Disputes And Obligations Under Time Charter Party In The Shipping Industry

Since the shipping industry operates in an economic environment that is characterized by a volatile, unpredictable and a highly cyclical form, there are many disputes that arise between the parties involved. This market is characterized by these forms due to its high-risk involvements and the kind of issues that are undertaken under the same trade (Goulielmos and Plomaritou, 2016). The time charterers too may find some disputes between them and the owners of the ships that they do business with. Most of these disputes under this charter are however related to the risks related to technologies, economics, social, and political issues among others.

1.Identify and describe the main areas of dispute(s) that may arise between shipowners and charterers under above charterparty.

2.Explain the obligations of the charterer under the above charterparty and discuss the consequences if these obligations are not fulfilled.

Identifying and Describing Main Areas of Disputes Between Shipowners and Charterers

1. Identify and describe the main areas of dispute(s) that may arise between shipowners and charterers under above charterparty.

Since the shipping industry operates in an economic environment that is characterized by a volatile, unpredictable and a highly cyclical form, there are many disputes that arise between the parties involved. This market is characterized by these forms due to its high-risk involvements and the kind of issues that are undertaken under the same trade (Goulielmos and Plomaritou, 2016). The time charterers too may find some disputes between them and the owners of the ships that they do business with. Most of these disputes under this charter are however related to the risks related to technologies, economics, social, and political issues among others.

These are the issues that directly have an impact on the level of freights been undertaken and the consequential contracts and the relationship between the same time charters and the ship owners (Panayides, 2017). Though there have been many setups made to regulate the same under a specific strategy involving the rigorous monitoring of the contracts and the guides to the business, some decisions are never successful with the time chatterers more so when it comes to issues of the time chartering policies, the commercial decisions needed under the same charter, and the marketing management that is undertaken to take place under the same charter.

The essence of these risks is the basic foundation in which some recognizable attributes of differences are realized and then disputes arise from the two parties. One of the areas that may bring along disputes between the time charterers and the ship owners is the duration and the hiring terms of operation (Stopford, 2009). This mostly occurs when the owners or the charterers do not uphold the terms set aside for the hiring time and the delivery time without forgetting the period that is set as the limit of hiring. The second area is the disposal delivery more so when the two parties or one of the parties does not place the vessel for the other to access (Martin and Anthony, 2004). The owners should pace the vessel at the disposal of the charters and vice versa.

On-Off hire survey too has a direct impact and may bring disputes. This may happen when the parties do not have their surveyors at their disposal to perform their delivery work. In areas of cargo exclusions and dangerous cargo, there is maybe dispute between the charterers and the owners of the ship due to the lawful aspect that is attached to the requirements and recommendations of competency and registry measures (ICS 2009/2010). If one party does not uphold the same descriptions, this may bring to a bitter dispute. Areas of trading limits too may bring disputes in cases where the vessel is not employed in lawful trade and more so when the charterers do not direct some of these issues. The insurance areas are other issues that may bring a dispute in this charter.

Obligations of the Charterer and Consequences of Non-Fulfillment

This majorly occurs when the owners do not provide the insurance of the vessel and other insurance provisions. When the Charterers do not provide the necessary bunkers as agreed it may also be an issue that if not handled with the owners at the right time may end up being a dispute. The performance voyages are also another area that may bring about the disputes. When the voyages are not performed and dispatched and the customary assistance rendered under the specific directions and orders as per the agency and the employment acts, there might be a dispute (FONASBA, n. d). When the charterers have a reasonable clause that they might not be satisfied with, they might bring out some complaints and necessary disputes that might lead to investigation and appointments. The rate of hiring, notices and the redeliver areas may also have aspects of disputes.

The charterers under this charter should pay for the vessels under the given rates and this should be made after the commencing of delivery and if this does not happen, some disputes may arise on the redelivery terms made by the ship owners. When the dates are also extended or delayed, the parties may be finding some disputes on the contract. When there are no spaces available on the delivery dates and there are no accommodations for the charterers to deliver after the duration of operation, this brings a lot of disputes since time is wasted and some indemnified issues. The financial terms of crew overtime and other lading bills may also end up bringing some disputes that might bring up inconsistency disputes and other consequences that the parties may find hard to solve.

2. Explain the obligations of the charterer under the above charter party and discuss the consequences if these obligations are not fulfilled. 

OBLIGATIONS OF THE CHARTERER

A charterparty is a legal written contract whereby a ship owner or a vessel owner agrees to place a part of the vessel or all of it to the disposal of a charterer for purposes of carrying his goods or cargo from one port to another by sea (Zhang, 2003). The charter party is a very important document as it lays out important shipping matters and terms under which the various goods of the charterer are to be carried under as well as the different obligations of the contracting parties. As a result, the charter party tends to be an internationally recognized and legally binding document (Wilson, 2004). In matters regarding shipping, the charter party is very significant as it allocates the different duties, rights, obligations, profits, costs and earnings between the various contracting parties, in most cases the ship owner and the charterer.

