voyage charters demurrage

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Laytime & Demurrage

Laytime and demurrage are two of the most fundamental principles applicable to voyage charterparties.

This guide will set out a basic summary of what they are and how they operate in practice. Whilst the position can vary from jurisdiction to jurisdiction, the following principles govern the construction of the relevant incorporation clauses under English law and are set out below for guidance purposes only.

What is Laytime?

Put simply, laytime is the amount of time allowed for loading and discharging of cargo during a voyage charterparty.

However, this means not only placing cargo in the vessel but also the stowage/securing/other cargo operations to ensure safety. In the absence of express provision, it does not matter whether the charterparty requires the charterer or the owner to perform those tasks. “ Loading is not complete until the cargo is so placed in the ship that the ship can proceed on her voyage in safety ”   [1]

The Commencement of Laytime

Laytime commences after the tendering of a Notice of Readiness (NOR). This is a notification that both (i) the vessel has arrived at the agreed place; and (ii) it is ready to load or discharge (physically and legally).

In “The Tres Flores” [2] the Court of Appeal held that in order to give a valid notice of readiness a ship must be ready to obey the charterer’s instructions for loading whenever they should be given. In this case there were pests in the holds, making the ship unready to receive the chartered cargo until fumigation had been completed, the notice of readiness was invalid.

Readiness is a preliminary existing fact which must exist before notice of readiness can be given.

The vessel must not only be physically ready to load or discharge, as required, when the notice of readiness is given but also legally ready. The normal requirements, for which express provision is commonly made in charterparties, concern customs clearance or entry, immigration and police approval and health or free pratique.

However, the invalidity of an NOR can prevent the commencement of Laytime. In “ The Mexico I ” where notice was given before the ship was ready to discharge, it was held that the notice was invalid and did not become valid when the ship became ready. If the vessel is accepted as ready to load or discharge and loading or discharge commences without any rejection or reservation, then the NOR is to be considered valid.

The tendering of the NOR can be modified by the following common clauses:

• “ Time actually used before commencement of laytime shall count ”: where work is carried out before the laytime begins the time used will count.
• “ Time lost in waiting for berth to count as loading or discharging time ”: places the
• risk of congestion upon the charterer, whether the charter is a port or a berth charter.
• “ Whether in berth or not .”: justifies the giving of NOR before the vessel berths, as long as she is within the port (berth charterparties).
• “ Whether in port or not .” : justifies the giving of NOR outside port limits, so long as the ship is at a usual waiting area for the port.

How long is allowed for Laytime?

This is agreed between the parties at the time of forming the contract. The actual words used to describe laytime are vitally important. The norm is for laytime to either be expressed as a period of days, or alternatively as a load/discharge rate. Common additional modifiers are:

• “ Running days ” – runs continuously during both day and night and irrespective of normal working hours – will depend upon conditions prevailing at the ports of loading and discharging, as appropriate;
• “ Weather working days ” or “ weather permitted ” – if a day is not a “weather working day” the laytime period is automatically extended. The meaning of the word “weather” is to be determined as a question of fact. What might constitute bad weather for one vessel will not necessarily be the same for another, even if in the same port/ at the same time;
• “Sundays and holidays  excepted”  or “ SHEX ” – Whether a day is a holiday is a question of fact. A holiday can be decided by local authorities and it might apply to the port or local area.

The above form part of the definition of laytime and are known as “ interruptions ” to laytime; these are distinct from “ exceptions ” which are discussed below. Where an interruption applies laytime is automatically extended.

Where no Laytime is agreed, in “ The Spiros C ” it was held that discharge would take place within a reasonable time (reasonable time does not mean normal or average time but will depend on the circumstances existing at the time of loading or discharge). The charterer is not to be responsible for delays caused due to reasons beyond their control, which they are unable to prevent by reasonable endeavours.

Exceptions to Laytime

Exceptions are specifically provided for events, which absolve the charterer of liability for exceeding the permitted Laytime on their occurrence. Two such examples are the General Strike Clause and the General Ice Clause found in Bimco’s GENCON.

Exceptions clauses are interpreted strictly against the party for whose benefit they are included.

Laytime does not run during periods of delay due to the fault of the owner; it is not necessary for the charterer to show that the fault is actionable. However, any time is not interrupted by the valid exercise of a lien.

What is Demurrage?

" A liability for demurrage is a liability for liquidated damages for breach of contract. The breach of contract is the failure to discharge (or load) within the permitted laytime. The obligation has two different aspects: the first is the obligation to discharge and the second is to do so within the limited time. There is no breach before that limited time has expired. Once the limited time has been exceeded there is a continuing breach for which the liability in liquidated damages (that is to say demurrage) continues to accrue minute by minute as the failure to complete discharge continues' [3]

Even when a charterparty does specifically refer to delays due “charterer’s fault” (to trigger liability for demurrage), it seems that the mere fact of the laytime being exceeded is sufficient to bring the charterer in breach of the contract.

Generally speaking, the charterer is the party responsible for the payment of demurrage. However, in  Porteus v. Watney [4]   the bill of lading holders were held liable for demurrage the bill of lading holders were held liable for demurrage as the charterparty was incorporated in the bills of lading and did not specify the charterer as the party responsible.

Once on Demurrage always on Demurrage?

This is a common maxim applied to demurrage. Essentially, it means that once a vessel has exhausted the time allowed for laytime and goes on to demurrage, it will remain on demurrage until loading has completed, even where subsequent delays would not usually count towards Laytime. However, it is worth noting that the parties may have specifically agreed to apply the Laytime exceptions to Demurrage.

Obligations on the Owner

The Owner should not prevent or delay cargo operations in terms of depriving the use of the vessel or access to cargo. The onus is on the owner to prove that no delay resulted from his action.

Further, whilst there is uncertainty, it seems that the Owner has no general duty to mitigate, but they may have a duty to show that they have exercised reasonable efforts to ensure that the period of delay is not prolonged, i.e. exercise of lien and acceptance of security.

Damages for detention

Demurrage is the liability in liquidated damages for the detention of the ship. Some charterparties, such as the Gencon, expressly provide a period during which the damages for delay in loading or discharging are liquidated at the demurrage rate as stipulated in the contract. Once that period has passed, the owner is entitled not to demurrage but to damages for detention at large. In the absence of a stipulation limiting the time on demurrage, questions of frustration and repudiation would have to be answered, demurrage at the agreed rate to accrue continuously until the completion of the functions that would have stopped laytime running. In  The Eternal Bliss , the Court of Appeal held that parties have to consider exactly what damages/losses they want demurrage to cover, as under standard demurrage clauses and absent an independent breach of the voyage charterparty, the damages for delay are limited to the amount stated in the demurrage clause. As per the Court of Appeal’s conclusion “ the charterer is not liable to pay damages in addition to demurrage for its breach of contract in not completing discharge within the permitted laytime .’ [5]

Demurrage Time Bars

The default position is that a claim for demurrage is subject to the general contract time bar of six years from the date of breach of contract.

However, charterparties often contain a “ Demurrage Time Bar Clause ” which provides that “ all supporting documents ” must be provided with a short time frame, often a number of days. Failure to comply with this will mean that a claim for demurrage is time barred.

What documents are required will depend on the wording of the clause. However, generally it will require the provision of all documents that would allow the charterer to assess the claim and includes bills of lading [6] , the NOR, time logs, pumping logs any letters of protest.

Where specific documents are referenced in the clause, they must be provided within the time frame unless they do not exist or were impossible to obtain, whether relevant or not [7] .

As can be understood from the above, while laytime and demurrage are very common concepts in voyage chartering, there are a large number of pit falls that must be avoided. We therefore recommend, if a dispute arises that you speak with your Club LCC contact as soon as possible to ensure your position is protected.

[1] (Argonaut Navigation Co. v. Ministry of Food (The Argobec) (1948) 82 Ll. L. Rep. 223; see also Svenssons Travaruaktiebolag v. Cliffe Steamship Co. [1932] 1 K.B. 490.)

[2]  Compania De Naviera Nedelka S.A. v. Tradax International S.A [1973] 2 Lloyd’s Rep 247

[3]  Islamic Republic of Iran Shipping Lines v. Ierax Shipping Co. [1991] 1 Lloyd’s Rep. 81, at p. 87.

