CHARTER PARTY CONTRACT

The term “Charter Party” is the contract between the owner of a vessel and the one that takes
over the vessel for a certain amount of time or voyage. In commercial shipping it regulates
the relationship between the owner of the ship and the Charterer. It also includes all the terms
and conditions in regards with the charter, such as the operations of ship and cargo as well as
the freight or hire payments. If the terms of the charter party contract permits, the charterer
may enter into subcontracts with other shippers.

DIFFERENT KINDS OF CHARTER

Charter parties are broadly classified into two kinds. They are as follows:
a) Voyage charter parties
b) Time charter parties
The parties decide whether a charter party is voyage charter party or time charter party which
is shown in their contract. There is yet another kind of charter party contract called as Port,
berth or dock - charter party.

Time Charter Party

In case of time charter parties, the ship is leased out to the charterer for the time being
therefore it is also known as charter party by demise.

Voyage Charter Party

In Voyage Charter parties, the parties are for the carriage of a full cargo, which is hired not
for a period of time, but at a specified rate per ton, only for one voyage, between named ports
or the ports to be named on arrival in a given area. It is frequently used when there are
different varieties, and most commodities and trades have a particular type to suit their
purposes. Generally, the Voyage Party Contract is used by shippers of bulk quantities of
cargo such as phosphate, coal, grain, etc., have charter parties with special titles like "Fosfo",
"Americanized Welch Coal Charter Party", "Baltimore Grain Charter Party", etc. Here the
charterer assumes that there is no responsibility for the operation of the vessel but generally
pays for the stevedoring expenses in and out which will be included in the charter party. In
Voyage Charter Party contract, the master is particularly concerned with parties because of
the lay time, dispatch and demurrage clauses and the necessity of tendering the Notice of
Readiness to load or discharge. In this type of charter, the charterer contracts is an agreement
to provide a cargo at given rate per day. The Voyage charter contract is generally for bulk
cargo, in the scale of tons or cubic feet, for all or part of the carrying capacity of the vessel.

Bareboat Charter Party

In case of Bareboat Charter Party contract, the owner of the ship leases the entire bare vessel.
The charterer has the responsibility of operating it as though it were his own vessel. As long
as the vessel is covered by the chartered party, the owner of the ship loses authority over the
shipping vessel. The contract specifies that charterer pays all the expenses such as: fuel,
stores, provisions, harbour dues, pilotage, etc. and employs and pays the crew.
A clause in the charter party may however state that the master and the chief engineer must
be approved by the owner of the ship. The charterer is also responsible to deliver the ship in
the same order and condition as when delivered, ordinary wear and tear is accepted and
excused from charges. On delivery of the ship back to the charterer, the vessel is surveyed by
a team of representatives of both parties and the same is done on redelivery. The
representatives of the owner of the ship, mostly the port captain and the port engineer, may
check the logbooks for information relating to the groundings, striking objects and collisions
on redelivery. Fuel oil in the vessel on delivery is paid for by the charterer - at the current
price at the port at that time, and on redelivery, the owner of the ship pays for the fuel in the
vessel at the current price in the port at the time.

Port, Berth or Dock Charter – Party

A Port Charter Contract simply states the port at which the ship shall be made available is
called “port charter party”. The berth or dock charter party states where the ship is to be made
available at the specified loading spot in a port or dock. Here, owner of the charterer is
obliged to bring the ship at the specified berth or dock. If that place is not in a position to
receive the ship due to some congestion or some other cause, the waiting period would go to
the owners of the ship account.
In the case of a port charter party, the area which is designated as the commercial area of the
port is used by the owner of the ship where ships usually wait for berth and from where it can
be put at charterer. The commercial areas of a port are not identified easily but the house of
lord held that the emphasis has been not on distance from the loading place but upon the fact
that the ship should be at the disposal of the charterer.

Persons Bound By the Charter Party

Apart from the ship owner and charterer, the following persons are bound by a charter party.

Part owner of Shares in ship

Any part owner of a ship can reserve the right to its employment in any particular way,
though such employment is under a charter made by the managing owner appointed by
himself. In such a case, that part owner will also neither share the profits nor be liable for the
losses incurred in such voyage.

Purchaser
The purchaser or assignee having a partial interest in a ship under the charter is bound by the
charter in existence, but is not liable for expenses or in case of losses on charters that were
completed before his purchase.

Mortgagor or Mortgagee
A mortgager in possession has by statute the powers of an ordinary owner, except that he
must not materially impair the value of the mortgagee’s security. In case of security, the
charter of any kind does not impair his security therefore binds the mortgagee out of
possession, and the burden of proving that a charter is of such a nature is on him.
But the mortgagee is not bound by a charter, entered into by the mortgagor after the
mortgagee, which does impair the mortgagee’s security – e.g. consider a charter to carry the
contraband of war to a port of a belligerent power, in such a case the insurance against the
risk of capture is impossible.

Insurer or Underwriter
An underwriter on a ship, by acceptance of notice of abandonment of a ship, becomes entitled
to freight earned by her subsequently but does not become entitled to the benefits or liable to
the obligations of any pending contract of affreightment.