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CHAPTER TWO CHARTERING PROCEDURE AND PRACTICE. SECTION 1. CHARTERING PROCEDURE SECTION 2. CUSTOMARY ABBREVIATIONS SECTION 3 CHARTERING PRACTICE. SECTION 1 CHARTERING PROCEDURE. 1. Inquiry or quote 2. Offer 3 Counter offer 4 Firm offer 5 Subject to 6 Acceptance and Fixture

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chapter two chartering procedure and practice
CHAPTER TWOCHARTERING PROCEDURE AND PRACTICE

SECTION 1.

CHARTERING PROCEDURE

SECTION 2.

CUSTOMARY ABBREVIATIONS

SECTION 3

CHARTERING PRACTICE

section 1 chartering procedure
SECTION 1 CHARTERING PROCEDURE

1. Inquiry or quote

2. Offer

3Counter offer

4 Firm offer

5 Subject to

6 Acceptance and Fixture

7 The period of following-up

1 inquiry or quote
1. Inquiry or quote

1.1 Initial order

  • It is usual to consider the initial order to come from the charterer since the movement of cargo is the core element of the shipping industry. The following is an example the initial order from the charterer:
  • “Please find a ship of about seven thousand tons which we could charter for 12 months to take consignment of wheat from ports of North American to various ports along the China coast. The question of speed is important as the ship we need must be able to make a fast turn round. Please advise us if you can get a suitable ship and let us know the terms”.
1 2 meaning of quote
1.2 Meaning of quote
  • Quote is the common denomination for every request for transportation of a specific cargo from one port to another.
  • Quote is made by broker when he received the order from the charterer.
legal sence
Legal sence
  • From legal point of view, a quote is not binding on the party making it.
  • According to the Contract Law of the People’s Republic of China, a quote is not an offer, it is only an invitation for offer. An invitation for offer is a proposal for requesting other parties to make offers to the principal.
1 3 contents of the quote
1.3 Contents of the quote

(1) Quote made by charterers under voyage charters

  • The charterer’s name and domicile.
  • Cargo quantity and description of the commodity.
  • Loading and discharging ports.
  • Laydays and canceling day.
  • Loading and discharging rates and terms.
  • Any restrictions or preferences regarding type or size of ship.
  • Charter party form on which the charterer wishes to base the terms and conditions.
  • Commissions to be paid by the owner.
2 quote made by owners under voyage charters
(2) Quote made by owners under voyage charters
  • The owners’ name and domicile.
  • Description of the vessel
  • Loading and discharging ports.
  • Laydays and canceling day.
  • Loading and discharging rates and terms.
  • Freight rate and payment of freight.
  • Charter party form on which the owners wish to base the terms and conditions.
  • Commissions to be paid by the owner.
3 quote made by charterers under time charters
(3) Quote made by charterers under time charters
  • The charterer’s name and domicile.
  • The tonnage and type of the ship.
  • The duration of chartering.
  • The place of delivery/redelivery.
  • The date of delivery and canceling
  • Hire rate and payment of hire.
  • Charter party form on which the charterer wishes to base the terms and conditions.
  • Commissions to be paid by the owner.
4 quote made by owners under time charters
(4) Quote made by owners under time charters
  • The owner’s name and domicile.
  • The tonnage, name, nationality and other particulars of the ship.
  • The duration of chartering.
  • The place of delivery/redelivery.
  • The date of delivery and canceling
  • Hire rate and payment of hire.
  • Charter party form on which the owner wishes to base the terms and conditions.
  • Commissions to be paid by the owner.
5 example of a quote
(5) Example of a quote
  • XXX GRAIN CORPORATION
  • 30000 TS 10 PC MOLOO
  • 1/2 SB 1/2 SP USGULF
  • 1/2 SB 1/2 SP CHINA
  • 8 WWDAYS SHEXEIU
  • LAYCAN 30 SEPT/10 OCT
  • USUAL TERMS BASIS NORGRAIN CP
  • WITH 1 PC ADDRESS COMMISSION
  • BEST OFFER INVIDED
2 offer
2. Offer

2.1 Meaning

  • An offer is a proposal hoping to enter into a charter party with other parties.
  • When shipowner is informed that a charterer needs tonnage of a type that the shipowner may provide he makes a calculation based on the actual vessel. The shipowner will need necessary information concerning costs for the operation of the vessel, e.g., costs for the handling of cargo in ports, port charges and dues associated with the ship’s call, costs for canal passages, notes about bunker prices, etc. If the calculation seems reasonable the shipowner may make an offer.
2 2 detail of offer
2.2 Detail of Offer
  • The ship’s name and particulars.
  • Cargo quantity and description of the commodity.
  • Loading and discharging ports and berths.
  • Laydays/canceling day.
  • Loading and discharging rates and terms.
  • Demurrage and dispatch rates.
  • Freight amount and conditions for payment of freight.
  • Charter party form.
  • Commissions.
2 3 details of the vessel
2.3 Details of the vessel
  • Vessel’s name
  • Year built
  • Flag
  • Deadweight
  • Cargo space cubic
  • Number of hatches and holds
  • Cargo gear
  • Speed and bunker consumption etc
2 4 legal sence
2.4 Legal sence
  • The general contract principle is that an offer is binding. Then a counter offer will be regarded as a rejection of the original offer in conjunction with a new offer binding upon the person who has given the count offer.
  • An offer is not binding for any length of time. If the offer prescribes a certain time before which it must be accepted, the expiration of this time means that the offeror is no longer bound.
  • If no time has been expressly stated the basis is that the offeree shall have reasonable or customary time at his disposal to reply. This time is determined with regard to the importance of the business, the circumstances under which the offer has been given, the speed of the transactions in the trade, etc.
3 counter offer
3. Counter offer