[4]  (1878) 3 Q.B.D. 227 and 534.

[5]  [2020] EWHC 2373 (Comm)

[6]  TRICON ENERGY LTD v MTM TRADING LLC (THE “MTM HONG KONG”) [2020] EWHC 700 (Comm)

[7]  “Amalie Essberger” Tankreederei GmbH & Co KG v Marubeni Corporation [2019] EWHC 3402 (Comm)

For further information please visit  www.shipownersclub.com/lcc

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Charter Parties

A charter party is a highly standardized written document that provides the contractual arrangements for one party (the charterer) to hire the carrying capacity of a vessel, either in whole or in part, owned by another party. Generally, charter parties are subject to the rules and requirements of contract law. Charter party forms are used worldwide, and many of them have been drafted to take into consideration the specific needs of particular trades. Other charter parties are more general in form and are not adapted to a specific trade.

There are three basic types of charter parties: a voyage charter, a time charter, and a demise charter.

Under a voyage charter, the owner of the vessel agrees to carry cargo from one port to another on a particular voyage or voyages. The vessel is manned and navigated by the owner�s crew. A voyage charter may be used as a contract of affreightment�that is, for the shipper�s purpose of sending its goods from the port of origin to a port of destination. To the extent that a voyage charterer obtains only the carrying capacity of a particular vessel, the charterer is not responsible for maintenance, repairs to the vessel, or injuries to third parties arising from the crew�s operational negligence. A voyage charterer usually is not liable for expenses such as bunkers (fuel).

A time charter is a contract for the use of the carrying capacity of a particular vessel for a specified period of time (months, years, or a period of time between specified dates). As with a voyage charter, the vessel owner under a time charter is responsible for the navigation and management of the vessel, subject to conditions set out in the charter party. The vessel�s carrying capacity is leased to the charterer for the time period fixed by the charter party, allowing for unlimited voyages within the charter period. Therefore, the vessel is under the

charterer�s orders as to ports of call, cargo carried, and other matters related to the charterer�s business. The master and crew remain employees of the owner and are subject to the owner�s orders with regard to the navigation and management of the vessel. Because a time charterer obtains only the carrying capacity of a particular vessel, the charterer is not responsible for maintenance, repairs to the vessel, or injuries to third parties arising from the crew�s operational negligence. Time charterers usually are responsible for expenses of operating the vessel.

In a demise charter, the charterer not only leases the carrying capacity of the vessel but, unlike a time or voyage charter, also obtains a degree of control over the management and navigation of the vessel. As such, the charterer becomes, in effect, the owner of the vessel pro hac vice for the duration of the charter. The test for whether a charter party is a demise charter is whether the owner has turned over to the charterer �the possession, command, and navigation� of the vessel during the period it is in effect. When a vessel with a preexisting master and crew is under a demise charter, the master and crew may remain on the vessel and operate the vessel for the charterer as a provision of such agreement. The master and crew are subject to the orders of the charterer and its agents, and they are considered its employees. Under a demise charter, an owner may also turn over the vessel to the charterer without a master and crew. A demise charter of this type is also referred to as a bareboat charter.

Under a demise charter, the legal relationship between the owner and the charterer is significantly different from that created by a time or voyage charter. Because a demise charter transfers the possession and control of the vessel to the charterer, one who takes a vessel on demise is responsible for maintenance, repairs, or damages caused to third parties by the crew�s negligent navigation of the vessel. Thus, the owner who has demised its vessel will generally not be liable in personam for the fault or negligence of the crew�the charterer will be

primarily liable. Demise charterers usually are responsible for the vessel�s operating expenses. In addition to these three types of charter parties, a number of variations have been created to accommodate containerisation and the changing nature of the shipping industry.

The Contract

Most charter party transactions use standardized printed forms. Some of the clauses contain blank spaces that require the parties to supply information. Typically the parties must specify the names of the owner and of the charterer and the amount of payment, referred to as �hire� or �charter hire.� Obviously, a voyage charter must specify the voyage to be undertaken, and a time charter must specify the length of time. In addition, a time charter requires information about the physical characteristics of the vessel and any restrictions on the use of

the vessel. The charter form also sets out standard terms and conditions that apply under the contract. Charter parties typically are negotiated contracts and, in contrast to transport pursuant to bills of lading, are often marked up�that is, provisions are added, deleted, or modified. These changes reflect the market and the relative financial strength of the owner and the charterer.

Typical Areas of Dispute

Freedom of contract is the touchstone to the resolution of charter party disputes between owner and charterer. The rules applicable to charter party disputes derive from the terms of the charter party itself and generally do not implicate public policy concerns. These are contracts between businesspersons, negotiated at arm�s length, often through intermediaries (i.e., brokers who are experts in the field). It is often assumed that the contracting parties are sophisticated and that considerations of consumer protection are absent. Confirmation of this view is the fact that key terms, such as rate of charter hire and length of charter term, are often subject to hard bargaining. This does not mean that the parties negotiate from equal positions of strength. Like other areas of commercial transactions, supply and demand may strengthen an owner�s hand when vessels are in short supply or may put charterers in a better position when there is a surplus of tonnage available in the charter market. The advantages that inhere in these circumstances are not the equivalent of overreaching.

Most terms used in standard charter parties are terms of art that have well-established and well-understood meaning within the industry. Old-fashioned as some may seem, the terms (including those described below) ought to be interpreted and applied in litigation as they are understood in the industry.

Misrepresentation

The term �misrepresentation� includes not only fraud or intentional misrepresentation but also any situation where a vessel does not conform to factual representations as stated by the owner in the charter party. Courts today take a pragmatic approach, and resolution of a dispute may hinge both on the materiality of the representation or undertaking and whether the charterer seeks damages or termination of the contract.

Size and Speed�A breach of an express warranty as to size and speed may entitle a charterer to recover damages.164 At the election of the charterer, the breach of such an express warranty may provide a basis for rescission. Rescission of the charter party is available only under circumstances where the breach is material or where it is discovered before the vessel has been accepted by the charterer.  

Seaworthiness�In general, a shipowner has a duty to ensure that his or her vessel is seaworthy and capable of transporting the cargo for which it has been chartered.166 A charter party that describes the vessel as �with hull, machinery, and equipment in a thoroughly efficient state� or �that on delivery the ship be tight, staunch, strong and in every way fitted for the service� gives rise to a warranty of seaworthiness. In the absence of an express and unambiguous stipulation or a controlling statute to the contrary, a warranty of seaworthiness will be implied by law.

The parties may stipulate that there is no warranty of seaworthiness, but such agreements are not favored168 and will be enforced only if they �clearly communicate that a particular risk falls on the [charterer].�

Breach of the warranty of seaworthiness does not by itself confer upon the charterer the right to repudiate. Repudiation by a charterer is permissible only where the breach of the owner�s undertaking of seaworthiness is so substantial as to defeat or frustrate the commercial purpose of the charter.170 This view is consistent with the modern approach that the undertaking of seaworthiness is to be treated like any other contractual undertaking. Thus, an insubstantial breach that does not defeat the object of the contract will not justify repudiation unless expressly made a condition precedent to a party�s performance of its obligations.

Likewise, the terms of the charter party must be examined carefully because the parties may have agreed to a lesser undertaking with respect to seaworthiness. For example, an owner may have expressly undertaken only to exercise �due diligence� to provide a seaworthy vessel.

Temporary Interference with Charterer�s Use of the Vessel

Charter parties commonly provide for contingencies, short of frustration, that result from the inability of the charterer to use the ship as intended. This may occur in the case of a mechanical malfunction or illness of the crew or some other factor that renders a vessel temporarily unusable. A common provision in charter parties is an �off hire� or �breakdown� clause. Under an off hire clause, a charterer�s duty to pay hire ceases in the event that it is deprived of the use of the vessel, either in whole or in part, as a result of some deficiency of the vessel, its equipment, or the crew. There are many variations in the wording of an off hire clause, and sometimes there are disputes as to the applicability of the particular clause in question.

