After reading this chapter, you should be able to; ¢ define a voyage charter contract and explain the reasons why a voyage charter contract is concluded; «discuss contents of the voyage charter party and explain the legal implications of some important conditions of the voyage charter contract; ¢ — understand the charter parties for consecutive voyages; © — interpret and understand the meaning of laycan in charter parties; «explain the common exception clauses in the contract and understand the loading process; © know when the ships is considering an “arrived ship”; and * explain the meaning of laytime, demurrage and despatch. 61 INTRODUCTION A shipper has a large quantity of cargo. He wants the cargo to be carried by a single vessel that is specially suited for the cargo. Oftentimes, this is not possible to be loaded in a liner trade where other cargoes are also accommodated. The shipper then becomes the charterer of the vessel when he decides to make a contract with a shipowner for the carriage of his cargo. Voyage chartering is different from a bareboat and time chartering. Unlike in the time charter or in the bareboat charter, the contract for voyage charter docs not give opportunity for a charterer to control or temporarily own the vessel, In many aspects, the voyage charter differs from the time charter in terms of remuneration, description of ship, conditions for cargo, the expenses for the transport of 93goods, etc. Most of all, the legal implications to the parties concerned of binding themselves to the voyage charter party are different from other charter parties. This chapter discusses the meaning of the voyage charter, reasons why a charterer prefers the voyage charter party and the legal implications of the various terms or conditions stated in the voyage charter contract. 6.2 THE VOYAGE CHARTER PARTY. The voyage charter contract is also called the voyage charter party. It is a document or contract between the shipowner and charterer containing the terms and conditions for the use of a ship’s cargo space for one or more than one voyage. There are two major parties to the voyage charter contract, One party is the shipowner (or carrier) who promises to undertake the carriage of a large quantity of goods on a named vessel against remuneration for one or more voyages between named ports. The other party is the charterer (sometimes a shipper) who promises to deliver the named cargo to the vessel and to pay the shipowner a remuneration (or freight) for that transport of cargo. The owner retains the operational control of the vessel and is responsible for all the operating expenses such as port charges, bunkers, extra insurances, taxes, etc. The charter’s costs are usually costs and charges pertaining to the cargo. Loading and discharging charges are divided between the owner and the charterer, but based on agreement in the contract. Agreement could be under the term “free in and out” (f.i.0.), which means that the charterer bears the costs involved in connection with loading and discharging. 6.3 REASONS WHY A VOYAGE CHARTER PARTY IS CONCLUDED Voyage charter parties are concluded because the charterer wants a specific type of vessel for a large consignment of cargo. Although the charterer can make a consignment through a liner shipping company (liner shipping provides fleet of ships regularly calling in various ports), voyage chartering is preferred because of the following reasons: 1, The volume or quantity of cargo is too big, which cannot be accommodated by the liner ship. 2. The liner company does not have a ship that directly service the ports, where the charterer wants his cargoes to be loaded or discharged. 3. Chartering a whole vessel for one or more voyage is less costly than contracting spaces on a liner vessel for large quantities of cargo. 9464 CHARTERING PROC! UNDER A VOYA! CHARTERING PROCESS UNDER A VOYAGE CHARTER The voyage charter parties are normally negotiated and concluded through a broker. In voyage chartering, the charterer looks for a broker who is an expert in dealing with contracts for the kind of cargo that the charterer wants to transport. For example, if the cargo is a large shipment of coal, then he looks for a broker who is an expert on contracting shipment for this type of cargo. The broker contacts the shipowner and gets the proposal or offer from him. The shipowner may also have his own broker or agent. If he has, the charterer’s broker deals with the shipowner’s agent or broker. The negotiations could be through telephone, telefax, e-mail or person to person. It takes sometime until an agreement is reached and the contract is executed, 6.5 FREEDOM OF CONTRACT The shipowner and the charterer can choose what form of voyage charter contract shall be used. There are many forms available for a variety of cargoes. There are forms for oil, grain, coal, salt, etc. A number of these forms have been enumerated in chapter 5. The most commonly used form in voyage charter is the GENCON charter form. The documentary committee of the shipping chamber of United Kingdom approved this form. The GENCON is a code name and an abbreviation for the words “general conference.” The documentary committee of a particular sector in a country approves most of the forms used in charter parties. The Baltic and International Maritime Conference (BIMCO) is an international organization of shipowners and brokers, which formulates some forms. Another example of voyage charter contract form is the RUSSWOOD. This is the code name for the contract form used in consignment of timber (woods) from the former USSR. For grain trade, many countries used the BALTIMORE charter form which is the code name given by the Association of Shipbrokers and Agents (USA) Inc. in New York. Parties may alter or make amendments or changes to the terms or words written in the forms if they think of other words that are more suitable than the ones written on the contract form. 6.6 THE CONTENTS OF A VOYAGE CHARTER CONTRACT Some of the important provisions commonly included in a voyage charter contract are as follows: 1. Condition that the shipowner shall provide a ship for the cargo. The details of the ship are described in the contract. 952. Condition that the shipowner shall perform the preliminary voyage to the Port of Loading identified in the contract with reasonable dispatch. 