Time Chartering

Time Chartering

A time charter is basically a contract for the hire of a specifically-named vessel, for a specified period of time. The charterers agree to hire a specifically-named ship from the ship owner, of specific technical characteristics, for an pre-agreed period of time, for the charterer’s purposes, subject to certain pre-agreed restrictions. The hire-period could be the duration of one voyage (i.e. a trip charter), or, anything upto several years (i.e. a period charter).

The ship owner is responsible for the vessel’s “running expenses”, such a manning, repairs, maintenance, stores, master’s crew and wages, hull and machinery insurance-cover. The ship owner operates the ship technically, but not commercially. The owner bears no cargo-handling expense and do not appoint stevedores).

The charterers are responsible for the commercial employment of the ship, bunker fuel purchase and for insurance cover, port and canal dues along with the pilotage, towage, linesman, and, all loading/stowing/trimming/discharging and their costs. They direct the ships “commercial operations”, but not her daily running and operations. The charterers usually engage agents/stevedores.

A “directions and logs” clause requires the charterers to enlighten the Master with all instructions and sailing-directives. The Master and Chief Engineer are required to keep full and correct logs, as accessible to the charterers or their agents, so that these entities could monitor the vessel’s efficiency. “Stevedoring damage notification forms”, and, log-abstracts, will normally be required to be sent to the charterers. Additional agreements may be drawn between the parties, for an “extra payment” to be made by the charterers every time when the ship’s crew, sweep and/or hose-down the holds of a dry-cargo ship.

Time-charterers could be permitted to fly their own “house-flag” and paint their own colours, on the funnel and/or sides.  

A time charter is normally a long term contract where vessels are employed for a fixed period of time. The commercial risk of finding cargo and earning revenue transfers from the ship owner to the charterer in a time charter. The charterer appoints port agents, purchases bunkers, etc. The ship owner is responsible for crewing, maintenance, insurance etc.
The ship owner is rewarded for contract performance by the payment of regular amounts of hire money, normally paid in advance as negotiated in the contract. This could be either monthly or bi-monthly. However non-performance of the vessel could lead to her being put ‘off hire’. When a vessel is off hire, hire money will no longer be paid or might be paid at a discounted rate. A vessel is considered to be ‘off hire’ when in dry dock or for non-performance. An example of non-performance in a time contract would be, when the vessel’s engine breaks down at sea or when cargo gear breaks down for a geared vessel when in port.
When vessels are employed on a time charter for a single trip (from a load port to a discharge port), this type of charter party is called a trip charter. A trip charter is a short term employment contract and is similar to a voyage charter but payment is ‘hire money’ and not freight.
In some time chartering contracts the charterer may negotiate with the owner to change a vessel’s flag and/or name, so that the vessel is identifiable with a particular route. This is normally the case when a vessel is employed by a liner company on a long term basis. Sometimes vessels are time chartered as replacement vessel(s) by liner shipping. This might happen when a vessel normally employed on a liner route is no longer available, because the said vessel is laid up for repairs or is in dry dock.
Vessels could also be time chartered to ply on a liner route when there is an increase in cargo traffic on that route.
Division of time charter responsibilities

In a time charter the charterer retains the responsibility of stevedoring, cargo handling and insurance of cargo, unless negotiated otherwise.

• The charterer agrees to hire from the owners a ship which is generally named of their required specifications for a period of time stated subject to agreed exclusions.
• The period of Time Charter may be one voyage (Trip charter) or upto several years (Period charter).
• The charterers may use the vessel for any voyage that he wants within the trading area agreed in C/P.
• The charterer pays for the “commercial expenses” of the ship i.e. bunkers, cargo loading & discharging, port dues, canal dues and pilotage.
• The owner pays for the “liming expenses” of the ship i.e. manning, repairs, maintenance, stores, master/crew wages, hull & machinery. insurance, provisions etc.
• The time charterers usually use their own stationery, fly their own flag and paint their own colours on the ship.
• C/P contains a description of the ship including its speed and fuel consumption. In case of non-performance with these specifications, the owner has to forfeit a part of his hire charges.
• In case the ship is unable to maintain the warranted speed or bunker consumption as per C/P as a result of heavy weather or any other cause, it should be clearly substantiated by entries in the log book.
• OFF HIRE CLAUSE:

1. This gives the circumstances in which the payment of hire stops during time lost to the charterer. Normally this comes into effect after the vessel has been unavailable for a stated period of time, e.g. 24 Hrs & 48 Hrs.
2. Examples of Off Hire: machinery breakdown, crew strikes, drydocking, or other reasons beyond owners control.

• A Dry Deck clause makes the ship available to the owner without cargo after a stated period of notice. During the dry docking the ship is off hire.
• Deviation Clause: If deviating for owners purpose, e.g. landing sick seamen, repairs, dry docking etc. The vessel is off hire from the moment of the deviation until she is ready to resume service in a position as favorable to the charterer as before. A deduction from hire is calculated on the basis of fuel used including FO and DO at the port deviated to. But if the deviations is for the charterer’s purposes e.g. weather conditions etc., the vessel will remain on hire.
• Charterers are expected to redeliver the vessel in the same good order as when delivered to the charterer, fair, wear & tear expected. In case this is not so then the charterer is liable for the cost of its repairs. A charterer can be given the option of “redelivery dirty” in which case a compensation will be paid to the owners.
• An on hire survey and a redeliver survey are held before hire and before redelivery respectively.
• The master is usually required to sign the bill of lading as presented to him by the charterer or the charter party may give the charterer the right to sign them on his behalf.
• Stevedore damaged clause also called Grab damaged clause. This clause describes the methods of survey to be held in case of damage caused to the vessel by the Stevedores and how payment for repairs is to be made.