CERTIFICATE IN LAYTIME AND

DEMURRAGE
Module One: Introduction and Context

Course Director
Dr Katerina Konsta
CEO, Seaworks Training & Consultancy
 Contents
1 LEARNING OUTCOMES............................................................................................................................. 4
2 KEY TERMS AND CONCEPTS ..................................................................................................................... 5
2.1 Chartering ......................................................................................................................................................... 5
2.2 Charterers ......................................................................................................................................................... 5
2.3 Shipowners........................................................................................................................................................ 5
2.4 Ship Management Companies........................................................................................................................... 5
2.5 Chartering Brokers (Shipbrokers) ..................................................................................................................... 5
2.6 The Contract of Carriage ................................................................................................................................... 6
2.7 Laytime .............................................................................................................................................................. 7
2.8 Demurrage ........................................................................................................................................................ 7
2.9 Dispatch ............................................................................................................................................................. 7
3 BACKGROUND TO CHARTERING .............................................................................................................. 8
3.1 The Chartering Practice ..................................................................................................................................... 8
3.1.1 Description of the Ship ...................................................................................................................................... 8
3.1.2 Description of the Trade.................................................................................................................................... 8
3.1.3 Description of the Period .................................................................................................................................. 9
3.2 Types of Charterparties ..................................................................................................................................... 9
3.2.1 Voyage Charterparty ....................................................................................................................................... 11
3.2.2 Time Charterparty ........................................................................................................................................... 12
3.2.3 Bareboat Charter ............................................................................................................................................ 12
3.2.4 Other Types of Chartering Agreements .......................................................................................................... 12
3.3 Freight ............................................................................................................................................................. 13
3.4 Hire .................................................................................................................................................................. 13
3.5 Fixing a Voyage Charter ................................................................................................................................... 14
3.5.1 The Investigation Stage ................................................................................................................................... 14
3.5.2 The Negotiation Stage ..................................................................................................................................... 15
3.5.3 The Post-fixture Stage ..................................................................................................................................... 16
3.6 How to Negotiate charters? ............................................................................................................................ 16
3.7 Post digitization and chartering ...................................................................................................................... 17
3.8 Is a New Era about to begin for Shipping? ...................................................................................................... 17
3.9 Febrile Times ................................................................................................................................................... 18
3.10 Love-Hate Relationship Between Portals and Brokers.................................................................................... 19
3.11 Old fashioned brokers still in vogue ................................................................................................................ 19
4 LEGAL FRAMEWORK .............................................................................................................................. 20
4.1 The Basis of Laytime and Demurrage .............................................................................................................. 20
4.2 Requirements for a Valid Notice of Readiness to be Served:.......................................................................... 20
4.3 The “Arrived Ship” Notion ............................................................................................................................... 20
4.4 The Notice of Readiness (Nor) ........................................................................................................................ 21
4.4.1 NOR: An example ............................................................................................................................................ 22
4.5 NOR Example 2................................................................................................................................................ 25
4.5.1 How tribunals consider laytime and demurrage issues concerning part cargoes .......................................... 25
4.5.2 Owners’ demurrage claim and Tribunal’s findings ......................................................................................... 26
4.5.3 Comment ........................................................................................................................................................ 26
4.6 Statement of Facts (SOF) .................................................................................................................................. 26
5 CHARTERPARTIES AND CLAUSES............................................................................................................. 28
5.1 Charterparties ................................................................................................................................................. 28
5.1.1 Commonly used voyage charters are the following:....................................................................................... 28
5.1.2 List of Voyage Charterparty Clauses ............................................................................................................... 29
5.2 Clauses for the Tanker and Dry Market ........................................................................................................... 32
5.2.1 Tanker Charterparty Clauses ........................................................................................................................... 32
5.2.2 Dry Charterparties Clauses ............................................................................................................................. 33
5.3 Special Clauses ................................................................................................................................................ 34
6 CHARTERPARTY DRAFTING .................................................................................................................... 36
6.1 Is the drafting of the contact of the actual causes of demurrage ................................................................... 37
7 LAYTIME AND FREIGHT RATE .................................................................................................................. 37
7.1 Freight ............................................................................................................................................................. 37
7.2 Laytime ............................................................................................................................................................ 38

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 7.2.1 Example ........................................................................................................................................................... 39
7.3 Demurrage ...................................................................................................................................................... 39
7.4 Dispatch ........................................................................................................................................................... 39
8 EXAMPLES ............................................................................................................................................. 41
8.1 Example 1. "Sundays and Holidays excepted unless used (SHEX u.u.)" and "Weather working days (WWD)".
........................................................................................................................................................................ 41
8.2 Example 2. "Sundays and Holidays excepted (SHEX)" and "Weather working days (WWD)". ....................... 42
9 SUMMARY ............................................................................................................................................ 44
10 AUTHOR BIOGRAPHY ............................................................................................................................ 45
11 REFERENCES .......................................................................................................................................... 46

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1 Learning Outcomes

Learning Outcomes
By the time this module is completed students should be able to:

• Understand the basic principles of chartering.

• Distinguish between different types of chartering: time, voyage and bareboat.

• Understand what is laytime, demurrage and despatch.

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2 Key Terms and Concepts

The aims of this section is to:

• set the grounds for laytime and demurrage
• to define principle notions

2.1 Chartering

Chartering is an activity within the shipping industry. Charterers and cargo owners are interested in
chartering ships to get their cargoes effectively and efficiently to a destination. On the other hand, shipowners
are interested in chartering their ship on a profitable charter. This is chartering and it is a totally global market
– the cargo owner may be Brazilian, the charterer may be Italian, the shipbroker German and the shipowner
Greek.

2.2 Charterers

Charterers are those who “charter” ships to carry commodities. There are many kinds of charterers,
from individuals operating small corporations and concerned only with the carriage of a particular
commodity, to major international trading houses, to whom involvement in the international dry-cargo
market represents a very small part of their overall corporate activities. Some charterers are involved as
“traders” in the worldwide purchase, sale and transportation of a range of goods (grains, fertilisers,
minerals, etc.), others are manufacturers, mine owners, farmers, shippers or receivers, for a singe commodity
or from a particular geographic area. Other charterers may be state operations (e.g. the Indian
government): these are government employees being given the task of securing suitable ships for the state’s
needs.

2.3 Shipowners

There are a wide variety of shipowners. Some are owners of a single ship, others of larger fleets. Some
concentrate on ships of a particular type or size, others operate a varied collection of vessels. Some are
state controlled or run their ships under the flag of the country in which they reside, while others operate
“off shore” under a “convenient” flag (“flags of convenience”, or FOCs). Many shipowners operate from
one or more of the traditional or regional centres that maintain an important presence in the international
dry- cargo market, while others operate from locations in their own country, although, in order to avoid taxes
levied against ship earnings, they often operate under an “agency agreement” with the “off shore” company.

2.4 Ship Management Companies

Ship management companies are companies or individuals experienced in the market and in its mechanisms
who, for a negotiated fee, offer their experience in trading in shipping and undertake the responsibility for
the management of vessels. When ships are bought by individuals as an investment but the owners do not
wish to participate in running the ships, ship management companies are hired to do this job.

This can take many forms, varying from giving ship managers total control of a vessel or fleet to sub-contracting
one element of management, such as a ship management company taking over just manning of the ship,
technical management, safety and quality management, etc.

2.5 Chartering Brokers (Shipbrokers)

Chartering brokers (ship brokers) are the medium between charterers and shipowners. They identify supply
5
and demand for ships and cargoes and help the main players to secure cargoes for their ships and ships
for their cargoes. Chartering brokers maintain a list of “open” tonnage (i.e. vessels) expected to become
available in the future and a list of available cargoes, so they circulate this “tonnage list” to their principals
(charterers) and try to match suitable cargoes for the available vessels.

A shipbroker’s income is in the form of the reward of “commission”, known also as “brokerage commission”,
paid for a successful introduction and negotiation between shipowner and charterer, leading to a fixture.
In cases where negotiations between charterers and shipowners, which can take days, do not finally lead to
a fixture, the shipbrokers do not get paid. Some shipbrokers are specifically hired as employees by shipowners
or by charterers to “work” their tonnage or cargoes. However, most of them are separate individuals or
companies acting for principals in an “exclusive” or “semi-exclusive” capacity or fixing as “competitive”
brokers. Correspondent brokers can also be used co-operatively to seek suitable tonnage or cargoes in
another place.

Shipbrokers circulate details of new business – orders – as soon as possible and maintain good and close
contact both with those charterers providing business, but also with “correspondent” brokers and
shipowners, whose vessels they may need to fix. Once a fixture is concluded, a shipbroker must also
perform the following activities:

• draw up the charterparty recording all details that have been agreed (negotiated);
• deal with all subsequent amendments and/or additions to the negotiations (e.g. any terms agreed
after the main fixture, amending the charterparty);
• handle communications between the parties;
• deal with financial exchanges such as payment of freights, voyage balances and hires;
• chartering and shipowning relationships should be maintained to the best possible level.

2.6 The Contract of Carriage

The traditional contract for the movement of materials is the charterparty – the contract of carriage. The
charterparty is negotiated in a free market, subject only to the laws of supply and demand. The relative
bargaining strengths of the two parties will depend on the current state of the market: the shipowners and
the charterer are able to negotiate terms entirely free from any statutory interference.

A customary standard form of charterparty (c/ps) for the particular trade is adopted: for example, there
are “grain” c/ps, wheat c/ps, etc. This standard charterparty is usually supplemented with additional
clauses.

The rate agreed will depend upon the state of the market.
Standard forms of c/ps were imposed on the market by the charterers to fit into their contracts of sale
of the commodity and to band together all charterers trading with the same commodities. Their existence
greatly facilitates negotiations and saves time.

When charterers have one cargo to move, they usually contract with a shipowner for the ship to make a
voyage charter, that is they pay for the transport of goods from place A to place B (or more
loading/discharging ports) on a US$X per ton of cargo loaded.

A time charter covers the case where charterers’ commodities are drawn from a number of places and are
sold to several buyers in different locations. Time charters are contracts based on time, whereby the
shipowner remains responsible for the running of the vessel, but the commercial direction and command of
the ship is transferred to the time charterer (bunkers, port agents). Time charters vary in duration from a few
days to years.

In every commercial sale the contracting parties will seek certainty when it comes to their rights and
6
obligations under the contract (Sale of Goods Act 1979, S. 62 (2)). This is especially true for provisions
concerning time and money, as these elements are generally considered to be of immense importance to
commercial parties.( The Starsin [2004] 1 AC 715 [13] )

If the laytime and demurrage clause in the contract of sale is seen as an independent obligation regardless
of the charterparty, the consequence is that demurrage might be payable under the sale contract but not
under the charterparty itself, giving the other party a benefit, which might be regarded as unjustifiable.

