25

Laycan

Answer 25

(used in both Voyage and Time charters)
It’s the agreed time period when the vessel should be ready to load at the first port or be delivered to Charterer
Lay is short from of “Laytime not to commence before”
Under a voyage charter, the Charterer is not obligated to start loading the vessel before the beginning of the laycan, even if the vessel arrives early
Under a time charter, the Charterer is not obligated to take delivery of the vessel before the beginning of the laycan, even if the vessel arrives early

Question 26

considerations

Answer 26

The consideration for the charter party agreement - the money the charterer pays the shipowner for use of the vessel
The term is only employed when the Charter Party in question is a Bareboat or Time Charter agreement
For Voyage Charters, the “consideration” is referred to as Freight

Question 27

Main terms

Answer 27

(primary terms negotiated and agreed upon during the trade, the offer/counter offer process)
Identity of Owner
Identity of Charterer
Name & relevant particulars of vessel
Quantity & Cargo type
Load & Discharge Ports
Laycan - Lay Days/Canceling Date
Loading & Discharge Terms
Freight/Hire Rate
Charter Party Form
Commission
Terms of special importance to Owner/Charterer

Question 28

war risk

Answer 28

The intent is to define the rights and obligations of the parties when the crew, ship, and cargo are exposed to war risks
The war risk clause must have a definition of “war risk”

Question 29

war cancellation

Answer 29

The intent is to give both parties a chance to cancel the charter agreement when the freight market has drastically changed as a result of war between certain countries or when further trading is prevented as a result of vessel requisition or similar action from the vessel’s home country
The war cancellation clause is typically used in long term charter parties and COA’s, but growing to certain extent in t/c’s and voyage charters

Question 30

Hardship Clause

Answer 30

opportunity to renegotiate charter

Question 31

Bunker Clause

Answer 31

compensation for higher bunker prices

Question 32

Currency Clause

Answer 32

compensation for exchange rate fluctuation

Question 33

How a broker makes their money

Answer 33

Makes money only by putting deals together

Question 34

general average

Answer 34

all stakeholders in a sea venture proportionately share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency.

Question 35

Force Majeure

Answer 35

the Affected Party is prevented from performing one or more of its obligations under the contract. Protects the Affected Party from being in breach and liable in damages for non-performance due to force majeure.

Question 36

Preamble

Answer 36

(written contracts often start with a preamble) it’s a place in which the parties and the main contents of the agreement are presented
Any idea on specific contents?
Identity of Owner, Charterer, Broker
Vessel nomination identity, and any substitution (mv “Barbel P” or suitable sub)
Vessel trading limits (lakes fitted, canal suitable, IWL (Institute Warranties Limits)

Question 37

LPG Characteristics

Answer 37

(liquified petroleum gas)
Includes such gasses as propane, butane, and propylene. These have much higher boiling temps than LNG
Is sometimes carried fully refrigerated in large insulated tanks and sometimes semi-refrigerated in pressurized tanks
Due to the higher boiling temps and hence lesser need of refrigeration, the LPG’s typically have re-liquefaction equipment for the boil off
Both the LNG and LPG vessels require cooling of their tanks before loading of cargo