3. Condition that the shipowner shall provide statement of fact about the fitness of the ship for the voyage. Condition that the shipowner shall transport the goods to the identified destination. Condition that the charterer shall provide a full cargo. Condition that the charterer shall pay the freight. Condition on exception of liabilities. Condition on canceling date. Condition on the application of relevant rules of the Hague-Visby or Hague Rules (paramount clause). Cenaws 6.7 PROVISION OF THE VESSEL In the voyage charter party, the shipowner promises to provide a vessel to the charterer for the carriage of goods. The description of the vessel includes the identity of the vessel, her carrying cargo capacity and seaworthiness. The legal implications of this clause in the contract are discussed below. 1, Identity of the Vessel In identifying the vessel to be used in the carriage, the parties may agree to give the name of the vessel. When the vessel is specifically named in the contract, the shipowner is legally bound to use that vessel. He is not allowed to provide any other vessel for the voyage that is being contracted. He has to use only the vessel that is named in the contract. In some contracts, the shipowner does not give the name of the vessel. The condition in the contract may be written in the following way: “....the vessel is (to be named later) ...” This type of contract means that the name of the vessel to be used in the particular voyage charter shall be given by the shipowner at a later time. There will be no legal problem if the kind of the vessel that will be named later by the shipowner is very clearly described in words. Problems come out when no further description of the vessel is written and as the vessel arrives at the port of loading, she turns out to be unsuitable to the need of the charterer. The other scenario is when the contract bears the name of the vessel and the words “or substitute” is added. In this type of contract, the shipowner gives the particular name of the ship that will perform the voyage but in case the ship becomes unavailable for unavoidable circumstances, a substitute vessel shall perform the voyage. Again, the description of the substitute vessel shall be written clearly in words in order to avoid any problems with regard to the particular need of the charterer. 96v ‘The terms in the contract pertaining to the vessel is an important condition of the contract and deviation from the agreed terms shall mean a breach of contract, which entitles the injured party to claim for damages and losses. Cargo Carrying Capacity The provision in cargo carrying capacity of the vessel is important to the charterer. It is expressed cither in deadweight or cubic meter capacity or sometimes both. The deadweight capacity and the cubic capacity are the very common. The deadweight capacity is the ship's weight-carrying capacity. It is usually expressed in metric tons and sometimes in long tons. The deadweight capacity of the ship usually includes the vessel's capacity for cargo, fucl, fresh water and stores. There are voyage charters in which the cargo-carrying capacity figure is used instead of using deadweight capacity figure. One example of this type of voyage charter is the “Gencon 1976 form” which uses the expression “dwt all told”. It means that the deadweight capacity of the ship includes all such as cargo, fuel, freshwater and stores. The main difference between the deadweight capacity figure of the ship and the cargo-carrying capacity figure is that the cargo-carrying capacity does not include the capacity necessary for fuel, freshwater and stores. Accurate information about the cargo carrying capacity of the vessel is important because the charterer wants to be sure that the ship being chartered can accommodate all his cargo. Likewise, the information shall enable him to decide on what to do with his cargo in case the capacity of the ship is not enough for all the cargo that he intends to load on board the ship. The charterer can decide how much cargo can be deducted from the total cargo and be sub-chartered to another. Any misrepresentation (false statements of facts) on the part of shipowner about the cargo carrying capacity of his ship would give the charterer the right to revoke the contract. The charterer can sue him in court for breach of contract and claim for damages and losses. Seaworthiness Seaworthiness is a common clause in all types of charter parties. On the part of the shipowner, seaworthiness is an implied undertaking in the contract of the voyage charter. It is not expressly stated in the contract because the duty to provide a vessel that is seaworthy is an obligation on his part. In the book of Chorley and Giles, seaworthiness is defined by the authors as “...to be seaworthy a vessel must have that degree of fitness which an ordinary, careful and prudent owner would require his vessel to have at the commencement of her voyage, having regard to all the probable circumstances of it” (Gaskell, et al., 1987). 97The above definition means that when the voyage charter starts, the ship is seaworthy for that voyage. Seaworthiness means the vessel is fit to encounter the perils of the voyage. She is fit to carry her cargo safely. The shipowner is responsible for a defect of the ship. He must prove that his ship is not unseaworthy (c.g. unseaworthiness includes lack of sufficient bunker fuel for the voyage). If the charterer finds that the ship has a defect and is unseaworthy before the beginning of the voyage and that the defect cannot be repaired within reasonable time, the charterer has the right to end or rescind the contract. He can later file a claim for damages or losses suffered because of unseaworthiness. If the ship is seaworthy upon sailing but becomes unseaworthy while at sea due to certain dangers or perils encountered, and the charterer suffered losses and damages because of the unseaworthiness, the shipowner is free from liability for any loss or damage that may be claimed by the charterer. If the charterer delivers cargo that is less than the promised quantity, the charterer shall pay to the shipowner for freight of the cargo not delivered. This is based on the principle of deadfreight, wherein the shipper or charterer pays to the shipowner an amount of money for the charterer’s failure to provide the quantity of cargo he promised to load on the voyage charter party. 