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The shipping industry involves an activity called chartering. This activity in its simplest form involves a rental agreement where a charterer contracts to rent a ship from the ship owner. Depending on the type of charter and the type of ship involved in the rental agreement, the standard contract is called the charter party which requires specific details about the rate, duration and the terms which are decided by the ship owner and the charterer. The time charter refers to renting a ship for a fixed period of time. The general trend of chartering involves renting a ship for a specific number of voyages; however a time charter is hired for a specified number of days or period (Wijnolst and Waals 2011).
The activity of chartering can be of different types which involve different types of charters. Thus, there are five popular types of charter namely the voyage charter, time charter, contract of Affreightment, trip time charter and bareboat charter.
As stated above, a time charter is referred to renting a vessel for a specific time. There are many features of a time charter, some of which are stated as follows:-
There are two very popular types of time charters namely the Baltime and the New York Product Exchange (NYPE). The first one is considered very favorable for the ship owners while the later one favors charterers.
Under the time charter contract, the ship-owner bears the risk of delays unless the time charter contract has an exemption clause, which can exempt the ship owner if he established that the delay was due to an event mentioned in the exemption clause (Jansson 2012).
Under the time charter clause, the charterer is obliged to bear the risk of delay, which requires the charterer to pay the hire price for all the days the ship is delayed unless the contract has any express term decided on the said matter. Thus, in most time charter contracts a hire-off clause is incorporated which clearly specifies when a charterer is exempted from paying the prices agreed for hiring the vessel (Kamwetu 2013). There are two types of hire-off clauses generally used in time charter contracts namely the “net loss of time clause” and “period clause”. The New York Produce Exchange (NYPE) and the Baltime form consist of the “net loss of time clause”. This clause makes the charterer deduct from the hire he is entitled to pay only if a list of qualifies off-hire events have caused the charterer to suffer some real loss of time in the entire duration of the voyage. Thus, there is no off-hire clause, unless some time is genuinely loss. Thus, the charterer is only permitted to declare that a ship is off-hire when services offered by the vessel are delayed or interrupted. For example, if ship is loading cargos despite having engine failure, there is no loss of time (Goulielmos and Psifia 2016).
The New York Product Exchange (NYPE) 93 is a charter form which is widely used for dry cargo charter under the time charter contracts. The NYPE 93 was issued by the Association of Ship Brokers and Agents (U.S.A) on 6 November 1913. Since its formation, the NYPE 93 form has been amended several times with last amendments on September 1993. The NYPE 93 is highly used in the commercial shipping industry and is recommended by the Baltic and International Maritime Council (BIMCO) and The Federation of National Associations of Ship Brokers and Agents (FONASBA) (Grammenos and Papapostolou 2012). The NYPE 93 form is in a form of a contract between the vessel owner and the charterer defining the details of the contract which includes party names, description of the ship, duration and many other terms which are usually incorporated in a shipping cartel contract. One of the important terms of a time charter contract is the Off-Hire clause which is most of the times included in the time charter contract (Baughen 2012).
Thus, the off hire clause in the NYPE 93 form protects and favors the charterer exempting him from paying hire charges for any time that is lost due a list of events which are not under the control or with no fault on part of the charterer.
Events leading to off-hire and remedies available to a Time Charter
The off-hire clause in the NYPE 93 form details out a list of many events that lead to off hire including events that create loss of time due to deficiency, strike or shortage officers, crew or the port, damages arising out of breakdown of fire, machinery or engine. Loss of time also includes time lost due to arrest or detention of the ship excluding arrest or detention which is a result of any fault on part of the charterer or his employees and servants or detention by accidents of vessel or cargo unless they result from an inherent defect in the vessel, its quality and durability, dry-docking or painting bottoms of the vessel which disturbs the entire working of the vessel or for any similar reasons which prohibits the vessel to function its duties and work efficiently. In case of any of occurrence of any of the above mentioned events, the charter is exempted from paying hire rates from the occurrence of any loss of time (Kirkaldy 2012).
Thus, the time charter contracts are a type of a rental contract which a vessel owner and a charterer enter into for a specific period of time. The responsibilities of the vessel owner and the charterer depend upon the terms of the contract along with the type of charter contract and the type of ship. Thus, under the time charter contracts, an exemption clause called “off hire” is usually incorporated to protect the interest of the charterer. This off hire clause exempts a charterer from paying hire costs to the ship owner from the moment time is lost during a voyage without ant fault on part of the charterer, his employees and servants. Thus, the off hire clause in the NYPE 93 is highly recommended to serve the best interest of the charterer.
Baughen, S., 2012. Shipping law. Routledge.
Branch, A.E., 2012. Economics of shipping practice and management. Springer Science & Business Media.
Chenya, L., 2011. The Analysis on Off-Hire Clause of the Time Charter.Journal of the Postgraduate of Zhongnan University of Economics and Law,5, p.028.
Coghlin, T., Baker, A., Kenny, J., Kimball, J. and Belknap, T., 2014. Time charters. CRC Press.
Goulielmos, A.M. and Psifia, M., 2016. Shipping finance: time to follow a new track?. Maritime Policy & Management, 33(3), pp.301-320.
Grammenos, C.T. and Papapostolou, N.C., 2012. US shipping initial public offerings: Do prospectus and market information matter?. Transportation Research Part E: Logistics and Transportation Review, 48(1), pp.276-295.
Hoff, A., Andersson, H., Christiansen, M., Hasle, G. and Løkketangen, A., 2010. Industrial aspects and literature survey: Fleet composition and routing.Computers & Operations Research, 37(12), pp.2041-2061.
Jansson, J., 2012. Liner shipping economics. Springer Science & Business Media.
Kamwetu, M., 2013. The Off Hire Clause; a case of Any Other Cause?.
Kirkaldy, A.W., 2012. British Shipping, Its History, Organisation and Importance. BoD–Books on Demand.
Lindstad, H., Asbjørnslett, B.E. and Strømman, A.H., 2011. Reductions in greenhouse gas emissions and cost by shipping at lower speeds. Energy Policy, 39(6), pp.3456-3464.
Morgan, M., 2013. Have recent off-hire, war risk and piracy clauses improved the position of time charterers by distributing the risk of delay caused by pirate attacks on their time chartered vessels more equitably as between owner and time charterer? (Doctoral dissertation, University of Cape Town).
Weixia, G. and Lindenbaum, J.A., 2016. NYPE 93 Arbitration Clause: Where Ends the Open-End, The. J. Mar. L. & Com., 37, p.245.
Wijnolst, N. and Waals, F., 2011. Shipping industry structure. Delft University Press.
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