In addition to this, the interpretation and understanding of the above-mentioned shipping matters and charter party terms is considered very fundamental in the practice of the shipping chartering practice. This is because there are a number of significant aspects that arise from the different shipping charter parties. Building on the universal English common law upon which most chartering process and practices are based on, liabilities and expenses are fairly distributed between ship owners and charterers. Specifically, the obligations of these parties mainly revolve around the vessel description, seaworthiness, avoidance of deviations that are not justifiable, discharging and loading of operations, arrival of the vessel at the port and cargo delivery among other responsibilities (Plomaritou, 2014).

As a matter of fact, the obligations of both the ship owners and the charterers in most representative charter parties tend to be viewed and set from a commercial standpoint. In addition, it is important to note that charter parties tend to fall into different categories based on the cargoes being caries or the types of charters involved. Given the fact that there are two main charter parties which are the voyage and the time charter parties, it is evidently clear that the two are different based on the functions that they serve (Plomaritou, 2014). Under the time charter party, both the ship owner and the charter have separate obligations. Under this charter party, the charterer is given the right by the ship owner to use a ship for a specified period of time or trip.

In most dry bulk markets, the commonly used time charter party is the NYPE ‘93 charter party. Under this document, a charterer has the freedom and right to use the vessel for whatever purpose that he wishes within the time limits of the contract. As a result, the charterer has the ability to control the commercial activities of the ship. In addition, based on the terms of the contract, he also has the obligation to explain the consumption of fuel by the vessel, its speed and capacity. Since the success of the contract wholly depends on the qualities and terms of the document, it is imperative to ensure that its terms are well written in clear and simple words to avoid ambiguity.

In a time charter party, the charterer undertakes the employment of a ship on commercial purposes but the ownership of the vessel remains with the operational management who in this case is the ship owner. As a result, the contract lays out different obligations for both the ship owner and the charterer.

The time charter has a flat period which tends to be the specified fixed time upon which a vessel is chartered. The charterer has the right and freedom to prolong the stated charter period as most of these have an additional of 15 days (Plomaritou, 2014). However, it is important to note that the charterer has no right to extend the flat period due to off-hire periods especially those that occur during the charter unless it is stated on the contract. In such a case, therefore, a clause stating the latest time by which the charterer must tell the ship owner that he intends on extending the period should be inserted in the contract. The hire of the additional period should also be stated in the charter party.

Under this clause, the charterer also has the obligation to trade the ship only among ports that are safe within the agreed trading and time limits. Under the concept of a ‘safe port’ in the time charter like any other contract, the charterer is entitled with the responsibility to ensure that the vessel is traded in ports that cannot result to liabilities such as pollution, cargo damage, personal injury or wreck removal among other possible liabilities (Wang et al., 2013). Another obligation of the charterer under the time charter is that of payment of hire to the vessel owner either in advance or on a specified due date (Plomaritou, 2015). The payment of the ship in most time charter should be made in advance either on a monthly or semi-monthly basis. In whatever specification, the payment should not be made later than the specified due date. If so happens, the charterer is considered to be in default of the contract (Ad?sc?li?ei, 2013).

In case the charterer redelivers the vessel before the stated period, the owner should accept it back despite the fact that this is viewed as a breach of contract by the charterer. As a result, if the ship owner does not get employment of the vessel in such a case, the charterer must compensate him (Plomaritou, 2014). The charterer has the obligation to take into consideration all aspects that may affect the redelivery of the vessel when making the last voyage as the ship should be returned in accordance with the contract. If the charterer returns the ship in a later date than specified in the contract or have not notified the ship owner of his intentions to extend the period, he is also entitled to pay additional damages to the ship owner. From the above, it is clear that the charterer has the obligation to estimate the charter period in good faith.

A breach of this obligation means that the charterer has the responsibility to cover all damages that occur to the vessel or that result from the vessel being in an unsafe port. What this indicates is that the hirer must indemnify the ship owner of all liabilities and consequences of failure to comply with the concept of safe ports as stated on the charter thereof (Plomaritou and Nikolaidis, 2016). In such cases whereby the charterer breaches the payment terms, the ship-owner has the freedom to ask for damages or terminate the charter whereby he has the right to withdraw the ship from services.

References

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Evi Plomaritou 2014, ‘A Review of Shopowner’s & Charterer’s Obligations in Various Types of Charter’, Journal of Shipping and Ocean Engineering 4. Accessed 20 Dec 2018.

FONASBA n. d., ‘Time Charter Interpretation Code 2000’, The Federation of National Association of Ship Brokers and Agents. Accessed 22 Dec 2018. https://www.fonasba.com/wp-content/uploads/2012/02/TCIC-2000.pdf

Goulielmos, A.M. and Plomaritou, E., 2016. The Shipping Marketing Strategies within the Framework of Complexity Theory. VOLUME III, (1), p.12.

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