2.7 Laytime

Laytime is the specified time given to charterers in which to affect loading and discharging operations. It is a
negotiable time and can either be expressed as a certain number of days or as undertaken loading/discharging
at the rate of x tons per day.

According to the Baltic and International Maritime Council (BIMCO) laytime is defined as “the period of time
agreed between the parties during which the Owner will make and keep the vessel available for loading or
discharging without payment additional to the freight”.

2.8 Demurrage
Demurrage is levied when charterers exceed the allowed laytime, and the shipowners receive liquidated
damages in the form of demurrage at a negotiated sum per day.

According to BIMCO, demurrage is defined as an agreed amount payable to the Owner in respect of delay to
the vessel beyond the laytime, for which the Owner is not responsible. Demurrage shall not be subject to
laytime exceptions.

2.9 Dispatch

Dispatch applies to dry cargo charters. When charterers carry out the cargo operations in a shorter time
than that allowed for by the laytime, they receive a “reward” in the form of dispatch at an agreed sum
(usually half the demurrage rate for every day “saved” or pro rata, that is, for the part of the day “saved”).

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3 Background to Chartering

The aims of this section is to:

• set the framework for chartering practices
• explain the basic chartering principles

3.1 The Chartering Practice

The charter market is a market where most brokers are located and where cargo and vessel interests
come together to trade.

The aim of the shipowner is to find continued and suitable employment for the ships in order to maximise
revenue earnings. The job of the shipbroker is finding and matching suitable cargoes for ships.

All parties to the chartering of the ship – the shipowner, charterer and broker – evaluate the intended
voyages to maximise earnings. For the shipowner that is to pay for the cost of ship, the cost of its operations
and to make some profit.

The charterparty is a contract between the shipowner and the charterer.

There are three basic and important elements to this contract: (a) description of the ship;
(b) description of the trade; and (c) description of the time period.

3.1.1 Description of the Ship

The type of ship to be hired/chartered very much depends on the nature and whereabouts of the intended
trade. It is normal for owners to provide all the details of the ship with a guarantee about their accuracy.
For example the oil companies have developed a specific format which is required to contain several pages
of information about ship details.

Many charterers require plans to be supplied by the owners, such as the pumping arrangement plan
in the tanker trade.

Information such as the cubic capacity, speed and consumption and constant weights are vital. These,
apart from the name of the ship, include: year of build, flag, deadweight, maximum dimensions, maximum
draught, fresh water allowance, speed, fuel consumption, cargo space in bale and grain capacities, number
of hatches and holds, type and safe working load of cargo gear, compliance with international
regulations for carriage of specialised cargo and such other important details relevant for the intended
cargo and trade.

For example some bulk cargoes may require that the holds be equipped with a special form of cargo securing.

3.1.2 Description of the Trade

The charterer is interested to know the details of the ship in the same way the owner is interested to
know about the type of trade the ship will be engaged in.

Owners will negotiate an entry to the effect that the berths and ports to which the vessel will trade are
safe and the ship will remain afloat. The charterparty will guarantee that the vessel will trade within the
Institute Warranty Limits (IWL) – a trading area defined by underwriters to prevent the more serious risk of
ship causality loss. Dangerous areas such as war zones and icebound areas may be excluded from the
charterparty.

8
The charterparty shall also include certain exclusions for the cargo to be loaded, such as asphalt in bulk,
pitch in bulk, livestock, explosives, fish meal, scrap, sulphur and logs.

3.1.3 Description of the Period

The period of charter commences with vessel’s delivery to the charterers and, like all charters, this
delivery is either spot or in the liner market.

3.2 Types of Charterparties

There are three types of charters: VOYAGE, TIME and BAREBOAT or DEMISE charter.

1. Time charters are contracts for the use of the ship and her crew for a specified period of time within
agreed trading limits as directed by the time charterer in consideration for the payment of hire.

2. A voyage charterparty is a charterparty under which the shipowner charters out and the charterer
charters in the whole or part of the ship’s space for the carriage by sea of the intended goods from one
port to another and the charterer pays the agreed amount of freight.

3. A bareboat or demise charter is an arrangement for the hiring of a vessel whereby no administration or
technical maintenance is included as part of the agreement. The charterer or the ship management
company obtains possession and full control of the vessel along with the legal and financial
responsibility for it. The charterer pays for all operating expenses, including fuel, crew, port expenses
and P&I and hull insurance. In commercial demise chartering, the charter period may last for many
years, and may end with the charterer acquiring title (ownership) of the ship. In this case, a demise
charter is a form of hire-purchase from the owners, who may well have been the shipbuilders.
Demise chartering is common for tankers and bulk carriers.

Who pays what under the above charterparties is presented in the following tables.

Table 1 Different charterparties

Chartering
Bareboat Time Voyage
Master appointed by charterers Master appointed by Master appointed by
owners owners
Owners do not act as carriers Owners do not act as Owners act as carriers
carriers
Entire ship’s capacity Entire ship’s capacity Full or part cargo
Hire depends on duration of charter Hire depends on Freight depends on
duration of charter quantity of cargo

Source: Galvagnon/Pearson ENMM Marseille 2002, http://www.pfri.uniri.hr

9
 Table 2 What owners pay under a charterparty

For account of Owners For account of Owners For account of Owners

Bareboat Time Voyage
Depreciation Wages Wages
Insurance/Survey(unless otherwise Provisions Provisions
agreed) Maintenance/Repairs Maintenance/Repairs

Brokerage, if any Stores/Supplies/ Stores/Supplies/

Equipment Equipment
Lubricating Oil Lubricating Oil
Water* Water
Insurance/Survey Insurance/Survey
Overhead Charges Overhead Charges
Depreciation Depreciation
Brokerage, if any Fuel
Part of claims* Port Charges
Stevedoring Charges*
Cleaning of Holds
Dunnage
Ballast (if any)
Commissions/Brokerage
Claims
* Dependent on the conditions of the C/P

Source: Galvagnon/Pearson ENMM Marseille 2002, http://www.pfri.uniri.hr

10
 Table 3 What charterers pay under a charterparty

For account of Charterers For account of For account of

Charterers Charterers
Bareboat Time Voyage
Wages Fuel No expenses, unless
Provisions Port Charges according stevedoring
Maintenance/Repairs Stevedoring Charges expenses are partly or
wholly to the C/P for
Stores/Supplies/Equipment Cleaning of Holds
charterers’ account*

Lubricating Oil Dunnage

Water Ballast (if any)
Insurance/Survey(unless Water*
otherwise agreed) Commissions/Brokerage
on cargo only
Fuel Part of claims*
Port Charges
Stevedoring Charges
Cleaning of Holds
Dunnage
Ballast (if any)
Commissions/Brokerage on cargo
only
Claims
* Dependent on the conditions of the C/P

Source: Galvagnon/Pearson ENMM Marseille 2002, http://www.pfri.uniri.hr

3.2.1 Voyage Charterparty

A voyage charter is an engagement of a vessel for a single voyage between declared ports to transport a full
shipload of cargo or a certain quantity of cargo. The freight is paid on a per tonne of cargo (DWT) basis or
on a lump sum basis.

The shipowner provides for all the ship’s costs with its crew, expenses for fuel, water, canal dues, port dues,
loading and discharging expenses, etc. In return the charterer pays him the hire charges for carrying the
cargo as per described or utilised cargo capacity of the ship.

To compensate for the delays that may be encountered in cargo loading/discharging operations, the
“demurrage and despatch” clauses for compensation to the affected parties are inserted in charterparty.

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3.2.2 Time Charterparty

Time charter terms are for longer duration, for a few months to over a year and in certain cases for a number
of years. In time charters the charterer takes a ship on daily hire basis for a specific time period and utilises
it for number of voyages in a declared geographical range of ports, but is not bound to operate the vessel on
fixed routes.

The charterer has to ensure that the vessel is not required to sail beyond the International Warranty Limits
or in war zones without the owner’s knowledge.

The decision for such operations is entirely the owner’s prerogative. Time charter hires are payable in
advance, generally on a fortnightly basis. Performance clauses are incorporated in time charterparties.

Underperformance on account of speed, excessive fuel consumption and deficiency in cargo handling
rates make the owner liable for compensation to the charterer. In some charterparties a certain time
period may be allowed for the regular routine maintenance, beyond which the vessel becomes “off hire”,
and pro rata deductions are made from the time charter hire.

3.2.3 Bareboat Charter

A bareboat charterparty is a charterparty under which the shipowner provides the charterer or a ship
management company with an unmanned ship which the charterer shall possess, employ and operate within
an agreed period and for which the charterer shall pay the shipowner the hire.

• The shipowner shall deliver the ship and its certificates to the charterer at the port or place and
time as stipulated in the charterparty. At the time of delivery, the shipowner shall exercise due
diligence to make the ship seaworthy. The ship delivered shall be fit for the agreed service.

• Where the shipowner acts against the provisions of the preceding point, the charterer shall be
entitled to cancel the charter and claim any losses resulting therefrom.

• When the charterer redelivers the ship to the shipowner, the ship shall be in the same good order
and condition as it was at the time of delivery, fair wear and tear excepted.

Where, upon redelivery, the ship fails to remain in the same good order and condition as it was at the
time of delivery, the charterer shall be responsible for rehabilitation or for compensation.

3.2.4 Other Types of Chartering Agreements

It is becoming increasingly common to see charters which combine some of the aspects of both time and
voyage charters, for example:

1. Trip charters, that is, contracts obliging the charterer to pay hire for the time taken by the ship
to complete a specified voyage, for example, a round Atlantic voyage.

2. Consecutive voyage charterparties, for example, four consecutive voyages between A and B.

3. Slot charters space sharing agreements, that is, agreements which enable liner operators to utilise
empty space on their ships by allowing other operators to use some of the empty capacity in
their vessels in exchange for the right to use an equivalent amount of space on the ships of such
other operators. This form of arrangement is common in the container trade and remuneration
is a complicated equation often calculated with regard to the net profit over a period by all the
12
 operators who are part of the arrangement.
3.3 Freight

This is the income of a ship derived from a voyage charter or from liner operations. Freight is paid for the
carriage of a quantity of cargo from one place to another. Freight rates can be expressed in the following
ways:

1. As US$ xx. per metric ton (mt) of actual cargo carried.

E.g. A ship loads 47,582.48 mt of cargo Freight will be calculated as follows: 47,582.48 mt * US$ 28/mt =
US$1,332,309.44
2. As a lump sum payment: US$ xxxxxxxxx for the voyage

E.g. US$620,000 for a cargo of min 45,000 mt

Freight will be the lump sum amount agreed, that is, US$620,000.

