consecutive voyage charter meaning

Voyage Charter : Definition & Full Guide

• By MascotMaritime
• April 22, 2022
• 3 mins read

Table of Contents

What is a voyage charter.

Voyage charter definition : The voyage charter is a contract (voyage charter party) between the shipowner and the charterer wherein the shipowner agrees to transport a given quantity of a shipment, using a pre-nominated vessel for a single voyage from a nominated port (say X) to a nominated port (say Y), within a given time period.

Who is a voyage charterer? What is the freight & voyage charter party? 

The person who charters the vessel is called the voyage charterer , the payment is called freight & the contract is called the voyage charter party. The freight rate is calculated as $/tonne of shipment. 

What is the most significant part of a voyage charter party?

The most significant parts are the description of the voyage, size & capacity of the vessel, cargo, the allocation of duties and costs in connection with loading and discharging, the specification of the freight, and the payment of the freight, the laytime rules, the allocation of the liability for the cargo and the allocation of other costs and risks.

Depending on the circumstances, other questions and clauses can be very important in the negotiations between the owners and the charterers.

In this type of charter, the vessel must be in the position that the owner specified when the charter was concluded & the vessel must, without undue delay, be directed to the port of loading.

At the port of loading, the charterer must deliver the agreed cargo. 

The cargo must not be dangerous cargo unless otherwise agreed. The cargo must be brought alongside the ship at the loading port & must be collected from the ship side at the port of discharge.

Mainly with the bulk cargoes, the charterer often undertakes to pay to load and discharge & often clauses of f.i.o or f.o.b are met. Very often parties agree on f.i.o.s or f.i.o.s.t terms.

In voyage charter, the discharge port need not be nominated in the charter party & in such cases, the charterer must have the right later to direct the vessel within a certain range to a specific port of discharge.

In a voyage charter where the charterer carries out loading &(or) discharging, it is generally agreed that the charterer will have a certain period of time at his disposal for loading & discharging of the vessel & it is called laytime .

If the charterer fails to load and(or) discharge the cargo from the vessel within the laytime, then he has to pay compensation for the extra time used called demurrage . Once in demurrage always in demurrage.

In other cases, if the charterer loads &(or) discharges the cargo from the vessel more quickly than the agreed laytime time, then he is entitled to claim compensation (only if agreed earlier) called despatch money.

In voyage charter, unless lumpsum freight is paid, the owner may claim freight compensation if less cargo is delivered, or cargo is delivered in such a way that ship’s capacity cannot be utilized due to broken stowage . This freight compensation is called deadfreight .

Voyage charter party agreement example:

Click here to see the example of a voyage charter party (NORGRAIN 73).

What are the factors which influence the freight rate in a voyage charter market?

In the voyage charter market, rates are influenced by cargo the charterer must deliver the agreed cargo size, commodity, port dues, and canal transit fees, as well as delivery and redelivery regions.

In general, a larger cargo size is quoted at a lower rate per tonne than a smaller cargo size. Routes with costly ports or canals generally command higher rates than routes with low port dues and no canals to transit.

Voyages with a load port within a region that includes ports where vessels usually discharge cargo or a discharge port within a region with ports where vessels load cargo also are generally quoted at lower rates because such voyages generally increase vessel utilization by reducing the unloaded portion (or ballast leg) that is included in the calculation of the return charter to a loading area.

What are the costs paid by the shipowner & charterer in a voyage charter?

In a voyage charter, the shipowner retains the operational control of the vessel and pays all the operating costs (crew, fuel, freshwater, lubes, port charges, extra insurances, taxes, etc.), with the possible exclusion of the loading/unloading expenses. 

The charterer’s costs are usually costs & charges relating to the cargo.

What are the types of voyage charter?

It can be of the following types:

• Immediate  –  which is carried out within weeks of the contract agreement and the agreed freight rate is called the spot rate.
• Forward –  which is scheduled & fulfilled at the agreed time in the future, for example in say three months.
• Consecutive – which refers to several same consecutive voyages.

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A Layman’s Guide to Laytime, Charter party Agreement and Voyage Charter

The word “Charterer” is probably as old as the word “Ship” itself.

Do you keep hearing this word so regularly?

Well, who doesn’t?

From seafarer’s point of view, it is so much important to understand these terms.

From commercial point of view, it is the moral responsibility of the seafarers to ensure that the ship owner profits from the ship operation.

And for this reason, we must understand when and where our loyalties lies.

But sometimes it becomes difficult to get a hang of all of it.

Not anymore.

In this blog, we will discuss about the terms charterer and charter party agreement.

Concept of Charter party agreement

It is all business.

And like in all kind of business, there are at least two parties involved, one of which provide a service or product to the other for a price.

With respect to carrying the cargo onboard the ships, these two parties are,

1) Ship owner who has the ship and provide the space on the ship to carry the cargo.

2) Shipper who has the cargo and wants a ship to transport the cargo

Then where does the term charterer fits into this?

Charterer is the party that has chartered (think of simple word “hired”) the ship.

If the shipper has chartered the entire ship then shipper will also be the charterer.

In most of the cases, charterer is a kind of middle man between shipper(s) and shipowners

This is particularly the case if there are more than one shipper.

For example, if the vessel is to load 50000 tons of cargo, there could be 10 shipper, say each of them with 5000 tons of cargo.

Alone none of the shippers would want to hire the entire vessel of 50000 tons capacity for their 5000 tons of cargo.

So they contact a charterer for transporting their cargo.

The charterer’s job is to find a vessel for the cargoes they have from different shippers and maximazing the space on ship they plan to hire.

Charterers may not be the only person involved in filling the gap between shipowner and shipper.

Sometime there are some other companies or persons who help shipper, charterer and shipowner to connect with each other for a fees.

They are called “Brokers”.

So the shipper’s broker is the person or company that help shipper find a charterer for a fees called brokerage.

And charterer’s broker is the person that help charterer find a ship to hire.

The charterer may even have brokers for different purpose. For example charterer may have a broker to find a cargo for the ship they want to hire and they may have another broker to find a ship for the cargo they have in hand.

Broker or no broker, the charterer and shipowner would agree on the terms and conditions which would form “ Charter party agreement “.

Charter party agreement is a detailed document which, apart from various clauses, has informations such as

• When and where the vessel is required to be
• the freight agreed
• If the broker was used, who need to pay the brokerage fee and how much

Even though shipowners is primarily dealing with the charterer, it does not mean that the shipowner would have no relation with the shipper.

Shipper and shipowner are connected by the “carriage of cargo at sea act”, also called COGSA .

And one of the main point of it is that shipowner is required to issue bill of lading to the shipper for the cargo loaded onboard.

And with that each of the shipper have entered into an agreement with the ship owner which is called “Contract of  carriage”.

While the “charter party agreement” is a formal agreement, the contract of carriage is governed by various laws and regulations such as Hague-Visby rule .

Charter party agreement supplement the contract of carriage.

Usually you would find a mention of the charter party agreement in the bill of lading. The wording in the bill of lading could be something like this.

This shipment is carried pursuant to charter party agreement between “ Charterer’s name ” and “ Carrier’s name ” and all the terms, clauses, conditions, liberties and exceptions whatsoever contained therein are incorporated into this bill of lading.

But do the shipowners and charterers do this exercise of negotiating the format of the charter party agreement each time they do the business together.

Absolutely not. Hell, it would take a lot of time.

Instead they use pre-defined forms. These forms are developed by Independent International stakeholders such as BIMCO and INTERTANKO and are widely used in the shipping business.

There are different forms for different trades.

For example there is form  SHELLVOY 6 for use in tanker trade and then there is form AMWELSH 93 for coal dry cargo chartering.

Also if a charterer and ship owner have done the business before, they use the same charter party agreement for the future shipments too.

For this reason, many a times even for a voyage in 2019, you may find the mention of charter party dated in 2016 or even before. In the bill of lading issued even in 2019 , it may read something like,

The shipment is carried pursuant to charter party agreement between “ Charterer’s name ” and “ Carrier’s name ” dated 01 January 2016…..

Now that we understand the concept of chartering, let us understand the different ways in which the ships can be chartered.

Voyage Charter, Time charter, Demise charter

There are different ways in which a charterer can charter (Hire) the vessel.

Charterer can charter the vessel for one voyage (Voyage charter), for a particular time period (time charter) or they can hire and run the vessel as if they are the owner of the vessel (Demise or bareboat charter).

In each type of charter, charterers and shipowners have different area of responsibilities.

Each type of charter is a subject in itself. So in this blog we will explore the voyage charter.

Voyage Charter

It should be clear from the name.

Under the voyage charter, the ship is hired from the ship owner for one voyage.

One voyage could consists of multiple load ports and multiple discharge port.

The best analogy to the term voyage charter is that with hiring an Uber for a ride from one place to the other, sometimes with multiple stops in between.

So when we hire an Uber, we hire just the cab. The cab driver is still under the instructions of Uber.

Similarly, under the voyage charter, the charterer has hired the ship’s cargo space. But the Master and crew still remains under the disposal and instructions of ship owner and  ship managers.

When we hire a cab for a ride, we just pay the hire (pre-agreed or by the meter). We do not pay for or are not concerned about the fuel costs or the amount of fuel consumed.

Similarly, under the voyage charter, charterer is not concerned about the fuel consumption. The fuel costs are for the ship owners.

And when we hire an Uber, we do not pay for maintenance of the cab.

Similarly, under the voyage charter it is the ship owner who pays for the maintenance of the ship.

Whenever we have any doubt about anything under voyage charter, just think of this analogy of hiring the cab.

Most likely you will get the answer.

Laytime, Demurrage and despatch

Lord Diplock during one of the leading cases on Laytime described the voyage charter party comprising of four stages .

• Stage 1 is the loading voyage: The voyage from wherever the ship is to the loading port specified in the voyage charter party
• Stage 2 is the Loading operation: The loading of the cargo at the port of loading
• Stage 3 is the carrying voyage: The voyage from load port to the discharge port specified in the voyage charter party.
• Stage 4 is the discharging operation: The discharging of the cargo from the ship to the port of discharging as specified in the voyage charter party.

In the first and third stage, it is only the ship owner that need to perform. For example. ship owner is required to adjust the speed of the ship to arrive at the loading port within the agreed dates (Laycan).

And in the third stage, the ship owner is required to instruct the vessel to maintain the charter party speed.

However it is the second and fourth stage where most of the disputes take place.

Because in these two stages it is mutual reponsibility of the two parties to ensure that cargo loading and discharging is done without any delays.

In case of delays, each one can accuse the other for delays.

It is definately not commercially profiting for the shipowner if the voyage is extended beyond their expectations.

For example, what if the loading of the cargo took 15 days in comparison to just 2 days that shipowner had expected?

Or what if the ship could not berth at load port or discharge port for many days because of other ships ahead in line up?

Too many uncertainties.

But ship owner’s freight (and profits) cannot depend upon so many uncertainties.

So the shipowner and charterers agree on the factors like allowed number of days for loading and discharging.

In chartering terms this is called “Laydays” or “Laytime”.

The laydays is mentioned in the voyage charter party agreement between ship owner and charterer.

It could be mentioned as number of days and hours or as tons per hours or per day.

