4. Delivery and Redelivery of a vessel.

The ship can be hired for a number of calendar months or even for a number of years. "The owners let and the charterers hire the vessel for a period of the number of calendar months indicated in Box 14 ...." (BALTIME, Clause 1). A vessel can also be hired for one or several voyages but this is usually done under a “Trip Time Charter”.

The period of hire runs from the delivery date until the re-delivery date. This is the planned period of the time charter agreement called “flat period”.

So a time charter period is defined by the delivery of the ship to - and the redelivery of the ship from - the time charterers. The time charterers are not obliged to take delivery of a ship that is delivered too early. If the ship arrives too late, they are entitled to cancel the agreement and in some cases, they are also entitled to damages. In the context of a time charter, redelivery is the termination of charterer's right to use the vessel and takes place at that moment when the charter comes to an end. There is no physical return of the vessel to the Owner, who has been actually operating the vessel throughout the charter, but under charterer's orders.

As far as the time for redelivery is concerned, time charterparties usually accept a certain amount of flexibility in this respect. If the charterers redeliver the ship too late, the owners may be entitled to damages from the charterers (depending, in part, on the charterparty’s terms governing law and the reason for the late delivery). If it is clear that at the time the vessel was ordered on its last voyage, the charterers realized (or should have realized) that it would no be possible for them to redeliver the vessel in accordance with the agreement, the owners usually stand a good chance of obtaining damages for their loss. The situation is more difficult when the redelivery has been delayed due to a reason beyond the charterer’s control (provided that reason is not due to the charterer’s negligence).

Time and Place of Delivery / Redelivery:

Although many standard charterparties stipulate that the vessel can only be delivered and redelivered during weekdays and office hours, those limitations are frequently deleted in the individual charterparty. It is also useful if the charterparty clearly indicates whether UTC (Universal Time Coordinated) or local times should be applied when the exact time for delivery and redelivery is established. The place or port of delivery and redelivery can vary in terms of specificity, with a specific port mentioned in some cases and a certain area or range in others (e.g. “vessel to be delivered and redelivered in the Mediterranean”). When only an area or range is mentioned, it is usually the owners who choose the place of delivery and the charterers who decide on the port of redelivery (since it is in the charterer’s best interest to have as many options and as much flexibility when it comes to redelivery as possible). For example, the Exxon Mobil 2000 form (a tanker time charter) provides for redelivery “at a port or place worldwide, in charterer’s option.” Although this form is highly favourable to the charterer on this point, it nevertheless provides the advantage of absolute clarity, which is a key consideration in avoiding disputes among the parties.

Condition of the Ship Upon Delivery and Redelivery:

On delivery to the charterers, the vessel should generally be seaworthy and conform to the requirements of the contract (e.g. “… she being in every way fitted for ordinary dry cargo service with cargo hold well swept, cleaned and ready to receive cargo before delivery under this charter”). As far as redelivery is concerned, a standard charterparty clause will read: “the vessel to be redelivered on the expiration of the charter in the same good order as when delivered to the charterers (fair wear and tear excepted)….” These two clauses basically mean that upon delivery, the charterers can require that the ship be in the condition specified in the contract and ready to commence commercial trading for them. They are also obliged to redeliver the vessel in a similar condition, enabling the owners to start immediate commercial trading again, either for their own account or that of another time charterer.

An issue which can sometimes cause problems involves the clearing of cargo holds. Although the charterers cannot in principle redeliver the vessel before she is swept and cleaned, they can sometimes negotiate a charterparty clause containing words to the effect that “The charterers shall have the option to re-deliver the vessel with unclean / unswept holds against a lump sum payment of …..in lieu of cleaning.” Given that it can be difficult to estimate beforehand how many men / hours will be required to clean the ship, it is usually better from the owner’s viewpoint to discuss

the specific amount of the lumpsum payment when the vessel is at the redelivery port and and her next employment is known.

It is worth noting that unlike charters for dry bulk trades, few of the tanker time charters contain provisions regarding the condition of the ship upon redelivery. Indeed, the tanker forms generally obligate the owner to maintain the condition of the vessel throughout the entire charter period. Repair expenses are for the owner’s account whether or not they constitute ordinary wear and tear. Cases in which a charterer would be liable for physical damage would include a breach of its safe port or safe berth obligations, or as a result of bad bunkers or cargo which did not conform to the charter requirements.

Allocation of costs at delivery and redelivery:

When the vessel is delivered under the charter, liability for certain costs such as bunkers, harbour dues and agency fees is passed from the owners to the charterers. In the same way, liability for those costs gets passed back to the owners at redelivery. In order to obtain a basis for the allocation of costs, special on-hire and off-hire survey reports are usually issued in connection with delivery and redelivery. These reports indicate the exact time for delivery and redelivery, as well as the quantities of fuel and diesel on board and the vessel’s general conditions (or any damage she may have sustained). The damage report can play a key role in establishing liability for damages which sometimes arise during and after the charter period. Although charterers and owners can undertake separate surveys, it is also common that they agree to a joint survey by an independent surveyor, in which cases they must agree for whose account the survey is and in whose time. There are a number of options they could choose in this respect. For example, the charter party clause could read: “Unless otherwise mutually agreed the owners and charterers shall each appoint surveyors for the purpose of determining the condition of the vessel at the time of delivery and redelivery hereunder. Surveys whenever possible to be done during service, but if impossible any time lost for on-hire survey to be for owner’s account and any time lost for off-hire to be for charterer’s account.” An alternative option would be to incorporate a charterparty clause that reads: “A joint survey at delivery to be arranged by owners and effected in their time. A joint survey on redelivery to be arranged by charterers and effected in their time. Costs for both surveys to be shared equally.”

