A charterparty is a legal contract used in the shipping industry to outline the terms and conditions for the hire of a vessel for a specific time (time charter) or to hire a vessel to carry a specific cargo from a port to a port (voyage charter).
It is a crucial document that establishes the rights and responsibilities of the parties involved in chartering of a ship (the shipowner and the charterer (cargo owners)).
There are three main types of charterparties: Time charter, voyage charter and bareboat charter.
In a time charterparty, the charterer hires the vessel for a specific period, typically for several months or years. During this time, the charterer has more control over the vessel and may use it to transport goods to various locations as they see fit.
The shipowner provides the vessel and crew, while the charterer pays a hiring rate for the duration of the charter. The charterer is responsible for covering various operational costs, such as fuel, port expenses, and maintenance.
In a voyage charterparty, the charterer hires the vessel for a specific voyage or a one-way trip. This type of charter is often used for one-off shipments or when the charterer has specific cargo to transport.
The shipowner typically provides the vessel, crew, and covers operational expenses, and the charterer pays freight for the transport of their cargo.
In a bareboat charterparty, the charterer hires the vessel for a period of time and has full control of the vessel. Apart from the capital cost of building the vessel, which is the owner’s responsibility, all other costs including fuel, crew, port charges, maintenance and insurance, are paid by the charterer.
Examples of organizations working with maintaining charterparty and definitions in main terms clauses or rider clauses are Intertanko and BIMCO.
The terms in a charterparty agreement can vary depending on the type of charter and the trades for which they are
Some of the main terms typically included in a charterparty are:
Preamble is the general outline of the charterparty and includes the place where the contract is made, the date of the charterparty, the names and addresses of the contracting parties, and the name and description of the ship.
These are the standard terms and conditions that are printed in the charterparty and differ between varying types of charterparty. Much of the negotiation between shipowners and charterers is concentrated on which words to delete from the printed clauses, to be replaced by rider clauses.
Ridder clauses are additional clauses that have been specifically agreed upon by the shipowner and the charterer. If there is any conflict with the printed words in the main terms, the rider clauses will always prevail. Often rider clauses are defined by specific charterers, like Exxon, Shell, ThyssenKrupp, Tata etc.
The most important clauses in a timecharter party may vary depending on the specific agreement and the parties involved. However, some of the most common and critical clauses in a timecharter party include:
This clause outlines the technical specifications of the vessel, including its size, capacity, and condition.
The speed and consumption is of special importance to the charterparty as it has a huge impact on the earning capacity of the vessel.
This clause gives the dates that the vessel is to be ready to commence the timecharter.
These clauses give the port and/or area and the terms and conditions for the vessel's delivery to the charterer and redelivery to the owner.
This clause specifies the duration of the charter party agreement, including the start and end dates.
This clause specifies the amount of money to be paid in hire by the charterer to the shipowner for the use of the vessel.
The notice of readiness clause specifies the requirements for the shipowner to give notice of readiness to the charterer, indicating that the vessel is ready to commence the timecharter.
This clause specifies how much bunkers and lube oil the vessel should have onboard at delivery and redelivery, and how to settle the associated costs.
This clause specifies the geographical limits that the charter can order the vessel to while it is on time charter.
Below you will find the key clauses that are typically included in any voyage charterparty, but the specific terms will vary depending on the type of charter and the trades for which they are used.
This specifies the amount of money that the charterer will pay to the shipowner for the use of the vessel. The freight rate might be in USD/mt, EUR/mt inWorldScale (tankers) or in lump sums.
This specifies when and how the charterer will pay the freight to the shipowner.
Laytime is the amount of time that the charterer has to load and unload the cargo.
Demurrage:
Demurrage is the amount of money that the charterer will pay to the shipowner if the cargo is not loaded or unloaded within the laytime.
This is a notice given by the shipowner to the charterer indicating that the vessel is ready to load or unload the cargo.
This specifies the circumstances under which the charterparty can be terminated by either party.
When international politics are implemented in shipping, new clauses will be made to distribute the risk between the parties. Examples of such are pollution likeSOX, NOX and Carbon emissions, and related new legislation like ETS, and CII and FuelIEU Maritime.
A bareboat charter party will contain much the same clauses as a time charterparty. Both contracts involve the owner renting out the vessel for a period of time, but in a bareboat charter party the charterer will also take over the crewing and the maintenance of the vessels, so there are additional clauses that describe their obligations with regard to this responsibility.
This clause specifies which party is responsible for the insurance of the vessel.
Clauses detailing the right of the owner to inspect the vessel during the charter.
Clauses related to the financing of the vessel.