Sometimes the inability to use a vessel is unrelated to the physical condition of the vessel itself or its crew, such as where a strike by longshoremen or government intervention prevents a vessel from sailing or from loading or discharging cargo. Other clauses in the charter party may determine who bears the risk of such events. Under a �mutual exceptions� clause, for example, if a party is prevented from fulfilling its obligations because of the occurrence of a circumstance enumerated in the mutual exceptions clause, such non-performance is not considered to be a breach of the charter party contract. �Restraint of princes� (an embargo) is usually one of the circumstances enumerated in a standard mutual exceptions clause. Thus, the action of a government that prevents an owner from fulfilling its obligation to the charterer�for example, by placing the vessel in quarantine�will excuse the non-performance of the owner. Other circumstances commonly excepted are acts of God or of public enemies.

Safe Port and Safe Berth Provisions

In time and voyage charters there are express or implied obligations that the charterer will not require the vessel to call at an unsafe port or enter an unsafe berth to load, discharge, or take on bunkers. Time and voyage charter parties usually contain a provision referred to as a �safe port/safe berth� clause that purports to place on the charterer the risks to the vessel posed by the particular ports at which the vessel will call and the berths where the vessel will lie. It is not clear whether this clause in a charter party obliges the charterer to �warrant�

the safety of ports and berths entered. A safe berth clause does not impose strict liability upon a voyage charterer, and the charterer is not liable for damages arising from an unsafe berth where the charterer has exercised due diligence in the selection of the berth. Where a time charter party includes a safe port/berth clause, the charterer warrants the safety of the berth it selects. In any event, under a safe port/berth clause the master of a vessel may refuse to proceed to an unsafe port/berth nominated by the charterer without placing the owner in breach of the charter.

Notwithstanding a safe port/berth provision, negligence on the part of the master may relieve a charterer of its liability to the extent that such negligence permits the fact finder to conclude either that the port was safe because the peril could have been avoided by prudent seamanship or that, in the case of an unsafe port, the master�s conduct was an intervening, superseding cause of the resulting damages. Obviously, not every risk taken by a master will be considered a superseding cause. If the casualty results from the combined negligence of the charterer and the vessel�s master or other agent of the owner, damages are to be apportioned according to the respective fault of the parties.

Demurrage and Detention

In a time charter, the charterer has the vessel�s carrying capacity at its disposal for a specified period of time. As such, it makes no difference to the owner whether the charterer makes efficient use of the time chartered vessel. By contrast, in voyage charters, the time during which the voyage charterer may use the vessel is measured by the length of time it takes to complete the voyage. Obviously, it is to the owner�s advantage to have the voyage completed as quickly as possible: The sooner an owner has the vessel at his disposal, the sooner he can use it for his own purposes or charter it to another person. Consequently, a frequent issue in voyage charter party disputes is the shipowner�s claim for �demurrage.�

Voyage charter parties provide a time frame for loading and unloading the vessel. Under such a provision, the charterer is allowed �laytime��a specified period (hours or days) during which it can perform its loading and unloading operations without incurring charges in excess of the agreed rate of charter hire. These clauses vary greatly. If a charterer takes longer to load or discharge cargo than is provided in the charter party (i.e., it exceeds its laytime), it will be charged an additional amount called �demurrage.� Thus, demurrage refers to the sum that a charterer agrees to pay for detaining the chartered vessel for that period of time that exceeds the laytime. It should be noted that where a charterer completes loading or unloading in a period of time less than that specified as laytime, the charterer has conferred a benefit on the owner and may be entitled to financial allowance referred to as �dispatch.�

A typical demurrage clause in a charter party specifies the amount of demurrage that must be paid and the maximum amount of time allowed for demurrage. In this respect, demurrage should be distinguished from detention. Whereas demurrage is a contractual charge imposed on the charterer for exceeding laytime, detention is a legal remedy, in the form of damages, available to the shipowner after the period during which demurrage has expired.180 Nonetheless, detention is recoverable only where the owner can demonstrate that it has sustained damages, such as an opportunity cost.

A charter party may include a clause permitting the owner to withdraw the vessel where hire payments are not made in accordance with the requirements set out in the written agreement. A shipowner may insist on strict compliance with these requirements; and where these requirements are not complied with, courts are likely to uphold the owner�s right to withdraw its vessel. Owners may not withdraw a vessel while cargo is on board.

Subcharters

The right of a charterer to sublet or subcharter a vessel depends on the wording of the charter party. Charter parties often expressly authorize a charterer to subcharter the vessel and usually specify that a subcharter arrangement does not relieve the principal charterer of its obligations to the owner under the head or primary charter party. The owner is not in privity of contract with subcharterers who may not rely on the terms either expressed or implied in the head charter

party. The head charter party may, in order to protect the owner�s right to hire, contain a provision giving the owner a lien on subfreights whereby the owner steps into the shoes of the charterer with respect to freight due the charterer from cargo interests.

Liability of the Owner for Damage or Loss of Goods

Charter parties, per se, are excluded from the terms of the Carriage of Goods by Sea Act (COGSA). Any disputes between the owner and charterer must be resolved according to the terms of the charter party.   Courts generally apply the rule of freedom of contract in the interpretation and enforcement of charter parties. This approach enables the parties to bargain freely and to include in the contract any stipulation allowed by law. As such, the parties are free to incorporate the terms of COGSA by reference into the charter party, and they frequently do. Thus, various provisions of COGSA often become terms of a charter party through contractual stipulation. The parties are, of course, free to modify, or even exclude, COGSA provisions in the contract. Such modifications are permissible as long as COGSA does not apply by operation of law.  

Even where a carrying vessel is under charter, however, there are circumstances in which COGSA is applicable as a matter of law. This occurs where the owner has issued a bill of lading to the charterer, who in turn has transferred the bill of lading to a third party, such as a consignee. These situations are discussed in the following section.

Arbitration Clauses

Most charter parties contain a clause whereby the parties agree to resolve by arbitration disputes that arise under the charter party. These provisions are enforceable and, under certain circumstances, may bind others, such as a consignee.

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: Laytime and Demurrage

• First Online: 02 September 2021

Cite this chapter

• 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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Journal article : Case note

The scope of a demurrage clause.

“Demurrage” is the term given to an agreed charge which is paid by a charterer to a shipowner, under a voyage charterparty, for detaining the vessel beyond the time agreed for loading and unloading (“laytime”). If laytime is exceeded, the shipowner will lose the opportunity of future employment of the vessel, sometimes for the same charterer, as for example under a consecutive voyage charter. Demurrage might be viewed as the “price” paid for an extension of laytime, but it is now established ...

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• Contracts and clauses
• BIMCO contracts
• GENCON 2022
• Voyage charter
• General cargo

BIMCO’s general purpose voyage charter party, codenamed “GENCON,” is synonymous with BIMCO contracts. Since it was first developed in 1922, it has been considered BIMCO’s flagship contract, and it is world-wide the most widely used voyage charter party in the dry bulk sector.

The last revision was published in 1994. That revision was, to a large extent, triggered by some significant English court cases that cast doubt on the understanding and intention behind important clauses in GENCON 76 such as the General Strike Clause. The intention then was not to rewrite GENCON 76, but simply to clarify and update it where necessary. However, a lot has happened since 1994. The shipping industry has become much more complex and regulated, with both shipowners and cargo owners being subject to obligations that were never thought of in 1994. The drivers for revising GENCON 1994 were therefore somewhat different to those thirty years ago.

The subcommittee engaged in the revision of GENCON 1994 did, however, spend quite some time considering: should its work be limited to a modest revision, maintaining the familiarity of the charter? Or should it provide for a more prescriptive and comprehensive rewriting of the charter? The subcommittee, with the support of BIMCO’s Documentary Committee, opted for the comprehensive approach. In an increasingly complex shipping environment, it was felt that many shipping companies with no “in house” legal support would find it helpful to have a charter party that addresses most of the relevant issues from the outset.

The result is a new edition of GENCON that provides a solid commercial and legal basis for negotiation . And, as with many other contracts provided by BIMCO, it has been written in the clear and easily understood language that has become our hallmark.