Freight is payable according to charterparty terms. Some typical examples of freight payment include
the following:

Fully prepaid or within a specified number of days of signing bills of lading (Bs/L).

Proportionally prepaid (90% or 95%) within a specified number of days of signing Bs/L. In this case, any
balance due to owners is settled with the calculation of demurrage or dispatch (for dry cargoes) and with
demurrage calculation (for the tanker market, as in tankers there is no dispatch).

Before breaking bulk (BBB), that is, before commencement of discharging. In this case, it is of vital
importance that freight is indeed paid BEFORE the ship commences discharging, otherwise, huge claims
could arise.

On “right and true delivery” of the cargo, that is, on completion of discharging.

The first two ways are more common in the dry market, whereas the two latter are more extensively used
in the tankers market. However, variations of all above ways of payment can be found in both markets.

3.4 Hire

This is the income of a ship yielding from a time charter and is usually an agreed sum per day paid every 15
or 30 days IN ADVANCE.

E.g. A ship is time-chartered for US$25,000 per day

Assuming hire is payable 15 days in advance, then gross hire will be calculated as follows:

15 days * US$25,000 per day = US$375,000.

The charterers might make various deductions from the hire, however, all of them must be specified in
13
the charterparty. Such deductions will include commissions due to the charterers’ brokers and sums
advanced by the charterers to cover “owner’s expenses” at various ports of call.

In the first hire payment, charterers also include the value of the bunkers remaining on board at the time
of delivery of the vessel. Bunkers on redelivery of the vessel are deducted from the last hire payment.

The operations department makes arrangements for a qualified surveyor, approved by shipowners and
charterers to board the vessel and perform the “bunkers survey” or an “on hire survey” at the port of delivery
and an “off hire survey” at the port of redelivery. This is a precise survey carried out so that the exact
quantities of bunkers are determined and both shipowners and charterers accept the figures yielded in it.

A hire invoice also includes any amounts that are due to owners on account of any damages that might occur
during the charter period. These damages, usually stevedore damages occurring at various ports, are
mostly repaired on the spot and are paid by the master, however, since the ship is “delivered” to the
charterers, their cost has to be paid by the charterers in the end, this is why they are also shown in a hire
statement or, more often, in a final hire statement, that is, after ship’s redelivery to owners.

3.5 Fixing a Voyage Charter

The chartering process is divided in three stages:

1. The investigation stage

2. The negotiation stage

3. The post fixture stage.

3.5.1 The Investigation Stage

Before a charterer enters the market with an order he has to decide whether:

(a) he is prepared to enter into firm negotiations with a suitable shipowner; or

(b) if he wishes primarily to collect various proposals and intends to short list and evaluate them
prior to starting negotiations.

The starting point for the chartering process is when a charterer enters the market with an offer or when a
shipowner enters the market with a position.

The purchase transaction is complete only when:

the contract for the sale of goods is signed;

the documentary credit, if required, is opened and advised/confirmed; and
cargo is ready and available or can be made available to the shipowner.

The wording in the chartering negotiations changes depending on the willingness of the charter to make
an offer. For example:

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When the charterer wants to have an idea of the prevailing freight the following wording or something similar
can be used:
• prospective order;

• order expected to become definite.

When the purchasing transactions are complete and the charterer wishes to enter into firm negotiations
immediately:

• “firm”;

• “definite, firm and ready to go”.

Then the following information may be found in the order:

• Charterer’s name and domicile.

• Cargo quantity.

• Description of the commodity/indented trade.

• Loading and discharging ports.

• Period within which a vessel is to be presented for loading.

• Loading and discharging rates and terms.

• Any restrictions or preferences regarding the vessel.

• Charterparty form on which charterer wishes to base terms.

• Request for general and specific information about the ship.

• Currency in which freight rates to be quoted if not US dollars.

• Types of offer.

The shipowner may put a forward offer or he may give a proposal along with a freight idea.

3.5.2 The Negotiation Stage

The parties discuss the main terms and after they have discussed and agreed on them they go into more detail,
negotiating the exact wording of certain clauses that they have agreed.
In English law an offer should be:
specific as to the price and terms;
binding on the person making it; and
limited in time.

Anything else is an “invitation to treat”. Thus an offer “subject to details” is only an initial exploration
between the parties anxious to finalise a deal and it is not a contract.

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A shipowner’s offer in response to an order would start firm negotiations. For voyage chartering the
offer will contain the following details:

• Period for which offer is valid.

• Name of owner/operators of the vessel.

• Principal particulars of the vessel.
• Vessel’s cargo carrying capacity.
• Laydays/cancelling date.
• Loading/discharging ports.
• Loading/discharging rates.
• Demurrage/dispatch.
• Commission.
• Vessel’s ETA (Estimated Time of Arrival) at the port of loading.
• Vessel’s present position.
• Freight rate.

The vessel’s particulars are:

• Type of vessel.
• Year of build.
• Flag.
• Deadweight carrying capacity including constant.
• Capacity of the vessel – both grain and bale space.
• Draught on stated deadweight.
• Cargo gear with safe working loads.
• Speed – the average service speed.
• Bunker consumption – both at sea and at port.
• Grade of fuel oil in seconds of Redwood Scale.
• Special fitting, if any.

3.5.3 The Post-fixture Stage

If the parties reach an agreement, immediately after the confirmation the broker prepares a recapitalisation
(recap) of all the terms agreed and exchange them. This may also refer to a fixing letter.

It is very important to fix time limits for replies to offers.

Once agreement has been reached on the details of the charterparty, the broker will usually sign the
charterparty on behalf of their principal as their agents.

3.6 How to Negotiate charters?

A negotiator may be a buyer or seller, a customer or supplier, a boss or employee, a business partner, a
diplomat, or politician. People do not negotiate only in business life but also in personal life. People cannot
avoid negotiations.
A charter and a shipbroker or a shipowner are negotiators that they buy and sell. What? capacity and freight.
For example determining the charter rate is determined through the general process of negotiation with the
power of the demand and supply in the market including various factors. Is it just the power of demand and
supply?

16
How can negotiations be successful? Successful negotiation is an art form that comes naturally to some, but
as a skill that can be learned by most.
Thus, the basics elements of successful negotiating are:
1. Preparation (setting goals, knowing your market, your strengths and weaknesses, define and setting
limits)
2. Effective communications (active listening, clarity)
3. Emotional Control
4. Closing the deal

More particularly, have the right contacts, know your market, and service patterns, understand the terms of
the contract, minimise changes, get rates in real time, get advice, and do not just focus on price.

3.7 Post digitization and chartering

It is interesting to read the following article written by Inderpreet Walia (Lloyd’s List 15 June 2017) which
will provide you with insights, thoughts, discussion and actions with regards to the shipping and chartering
market. The author is Post fixture digitalisation and anxiety by Inderpreet Walia (Lloyd’s List 15 June 2017).

3.8 Is a New Era about to begin for Shipping?

Although fixing a ship through a digitalised platform may be a long way from the ease of Uber, the shipping
industry appears to be shifting gears.

The era of digitalisation is starting to bring shipping deals typically done over phones or in pubs onto online
platforms that serve as intermediaries, connecting the owners with the charterers like never before.

Perhaps, one can argue that digitalisation hit the dry bulk market like a tsunami in the beginning of this year
when BHP Billiton, the world’s largest miner, launched its online freight platform in January.
The online platform for vessel trading became the biggest threat for the largely analogue shipping world,
some brokers pointed out then.

While these web-based systems still have a way to go before they totally replace humans, their protagonists
claim the number of adopters of digitalisation is rapidly growing.

Even the Baltic Exchange, one of shipping’s most historical institutions used to be largely owned by brokers,
has plans to untangle the complex web and launch tools to assist the shipbroking world as electronic trading
looms on the horizon.

In a speech made in April, chief executive Mark Jackson said the exchange has ambitious plans to assist
industry in the “post trade space”.

“We believe that the digitalisation of post-trade will create an accurate and efficient tool, reducing
information duplication and error,” Mr Jackson said.
“We envisage a platform utility that provides the industry with real-time contract management, messaging
workflows and data standards.”

The role of the shipbroker contributes to the post trade space and by working closely with them, and the
market, Mr Jackson believes that the Baltic Exchange can add real value.

While little noticed in the wider shipping world, the announcement sent shudders down the spine of

17
shipbrokers who were worried about their jobs as they generally dealt with post-fixture settlements.

“The farewell party which prefaces an end to traditional shipbroking has well and truly began,” said a dry
bulk broker who has been in the profession for the last 20 years.

“A new breed of brokers [online platforms] are being insinuated into the industry, leading to more
productivity, but I can still feel the palpable signs of satisfaction when I fix a vessel at higher numbers.”

3.9 Febrile Times

In today’s world, shipbrokers are typically involved in three processes: vetting of ships, price matching, and
post fixture operations. The post-fixture works involve dealing with disputes, and providing accounting
services in respect of freight and demurrage.

But there are now many independent online platforms available with the aim to deal with the first two steps
of the broking process, which are already like thorns in the brokers’ side.

To take the matter one step further, Baltic Exchange’s vision to roll out a post operations platform posed an
even more serious question on the role of brokers in the industry.

“Amongst all the bits and pieces in the dry bulk market, the one that is most easily disrupted would be the
shipbrokers’ role,” said Precious Shipping’s head Khalid Hashim.

“The future for ship brokers is very limited.”

Nanyang Technological University’s assistant professor Okan Duru, who specialises in shipping, had a similar
view and suggested that the number of shipbrokers may decline since needs for their services may be
reduced.

When asked about the exchange’s post-trade endeavour, Mr Jackson told Lloyd's List that it is currently
investigating how it can support post-fixture activities undertaken by shipbrokers through online tools.
“We are not seeking to build a system which undermines the numerous services currently offered by
shipbrokers, but to assist in the setting of standards and workflows,” Mr Jackson stressed.

He said that as an independent organisation at the heart of the bulk shipping markets, the exchange holds a
unique position to help the industry coalesce around a single system or standard and then oversee and host
it.

Brokerage Clarksons’ head of Asia, Martin Rowe, said that what is being proposed by the Baltic is another
step in harnessing technology to make the lives of brokers, owners and operators easier and more efficient,
and in so doing, profitability can be improved and trades can go smoother.
On the other hand, Mr Rowe also defended the role of brokers.

“There is a lot of experience and knowledge from back office professionals that I am not sure if any artificial
intelligence will ever be able to properly replace,” he said.