If the charterer uses more time for loading and discharging than the allowed laydays as per charter party agreement, then charterer is supposed to pay for extra time used.

The chartering term for this additional payment is “Demurrage”.

So we can say that if charterer uses more time for loading/discharging than laydays, they need to pay demurrage to the ship owner.

But if the charterer uses less time than laydays then ship owner need to pay the charterer for the time saved.

The chartering term for this is “despatch”.

Usually the agreed amount of despatch is about half of the agreed amount for demurrage.

Finally at the end of the voyage, a statement is made to shows the time saved and/or extra time taken at different ports.

Below is the simplified version of the laytime summary calculated at the end of the voyage.

This statement would also show the final amount due and to whom it is due. Means if the final amount is demurrage or despatch and how much.

Notice of readiness and statement of facts

For calculation of laytime, it is important to know when the laytime counting and calculation would start.

This information is also provided in the charter party agreement.

In most of the cases, the laytime would commence to start when the vessel has arrived at the port. In chartering term, this is called “ Arrived Ship “.

Legally, a ship is considered as an ‘Arrived Ship” only when

• Ship has arrived at the port of loading or discharging (port voyage charter) or at the designated berth (Berth Voyage charter).
• Ship is ready in all respects to commence loading (or discharging) or the cargo, and
• Master has sent the notice of readiness to the all parties concerned

The charter party agreement contains the information if the voyage charter is a port voyage charter or a berth voyage charter.

Irrespective if it is port or berth voyage charter, from the ship’s point of view it is important that the master of the vessel send the notice of readiness.

Notice of readiness need to  state that the vessel has arrived and she is ready in all respect to commence loading (or discharging ) of the cargo.

The laytime would start to commence at this time or sometimes few hours later if specifically mentioned in the charter party agreement.

Since one of the condition for the laytime to start is for the master to send the notice of readiness, it makes it so much of an important aspect.

Statement of Facts

The vessel and the master of the ship are the owner’s representative at the action site (loading port or discharging port).

Ship Owner would know only know the information that we provide them. They would use this information for calculation of any demurrage due to the charterers.

But for the correct demurrage calculation, the information we provide must be correct and we must not miss any important information such as any delays.

That make the statement of facts (commonly called SOF) an important document.

At the least, statement of facts must include

• any delays from shore side or from ship’s side and reason of delay
• any delays because of weather conditions
• Timings for the movement of the ship (such as times for anchoring, anchor aweigh, pilot onboard, NOR Tendered etc)
• Timings related to cargo operations (Commenced cargo operation and completed cargo operation

Master’s actions during voyage charter

Master and ship staff may not see the actual charter party agreement between the charterer and the ship owner.

And it is for their own benefit too.

Because there would be so many things in that which we seafarers are not concerned about.

But when the  ship is fixed for the voyage charter, master will receive “Voyage instructions” from the charterer through the ship owner’s commercial team.

The voyage instructions contains the information from the charter party agreement that requires master’s attenstion and subsequent actions.

Master must not miss the points in the voyage orders that requires his actions.

One of the way to do it is to highlight the text of the voyage instructions that require his attention for easy follow up.

Once Master reads the voyage instructions, he may come across insufficient information that need more information or clarification.

Like this one in one of the voyage orders.

Clarification must be sought from the ship operator for any of such information in the voyage orders.

After all it just takes a simple email to get everything in place.

And once everything is clear and in place, it is just about following that.

There are may be only a handful of shipowners that do not rely on the charterer to find the cargo for their vessel.

Having the vessel on charter is so common.

And vessel can be chartered in different ways. Vessel can be on a voyage charter, time charter or demise/bareboat charter.

With respect to voyage charter, master and ship staff must understand few thing

First, when is the laycan for the vessel. This is period in which vessel must arrive at the load port.

If master thinks that vessel may not be able to make it to the loadport in laycan period, the commercial operator must be informed who can then try to extend the laycan.

Second, when the notice of readiness need to be tendered.

If the voyage charter is a port charter, NOR can only be tendered when vessel is at least within the port limits. Usually in this case NOR is tendered when pilot boards the vessel.

If the voyage charter is berth charter, the NOR can only be tendered when the vessel is alongside the designated berth.

Wrong tendering of NOR can make the Notice of readiness null and void and shipowner may loose tons of money.

Lastly, the ship staff need to be make sure that a correct record of statement of facts is kept. This is the document that is used for laytime calculations .

If the charterer uses more time than agreed for loading or discharging the cargo, the ship owner is supposed to get a pre-agreed compensation called demurrage.

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About Capt Rajeev Jassal

Capt. Rajeev Jassal has sailed for over 24 years mainly on crude oil, product and chemical tankers. He holds MBA in shipping & Logistics degree from London. He has done extensive research on quantitatively measuring Safety culture onboard and safety climate ashore which he believes is the most important element for safer shipping.

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70 comments.

How i wish that our exam books were written so precisely yet so easy to understand .Thanx for all the pain you take .No amount of words would do justice to match the level of you efforts.

Thanks Alok...The readers liking it make all the hardwork worthwhile...

its amazing how you describe anything sir

what if the vessel is about to tender NOR and shipper cancels the order. what would be the penalty

Great article to understand the business with ease as an ASM candidate

Many thanks for writing such articles with such an ease of understanding sir...

Glad you liked it Sukhchain...

Another good read. Thank you for taking time to write articles. All Seafarers must understand the commercial aspects of ships. All the best and I cant wait to read the next one.

Glad you liked it Marlon...

what if the ship could not berth at load port or discharge port for many days because of other ships ahead in line up?Too many uncertainties.But ship owner’s freight (and profits) cannot depend upon so many uncertainties.So the shipowner and charterers agree on the factors like allowed number of days for loading and discharging.In chartering terms this is called “Laydays” or “Laytime” ??? Laydays refer to the time when a ship must present itself to the charter.If the vessel arrives after the laydays ,than contract can be cancelled. -Laycan. Laytime is the amount of time allowed (in hours and days)in a voyage charter for the loading and unloading of cargo.

Thanks for your input Zibi...

Laydays or "Laycan "I think is the correct term not Laytime. :)

Thanks for such simplified explanations. Sir could you please tell the few famous ship brokers names in india and worldwide.

Interocean is one of them...

Thank Captain for simple & detailed explanation. Information is really worthy .

Glad you found it useful Sajjad...

Thanks Capt. Rajeev for this good information in simple way.

Glad you liked it Dharmdeep...

Very well written capt., pls continue the good work

Thanks Capt Pereira...

This is a scholarly article Great job Captain!

Glad you liked it Tunde...

Good job, Capt. Jassal! These mandatory intricacies of ship's business & chartering are excellently presented. Organized and laid out as you have, this blog subject does a great service to anyone who longs to learn more about it & be more familiar with the clauses, details & positions (which is probably everyone, right?) -- including this marine cargo surveyor!

Glad you liked it Capt Edward...

Many thanks

Thanks Rafik...

sir plz explain magnetic compass

I will do that in a different blog...

Once again thank you very much.

Thanks Raju...

Informative Awaiting next one regarding time charterers

Will write on Time chartering too...

many thanks for this jobs cap

How easy way for explain this matter ,really very good job captain I appreciate your good effort waiting more and more

Thanks Ahmed...

sir waiting for your blog on purging and gas freeing cargo tanks

Very nicely explained and written good effort

Very nice explanation capt,

Generally the CP agreement is never sent to ship..and hence for tendering NOR what criteria(LOCATION) shall be followed as Master will not be aware if the C/P is voyage or Port C/P .These days Master tender NOR on arrival and then they keep re tendering every 24 hrs or at important events like POB, or All Fast.What is the logic behind following this and how we can ensure the NOR tendering doesn't becomes null and void. really APPRECIATE YOUR GREAT EFFORTS

if the vessel arrived at the agreed laycan and gave a valid NOR tendered and waited for almost 5 days before berthing, then while berthing the vessel had an accident and the owner requsted a new laycan, the question here is, does cancelling the old laycan result in canceling the demurrage fees caused by it?

When a vessel suffers breakdown typically NOR becomes invalid as the vessel was not in all respects ready to load her cargo.

U don't see such priceless articles often.. Good work cap. Let's make the world a better place to sail????????

To the writer of this blog- what made you write this? IT IS FANTASTIC. Well done. Also your MBA, was it the distant learning one from Middlesex?

On the Laytime Summary calculation, wouldn't it be correct to say that on the loading it was lost 0d-12h-24 min instead of 1d-00-24m?

Captain sahab, if I ever get a chance, I'll surely shake hand and say thank you, for all your efforts in simplifying the topics

can you advise for the following : in case a vessel is on Voyage Charter, and during loading or discharging alongside berth, there is a rainy period, so the daytime for this period should be NOT TO COUNT, correct??? cause there is the terms "weather permitting".

Great article sir......waiting for more.....

Hi. How does the shipbroker locate a suitable ship to transport the cargo?

Good day! You have mentioned different stages of voyage charter. May I ask what are the different stages of Time Charter and Bareboat Charter? Thank you in advance.

Nice blog...pleasure to read

I love your write up. Please, keep exposing our mind to the rudiments of shipping business.

Sir, in voyage charter party at what time and place charter party agreement will start? After ship arriving on laycan days or after giving notice of readiness? And notice readiness when we can give? Is there any specific time only we can give NOR?

I have a question, How to calculate the freight for a Multiport voyage. for example, there is a Cargo loaded from the country (C) and need to discharge its half portion in other countries multiple ports (A) & (B). For single port discharge, the cost is 8$ in port A and in Port B 11$, but the agent says he could fulfill this in 10$ for both ports. Now my question is how is he calculating the freight 10$ for Multiple port ?

Thank you sir for this great effort helping a lot for phase2 law preparation

Hi Sir! I am so pleased to have found your blog, it is absolutely helpful. if it is not too much to ask, do you have a quote sample for time and voyage charter? and the stardard terms and conditions? sorry if I am asking too much. thank you

Excellent blog about chartering service. This blog cleared my doubt about chartering service for ship

could you please advise that how long a shipowner should wait cargo to load on board (if cargo not ready) and no any specific clause written on voyage cp

Hi, Capt Jassal, I find every write up on any marine subject is excellent and easy to understand for students. I highly appreciate the contents of your blog. Regards Capt MK Srivastava , Ex-DPA, The SCI Ltd.

Wonderfully explained

While the blockchains themselves are secure, the applications running on the blockchain may not be. These applications interact with the blockchain through smart contracts, but just like any other software, bugs in the code can lead to security vulnerabilities. For this, we need to involve the auditors who conduct security audits on the smart contract. Smart Contract Audit helps you find hidden exploits and eventually reduce the risk and provide you an extra layer of security. Bug-free code is nice to have in other types of software, in blockchain applications, it is essential.

Dear Capt Rajeev Jassal, with interest i have seen your blog however the title struck me a bit - A Layman's Guide to Laytime - this sounds very familiar, if not accurate, with the dissertation i wrote for the ICS, Institute of Charterers Shipbrokers London, who hold copyright on this. Kindly amend the title of your blog to avoid confusion in the industry as to whom the readers take their information from. With best regards, Erwin de Zwarte, FICS

sir will you pls write on paramount clause , new jasson clause , cesser clause and both to blame collision clause

Such a great explanation! Thank you so much!