3.1 Meaning

  • A counter offer will be regarded as a rejection of the original offer.
  • A counter offer is a new offer.
  • When one makes a count offer one is in fact saying ‘I decline your offer and I now make you the following new offer’.
3 2 kinds of counter offer
3.2 Kinds of counter offer

(1) “We accept Shipowner’s/Charterer’s offer, except┄” followed by the terms that shipowners or charterers want to change (this is if the offer is acceptable in parts, but some terms must be subject to further negotiation). The parties have already agreed on a number of terms.

(2) “WE decline shipowner’s/Charterer’s offer and offer as follows┄”. Technically the parties have not yet agreed on any point. If the charterers or shipowners find most of the terms offered unacceptable, but nevertheless will try to negotiate. The charterers or shipowners will in this case go back to the shipowners or charterers with a full offer of their own.

3 2 kinds of counter offer17
3.2 Kinds of counter offer

(3)“Charterers decline shipowner’s offer without counter”. If the charterers find the shipowner’s offer to be completely unacceptable and they find it pointless to continue the negotiations. The negotiations will be terminated.

(4)“We repeat our last” or “We repeat our last, except”--It means that the shipowners or charterers insist on their requirement or with slightly amendment.

3 3 legal sence
3.3 Legal sence
  • Counter offer is a new offer and the parties are obviously trying hard to conclude a contract between them.
  • However no one in shipping expects an offer to remain open forever and so it is usual to place a limit upon the validity of the offer. This allows either party to begin negotiations with another
  •  It is important that offers and counter offers not only state the time by which a reply is due but also the place where any reply must be made within that time limitation. The time and place for reply to an offer must be quite explicit. Beware of imprecise expressions such as “for prompt reply” or “ for immediate reply”.
4 firm offer
4 Firm offer

4.1 Details

  • Period of which the offer is valid.
  • Freight rate.
  • Name of vessel.
  • Laydays.
  • Vessel’s carrying capacity of the cargo in question.
  • Loading and discharging ports.
  • Loading and discharging costs.
  • Demurrage and dispatch.
  • Commission.
  • Charter party form to be used.
4 2 example
4.2 Example
  • TKS FOR YOUR FAX THIS MORNING WHICH CHRTS FIRM OFFER ASF FOR YOUR REPLY W/I 30 MINS:
  • FULL N COMPLET CGO MAINLY INCL PIG IRON IN BULK, STEEL, CHEMICALS IN BGD/DRUM, ETC. AT CHRTS OPTION AND SUBJ FINAL LOADG LIST.
  • LAYCAN 08TH-13TH MAY 1999 1/2 SB 1/2SP N. CHINA DALIAN, XINGANG.
  • 1/2 SB 1/2 SP ASIA, BANGKOK.
  • FRT USD 85000 IN LUMPSUM FIOST BSS 2/1.
  • FULL FRT TO BE PAID W/I 5 BKG DAYS AFTER COMPLETION OF LOADING.
  • OWRS TO APPOINT AGENTS WHICH TO BE NOMINATED BY CHRTS BENDS.
  • L/DISRATE CQD/CQD.
slide21