6.8 PRELIMINARY VOYAGE Fixtures are made for the employment of a vessel under a voyage charter after an order from the charterer and offer from the shipowner and a series of counter offers. Most of the time, fixtures are concluded even when the vessel is still sailing or carrying goods for the charterer. In this case, there is a need for the shipowner to take the vessel to the port of loading, which is called preliminary voyage. 6.9 THE PORT OF LOADING An order is usually placed by the charterer when he needs a ship to be contracted and the loading port must be specified prior to the preliminary voyage. However, if the shipowner knows that there might be circumstances, which could delay the ship while proceeding to the nominated loading port, the “near clause” is used in the charter party, in which it is indicated that instead of proceeding to the nominated Port by the charterer, the vessel shall proceed to another port which is nearer and safer for the vessel to berth and load. In this case, the charter party shall contain the words “proceed to Port A or so near thereto as the vessel may safely get.” Another clause or phrase is included in the contract in cases where the port designated is unsafe or dangerous for ships to reach and remain due to weather, season, and political 98roblems, War, etc. It is the charterer’s obligation to nominate a “safe port” and therefore, he is liable for damages if the ship is damaged in the nominated port. on in TANKERVOY 87 charter party could help the charterer to avoid such ity. It states that “charterer shall exercise due diligence to ascertain that any port or place to which they order the vessel are safe for the vessel and that she can lie there always afloat and to ensure that any transshipment operation at sea conform to standards not less than those set out in the latest edition of ICS/OCIMF ship-to-ship transfer guide (Petroleum). The charterer shall, however, not be deemed to warrant the safety of any place and shall be under no liability on respect of any loss to prove the exercise of due diligence as aforesaid” (Intertanko, 1987). Other charter parties have incorporated clauses to qualify nominated port of Joading/discharging. Some examples are ; ice clauses, strike clauses and force majeure clauses. One good example of strike clause can be found both in the amended Centrocon and Continent Grain Charter parties The strike clause of Continent Grain Charter Party expresses that “if the cargo cannot be loaded by reasons of riots, civil commotion or of a strike or lockout of any class of workmen essential to the loading of the cargo, or by reason of obstructions of stoppages beyond the control of the charterer caused by riots... “In case of any delay by reason of before-mentioned causes, no claim for damages or demurrage shall be made by the charterers” [Sindicat National Du Commerce Exterieur Des Cereales (Synacomex), 1990]. Another example of strike and force majeure clause is the provision in the Sugar Charter Party, which states that “strikes or lockouts of men, or any incidents or stoppages on railway and/or any other force majeure causes including government’s interference’s occurring beyond the control of the shipper or consignee which may present delay the loading and discharging of the vessel are always excepted” (Synacomex, 1990). 6.10 | CANCELLATION OF A CHARTER AND CANCELING DATE Every charter has a date by which the shipowner must tender the notice of readiness to the charterer that the ship has arrived at the port of loading and said ship is ready to receive or load the cargo. Canceling date is the last date agreed in a voyage charter party or time charter party 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” (Brodie, 1997). In short, it is the last date on which vessel must be ready to load. Another important date or term, which is always associated with canceling date, is the laydays. It means the days allowed by the shipowner to the voyage charterer in which to 99load and/or discharge the cargo. In charter parties you will see the clause “layean” which is the combination of the laydays and canceling date. Laycan is usually expressed in two dates, An example of the laycan clause is shown below: laycan ~ 30 July/ 08 Aug. The above clause is an abbreviation of the term: laydays 30 July canceling 08 August. Considering that the charterer might have been fixed while the ship is still completing another voyage or the vessel is at another port, delay may occur. What are the remedies available to the charterer if delay does occur? First, the charterer has the option to cancel the charter/ contract. Second, he can claim damages for the loss. However, the shipowner should provide the charterer with information on the ship’s position and its prior obligations. Otherwise, he will be liable for damages. Mostvoyage charter party has clauses for the cancellation of the charter. One example is the BIMCO’s general purpose charter-party. It gives the charterer the option to cancel the voyage contract if the vessel is not ready to load on or before the date indicated in the agreed schedule, provided that the option to cancel is declared at least 48 hours before the vessel’s expected arrival at the port of loading. Delay is unlikely to happen if the ship is fixed spot prompt or the vessel is already located in the loading port and is ready to take cargo on board. Another instance which may give rise to claim for damages is when the vessel is in another port and according to the contract, the ship should “proceed with due dispatch”. If it is the case and the ship, after discharging at said port, is allowed by the shipowner to perform unrelated voyage, the shipowner will be liable for any loss incurred by the charterer To be exempted from liability for claims due to delay, excepted perils should have occurred while the ship was engaged in the chartered voyage. Additionally, the charter party should declare that certain perils are always accepted. 