“I shall be highly impressed to see the day when the computer algorithm has learned to negotiate a cargo
Letter of Intent or a Double Banking Discharge Clause at 1000hrs on a Friday night after everyone has left the
office.”

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3.10 Love-Hate Relationship Between Portals and Brokers
All that said, post-fixture settlement portals are nothing new. Digitalising the post-fixture procedure into a
highly structured, compliant and legally controlled process is already underway to improve efficiency and
optimise costs.
These have been already borne out at Norway-based owner Torvald Klaveness and some brokerage houses.
The Klaveness Data Platform, which collects and combines data from different sources, has laid the
foundation for developing predictive algorithms that can enable better use of business data in the
organisation.

Meanwhile, chemical tanker brokerage SPI Marine has for many years used its own post-trade web-based
marine logistics and data management tool, which allow its employees to manage all stages of the shipping
process from the point of fixture through the post-fixture stage.

“This tool facilitates our company’s workflows and enhances our service offer,” said SPI Marine managing
director Michael Kardel.

But Mr Kardel pointed out all data needs to be put in by the company’s brokers, who analyse the data from
laytime and demurrage through a whole range of other performance indicators. And most of SPI Maritime’s
clients still like to get all data through e-mails rather than log in themselves.
Also, the system cannot provide solutions when operational issues arise, where the expertise of the broker
still is needed, he added.

“The Baltic’s or other “post-trade” tools should allow brokers to become more productive, but for the
aforementioned reasons the post fixture settlement will continue to be done by brokers, whose experience
and expertise cannot be replaced,” Mr Kardel said.

3.11 Old fashioned brokers still in vogue

Not everyone in the shipping industry is convinced that digitalisation would change the shape of the
shipbroking business, or for that matter, make it slimmer.

For one, Singapore-based Elecktrans Group chief executive Michael Elwert said he does not see the dry bulk
segment getting fully digitalised any time soon.

“Transaction management in this segment will not change,” Mr Elwert said, citing the example of the various
charter party formats the segment still trades in. Different formats would make the digitalising process more
difficult.

Mr Elwert also noted that the bigger owners are moving ahead with their digital strategies yet the smaller
owners are far from going e-shipping, which require upfront investments at times.

There will always be some opportunities between the prostitutes and the people, likewise the shipbrokers
and owners will always match up with each other in some occasions, said a Genoa-based broker.

“But it is difficult to say if brokers would have the same role as in the past,” he added.

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4 LEGAL FRAMEWORK
The aim of this section is to explain the legal framework and the related principles of laytime and demurrage.

4.1 The Basis of Laytime and Demurrage

The basic principle of laytime and demurrage is… your delay, my cost!

The concept of laytime and demurrage lies in the carriage of goods by sea, the charterparty. There are two basic
types of contract for the carriage of goods by sea:

• a contract evidenced by a bill of lading, and

• a charterparty.

A ship which is carrying goods under a bill of lading is running under a charterparty. Although the bill
of lading and the charterparty are separate contracts, in tramp shipping it is everyday practice that a ship
which is carrying cargo under a bill of lading is running under a charterparty.

Laytime and demurrage comprise one aspect of English maritime law, in particular the law relating to voyage
charters.

“The present law has for the most part been developed by judicial interpretation of clauses in commercial
charterparties over the last one hundred and fifty years, although some of the basic principles were
established somewhat earlier, at around the time that Queen Victoria came to the throne”. (Schofield, 2011)

In simplified words, a voyage charterparty is a contract for the carriage of goods on a specific ship for
a voyage from one port or area to another, with the shipowner being reimbursed for the use of the ship
by freight money, paid either in relation to the quantity of the cargo carried or on a lump sum basis.

There are many standard forms of voyage charterparties covering the whole spectrum of cargoes. The
majority of forms are designed with particular terms to cover the peculiarities of specific trades such as coal,
grain, iron ore and oil.

Important legal elements are the following: notice of readiness, statement of facts and arrived ship
notion.

4.2 Requirements for a Valid Notice of Readiness to be Served:

The requirements for a valid notice of readiness to be served:

• The vessel is an arrived vessel

• The vessel is ready to receive or discharge the cargo
• The notice of readiness is tendered to and received by the proper person according to the
charterparty
• The notice of readiness is tendered in a contractual way
• The notice of readiness is tendered at a time that is allowed by the charterparty.

4.3 The “Arrived Ship” Notion

The vessel in order to be “an arrived ship” must (a) reach the agreed destination and be physically and
legally ready to commence cargo operations and (b) the notice of readiness must be given correctly by the
20
master. These are the basic requirements for laytime to commence counting against the charterer.

A vessel is an “arrived ship” and the laytime begins to count as soon as the following conditions have
been met:
1. The vessel must reach the contractual loading or discharging destination as stipulated in the charter.
(“Geographical arrival”.)

2. The vessel must be ready in all respects to load or to discharge or lie at the disposal of the charterers.
(“Actual readiness”.)

3. Proper notice of readiness (“NOR”) must have been tendered to the shippers or consignees in the
manner prescribed in the charterparty. (“Triggering of laytime”.)

The destination is the place or point named in the charterparty or the charterers have the option to name
it later. When the charterers exercise their option the situation is as if the place was named in the
charterparty.

To determine whether the vessel has become an “arrived ship” it is important to know whether the
charterparty is a “port charterparty” or a “berth charterparty”. In a berth charter the contractual destination
is the berth or wharf so that there is no further movement necessary to load or discharge the cargo.

If the ship has arrived at the agreed port but a loading or discharging berth is unavailable the master must
still give notice of readiness (WIBON clause: “whether in berth or not”).

Practically, the vessel “arrives” when it is:

a. within the port limits (geographical and legal limits);

b. at the immediate and effective disposal of the charterer; or
c. when it is anchored at a place where vessels usually lie waiting for a berth to become available and
orders to berth being given to the master.

Once the vessel has arrived it is up to the charterers to arrange for a berth with the least possible delay.
The laytime allowed under the charter soon begins to count and any delay in allocating a berth may increase
the risk of demurrage being incurred.

Occasionally, a shipowner or operator will agree for his ship to be loaded or discharged as per “custom of
the port” (COP), “customary despatch” (CD), “customary quick despatch” (CQD), or “fast as can” (FAC) terms.
All these concepts will be discussed in the next module.

The risks of bad weather, port congestion and such like are all for the shipowner to bear.

4.4 The Notice of Readiness (Nor)

Once a ship has been granted free pratique, entered at the custom house and had her holds inspected and
passed, the master must tender a notice declaring to all parties concerned his vessel’s readiness to
commence cargo operations – the notice of readiness.

The following is a definition of a notice of readiness (NOR):

A notice tendered by the master of a ship (by e-mail, radio, or a specific form, depending on what has been
agreed), notifying agents that the ship is “an arrived ship” and ready in all respects to commence loading
or discharging operations. (see the actual NOR in Document 1 and Document 2 which follow) A ship has
21
arrived when she has reached the “commercial area of the port” or the “normal waiting place” of the port,
when she is ready to perform her cargo operation.

In cases where reasons beyond the ship’s control (such as port congestion) can prevent tendering notice of
readiness, the master should tender it anyway, as it is mostly accepted.

If a NOR is not accepted for some reason (e.g. ship’s holds not being accepted), then the master must re-
tender it, until it is accepted.

Tendering the NOR is heavily dependent on the charterparty agreed, as in some cases (especially for dry
cargoes) the notice can only be given during daylight or during office hours, during port working days, etc.
Therefore, it is of paramount importance that a master does all in his power to complete all formalities as soon
as possible and tender the NOR as quickly as he can, so that laytime commences as soon after arrival as
possible.

It is upon the acceptance of NOR that laytime begins to count depending on what terms have been agreed
on the charterparty (e.g. 6 hours after tendering a valid NOR, or 0800 hrs next working day, etc.).

4.4.1 NOR: An example

Was email a contractually permissible method of serving notices of readiness under this charterparty? Can
the Captain send the NOR by mail?

Trafigura Beheer BV v Ravennavi SpA (The “Port Russel”) [2013] EWHC 490 (Comm) 1 March 2013

This matter came before the Commercial Court on appeal under s.69 Arbitration Act 1996 from an arbitration
award in favour of the owners. Somewhat unusually, the owners con- sented to the charterers having
permission to appeal, but elected not to participate in the ap-peal.

By a voyage charter on an amended BPVOY 3 form with additional clauses, the owners char- tered the vessel
“Port Russel” to the charterers. Disputes arose in relation to demurrage and were referred to arbitration.

A preliminary issue was posed by the parties: “Was email a contractually permissible method of serving
notices of readiness under this charterparty?” In its award the tribunal held by a majority that email was a
contractually permissible method of serving notices of readiness under the charterparty.

The charterparty provided as follows: Clause 19:

“… (a) laytime or, if the Vessel is on demurrage, demurrage shall at each loading and each discharge port
or place commence at the expiry of 6 hours after Notice of Readiness to load or discharge has been
received from the Master or his agents by Charterers or their agents, berth or no berth, or when the
Vessel commences to load or discharge at the berth or other loading or discharging place, whichever first
occurs. Such Notice of Readiness may be given either by letter, facsimile transmission, telegram, telex,
radio or telephone (and if given by radio or telephone shall subsequently be confirmed in writing and if
given by facsimile transmission confirmed by telex) but Notice of Readiness shall not be given without
Charter-ers’ sanction, before the commencement of laydays … “

The tribunal held that the original authors of Clause 19 intended that NoRs might be tendered in a
wide variety of ways and did not accept that the authors intended their list to be exhaus-tive or exclusive.

The court was referred to a number of authorities citing that the use of the word “may” can denote a clause
which is permissive or a clause which is obligatory. As such, each clause will fall to be construed within its
own particular factual and commercial context.

22
In this instance, Mr Justice Popplewell found that the language of clause 19(a) was prescrip- tive and defined
the form in which a valid Notice of Readiness must be given. It was obliga-tory, not permissive. The word
“may” prescribed what was permissible. This was supported by the use of the words “either” and “or”.
These naturally denoted alternatives which made an exclusive group. There would be scant reason in
denoting six specific alternative methods of giving notice if any method of giving notice were permissible.
In the Judge’s view, the giving of an NoR had important consequences. It starts the running of laytime and those
involved both in the giving and receiving of such notices are assisted by certainty as to whether the notice had
been validly given. If clause 19(a) was prescriptive, it conferred certainty. If it was permissive, it left
uncertainty over whether an NoR which was given by a method not listed had been validly given. There was
an imperative for treating the listed methods as the exclusive list of permitted methods.

