What is Chartering?
In general, you know how cargo moves via sea with the support of the carrier. If the shipper has cargo to fill the entire vessel it’s not ideal for the shipper to hand over goods to the intermediary parties for shipping.
Further, a party may wish to become an NVOCC yet, unable to buy a vessel. Or even there could be carriers who wish to hire a vessel from another party instead of investing in procuring a vessel.
In such situations, the best option for a shipper is to hire an entire vessel to carry cargo from a shipowner. So, the party who requires a vessel hires a vessel from a vessel owner. This process calls vessel chartering, the Charter Party Contract, or Charter party agreement.
What is the Charter Party?
For vessel chartering, there should be an agreement between the parties to charter the vessel. This calls as the charter party or the charter party agreement. This is a maritime contract on vessel leasing.
What are the Types of Charter Parties?
There are three types of vessel chartering as below.
- Bare Boat Charter Party| Demise Charter Party
- Time Charter Party
- Voyage Charter Party
◼️ The Charter Party in Detail
▪️ Voyage Charter Party
As the name reflects, the voyage charter party is an agreement to charter a vessel for a specific voyage. Here carrier agrees to carry, a specified quantity of cargo from one place to another.
The parties can agree on the loading and discharging ports too. During this agreement, the vessel owner should provide the vessel crew, and overlook the operational matters, and navigational matters.
The charterer only pays the agreed freight rate for the voyage. Here parties agree on a time duration for cargo loading and discharging which can define as the Lay Time.
If the charterer enjoys more time for loading and discharging than agreed, the ship owner can charge on that which is the demurrage charge.
Under the contract, the charterer has minimum control over the vessel.
▪️ Time Charter Party
The hiring of a vessel for an agreed time period is the time charter party. For each hire, the charterer has to arrange the payments to the shipowner.
This payment is for the time period from the date of vessel delivery to the date of vessel redelivery. Here, the charterer bears all the time losses as the vessel is under the charterer’s disposal.
There can be time periods where vessel operation has to suspend for repairs. The charterer does not have to pay the shipowner for such time periods.
Work suspended time periods due to repairs calls as off-hire time. The charterer should arrange the hire in agreed time intervals during the time charter. Yet, the ship crew hires by the shipowner.
▪️ Bare Boat or Demise Charter Party
Here, the ship is leased to the charterer who enjoys total control of the vessel for an agreed period. There is no involvement of the shipowner during the time period.
The charterer is responsible for including but not limited to hiring the ship crew, ship equipment, and navigational and operational matters too.
This is the only charter party contract that allows the charterer to act as the owner of the ship. During the demise charter, the party who charters the vessel can even paint the ship as per the charter’s preference. Normally a demise contract is a long-term contract.
What is the Difference Between the Time and Demise Charter Party?
Both charter parties are for an agreed time period. But, in the bareboat, the charterer act as the owner of the ship, and the whole control of the ship lies with the charters during the agreed time period.
In time charter party it is not the same as that. The charterer has limited rights over the vessel and the ship crew also acts as the assistants of the ship owner.
What is the Dispatch?
Dispatch is the payment from the ship owner to the charterer. Normally, dispatch pays if the charterer takes time, less than the agreed time for loading and discharging of cargo.
In general, dispatch is half of the demurrage charge.
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