BIMCO would like to thank the drafting committee for their commitment to the project and their considerable time and effort in producing GENCON 2022:

John Weale, Fednav (Chairman)

Stephen Harper, BW Group

Captain Qin Ling, COSCO Shipping/Captain Lin Huoping, COSCO Shipping Bulk Co

Shotaro Aoto, Japan Shipping Exchange

Olaf Schroeder, Oldendorff Carriers

Basil Logothetis, Empros Lines Shipping

Ann Shazell, Cargill Ocean Transportation

Struan Robertson, Clarksons

Paul Hirtle, ASBA

Fulvio Carlini, FONASBA

Magne Andersen, Nordisk Defence Club

Helena Biggs, Gard

Professor Richard Williams, School of Law, Swansea University

BIMCO secretariat support was provided by Søren Larsen, Deputy Secretary General and Mads Wacher Kjærgaard, Project Manager, Standards, Innovation & Research.

As part of the development work, the drafting committee consulted a broad group of owners, charterers, P&I clubs & lawyers. BIMCO would like to thank them all for their support and valuable input.

Supporting documents

Sample copy of GENCON 2022

Log in to see the explanatory notes

Explanatory notes.

Explanatory Notes

The following explanatory notes are intended to explain the drafting team’s thinking behind some of the key clauses. This document is intended as a living document and as BIMCO receives questions on some of the clauses, the notes will be expanded.

The contract is divided into the now familiar two sections. Part I is used to insert the contract variables such as the name of the parties, the details of the ship, the freight and the load and discharge ports. Part II contains the standard terms and conditions.

The box layout of GENCON is a standard design used by BIMCO.

Part I incorporates the BIMCO Authenticity Clause immediately above the signature boxes. The objective of the clause is to combat the industry’s – often unknowing – use of counterfeit and/or erroneous copies of BIMCO forms. If one of the parties provides the contract template for negotiation and is reluctant to include this clause, then this should serve as a warning that the offered contract may not be a genuine BIMCO standard agreement.

Clause 1 – Scope of Contract Voyage

This clause covers the same ground as Clause 1 of GENCON 1994, but with the text broken into three subclauses for the sake of clarity.

Under subclause (a) , the Owners’ obligation to ensure the vessel sets out “as soon as its prior commitments have been completed” has been qualified by the addition of “unless prevented or hindered by events beyond the Owners’ control”. The purpose here is to cover external causes of delay which prevent the vessel from departing immediately on the approach voyage, such as tug strikes or channel blockage.

Clause 2 – Owners’ Responsibilities

This clause replaces the Owners’ Responsibility Clause of previous versions of GENCON. That clause, which goes back to the 1922 version of the charter, is essentially a pre-Hague Rules bill of lading clause. While it provided broad protection to the Owners for loss, damage or delay to the cargo, its scope was strictly limited to the carriage of goods. So, for example, it provided no protection to the Owners in respect of an accident occurring on the approach voyage to the loading port, or for failure to load all or part of the cargo.

Under subclause (a)(i) of the new Clause 2, the Owners have two “snapshot” obligations to exercise due diligence: (1) to have the cargo spaces fit for the cargo at the commencement of its loading; and (2) to have the ship seaworthy and properly manned and equipped at the commencement of each cargo-carrying voyage. And under subclause (a)(ii) , the Owners undertake properly to carry and care for the cargo while it is on the vessel.

Under subclause (b) , the Owners are entitled to the protection of all rights, defences, immunities, time bars and limitations of liability available to a carrier under the Hague-Visby Rules, with such protection to apply to any claim for loss, damage, delay or failure in performance.

Clause 3 – Cargo

When compared to GENCON 1994, this is a new clause. Over the past 25 years or so, shipping has become more highly regulated, with the imposition of many new requirements on the carrier in relation to the cargo. Because GENCON remains a FIOS charter, it is necessary to define exactly how these obligations are being allocated between the parties.

Subclause (a)(i) deals with the documentation and stowage of the cargo as presented for shipment. Subclause (a)(ii) addresses the treatment and handling of stowing and securing materials. Subclause (a)(iii) requires the cargo to be lawful at all material times. Subclause (a)(iv) requires the cargo to be properly fit and suitable for the intended voyage. And subclause (a)(v) obliges the Charterers to provide in good time all information required for any advance cargo declarations.

Subclause (b) addresses two aspects of bulk cargoes which are not loaded in accordance with the vessel’s natural segregation: (i) where such stowage results in commingling or contamination; and (ii) where there are resulting claims for under- or over-delivery – in each case, absent fault on the part of the Owners.

Subclause (c) allows the Owners to load additional cargo where the Charterers’ contractual commitment is for a less-than-full cargo.

Subclause (d) makes the Charterers responsible for the disposal of cargo residues which may be harmful to the marine environment

Subclause (e) deals with the situation where the cargo is loaded from or discharged into lighters. (Note that this provision deals only with lighterage, and does not permit ship-to-ship operations.)

Clause 4 – Loading and Discharging

This clause deals with the allocation of risk and responsibility for the handling of the cargo and its stowage and securing. In recent years, several judgments have addressed the issue of how responsibility for safe stowage and handling of cargo should be allocated between owners and charterers who have divided up the carrier’s responsibilities under the contract of carriage. An obvious example is where, unknown to the Charterers, their stowage materially affects the vessel’s seaworthiness: how far should the Owners be held responsible for the loss? The solution adopted by Clause 4 of the new GENCON is to follow the approach adopted by the NYPE 2015 time charter, making the Charterers responsible, but subject to the supervision of the Master.

With this qualification, subclause (a) makes the Charterers responsible for all loading and discharging operations, and for the safe stowage of the cargo for the loaded voyage and also when shifting between ports or berths.

Subclause (b) deals with the situation where the vessel has to incur additional costs and/or to leave the berth part-loaded for reasons of safety (e.g. hurricane, excessive swell). (Note that this subclause says nothing about laytime.)

Subclauses (c) and (d) are conventional provisions dealing with the provision of the vessel’s lighting and gear, and with stevedore damage.

Clause 5 – Cargo Fumigation

Clause 5 deals with on-board fumigation of cargo. It is designed to deal with problems of cost and delay which can arise with this operation, often because the parties are not sure about their respective rights and obligations. It is assumed that it will simply be deleted where on-board fumigation is not required or allowed.

Clause 6 – Deck Cargo

This clause can only be activated by the specific written consent of the Owners.

Subclause (c) places the risk of loss or damage to deck cargo on the Charterers, including claims arising from the negligence of the Owners.

Clause 7 – Freight

This clause deals separately with how freight is to be paid ( subclause (a) ) and how it is to be earned: subclause (b) provides that all freight other than lump-sum freight is earned progressively as the cargo is loaded; and subclause (c) provides that lump-sum freight is earned only on completion of loading.

Subclause (d) provides that freight is non-returnable even if ship or cargo is lost.

Subclause (e) provides that the Charterers are entitled to demand “Freight paid” bills of lading only where the freight has been paid in full.

Clause 8 – ETA Notices

This clause is a conventional provision giving effect to the notice provisions set out in Part I of the charter.

Clause 9 – Notice of Readiness

This clause deals with the commencement of laytime. As before, and like many other charters, the new GENCON provides for a mixed port/berth regime.

Subclause (a) provides for the tendering of the Notice of Readiness where the vessel is at the berth and in all respects ready to load or discharge. It also provides that, prior to tendering Notice, the Owners shall exercise due diligence to ensure that any cargo spaces required for loading at that place are clean, dry and in all respects suitable for receiving cargo.

Subclause (b) allows the Notice to be tendered from the anchorage if the berth is not designated or if it is not reachable on the vessel’s arrival. Laytime will commence accordingly, but time actually shifting from the anchorage to the berth will not count.

Subclause (c) deals with the difficult situation where the vessel over-runs the cancelling date because it is obliged to wait for a berth on its arrival, and is then found to require further cleaning following inspection alongside. Under such circumstances, the Charterers shall have the right to terminate the charter on the later of the cancelling date and the expiry of 96 hours from the time of reinspection. But then, if the charter is so terminated, the Charterers will compensate the Owners at the demurrage rate for the original waiting period.

Subclause (d) allows the Notice of Readiness to be tendered prior to the opening of the laydays; but laytime cannot commence before that time unless Charterers elect to commence cargo operations sooner.