He further considered that there was a common feature in the listed methods, which was missing in the
case of service of an NoR by email. The listed methods allowed for a hard copy document to be received.
That allowed the document to be signed for receipt or marked by the recipient as rejected or claused. It
gave an opportunity for the recipient to comment upon the NoR. Such comments might be of significance
when a dispute arose as to the valid-ity of the NoR. In contrast an email will only exist in soft copy form
unless printed out by the recipient. Whilst a recipient may print the email and sign for receipt or clause it
with comments, if so desired, he was not bound to do so.

This was not, Popplewell J held, one of those cases where the plain language of the clause led to such an
absurd result that it must yield to some unnatural meaning. Ultimately the Judge’s view was that what
mattered was not what would have been in the minds of those drafting the clause in the 1990s; what
mattered was the intention to be derived from the words used by these parties, at a time when these parties
were well aware of the existence of email as a common method of communication and chose not to refer to it
in clause 19(a).

You may also see the link http://www.charterama.nl A more recent concern: Ebola and shipping
There is a risk that a vessel could be placed off hire if it is quarantined prior to being allowed entry to a port.
Therefore, quarantine and free pratique clauses should be examined, as they may affect both the
commencement of laytime and the giving of notices of readiness.
(http://www.lloydslist.com/ll/incoming/article450184.ece)

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Document 1. Notice of Readiness Source: http://www.lawandsea.net

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 Document 2. Notice of Readiness Source: http://www.lawandsea.net

4.5 NOR Example 2

4.5.1 How tribunals consider laytime and demurrage issues concerning part cargoes
A vessel was chartered on an amended Gencon 94 form, for a part cargo of petcoke. A completion cargo of
wheat was also arranged. The petcoke cargo was loaded first, however its receivers had not negotiated a
provision that it be discharged first. The wheat cargo was carried on a “last in, first out” basis. Both cargoes
were to be discharged at Djibouti. (Allan 2015)
The charter was a berth charter, but allowed NOR to be tendered on arrival if the intended berth was
occupied. When the vessel arrived at Djibouti, both the petcoke and wheat berths were occupied. NOR was
tendered for the petcoke cargo on arrival. Although the tribunal was not told that NOR had been tendered
for the wheat cargo at the same time, correspondence stated that the “vsl tendered general nor for both
cqgoes”. (Allan 2015)
Two days after arrival, the vessel shifted to the petcoke berth, however the Master refused to allow
discharge. The vessel then shifted back to anchorage, correspondence stating that “owners decided to
discharge wheat cargo first”. The vessel waited at anchorage for the wheat berth to become free. After the
wheat cargo was discharged, a second NOR for the petcoke cargo was tendered. The vessel then remained
25
in the wheat berth for several days, with the initial intention being that she would shift directly to the petcoke
berth. When that proved not to be possible, the vessel shifted back to the anchorage. Discharge of the
petcoke cargo was eventually completed 81 days after the vessel had arrived at Djibouti. (Allan 2015)

4.5.2 Owners’ demurrage claim and Tribunal’s findings

Owners brought a claim for demurrage. The Tribunal considered two issues:
Was laytime in respect of the petcoke cargo triggered by the first NOR but then suspended (as Charterers
contended), or was it triggered by the second NOR after the wheat cargo had been discharged (as Owners
contended)?

If the former, did laytime resume following completion of discharge of the wheat cargo (as Owners
contended), or when the vessel returned to the petcoke berth (as Charterers contended)?

The Tribunal held that the commencement of laytime was triggered by the first notice. Here they referred to
the statement in The Tres Flores [1973] 2 Lloyd’s Rep 247 that “a ship in order to be ready and thus be entitled
to give valid notice of readiness must be ready to obey the charterer’s order whenever they are given”. The
“readiness” referred to was the physical and legal readiness of the vessel. There was no dispute here about
the vessel’s physical readiness. As to legal readiness, when the first NOR was tendered, all her papers were
in order, there was no infection, and no permits or consents were not in place or required, so there was no
legal impediment to commencement of discharge. The fact that Owners would have been in breach of charter
relating to the wheat cargo did not mean that the vessel was not legally ready in respect of the petcoke cargo.

Laytime was suspended during shifting (as per the charter terms), and did not resume when the vessel first
berthed at the petcoke berth because the Master refused to commence discharge. This amounted to “fault”
on the part of Owners, delay caused by which does not count as laytime or demurrage. (Allan 2015)

The next question was: when did this period of fault end? The delay and the cause of the delay (i.e. the fault)
had to be contemporaneous. When the fault ceased, either laytime or time on demurrage resumed. For
laytime or demurrage to run, the vessel had to be continuously available for cargo operations (see The Stolt
Spur [2002] 1 Lloyd’s Rep 786). In the absence of some other clause excluding time, therefore, the loss of
time was confined to the period when the vessel was not so available. The Tribunal was satisfied that the
vessel was at the immediate disposal of the charterers after discharging the wheat cargo, even if she did
remain at the wheat berth. (Allan 2015)

On that basis, Owners were entitled to demurrage from the time when discharge of the wheat cargo was
completed.

4.5.3 Comment
This case considered some of the core laytime and demurrage issues, including when laytime commences
and in what circumstances and for how long laytime and/or time on demurrage are suspended. Difficulty was
caused in this case because the vessel carried two cargoes under separate contractual arrangements. The
Tribunal’s findings make clear that, in such cases, each contract will be considered individually and on its own
terms. (Allan 2015)

4.6 Statement of Facts (SOF)

Upon departure of a vessel from a port, agents must produce a series of documents, one of which is the
Statement of Facts (SOF).

The SOF is defined as follows:

The SOF is a statement prepared and issued by a ship’s port agent upon completion of the vessel’s call to
the port and states dates and times of tendering Notice of Readiness, commencement and completion of
26
cargo operations and details of daily cargo working,
together with reasons for interruption of cargo working. It is signed by all parties concerned in the port
operations of the ship, including charterers and/or cargo shippers or receivers. BIMCO has produced a
standard SOF form which is extensively used.
An example of the SOF form published by BIMCO can be viewed at the following site:
http://www.maritimeknowhow.com

Normally, a SOF, as the term implies, states the exact facts that happened during vessel’s stay at port for
loading/discharging purposes, therefore, no disputes should arise in composing it. In case a party
disagrees with some of the facts recorded, the alternative is to sign it “under protest”, attaching an extra
form or letter or protest, giving the reasons of disagreement. In many occasions, agents, receivers and/or
other parties involved in the loading or discharging of a cargo, produce their own SOF, which, however, is not
signed by all parties, but merely “complements” the rest of ship’s documents.

The SOF includes information vital to the laytime calculator and its interpretation may differ from party to
party, with the most common example being that of charterers and shipowners interpreting the facts in a
different way, affecting how laytime counts.

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5 Charterparties and Clauses
The aim of this section is to examine the charterparties and clauses related to laytime and demurrage.

5.1 Charterparties

Standard formats have been developed or approved by internationally reputable institutions such as: the Baltic
and International Maritime Council (BIMCO); International Association of Independent Tanker Owners
(INTERTANKO); General Council of British Shipping (GCBS); Institute of Chartered Shipbrokers; and Association
of Shipbrokers and Agents USA; etc.

Amendments in a charterparty can be made as necessary for a specific voyage by

inclusions/replacements/removal of clauses on the basis of agreements between the two parties.

Examples of BIMCO Contracts: AMWELSH 93 1, BALTIME 1939, BARECON 89, BIMCO STANDARD BUNKER
CONTRACT 2001, BOXTIME, BPTIME 3, CONGENBILL 1994, CONLINEBILL 2000, CONLINEBOOKING 2000,
CREWMAN A, CREWMAN B, FUELCON, GENCON 94, GENTIME, HEAVYCON, HYDROCHARTER, NORGRAIN 89,
SALEFORM 87, SALEFORM 93, SHIPMAN 98, SLOTHIRE, SUPPLYTIME 89, SYNACOMEX 2000, TOWCON,
TOWHIRE, VOLCOA, WORLDFOOD 994.

5.1.1 Commonly used voyage charters are the following:

• GENCON, General purpose BIMCO form; box layout available.

• FERTIVOY Fertilisers.
• C’ORE’7 Iron ore; full name: Mediterranean Iron Ore C/P.
• OREVOY Iron ore BIMCO form with box layout.
• AMWELSH Coal; Americanized Welsh Coal C/P; used widely.
• GRAINVOY Grain BIMCO form.
• NORGRAIN 73 North American grain; American form.
• AUSTWHEAT Australian wheat; Australian Wheat Board form.
• AFRICANPHOS Moroccan phosphates; charterers’ form.
• NUBALTWOOD Timber; used in Baltic trade.
• BEEPEEVOY Tanker BP form; used by many companies.
• SHELLVOY Tanker Shell form; used by many companies.
• INTERTANKVOY Tanker Intertanko form; used by independent owners.
• ASBATANKVOY Tanker; American form.
• CHEMTANKVOY Chemicals; BIMCO form; box.

A number of charterparties can be used for all types of cargoes and for any type of voyage. The most
frequently used general voyage charter agreements which are called uniform general charterparties and
are the following:

• Multipurpose Charterparty, 1982, “MULTIFORM” published by FONASNBA

• Uniform General Charter (as revised 1922, 1976, 1994), “GENCON” published by BIMCO see
the GENCON charterparty at http://www.uio.no
• Tanker Voyage Charterparty 1984, “ASBA II”, published by ASBA.
• Tanker Voyage Charterparty, “INTERTANKVOY 76”, published by ASBA.

1
For an example, see https://www.bimco.org/~/media/Documents/Document_Samples/Voyage_Charter_Parties/Sample_
Copy_AMWELSH_93.ashx
28
5.1.2 List of Voyage Charterparty Clauses

A typical voyage charterparty will contain the following clauses:

Preamble, owner’s responsibility, payment of freight, loading and discharging, laytime, demurrage, lien,
Cancelling, bill of lading, agency, brokerage, general strike, war risks, general ice, law and arbitration,
deviation, both to blame collision, general average and new Jason, taxes and dues.

In more detail:

1. Preamble

This can be extensive in some charterparties. In the Multiform much of what may be found in preambles of
certain other forms is contained in clause 1.

There are two important aspects of the brief Multiform preamble however – the place and the date of the
charterparty.

Place: This can be important as, in the absence of a clause to the contrary, the place where a contract is deemed
to have been signed may govern the law which is to be applied to that contract in the event of dispute. Thus if
the place is London (which is common), English law will very likely prevail.

Date: equally important, the date to be shown is that by which fixture negotiations are concluded with
all subjects lifted – in other words, when all negotiating formalities are complete.