4.2 Example

  • SHIPSIDE TALLY OWRS ACCT SHORESIDE TALLY CHRTS ACCT.
  • MASTER TO GIVE 7/5/3/2/1 DAYS ETA NOTICE ENDS.
  • ANY TAXES/DUES ON CGO CHRTS ACCT SAME ON FRT/VSL OWRS ACCT
  • L/S/D IF ANY TB FOR CHRTS ACCT.
  • SHORE CRANES IF USED TO BE FOR CHRTS ACCT, BUT IF VSL’S GEARS BE OUT OF ODER OR BREAK DOWN AT LD/DISPORT, THEN SHORE CRANES TO BE FOR OWRS ACCT.
  • ALL HATCHES/HOLDS TO BE DRY AND CLEAN TO CHRTS/SHIPRS SATISFACTION BEFORE LOADING COMMENCEMENT.
  • OTHERS AS PER GENCON CP.
  • COMM TTL 3.75% .
  • MV YUN HAI PRC FLAG BLT 1986 GRT/NRT 6055/3010 DWT 7100 MT ON 7.40M LOA/BM 118/17 TWEEN-DECK 3HA/3HO BALE 10350.
  • PLS CNFM BY RTN W/I 30 MINS.
  • B.RGDS
5 subject to
5. Subject to
  • “Subject to charterers’ board’s approval”.
  • “Subject to receiver’s approval”.
  • “Subject to stem”.
  • “Subject to open”.
  • “Subject to details”.
5 1 subject to approval
5.1 Subject to approval
  • When the parties have in their negotiations used such phrases as “Subject to charterers’ board’s approval” or “Subject to receiver’s approval”, it is a matter of construction of all the exchanges in their contexts to decide whether there is (a) no binding contract at all; or (b) a contract which binds immediately but whose main obligations come into operation only if and when the approval has been given;
  • Although the main obligations of the contract will not come into operation until approval is given, there may, meanwhile, be an obligation on one or both of the parties not to prevent the fulfillment of the requirement or even to do what is reasonable to try to fulfill it.
5 2 subject to stem or open
5.2 Subject to stemor open
  • A typical example may be that of a merchant who wants to secure shipping space for goods he is about to buy or sell. He may find it practical to have tonnage at hand and negotiate all arrangements for shipment prior to buying or selling the goods. In such a case his charter offer is made “subject stem”, meaning that he is in no way committed if the purchase or sale of the goods should not materialize. It is an expression used to qualify an agreement to load under a charter by making the obligation subject to the agreement of suppliers to make cargo available at the relevant time.
  • Another example is that of the shipowner who makes a firm offer “subject open”, meaning that he retains the right to withdraw his offer in case the vessel should be fixed for other business prior to acceptance of the offer in question. In general such an offer is no more than an indication or quote.
5 3 subject to details
5.3 Subject to details
  • This term is a well-known expression in chartering practice which is intended to entitle either party to resile from the contract if in good faith either party is not satisfied with any of the details as discussed between them. English authority clearly supports the view that the use of the qualification “subject to details” indicates that the parties do not yet intend to be bound.
  • In The Junior K [1988] 2 Lloyd’s Rep. 583, a case on a voyage charter of the Junior K, it was held by the court that the stipulation “subject to details of the Gencon charter party” conveys that the fixture is conditional upon agreement reached on the details of the Gencon form, which had not yet been discussed.
  • It should be noted that there are American cases to a contrary effect. The widespread practice of fixing “subject details” ordinarily will not be construed as requiring agreement on each and every charter term before a binding contract is created. Once there has been agreement on essential terms, a contract is deemed to exist and the negotiation of remaining details becomes a ministerial task.
6 acceptance and fixture
6 Acceptance and Fixture
  • An acceptance is a statement made by the offeree indicating assent to an offer.
  • Making a fixture means that the parties interested in a specific sea transport, through negotiations, reach a mutual agreement on all details in a charter.
slide27

6.1Voyage chartering fixture note

  • It is mutually agreed between Messrs as owners and Messrs charterers that:
  • 1.Cargo 15,000T Rice in bags 5% more or less at owner’s option ( owners to
  • declare quantity to be shipped 2 days before vessel arriving at loading port).
  • 2.  Loading at one safe port Singapore.
  • 3.  Discharging at one safe port China.
  • 4.  Laydays and Canceling Date: 20th /30th Oct. 1989.
  • 5.  Freight rate USD 19.00 per Metric ton FIOST, CQD both end.
  • 6. 100% freight prepaid by T/T to owner’s account in US dollars at Singapore
  • after completion of loading before releasing Bill of Lading.
  • 7.  Any dues/taxes on vessel, on freight to be for Owners’ account.Any dues/taxes
  • on cargo to be for Charterers’ account.
  • 8. If charterers fail to ship as agreed quantity, they are liable to pay the deadfreight
  • at the freight rate as agreed.
  • 9.  Otherwise details as per Gencon C/P.
  • For and on behalf of For and on behalf of
  • (owners) (charterers)
slide28
6.1.2 Example Two
  • OWNERS: ABC shipping Co.
  • CHTRS: XYZ Corporation Ltd
  • CGO/QTTY: 35,000MT 10PCT MOLOO COAL IN BULK
  • L/PORT: 1SAP CALCUTTA, INDIA
  • D/PORT: 1SBP ZHANGJIAGANG, YZ RIVER, CHINA.
  • LAYCAN: JUN 7-15TH, 2005
  • FRT: USD 19.00 PMT FIOST. BSS 1/1
  • FRT PAYMENT: 100PCT FRT TO BE PAID BY CHTRS TO OWR'S NOMINATED BANK ACCOUNT 3 BANKG DAYS AFTER COMPLETION OF LDG AND IN CASE 'FRT PREPAID' B/L NEEDED, OWS TO ISSUE THE SAME ONLY AFTER RECEIVING FULL OCEAN FRT, UNREVOCABLE AND DISCOUNTLESS, WHETHER VSL/CGO LOST OR NOT.
slide29
DEM/DES: DEMURRAGE USD 20,000 PER DAY/DHD BENDS IF ANY DEMURRAGE AT L/PORT, SAME DEMURRAGE MONEY TO BE SETTLED AND PAID BY CHTRS TO OWS BEFORE VSL'S ARRIVAL AT DISPORT. DEM AT D/PORT, IF ANY, TO BE SETTLED AND PAID W/I 5 DAYS.
  • N.O.R. TO BE RENDERED AND ACCEPTED ATDNSHINC W/W/W/W, BENDS ACTUAL TIME USED FOR LDG/DISCHG BEFORE COMMENCE OF LAYTIME TO BE CALCULATED AS LAYTIME AS PER GENCON 94 C/P FORM, ONCE ON DEMURRAGE, ALWAYS ON DEMMURAGE
  • L/RATE: 8,000MT PWWD SHINC
  • D/RATE: 12,000MT PWWD SHINC
  • AGENTS: OWS TO APPOINT LOCAL AGENTS BENDS, AND PAY PORT DISBURSEMENTS
slide30
CHARGES/FEE LIFTED BY VSL/FRT TAX/FLAG TB FOR OWS' ACCT
  • CHARGES/FEE LIFTED BY CGO TAX/TARIFF/STEVEDORE TB FOR CHTR'S ACCT
  • OWS TO GTEE VSL'S GEARS TO BE IN GOOD ORDER AND WORKABLE, AND SUITABLE FOR GRAB OPERATION. IN CASE ANY BREAKDOWN OF VSL'S GEAR, LAYTIME TO BE CALCULATED PRO RATA.
  • OWS/MASTER TO GIVE CHTRS AND AGENTS 5/3/2/1 DAYS PRIOR ARRIVAL NOTICE.
  • THIS C/P IS GOVERNED BY CHINESE MARITIME LAW, ANY DISPUTE AND ARGUMENT TB SETTLED BY SHANGHAI MARITIME COUNT
  • IF SHIPPERS/CHTRS CANNOT LOAD/SHIP WITH FIXED CGO 5 CALENDAR DAYS AFTER VSL'S ARRIVAL AT LDG PORT, CHTRS TO REMIT 5 DAYS DEMURRAGE MONEY TO OWR'S BANK ACCOUNT AS GTEE AND OWS ARE INTITLED TO WITHDRAW VSL AND CANCELL THIS C/P.
slide31
ANY LOSS/DAMAGE TO OWS CAUSED IN THIS CASE TO BE FOR CHTR'S ACCT.
  • DETAILS/OWISE AS PER GENCON 94 C/P FORM
  • AFTER BOTH SIDES SIGN AND CHOP/STAMP ON FAX COPY OF THIS FIXTURE NOTE, THIS FIXTURE TO COME TO EFFECT. AND HAVE SAME LEGAL EFFECT WITH ORIGINAL C/P SIGNED BY BENDS.
  • IN CASE ANY DIFFERENCE/DISCREPANCE BETWEEN ENGLISH AND CHINESE VERSION OF THIS FIXTURE NOTE, ENGLISH VERSION TO DOMINATE.
slide32