Subclause (e) provides that, if more than one Notice is tendered, no such notice shall prejudice any other notice.

Clause 10 – Laytime

Subclause (a) deals with the nature and definition of laytime, incorporating BIMCO’s 2013 Laytime Definitions, subject to consistency with the terms of the charter. It is important that the parties are alert to the significance of this inclusion and consider the implications of the relevant definitions.

The expressions “SHINC” and “SHEX” are defined, the latter in such a way (“customary days of rest”) as to deal with the situation where the exclusion relates to Fridays or lunar holidays.

Subclause (b) – where the older versions of GENCON used the expression “weather permitting” to make it clear that laytime would run continuously unless the actual working of the vessel was prevented, the new version has replaced this phrase with the following exception: “except to the extent that the actual loading/discharging is delayed or prevented by weather”. The purpose here is to avoid ambiguity as to the intended effect. Users should note that GENCON never has been drafted to accommodate “weather working days” or similar definitions of laytime. If, therefore, the parties should agree to define laytime in this way, they should recognise that the exception set out in subclause (b) may be inconsistent with that definition and so may be rendered ineffective.

Subclause (b)(i) states in terms that, where separate laytime is allowed for loading and for discharge, laytime is not reversible between the two operations.

Subclause (c) deals with the situation where the laytime is based on the tonnage loaded, and the Charterer has paid full freight on the cargo short-loaded: in that case, the Charterers are entitled to laytime based on the larger quantity.

Clause 11 – Commencement of Laytime

This clause addresses when laytime should start to run. Subject to subclause 9(d) , it states that laytime shall commence at the earlier of (1) commencement of cargo operations and (2) specified times on that or the next working day.

Clause 12 – The Running of Laytime

This clause deals with issues affecting the counting of laytime.

Under subclause (a) , time and costs used for shifting between berths in the same port are to be for the Charterers’ account (unless carried out for Owners’ purposes).

Subclause (b) addresses the issue of time lost on account of environmental or public health issues relating to the cargo (e.g. dust), providing that time will count and any costs will be for the Charterers’ account.

Subclause (c) defines the conclusion of laytime/time on demurrage. It allows the Charterers three hours for provision of cargo documents.

Clause 13 – Demurrage and Despatch

Subclause (a) provides that despatch will be payable at half the demurrage rate on all laytime saved.

Subclause (b) provides that demurrage will run continuously unless, but then only to the extent that, time is actually lost to the Charterers by the vessel’s inability to perform the service immediately required.

Under subclause (c) , demurrage falls due day by day, and is payable upon receipt of invoice.

Note that the English Court of Appeal has recently decided that, absent clear agreement to the contrary, and absent any other causative charterers’ breach, the expression “demurrage” covers any loss incurred by the shipowner as a result of delay in loading or discharging the cargo. The issue will be taken up by the Supreme Court in 2023. In this current state of uncertainty, the GENCON subcommittee has decided to leave the expression as defined by the BIMCO Laytime Definitions (see subclause 10(a)): “… an agreed amount payable to the owner in respect of delay to the Vessel once Laytime has expired, for which the owner is not responsible.” However, the parties should consider whether this definition truly reflects their agreement.

Clause 14 – Cancelling

Subclause (a) provides that, where the vessel has not tendered its Notice of Readiness by midnight on the cancelling date, the Charterers have the option of cancelling the charter; but its declaration must be made within 48 hours of the cancellation date.

Subclause (b) is deals with the situation where it is clear that the vessel is running late and will miss its cancelling date. The purpose of such an interpellation provision is that the vessel shall not have to proceed on a long ballast voyage towards the loading port not knowing whether or not the charterers will accept the vessel once it has arrived. When Owners have informed the Charterers that the cancelling date will be missed and provided a new ETA, the Charterers then have 48 hours to accept that new ETA as the revised cancelling date or cancel the charter.

Subclause (c) provides that action or inaction under the cancelling clause does not prejudice any claim for damages which either party may have against the other.

Clause 15 – Lien

T his clause is a conventional lien provision. It has been kept separate from Clause 16 because it may qualify for inclusion in bills of lading where such inclusion is limited to charter provisions relating to the carriage of goods.

Clause 16 – Suspension and Termination

This clause relates to actions which the Owners may take where the Charterers have failed to make due payment under the charter.

Subclause (a) allows the Owners to suspend performance

Subclause (b) deals with a prolonged (96 hour) failure by Charterers to pay or to provide security, this giving the Owners the right to terminate the charter and/or to discharge the cargo.

Subclause (c) contains a general indemnity in favour of the Owners for any action taken under the clause.

Clause 17 – Strikes

This clause is a reworking of the traditional General Strikes Clause which appears in previous versions of GENCON. As in the 1994 version, the clause is limited to strikes or lockouts which delay or prevent the actual loading of the cargo: that is, the clause is limited to strikes or lockouts which directly affect the vessel.

Subclause (a) deals with the situation where no cargo is on board the vessel. In that situation, the Owners may seek affirmation from the Charterers that they will ignore the strike. If the Charterers decline or ignore this request, the Owners will have the right, but not the obligation, to cancel the charter.

Subclause (b) deals with the situation at the loading port where the strike affects the actual loading of the ship. In that case, the laytime will run normally and any demurrage will be at 50% for up to 10 days, thereafter at the full rate.

Subclause (c) addresses the situation where the strike is prolonged. It provides that the Owners will be entitled to be paid the greater of the demurrage rate and the ship’s then open market value after 25 days.

Subclause (d) deals with the situation at the discharge port. There, the vessel must stay, with any demurrage to be incurred at 50% for 10 days, and thereafter at the full rate for up to 25 days. Thereafter, the Owners are entitled to receive the greater of the demurrage rate and the then open market value.

Subclause (e) provides for regular payment of amounts falling due under the clause; and subclause (f) exempts the parties from liability for the consequences of strikes.

Clause 18 – General Exceptions Clause

Under GENCON 1994 and its predecessors, the Charterers had no defence where their ability to perform was prevented by external events beyond their control. In effect, their obligations were absolute, short of extreme legal consequences such as frustration or supervening illegality.  The purpose of the General Exceptions clause is to provide a mutual exemption from liability for adverse effects which are beyond the control of the party claiming its benefit.  However, the charter otherwise remains in full effect, including the running of laytime and the payment of any sums falling due.

Clause 19 – Bills of Lading

This clause follows the logic of Clause 10 of GENCON 1994.

Where the 1994 form provided that the bill of lading must be presented in a particular form, this clause states that the terms must be no less favourable to the carrier than CONGENBILL 2022, and always in conformity with Mate’s receipts. The Charterers indemnify the Owners for failure to comply with the clause.

Clause 20 – BIMCO Electronic Bills of Lading Clause 2014

This is a standard BIMCO clause. The explanatory notes can be found here .

It should be noted that, although this clause refers to waybills, these are not mentioned or allowed under Clause 19 or otherwise under GENCON 2022. This omission is deliberate: while waybills are not bills of lading for purposes of the Hague/Hague-Visby Rules, they may count as such under other legislation such as the Harter Act, which continues to apply to contracts of carriage which fall outside the scope of the USA Carriage of Goods by Sea Act 1936.

Clause 21 – Classification and Insurance

This clause records the vessel’s classification and liability insurance, and provides that these will be maintained unless agreed otherwise, such agreement not to be unreasonably withheld.

Clause 22 – Liberty and Deviation

This clause is an expanded version of the Deviation clause of GENCON 1994, expressly including landing of stowaways, medical emergencies, taking on spares and ballast water exchange. It should be noted, however, that its scope is expressly limited to purposes reasonably necessary for the safe performance of the charter voyage.

Subclause (b) requires its incorporation in any subcharter and bills of lading.

Clause 23 – Substitution

This clause allows the Owners to provide a materially similar substitute vessel within the lay/can spread, subject to the Charterers’ prior consent not to be unreasonably withheld.

Clause 24 – Sub-let and Assignment

This clause allows the Charterers to sub-let or assign performance of the charter, subject to the Owners’ prior consent not to be unreasonably withheld.

Clause 25 – Taxes and Dues

This clause is essentially the same as Clause 13 of the 1994 GENCON.