Clause 1: Name and brief description of vessel

The Multiform allows for a more complete vessel description in the main, printed part of the form than
many (e.g. compare with AMWELSH). The position of the vessel when the contract is negotiated is also
important.

Clause 2: Condition of vessel

It is usual for a shipowner to confirm that a vessel is in a suitable condition safely and properly to
undertake the contractual voyage.

Cargo Description – Commodity and nature of the goods to be carried, for example, bulk or bagged stowage
factor (e.g. about 55 cubic feet per tonne) and either minimum/max quantity or cargo size margins and
in whose option (e.g. 12,000 tonnes, 5% or less in owner’s option).

Loading Places – Names of loading place(s) and or range (e.g. Bordeaux/Hamburg range); mention of number
of safe berths/anchorages charterers entitled to use at each place; whether vessel to remain always
afloat or safely aground maximum/minimum available drafts.

Clause 3: Discharging places and port orders/rotation

Clause 4: Laydays and cancelling

The spread of dates which a vessel is to present herself at the first (or sole) loading port. This spread should
be entered in a contract as well as conditions under which the contract can be cancelled in the event that the
vessel is unable to meet those dates.

29
Clause 5:

Freight – The amount and currency of freight to whom, where and when payable. The risk of vessel
and/or cargo loss on passage in relation to freight should be specified – i.e. whether freight is deemed
earned as cargo is loaded or upon delivery.

Clause 6:

Cost of Loading/Discharging – which of the parties to the contract is to appoint and pay for cargo handling at
each port.

Clause 7:

Notice of Readiness/Time Counting – An important clause in the calculation of laytime.

Clause 8:

Loading/Discharging Rates – The speed at which cargo-handling activities are to be performed.

Clause 9:

Demurrage/Despatch – Daily amount of liquidated damages (demurrage) payable by a charterer in the

event a vessel is detained in port beyond the maximum permitted laytime as well as any stipulations to
despatch.

Clause 10:

Notices – A shipowner/master may be required to give comprehensive notices of a vessel’s expected arrival
at the first (or sole) loading port, failing which the shipowner may face a penalty in the form of extra laytime
allowed a charterer.

Clause 12:

Ship’s Gear – A normal clause in dry cargo shipping specifying that a vessel’s gear will be maintained to a high
standard and specifying what happens in the event of gear breakdown resulting in extra expense.

Clauses 14 and 15:

Grab Discharge/Stevedore Damage – Owners normally confirm that a vessel is suitable for grab discharge and
formalities need to be set out in the event that a vessel suffers damage during the cargo-handling processes.

Clause 17:

Overtime – Who is to pay for overtime.

Clauses 18 and 19:

Shifting/Seaworthy Trim – Who is to pay shifting costs (if any) between berths also whether time so used is
to count as laytime. The vessel is to be left in safe seaworthy condition between the ports.

30
Clauses 13 and 16:

Cargo Separation and Tallying – Where a vessel is to carry various parcels of cargo, it may not be possible for
all separations between individual parcels to be natural.

The tallying (checking) of cargo as it is loaded or discharged is frequently an expensive operation and cargo
claims can arise for alleged short delivery, bad condition, etc.

Clause 20:

Dues and Taxes – This clause specifies which party to the contract is responsible for taxes which may be levied
against the vessel and/or her cargo and/or the freight.

Clause 21:

Port Agents – In any charterparty it is advisable that reference be made as to which of the parties is
responsible for the selection of an agent.

Clauses 22 and 34:

Bills of Lading – The bill of lading to be presented to the master or his/her agent upon completion of the
loading. The master or his/her agent is to sign the bill of lading indicating the apparent condition of the cargo.

Clause 23:

Lightening – Where cargo lightening is necessary a comprehensive clause covering all facets of this
sometimes complex operation should be negotiated. The MULTIFORM and AMWELSH clauses between them
cover several of these facets.

Clause 26:

General Average – A clause specifying what is to be adjusted and or paid irrespective of the ports of call
involved and the laws relating to GA.

Clause 27:

Strikes – Both parties to a charterparty have risks and liabilities in the event of a strike.

Clause 28:

Exception – The rights of contracting parties to cancel the charterparty in case of events making its
performance virtually impossible – e.g. force majeure or acts of God.

Clause 31:

Commission – Specifies the amount and to whom commissions and brokerages are payable, usually
adding that commissions/brokerages are payable on freight, deadfreight and demurrage.

Clauses 32 and 33:

31
Protecting Clauses – A set of clauses commonly included in the printed form of a charterparty or as additional
clauses. This also includes a P&I bunkering clause which sets out owners’ rights to deviate for bunkers during
the contractual voyage.

Clause 24:

Lien and Cesser – Most charterparties contain a cesser and lien clause and the MULTIFORM and AMWELSH
(clause 26) are no exceptions.

A cesser clause and a lien clause go together. If a cesser clause is incorporated in the charterparty, a lien
clause will also be included giving the owners the right to retain possession of the goods at the discharge
port until outstanding debts are paid.

In the case where the charterer is not the owner of the cargo, but is acting only as an agent or broker for the
loading of another party’s goods, he will want to ensure that his liability for the cargo ceases once it is loaded.
This is usually expressed in a cesser clause stating that “... charterers’ liability will cease on shipment of cargo
and payment of freight, deadfreight and demurrage”, that is, sums incurred at the loading port.

Equally the shipowner will not want to find himself without a remedy for any breach of contract or
damage done to his vessel after the charterer’s liability has ceased, and will want legal recourse against
another party, who will usually be the receiver of the goods. The relief given to the charterers from their
obligations only operates to the extent that outstanding sums can be recovered at the discharge port.
The owners must proceed against the receiver first, but the charterers will remain liable for sums which
cannot be recovered from the receiver.

Clause 33:

Ice – Depending on the trade involved it may not be necessary for an ice clause to be included in a
charterparty, but where one is required, great care should be taken over its wording. This is to avoid
misunderstandings which could cost millions of dollars in courts. For more information, see the BIMCO sit
on ice clauses:

https://www.bimco.org

Clause 33:

War Risks – War risks clauses should be examined in detail as some are unfair to shipowners, others
to charterers and/or patently unsuitable for the purpose intended.

A war risk clause should provide a shipowner with the right to refuse to allow his vessel and her crew to
enter or to remain in an area which has become dangerous due to warlike activity.

Signature – No charterparty is complete without the signatures of or on behalf of the parties concerned.

5.2 Clauses for the Tanker and Dry Market

5.2.1 Tanker Charterparty Clauses

There are many elements in tanker charters which follow the same lines as dry cargo forms, but there
are several significant differences.

The tanker market has its own standard forms but, with perhaps only two exceptions, these forms have been
devised by the oil companies themselves. Examples of voyage charters include “ASBATANKVOY” and

32
“Shellvoy”.

In the Shellvoy, line 56, reference is made to the laytime and running hours (i.e. SHINC 2), because almost
always the agreed total length of time for loading and discharging is 72 hours regardless of the size of the
ship.

SHINC are shipowners’ terms. It means laytime is continuous including Sundays and other holidays which is of
advantage to shipowners.

In the case of Islamic countries, as they observe Friday as holidays, we can also see FXEX (Friday Holiday
Excluded) and FHINC (Friday Holiday Included).

SHEX terms favour charterers as Sundays and holidays are to be excepted from the counting of laytime.
Normally this term applies as it would not be usual to carry our cargo operations in some countries. However
it has become common that charterers quote SHEX terms because it gives them more time to complete cargo
operations and finish within the laytime allowed without incurring demurrage. In some cases charters even
quote SHEX EIU (Even If Used) which means laytime will not be counted even if cargo operations are carried
out on these days. Similarly SHEX UU (Unless Used) refers only to actual time used for cargo operations.

But generally speaking the ship’s pumps are invariably designed to match the size of the ship and shore
pumps always have plenty of spare capacity. Running hours, as the words imply, mean no breaks for Sundays
and holidays, because oil installations by their very nature work 24 hours a day and almost every day of the
year.

Lines 57/60 deal with demurrage and it should be noted that tanker charters have no provision for
despatch money.

5.2.2 Dry Charterparties Clauses

On a global basis, the Uniform General Charter (Gencon Charter) is the most popular and widely used general-
purpose voyage charterparty. Under this charterparty the ship has the obligation of proceeding to the port
of loading or discharging. When she arrives, laytime starts to run, and should it thereafter take too long to
load or discharge cargo, her charterer may incur additional expense in the form of a charge by the shipowner
for demurrage.

In the Gencon Charter, a ship is excused from strict compliance with the duty to arrive at the designated
port, and laytime may start to run, when she has come so near thereto as she may safely get, even if she is
not yet where loading or unloading can begin.

Relevant boxes and clauses to laytime and demurrage are the following:

• Gencon, Part I, Box 16 a, b and c confirm the laytime.

• Gencon, Part I, Box 20 confirms the demurrage rate.

• Gencon, Part II, clause 6, laytime, additional clause, allowed time, demurrage, despatch.

• Gencon, Part II, clause 6a, separate laytime.

• Gencon, Part II, clause 6b, total laytime.

• Gencon, Part II, clause 6c, commencement of laytime.

2
Sundays and Holidays Included
33
 • Gencon 2pm/8am clause.

• Gencon, Part II, clause 6c, shifting roads to berth.

• Gencon, Part II, clause 6c, prior time.

• Gencon, clause 6, notice of readiness, statement of facts, physical readiness, legal readiness,
surveyor, laytime, freetime, grace time.

• Gencon, Part II, clause 7, demurrage.

• Gencon, Part II, clause 9, cancellation.

• Gencon, Part II, clause 16, general strike clause.

• Gencon, Part II, clause 18, ice clause.

• Gencon, Part II, clause 5b – for geared ships, also contains provisions for calculating laytime –
but mainly interesting when the crane is out of order … . This clause will be reviewed in more detail
later in this course.

• Gencon, Part II, clause 5c, stevedores damage clause will also be briefly reviewed.

For the actual clauses see http://www.maritimeknowhow.com

5.3 Special Clauses

There is a variety of voyage charterparties clauses for different trade routes and cargoes. The parties are
free to construct their own contracts or use terms already existing in contracts.

In the charterparties some clauses refer to specific situations where (usually) laytime is NOT to count.
Other clauses are just to clarify who is responsible in certain situations and how and if this will effect laytime.

Laytime and demurrage continue to be a more or less constant source of disagreement and will most
probably always be so. Both owners and charterers are constantly probing for advantages under laytime
and demurrage clauses (which have been used for a long time), especially when events may provide a
possibility for a possible advantage under these clauses.