6.2 TCT fixture note

It is this day mutually agreed through friendly consultation between Shipowner and Charterer on chartering of M/V “ABC” with terms and conditions as following:

① Delivery place: port of Yantai, China

②Delivery time: around 12/15 July, 1999. Begin with the moment that the outward document completed or pilot onboard the vessel whichever occurred last, whether on Sunday, Holiday or not, when in day or night.

③Redelivery place: the last discharging port in Japan of the voyage.

④ Redelivery time: when dropped outward pilot at the place of clause 3.

⑤ Daily hire: US$3,700 per day or pro rata including crew’s overtime.

⑥Hire payment: first 15 days hire will be paid in advance before delivered the vessel, the rest to be sent within 3 banking days after redelivery the vessel.

⑦ Cargo to be loaded: rough granite.

⑧ Stevedores damage to vessel: charterers to be fully responsible for damage to the vessel caused by stevedores or others employees by the charterers.

⑨ Agents: charterers to appoint agents at both ends and pay agency fee.

⑩Commission: 2.5 percent total.

(11)Other terms and conditions to be subject to NYPE.

6 3 standard form of fixture note of voyage charter party
6.3 Standard form of fixture note of voyage charter party

China Chamber of International Commerce

Fixture Note of Voyage Charter Party(2000 Standard Form)

day______/month_____/year_____

It is mutually agreed between_____________________as Owners (address:____________fax:___________telephone:_________)and________________________________________as Charterers(address:____________fax:___________telephone:_________)that this Fixture Note shall be performed subject to the following terms and conditions:

slide34
1、Particulars of Performing Vessel:

M/V:________Flag:___________Built:_____________

Classification:_______ _Registered shipowners:_______

GT/NT/DWT:______/_____/_______TS SSW:___________

LOA/BM:______/_____MS Grain/Bale Capa:__/____CBMS

Ho/Ha:______/________Derr:_______Tweendeck:________

[add other items when necessary]_______________________ _________________________________________

2、Cargo and Quantity: [ Indicate Alternative(A)or(B)with√]

[ ] (A)______m/ts of __________in____[bag or bulk],____% more or less at ________ option [Owners' option or Charterers' option].

[ ] (B) _____cbms of__________________________,____% more or less at ________option [Charterers' option or Owners' option].

3、Laycan:_________________ / ________________.

4、Loading /Discharging Port(s): [ Indicate Alternative (A) or (B) with√]

[ ] (A) _____safe port(s) at_____________/________________ .

