The Charterer’s core rights and responsibilities

In module 4, we considered in an introductory way the various types of ‘contracts of affreightment’ under which goods are carried at sea. We will now concentrate on one key overall type of contract of affreightment; ship chartering. Ship chartering includes voyage chartering, time chartering and demise chartering. A ship’s charter has very deep and ancient routes and, simply put, is the hire of a vessel (crewed or uncrewed).
Our task is to largely investigate liner shipping (which is supported by bills of lading and related contracts of affreightment). However, we need to understand some key concepts and legal underpinnings of chartering. In particular we need an understanding of voyage charters.

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Time and demise (bareboat) charter

A time charter and a demise (bareboat) charter are, in fact, contracts of hire, where a charterer takes a ship on hire for a period of time. The charterer may use the ship to carry its own cargo, but the usual case is that the ship carries cargo belonging to other shippers. An example would be a shipping line that seeks to supplement its fleet.

Voyage charter

Voyage charter is the oldest form of chartering. In a voyage charter, the shipowner provides the charterer with all or part of the transport capacity of the ship in order for the charterer to transport its goods. The voyage charter may be for one or more voyages.
The payment is in the form of freight and the freight rate varies with the type of cargo and the duration and length of the voyage performed.
In this kind of chartering both the nautical and the commercial aspects of operating the ship are in the hands of the shipowner. The charterer in this case is like a normal shipper who has made a reservation for all or part of the ship to transport goods. The charterer has nothing to do with the operation of the ship itself, apart from at times undertaking the task of loading and discharge.
Normally, the charterer uses the chartered capacity to transport its own cargo, but at times the charterer may arrange for other shippers to use the chartered capacity. Thus, the charterer may or may not be the shipper.

Focus questions

The purpose of this module is for you to be able to answer the following critical questions:

Define the 3 sub-species of charterparty. What are their similarities? What are their differences?
Identify and describe the 4 successive and related stages within a typical voyage charterparty.
What are the possible contractual positions in regard to the preliminary voyage under a voyage charterparty? Describe the consequences of failure to comply with the obligations of the preliminary voyage under each of the 3 possible contractual positions.
Why are the legal mechanisms of laytime, demurrage, despatch and deadfreight as used in voyage charterparties so critically important to the business of shipping?
What are the essential legal and commercial differences between a bill of lading and a charterparty?

Context

This module narrows down the broad focus of module 5. Module 5 provided an introduction to the legal superstructure supporting world trade and transport. We now investigate one of the legal pillars within the broad legal superstructure, voyage chartering. Voyage chartering has its own particularities largely as a result of the practice being developed over millennia. This topic requires careful investigation.

What you need to do

Consider the focus questions above.

Carefully read through and study the Module 8 PowerPoint presentation.
(a) Read and study chapters 9 and 11 of the prescribed text Baughen (2012). In so doing, recall that Baughen is UK-based. This is a fairly large amount of reading so don’t rush, take your time.
Put very simply, the drive for commercial certainty has meant that there are contractual standard forms of charterparty agreement and there are international conventions that also provide in their own way for uniformity and certainty of contractual provisions.

(b) Terms/phrases/concepts –
Recall that in module 4, I introduced two key sources that may assist you with this activity from this module to the end of the unit. The first is the prescribed unit text itself. Baughen has a glossary as part of his excellent text, please refer to his work to assist you. The second source is an online maritime law glossary compiled by one of the leading maritime lawyers/academics in the world (Professor William Tetley of McGill University). It is very ‘friendly’, easy to use and tries to break down legal jargon and terminology.
http://www.mcgill.ca/maritimelaw/glossaries/maritime/

This week’s terms/phrases/concepts are –
‘charterparty’, ‘voyage charterparty’, ‘preliminary voyage’, ‘laytime’, ‘demurrage’, ‘detention’, ‘arrived ship’, ‘berth charterparty’, ‘port charterparty’, ‘notice of readiness’, ‘damages for detention’, ‘despatch money’ and ‘deadfreight’.

Lectures – note the following are alternative options:

(a) Distance students – Study the Lecture 8 PowerPoints downloadable from MyLO. (The audio recording of the attending lecture will also be available through MyMedia Service a few days after delivery.)

OR

(b) Attending students – Attend and participate in Lecture 8.
Read and study the following readings. Be aware of the guidance given with each reading. Please ensure when studying each reading, to highlight, add to your terms/phrases/concepts spreadsheet, and study visual representations.
Hint: When studying this and other materials, have the focus questions at the front of your mind. You may want to use the focus questions as headings when taking notes.

Reading 8.1 Baltic and International Maritime Council 1994. BIMCO Uniform General Charter – Code name: GENCON, https://www.bimco.org/~/media/Chartering/Document_Samples/Voyage_Charter_Parties/Sample_Copy_GENCON_94.ashx, accessed 21 January 2014.
This is a standard form of voyage charterparty issued by BIMCO. Scan and highlight/notate where useful. This document will be discussed in class.

Check MyLO for any additional learning resources or other guidance that I have posted and use any such resources/guidance.
MODULE 8 TUTORIAL – Work through and respond to the following critical activities.
Group A: Describe this module’s Terms/phrases/concepts.

Group B: Answer focus questions 3-4.

Group C: Answer focus questions 1-2.
Group D: Answer focus question 5.

Test your understanding! Go back to the focus questions.

Want to go deeper?

Turn back to reading 8.1. Rewrite the cancellation clause (clause 9) into plain English, describing the detail of the parties’ obligations under such clause. Is it easy? Compare the 2 documents. Is the drafting style of the BIMCO charterparty necessary?

Answers to these extension activities may be posted on the MyLO discussion forum (there is no requirement to do so) or may be discussed with the lecturer.

Ready to move on?

We have investigated the legal framework supporting a pillar of modern commercial shipping – the voyage charterparty.

We have a really good foundation that will allow us to examine the next module – the United Nations Convention on the Law of the Sea, 1982 (‘LOSC‘ or ‘UNCLOS’). UNCLOS is often referred to as the ‘Constitution of the Seas’. This is a grand statement, but it is not hyperbole! UNCLOS is a key foundation to our studies.

In considering UNCLOS, we have to consider the long history of the uses of the World’s seas and oceans. We consider international law and policy that has developed over millennia to address these key challenges for the development of the World!

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