The “Necochea Swell clause” is a special clause. At Necochea, if a vessel is unable to enter port due to
swell and/or bad weather, the master may be permitted to tender NOR at/ off the port and laytime to count
in accordance with the charterparty (CP) agreement. This in effect shifts time so as not to count as laytime.

Upon completion of loading if the vessel is unable to sail due to swell and/or bad weather, laytime is to count
from the first high tide until the vessel can actually sail including excepted periods. Any additional port dues,
bunkers, and/or daily charges incurred if the vessel is unable to sail upon completion of loading because
of swell and/or bad weather are to be for the charterer’s account.

In the Ashland Special Clause, if lighterage is required at any designated port, time consumed (including
backloading) shall count as laytime or time on demurrage. In either event, time shall commence six (6) hours
after tendering notice of readiness and anchoring or whenever the lighterage craft is all secure alongside,
whichever first occurs. The anchorage or lighterage area shall not be considered as an additional port or
berth and any running time from such lighterage area shall not be considered as used laytime or time
on demurrage. The charterer shall have the benefit of six (6) hours free time after NOR at all ports even
if laytime has expired. In addition, running time shall never count as used laytime or time on demurrage. Any
additional time consumed as a result of crude oil washing, up to a maximum of eight (8) hours, shall constitute
34
used laytime. Any delays due to weather conditions and their effects at load or discharge ports/areas shall
count as one- half laytime or if on demurrage as one-half time on demurrage.

A WIBON clause allows a master to give NOR “whether in berth or not”. When there is a WIBON clause
inserted in a charterparty, then laytime will commence even though the notice is served from outside the
berth, providing that:

• the vessel is within the port; and

• congestion at the berth is not due to bad weather.

35
6 Charterparty Drafting
Drafting a charter party is not an easy task. Accoring to Lloyds List A recent tribunal decision reinforces the
need for practitioners to draft charterparties clearly to ensure that proper distinction is made between items
that are intended to be interruptions to laytime and items intended to be exceptions, said Clyde & Co London
legal director Simon Jackson.

Mr Jackson said voyage charterparties sometimes contained a promise on the part of charterers that, upon
arrival at the loading or discharging port, the vessel will be able to proceed directly to berth.
This promise usually took the form of the stipulation “reachable on arrival” or “always accessible”.

However, it has not always been clear whether owners can claim damages if charterers break their promise
and how such a breach would impact the laytime and demurrage provisions in the charterparty.

“As to damages, once the vessel has tendered notice of readiness and so become an arrived ship, no question
of damages can arise in relation to the broken promise,” Mr Jackson said.

“Simply, laytime will start running and, if it expires before loading or discharging is completed, owners will
be entitled to demurrage.

“Where laytime starts running, and the charterers are still in breach of an always accessible or reachable on
arrival warranty, the charterers will, however, not be entitled to rely on any exceptions to laytime whilst the
breach persists, even where the exception is traditionally an owners’ risk.”

In London Arbitration 5/124, owners sought to test the limits of these principles.

Mr Jackson said the vessel was chartered on an amended Synacomex form for the carriage of sunflower seed
meal in bulk, from Nikolaev, Ukraine, to Tarragona, Spain.

The charterparty contained the notation “always afloat, always accessible”.

The vessel arrived at Nikolaev on March 6, 2012, and tendered NOR. There was then a delay of 11 days before
berthing. Owners sought damages for detention and demurrage.

“The claim for damages for detention failed, because the vessel had arrived and so the charterers were
entitled to use the laytime that they had paid for with the freight, a straightforward application of The Delian
Spirit [1972],” Mr Jackson said.

“However, the calculation of laytime gave rise to difficulty because laytime was not expressed as a period of
days or hours, but in weather working days, which did not run when the weather prevented working,
Saturdays, Sundays and holidays.”

Owners argued that charterers were not entitled to discount these days because they were an exception to
laytime, to which charterers were not entitled, because they were in breach of the “always accessible”
warranty.

However, Mr Jackson said the tribunal disagreed and found that the difference between such laytime clauses
and exception clauses was that exception clauses stopped time running during periods covered by the clause,
whereas with the laytime clauses, time did not run because it was outside the definition of such laytime.

“In the present case, therefore, time when the weather prevented working, Saturdays, Sundays and holidays,
were all outside the definition of the laytime allowed, such disallowed time being referred to as interruptions
to laytime, rather than exceptions to laytime,” Mr Jackson said.
36
“So where a charterer failed to meet his obligations to procure a berth that was always accessible and
reachable on arrival, time which was outside the agreed definition of laytime, nevertheless, did not count
against the charterers.”

The distinction between “exceptions” and “interruptions” is not always obvious and Mr Jackson said the
tribunal’s decision reinforced the need for practitioners to draft charterparties clearly to ensure that proper
distinction was made between items that were intended to be interruptions to laytime and items intended
to be exceptions.

6.1 Is the drafting of the contact of the actual causes of demurrage

Even if the shipper does its best to plan loading/unloading and has all necessary paperwork, there are other
external factors that could affect deadlines and cause demurrage. Late freight release or custom release of
containers, damaged containers, or overweight containers are some reasons a shipper could be charged a
demurrage fee.

Although, the most common reasons of demurrage are trigged by a shipper’s actions
(http://info.plslogistics.com/blog/the-causes-and-effects-of-demurrage)_:
Delay in payment. If the shipper paid for only part of a shipment, the vessel can refuse to release the freight
until paid in full. Any delay in payment will lead to cargo detention at the port, which in turn causes
demurrage charges.
Paperwork errors. Shippers may not succeed in preparing all initial documents for clearing customs process
– after all, the procedures can be confusing To clear shipments through US Customs, shippers need four
documents: a Commercial Invoice, a Bill of Lading or Airway Bill, a Packing List, and an Arrival Notice.
Although, some specific goods require additional documents. Without these documents, demurrage charges
will occur.

Do you need to be a lawyer to deal with demurrage? Are there any management tips for dealing with
Demurrage?
• Share cargo and shipment delivery instructions with all parties (carrier, vendor, third party provider)
in advance, to plan smooth loading/unloading process and avoid delays.
• Provide a back-up plan for the carrier’s driver in case of port congestion - have alternative routes for
a tight situation and be able to adjust.
• Large shippers could ask for extended free time (large shipper status starts at a volume of 800
containers a year).
• Understand all required documents and perhaps hire an experienced custom agent that will help
eliminate paperwork-related problems.
• Consider the automation of demurrage management by monitoring the containers/cargo as they
move through facilities.
• Advanced planning and streamlining trading processes are the keys for minimizing the risk of
demurrage charges.YTIME AND FREIGHT RATE

The aim of this section is to illustrate the relationship between freight and demurrage.

6.2 Freight

Freight is the consideration paid to the shipowner for performing his part of carriage of goods by sea
under the voyage charterparty. An agreed rate is payable according to the weight or volume of cargo carried
to and delivered at its destination.

The voyage charterparty, in the freight clause records the agreed rate of the freight. The freight can be
alternatively expressed as a lump sum for the cargo carried. Provisions can also made for indicating if the
freight is paid in advance on signing bills of lading, or only on the delivery of the goods at their destination.
Another alternative is for a part of freight to be paid in advance and the balance on delivery of the cargo.
37
Clauses will make provisions for the currency in which the freight is to be paid.

For example under the Gencon clause 4 (for the payment of freight) the freight can either be “pre-paid” or
“paid on delivery”, although it is common practice that freight is paid in advance. When freight is to be
pre-paid on shipment, the clause provides that the freight is deemed earned and non-returnable. Even if
the cargo is subsequently lost in transit, provided that the loss is covered by an exception in the
charterparty, or that the charter is subsequently terminated by frustration. The “when payable” is very
important. Parties should include “Freight to be prepaid within x banking days after signing & releasing bill of
lading/final sailing”. Once paid and earned, the advance freight becomes irrecoverable to the charterers.

If freight is to be paid on delivery, freight only becomes due and payable upon delivery of the cargo at the
destination. In cases where only part of the cargo is delivered, the charterers have a right to decline payment
of freight on cargo lost or not delivered. It is important to note that freight is calculated and paid on the
basis of intake quantity save where freight is to be paid upon delivery. In the latter case, the charterers have
the option of paying the freight on the basis of delivered weight/quantity on condition that such option is
declared before breaking bulk and the weight/quantity can be ascertained at the destination.

A lump sum freight is one which is not directly related to the quantity of cargo actually carried. It is a
definite sum agreed to be paid for the hire of a ship for a specified voyage. This may be the easiest way to
define the freight obligation when the charterer does not know the exact quantity of cargo which will be
loaded or when it is difficult to measure the quantity actually loaded.

Sometimes pro rata freight is payable, that is, a payment proportionate to the part of the voyage
accomplished or to the part of the cargo delivered.

All the major charters make provision for the payment of deadfreight if the agreed quantity of cargo is not
supplied. When the charterers fail to deliver the agreed quantity of cargo to the vessel, the shipowners
will normally be entitled to compensation for their loss of freight. This compensation is called deadfreight
and is calculated by deducting what is saved in costs from the freight that should be paid for that part of
cargo which has not been delivered.

Back freight is when the owners of a ship are entitled to payment as freight for merchandise returned through
the fault of either the consignees or the consignors. Such payment is called back freight.

For the actual clause see: http://www.maritimeknowhow.com/English/Know-How/Charter_

parties/voyage_charter_party/gencon_clause_4-payment_of_freight_clause.html.

6.3 Laytime

The laydays depend in the quantity to be loaded or discharged (Gencon, clause 6). The laytime is calculated
as indicated in the charterparty and that can create disputes. Usual expressions include:

“Loading at the rate of 100 tons metric per day”

“Loading at the rate of 150 metric tons per day and per hatch”

“Cargo to be loaded stowed and trimmed at a rate of 150 metric tons per available hatch”

“Cargo to be discharged at a rate of not less than 100 metric tons per day”

Simplifying the calculating methods for laytime, there are two methods which can be considered.

The following method of calculation is the “main principle”.

38
Laydays = largest quantity in a hold/daily quantity per hatch × number of gangs in the
hatch

In case that the gang only works in the main hatch, then the number of laydays is equal to the quantity in the
main hatch divided by the daily quantity per hatch (www.maritimeknowhow. com).

The following method is called “multiplication system”:

Laydays = quantity of goods/daily quantity x number of hatches

6.3.1 Example

A ship has three holds: I, II, II. Each with a different size, Hold I has 1,500 tons, Hold II 2,000 tons and Hold
III 1,000 tons of cargo. The ship must discharge 500 tons per day and per hold.