Clause 26 – Agency

In recognition of standard market practice, subclause (a) of this clause is materially different from its 1994 predecessor. Unless provided otherwise, the vessel will be consigned to agents nominated by the Charterers and engaged by the Owners. However, where the agent is acting in relation to the cargo or any obligation of the Charterers, it shall be deemed to be the agent of the Charterers.

Subclause (b) provides that each party will be responsible for acts or omissions of their respective servants, agents and subcontractors, and that shippers and receivers are to be considered the agents of the Charterers in the performance of any function allocated to the Charterers under the charter.

Subclause (c) sets minimum quality standards for agents nominated by the Charterers.

Clause 27 – Limitation of Liability

Subclause (a) provides that neither party is surrendering any right of limitation of liability.

Subclause (b) requires the Charterers to indemnify the Owners for any such loss of limitation arising from the terms of use of any berth which is not expressly identified in the charter.

Clause 28 – Protective Clauses

This clause incorporates in the charter the CONGENBILL New Jason, Both-to-Blame Collision , and Himalaya clauses, and expressly requires their insertion in any bill of lading issued under the charter.

Clause 29 – General Average

This clause requires general average to be adjusted and paid in London (unless another place has been agreed) under the York-Antwerp Rules 2016.

Clause 30 – BIMCO Ice Clause for Voyage Charter Parties 2005

Clause 31 – BIMCO ISPS/MTSA Clause for Voyage Charter Parties 2005

Clause 32 – BIMCO Sanctions Clause for Voyage Charter Parties 2020

Clause 33 – BIMCO War Risks Clause for Voyage Chartering (VOYWAR 2013)

Clause 34 – BIMCO Piracy Clause for Single Voyage Charter Parties 2013

Clause 35 – Brokerage

This c lause provides for the payment of brokerage commission on freight, deadfreight and demurrage as actually received by the Owners.

Clause 36 – Notices

This clause deals with the giving of notices – apart from notices relating to arbitration, which are dealt with under subclause 37(f).

Clause 37 – BIMCO Law and Arbitration Clause 2020

This is BIMCO’s 2020 edition of the law and arbitration clause which offers four named arbitration venues and a free choice of law and forum. When using SmartCon, the option chosen by the parties in Box 32 will appear automatically in the body of this clause. If the parties fail to make a choice, English law and London arbitration will be the default position.

Subclause 37(a)  determines the governing law; the place of arbitration; the applicable arbitration legislation; and the seat of arbitration (where the arbitration takes place in a jurisdiction other than the agreed place of arbitration). It is an “exclusive” arbitration agreement. This is emphasised by the addition of the phrase “referred exclusively to arbitration”.

Subclause 37(b)  requires the parties to appoint three arbitrators but allows for a different number of arbitrators to be agreed.

Subclause 37(c)  applies the terms (or rules) of the chosen arbitration association to the conduct of the arbitration. An appointment procedure is no longer included in the clause because the terms of the named arbitration venue contain a procedure to which parties should refer when making appointments of arbitrators.

Subclause 37(d)  provides for the small claims procedures offered by the named arbitration association. Parties are free to decide on the maximum applicable sum for small claims, but otherwise the clause will display the default amount used by each of the named venues. If the London arbitration version of the clause is chosen then an additional “intermediate claims procedure” provision will apply optionally.

Subclause 37(e)  applies the terms, rules procedures of the chosen arbitration association current at the time that arbitration proceedings are commenced. This is the common approach for arbitration in London, Singapore and Hong Kong. In New York the rules are different and it is those current at the time the contract was concluded that will apply.

Subclause 37(f)  addresses the correct service of arbitration notices and communications. Parties are free to serve notices by whatever effective means they choose, but if they choose email then they must provide the email address of someone authorised to receive arbitration notices (and advise the other party of any change of address during the period of the agreement). Notices are considered effectively served immediately on sending by email.

Clause 38 – Original Charter Party

Under this clause, each party undertakes to provide on demand a duly signed original of the charter. This formal document is sometimes required in litigation or arbitration with third parties, and the clause requires prompt cooperation.

Copyright and availability

Copyright in GENCON 2022 is held by BIMCO.

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Voyage Charter vs Time Charter

Ships, boats and other recreational vessels are owned by a large number of individuals who often purchase them as assets. They do not use these vessels for shipping goods or for ferrying passengers.

Instead, they often lend them out to third party organizations who use them for a variety of purposes. In maritime legal terms, this lending process is known as chartering. Chartering is an important concept of the global maritime trade sector, and is of different types.

This article will delve into the differences between two specific categories of charters – the voyage charter and the time charter.

What is a Charter?

A charter is an agreement between two or more groups known as charter parties, regarding the leasing of a vessel for a fixed set of conditions. The terms and conditions stipulated in the charter are binding on all the parties in the agreement and covers a wide variety of clauses and possible scenarios that may arise. It is considered to be an official document in legal aspects and is required by Admiralty Law to be drawn up in case of any form of vessel hiring or leasing.

A shipowner is the first party in the charter agreement who owns the vessel under consideration. The charterer is an individual or organization who is in need of a ship.

The charterer may have cargo that he wishes to transport, or may further lease out the vessel to third parties.

The shipbroker is a link between ship owners and charterers, and aids in finalizing the terms of the agreement. The terms of the agreement include the duration of leasing, fees, payment instalments, regulations on usage, and detailed surveyor reports on the condition of the ship.

Payment is termed as a freight rate and is remitted to the shipowner at fixed intervals decided in the agreement.

Surveyor reports are important in chartering, as they ensure that the vessel is seaworthy prior to being chartered. Similarly, on completion of a charter agreement, and before final payment formalities, another survey report is conducted to ensure that the vessel has sustained no damage during the lease period.

The charter agreement lays down the responsibilities of each group and stipulates the condition in which the vessel is to be maintained.

There are three main types of charters – voyage charter, time charter, and demise charter.

The demise charter is often known as a bareboat charter, and grants ownership or possession of the vessel to the charterer subject to certain time-bound conditions.

Terms and Features of a Voyage Charter

A voyage charter is a type of charter in which a vessel is leased out for a particular voyage. The charter agreement lists the ports of call, destination, and restrictions on cargo, if any.

Most voyage charters are undertaken by charterers who have cargo that needs to be shipped. For this, they contact ship owners through brokers and arrange a ship for a particular voyage.

Payment of voyage charters can be done in two methods – on a per-ton basis, or on a lump-sum basis .

The per-ton basis involves paying the owner for every ton of cargo or freight transported on the vessel. This is preferred when the cargo tonnage is considerably lower than the gross maximum cargo tonnage of the vessel.

On the other hand, when a higher weight of the cargo is carried, it is advisable to pay on a lump-sum basis . The shipowner must ensure that the tonnage carried on board the vessel is within the acceptable limits of the ship. This includes checking the tonnage of on-deck cargo, and the various load lines of the vessel.

There are some important terms used in a contract agreement, that lays out the time-based rules to be followed for the duration of the contract.

Laytime refers to the time that a charterer is allowed to complete the loading and unloading process at a port of call. Since the owner pays duties and berthing charges at the port, they expect the charterer to hasten the process.

In case the charterer exceeds the laytime laid out in the contract, he is obliged to pay a penalty known as demurrage . This covers the extra costs incurred by the shipowner owing to the delay by the charterer.

On the other hand, if the ship is able to complete the loading and unloading operations before the stipulated time, the charterer can claim payment of a despatch from the owner. This is often seen as an incentive for charterers to complete the port operations as soon as possible.

In voyage chartering, the shipowner undertakes payment of fuel, operation, and employment-related costs. It is their responsibility to hire the officers and other crew members for the voyage either from a pool of individuals working for them, or using brokers as middlemen to source mariners and seafarers.

In addition, the owner must also pay costs such as berthing and loading operations. Any equipment used must also be paid for by the owners.

To recoup these costs, the owners charge a higher rate from the charterer. In general, charterers transporting a one-off consignment prefer voyage charters despite the high cost. This is because they are not tied down to the contract for a long period of time.