6.11 THE LAYTIME AND AN “ARRIVED SHIP” Laytime is the time agreed by parties during which the owner will make and keep the vessel available for loading and discharging. Laytime could be separate for loading and separate for discharging or combined for both. The critical issue on laytime is when laytime begins to run. The requirements for laytime to start counting are when the ship has been considered as an “arrived ship”. By that 100time, the ship must be ready to receive cargo with adequately cleaned cargo holds and a notice of readiness must be given upon arrival. As defined by Brodie (1997) an “arrived ship” means the requirement of the voyage charter before laytime can commence, The ship must reach the agreed destination before she can be considered as an arrived ship. Where the charterer has nominated a berth or dock, the ship must have arrived at that berth or dock, When a port is nominated, the ship must have arrived at the port, although various legal decisions have defined differently a port in this context in cases where there is no berth available and the ship is obliged to wait. When the charterer nominated a berth in the charter party, the owner bears the risk of waiting if the berth is not yet available, He has to bear the cost of waiting as contrasted when a port is nominated wherein the charterer bears the risk of waiting. An important document relating to an arrived ship is the NOR or notice of readiness. In a berth charter party, arrival of the ship and commencement of laytime and the readiness to load coincide. When a vessel has arrived the master usually gives a notice of readiness and quite often the charterers are entitled to notice time (i.e free time, grace period of time), prior to the start of laytime. This grace period is given to allow preparation for the loading or discharging operations. With the advent of email, telefax and direct dialing systems of communications, the owners are usually in constant contact with the charterer. Thus, notice of time is considered obsolete. However, in certain situations charterers have no chance to begin the loading or discharging operations immediately after the ship’s arrival in a port because the ship arrived during holidays or during nighttime or at a time when there is a calamity in the port. In these cases, there are risks that the vessel will be idle from the time of arrival until the commencement of ordinary or routine working hours in a port. Many disputes arise from the voyage charter agreements relating to the calculation of the laytime. This is because of the vague and complicated statements in the clauses of the charter party. In order to come up with a uniform interpretation of the laytime clauses, international associations such as BIMCO, CMI, INTERTANKO and FONASBA joined altogether and issued the “Voyage Charterparty Laytime Interpretation Clauses” in 1993. It is popularly called the “VOYLAYRULES 93”. The rules can be applied to-any form of contract of carriage or affreightment including contracts evidenced by the bills of lading. The “VOYLAYRULES 93” has 28 terms and phrases with uniform interpretations from the concerned parties. 101After knowing the time when laytime is to commence, another important factor is how long shall laytime be allowed. There are ways to determine laytime period, These are as follows: Example: 72 running hours SHINC Which means: 72 running hours, Sundays & Holidays included When the parties agreed that time shall not count during Sundays and holidays, the expression “Sundays and holidays excluded” (SHEX) is normally applied. If the parties agreed that Sundays and holidays shall count, the expression “ Sundays and holidays included”(SHINC) is used. ‘These terms are expressed in the different forms of voyage charter party. Example: 500 metric tons per day, or 125 metric tons per day per hatch There are many abbreviations of terms and description used in determining loading time, the most common refer to weather hindrances. Some terms used are as follows: WD Working Days WHD Working Hatch Per Day WWD Weather Working Days WP Weather Permitting Other terms such as clear days, running days and consecutive days are also commonly used. 6.12 EXCEPTION FROM LAYTIME/TIME NOT COUNTED The time lost caused by some circumstances, which are specifically mentioned in the charter party, is not to be counted as laytime. These exemptions are as follows: 1. . interference in loading which the shipowner or his representatives is responsible for. Examples: a) a crane broke down; b) inavailability of the ship’s personnel; 2. strike, lockout or other restraint of labor, of pilot or tug personnel; 3. _ stoppages on the vessel’s orders; 4, time waiting for next high tide or daylight to proceed on inward passage from waiting place to a loading or discharging berth; 5. waiting time for pilot or tugs in order to move; and 6. moving from waiting place to loading berth. Laytime and exceptions to laytime are all stipulated in the charter parties. When th laytime is used up, the ship goes on demurrage. 102613 UNREASONABLE DEVIATION After completion of cargo loading at the nominated port, the next important phase is the yoyage itself, Under the bill of lading, there is an implied undertaking that the ship should proceed with reasonable dispatch and without unjustifiable deviation. When the voyage is completed, the cargo will be discharged and subsequently delivered to the consignee. Deviation has been defined in the previous chapter departure from the prescribed ordinary trading route. It could also be defined as the voluntary substitution of the contracted voyage with another voyage. The contracted voyage is one which has been expressly agreed, or in the absence of a specifically prescribed route (which is normally not prescribed), the ordinary trading route for ships engaged in similar circumstances. Geographically, the contracted voyage refers to the most direct route, but the carrier is entitled to show evidence that the most direct route would be unreasonable for this particular ship at the particular time, as long as it is not inconsistent with the express terms of the charter. A particular route may be reasonable and usual even if it is used only by ships of a particular line and has only recently been adopted. 