When applying the “main hatch principle”, “500 tons per workable hatch per day”, gives:
Laydays = II/500
= 2,000 : 500
= 4 days

When applying the multiplication system, “500 tons per hatch per day”, which gives:
Laydays = (I + II + III) : 500 x 3
= (1,500 + 2,000 + 1,000) : 500 x 3
= 4,500 : 1,500
= 3 days

6.4 Demurrage

According to VOYLAYRULES 93, demurrage means an agreed amount payable to the shipowner in respect
of delay to the vessel beyond the laytime for which the shipowner is not responsible. Demurrage shall not
be subject to laytime exceptions.

A demurrage clause is merely a clause providing for liquidated damages for a certain type of breach. It is
presumably the parties’ estimate of the loss of prospective freight which the shipowner is likely to suffer if
his ship is detained beyond the laytime.

An agreement to pay demurrage is normally treated as preventing the shipowner recovering from the
charterer more than the agreed sum for the wrongful detention of his ship.

In the event the demurrage is not paid in accordance with the charterparty – e.g. Gencon
– the owners shall give the charterers 96 running hours’ written notice to rectify the failure. If the demurrage
is not paid at the expiration of this time limit and if the vessel is in or at the loading port, the owners are
entitled at any time to terminate the charterparty and claim damages for any losses caused thereby.

6.5 Dispatch

Dispatch or “Despatch” shall mean an agreed amount payable by the owner if the vessel completes loading
or discharging before the laytime has expired.

This monetary reward, termed dispatch or dispatch money, is normally payable by the owners to the
charterer.

39
Dispatch will only be payable if provided for in a charterparty clause. Some charterparties stipulate “free
dispatch”, meaning that the owners will not pay any dispatch money if time is saved.

The daily dispatch rate, which is normally quoted in US dollars, is traditionally half the agreed demurrage
rate, the reasoning being that while early completion of cargo may give the owners an opportunity to
complete the voyage early and fix the vessel on another charter, the charterers may also benefit from early
berthing of the next due vessel.

If dispatch is payable for all time saved, the laytime exclusions (for weather stoppages, etc.) are not taken
into account after the completion of cargo. If dispatch is payable only for working time saved, laytime
exclusions must be taken into account.

40
7 Examples
The aim of this section is to introduced student to calculations

The examples can be found at http://www.shipinspection.eu/index.php/chartering-terms/86-t/4969-

timesheets-and-laytime-calculation

7.1 Example 1. "Sundays and Holidays excepted unless used (SHEX u.u.)"
and "Weather working days (WWD)".
A GENCON charterparty, with modifications and rider clauses, provides for:

Cargo: minimum 5000 metric tons (mt) up to full load capacity of the vessel at charterers' option.
Laytime for loading: 1600 mt per WWD SHEX u.u.
Laytime for discharging: 1200 mt per WWD SHEX u.u.
Laytime clause: "Laytime for loading and discharging shall commence at 1 p.m. if Notice of Readiness is given
before noon and at 8 a.m. next working day if notice given during office hours after noon.

Notice at loading port to he given to the shippers named in Box 17. Time actually used before commencement
of laytime shall count. Time lost in waiting for berth to count as loading or discharging time as the case may
be."

Demurrage and despatch clause: "Demurrage to be paid at the rate of USD 1,800 per day/pro rata for all
working time lost. Despatch money to be paid at half the rate of demurrage for all working time saved.
Demurrage/ despatch, if any, to be settled directly between Owners and Charterers."

Statement of facts:

Vessel arrived: 14.00, Thursday 22 November

Vessel berthed: 15.30, 22 November
Notice of Readiness tendered: 14.00, 22 November
Notice of Readiness accepted: 14.00, 22 November
Cargo weight/quantity: 5,500 mt
Loading commenced: 16.00, 22 November
Loading completed: 10.30, 29 November
Laytime allowed for loading: 3d. l0h. 30m. (5500/1600)
Time to count from: 0800, 23 November
Working hours /meal hours of the port: Midnight. to midnight each day except on Sundays, and holidays
unless required.

41
Demurrage: 1d 9h 34m @ $ 1800.00 per day and pro rata = $2512.50

The rain on 28 November occurred after laytime expired and the principle of "Once on demurrage, always
on demurrage" applies.

7.2 Example 2. "Sundays and Holidays excepted (SHEX)" and "Weather

working days (WWD)".
Same as Example 1 with changes to clauses as follows:

Laytime for loading: 1600 mt per WWD SHEX.

Laytime clause: "Laytime for loading and discharging shall commence at 1 p.m. if Notice of Readiness is given
before noon and at 8 a.m. next working day if notice given during office hours after noon Notice at loading
port to be given to the shippers named in Box 17".

Statement of facts:
Vessel arrived: 14.00, Thursday 22 November
Vessel berthed: 15.30, 22 November
Notice of Readiness tendered: 14.00, 22 November
Notice of Readiness accepted: 14.00, 22 November
Cargo weight/quantity: 5,500 mt
Loading commenced: 16.00, 22 November
Loading completed: 10.30, 29 November
Laytime allowed for loading: 3d. l0h. 30m. (5500/1600)
Time to count from: 08.00, 23 November
Working hours/meal hours of the port: Midnight to midnight each day except on Sundays and holidays as
required
Exceptions to laytime (and reasons): 24 November, 08.00 to 10.30-rain 26 November-Public holiday; no work
28 November, 16.30 to 23.15-rain

42
Demurrage: 06h 45m @ $1800.00 per day and pro rata = $506.25

43
8 Summary
This module has been an introduction to laytime and demurrage.

There are two basic types of contract for the carriage of goods by sea: (1) a contract evidenced by a bill
of lading and (2) a charterparty. A ship is carrying goods under a bill of lading and is running under a
charterparty.

Laytime and demurrage comprise one aspect of English maritime law, the law relating to voyage charters.

A voyage charterparty is a charterparty under which the shipowner charters out and the charterer charters
in the whole or part of the ship’s space for the carriage by sea of the intended goods from one port to
another and the charterer pays the agreed amount of freight.

Standard formats have been developed or approved by internationally reputable institutions such as: Baltic
and International Maritime Council (BIMCO); International Association of Independent Tanker Owners
(INTERTANKO); General Council of British Shipping (GCBS); Institute of Chartered Shipbrokers; and Association
of Shipbrokers and Agents USA, etc. Examples are: Gencon, Shellvoy, and ASBATANKVOY.

Amendments in a charterparty can be made as necessary for a specific voyage by inclusions/

replacements/removal of clauses on the basis of agreements between the two parties.

Laytime means the period of time agreed between the parties during which the shipowner will make and
keep the vessel available for loading or discharging without payment additional to the freight. Whereas
demurrage, means an agreed amount payable to the shipowner in respect of delay to the vessel beyond
the laytime for which the shipowner is not responsible. Demurrage shall not be subject to laytime
exceptions. Finally despatch shall mean an agreed amount payable by the owner if the vessel completes
loading or discharging before the laytime has expired.

Important elements in the law and practice of laytime are the notice of readiness, the statement of
facts, and the “arrived ship” notion.

Online Assessment
When you are ready, please go online to complete the online assessment for this module. If you don’t
achieve at least 70%, you may revise the module and attempt the test again to improve your score.

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9 Author Biography

Dr Katerina Konsta

Dr Katerina Konsta (https://gr.linkedin.com/in/katerina-konsta-847107a ) is the CEO of SeaWorks Training &

Consultancy (UK) and Managing Director of STAMKON (Greece).

In parallel with her full time duties, she is as an Examiner for the Institute of Chartered Shipbrokers in London.
She still enjoys being actively involved in the courses delivered by SeaWorks Training & Consultancy (UK) in
collaboration with the University of Athens – Kapodistriako (Greece). She is also with Lloyd’s Maritime
Academy (UK) and the University of Middlesex (UK). Alongside her consulting work, she has collaborated in
other academic posts for shipping subjects with Solent Southampton University (UK), London Metropolitan
University (UK) and Maritime Colleges in Greece.

Katerina has more than 20 years of international experience in maritime and logistics education, designing
and managing undergraduate and postgraduate courses, executive education portfolios, professional
development and online courses which has been delivered around the globe, at the top maritime centres.
Her extensive teaching experience has been gained at various organisations, associations, colleges and
universities, lecturing on undergraduate courses in shipping, maritime business and related subjects. She has
also developed shipping departments and faculties for Colleges and Universities. Her writing experience
includes 30 distance learning books, papers in refereed journals and conferences. She has also served as a
reviewer for Maritime Policy & Management Journal.

Education and training with no on-hands experience means nothing to her, which explains why she was
always undertaking consulting projects, as a shipping and/or logistics consultant. She is the first woman
Course Director at Lloyd’s Maritime Academy and the first woman in Greece serving as the Head of the
Shipping, Transport & Logistics Department at a College in Greece (which collaborated with a British
University offering shipping and logistics undergraduate and postgraduate courses).

She is invited as a speaker or moderator at international conferences and forums. She also mentoring
shipping students at the University of Plymouth.

Katerina holds a degree in Maritime Business and Maritime Law from the University of Plymouth (UK). Prior
to this she studied Business & Finance at North Hertfordshire College (UK). Her postgraduate studies include
International Shipping at the University of Plymouth (UK) and Maritime Studies with International Transport
at the University of Piraeus (Greece). She has obtained her Phd from the University of Plymouth (titled as
Maritime Policy and The Success of Nations: The case of the Greek flagged Ocean Shipping) being supervised
by Professor Michael Roe and Professor Jingjing Xu.

Katerina is a member of the Women’s International Shipping & Trading Association (WISTA), the Hellenic
Association of Maritime Economists (HAME), International Maritime Lecturers’ Association (IMLA), the
Piraeus Association for Maritime Arbitration (PAMA), and the Chios Marine Club. Since 2018 she is a member
of the Diversity and Inclusion Committee of the International WISTA.

45
10 References
• Schofield, J., 2011, Laytime and Demurrage, Informa Publications, Lloyd’s Shipping Law Library.

• Wilson, J.F., 2004, Carriage of Goods by Sea, Pearson Longman.

• www.maritimeknowhow.com.

• www.accesstolaw.com.

• www.admiraltylaw.com.

• www.admiraltylawguide.com.

• www.lawtext.com.

• http://www.steamshipmutual.com

• http://www.charterama.nl

• http://www.lawandsea.net

• http://info.plslogistics.com/blog/the-causes-and-effects-of-demurrage

• Wanke P. 2011. Ship-berth link and demurrage costs: evaluating different allocation policies and
queue priorities via simulation. Pesqui. Oper. vol.31 no.1 Rio de Janeiro Jan

• Allan, A. 2015. Tribunal considers laytime and demurrage issues concerning part cargoes. ReedSmith

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