This article is a big help for those individuals that are trying to expound their knowledge in shipping. I much appreciated because at present i am taking my master's degree in ship management. Thank you...

Wow, so clearly written that I didn't have to read it twice to understand! Why don't our text books/ Oral notes be like this?! Thank you so much Capt. Jassal.

It’s a great and useful piece of info. I’m happy that you just shared this useful info with us. Please stay informed like this. Thank you for sharing. Here’s another informative content on Common Law Separation Agreement , may find more details here.

thanks alot of info keren bgt

Sir u r the best , undoubtedly . The confidence which i gain every time when ever I read your blog is just unspeakable and it sharpens my knowledge every single time. A teacher like you is what this shipping industry needs and I am glad to find the perfect one . Every time when ever I am in doubt I refer to your blogs and it works miracle .....thanks a ton to you sir .....simply great.

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Voyage Charter vs Time Charter – Everything You Need to Know

Voyage Charter vs Time Charter – Everything you need to know.

One of the biggest questions facing a charterer is whether to opt for a voyage charter or a time charter. Evaluating voyage charter vs time charter can be a complex process, but we’ve broken everything down on this page, making it easier for charterers to decide which type of vessel chartering is best for them.

1. What is a Charter? 2. What is a Voyage Charter? 3. Voyage Charter Features/Terms 4. Voyage Charter Pros & Cons 5. What is a Time Charter? 6. Time Charter Features/Terms 7. Time Charter Pros & Cons 8. How to Choose a Charter Type 9. Charter Cost 10. Ongoing Cost 11. Flexibility 12. Contract Length 13. Convenience 14. FAQs About Voyage Charter and Time Charter 15. Conclusion

What is a Charter?

A voyage charter and a time charter are two options commonly found in the chartering business. A voyage charter is when the charterer leases a vessel for a specific voyage, such as Dubai to Singapore, while a time charter is a type of lease that allows the charterer use of the vessel for a specific period of time.

As you might imagine, there are many differences between these two types of charters, and both vessel chartering options have their own pros and cons. Keep on reading this page about voyage charter vs time charter to find out which of the two options will be most suitable for your ship chartering requirements.

Voyage Charter

What is a voyage charter.

A voyage charter is a type of ship chartering that sees the charterer agree to lease the vessel for one specific voyage. So, for example, the agreement might be for the charterer to gain use of the charter ship for a journey from Dubai to Dover.

Features/Terms

As just mentioned, a voyage charter is when a charterer leases a vessel for one voyage. Before the charter contract is signed, the parties will agree on the end destination, any ports of call, and whether there will be any restrictions on cargo. Once signed, the charterer must not deviate from any of these agreements.

The terms and conditions of the charter agreement will also stipulate the laytime permitted. The laytime refers to the amount of time it takes for the vessel to be loaded and unloaded. As the ship owner pays for all costs at the port, they need this process to be as quick as possible. If the charterer exceeds the agreed time, they must pay demurrage to the ship owner. Conversely, the ship owner will usually refund some money if the loading and unloading is quicker than stipulated.

But who is responsible for what costs? Well, with a voyage charter, nearly all costs are covered by the ship owner. These include costs relating to staffing, berthing, loading, unloading, and fuel. They cover these costs by charging the charterer a fee for leasing the vessel.

The amount of money paid by the charterer can be determined in two ways. The most common way to pay is on a per-ton basis. As the name implies, this sees the charterer paying a set price for every ton of cargo they transport. This is preferred by charterers when the amount of cargo they’re transporting is significantly less than the vessel’s gross maximum cargo tonnage.

The other payment type is a lump sum – one payment that allows the charterer to transport as much cargo as they want to. It is the ship owner’s responsibility to ensure the cargo weight does not exceed the gross maximum tonnage of the vessel. This type of payment is preferred by charterers when they’re carrying a higher weight of cargo.

This type of vessel chartering is generally preferred by charterers. This is because it often has more competitive prices, plus they are not tied down to any long-term commitments.

Pros & Cons

Pro: Charterer not liable for any costs, except initial charter fee Pro: Incentives to complete port operations quickly Pro: No need to find a crew Pro: No long-term contract

Con: Lack of flexibility for charterer Con: Higher initial charter fee

Time Charter

What is a time charter.

A time charter is a type of vessel chartering that sees the charterer lease the ship for a set period of time. So, they might lease the ship for two months, during which time they have the flexibility to choose their own routes and destinations.

Before anything is signed, the ship owner and the charterer will agree the exact period of time the lease will run for. Unlike with voyage charters, the two parties will not need to agree on ports of call and destinations, as the charterer has complete discretion over this.

With a time charter, the ship owner does not cover all costs. Instead, the charterer must pay for fuel and supply costs, as well as the cost of cargo operations. However, the charterer won’t have to pay such a large charter fee, which balances things out somewhat. The owner is still required to pay for the crew and ongoing maintenance, and also must ensure the vessel meets all necessary maritime safety standards.

It is generally the case that the charterer will pay for hire in advance, on a per-day basis. Payment is not usually made in one lump sum, with the charterer instead paying the lease charge in set instalments, which are usually quarterly. It’s important to note that, should the ship be held up in unforeseen circumstances, such as inclement weather, the lost time – referred to as off-hire hours – will not usually be charged for, although if too many off-hire hours are accrued, the charterer might end up being liable.

Ship owners generally prefer their vessels to be leased on a time charter. This is because time charters guarantee income for a long period of time, giving the ship owner increased security.

Pro: Guarantees charterer access to a vessel Pro: Initial lease cost is lower Pro: More flexibility for the charterer

Con: Several ongoing costs to pay Con: Tied down to long-term contract

How to Choose a Charter Type

We’ve discussed voyage charter vs time charter above, looking at the various pros and cons of each. But which should you choose when looking to charter a ship?

Well, this really depends on your requirements. We’ve broken things down into five sections – charter cost, ongoing costs, flexibility, contract length, and convenience – and will let you know which of the ship chartering options is better for each one.

Charter Cost

When it comes to the initial cost of chartering a ship, it’s nearly always going to be cheaper to go with a time charter. This is because the ship owner will be more amenable to a lower price, as they know you’ll be hiring the vessel for longer. What’s more, you, and not the ship owner, will be expected to cover other costs, pushing the initial price down further.

So, if you’re looking for the lowest possible upfront cost, the best option is a time charter. However, remember that other costs will also need to be paid.

Ongoing cost

If you choose to take out a time charter, you will have to pay several costs, including fuel and supply costs. With voyage charters, the only significant cost payable is the initial charter – all other major expenses are covered by the ship owner.

Therefore, if you want the lowest possible ongoing costs, the clear winner is the voyage charter. However, the upfront cost will be more expensive than a time charter.

Flexibility

Those who sign up for a voyage charter are limited in their movements, as they will have already agreed a set route with the ship owners. Those who have taken a time charter have far more freedom, as they can choose where to go throughout their charter.

This clearly means that those looking for more flexibility should opt for a time charter, as there are no limitations on route, ports of call, and destinations.

Contract Length

With a time charter, you’re tied into a long contract, committing you to ongoing payments. Voyage charters, on the other hand, only last for the duration of the voyage, meaning voyage charters are generally much shorter than time charters.

This all means that those looking for the shortest contract should opt for a voyage charter. However, if you know you’ll constantly need an available vessel, the long contract of a time charter could be more suitable.

Convenience

There will be no need to hire and pay a crew when opting for either the time charter or the voyage charter. It’s only bareboat charters that require the charterer to hire and pay their own crew. However, the ongoing costs associated with time charters can be inconvenient.

Overall, voyage charters are the more convenient of the two options, as there’s no need to organise payment for such things as port costs and fuel. However, both options are generally far more convenient than a bareboat charter.

FAQs About Voyage Charter and Time Charter

What are BIMCO Sanctions Clause for Voyage Charter Parties 2020?

These are intended to help in two scenarios. Firstly, if one of the signatories of the agreement gets sanctioned, the other signatories will be able to end the contract and claim damages. Secondly, when the trade or activity is subject to or becomes subject to sanctions, the ship owners can refuse to perform their contracted duties.

What is the difference between bill of lading and charter party vs time and voyage charter?

A charter party is an agreement between charterer and ship owner to lease a ship. A bill of lading is an agreement that legally obligates the charterer to carry cargo that has been loaded aboard the ship.

A time charter is a type of vessel chartering whereby the ship owner leases the ship for a set length of time. A voyage charter is a type of vessel chartering whereby the ship owner leases the ship for the duration of a specific voyage.

What are the duties and responsibilities of the ship owner and charterer under a time charter and voyage charter party?

Under a voyage charter, the ship owner assumes almost all responsibility, including hiring and paying crew, and paying for all significant costs associated with the journey. The charterer simply has to pay the ship owner a fee to secure their vessel.

With time charters, ship owners must still hire and pay staff. However, most other significant costs associated with a voyage, such as fuel and port fees, must be paid by the charterer.

Why do ship owners prefer voyage charter over time charter?

Quite simply, they don’t. Ship owners usually prefer time charters, as they ensure that their ship is guaranteed to be chartered for a longer period, generating income throughout.

Voyage charters are short, meaning the ship owner must continually find new charterers to lease the vessel to – something that isn’t always possible. When a new charterer can’t be found, the ship owner loses money.

Please note that charterers are required to take out insurance for both types of charter, to cover them against damage, injury, marine salvage , and more.

Those looking for short-term charters are best served by opting for a voyage charter, as these don’t require a long contract to be signed. They do have a higher initial cost, but this is offset by the fact that no other significant fees need to be paid.

However, those who know they’ll regularly require the use of a vessel might be better off with a time charter, as these see vessels leased for a long period of time. During this time, the vessel can be used to travel anywhere, without restriction. Time charters cost less upfront, but require the charterer to pay various other costs, such as the cost of fuel and port fees.

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What Is Ship Chartering? Charter Types Explained!

The need for organizations to transport goods by sea in a cost-effective manner constitutes the backbone of Global trade. Organizations achieve this objective by either using their own ships or leasing them from others in cases where their own assets do not meet their requirements.

Chartering of a vessel is a maritime term that is used to describe the form of business hiring or renting out a vessel and crew to transport goods or passengers for a fee.

Ship chartering is a popular way for companies to transport goods and materials around the world. It is also used by the military and government for the transport of personnel and equipment.

Ship chartering is a complex process, as there are a number of factors that must be taken into account before a charter is finalized. In this article, we’ll explain the different types of chartering, how ships are chartered, and the different parties involved in chartering.

What is Ship Chartering?

Let’s take a closer look at what is ship chartering. Ship chartering is the process of entering into an agreement where a shipowner agrees to rent out their vessel to a cargo owner to carry freight from one port to another.

The two parties involved in this process are the shipowner, who is the legal entity registered as the owner of the vessel, and the charterer, which is a company that has hired out the ship for transporting their goods. A charter contract outlines all of the conditions, obligations, and details related to how these agreements are established.

Sometimes a charterer may also be a party that does not have cargo but takes a vessel on hire for a predetermined period from a shipowner. This party then trades the ship to carry cargo at a profit that is greater than the hire rate or even makes a profit in a rising market by re-letting the ship out to other charterers.