7 6.14 DEVIATION ALLOWED BY THE HAGUE-VISBY The Hague-Visby Rules (1968) states that “any deviation in saving or attempting to save life or property at sea or any reasonable deviation shall not be deemed to be an infringement or breach of the said Convention or of the contract of carriage, and the carrier shall not be liable for any loss or damage resulting therefrom” (Art.4.4). Correspondingly, the Hamburg Rules (1978) also provides that “the carrier is not liable, except in general average, where loss, damage or delay in delivery resulted from measure to save life from reasonable measures to save property at sea” (Art.5.6). Clearly, under the Hague-Visby Rules, a deviation for the purpose of saving life at sea is permissible (it is even an obligation for the vessel). The same is true under the cited provision of the Harmburg Rules. In any case of deviation, it is necessary to first determine the route, which has been contracted. Normally, the bill of lading only declares the ports of loading and discharge and rarely specifies the route (but could say, for example, “via Suez Canal,” in which case that is the agreed route). The bill of lading is not the whole contract but it is evidence of the contract. Other “sources” for determining the ordinary trading routes used by line in the past are notices and advertisements, the booking note and the charter party (if there is one). 1036.15 DEVIATION ALLOWED IN COMMON LAW In Common Law, the deviation is justified when it is necessary for the safety of the adventure. A vessel may, therefore, deviate in order to avoid threatening dange, (hurricanes, icebergs, pirates, etc.) or when, due to a breakdown, she is in urgent need of repair. In case there is urgent need for repair, the vessel does not necessarily have to go to the nearest port. However, it should go to the nearest port where repairs can be reasonably carried out. The vessel, however, should consider the danger, distance, repair facili expense, total time, etc. in making the decision to go to the nearest port for repair. A deviation for repairs is still justifiable when the repair is needed to make the vesse| seaworthy and even if the need for repairs would mean that the vessel could be liable for any damage or delay. 6.16 DEVIATION ALLOWED BY A “DEVIATION CLAUSE” It is common for contracts of carriage to contain an “express deviation clause”. Courts normally permit and uphold such clause, provided that the effect of deviation would not render the whole performance of the contract impossible or it would not destroy the commercial object of the contract. If the deviation is not permissible, the effect of such non-permissible deviation is that the carrier loses the right to invoke exemptions of liability from losses and damages cited under UN convention (UNCITRAL) and the Carriage of Goods. However, in order for the carrier to lose the exemptions, the claimant /complainant will have to prove the following: 1. That there was a deviation 2. That the deviation was unreasonable 3. The loss or damage was a result of the deviation 6.17 EFFECTS OF UNREASONABLE DEVIATION When the ship deviates from her contracted route unreasonably, the charterer has the right to sue him in court for breach of contract. The charterer is discharged from the terms and conditions of the contract and can claim damages from the shipowner. The defenses of the shipowner, such as Act of God, the Queen’s enemies inherent vice of goods, defective packing and general average sacrifice against claims from cargo owners could not be invoked when the ship departs from the proper route. The only defense for the shipowner is to prove that the loss was likely to occur on the proper route. 104This is further explained by Ivamy (1989) when he stated that “where there has been unjustifiable deviation, the shipowner cannot rely on the exception clauses in the charter party and is then only entitled to the benefit of the exceptions available to a common carrier, e.g. Act of God, loss by the Queen's enemies if he can prove that the loss would have occurred even if no deviation has taken place” (p. 23). A shipowner, who has deviated from the contracted route, has in effect, revoked the contract, and therefore, cannot claim to be remunerated, With regard to the freight, the shipowner cannot claim the contracted rate of freight under the charter party. He may, however, claim a reasonable sum if the goods are safely delivered to the destination. In general average, the shipowner cannot claim contributions from the charterer on limitation of liabilities, a shipowner cannot rely on any clause in the charter party entitling him to limit his liability (Ivamy, 1989, p. 24). 618 STOPPAGE IN TRANSIT There might be instances, when after receiving the cargo, the buyer becomes insolvent and the seller instructed the shipowner/carrier to redeliver the goods to him instead of the buyer. However, there may also be a third party claiming the goods to who would stop them in transit. In case there are two parties claiming the goods as a result of stoppage in transit, the shipowner is placed in a very difficult situation. The case should be brought to court to determine the rightful claimant. The shipowner wants to avoid risk of giving or delivering the goods to the wrong person. His only interest is on the freight for the cargo. 6.19 DISCHARGE, DELIVERY, AND FREIGHT PAYMENT. 1. Discharge At the end of the voyage is the discharge of the goods and subsequent delivery to the consignee. 105Figure 6.1 - Discharge of Ro-Ro cargoes in a port of discharge The Port of Discharge is named in the contract. It is where the vessel is supposed to unload the shipment prior to the delivery to the owner Sometimes there are clauses jn the bill of lading that state that the goods may be discharged on the quay and into lighters at the consignee’s risk and expense. Although the port of discharge is named, it is not necessary in the voyage contract to nominate the port of discharge because the basic feature of the voyage charter is tha. the nominated vessel shall be put at the disposal of the charterer (Gorton, Hillenius, Ihre and Sandevarn, 2004). In this case the charterer has the right to direct the ship later within a certain range to a specific port of discharge. operation depends on the agreement made by the parties as well as the in the port discharge. In the provisions of the Hague-Visby Rules (1968), it is an obligation of the carrier to properly and carefully discharge the goods carried. (Art.3.2) Delivery Delivery means the actual passing of possession of cargo to the consignee. The obligation of the carrier to deliver the goods is not imposed under the Hague-Visby Rules. There are cases when the carrier gave information regarding the place and date of the vessel’s arrival where the consignee is ready to receive the cargo immediately after discharge. However, in most cases, delivery is made some time after discharge and the cargo is placed into a safe place ready for delivery. The consignee collects the cargo at 4 later time. There is