Damages.

When deciding on damages, courts and arbitration panels take a very case-based approach. The basic rule is that the non-breaching party is to be put in the same position, insofar as money can do so, as it would have been in had the charter been performed according to its terms.

The standard approach in an underlap case is that hire is awarded up to the earliest time redelivery is permitted under the charter. In the case of overlap, owner will be awarded damages based upon the charter hire for the period of the charter (including implied or express margins), but will get damages based on the market rate for any additional time. Lost profits for business which could not be carried out because of a late redelivery may possibly be recoverable if the charterer was put on notice of owner's possible employment.

If the charterer's liability is incurred as a result of insufficient cleaning, owner is entitled to the actual costs of cleaning, plus hire for the time the operation takes. If, on the other hand, the breach consists of redelivery of a ship with structural damage, the measurement of damages will be related to the diminution of the value of the ship or the cost of repairing the defective condition.

The owner, however, normally cannot elect to treat the failure to redeliver in like good order as an overlap issue and claim hire for the period it would take to put the ship back to "like good order". The owner cannot refuse to accept redelivery unless the damage is such as to make the vessel unseaworthy and thereby deprive the owner of the immediate use of his ship.

5. Sub-let clause. To sub-let (or to sub-charter, or to assign), said of a charterer, is to charter or hire the ship out to another party, known as the sub-charterer. The sub-let clause gives the charterer permission to sub-let the vessel. Normally the clause holds the charterer responsible for the fulfilment of the contract even if he sub-lets the ship.

This right is of considerable importance to the charterer since it gives him a certain freedom to utilize the vessel in the way that is most economical for him. In practice often found that the charterer have chartered the vessel for the only one purpose, for making a profit by subletting it. From the other side a charterer may find out that the cargo which he intended to ship is not available or, that he is not in a position to utilize the vessel for the original intended purpose, in that case he will seek other employment in order to cover the freight that he is obliged to pay to the owner. He also may find out, that because of a rise in freight market rates it will be more profitable for him to recharter the vessel, than to utilize it in the way originally intended.

Thus the charterer may not only be the user of the services provided by the shipowner; he may also act, simultaneously, as the supplier of the same services by means of the subletting vessel

5. Paramount clause. This clause is generally found in a bill of lading but can also be found in a charterparty. The main purpose of such a clause is to incorporate the terms and conditions of the Hague or Hague-Visby Rules (or the Hamburg Rules) into the document which is (or which evidences) the contract of carriage of goods by sea.

The word “paramount” means “supreme” or “above all others”. It is related to some feature that prevails over everything else. The phrase ‘‘paramount clause’ would seem to imply that all other clauses in a printed contract of carriage, whether it be contained in a charterparty or bill of lading, would be subject to the terms incorporated by the paramount clause. For example, if the clause stated that the carriage of goods was subject to the Hague-Visby Rules, these Rules would then become part of the contract of carriage and would establish express, contractual obligations and rights of the parties. If the clause stated that the carriage was subject to the United States Carriage of Goods by Sea Act 1936, this Act, which implements the 1924 Hague Rules, will govern the contract of carriage.

Without the incorporation of the Hague Rules/Hague-Visby Rules or Hamburg Rules, the parties to a contract of carriage are free to allocate the obligations and rights between themselves. This was established by the English House of Lords in Court Line v. Canadian Transport, 1940. Far too much freedom would allow a stronger party, for example the shipowner, to impose obligations on the charterer or shipper and exclude his own liability.

Accordingly, the legislatures of many countries may attempt to restrict the freedom of contract of carriers in a just manner by requiring that a contract of carriage of goods by sea from that country should contain a clause making the contract subject to some “Rules”. For example, in the United Kingdom Carriage of Goods by Sea Act 1924, section 3, provided:

“Every bill of lading or similar document of title, issued in Great Britain or Northern Ireland which contains or is evidence of any contract to which the Rules apply shall contain an express statement that it is to have effect subject to the provisions of the said Rules as applied by this Act.”

There was no sanction or penalty for failure to comply with this requirement. However, this did seem to interfere with the sacred doctrine of “freedom of contract” and when the 1924 Act was replaced by the Carriage of Goods by Sea Act 1971, this provision was missing. Now, in English law, the Hague-Visby Rules merely have the force of law when they apply to carriage of goods as provided for under the Rules and the Act.