Sometimes operators employ a ship and then re-employ the vessel for further business chartering. In such a new role they are described as disponent owners or time charter owners. A disponent owner is a party deemed to be the shipowner having control of the vessel by time charter

Chartering activity relies heavily on the services of brokers who may either be hired to locate a ship that will deliver the cargo for a specified fee known as the freight rate – ship brokerage, or brokers who locate cargo for ships- cargo brokerage.

Rates for transporting freight can be calculated based on the number of tons transported along a particular route, or they can be stated as a total amount – typically denominated in United States dollars – each day for the period of the charter that has been agreed upon.

What Are the Different Types of Ship chartering

The process of ship chartering is an important one in the world of maritime transportation . In order to understand ship chartering, it is first important to understand the different types of ship charters that exist.

There are three main types of ship charters: Bareboat, Time, and Voyage. Each type of charter has its own unique benefits and drawbacks that should be considered before entering into an agreement.

The various costs associated with chartering which are as follows are shared amongst the shipowner and charterer according to the type of charter. Ship operating costs. are costs that do not vary with ship use but are essentially incurred in the running of the vessel. They include crew costs, stores, maintenance & repairs, insurance, and administration

Voyage Costs on the other hand are expenses associated with moving the vessel from one port to another. They include port charges, light dues, stevedoring charges , cleaning holds, cargo claims, bunker fuel , and canal fees .

Voyage Charters

Voyage chartering is a contract in which the shipowner agrees to carry a specific cargo on their vessel for a single trip from one or more loading ports to one or more discharge ports. The payment for this service is called freight, and the contract is called a voyage charter party.

Voyage charters are typically between the shipowner or despondent owner and the charterer. The person who charters the ship is known as the voyage charterer, while the person who charters out their ship is known as the shipowner or deponent owner. This form of contract is often selected when the charterer has no experience in operating a ship, or when they only need to transport one consignment of cargo from one place to another.

Under a voyage charter, the master is appointed by the owner, revenue depends on the quantity of cargo and rate, and the shipowner is responsible for both operating and voyage costs. There are different forms of voyage chartering which are: single voyage chartering  return voyage chartering,  consecutive single-voyage chartering, and consecutive return voyage chartering

A voyage charter indicates a specific vessel, specific cargo, specific port, and specific route. The rights, duties, and responsibilities of ship owners and charterers are determined by the charter party, and the payment by the charterer to the shipowner for the chartered vessel is usually called freight instead of hire. The ship-owner can charter out the whole vessel or part of her space to the charterer. There are provisions made for laytime, demurrage, and dispatch

Time Charters

A time charter is when a ship owner offers a designated manned ship to a charterer to use for a set time period in exchange for a hire fee rather than for a set number of voyages or excursions. The entire or a portion of the ship is hired, and the hire is computed and paid based on the period of the charter and the agreed-upon hiring rate. The delivery and redelivery of the vessel are covered by stipulations.

Loading and unloading fees are often excluded from time charter rates. The duration of the charter could be for a single trip, many months, or even a few years. The time charterer could be a cargo owner who always requires transportation or a shipowner who needs to temporarily expand his fleet but does not want to invest in a ship but wants to be in charge of its commercial operation. A speculator taking a position in anticipation of a shift in the market may be the charterer.

The charterer is responsible for all expenses directly related to using the vessel, such as port fees and bunker costs, and they also cover loading and unloading. In a time charter, the shipowner, who is also in charge of the maintenance and navigational operation of the vessel as well as the management of the cargo, employs the crew.

The costs of the crew’s salary and rations are covered by the shipowner, who is also in charge of the manning of the vessel. In terms of employment and agency, the master is subject to the charterer’s orders and directives.

The ship owner must, upon receiving a complaint from the charterer, make any necessary changes to the appointments of the master and officers if the charterer has good grounds to be unhappy with their performance.

The charterer is in charge of running the ship and is responsible for paying all variable operating expenses like bunkers , port fees, handling fees, tolls on canals, etc.

The shipowner is responsible for paying the fixed operating expenses such as the cost of the ship’s capital, upkeep, supplies, insurance premiums, etc. Time charters are typically used for shorter-term leases and offer more flexibility to the charterer.

Bareboat Charters

The bareboat charter or demise charter is a different kind of charter. According to this agreement, the shipowner is leasing the ship to the charterer. Bareboat chartering typically involves placing a vessel at the charterer’s disposal for an extended length of time without any crew.

Thus, other than paying capital costs, the charterer will assume nearly all of the shipowner’s duties. This implies that the charterer will be financially responsible for the vessel’s maintenance, personnel expenses, insurance, and other charges, in addition to having commercial and technical responsibility for it.

Compared to other contract forms, bareboat chartering is less frequent. When a shipowner or ship operator wants to operate ships or add to his fleet for a while without making the financial obligations of true ownership, but at the same time has to have full control of the chartered vessel, including control over its navigation and management, it may be employed.

Additionally, bareboat chartering is occasionally used in conjunction with the financial plans for the vessel’s installment purchase. The bareboat charter then functions as a hire/purchase agreement, under which the shipowner/seller maintains legal ownership of the vessel and, consequently, security in it, up until the full purchase price is paid.

By employing the master and crew, a time charter differs from a bareboat charter. The master and crew are still the shipowner’s workers when a time charter is in place, but they will be under the time charterer’s control. As a result, the time charterer does not acquire ownership of the ship. With a bareboat charter, the charterer employs the master and crew and therefore assumes ownership of the ship.

What Are the Benefits of Ship Chartering?

There are many benefits that come with chartering a ship. First and foremost, chartering a ship is a great way to save money on transportation costs. Shipping cargo via a charter vessel can be up to 50% cheaper than shipping via a liner vessel.

Another benefit of chartering a ship is that it gives the charterer complete control over the vessel. The charterer gets to choose the route, speed, and port of call for the vessel. This is a great way to ensure that your cargo arrives on time and in good condition.

Finally, chartering a ship is a great way to avoid the hassles and costs associated with owning and operating a vessel. When you charter a ship, you don’t have to worry about things like maintenance, repairs, or crew. This can be a great way to save time and money.

What is a Charter Party?

A Charter Party is the agreement between the party in charge of a ship and a party seeking to use the ship. 

A Voyage Charter party contains the names of the parties, the ship’s name and nationality, its deadweight and bale or grain capacity, the description of the goods to be loaded, the port of loading and discharge, lay days , the time for loading and discharge, the payment of freight, demurrage, despatch, and other pertinent information. There are more standard forms of voyage charter party than any other type of agreement.

The most well-known and often used general-purpose voyage charter party worldwide for all types of trades and for many different types of cargoes is the Uniform General Charter, also known by the code name GENCON and here is the latest published version by BIMCO . When these forms are used, multiple additional clauses usually referred to as rider clauses will be attached to address situations that the written provisions do not address.

There are several time forms for usage in the time chartering industry, although significantly less than the extensive selection offered for voyage chartering.  The NYPE (New York Produce Exchange (NYPE 93) (amended 2001) and BALTIME (Baltic and International Marine Council (BALTIME 1939) are the two main types used for time charters. The NYPE Charter Party forms the basis for the vast majority of time charters.

There is just one widely used standard form for bareboat charter parties, and that is the BARECON form created by BIMCO. There are several clauses in this form that are frequently seen in time charter parties, as can be seen by closely examining it.

Particularly, if included in a time charter party, the provisions pertaining to delivery, canceling, trading limitations, surveys, inspections, hire, redelivery, general average, war, commission, and law and arbitration would be similarly effective.

Charter abbreviations

ATDNSHINC = Any Time Day or Night Sundays and Holidays Included

ATUTC = Actual Times Used to Count

FHEX = Fridays/Holidays Excluded

FHINC = Fridays/Holidays Included

FILO = Free In/Liner Out. Seafreight with which the shipper pays load costs and the = carrier pays for discharge costs.

FIO = Free In/Out. Freight booked FIO includes the sea freight, but no loading/discharging costs, i.e. the charterer pays for the cost of loading and discharging cargo.

FORCE MAJEURE = Clause limiting responsibilities of the charterers, shippers, and receivers due to events beyond their control.

SSHEX (or SATSHEX) = Saturdays, Sundays, Holidays Excluded

SSHINC = Saturdays, Sundays, Holidays Included (or SATSHINC)

WPD = Weather Permitting Day

WWD = Weather Working Day

Ship chartering is a great way to save money on transportation costs and avoid the hassles and costs of owning and operating a vessel. There are three main types of ship charter: Bareboat, Time, and Voyage.

Each type of charter has its own unique benefits and drawbacks. When chartering a ship, it’s important to understand the terms of the contract and to have the financial resources in place to make the initial payment and cover the costs of operating the vessel

About the author

I worked as an officer in the deck department on various types of vessels, including oil and chemical tankers, LPG carriers, and even reefer and TSHD in the early years. Currently employed as Marine Surveyor carrying cargo, draft, bunker, and warranty survey.

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The ins and outs of ship chartering

Ship chartering is the hiring out the use of a ship by a vessel owner to another company, the charterer, for the transportation of goods. It may sound straightforward enough, but in practicality, it’s anything but simple. There are many different types of charter contracts, various cost components, and of course many different players involved. In this article, we’ll breakdown the ins and outs of chartering, covering how it works, who’s involved and how costs are divided.

• The main players

The two main players in ship chartering are the ship owner and the charterer. There are others as well, the most important being the ship broker. There is also the shipping agent who takes care of the essential in-port details and the ship manager, who takes care of operating and crewing the vessel on behalf of the owner for a fee.

It should be noted that the term charter party refers to the contract itself, and not to the parties entering into the contract. The charter party defines the rate, duration, and terms agreed between the ship owner and the charterer.

The ship owner provides the means for transporting cargo from one port to another. The Charterer enters into a contract with the owner to hire the ship, or space in the ship, for transporting his cargo. In some cases a charterer may own the cargo and employ a ship broker to find a suitable vessel to deliver the cargo for a certain price, called the freight rate.

The charterer may also not have his own cargo, but instead charters a vessel for a certain period of time and trades the ship to carry cargoes at a profit. He can also sub-hire the ship to other charterers in positive market conditions.

The ship broker is essentially a middleman who connects the principals in order to earn a brokerage fee. He can represent either the owner or the charterer in negotiations, and usually specialises in specific areas of cargo carrying. For example, a dry cargo broker focuses on the chartering of bulk carrier vessels. He can represent either an owner looking for a charterer, or a charterer seeking a suitable vessel for shipping his cargo.

Similarly, and as the name suggests, a tanker broker specialises in chartering tanker vessels and has a good understanding of the specific needs for transporting crude oil, gas, oil products, or chemicals.

Shipping Agents are designated to take responsibility for handling shipments and cargoes at the ports on behalf of the owners, fleet managers, and charterers. They handle the essential routine tasks, such as crew transfers, customs documentation, waste declarations and so on, working closely with port authorities. They can also provide detailed information on activities at the destination port, so that the shippers can be aware of situations while the goods are in transit.

• Types of charters

The three most common types of charter contracts are the voyage charter, the time charter, and the demise (or bareboat) charter.

Voyage Charter

The basic hiring of a vessel and its crew for a voyage between the port of loading and the port of discharge is known as a voyage charter. In this type of contract, the ship owner is paid by the charterer either on a per-ton basis, or as a lump sum. Port costs, with the exception of stevedoring, fuel costs, and the crew costs are paid by the owner, and payment for the use of the vessel is known as freight.