no obligation imposed on the consignee to take the delivery. The duty is contained in the Bill of Lading, giving the consignee reasonable time (0 106collect the goods. Gorton, et al (2004) explains this condition when they cite as follows: “The charterer has a duty to deliver cargo and to perform his undertakings and may not, unless there is an express agreement to the contrary, allege that it is difficult to find cargo or to have it made available to the vessel.” Delivery is made to the claimant/consignce after presentation of a bill of lading. If a bill of lading is lost or delayed, the goods may be delivered against a letter of indemnity issued by a bank. Freight and Payment of Freight After delivery of cargo, the shipowner/carrier is entitled to the payment of the freight for the carriage of goods or hire for the use of the ship. Freight is the amount of money paid by the charterer to the shipowner for the carriage of cargo. Ivamy (1989) defined freight in his book as “the remuneration payable to the carrier or shipowner for the carriage by sea. When there are no provisions to the contrary, freight is payable on the delivery of goods and is calculated on the amount actually delivered” (p. 257). Freight is the main obligation of the charterer. The rate of freight is often negotiated between the shipowner and the charterer. It can be paid on the basis of a certain fixed amount for every ton of the cargo, or in lump sum. In practice, the freight is paid when the goods are discharged at the port of discharge. Therefore, the shipowner has to wait for the payment by the charterer of freight until after the ship arrives at the port where she can discharge the cargo. Freight is also paid according to the fate of the ship and her cargo. If something happens to the ship during voyage and the ship is lost together with the cargo, the shipowner is not entitled to any freight. If the charterer made advance partial payments, problems usually arise because the charterer demands the shipowner to retum to him (charterer) the advance payments. It depends on what has been written in the contract. When the ship arrives at the port of discharge and the cargo is found damaged, problems arise. Normally, it is not always the fault of the carrier that the cargo is damaged. Ifthe shipowner can prove that damages are caused by the negligence of the shipper or the charterer in packing the goods or failure in giving sufficient information to the shipper for handling the goods, the shipowner cannot be held liable for damages. The freight shall be payable after the carrier has performed his duty under the contract of the delivery of the good. Delay in the payment of hire entitles the owner to withdraw the vessel. Ordinarily, the carrier is not entitled to freight, if it has not delivered the goods. However, if he was prevented from performing his duty, by acts of the shipper, consignee or other bill of lading holder, the freight becomes payable on discharge of the cargo. 107When the vessel cannot reach the port of destination due to perils of the sea or other excepted perils, then, the carrier can cither forward the cargo to another convenient port or to bring back the cargo, and he can claim back the freight. Even if the goods are damaged but the carrier is ready to deliver, the freight is stil] payable in full. Claim for damages should not be deducted from the freight. If the delivery is short of place of destination, the freight shall not be payable when it is due to the default of the cargo owner. If as a result of initial unseaworthiness the cargo was discharged somewhere, the shipowner shall be responsible for transshipment costs or carriage of the goods in another ship to the intended destination. Another case is when the goods are carried part of the way only and continuation of the voyage is impossible. The consignee or cargo owner should accept the delivery of the goods at ports short of final destination. Pro rata payment is acceptable if the cargo owner agreed to pay. 6.20 TYPES OF FREIGHT According to Ivamy (1989), the following are the types of freight used in the chartering of ships: lL Freight Payable Upon Delivery Payment of freight is made at the port of discharge unless other agreements are expressed in the voyage charter party. The manner of payment in this case is anchored on the principle that the freight is earned when the owners have fulfilled their obligation to carry the cargo and are ready to deliver said cargo to the consignee. . If the shipowners fully or partly fail to fulfill their obligations to carry the cargo, then, they lose their right to collect freight. If the vessel sink together with the cargo, in case of a maritime accident, the owner is not entitled to freight. If only part of the cargo is delivered to the agreed destination, the shipowner can proportionally claim for freight. Lump Sum Freight Lump sum is paid tothe shipowner for the carriage of cargo upon completion of the voyage and delivery at the destination. If the ship fails to fulfill this obligation and some cargoes are lost, questions may arise. If the loss is due to perils of the sea or act of God, the shipowner is entitled to the whole freight because he can be exempted from any liability arising from suc 108natural causes. The provisions on exception clauses are usually included in the contract. Advance Freight Payment is made to the shipowner even if the cargo is not yet delivered to the shipper or charterer. If freight is paid in advance, it cannot be recovered anymore even if the voyage is abandoned and if the goods are lost before and after payment. The place where payment shall be paid is more important to the charterer because if the vessel was lost on voyage, he is not obliged to pay the freight. ‘The vessel at the identified place where freight is supposed to be paid discharged no cargo. Pro Rata Freight This refers to the payment of freight proportionate to the part of the voyage accomplished or the part of cargo delivered. The conditions for paying pro rata occurs when a portion of the total cargo is written to be discharged at one named port and the rest at another named port. When an unavoidable circumstance happens and the carrier discharges all the cargo in one named port instead of two identified ports, the charterer has the right to refuse payment of pro rata freight. Discharging all cargo in one port instead of the two named ports