Lecture II. General contractual terms

1. Charterparty period

2. Commencement of a period

3. Extension of a hire period

4. Delivery and Redelivery of a vessel

5. Sub-let clause

6. Clause "Paramount"

7. Bill of Lading

1. Charterparty period. The duration of a charterparty period is important to both owners and charterers:

It is important for charterers since they cannot properly plan sub fixtures unless they know that they have the use of the vessel for a specified period;

It is important to owners since, firstly, they wish to know what their gross income will be for the charter period and since, secondly, they need to know when the vessel is likely to be redelivered to them in order to plan future employment.

Each Time charterparty will specify the date of delivery, which is the beginning of the charterparty period. The charterer must redeliver the vessel when the specified charterparty period has come to an end, not earlier and not later. Otherwise charterers are in breach of the charterparty. As it is difficult to predict how long one or more voyage(s) will take, charterers need to build in some flexibility with regard to the charterparty period and agree upon a margin. For example this can be achieved as follows:

• About 4 months

• 4 months 15 days more or less (in charterer’s option)

• Minimum 3 months maximum 5 months

• About 4 months to a maximum of 5 months

• About 4 months without guarantee

In case the charterparty does not allow for an express margin of the charterparty period a reasonable tolerance will be implied because it is not possible to calculate the exact date on which the vessel will be redelivered.

What is “reasonable” will depend on the circumstances of the case and in particular the length of the charterparty period. For example it was held that in relation to a charterparty of 6 months and 20 days a margin of 8,4 days should be allowed. The same applied to a margin of 11 days in relation to a C/P of 30 months.

“About”

For example in the New York Produce Exchange 1946 form the charterparty period has been qualified by “about”. The effect is the same as the margin which might be implied if the charterparty does not provide for an express margin. As a guideline, a margin of 5 days was allowed in respect of a charterparty period of “about 4 to 6 months” and in respect of a charterparty period of “about 6 months”, 12 days beyond the charterparty period was held to be not an acceptable tolerance.

“Without guarantee”

If the charterparty period has been qualified as such, the obligation on the charterer is restricted to provide an estimate of the duration of the charterparty period in good faith. So, what charterers genuinely believe to be correct at the time of fixing. Charterers will still be in breach of the charterparty if they knowingly provided wrong information.

2. Commencement of a period. It is very important to determine the point of time from which computation of the charterparty time scale commences because the hire payment commencing on and from the day of delivery of the vessel.

Lines 18-24 of NYPE 46 state: Vessel to be placed at the disposal of the Charterers, at ... in such dock or at such wharf or place (where she may safely lie, always afloat, at all times of tide...), as the Charterers may direct....Vessel on her delivery to be ready to receive cargo with clean- swept holds and tight, staunch, strong and in every way fitted for the service, having water ballast, winches and donkey boiler with sufficient to run all the winches at one and the same time (and with full complement of officers, seamen, engineers and firemen for a vessel of her tonnage)...

So delivery is complete when the ship and her crew are placed at the disposal of the charterer at the place stipulated and time starts to run from that point of time.

A failure in delivery of a vessel may result in time not commencing and the charterparty being terminated, though the charterer can choose to waive the breach, continue with the charter and reserve the right to damages, through protest, to cover any losses arising out of the late delivery. The right to terminate the charterparty for late delivery of the vessel may be implied at common law and is expressly provided for in charters which stipulate a final date of delivery coupled with a cancellation clause.

Cancellation Clause - charterparty clause specifying the last date known, as the cancelling date, on which a ship must be available to the charterer at the agreed place. If the ship arrives after the canceling date, the charterer may have the option to cancel the contract.

Canceling Date - last date, agreed in a charterparty, by which a ship must be available to the charterer/at the agreed place at the commencement of the contract. If the ship is not available by that date, the charterer may have the option to cancel the charter under certain circumstances and clauses of the charterparty.