CHARTER

PARTIES
 CHARTER PARTY
– A contract whereby an entire ship or some
principal part of said ship, is let by the owner
thereof to a merchant or other person for a
specified time or use for the conveyance of
goods, in consideration of the payment of
freight. (Caltex Philippines, Inc. v. Sulpicio Lines,
G.R. No. 131166, September 30, 1999)
KINDS OF CHARTER PARTIES

1) Bareboat or Demise Charter

2) Contract of Affreightment
a) Time Charter
b) Voyage Charter
 BAREBOAT OR DEMISE
CHARTER
– The shipowner leases to the charterer the whole
vessel, transferring to the later the entire
command, possession and consequent control
over the vessel’s navigaton, including the master
and the crew, who thereby becomes the
charterer’s “servants”.
 IMPLICATIONS OF A
BAREBOAT CHARTER
1. The charterer becomes the owner pro hac vice, as such, he is liable for the
expenses of the voyage including the wages of the seamen. (Litonjua v. NSB,
G.R. No. 51910, August 10, 1989)
2. Charterer assumes the customary rights and liabilities of the shipowner in
relation to third persons dealing with him or with the vessel. (id.)
3. The master of the vessel becomes the agent of the charterer. (id.)
4. The charterer of a common carrier is converted into a private carrier. (id.)
5. The charterer is also liable for damages arising from negligence (Coastwise
Lighterage Corp. v. CA, G.R. No. 11467, July 12, 1995)
 CONTRACT OF
AFFREIGHTMENT
– A contract whereby the owner of the vessel leases part
or all of its space to haul goods for other.
– It may either be:
a) TIME CHARTER – vessel is chartered for a fixed period of time
or duration of voyage.
b) VOYAGE OR TRIP CHARTER – the vessel is leased for one or
series of voyages usually for purposes of transporting goods for
the charterer.
IMPLICATIONS OF A CONTRACT
OF AFFREIGHTMENT

1. The charterer hires the vessel only.

2. Master and crew remain in the employ of the shipowner.
3. The charterer acquires the right to utilize the carrying capacity
and facilities of the vessel and to designate her destinations for
the duration of the time or voyage stipulated.
4. Shipowner remains as the owner of the vessel.
5. Shipowner is liable for the expenses of the voyage. (Planters
Products, Inc. v. CA, G.R. No. 101503, Sept. 15, 1993)
 BAREBOAT AFFREIGHTMENT
As to liability
Charterer becomes liable to others caused Owner remains liable as carrier and must
by its negligence answer for any breach of duty.
As to Owner
Charterer regarded as owner pro hac vice for Charterer is not regarded as owner
the voyage
As to Possession & Command of Vessel
Owner of vessel relinquishes possession, The vessel owner retains possession,
command and navigation to charterer command and navigation of the ship
As to Conversion
Common carrier is converted to private Common carrier is not converted to a
carrier private carrier.
 PERSONS WHO MAY MAKE
CHARTER
OWNER/ OWNERS
CHARTERER – if not prohibited in the original charter.
SHIP AGENT – only if properly authorized by the owner by
virtue of an authority given by a resolution of the majority of
the co-owners
CAPTAIN OR MASTER – only in the absence of the ship agent
or consignee, and only if he acts in accordance with the
instructions of the agent or owner and protects the latter’s
interests.
 REQUISITES OF A VALID
CHARTER PARTY
1) Consent of the contracting parties;
2) Existing vessel which should be placed at the disposition
of the shipper;
3) Freight; and
4) Compliance with Art. 652 of the Code of Commerce:
a) In writing
b) Drawn in Duplicate
c) Signed by the parties; and
d) Containing the mandatory conditions in such contract.
 MANDATORY CONDITIONS
(Art. 625, Code of Commerce)
1) The kind, name, tonnage of the vessel.
2) Her flag and port of registry.
3) The name, surname and domicile of the captain.
4) The name, surname and domicile of the ship agent, if the latter
should make the charter party.
5) The name, surname and domicile of the of the charterer, and if
he states that he is acting by commission, that of the person for
whose account he makes the contract.
6) The port of loading and unloading.
 MANDATORY CONDITIONS
(Art. 625, Code of Commerce)
7) The capacity, number of tons or weight, or measurement which they
respectively bind themselves to load and transport, or whether the charter
party is total.
8) The freight to be paid, stating whether it is to be a fixed amount for the
voyage or so much per month, or for the space to be occupied, or for the
weight or measurement of the goods making up the cargo, or in any other
manner whatsoever agreed upon
9) The amount of primage to be paid the captain.
10) The days agreed upon for loading and unloading.
11) The lay days and extra lay days to be allowed and the demurrage for each of
them to be paid.
 TERMS TO REMEMBER
 PRIMAGE – bonus to be paid to the captain after the successful
voyage
 DEMURRAGE – the sum of money due by express contract for the
detention of the vessel in loading or unloading, beyond the time
allowed for that purpose in the charter party.
 DEADFREIGHT – the amount paid by or recoverable from a charterer
of a ship for the portion of the ship’s capacity the latter contracted
for but failed to occupy.
 LAY DAYS – days allowed to charter parties for loading and unloading
the cargo
PERMISSIBLE CLAUSES IN A
CHARTER PART

