Meaning of Charter, Types of Charters and Relevance To Trade
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ahadinreallifeMeaning of Charter, Types of Charters and Relevance To Trade
Uploaded by
ahadinreallifeMeaning of Charter, Types of
Charters and Relevance to Trade
Chartering
A shipowner hires out the use of his vessel
to a charterer in the shipping industry
Charter Party
Meaning of A contract under which a charterer agrees
to hire the use of a ship from a shipowner.
Chartering Sets out the terms and conditions and
helps in resolving conflicts
Freight
A price at which aRate
certain cargo is
delivered from one point to another
based on form of cargo, mode of
transportation, weight of cargo and the
distance.
Types of
Charter
Demise or
Voyage Time
Bareboat
Charter Charter
Charter
Characteristics of Voyage Charter
Based Charter Payment
on Party Mode
Vessel is leased out Specifics of cargo, ports, route, Per-ton basis
for a particular voyage destination or
Any restrictions Lump sum basis
Duties and responsibilities of
ship owner and charterer
Freight Rate
• Per-ton Basis
• When the weight of the cargo is considerably lower than the
ship’s capacity
• Lump-sum Basis
• When the weight of the cargo is high but within an acceptable limit
Characteristics of Voyage Chartering
Time Based Rules
Time allowed to charter to load The shipowner pays for the
and unload the cargo at a port. duties and berthing
Laytime charges at the port so
expect charterer to finish
on time
Exceeds the time Finishes earlier than
allotted to load and the time allotted to
Demurrage Despatch
unload the cargo load and unload the
cargo
Payment of Incentive
Penalty to from ship
Ship Owner Owner
Characteristics of Voyage Chartering
• Shipowner Responsibility
• Pays for crew cost, all running and voyage costs, port costs
unless the charter party specifically provides otherwise.
• Rights of Shipowner
• After discharge of cargo, the shipowner can take charge of the
ship and take up further consignments for other shippers
• Breach of Contract
• Any deviation without consent of the owner will be considered a
breach of contract.
Fly their own house flag No restriction on voyage
and, Time Based –
at their own expense, Charter only legal regulations
paint their own colours
on the funnel and/or sides.
Period
Trip Charter
Charter
Duration of
For Several
One
Years
Voyage
Responsibility of
Charterer
Characteristics of
Time Charter
• Commercial employment of the vessel
• Purchase of bunker fuel
• Cargo insurance, All cargo handling expenses, Appoint stevedores and
nominate agents
• Port and canal dues – pilotage, linesman
• Give orders and directions to the Master
• Make payments mostly on a daily basis
Responsibility of
Shipowner
Characteristics of
Time Charter
• Vessel’s running expenses, i.e. manning, repairs and maintenance,
stores, master’s and crew’s wages, hull and machinery insurance, etc.
• Terminate the Master if the charterer complains
Table of
Responsibilities
Service Provided Voyage Charter Time Charter
Crew hire and payment Owner Owner
Fuel and supply costs Owner Charterer
Cost of cargo operations Owner Charterer
Maintenance costs Owner Owner
The owner of the ship delivers it up to the charterer
Types of for the agreed period without crew, stores, insurance,
or any
The other provision
charterer is responsible for running the ship as if
Charter – itThe
were his ownobtains
charterer for the possession
period of theand
contract.
full control of
Demise or the vessel
The along
charterer
responsibility
payswith
forthe
all legal and financial
operating expenses,
including fuel,for it. port expenses and p&i and hull
crew,
Bareboat The charter period may last for many years and may
insurance.
end with the charterer acquiring title (ownership) of
Chartering the ship.
In a voyage or time charter, the charterer
charters the ship (or part of it) for a particular
voyage or for a set period of time. In these
charters, the charterer can direct where the
ship will go but the owner of the ship retains
Types of possession of the ship through its employment
Charter – of the Master and crew.
Compariso
n with In a bare-boat or demise charter, on the other
Demise hand, the owner gives possession of the ship to
the charterer and the charterer hires its own
Master and crew. The bare-boat charterer is
sometimes called a "disponent owner". The
giving up of possession of the ship by the
owner is the defining characteristic of a
bareboat or demise charter
A Contract of
Affreightment
• Is a contract between a ship-owner and the charterer
• The ship-owner agrees to carry goods for the charterer in the ship, or
• To give the charterer the use of the whole or part of the ship's
cargo-carrying space for the carriage of goods on a specified voyage
• Carry a number of cargoes within a specified period of time on a specified
route.
• Unlike other charter parties, no specific ship is named in the charterparty.
It is up to the owner or operator to provide the ships.
Relevance to Trade
• The ship owner gets a steady income and the charterer gets a
convenient way to send the cargo safely
• There is an agreement on the time of delivery
• Very cost effective when compared to air chartering
• Successful commercial decisions and clarity of contracts assist the
parties to limit or even to avoid some types of risks.
• The importer gets the cargo in good condition and in the right
quantity as the ship is exclusively to transport the goods for the
importer
Relevance to Trade
• For shipowners
• Shipowners earn sufficient revenue to operate their shipping
enterprises successfully and make a profit.
• For Charters
• The charter is need to carry the cargo safely on time, efficiently
and at the lowest freight rate possible to their chosen destination
is ensured
