Charter-party

Charter party (Latin: charta partita; a legal paper or instrument, divided, i.e. written in duplicate so that each party retains half), a written, or partly written and partly printed, contract between a shipowner and a merchant, by which a ship is let or hired for the conveyance of goods on a specified voyage, or for a defined period. A vessel might also be chartered to carry passengers on a journey.

A charter party is the contract between the owner of a vessel and the charterer for the use of a vessel. The charterer takes over the vessel for either a certain amount of time (a time charter) or for a certain point-to-point voyage (a voyage charter), giving rise to these two main types of charter agreement. There is a subtype of time charter called the demise or bareboat charter.

In a time charter, the vessel is hired for a specific amount of time. The owner still manages the vessel but the charterer gives orders for the employment of the vessel, and may sub-charter the vessel on a time charter or voyage charter basis.

The demise or bareboat charter is a subtype of time charter in which the charterer takes responsibility for the crewing and maintenance of the ship during the time of the charter, assuming the legal responsibilities of the owner and is known as a disponent owner.

In a voyage charter, the charterer hires the vessel for a single voyage, and the vessel's owner (or disponent owner) provides the master, crew, bunkers and supplies.

US law

(Note the US regime below can also be applied into charterparties or contracts of carriage subject to the laws of other jurisdictions.)

COGSA, the Carriage of Goods by Sea Act, does not apply of its own force to charter parties, but does apply to bills of lading issued to a shipper by the charterer (in the US) in conjunction with charterer's operations. As a practical matter, many charter party forms stipulate the applicability of COGSA or the Harter Act to the relations between owner and charterer. Such a stipulation is valid and enforceable even without the issuance of a bill of lading. Lawsuits brought for the breach of an obligation under a charter party are generally within the admiralty jurisdiction. As long as the agreement is executory, for inadequate performance the remedy is in personam which allows the plaintiff to go to state court under the "saving to suitors" clause. If, however, a charter breach creates a maritime lien, the suit is in rem, against the vessel itself, with exclusive admiralty jurisdiction.

What has been said above mostly applies to commercial operations and voyages. In pleasure boating, the most frequent charter arrangement is the bareboat charter. The voyage or time charter is only used for larger yachts and is more the exception than the rule. Charter fleets are mostly made up of boats belonging to individuals or companies who only use their boats on a part-time basis or as an investment. A recent arrangement in recreational boating is the time-share chartering in which several charterers are assigned a certain number of days per month or season in a manner which resembles time-share for residential resorts.

Typical clauses

A charter-party may contain these clauses.

Bunker clause

A bunker clause stipulates that the charterer shall accept and pay for all fuel oil in the vessel's bunkers at port of delivery and conversely, (owners) shall pay for all fuel oil in the vessel's bunkers at port of re-delivery at current price at the respective ports. It is customary to agree upon a certain minimum and maximum quantity in bunkers on re-delivery of the vessel..

Ship clause

Under this clause, the owner of the ship writes clearly that the ship would be seaworthy at the start of the voyage in every respect, in other words, the ship would be appropriate to travel to the country for which it is taken.

Ice clause

An ice clause is inserted in a bill of lading or a charter-party when a vessel is bound for a port or ports which may be closed to shipping by ice when the vessel arrives or after the vessel's arrival.

Lighterage clause

A lighterage clause is inserted into charter-parties which show as port of discharge any safe port in a certain range, e.g. Havre/Hamburg range.

Negligence clause

A negligence clause tends to exclude shipowner's or carrier's liability for loss or damage resulting from an act, default or neglect of the master, mariner, pilot or the servants of the carrier in the navigation of manoeuvring of a ship, not resulting, however, from want of due diligence by the owners of the ship or any of them or by the ship's husband or manager.

Ready berth clause

A ready berth clause is inserted in a charter-party, i.e. a stipulation to the effect that laydays will begin to count as soon as the vessel has arrived at the port of loading or discharge "whether in berth or not". It protects shipowner's interests against delays which arise from ships having to wait for a berth.

External links

 This article incorporates text from a publication now in the public domain: Chisholm, Hugh, ed. (1911). Encyclopædia Britannica (11th ed.). Cambridge University Press.