Even before the Act was repealed, this freedom to contract and allocation of obligations and liabilities between the parties came under fire in the English courts. For example, in Pyrene v. Scindia, 1951, it was said of the Hague Rules, especially Art. III, r. 2:

“Their object.. . is not to define the scope of the contract service but the terms on which that contract has to be performed.. . I see no reason why the Rules should not leave the parties free to determine by their own contract the part which each has to play. On this view the whole contract of carriage is subject to the Rules but the extent to which loading and discharging are brought within the carriers s obligation is left to the parties themselves to decide.”

Therefore the carrier may insert a clause in the contract of carriage specifying how he will load, handle, carry, care for and discharge the goods. The Rules require his operations to be proper and careful. Therefore, even though the Rules are incorporated into a charterparty by a paramount clause, the actual loading operations may be the obligations of the charterer. For example, in the New York St Produce Exchange form time charterparty the “employment clause” provides St that the loading, stowage and trimming of the cargo is at the charterers’ expense under the supervision of the master.

If a paramount clause is used in a charterparty it may not only make the contract of carriage under the charter subject to the Rules but may also require that all bills of lading issued under the charterparty must contain the paramount clause. For example, in the NORGRAIN 89 North American Grain Charterparty, clause 37 states:

“If the vessel loads in the USA, the USA Clause Paramount shall be incorporated in all Bills of Lading and shall read as follows: ‘This Bill of Lading, shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States, approved April 16, 193,6, or any statutory re-enactment thereof, which shall be deemed to be incorporated herein and nothing herein contained shall be deemed a surrender by the carrier of any of its tights or its immunities or an increase of any of its responsibilities or liabilities under said Act. If any term of the Bill of Lading be repugnant to said Act to any extent, such term shall be void to that extent but no further.’”

It has been observed that some shippers and charterers insist on the deletion in bills of lading of the paramount clause. This is particularly so in the oil trades. The paramount clause does allow the carrier to limit his liability if not exclude it and is a protective clause. Deletion may cause the carrier to face strict and unlimited liability. This may cause problems if the carrier is a shipowner because most shipowners’ P. and I. Associations insists on their members incorporating in every bill of lading and other contract of carriage of goods by sea a paramount clause. Shipowners should resist such pressure in the negotiation stages.

7. Bill of lading. A document issued by a carrier, or its agent, to the shipper as a contract of carriage of goods. It is also a receipt for cargo accepted for transportation and must be presented for taking delivery at the destination.

The word "lading" means "loading", both words being derived from the Old English word "hladan". "Lading" specifically refers to the loading of cargo aboard a ship. (However, "Bills of Lading" should never be called "Bills of Loading").

A Bill of Lading (sometimes abbreviated asB/L or BoL) is a standard-form document. It is transferable by endorsement and is a receipt from shipping company regarding the number of packages with a particular weight and markings and a contract for the transportation of same to a port of destination mentioned therein.

The principal use of the bill of lading is as a receipt issued by the carrier once the goods have been loaded onto the vessel. This receipt can be used as proof of shipment for customs and insurance purposes and also as commercial proof of completing a contractual obligation.

The bill of lading will rarely be the contract itself, since the cargo space will have been booked previously, perhaps by telephone, email or letter. The preliminary contract will be acknowledged by both the shipper and carrier to incorporate the carrier's standard terms of business. If the Hague-Visby Rules apply, then all of the Rules will be automatically annexed to the bill of lading, thus forming a statutory contract.

The bill of lading confers prima facie title over the goods to the named consignee or lawful holder. Under the "nemo dat quod non habet" rule ("no-one may give what he ain't got"), a seller cannot not pass better title than he himself has; so if the goods are subject to an encumbrance (such as a mortgage, charge or hypotheque), or even stolen, the bill of lading will not grant full title to the holder.

A bill of lading may be traded in much the same way as the cargo and even borrowed against if desired. This is a very important and common document used in export and import trade globally.

A charterparty governs the relationship between the shipowner and the charterer. The bill of lading governs the relationship between the shipper and the carrier (who will be either a shipowner or a charterer). If the exporter (the shipper) is shipping a small amount of cargo, he will arrange for a carrier to carry the goods for him, using a bill of lading. If the exporter needs the whole (or a very substantial part) of the ship's cargo capacity, the exporter may need to charter the vessel and he will enter into a charterparty agreement with the shipowner.

If the charterparty is a time or voyage charterparty, the shipowner will still have control of the ship and its crew. If there is a demise (or "bareboat") charterparty, the charterer will effectively have a long lease and will have full control of the vessel. If the master (the captain) issues a B/L to a shipper, he will be acting as an agent for the carrier. The "carrier" will be the shipowner (time or voyage) or the charterer (demise).

If a shipowner issues a B/L to the charterer, the document will be merely a receipt for the goods, as the charterparty will be the dominant document.

Review questions:

1. When the delivery of a ship is concerned to be complete?

2. Give a definition of a Cancellation Clause and Canceling Date

3. Explain the term «last voyage»

4. How does the time charter period is defined?

5. Explain the meaning of a Paramount clause

6. Give a definition of a Bill of lading