Simply put, a voyage charter involves a charterer hiring a vessel for the purpose of a single voyage, in which the route and ports have been pre-determined. The responsibility of duty and other payments along with recruitment is handled completely by the shipowner, while the cargo is the sole responsibility of the charterer.

Terms and Features of a Time Charter

A time charter is a time-bound agreement, as opposed to a voyage charter. The shipowner leases a vessel to a charterer for a fixed period of time, and they are free to sail to any port and transport any cargo, subject to legal regulations.

Although the charterer controls the ship, the maintenance of the vessel still falls under the purview of the owner. They are responsible for ensuring that the vessel meets internationally accepted maritime standards, throughout the course of the agreement. They regularly employ marine surveyors to prepare reports on the seaworthiness of the vessel and make repairs as and when required. The owner will face legal action in case the vessel is found to have some major problem.

The time charter agreement can span anywhere from a few days to a few years. This is a long-term agreement that works on a single rate of payment known as the freight rate.

Payment is to be remitted every quarter and does not fluctuate under ordinary circumstances.

In time chartering, the charterer is responsible for selecting a crew, paying charges that arise during the voyages, and arranging for provisions to ensure smooth operations at every port of call. They must intimate the planned route to the owners in advance. The payment is calculated on a per-day basis, with penalties added at a later time. The cost of fuel, provisions etc. are to be covered by the charterer, while the owner will handle all maintenance-related costs.

The charterer often does not sail on the vessel and provide instructions to the master of the vessel in their stead. This includes permissible cargo, route and ports, required charter speed etc.

Unlike voyage charters that use a rigid payment calculation, there are several provisions for unforeseen delays in time charters.

Since payment is on a daily basis, the charterer may be delayed for a certain reason, and these are covered in the agreement.

Time not included in the final payment is known as off-hire hours . For instance, if a vessel is slowed down because of poor weather that could not have been predicted, the extra time spent is not included in the final time count.

Similarly, if some form of damage occurs and repairs need to be carried out, the duration is considered to be off-hire . Certain clauses can be inserted in the agreement, that allows for a fixed number of off-hire hours. Beyond this, the charterer is charged for delays.

Briefly put, a time charter involves leasing a vessel for a fixed period, on a per-day rate, where the charterer is free to use the vessel. The owner only looks after maintenance-related cost.

Clauses are inserted to protect the charterer from having to pay for hours that were spent due to events that could not have been foreseen.

How to Choose a Charter Type

Voyage and time charters are very different, in their intended use and service conditions. Knowing when to choose each type of charter can go a long way in meeting expectations of the charterer and shipowner.

A voyage charter is preferred in cases where the charterer only needs the vessel for specific voyages that may arise for different reasons. This could be the case when there is an occasional cargo to transfer.

An occasional cargo commonly springs up during sudden surges in demand, when the supply services are down. Thus, companies that may deal in other commodities may enter the cargo industry for that period of time, in order to make a profit.

This can also happen when the charterer has already pressed into service their own fleet of vessels, which forces them to hire a ship from a third party so that they may undertake a single voyage.

Voyage chartering can be tricky for inexperienced charterers, since the matter of the crew and equipment must be handled correctly.

Most owners make arrangements to look after these requirements, but it is mostly based on goodwill. Having a shipbroker negotiate the terms can be very helpful in ensuring that the occasional charterer is not inconvenienced by having a ship without a crew to man it.

A time charter is more commonly used by more experienced chartering firms when there is a long-term requirement for a vessel. Instead of having to specify the ports and routes undertaken by the vessel in the charter agreement, the charterer simply hires the boat for a fixed period of time and takes complete control over the vessel in all but name.

As they are free to sail to any destination with any group of crew and officers, it is beneficial to companies that already deal in shipping. For instance, if a ship is decommissioned or is sent in for repairs, the company needs to be able to procure a vessel for the duration of that period.

Instead of having to book a ship every time they wish to undertake a voyage, they use time charters. Thus, for the duration of the agreement, they will have possession of the vessel and are free to use it, within the purview of the law. This is especially useful since such a charterer will often already have a crew ready to take over the hired vessel.

Another major factor that sways the decision to pick either a voyage or time charter is the finances of the shipping industry. Voyage chartering is considered to be a volatile market since there is no assurance of leasing a boat on completion of an existing contract. Since it is only applicable for a single voyage, the overall volatility of the voyage charter is high.

However, charterers prefer voyage charters for the reason that they can always get a more competent rate from other ship owners. In other words, the owners are at the mercy of the chartering sector.

So, most ship owners prefer time charters, as it guarantees financial returns for a fixed period of time, at a fixed rate. This offers some protection against rapid fluctuation of the chartering rates. However, charterers do not prefer this contract, as it ties them down at a single rate for an extended period.

A one-off charterer always goes for a voyage charter, while a regular charterer prefers time charters. Shipowners are often directly approached by charterers, instead of having marine brokers. Thus, one must have an overall look at various factors influencing the shipping sector, prior to choosing between a voyage and time charter.

Overall Comparison

Table of responsibilities.

You may also like to read –

• 8 Main Factors that Affect Ocean Freight Rates
• What is the Difference between Lay days and Lay time?

Disclaimer:  The authors’ views expressed in this article do not necessarily reflect the views of Marine Insight.  Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Marine Insight do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader.

The article or images cannot be reproduced, copied, shared or used in any form without the permission of the author and Marine Insight.

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About Author

Ajay Menon is a graduate of the Indian Institute of Technology, Kharagpur, with an integrated major in Ocean Engineering and Naval Architecture. Besides writing, he balances chess and works out tunes on his keyboard during his free time.

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Great article that provides lots of fundamental knowledge! Kudos to the author, thank you!

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International Trade, Bills of Lading, Day 9 Charterparties and Arbitration

Arun Kasi You may leave a Google Review Advocate & Solicitor, Malaya of the Sessions at (click below): Barrister, England and Wales Arbitrator, AIAC and THAC panels https://g.page/ArunKasi/review Fellow, Chartered Institute of Arbitrators London (CIArb) Member, London Maritime Arbitrators Association (LMAA)

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 1 Charterparties Voyage Charter: Laytime and Demurrage LAYTIME AND DEMURRAGE

• Laytime = contractually allowed time for loading / discharge

• Demurrage = contractually agreed rate of compensation when the laytime is exceeded

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 2 Charterparties Voyage Charter: Laytime and Demurrage LAYTIME DEFINITIONS

• Laytime may be stated in different ways • Number of days, number of hours (common in tanker charters), rate of loading or discharge.

• Laytime stated in days – may be calendar or conventional days • Eg. loading starts at 2 pm on Monday and finishes at 1 pm on Tuesday • Calendar days used = 2 • Conventional day used = 1 (because loading finished within 24 hours of starting) • If charterparty is silent as to calendar or conventional day, then likely calendar days

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 3 Charterparties Voyage Charter: Laytime and Demurrage LAYTIME DEFINITIONS

• BIMCO GENCON 1994 form, cl 16(c):

• Laytime for loading and discharging shall commence at 13.00 hours, if notice of readiness is given up to and including 12.00 hours, and at 06.00 hours next working day if notice given during the office hours after 12.00 hours.

• Leonis v Rank would suggest that this clause means conventional days

• Laytime may be qualified: • Weather permitting • Weather working day

• Exceptions to Laytime may be provided, eg. port workers’ strike

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 4 Charterparties Voyage Charter: Laytime and Demurrage LAYTIME DEFINITIONS

• BIMCO GENCON 1994 form, cl 6(a) / (b) defines laytime as weather permitting days/hours, Sundays and holidays (unless used) excepted:

• (a)* Separate laytime for loading and discharging

• The cargo shall be loaded within the number of running days/hours as indicated in …, weather permitting, Sundays and holidays excepted, unless used, in which event time used shall count. The cargo shall be discharged within the number of running days/hours as indicated in …, weather permitting, Sundays and holidays excepted, unless used, in which event time used shall count.

• (b)* Total laytime for loading and discharging

• The cargo shall be loaded and discharged within the number of total running days/hours as indicated in …, weather permitting, Sundays and holidays excepted, unless used, in which event time used shall count.

