The term "charter party" stands for the contract between the owner of a vessel and the charterer, which is the one that takes over the vessel for a certain amount of time or voyage. When there is an agreement or contract to carry some goods or provide a ship for carrying the same, a document called charter party contains the contract of affreightment. By this document the ship owner lets the ship for the purpose of carrying the cargo or undertakes to carry the full cargo on the ship.
As defined in the Black’s Law Dictionary, “a charter party means a contract by which a ship or a principal part of it, is lead by the owner especially to a merchant for the conveyance of goods on a predetermined voyage to one or more places; a special contract between the ship owner and charters, especially for the carriage of goods etc.”
The contract of affreightment may be either in the form of bill of lading or charter –party. A bill of lading is a pure and simple contract to carry the goods whereas a charter party involves the complete hiring of the ship itself. In simple terms, if a ship is booked by a shipper for his exclusive use for a voyage or a for certain period of time, that is called a charter party.
Different Kinds Of Charter
Charter parties can be broadly classified into two kinds, namely, Voyage charter parties and Time charter parties. Time charter parties are also know as charter parties by demise because the ship is leased out to the charterer for the time being. Whether a charter party is voyage charter party of time charter party depends on the intension of the parties that will be shown in their contract. There is yet another kind of charter party known as Port, berth or dock - charter party.
Voyage Charter Party
According to Black’s Law dictionary, a voyage charter is a charter under which the ship owner provides a ship and crew, and places them at the disposal of the charterer for the carriage of cargo to a designated port. The voyage charterer may lease the entire vessel for a voyage or a series of voyage or may lease only a part of the vessel (by space charter party)
Under a voyage charter the vessel is let out to the charterer for a specific voyage. The ship owner will be paid ‘freight’ which will cover its costs, including fuel and crew, as well as its profit. Legally, freight is a special type of payment, as the usual rule of set off will not apply to it. A set time, ‘lay time’, will also be provided for the loading and discharging operations. If these operations exceed the permitted lay time, the ship owner will be compensated by ‘ demurrage’ at the rate set down in the charter. For its part, the ship owner owes the charter the duty of proceeding with reasonable dispatch on the charter party voyage, or voyages, in the case of a consecutive voyage charter
A voyage charter differs from time charter in many respects, but primarily in that it is a contract to carry specific goods on a defined voyage or voyages, the remuneration of the ship owner being a freight calculated on the basis of the quantity of cargo loaded or carried or sometimes a lump sum freight.
A Voyage charter party usually carries a cancellation clause that gives the charterer the right to cancel the charter if the ship is not as his disposal at the port of loading at the specified time. The charterer would have to fix a cancellation date before exercising this right.
Time Charter Party
A time charter party is also known as charter party by demise. Morgan defines time charter as “a contract for the hire of a ship or charter party for a specified period of time; the charter pays for the bunker fuel, fresh water, port charges etc in addition to the charter hire.”
According to Blacks law dictionary, “charter for a specified period, rather than for a specific task or voyage; a charter under which the ship owner continues to manage and control the vessel but the charter designates the ports of call and the cargo carried. Each party bears the expenses related to its functions and for any damage it causes.” Also termed as catch-time charter.
A charter by demise operates as a lease of the ship itself, to which the services of the master and the crew may or may not be superadded. The charterer becomes for the time being the owner of the vessel; the master and crew become his servants and through them the possession of the ship is in him.
Under a charter not by demise the ship owner agrees with the charterer to render services by his master and crew to carry the goods that are put on board his ship by or on behalf of the charterer. In this case it was held that the ownership and also the possession of the ship remained with the original owner through the master and crew though the charterer has the temporary right to have his goods loaded and conveyed in the vessel.
Port, Berth Or Dock Charter – Party
A charter party that simply states the port at which the ship shall be made available is called “port charter party”. Where the ship is to be made available at the specified at the specified loading spot in a port or dock, it is called berth or dock charter party. In such a case the obligation of the charterer is to bring the ship at the specified berth or dock. If that place is not in a position to receive the ship due to some congestion or some other cause, the waiting period would go to the ship owners account.
In the case of a port charter party, it is enough for the ship owner to bring the ship to the area of the port where ships usually wait for berth and from where it can be put at charterer. Such area is designated as the commercial area of the port. There have been difficulties in identifying the commercial areas of a port. But the house of lord held that the emphasis has been not on distance from the loading place but upon the fact that the ship should be at the disposal of the charterer.
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