 JASON CLAUSE
PARAMOUNT CLAUSE
 RIGHTS & OBLIGATIONS OF THE
SHIPOWNER OR CAPTAIN
1) If the vessel is chartered wholly, not to accept cargo from others;
2) To observe represented capacity;
3) To unload cargo clandestinely placed;
4) To substitute another vessel if load is less than 3/5 of capacity;
5) To leave the port if the charterer does not bring the cargo within the
lay days and extra lay days allowed;
6) To place vessel in a condition to navigate; and
7) To bring cargo to nearest neutral port in case of war or blockage.
(Arts. 669-678, Code of Commerce)
RIGHTS & OBLIGATIONS OF
THE CHARTERER
1) To pay the agreed charter price;
2) To pay freightage on unboarded cargo;
3) To pay losses to others for loading uncontracted cargo
and illicit cargo;
4) To wait if the vessel needs repair; and
5) To pay expenses for deviation. (Arts. 679-687, Code of
Commerce)
 CASES WHEN FREIGHTAGE
IS NOT DUE
1) Jettisoned goods that are considered general average
loss;
2) Merchandise that are lost because of shipwreck or
stranding; and
3) Goods that are lost due to seizure by pirates or
enemies. (Arts. 660 & 661, Code of Commerce)
 REPLACEMENT OF VESSEL

The shipowner may replace the chartered vessel in the

following instances:
a) If, after receiving a part of the freight, should not find
sufficient to make up at least 3/5 of the amount which
the vessel may hold, at the price he may have fixed, he
may substitute for the transportation another vessel
inspected and declared suitable for the same voyage.
b) Substitution with consent of the charters or shippers.
 RESCISSION OF A
CHARTER PARTY
1) At Charter’s Request
a) By abandoning the charter and paying half of the freightage;
b) Error in tonnage or flag;
c) Failure to place the vessel at the charter’s disposal;
d) Return of the vessel due to pirates, enemies or bad weather;
and
e) Arrival at a port for repairs. (Art. 688, Code of Commerce)
 RESCISSION OF A
CHARTER PARTY

2) At Shipowner’s Request
a) If the extra lay days terminate without the
cargo being placed alongside the vessel; and
b) Sale by the owner of the vessel before loading
by the charterer. (Art. 689, Code of Commerce)
 RESCISSION OF A
CHARTER PARTY
2) Fortuitous cases
a) War or interdiction of commerce;
b) Inability of the vessel to navigate;
c) Prohibition to receive cargo;
d) Embargo; and
e) Blockade. (Art. 690, Code of Commerce)