A Charter Party or Charter is a written, or partly written and partly printed contract between a merchant and a ship owner by which a ship is lent or hired for conveyance of the goods on a specified voyage, or for a specific period[1].
It should be distinguished from a contract of affreightment in which ship owner agrees to carry goods for the charterer in exchange for freight. A Charter Party is usually used to rent an entire ship while a contract of affreightment organises the carriage of the goods, taking only a part of the ship and is represented by a bill of lading.
Charter Parties are generally categorized into three main groups:
- Voyage,
- Time, and
- Demise or bare boat.
In Voyage Charter, the ship is hired for a single voyage while remaining under the control of the owner.
In Time Charter, the ship is hired for a specific amount of time. The ship owner controls the ship under the charterer’s orders.
In Demise or Bare Boat Charter, the charterer takes over the ship completely, including crewing, navigation and maintenance.
Sometimes, there is a combination of voyage and time charters, in which times and routes are stipulated simultaneously.
Terms of Charters Parties depends on the negotiations between the parties involved, or national laws on admiralty. For instance, the Vietnamese Admiralty Law regulates terms that must be stated, such as name, flag, weight, engine capacity, gross registered tonnage, speed and fuel consumption, etc.
Besides, many aspects of a Charter Party which involve the parties should be reviewed, such as:
- The relative advantages and disadvantages of Time, Voyage and Demise Charter so as to decide which one fits your need and ability;
- Time and place of delivery and redelivery;
- The ship’s characteristics and warranty of its seaworthiness;
- Deviation, especially for Voyage Charter. Without a deviation clause, it is considered as a breach of the Charter if the ship deviates from its pre-arranged route, which usually results in loss of insurance coverage;
- Liability of the ship owner and Charter for any damage which may occur to the goods;
- Payment;
- Type of bill of lading to be issued and by whom – ship owner or charterer;
- The effect of the incorporation of the Charter Party’s terms into bill of lading. It is important to note that a bill of landing issued by the ship owner to the chartered is not considered to be a contract as a normal bill of landing. Instead, it performs as a receipt for the goods shipped and as a potential document of title which may, provided it is made out in the appropriate form, be endorsed to a third party. Therefore, the terms of Charter Party prevail over the bill of lading.
- Provisions for general average, or so-called Jason clause;
- Insurance; and
- Etc.
However, the negotiated terms of Charter Party could be limited when encountering ship collision, personal injuries, disaster, and limitation of carrier’s liability. For instance, a ship deviating from its intended route to carry injured crewmen to the nearest medical aid is not regarded as a breach of Charter.
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[1] Chisholm, Hugh, ed. (1911). “Charter-party”. Encyclopædia Britannica. 5 (11th ed.). Cambridge University Press. p. 953.