Under the terms of a voyage charter, a specific time is agreed for the loading and unloading of the cargo. This is known as laytime, which, if exceeded, obliges the charterer to pay demurrage. Conversely, if laytime is saved, the owner may have to pay despatch to the charterer.

There is also a consecutive voyages clause. This is used when one voyage follows another immediately for an agreed number of voyages within a specific timeframe. The ship is thus going back and forth with an agreed cargo between agreed ports.

Time Charter

A time charter refers to the hiring of a vessel for a specific period of time. Here, the owner still manages the ship, but the charterer selects the ports, decides the routing, and has full operational control of the vessel for the duration of the contract. He pays the fuel costs, port charges, cargo handling costs, commissions, and a daily hire fee.

There is also a trip time charter covering a specific voyage route only for the transportation of a specific cargo. It can be said to be a combination of a voyage charter and a time charter. The responsibilities are similar to those with a time charter (the fixed costs being paid by the owner and the variable costs by the charterer), but as with a voyage charter, the period of the contract depends upon when the voyage is completed.

The Demise Charter

Under the terms of a demise charter, also known as a bareboat charter, the charterer has full control of the vessel. Apart from the capital cost of building the vessel, which is the owner’s responsibility, all other costs including fuel, crew, port charges and insurance, are paid by the charterer. The legal and financial responsibility for the vessel rests with the charterer.

Under the demise clause, the contract can be for long period charters lasting for many years. This is fairly common for tankers and bulk carriers. It can be a form of hire-purchase whereby the charterer eventually acquires ownership of the vessel.

In the leisure industry, the term used is Bareboat Yacht Charter and the Demise Charter term is not used. It is normally a short-term charter for a matter of weeks only. Here, the owner supplies the yacht fully fuelled and in seaworthy readiness. The charterer is expected to pay for the fuel consumed.

Contract of Affreightment

Finally, there is what is known as a contract of affreightment. This is not strictly a charter contract, but is somewhat similar to a voyage charter. Under this type of contract, the owner agrees to transport the goods for the charterer on a specified route and for a specific period of time. More than one ship can be used and, in contrast to a true charter, there is no laytime period and no demurrage is payable.

• Who pays what?

There are various cost components applicable to all charter contracts. These can be summarized as follows:

In all cases, the owner is responsible for the capital cost of building and equipping the ship. The operating costs (OPEX), i.e. operating and maintaining the ship and complying with all applicable rules and requirements, are also paid by the owner in voyage and time charters. In demise charters, however, the operating costs are paid by the charterer.

Periodic costs are those that are incurred at certain intervals of time. These include, for example, periodic technical inspections and surveys for class classification purposes. Here again, the owner is responsible with time and voyage charters, but not for demise charters. In demise charters, it is the charterer who pays such periodic costs.

Voyage costs cover the fuel, any right of passage dues, such as canal dues, towage and piloting costs, as well as port agency costs. With time and demise charters, the voyage costs are paid by the charterer. Only in voyage charters are these costs paid by the owner.

The same is true of cargo handling costs – the cost of loading and discharging the cargo. With time and demise charters this is the responsibility of the charterer, while the owner pays these costs only with voyage charters.

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UK: Consecutive Voyage Charter: Commencement Of The Time Bar Period

X v . y [2011] ewhc 152.

The Commercial Court has recently given a judgment in the case of X v. Y (where, unusually even for an appeal from an arbitration award, the identity of the parties has been kept anonymous).

The case concerned the question of when time begins to run under a demurrage time bar clause containing two trigger points. The clause in question required that arbitration be commenced " within 12 months of final discharge or termination of this Charterparty ". The court found that time ran from both trigger points.

The owner (Y) and the charterer (X) agreed to a consecutive voyage charter (a "CVC") covering three voyages. Discharge of the cargo carried on the first voyage was completed by 08 February 2008. The owner submitted a claim for demurrage incurred on this first voyage and commenced an arbitration in respect of that claim on 23 February 2009. A dispute arose as to whether the 12 month time limit for commencing claims ran from the completion of discharge on the first voyage (i.e. 08 February 2009) or 12 months from the end of the CVC (14 June 2009).

The Commercial Court

Meaning of " final discharge ".

The judge went through the authorities concerning the meaning of the term " final discharge " under a CVC. In The Simonburn (1973), the Court of Appeal had determined that, under a CVC, the requirement to submit claims within a defined period after " final discharge " meant final discharge of the cargo on the voyage in respect of which the claim arises.

The judge in this case followed the decision in The Simonburn and held that, in the present case, the trigger point for the 12 month period from " final discharge " was the discharge of the first cargo (since the demurrage claim arose out of that voyage).

This point was decided on the basis of settled law. Had this been the only trigger point, then the owner's claim would have been time barred. The judge then had to decide the effect of the additional words " or termination of this Charterparty ", which were not included in the time bar provision considered in The Simonburn .

Meaning of " termination of this Charterparty "

The judge agreed with the owner that there were two trigger points for the commencement of the 12 month time limit. Arbitration either had to be commenced within 12 months of the " final discharge " or, alternatively, the termination of the charter. The judge rejected the charterer's argument that the clause required an arbitration to be commenced by the earliest trigger date.

Although the judge found that, on the true construction of the clause, time ran from both trigger dates, the effective result in the case was that the arbitration had to be commenced within 12 months of the latest in time of " final discharge " and the end of the charter. In the present case, the owner had commenced its arbitration well within the 12 month period following the end of the CVC.

The case is a timely reminder of the existing law where a charter contains a time limit running from " final discharge ". This will be relatively easy to ascertain in the case of a single voyage charter. In the case of a CVC, " final discharge " will be read as meaning discharge of the cargo on the voyage in respect of which the claim arises and not the discharge of the last cargo carried under the CVC.

Where a clause is expanded to provide that the time limit runs from " final discharge " or the termination of the charter, and both events occur (it should be borne in mind that both events might not occur, for example where there is no discharge), the effective time bar period will run from the later of the two dates. The result would of course be different if the clause also used wording to the effect of: "whichever comes first".

An owner may nonetheless wish to be prudent and take a cautious approach. When there are two trigger dates under a time bar clause, an owner would be well advised to protect time from the earliest possible date and not to simply rely on the possibility of an alternative later trigger date.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Voyage chartering

Voyage chartering is a chartering agreement in which the shipowner (shipper or time-charterer or bareboat charterer) makes available to the charterer the vessel, partly or in full, fully equipped, crewed and provided with fuels, lubricant and stocks.

He uses the vessel for the transport of a full or possibly part load of goods from 1 or more designated ports to 1 or more ports of destination (range of ports at the discretion of the charterer).

Payment is based on the freight rate per loaded or unloaded quantity of goods, expressed in the applicable units of weight or measure. Sometimes the freight rate is fixed.

In the event of voyage chartering, it is vital that the freight rate is based on the goods that are transported. Furthermore, the shipowner is the carrier of the goods. He issues the Bill of Lading. The chartering agreement can refer to a single voyage, a round trip or a number of consecutive voyages. Thus the chartering agreement is in first instance a transport agreement.

Stevedoring

Related terms.

• First Party Logistic Model (1PL)
• Second Party Logistic Model (2PL)
• Third Party Logistic Model (3PL)
• Fourth Party Logistic Model (4PL)
• Fifth Party Logistic Model (5PL)

Voyage Charter: Laytime and Demurrage

• First Online: 02 September 2021

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• Arun Kasi 2  

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This chapter covers laytime and demurrage in voyage charterparties. The various laytime definitions such as weather working day, etc and the charterer’s obligations arising from the laytime clause are considered.

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Box 16 and cl. 6(a) and (b).

E.g. Stolt Tankers v Landmark [2002] 1 Lloyd’s Rep 786 (EW HC).

[1908] 1 KB 499 (EW CA).

[1963] AC 691 (UK HL).

Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries and Food [1963] AC 691 (UK HL).

Dow Chemical (Nederland) BV v BP Tanker Co Ltd (The Vorras) [1983] 1 Lloyd’s Rep 579 (EW CA).

Margaronis Navigation Agency Ltd v Henry W Peabody & Co of London Ltd (The Vrontados) (HC) [1965] 1 QB 300, [1964] 2 All ER 296 (EW HC).

Another similar decision was reached in Total Transport Corporation v Arcadia Petroleum Ltd (The Eurus) [1996] 2 Lloyd’s Rep 408 (EW HC).

(1868) LR 2 QB 566 (EW HC), affirmed by the Court of Appeal in (1868) LR 3 QB 412 (EW CA).

[2015] SGCA 37, [2015] 5 SLR 178 (SG CA).

Houlder v General SN Co (1862) 3 F&F 170.

Christensen v Hindustan Steel [1971] 1 Lloyd’s Rep 395 (EW HC).

Compania de Naviera Nedelka SA v Tradax International SA of Panama City RP (The Tres Flores) [1974] QB 264, [1973] 2 Lloyd’s Rep 247, [1973] 3 All ER 967, [1973] 3 WLR 545 (EW CA).

Cobelfret NV v Cyclades Shipping Co Ltd (The Linardos) [1994] 1 Lloyd’s Rep 28 (EW HC).

Surrey Shipping Co Ltd v Compagnie Continentale (France) SA (The Shackleford) [1978] 1 WLR 1080, [1978] 2 Lloyd’s Rep 154 (EW CA).

Transgrain Shipping BV v Global Transporte Oceanico SA (The Mexico 1) (CA) [1990] 1 Lloyd’s Rep 507 (EW CA).

Ocean Pride Maritime Ltd Partnership v Qingdao Ocean Shipping Co (The Northgate) [2007] EWHC 2796 (Comm), [2008] 2 All ER (Comm) 330 (EW HC).

Sofial SA v Ove Skou Rederi (The Helle Skou) [1976] 2 Lloyd’s Rep 205 (EW HC).

Glencore Grain Ltd v Flacker Shipping Ltd (The Happy Day) [2002] EWCA Civ 1068, [2002] 2 All ER (Comm) 896, [2002] All ER (D) 219 (Jul), [2002] 2 Lloyd’s Rep 487 (EW CA).

E.g. Pteroti Cia Nav SA v National Coal Board [1958] 1 QB 469 (EW HC); Glencore Grain Ltd v Goldbeam Shipping Inc; Goldbeam Shipping Inc v Navios International Inc (The Mass Glory) [2002] EWHC 27 (Comm), [2002] 2 Lloyd’s Rep 244 (EW HC).

It is not compulsory that the destination point stipulated in the charterparty is a port or berth. It can also be other places like a sea mooring buoy or customary anchorage.

Cl. 6(c) (para 2).

Novologistics SARL v Five Ocean Corp (The Merida) [2009] EWHC 3046 (Comm), [2010] 1 Lloyd’s Rep 274 (EW HC).

Bulk Transport Group Shipping Co Ltd v Seacrystal Shipping Ltd (The Kyzikos ) [1989] AC 1264, [1988] 3 All ER 745, [1989] 1 Lloyd’s Rep 1 (UK HL).

[1950] 2 KB 194 (EW CA).

