Everything you need to know about Charter-party Contracts

The charter-party is a contract that is signed where the pact conditions are decided in those free markets, and the only law that applies to it is that law of demand and supply. The terms of the contract are generally dependent on the shipowner, charterer, and the market. The contracting parties can also customize the charter-party contract by laying down the contract terms as per their needs, which can remain free from any other legal interference. In practicality, most contracting parties follow the standard contract. 

 

Types of Charter-party contracts:

There are four types of Charter-party contracts:

1. In a Demise, Dry (or bareboat) Charter, it is the charterer’s responsibility to take care of the hiring and maintenance of the ship during the time of the charter. He takes on the legal responsibilities of the owner.
2. In a Time Charter, the hiring of vessels happens for a certain amount of time. While the ship/carrier’s management is still in the hands of the shipowner, the charterer gets to decide the employment and the sub-charterer.
3. In a Voyage (WET) Charter, the charterer hires the vessel/ship/carrier for a particular voyage. Still, the vessel’s employment, for example, the master, the crew, bunkering, is provided by the shipowner.
4. In Lumpsum Charter, a shipowner accepts the offer to ship a certain quantity of cargo or goods from one port to another port for a stated sum of money.

 

Clauses:

A charter party contract should contain clauses like: 

i. Bunker clause -

This clause states that the charterer, at the port of delivery, should pay for all fuel oil in the vessel’s bunkers, and conversely, the shipowner should pay for all fuel oil in the vessel’s bunkers at the port of re-delivery at the current price at the respective ports. 

 

ii. Ship Clause -

This clause states the ship is seaworthy at the commencement of the voyage in every respect; in other words, the ship is fit to travel to the country for which it is taken. The shipowner must undertake this clause. 

 

iii. Ice Clause -

An ice clause is included in the bill of Lading (a legal document that is issued by a carrier to a shipper that mentions in detail the type, quantity, and destination of the goods being carried.) or in a charter-party contract when a vessel is going towards for a port or ports which may be closed to shipping due to ice when the vessel arrives or after the vessel’s arrival. 

 

iv. Lighterage clause -

This clause states all the ports of discharge that are safe ports in a certain range, e.g., Havre/Hamburg range, where lighterage can be done. 

 

v. Negligence clause -

A negligence clause states that the shipowner is excluded from any liability in case of damage or loss resulting from an act, default, or neglect of the master, mariner, pilot, or the carrier’s servants in the manoeuvring of a ship. 

 

vi. Ready berth clause - 

This clause states that the lay count of the days will begin as soon as the vessel has arrived at the port of loading or discharge “whether in berth or not”. This protects the shipowner’s interests against delays that arise from ships having to wait for a berth. 

 

vii. Days for Loading and Unloading -

This clause lays down the number of days allowed for loading or unloading and determines who is to bear the expenses involved. It is interesting to note, that in the event of a dispute the charter party contract is generally subject to scrutiny and interpretation by the court of law or, in most cases, arbitration. 

Even though the UAE law recognizes the bill of Lading as the evidence of a contract of carriage where the parties are the shipper, the carrier, and the consignee, the UAE courts are reluctant to hold consignees bound by terms on the reverse of a bill of Lading, arguing that the consignee is a third party to the original contract had no opportunity to agree with or disagree with the terms of the same. However, an arbitration clause agreed in the charter party agreement will uphold that both parties sign a charter party agreement incorporating such a clause. In case there is some sort of discrepancy in the Bill of Lading and charter-party contracts, the charter-party contract will supersede the relationship between the shipowner and charterer. 

 

Liability of the charter party:

As per Article 275 of the Maritime Code, the carrier will be liable for loss or damage of the goods during the time he takes on the goods for delivery at the port of loading until he delivers the same to the person concerned. 

Moreover, the charterer will not be liable for the damage and destruction of the goods in the following cases: 

(i) Ship is unseaworthy of the ship, but on condition that the carrier proves that he discharged the obligations set out in Article 272; 

(ii) Fire, unless it  occurred through the act or default of the carrier; 

(iii) Sea and its unpredictability or other navigable waters, or dangers or accidents thereof; 

(iv) Act of God; 

(v) Perils of war; 

(vi) Acts of public enemies; 

(vii) Any detention by a power, state or people or judicial arrest; 

(viii) Quarantine restrictions; 

(ix) Any layoffs or any other obstacle such as to prevent a continuance of the work in whole or in part; 

(x) Civil unrest and commotion; 

(xi) Any act on the part of the shipper or owner of the goods or his agent or representative; 

(xii) A shortfall in bulk or weight or any other shortfall due to latent defect or because of the nature of the goods or any defect inherent therein; 

(xiii) Insufficiency of packaging; 

(xiv) Imperfections of distinguishing marks for the goods; 

(xv) Rescue or attempted rescue of persons or any property at sea; 

(xvi) Latent defects not discoverable by ordinary examination; 

(xvii) Any other cause that does not arise out of the carrier’s default or those who were working under him or his representative. 

The burden of proof shall be upon the person alleging such cause to show that no default of such persons was instrumental in causing the loss or damage. Interestingly, a maritime claim concerning the charter-party contract has a limitation period of one year from the date the goods were delivered at the destination port. Maritime time cases are generally heard in Civil Courts in UAE. And to know more regarding shipping charter-party contracts, you could contact our Maritime department at Fotis International Law firm.