[ ] (B) _____safe berth(s) at port(s) of _______/_ ___________.

slide35
5、Loading/Discharging Rate: [Indicate Alternative(A)or(B)or (C) with√][ ] (A)_________/__________m/ts per weather working day, Sundays and holidays excepted unless used (PWWD SHEX UU) .[ ] (B)_________/___________m/ts per weather working day , Sundays and holidays excepted even if used (PWWD SHEX EIU).[ ] (C)Customary quick despatch at port(s) of_________[ loading or discharging](CQD).
  • 6、Laytime Calculation: [ Indicate Alternative(A)or(B)with√][ ] (A)Separate laytime for loading and discharging.[ ] (B)Total laytime for loading and discharging.
  • 7、Freight Rate: [ Indicate Alternative(A)or(B)or(C)or( D)with√][ ] (A)Lumpsum _____________ fiost.[ ] (B)__________ per________[net or gross] m/t fiost .[ ] (C)__________ per________[net or gross] m/t on free in and liner out .[ ] (D)__________ per________[net or gross] cbm fiost.
slide36
8、Freight Payment: [Indicate Alternative(A)or(B )or(C)with√] [ ] (A)Freight to be paid within _____banking days after completion of loading . [ ] (B)Freight to be paid within _____banking days after completion of loading, but always before breaking bulk.
  • Freight collected or to be collected as per aforesaid (A) or (B) shall be deemed earned by Owners upon cargo loading on board, and such freight must be paid by Charterers non-returnable and non-discountable whether vessel/cargo lost or not.
  • [ ] (C) Freight to be paid within _____banking days after completion of discharging. 9、Demmurage/Despatch:______/_______per day or pro rata to be settled within____days after completion of discharging provided that Owner's lien,if any,on the cargo shall not be affected by this provision.
  • 10、Taxes/Dues/ Fee:        Taxes/dues/fee if any on vessel/freight to be for Owners' account, howsoever the amount thereof may be assessed. Same on cargo if any to be for Charterers' account, howsoever the amount thereof may be assessed.
  • 11、Agency: [ Indicate Alternative(A)or (B)with√][ ] (A)Owners' agents both ends.[ ] (B)Owners' agent at loading port and Charterers' agent at discharging port.
slide37
12、Commission: [ Indicate Alternative(A)or(B)with√][ ] (A) Commission on freight, dead-freight and demurrage totals____ percent including address commission.[ ] (B) Commission on freight, dead-freight and demurrage totals____percent , plus____percent to be for___________________________ .
  • 13、Law and Arbitration:        This Fixture Note shall be governed by and construed in accordance with Chinese law, and the Charter Party shall be established when this Fixture Note is signed. Any dispute arising out of or in connection with this Fixture Note shall be submitted to China Maritime Arbitration Commission for arbitration in Beijing. The arbitration award shall be final and binding upon the parties
  • 14、Gencon Charter: [ Indicate Alternative (A) or (B) with√][ ] (A) Other terms and conditions are as per Gencon Charter 1994, except Clause 2. [ ] (B) Other terms and conditions are as per Gencon Charter 1976, except Clause(s)
  • 15、Special Provisions:___________________________________________________________________________________________

______________________        ______________________    Owners' signature                         Charterers' signature

7 the period of following up
7.The period of following-up

7.1 Information and Instruction to Master

7.2 Appointment of Agents

7.3 Performance of Voyage Chartering

7.4 Performance of Time Chartering

7 1 information and instruction to master
7.1 Information and Instruction to Master

The voyage instructions in general contain the following items:

  • Name of the ports of call.
  • Name of the commodity.
  • Name of the agents at calling port.
  • Quantities to be loaded/discharged at each port.
  • Loading/unloading conditions and terms.
  • Where and how much bunkers is to be supplied.
  • Where and how many crew members are to be embark/disembark.
  • Where supplies for the ship can be lifted, etc.
7 2 appointment of agents
7.2 Appointment of Agents
  • Attending to the procedures for ship's entry into & departure from the ports of sea areas; arranging pilotage, berth, loading and unloading, etc.
  • Attending to marine survey, ship's repair; supply of fresh water, provisions and stores; purchasing and/or forwarding ship's spare parts, sea charts, etc.
  • Attending to the matters of ship's tenancy, sales and delivery.
  • Attending to the business of chartering ships and providing consultation and information.
  • Arranging for passports, visa, medical treatment, repatriation and sightseeing for crew members.
  • Attending to the maritime affairs.
7 3 performance of voyage chartering
7.3 Performance of Voyage Chartering
  • The vessel must be directed to the port of loading. Often a canceling day has been determined for the latest arrival of the ship at the port of loading, and if she has not arrived at that time the charterer may cancel the charter. The charterer may also be entitled to claim damages when the arrival of the vessel is delayed. The shipowner has then a duty to carry out the agreed voyage without delay and without deviating from the agreed or customary route.
7 3 performance of voyage chartering42
7.3 Performance of Voyage Chartering
  • In the port of loading the charterer must deliver the agreed cargo. Without particular agreement to the contrary the cargo must not be of a dangerous nature. The charterer usually has a duty to deliver a full cargo within the ship’s capacity. If too little cargo is delivered or the cargo is delivered in such a state that the ship’s capacity cannot be utilized, a freight compensation, the so-called deadfreight, can be claimed by the shipowner. This compensation is based on the difference between the full freight to which the shipowner would have been entitled if all cargo were delivered and the freight to be paid according to the intake quantity less any expenses saved for short delivered cargo. If, on the other hand, the vessel cannot load the agreed quantity, a corresponding freight reduction will be made. In addition, the charterer may eventually claim compensation for additional costs, for example, for other tonnage that has been chartered.
7 3 performance of voyage chartering43
7.3 Performance of Voyage Chartering
  • The freight will be paid for cargo discharged after the voyage. If the ship is lost or does not reach her destination, no freight will be paid at all. In order to protect the shipowner’s right to freight, the freight prepaid clause is often added or amended with “freight shall be considered as fully earned upon shipment and non returnable in any event whether or not the voyage shall be performed and whether or not the vessel and/or cargo shall be lost or not lost.”
  • On arrival at the port of destination the master will, provided that the freight has been paid, deliver the cargo to the consignee named in the bill of lading or to the first person who presents a properly indorsed bill of lading.
7 4 performance of time chartring
7.4 Performance of Time Chartring
  • The ship must be delivered to the time charterer not later than a certain date, and any delay beyond the canceling date entitled the charterer to cancel the charter. The voyages also have to be carried out without delay. If the vessel is delayed due to breakdown of machinery or for other specified reasons she may be off-hire, and then a reduction of the time may be made so that no hire will be paid during the off-hire period. But under a time charter the shipowner, basically, is not liable for delay not caused by the ship.
  • The hire is payable in advance for a month or other period. If the hire is not paid promptly the shipowner may be entitled to cancel the charter. The liability for the cargo may be determined in different ways and may rest with the shipowner or with the charterer or may be divided between them in one way or another.
7 4 performance of time chartring45
7.4 Performance of Time Chartring
  • When giving orders to the vessel the charterer must keep within the trading Restrictions prescribed by the contract, with respect to geographical areas as well as cargoes to be carried. Unless the parties have reached an agreement to the contrary, the charterer may only order the vessel to safe ports and berths. He must follow the terms and conditions of the charter party as to excepted cargoes and, as in a voyage charter, he must not ordinarily have goods carried which may cause damage to the ship, the personnel or other cargo.
  • At the end of the charter period the charterer has to redeliver the vessel at the place agreed. It would often be hard for the charterer to use the ship effectively during the last part of the charter period if he had to redeliver her on a particular day. The charter party therefore ordinarily contains provisions on over lap, entitling the charterer to use the vessel for a reasonable time after the expiration of the charter against an agreed hire or on under lap, entitling the charterer to redeliver her somewhat earlier than the basic charter provides.
section 2 customary abbreviations
Section 2 Customary Abbreviations
  • AA: Always Accessible signifies that the charterer is obliged to secure a berth that could be reached immediately on arrival. For tankers the term is more commonly used.
  • AAAA: Always Accessible Always Afloat signifies that the charterer is obliged to secure a berth that could be reached immediately on arrival and the berth there will always be sufficient water to prevent the ship from touching bottom at any time.
  • ACCT: Account signifies that the person concerned is liable for payment.
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APS: Arrival Pilot Station signifies a location on arrival at which a vessel will deliver on to a time charter.
  • ATA: Actual Time of Arrival signifies the time a ship will actually arrive at the port or place.
  • ATD: Actual Time of Departure signifies the time a ship will actually depart from the port.
  • ATDNSHINC: Any Time Day/Night Sundays and Holidays Included means that any time including Sundays and Holidays the master could tender NOR or delivery the vessel. BAF: Bunker Adjustment Factor is a Fuel Surcharge expressed as a percentage added or subtracted from the freight amount, reflecting the movement in the market place price for bunkers.
  • BB: Ballast Bonus is a lump sum amount paid to shipowner for positioning his vessel at a certain place as prerequisite for her delivery on to time charterer. Occasionally paid for accepting redelivery from time charterer in an unfavorable position.
  • BBB: Before Breaking Bulk refers to freight payments that must be received before discharge of a vessel commences. Freight not to be paid until after arrival at the discharge port but before commencement of unloading.