Oldendorff (E L) & Co GmbH v Tradax Export SA (The Johanna Oldendorff) [1974] AC 479, [1973] 3 All ER 148 (UK HL).

Federal Commerce and Navigation Co Ltd v Tradax Export SA (The Maratha Envoy) [1978] AC 1, [1977] 2 All ER 849 (UK HL).

See also Federal Commerce and Navigation Co Ltd v Tradax Export SA (The Maratha Envoy) [1978] AC 1, [1977] 2 All ER 849 (UK HL).

Navalmar UK Ltd v Kale Maden Hammaddeler Sanayi Ve Ticart AS (The Arundel Castle) [2017] EWHC 116 (Comm), [2017] 2 All ER (Comm) 1033, [2017] 1 Lloyd’s Rep 370 (EW HC).

There are a few LMAA awards that recognise this proposition. See Feoso (Singapore) Pte Ltd v Faith Maritime Co Ltd (The Daphne L) [2003] SGCA 34, [2003] SLR 556 (SG CA).

Bulk Transport Group Shipping Co Ltd v Seacrystal Shipping Ltd (The Kyzikos) [1989] AC 1264, [1988] 3 All ER 745, [1989] 1 Lloyd’s Rep 1 (UK HL).

[2011] EWHC 1361 (Comm), [2011] 2 Lloyd’s Rep 278 (EW HC).

North River Freighters Ltd v HE President of India (North River) [1956] 1 QB 333 (EW CA); Ionian Navigation Company Inc v Atlantic Shipping Company SA (The Loucas N) [1971] 1 Lloyd’s Rep 215 (EW CA); Aldebaran Compania Maritime SA, Panama v Aussenhandel AG Zurich (The Darrah) [1977] AC 157, [1976] 2 All ER 963 (UK HL); Freight Connect (S) Pte Ltd v Paragon Shipping Pte Ltd [2015] SGCA 37, [2015] 5 SLR 178 (SG CA).

Agios Stylianous Compania Naviera SA v Maritime Associates International Ltd Lagos (The Agios Stylianos) [1975] 1 Lloyd’s Rep 426 (EW HC).

Government of Ceylon v Societe Franco-Tunisienne D’armement-Tunis (The Massalia) (No. 2) [1960] 2 Lloyd’s Rep 352 (EW HC).

[2011] EWHC 1165 (Comm), [2011] 2 Lloyd’s Rep 177 (EW HC).

Aldebaran Compania Maritime SA, Panama v Aussenhandel AG Zurich (The Darrah) [1977] AC 157, [1976] 2 All ER 963 (UK HL).

The House of Lords overruled The Radnor [1955] 2 Lloyd’s Rep 668 (EW CA). The Radnor treated ‘time lost’ that did not admit laytime definition and exceptions when dealing with ‘time lost’ clauses.

Huyton SA v Inter Operators SA (The Stainless Emperor) [1994] 1 Lloyd’s Rep 298 (EW HC).

Moerland (Arnt J) K/S v Kuwait Petroleum Corpn (The Fjordaas) [1988] 2 All ER 714, [1988] 1 Lloyd’s Rep 336 (EW HC).

Seatrade Group NV v Hakan Agro DMCC (The Aconcagua Bay) [2018] EWHC 654 (Comm), [2018] 2 All ER (Comm) 843 (EW HC).

Inca Compania Naviera SA and Commercial and Maritime Enterprises Evanghelos P Nomikos SA v Mofinol Inc (The President Brand) [1967] 2 Lloyd’s Rep 338 (EW HC); Nereide SpA di Navigazione v Bulk Oil International (The Laura Prima) [1982] 1 Lloyd’s Rep 1 (UK HL).

Shipping Developments Corpn v v/o Sojuzneftexport (The Delian Spirit) [1972] 1 QB 103, [1971] 2 WLR 1434, [1971] 1 Lloyd’s Rep 506 (EW CA).

Inca Compania Naviera SA and Commercial and Maritime Enterprises Evanghelos P Nomikos SA v Mofinol Inc (The President Brand) [1967] 2 Lloyd’s Rep 338 (EW HC).

Oldendorff (E L) & Co GmbH v Tradax Export SA (The Johanna Oldendorff) [1974] AC 479, [1973] 3 All ER 148 (UK HL). See Chapter  14.4.2.1 for a discussion of this case.

Nereide SpA di Navigazione v Bulk Oil International (The Laura Prima) [1982] 1 Lloyd’s Rep 1 (UK HL).

The compensation payable by the charter, rightly, will be damages for detention, which may most of the time be same as the demurrage, unless the market rates have differed since the charterparty was entered into.

Sunbeam Shipping Co Ltd v President of India (The Atlantic Sunbeam) [1973] 1 Lloyd’s Rep 482 (EW HC): the charterer had a duty to secure ‘jetty challan’ for the ship to enter the port, where that was a requirement of the port authority.

Sociedad Financiera De Bienes Raices Sa v Agrimpex Hungarian Trading Company for Agricultural Products [Appeal in The Aello] [1961] AC 135, [1960] 3 WLR 145 (UK HL).

It follows that the ship could not issue notice of readiness.

Malaysian Contracts Act 1950.

Section 68 of the Malaysian Contracts Act 1950 identically provides.

See Chapter  12.6.1 .

Cl. 6(3) (para 2).

Tidebrook Maritime Corp v Vitol SA of Geneva (The Front Commander) [2006] 2 Lloyd’s Rep 251 (EW CA), speech of Rix JL: where the charterer requires early notice of readiness, the charter sanctions early commencement of laytime.

TA Shipping Ltd v Comet Shipping Ltd (The Agamemnon) [1998] 1 Lloyd’s Rep 675 (EW HC).

Galaxy Energy International Ltd v Novorossiysk Shipping Co (The Petr Schmidt) [1997] 1 Lloyd’s Rep 284 (EW HC), affirmed by the Court of Appeal in [1998] 2 Lloyd’s Rep 1 (EW CA).

See Tidebrook Maritime Corp v Vitol SA of Geneva (The Front Commander) [2006] EWCA Civ 944, [2006] 2 All ER (Comm) 813, [2006] 2 Lloyd’s Rep 251 (EW CA); Total Transport Corporation v Arcadia Petroleum Ltd (The Eurus) [1996] 2 Lloyd’s Rep 408 (EW HC).

[2010] EWCA Civ 713, [2010] 2 Lloyd’s Rep 257 (EW CA).

See Trafigura Beheer BV v Ravennavi SpA (The Port Russel) [2013] EWHC 490 (Comm), [2013] 2 Lloyd’s Rep 57 (EW HC).

Cl. 16 of Gencon 1994 form has detailed provision dealing with strikes.

Grant & Co v Coverdale, Todd & Co (1884) 9 App Cas 470, 53 LJQB 462 (UK HL).

Navrom v Callitsis Ship Management SA (The Radauti) [1988] 2 Lloyd’s Rep 416 (EW CA).

Cl. 6(c) (para 2): “… Time used in moving from the place of waiting to the loading/ discharging berth shall not count as laytime. …”

[1925] AC 799, [1925] All ER Rep 607 (UK HL).

Gem Shipping Co of Monrovia v Babanaft (Lebanon) SARL (The Fontevivo) [1975] 1 Lloyd’s Rep 339 (EW HC).

Blue Anchor Line Ltd v Alfred C Toepfer International GmbH (The Union Amsterdam) [1982] 2 Lloyd’s Rep 432 (EW HC).

Overseas Transportation Co v Mineralimportexport (The Sinoe) [1971] 1 Lloyd’s Rep 514 (EW HC), affirmed by the Court of Appeal in [1972] 1 Lloyd’s Rep 201 (EW CA).

[1920] AC 88 (UK HL).

[2002] 1 Lloyd’s Rep 786 (EW HC).

[1927] 1 KB 879 (EW CA).

[1905] 2 QB 267 (EW HC).

Universal Cargo Carriers Corp v Citati [1957] 2 QB 401 (EW HC).

Inverkip SS Co v Bunge [1917] 2 KB 193 (EW CA).

Wilson & Coventry Ltd v Otto Thoresen Linie [1910] 2 KB 405 (EW HC).

See Chapter  13.7 .

[2003] SGCA 34 (SG CA).

Dias Cia Naviera SA v Louis Dreyfus Corpn (The Dias) [1978] 1 All ER 724, [1978] 1 WLR 261 (UK HL).

Dias Cia Naviera SA v Louis Dreyfus Corpn (The Dias) [1978] 1 All ER 724; Nippon Yusen Kaisha v Marocaine de L’Industrie du Raffinage (The Tsukuba Maru) [1979] 1 Lloyd’s Rep 459.

Rich (Marc) & Co Ltd v Tourloti Cia Naviera SA (The Kalliopi A) [1988] 2 Lloyd’s Rep 101 (UK CA).

DGC Commodities Corp v Sea Metropolitan SA (The Andra) [2012] EWHC 1984 (Comm), [2012] 2 Lloyd’s Rep 587 (EW HC).

Which is identical to Article IV(2) of the Hague/Hague-Visby Rules.

K Line PTE Ltd v Priminds Shipping (HK) Co Ltd (The Eternal Bliss) [2020] EWHC 2373 (Comm), [2020] 9 WLUK 40 (EW HC).

Part II, cl. 15(c)

National Shipping Co of Saudi Arabia v BP Oil Supply Co (The Abqaiq) [2011] EWCA Civ 1127, [2012] 1 Lloyd’s Rep 18 (EW CA).

Waterfront Shipping Company Ltd V Trafigura AG (The Sabrewing) [2007] EWHC 2482 (Comm), [2008] 1 Lloyd’s Rep 286 (EW HC).

The Petroleum Oil and Gas Corporation of South Africa (Pty) Ltd v Fr8 Singapore Pte Ltd (The Eternity) [2009] 1 Lloyd’s Rep 107 (EW HC).

Emeraldian Ltd Partnership v Wellmix Shipping Ltd (The Vine) [2010] EWHC 1411 (Comm), [2011] 1 Lloyd’s Rep 301 (EW HC).

Nolisement (Owners) v Bunge and Born [1916-17] All ER Rep 734, [1917] 1 KB 160 (EW CA).

Zim Israel Navigation Co Ltd v Tradax Export SA (The Timna) [1971] 2 Lloyd’s Rep 91 (EW CA).

[1951] 1 KB 240, [1950] 1 All ER 768 (EW HC).

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About this chapter

Kasi, A. (2021). Voyage Charter: Laytime and Demurrage. In: The Law of Carriage of Goods by Sea. Springer, Singapore. https://doi.org/10.1007/978-981-33-6793-7_14

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freightcourse

Contract of affreightment (coa): definition, types & comparisons.

Shipping cargo via sea freight is one of the most popular modes of transport in the world of logistics. Today, nearly 90% of global shipping is done via container ships, tankers, dry bulk carriers, and general cargo vessels.  

Although shipping cargo with ocean carriers is slower than rail, road, or air freight, it’s the most economical option for shippers. Moreover, for large equipment and bulk cargo, it’s often the only option. 

Chartering a vessel mandates certain documentation and procedures before a shipper can charter a vessel to move their cargo from A to B, such as a Contract of Affreightment (COA), which is a contract between the shipowner and the shipper.

This vital piece of documentation puts the onus on the ship owner or carrier to transfer a certain amount of cargo within a specified timeframe. 