in the contract where pro-rata shall be paid at each port upon arrival of the vessel is legally not considered as a complete voyage. The charterer can sue the shipowner for breach of contract and even claim for damages resulting from the non- completion of the voyage agreed in the charter party. Back Freight This is the “freight payable to a shipowner for the carriage of goods back to the port or to another convenient port when the vessel is unable to reach the port of destination because of an excepted peril or because the consignee fails to take delivery of the goods or provide instructions for their disposal” (Brodie, 1997). Back freight may be claimed by the shipowner from the charterer in situations such as when the master of the ship was not able to deliver the cargo at the port of destination (e.g. there is a strike, war, or emergency situation prevailing at the port of destination). The master decides to carry the cargo where he thinks it is for the best interest of cargo owner or charterer. For expenses incurred in doing this, the shipowner can claim for back freight from the charterer or cargo owner, 109ace ee TSsS oS An amount of money is paid by the shipper or charterer to the shipowner for the charterer’s failure to provide the quantity of cargo he promised to load on voyage charter party. 6. Deadfreight 6.21 DEMURRAGE Demurrage is the agreed amount payable to the owner with respect to delays of the vessel beyond laytime. In short, demurrage is paid when actual loading/discharging time exceeded laytime. The demurrage rate is the amount entitled to the owners when the loading or discharging of cargo is not completed before the agreed time expires. Calculation and payment of demurrage is made after the final discharge and delivery of the cargo. The rate is usually agreed per 24 hours or “pro rata”. The owners do not have to prove their loss to be entitled to the demurrage because it is a kind of liquidated damages subjected to a prior agreement. Since charter parties contain demurrage rate, which is agreed upon by the parties, demurrage shall be paid for the whole day including Sundays. It is practically so because if the vessel had not been delayed, she would be at sea day and night and is supposed to be earning money while carrying cargo. It is often expressed by saying that “once on demurrage, always on demurrage.” The expression “Once on demurrage, always on demurrage” means that exception clauses do not apply to demurrage, unless they are clearly worded so as to have that effect. In many cases, it means that when the laytime expires and the vessel is on demurrage, all the time thereafter (24 hours per day, 7 days per week) shall count even though there are weather hindrances, holidays, etc. However, time counting can be interrupted if it is caused by the owner or owner’s servants or by fault on the vessel’s side. (Gorton Hillenuis, Ihre and Sandevarn, 2004). : In a voyage charter party, there is also an excepted period clause or period during which any time used to load or discharge does not count for the purpose of calculating demurrage or despatch other than by prior agreement. This clause sets out the periods which may vary according to contract. The period excepted are weekends, public holidays and certain periods of bad weather. Sometimes, the excepted period is also called “suspension of laytime”. , Although exceptions to laytime may also“apply to demurrage, it is important that the charter party should expressly say so. There is no limit to the number of days, which the ship must be on demurrage except in GENCON charter party where it is limited to only ten (10) days. 1106.22 PATCH If the situation is reversed and actual loading time is shorter than laytime, then the shipowner will pay the charterer, a bonus “despatch money.” Despatch, therefore, is the reverse of demurrage. It is the amount paid by the owners as compensation to the charterers for loading or discharging the vessel in a period of time that is shorter than the allowed laytime. Despatch rate is always fixed at half the demurrage rate. The provision in the charter parties sometimes has the phrase “despatch on all time saved or despatch on loading time saved.” Despatch on all time saved means that dispatch money shall be payable from the time loading/discharging is completed to the expiry of the laytime including periods excepted from laytime. Example: Laytime for five working days to end 1700 hours Monday Loading time finished 1200 hours Friday If despatch is on all time saved, despatch money shall be computed for 67 hours. Despatch could be on loading time saved which means that despatch money shall be payable from the time completion of loading or discharging to the expiry of the laytime excluding periods accepted from laytime. In our example above, if despatch is loading time save, then, despatch rate shall be multiplied by 12 hours only. An assumption is also made that Saturday is not a working day. 6.23 CARGO DAMAGE AND FREEDOM OF CONTRACT As discussed earlier, when the ship arrives at the port of discharge, there are instances when the charterer discovers some damages on his cargo. If this damage is proven to be due to unseaworthiness of the vessel at the commencement of the voyage, the shipowner can be held liable under US and English laws. The above-cited case is based on the doctrine of “warranty of seaworthiness.” ‘In many countries, the warrant of seaworthiness is not recognized, so the shipowner’s liability is based on his gross negligence. Even if the master or crew of the vessel causes the unseaworthiness, the shipowner normally bears the liabilities rising from such negligence of his servants, under the-_ principle of vicarious liabilities. It appears, however, that the shipowner js table for almost all kinds of omissions or negligence committed by his servants (master and crew): For this reason, the freedom of contract prevails in the voyage charter. This means that the shipowner and the charterer agree to distribute the risks to both of them. Normally, many voyage contracts insert riders and emphasize exception clauses to either free the shipowners from many liabilities arising from gross negligence and unseaworthiness or limit his liabilities on these claims. All these insertions are allowed as long as both parties agreed and provided that statutes do not prohibit the contents of the clauses. 