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Break bulk Cargo: Cargo that is shipped in packing units such as cartons, cases, crates, bales, or drums, but not containerized.
  • BCI: Baltic Capesize Index is a daily benchmark index published by the Baltic calculated from the weighted average weights on major routes, both voyage and time charter, as assessed by a panel of shipbrokers.
  • BENDS: Both Ends refers to load & discharge ports.
  • BDI: Baltic Dry Index refers to the Baltic Exchange's general dry freight market indicator which is an average of the BCI, BHMI, BPI.
  • BDTI: Baltic Dirty Tanker Index refers to the average of rates on the BITR dirty routes.
  • BHMI: Baltic Handymax Index refers to a daily benchmark index published by the Baltic calculated from the weighted average weights on major timecharter routes, as assessed by a panel of shipbrokers.
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CHOPT: Charterer’s Option may refer to charterer’s option to discharge at a number of ports or relative to a cargo size margin.
  • COA : CONTRACT OF AFFREIGHTMENT is an agreement by an owner or operator to lift an agreed number of cargoes over a period of time.
  • CQD: Customary Quick Despatch means that the vessel is to be loaded or discharged as quickly as is customary and possible.
  • CVS: Consecutive Voyage refers to a series of consecutive voyages, usually laden from port A to port B, returning in ballast condition and so on until completion of final cargo discharge.
  • DFD: Demurrage/Free Despatch is an expression confirming that the shipowner may be entitled to demurrage for port delay to his vessel but that no despatch is applicable in case laytime is saved.
  • DHD: Demurrage/Half Despatch is more frequently encountered than DFD in deep-sea trades, where despatch earned is agreed to be at half the daily rate of demurrage.
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DOP: Dropping Outward Pilot signifies a point of delivery on to or redelivery off time charter.
  • DLOSP: Dropping Last Outward Sea Pilot is as DOP but more clarified. In some ports as many as four pilots may be used on the outward passage. This term indicates that all acts of pilotage must be complete.
  • DWAT: Deadweight All Told means the total deadweight of a vessel against a particular draft including cargoes, bunkers, constant weights, etc.
  • DWCC: Deadweight Cargo Capacity means an estimate of the actual cargo intake against a particular draft less bunkers, constant weights, etc.
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EIU: Even if Used signifies that time spent on cargo working in excepted periods will not count as laytime, even if used.
  • ETA: Estimated or Expected Time of Arrival signifies the time a ship will be expected to arrive at the loading or discharging port or place.
  • ETC: Estimated or Expected Time of Commencement signifies the time a ship will be expected to commence the loading or discharging cargo.
  • ETD: Estimated or Expected Time of Departure signifies the time a ship will be expected to leave the loading or discharging port or place.
  • ETS: Estimated or Expected Time of Sailing signifies the time a ship will be expected to leave the loading or discharging port or place for sea voyage.
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FFA: Forward Freight Agreement. means of hedging exposure to freight market risk through the trading of specified timecharter and voyage rates for forward positions. Settlement is against a relevant route assessment published by the Baltic Exchange.
  • FHEX: Fridays and Holidays Excepted means that laytime will not count during Fridays and Holidays.
  • FHINC: Fridays and holidays Included means that laytime counts during Fridays and holidays.
  • FIO: Free In and Out means cargo to be loaded and discharged free of expense to the shipowner.
  • FIOS: Free in, out and Stowed means cargo to be loaded, stowed and discharged free of expense to the shipowner.
  • FIOST: Free in, out, Stowed and Trimmed ensures that none of the loading, stowing, trimming and discharging, expenses will be for the account of the shipowner.
  • FP: Free of Pratique refers to the vessel has been approved by the port medical authorities as not having any sanitary disqualification that would prevent her from proceeding to the berth and commencing operations.
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LAYCAN: Laydays/Canceling means a spread of dates between which dates a vessel is to present for loading. Too early and she will probably have to wait. Too late and she risks being cancelled by the charterers.
  • MOL: More or Less refers to a cargo size option usually clarifying whose option to select the final cargo size.
  • MOLCO: More or Less Charterer’s Option means that the charterer has the option for selection of the final goods size before loading at the loading port.
  • MOLOO: More or Less Owner’s Option means that the shipowner has the option for selection of the final goods size before loading at the loading port.
  • NOR: Notice of Readiness means the notice to charter, shipper, receiver or other person as required by the charter party that the vessel is ready to load or discharge.
  • PPT: Prompt indicates that a cargo or a ship is available promptly.
  • ROB: Remaining on Board refers to cargo, bunkers or fresh water remaining on board a vessel at any particular time.
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SA: Safe Anchorage refers to an anchorage where ship waiting for berth must be safe for her.
  • SB: Safe Berth refers to a berth where ship calling at must be safe for her.
  • SF: Stowage Factor means cubic space (measurement tonne) occupied by one tonne (2,240 lbs/1,000 kgs) of cargo.
  • SHEX: Sundays and Holidays Excepted means that laytime will not count during Sundays or Holidays.
  • SHINC: Sundays and Holidays Included means that laytime will count during Sundays and Holidays, which are considered to be normal working days.
  • SSHEX: Saturdays, Sundays, Holidays Excluded means that laytime will not count during Saturday, Sundays or Holidays.
  • SP: Safe Port refers to a port where ship calling at must be safe for her.
  • SWL: Safe Working Load refers to lifting capacities of cranes or derricks.
  • TIP: Taking Inward Pilot signifies a location on arrival at which taking aboard the pilot a ship delivers on to her time charter.
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UU: Unless Used signifies that if work is done during an excepted period laytime will count.
  • WCCON: Whether Customs Cleared Or Not
  • WIBON: Whether In Berth Or Not
  • WIFPON: Whether In Free Pratique Or Not
  • WIPON: Whether In Port Or Not
  • All the four terms are connected with the question of when the ship can be considered as “arrived” and so present a notice of readiness. In cases when all four apply the abbreviation WWWW is used instead.
  • WP:WEATHER PERMITTING means that time during which weather that prevents working shall not count as laytime.
  • WWD:WEATHER WORKING DAY shall mean a working day of 24 consecutive hours except for any time when weather prevents the loading or discharging of the vessel or would have prevented it, had work been in progress.
section 3 chartering practice
Section 3 Chartering Practice