In this article, we’ll go into detail about what a COA entails and explain how it’s different from other essential documentation, such as a time charter, voyage charter, and charter party agreement. 

What Is a Contract of Affreightment (COA) in Shipping?

A Contract of Affreightment (COA) is a legally binding contract between a shipowner (carrier) and a charterer (the shipper). This contract certifies the goods or equipment to be transported with its respective specifications such as weight and quantity, the destination, and the timeframe for delivery. 

It also obligates the charterer to pay the freight even if the shipment isn’t ready. This way, carriers can choose from different vessels and book the required amount of storage space for a particular shipment. 

Moreover, a COA is often used for more than one shipment at different intervals. As a result, charterers that opt for sea freight are certain they will have a vessel available to carry their cargo when required. 

Although many parties draft bespoke agreements, Contracts of Affreightment are governed by the Baltic and International Maritime Council (BIMCO). 

This council requires charterers and shipowners to follow certain standards, including VOLCOA, GENCOA, and INTERCOA 80. However, VOLCOA is a forerunner of GENCOA. Therefore, we’ll discuss GENCOA and INTERCOA 80 in detail below.

The GENCOA is a standard contract of Affreightment that was established by BIMCO specifically for dry bulk cargo transport via the sea. Therefore, voyage charter parties looking to move coal, grain, iron ore, sugar, cement, and other dry items are recommended to adhere to this standard and follow the best practices.

INTERCOA 80

Similarly, the INTERCOA 80 is a COA designed by BIMCO for charter parties looking to move liquids and gases in bulk quantities using tankers. Common examples include crude oil, liquid petroleum gas, liquified natural gas, and other petrochemicals. 

What Information Can Be Found In a Contract of Affreightment?

Most COAs are relatively straightforward and typically comprise a framework agreement outlining the terms intended to apply to all shipments and voyages for both parties (charterers and shipowners). 

For instance, it defines the cargo quantity to be shipped during each voyage along with the accepted ports within range. However, it doesn’t specify a particular vessel to be used, which gives shipowners the freedom and flexibility to choose from several options. 

Here are some of the most common details found in a COA:

• Owner Details – Standard COAs start with a preamble that outlines the shipowner’s details, including their name, address, telex number, and company or brokerage name. This section also contains the place and date of the contract.
• Charterers’ Details – Similarly, a COA contains the charterer’s details, including their name, address, and telex number. 
• Type of Cargo – This section briefly describes the type of freight the charterer intends to move (dry bulk cargo, liquids, gas, etc.). For tanker shipments, it also mentions the specific gravity. 
• Ports or Ranges – The port and ranges section of a COA covers the loading and discharge ports of all shipments within the agreement period. It also outlines the range of ports that are suitable for loading and unloading a certain cargo type. 
• Quantity of Cargo – This section specifies the minimum and maximum amount of freight to be transported per shipment within a specified timeframe. It would also specify the total quantity to be shipped for the full duration of the contract.
• Period of Contract – The period of the contract marks the first layday for the initial vessel and the final/canceling data for the final vessel. As a COA is usually effectuated for long-term transportation arrangements, the period of the contract may extend over a number of years.
• Schedule of Shipments – The schedule section outlines the frequency of shipments from A to B on the agreed routes with the COA. It may also specify the shipping period (days, weeks, or months) in a fiscal year. 
• List of Vessels – This section provides the list of vessels the shipowner will use to meet their charterer’s freight requirements. It specifies the length, age, size (capacity), tank coating, pumping capacity, and other details. 
• Rates – The rates section outlines the basic cost of moving a shipment from A to B, along with commission, late payment, demurrage, etc. Freight rates depend on many factors, including the destination, shipment weight, and cargo type. 
• Bunker Adjustment Factor – This section covers any additional charges levied on the shipowners due to fluctuations in fuel prices (also referred to as bunker prices). This would allow the shipowners to offset any additional costs in the event of a sharp increase in fuel prices.
• Dispute Resolution – The dispute resolution section of a COA mentions the different methods all parties can use to resolve disputes while adhering to lawful practices. Specific locations for arbitrations are typically included here.
• War Cancellation – Finally, the war cancellation section covers the terms all parties have to agree with to cancel the COA in the event of war among specified countries. 

Contract of Affreightment vs Charter Party

A contract of affreightment and a charter party agreement are both common pieces of documentation used by charterers and shipowners for sea freight transport, particularly bulk shipments. 

However, they’re two distinctive contracts. A COA doesn’t specify the vessel to be used for a particular shipment. Hence, shipowners have more freedom in selecting vessels to move goods from A to B within a specified timeframe and a fixed rate. 

Conversely, a Charter Party Agreement has more detailed clauses related to vessel selection and management. This maritime contract allows charterers to use a particular vessel or part of it to move cargo from one port to another. 

If both contracts are used together, the terms of the COA will supersede the charter party terms in the event of a conflict in any clause. As a result, most charterers use a COA in conjunction with the latter to facilitate and protect their shipments and prevent unnecessary delays or issues caused by conflicts. 

However, there are two types of Charter Party Agreements. We’ll explain how each type differs from a Contract of Affreightment below:

Contract of Affreightment vs Time Charter

A Time Charter is a type of Charter Party Agreement that enables charterers to book an entire vessel and its storage capacity while the shipowner and their crewmen navigate the ship. Moreover, they can also select their crew and aren’t responsible for ship maintenance. 

In other words, a Time Charter is essentially a leasing agreement between a shipowner and a charterer. Unlike a COA, this agreement has a short tenure, often between a few days to a year, depending on the number of shipments required. 

Moreover, Time Charters don’t require full payments upfront. Charterers can pay charges as they arise during their voyages or every quarter. 

Contract of Affreightment vs Voyage Charter

A Voyage Charter is the second type of Charter Party Agreement that leases out a particular vessel to a charter on a voyage basis instead of a time basis. The agreement outlines the destinations, ports of call, cargo restrictions, and undertakings by the charterers. 

The shipowner mans and navigates the ship just as with Time Charters. Additionally, they also pay the duties and berthing charges at the ports. Unlike COAs, which require upfront payment, Voyage Charters enable charterers to pay on a per-ton or lump-sum basis.

Most shippers use this freight method to transport full cargo on a single voyage. Nevertheless, it is important to note that the COA terms would supersede the terms in the Voyage Charter when both are in effect simultaneously.

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Home / What is a Consecutive Voyages Charter?

What is a Consecutive Voyages Charter?

A type of mixed charter that reflects consecutive voyages between two pre-specified ports during a specific period of time.

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Pros and Cons of Voyage Charter

Voyage Charter Pros

Voyage Charter provides a flexible means by which a ship can be provided for the carriage of a specific cargo between two specific ports. To this extent it will provide cover for a cargo interest’s short-term requirement to move cargo from X to Y.

Additionally, a shipowner can provide short-term employment for the ship by engaging them on voyage charters.

Many shipowners operating fleets of ships will employ ships in this way in order to balance their portfolio of work. A number of ships from the fleet will be operated on long-term time charters to provide a steady income stream for the shipowners.

The remaining proportion of the fleet will be employed on Voyage Charters in order to allow the shipowners to benefit from fluctuations in the market price for ships caused by shortages of ships.

In this way Voyage Charters provide a flexible solution to the intrinsically variable demands of shipping.

A voyage charter is a type of charter party in the shipping industry where a shipowner agrees to transport a specific quantity of cargo for a set price from one or more ports to one or more destinations. Like any contractual arrangement, voyage charters come with their own set of advantages and disadvantages:

Pros of Voyage Charter

• Defined Costs for Charterers : In a voyage charter, the cost of transporting goods is agreed upon in advance. This allows the charterer to know the exact cost of transportation, aiding in budgeting and financial planning.
• No Ship Operating Costs for Charterers : The shipowner bears all the operating costs of the ship, including fuel, crew, maintenance, and insurance. This is beneficial for the charterer as they are not exposed to these variable expenses.
• Efficiency in Cargo Transportation : Voyage charters are often the most efficient way to transport large quantities of cargo over long distances, making them ideal for bulk and commodity shipments.
• Flexibility in Cargo Handling : The charterer has some flexibility in specifying loading and unloading procedures, which can be tailored to the nature of the cargo.
• Market Opportunities for Shipowners : Voyage charters allow shipowners to capitalize on favorable market conditions, setting higher freight rates when demand is high.
• No Long-Term Commitment for Charterers : Voyage charters are typically for a single voyage, offering charterers flexibility without the need for a long-term commitment, as opposed to time charters which can last for several months or years.
• Market Insight for Shipowners : Engaging in various voyage charters can provide shipowners with valuable insights into different cargo markets and trade routes, which can inform future business decisions.
• Profit Maximization for Shipowners in High-Demand Periods : During periods of high demand, shipowners can capitalize by negotiating higher freight rates, maximizing their profit potential.

Cons of Voyage Charter

• Market Risk for Shipowners : The shipowner bears the risk of fluctuating market conditions. If the market rate for freight falls below the agreed-upon charter rate, the shipowner cannot benefit from the lower prices.
• Risk of Delays for Shipowners : The shipowner is exposed to the risk of delays due to loading and unloading operations, bad weather, or port congestion, which can increase operational costs.
• Limited Flexibility for Shipowners : Once a voyage charter is agreed upon, the shipowner has limited flexibility in employing the ship for other opportunities until the charter is completed.
• Potential for Cargo-Specific Issues for Charterers : If the cargo requires special handling or is subject to market fluctuations, the charterer might face challenges in timing and cargo readiness.
• Demurrage and Dispatch : If the loading or unloading takes longer than agreed (laytime), the charterer is typically liable to pay demurrage charges. Conversely, if operations are completed in less time, the charterer may receive dispatch money, but this is less common.
• Dependency on Ship’s Performance : The charterer’s operations are heavily dependent on the ship’s performance and punctuality, which they do not control.
• Operational Restrictions for Charterers : The charterer has limited control over the operational aspects of the ship, such as speed and route, which can impact the timing and efficiency of the cargo delivery.
• Risk of Freight Rate Fluctuations for Charterers : If the market freight rate falls after entering into a voyage charter, the charterer may end up paying more than the current market rate for the transportation.
• Potential Liability for Cargo Damage : In some cases, the charterer might be responsible for any damage to the cargo during loading or unloading operations, which could incur additional costs.
• Bunker Fuel Price Variability for Shipowners : The cost of bunker fuel, which is a significant operational expense, can fluctuate, impacting the profitability of the voyage for the shipowner, especially if not properly hedged or accounted for in the charter party agreement.
• Administrative and Coordination Efforts : Voyage charters often require significant administrative and coordination efforts, including contract negotiation, cargo scheduling, and liaison with port authorities.
• No Guarantee of Future Business : For shipowners, each voyage charter is a standalone agreement, which means there is no guarantee of continuous business once a voyage is completed.

While voyage charters offer a clear and straightforward way to transport goods, they also carry specific risks and limitations for both shipowners and charterers. The choice between a voyage charter and other types of charters, like time or bareboat charters, depends on the specific needs, risk tolerance, and operational preferences of the parties involved.

What are the benefits of Voyage Charter?