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 5 Charterparties Voyage Charter: Laytime and Demurrage LAYTIME DEFINITIONS

• Laytime may be provided separately or together for loading and discharge • Charterparties may allow a dispatch, particularly when separate loading / discharge laytime are provided, as reward for early completion of loading / discharge • Charterer does not have to save any laytime, and may deliberately delay up to last moment of laytime - The Vrontados and Hudson v Ede

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 6 Charterparties Voyage Charter: Laytime and Demurrage LAYTIME AND NOR

• Commencement of laytime is tied to Notice of Readiness (NOR)

• Laytime will start upon NOR or certain hours after NOR

• Eg. BIMCO GENCON 1994 form, cl 6(c) – Laytime commences after certain time once NOR is given

• ExxonMobil Voy 2005, cl 13 form provides for laytime to start 6 hours after NOR is given or upon arrival at berth

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 7 Charterparties Voyage Charter: Laytime and Demurrage NOR

• NOR may be given only when the ship becomes an ‘arrived’ ship • In a port charter, arrive at port – but may give NOR at port only if berth is not available on arrival at port. If berth is available on arrival at port, the ship must proceed to berth and then give NOR - The Johanna Oldendorff • In a berth charter, arrive at berth • Whether it is a port or berth charter may not always be straight forward • BIMCO GENCON 1994 form, cl 6(c) allows NOR to be given at port only if a berth is not available upon arrival at the port

• If NOR is given before right to give accrued, the NOR is invalid and does not take effect even when the right has accrued • Hence a fresh NOR must then be given • But if charterer accepts an invalid NOR, then charterer will be estopped taking challenge

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 8 Charterparties Voyage Charter: Laytime and Demurrage

ARRIVED SHIP

• Port charter – must arrive within port limits

• The Johanna Oldendorff – Indicative factors

• As set by law • If none: • The area within which a port authority exercises its various powers to regulate the movements and conduct of ships. • The powers relating to pilotage and other matters may well extend beyond the port limits. • Usual waiting place (in this case in 17 nautical miles away from the dock).

• The Maratha Envoy

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 9 Charterparties Voyage Charter: Laytime and Demurrage

WIBON / WIPON / TIME LOST CLAUSES

• wibon - whether in berth or not • wibon clause redundant in a port charter

• wipon – whether in port or not

• time lost - time lost in waiting for berth to count as laytime • Unlike wibon / wipon, this does not render the ship an arrived one to give NOR but merely deducts the waiting time from laytime, hence expands demurrage time

• Laytime definitions, qualifications and exceptions apply

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 10 Charterparties Voyage Charter: Laytime and Demurrage WIBON / TIME LOST CLAUSES

• Effective only if ship cannot berth due to congestion and not by other causes such as bad weather - The Kyzikos

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 11 Charterparties Voyage Charter: Laytime and Demurrage REACHABLE ON ARRIVAL / ALWAYS ACCESSIBLE CLAUSES

• Reachable on arrival

• Charterer to nominate berth upon arrival of the ship at port

• If charterer fails, for whatsoever reason, the charterer will be liable for detention, though this clause does not allow NOR to be given or laytime to start

• Laytime definitions, qualifications and exceptions do not apply

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 12 Charterparties Voyage Charter: Laytime and Demurrage REACHABLE ON ARRIVAL / ALWAYS ACCESSIBLE CLAUSES

• Always accessible

• Wider than ‘reachable on arrival’ clause

• Nominated port must be one that the ship can safely reach and leave

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 13 Charterparties Voyage Charter: Laytime and Demurrage LAYTIME EXCEPTIONS (SUSPENSION OF LAYTIME)

• Eg. frost, detention by ice, unavoidable hinderances delaying the discharge of the cargo

• BIMCO 1994 form, cl 6(c) excepts the shifting time from laytime where laytime started while waiting for berth

• Loss of laytime attributable to shipowner, irrespective of whether the shipowner is at fault or not

• The Fontevivo - in the midst of discharging, the crew sailed away for fear of war risks and then returned to the port of discharge after three days

• The Union Amsterdam - demurrage because ship was grounded by negligence of the shipowner - Liability for negligent navigation and management of ship was statutorily excluded – Held: the fault (though non-actionable) excepted the charterer’s liability for demurrage for the period of delay caused by the grounding

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 14 Charterparties Voyage Charter: Laytime and Demurrage TERMINATION AND DEMURRAGE

• Exceeding laytime is also a breach of the charterparty – innominate term

• Shipowner may terminate only if consequences are so serious

• BIMCO GENCON 1994, cl 7 form allows the shipowner to terminate if demurrage is not paid after 96 hours notice

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 15 Charterparties Voyage Charter: Laytime and Demurrage DEMURRAGE AND LAYTIME EXCEPTIONS

• ‘Once on demurrage, always on demurrage’ – The Dias

• Unless delay causing demurrage was fault (whether actionable or not) of shipowner – The Union Amsterdam

• Laytime exceptions do not apply to demurrage

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 16 Charterparties Voyage Charter: Laytime and Demurrage CONTRACTUAL TIME LIMITS FOR DEMURRAGE CLAIMS

• Eg. Shellvoy 5

• Demurrage claim documents to be submitted ‘fully and correctly’ within 90 days

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 17 Charterparties Voyage Charter: Laytime and Demurrage DEMURRAGE v DETENTION

• Detention payable where

• Eg. where charterparty provides no laytime / demurrage • Obligation to load / discharge within reasonable time • If reasonable time exceeded, then detention

• Eg. where charterer fails to nominate port upon arrival at port, where there is a ‘reachable on arrival’ clause

16/04/2021 www.arunkasico.com © Arun Kasi, 2021 18 International Trade, Maritime Law and Arbitration Web Reference arunkasico.com -> Maritime Law Knowledge Centre -> Conventions …

19 www.arunkasico.com/knowledge-centre © Arun Kasi, 2021 Carriage of Goods by Sea Further Reading Arun Kasi, The Law of Carriage of Goods by Sea, Singapore, Springer, 2021

PART I: INTRODUCTION AND INTERNATIONAL TRADE 1. Introduction and Legal Framework 2. Shipping Documents 3. International Trade PART II: BILLS OF LADING 4. Obligations of Carrier under Rules: Legal Bases 5. Third Parties: Protection and Action for 6. Proof of Damages: Presumptions and Estoppels 7. Implied Terms and Exclusion Clauses. 8. Hague & Hague-Visby Rules: Application 9. Hague & Hague-Visby Rules: Carriers' Obligations and Defences 10. Hague & Hague-Visby Rules: Carriers' Liability and Time Limitations 11. Shippers' Obligation for Dangerous Cargo PART III: CHARTERPARTIES 12. Charterparty: Introduction 13. Voyage Charter: Freight and Lien 14. Voyage Charter: Laytime and Demurrage 15. Time Charter: Orders and Indemnity 16. Time Charter: Withdrawal, Off-Hire and Redelivery 17. Time Charter: Apportionment of Cargo-Claims Liability

20 https://www.springer.com/gp/book/9789813367920 © Arun Kasi, 2021 Carriage of Goods by Sea Further Reading Availability Malaysia Australia Elovakia • Kinokuniya • Dymocks • Martinus • Booktopia UK • Kinokuniya Slovakia • Wildy • Gorila • Foyles Germany • Waterstone • Hugendubel Hungary • Blackwells • Weltbild • Bookline • John Smith’s • Thalia • Browns Books • Langer Blomqvist Denmark • Buchkatalog • Saxo USA • Umbreit • Barnes & Noble • Stephanus Buchhandlung Czech • Books A Million • Martinus • Walmart France • The Last Bookstore • Galignani Singapore • Schuler Books • Kinokuniya • Bookscouter Brussels • Joseph Beth • Standard Boekhandel Taiwan • Bluemanatee • Club • Kinokuniya • Literatibookstore • Books.com.tw • Powells Sweden • Bookshop.org • Adlibris Thailand • Kinokuniya • AkademiBokHandeln • Kinokuniya • Bokus Canada S. Korea • Indigo Switzerland • Aladin • Buchhaus New Zealand • OrellFuessli India • Mightyape • Books Wagon Estonia • Krisostomus 21 https://www.springer.com/gp/book/9789813367920 © Arun Kasi, 2021