6.24 EXPENSES BORNE BY THE SHIPOWNER AND THE CHARTERER Unlike in the time charter and bareboat charter, the shipowner generally bears all the expenses under the voyage charter party. The expenses borne by the shipowner are capital costs, maintenance, wages, supplies, loading/discharging costs, port dues, bunkers, etc. The charterer pays the freight but sometimes bears the expenses for the overtime of crew that is related to cargo handling in port. If the term is “free in out” (FIO) which is an INCO term, the charterer bears the expenses related to discharging and loading of cargoes at the named port. 6.25 CHARTER PARTIES FOR CONSECUTIVE VOYAGES The normal voyage under a voyage charter party is usually a single voyage. For example, the shiploads at Port X and proceeds to Port Y for discharging, thus, completing the single voyage charter. It does not happen all the time. There are charter parties for consecutive voyages. Consecutive voyage charters are a special type of voyage charter wherein the vessel is contracted for several voyages in consecutive order. The charterer and shipowner agree to have two or more voyages within a certain period of time under one document. This happens when in the contract it is stated that a named ship shall load cargo at Port X and proceed to Port ¥ to discharge. After discharging, the ship will return on Gallast voyage (without cargo) to Port Y for loading again then proceeds to Port ¥ to discharge. This is within a period of time. There are also voyage charter parties for consecutive voyages wherein the shipowner and the charterer agree to fix the chartering for a long period of time, say, one year. The shipowner provides the ships, which shall perform the loading, discharging and transport of goods in various ports named by the charterer within the agreed period of one year, 112Normally, there are problems regarding the completion of the voyage for the last round. This arises when the end of the term is very close and the vessel has to make another voyage to complete the one-year period. It is usually accepted that when the vessel arrives at the named port of loading and tendered the notice of readiness to accept the cargo and the charterer has the cargo ready to be loaded at the port before the end of the one-year period, the last voyage continues, The above practice usually applies in the tanker voyage charter parties. With regard to payment of freight, which varies for every distance of the port, this is solved by the adoption of the worldscale rate system, A ship is normally given a rating number. This rating number has an equivalent scale in the worldscale rating system, which is correlated to the distances between ports. The charterer and shipowner simply consult the worldscale to compute the freight rates for consecutive tanker voyage charter. SUMMARY 1. Voyage charter party is a document or contract between the shipowner and the charterer containing the terms and conditions for the use of a ship’s cargo space for ‘one or more than one voyage. The charterer prefers a voyage charter party for a large quantity of consignments that cannot be accommodated by liner shipping. Chartering process under the voyage charter is closely similar to time chartering. In the voyage charter party, the shipowner and charterer have the freedom of contract. The contract for the voyage charter party contains conditions for the vessel, freight, cargo, canceling date, cargo damage, and other exception clauses that are commonly found in the time charter. 4. Some provisions of the contract include the identification of the vessel, the cargo, the cargo carrying capacity, the freight rate, and the expenses to be borne by the charterer. 5. It is important for the shipowner to describe the ship and cargo carrying capacity of the ship because the voyage charterer’s calculation of profit and expenses depend on it. This disclosure is a condition in the contract and misrepresentations made by the shipowner would entitle the charterer to sue in court the shipowner for breach of contract. 6. Failure of the charterer to describe the cargo and provide the cargo at the named port of loading would entitle the shipowner to claim for damages or losses. 7. Seaworthiness is an implied undertaking under the voyage charter parties. Providing an unseaworthy ship gives the charterer the right to sue the shipowner in court for breach of contract and file claims for losses and damages which he may have suffered. 8. Canceling date is the last date agreed in a voyage charter party or time charter party, 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. Vv we 113Laydays means the days allowed by the shipowner to the voyage charterer in which to load and/or discharge the cargo. Laytime is the time agreed by parties during which the owner will make and keep the vessel available for loading and discharging. Laytime could be separate for loading and separate for discharging or combined. ). The requirements for laytime to start counting are: the ship must be an arrived ship; the ship must be ready to receive cargo with adequately cleaned cargo holds; and the ship must give notice of readiness upon arrival . Demurrage is the agreed amount payable to the owner in respect of delay to the vessel beyond laytime. Despatch is the bonus money paid by the owner to the charterer for finishing loading/discharging ahead of the agreed laytime. REVIEW QU INS 1, nN we 10. 1. 12. Explain the meaning of a voyage charter and the reasons why this contract is concluded. Discuss the meaning of freedom of contract under the voyage charter. What are the legal consequences if the shipowner has committed misrepresentations of the cargo carrying capacity of the ship to be used in the voyage charter party? What are the legal effects of unseaworthiness to the shipowner? If the charterer was not able to deliver the cargo at the named port of loading, what actions can be taken by the shipowner against the charterer? Can the charterer recover his prepaid freight when the ship is abandoned and the goods are lost or undelivered to the destination?. Explain the charter parties for consecutive voyages. Explain the importance of laycan clause in the charter contracts. Is the owner liable to damages or loss or delay in port in case of war or other political unrest? What are the requirements for laytime to start counting? When is a ship an arrived ship? Differentiate demurrage from despatch 114 NN