The benefits of a voyage charter, where a shipowner agrees to transport a specified amount of cargo for a charterer from one point to another for a predetermined rate, are numerous for both parties involved. Here are some key benefits:

Benefits for the Charterer

• Predictable Costs : The cost of transportation is fixed and agreed upon in advance, allowing the charterer to budget transportation expenses accurately.
• No Operating Costs : The charterer is not responsible for the operating costs of the ship, such as fuel, crew, and maintenance. This reduces financial risk and administrative burden.
• Suitable for Single or Occasional Shipments : Voyage charters are ideal for businesses that do not require regular shipments, offering a flexible and cost-effective solution for occasional transport needs.
• Flexibility in Cargo Management : Charterers can specify loading and unloading procedures to suit their cargo, ensuring optimal handling and safety.
• Reduced Liability : The charterer’s liability is generally limited to the cargo and operations at the port, reducing broader operational risks.

Benefits for the Shipowner

• Profit Opportunities : During periods of high demand, shipowners can negotiate favorable freight rates, maximizing their earnings.
• Market Exposure : Engaging in various voyage charters exposes shipowners to different markets and cargo types, diversifying their business experience and opportunities.
• Utilization of Ship : Voyage charters allow for the effective utilization of the ship, ensuring it generates income rather than remaining idle.
• Control Over Ship Operations : Shipowners retain control over the operation and navigation of the ship, allowing them to manage their fleet efficiently.
• Flexibility in Fleet Management : After the completion of a voyage charter, the shipowner is free to engage the ship in other charters or operations, maintaining flexibility in fleet management.

General Benefits

• Simplicity : Voyage charters are often straightforward and easier to negotiate and manage compared to more complex chartering arrangements like time charters.
• Clear Terms : The contract terms, including the freight rate, ports of loading and discharge, and laytime, are clearly defined, reducing the potential for disputes.
• Market Insights : For both parties, engaging in voyage charters can provide valuable insights into market trends, rates, and operational best practices.

Voyage Charters offer financial predictability and operational flexibility, making them an attractive option for both charterers and shipowners. The specific benefits can vary based on the nature of the cargo, market conditions, and the strategic objectives of the parties involved.

What are the advantages of Time Charter?

A time charter is a type of chartering agreement in the shipping industry where a charterer rents a ship for a specified period of time, with the shipowner still responsible for the ship’s operation and maintenance. This arrangement offers several advantages for both the charterer and the shipowner:

Advantages for the Charterer

• Operational Control : The charterer gains operational control over the ship for the charter period, including deciding the routes and cargoes, which offers greater flexibility in logistics and trade opportunities.
• Fixed Hire Rate : The charterer pays a fixed daily or monthly hire rate, making budgeting and financial planning more predictable.
• No Long-Term Capital Commitment : Charterers can secure the use of a ship without the capital investment required to purchase a ship, optimizing their capital allocation.
• Adaptability to Market Conditions : Time charters allow charterers to respond quickly to market changes by repositioning ships to more profitable routes or cargoes.
• Reduced Risk : Since the shipowner is responsible for the ship’s operation and maintenance, the charterer has reduced exposure to operational risks.
• Efficiency in Cargo Operations : Time charters are efficient for businesses with regular shipping needs, avoiding the need to negotiate separate voyage charters for each shipment.

Advantages for the Shipowner

• Stable Income : Time charters provide a steady, predictable income over the charter period, which can help in financial planning and securing loans.
• Reduced Marketing Effort : The shipowner doesn’t need to find new cargoes for each trip, as the charterer is responsible for cargo arrangements.
• Utilization of Fleet : Time charters help ensure that the ship is actively employed for a longer duration, reducing idle time.
• Operational Oversight : The shipowner retains control over the crew and the technical management of the ship, ensuring that standards are maintained.
• Flexibility in Fleet Management : After the expiration of the charter, the shipowner can reposition the ship for other opportunities, including other time charters or spot market voyages.

General Advantages

• Risk Distribution : Risks are distributed between the shipowner and the charterer, with each party bearing the risks associated with their responsibilities.
• Market Adaptability : Both parties can benefit from the flexibility to adapt to market conditions – the charterer through operational control and the shipowner through stable, long-term contracts.
• Long-Term Relationships : Time charters often foster long-term business relationships between shipowners and charterers, leading to future business opportunities.

Time Charters offer a balance of benefits for both parties, providing operational flexibility and market adaptability for charterers, and financial stability and reduced marketing efforts for shipowners. This makes them an attractive option for businesses with regular shipping needs and shipowners seeking stable, long-term engagements.

Why do Shipowners prefer Voyage Charter over Time Charter?

Shipowners may prefer voyage charters over time charters for several reasons, each linked to the specific characteristics of voyage charters and the strategic and financial priorities of the shipowner. Here are some of the key reasons:

• Higher Potential Profit in Favorable Markets : In a strong freight market, voyage charters can offer higher earning potential per voyage compared to the steady, but possibly lower, daily rates of time charters. This is particularly true when freight rates are rising, as shipowners can capitalize on higher market rates.
• Control Over Ship Operations : In a voyage charter, the shipowner retains control over the ship’s operation, including navigation and management. This allows them to maintain their operational standards and practices, which can be important for maintaining the ship’s condition and performance.
• Flexibility in Market Engagement : Voyage charters offer the flexibility to engage the ship in different markets and trade routes. After the completion of a voyage, the shipowner can reassess the market and choose the next charter based on the most favorable conditions, without being tied to a long-term commitment.
• No Dependency on Charterer’s Cargo Operations : In a time charter, the ship’s profitability is linked to the charterer’s ability to find and manage cargo effectively. In a voyage charter, the shipowner is not dependent on the charterer’s cargo operations, reducing the risk of inefficiencies or delays caused by the charterer.
• Risk of Market Downturn : While voyage charters expose shipowners to market fluctuations, some owners might prefer this over locking in a potentially lower long-term rate in a time charter, especially if they anticipate an upturn in the market.
• Reduced Credit Risk : Voyage charters typically involve shorter engagements with charterers and quicker payment terms. This reduces the credit risk associated with the charterer compared to longer time charter commitments.
• Easier Budgeting for Operational Costs : Since the shipowner is responsible for the ship’s operating costs in a voyage charter, they can more directly control and budget these expenses, as opposed to relying on the charterer’s management in a time charter.
• Lump Sum Payments : Some voyage charters involve lump-sum payments, which can be advantageous for cash flow management for the shipowner.
• Market Insights : Engaging in different voyage charters provides valuable insights into various cargo markets and trade routes, which can inform future business strategies.

However, it’s important to note that the preference for voyage charters over time charters can vary depending on the shipowner’s business model, risk tolerance, market conditions, and specific operational preferences. While some owners prefer the potential higher earnings and control of voyage charters, others might favor the stability and predictability of revenue from time charters.

Why do Charterers prefer Voyage Charter over Time Charter?

Charterers may prefer voyage charters over time charters for several reasons, mostly related to the specific benefits and characteristics of voyage charters that align with the charterers’ logistical needs, financial objectives, and risk management strategies. Here are some key reasons for this preference:

• Cost Predictability : In a voyage charter, the cost of transporting goods is fixed and agreed upon in advance. This allows charterers to know the exact cost of transportation, aiding in budgeting and financial planning.
• No Operational Responsibilities : The charterer is not responsible for the ship’s operational costs and management in a voyage charter. This includes crew wages, ship maintenance, and insurance, reducing the administrative burden and operational risks for the charterer.
• Ideal for Single or Specific Shipments : Voyage charters are particularly suitable for businesses that do not have regular shipping needs but require transportation for specific, occasional shipments.
• Reduced Capital Commitment : Since voyage charters are typically for single voyages, they require less commitment of financial resources compared to the potentially longer-term and more costly time charters.
• Avoidance of Market Fluctuations : Charterers are not exposed to fluctuations in charter rates once the voyage charter rate is agreed upon. This can be particularly advantageous in volatile markets.
• Flexibility in Cargo Handling : Charterers can have more say in specifying loading and unloading procedures in voyage charters, ensuring that these operations are tailored to the nature of the cargo.
• No Risk of Ship Underperformance : In voyage charters, the charterer is not affected by the risk of ship underperformance in terms of speed and fuel consumption, as these aspects are the shipowner’s responsibility.
• Simplicity and Convenience : Voyage charters are often more straightforward and easier to arrange and manage compared to the more complex and ongoing commitments of time charters.
• Less Liability for the Ship : The charterer’s liability is usually limited to the cargo and the operations at the port, and does not extend to the broader operations and maintenance of the ship.
• Suitable for Specific Trade Routes or Cargoes : For businesses that deal with specific trade routes or specialized cargoes, voyage charters offer the precision and customization needed for such operations.

The preference for voyage charters by charterers is largely driven by the cost predictability, reduced operational responsibilities, and suitability for specific or occasional shipping needs. However, the choice between voyage and time charters ultimately depends on the specific requirements, financial considerations, and risk appetite of the charterer.

What is the difference between Time Charter and Voyage Charter?

Time charter and voyage charter are two principal types of charter parties used in the shipping industry, and they differ significantly in terms of structure, responsibilities, and financial arrangements. Here’s a comparative overview:

Time Charter

• Duration-Based Agreement : In a time charter, the ship is chartered for a specific period. The charterer pays for the hire of the ship over this period, regardless of the number of voyages made.
• Charterer’s Control and Flexibility : The charterer has greater control over the ship’s operation, including its routes and cargoes, within the agreed limits of the charter.
• Shipowner’s Responsibilities : The shipowner is responsible for the ship’s operation and maintenance, including crewing, insurance, and repairs.
• Payment Structure : Payment is made on a per-day basis (hire rate), and the charterer is responsible for the fuel costs (bunker) and port charges.
• Risk Distribution : The charterer bears the commercial risks (such as cargo delays), while the shipowner bears the operational risks (such as mechanical failures).

Voyage Charter

• Trip-Specific Agreement : In a voyage charter, the agreement is for a specific voyage or series of voyages. The ship is chartered for the transportation of cargo from one or more load ports to one or more discharge ports.
• Shipowner’s Control : The shipowner controls the ship’s operation, including its navigation and management.
• Fixed Freight Rate : The charterer pays a lump sum or a rate per ton for the cargo transported. This rate is fixed regardless of the voyage duration.
• Shipowner’s Expenses : The shipowner pays for the ship’s operating costs, including fuel, crew, and maintenance.
• Risk Distribution : The shipowner bears most risks, including voyage duration and operational costs, while the charterer is primarily responsible for loading and unloading the cargo within the agreed laytime.

Key Differences

• Control and Flexibility : In a time charter, the charterer has more control and flexibility in employing the ship, while in a voyage charter, the shipowner has more control over the ship’s operation.
• Payment Structure : Time charters involve a day-rate payment model, while voyage charters involve payment based on cargo quantity or a lump sum for the journey.
• Duration of Agreement : Time charters are for a set period, whereas voyage charters are for one or more specific voyages.
• Risk and Responsibility : In time charters, operational responsibilities and some risks are with the shipowner, while commercial risks are with the charterer. In voyage charters, the shipowner assumes most of the operational and voyage risks.

Choosing between a time charter and a voyage charter depends on factors like the charterer’s need for flexibility, the duration of the requirement, cost considerations, and risk appetite. Each type offers different advantages and suits different shipping needs.

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