1. Sales Contract

  • The Sellers: China National ABC Import and Export Corp. Shanxi. Branch.
  • The Buyers: Thai1and Far East XYZ International Trading Go.
  • The Goods: Coke 6,000MT FOBT TIANJIN USD68/MT. Total amount. USD408, 000.00
  • Shipment quantity-10% more or less allowed.
  • Time of Shipment: To be shipped on or before May 5th, l998
  • Port of loading: Xingang, Tianjin.
  • Port of discharging: Bangkok.
2 transactions in concluding a voyage charter party
2 Transactions In Concluding A Voyage Charter Party

RE: 6000MT COKE IN BULK XGG/BKK

  • 6000MT COKE IN BULK SF ABT 1.8M³ 5 PCT MOL
  • XGG/BKK FIOT BSS l/l
  • LYCN 25/4-3/5 l998
  • ADCOM 2.5PCT
  • PLS ADV ANY SUTBL VSL

AVLBL N YR REST OFFER

  • TKS/BRGDS
7 practice offer
7 Practice (Offer )

RE: 6000MT COKE IN BULK XGG/BKK

RYTLX 2/4/98 ON THE CPTND SUBJ N OFFER AS FLWS:

  • 1 SBP XINGANG/1 SBP BANGKOK
  • 6000MT COKE IN BULK 5PCTMOL SF ABT l .8M³
  • LYCN 20/30 APR l998
  • LOAD/DISCH 2500/2500MT WWDSHEXUU
  • USD20.00 PMT FIOST l/l BSS
  • FULL FRT BE PAID W/I 3 BANKING DAYS AFT COMPLTN OF LOADING
  • DEM/DES USD4000/DHD
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OWS AGENTS BENDS

AP ON CGO DUE TO VSLS AGE IF ANY TB FOR CHTES ACCT

ADCOM 2.5PCT

SUBJ DTLS OWISE PER GENCON

FYI VSLS MAIN PARTL ASFLWS

NV RUDIA-PAN-80 BLT-SDBC-3 HOLDS-LOA ll7.20-DWT 8623-7.6M-G/B 12560/l l740 M³-3 x 20T DERS-l2 K

YR EARLIEST CFM THE ABV APRECD

BRGDS

7 practice counter offer
7 Practice ( Counter offer )

MV RUDIA 6000MT COKE XGG/BKK

  • TKS FOR YR OFFER 4/4/1998 WE COUNTER ASFLWS
  • LOAD/DISCH l500/2000MT WWDSHEXEIU
  • USD 18.00 PMT FIOST l /1 BSS
  • DEM/DES USD3000/DHD
  • AP IF ANY LPSM USD 1000 OWS ACCT
  • OTHERS AS PER YRTLX 3/4/98
  • PLS URG CFM THE ABV
  • TKS BRGDS
7 practice firm offer
7 Practice ( Firm offer )
  • TKS FOR YR COUNTER 4/4/98 WE FIRM OFFER ASFLWS
  • LOAD /DISCH 2000/2500MT WWDSHEX UU
  • USD 19.50 PMT FIOST l/1 BSS
  • ADCOM 1 .25PCT
  • OTHERS AS PER OUR PREVIOUS TLXES
  • SUBJ OWRS BOD APRVL W/l 24HRS
  • BRGDS
7 practice acceptance
7 Practice ( Acceptance )

MV RUDIA 6000MT COKE XGG/BKK

  • TKS FOR YR FIRM OFFER AS GOOD RELATION BTWN US YR FIRM OFFER ACPTD PLS ADJST FRT SUGST USD 19.00PMT
  • PLS URG CFM THE ABV
  • BRGDS
7 practice firm offer63
7 Practice ( Firm offer)

MV RUDIA 6000MT COKE XGG/BKK

  • TK U FOR UR TLX 6/4/98 N PREVIOUS TLXES WE RECAP FIXTURE ASFLWS
  • 6000MT COKE IN BULK 5PCTMOL SF ABT l .8M3
  • LYCN 20/30 APR l998
  • LOAD /DISCH 2000/2500MF WWDSHEXUU
  • USD19.00 PMT FIOST l /l BSS
  • FULL FRT BE PAID W/I 3 BANKTNG DAYS AFT COMPLTN OF LOADING
  • DEM/DES USD3000/DHD
  • OWRS AGTS BENDS
  • AP IF ANY LPSM USD 1000OWRS ACCT TB DEDUCTED FM FRT PAYMT
  • ADCOM 1 .25PCT
  • C/P DTLS TB REF TO OWRS PROFORMA WITH LOGICAL AMENDMENT
  • WL FAXU PROFORMA IN MINUTES (GENCON FORM)
  • PLS ACK RCPT THE ABV N UR COMMENTS
  • BRGDS
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TK U FOR UR PROFORMA WE SUGST TO DELET TALLYING N SEPERATION/CGO FUMIGATION CLAUSES N ADD CLAUSE OF ISSUING 2ND SEF OF B/LADING AT HKG SUGST USING FLWG AS NORMAL PRACTICE:
  • "UPON RCPT FULL FRT (LESS 1 .25PCT ADCOM), OWRS AGREE TO ISSUE FREE OF CHARGE TO CHTRS A 2ND SET FRT PREPAID B/LADING IN HKG AGNST CHTRS LETTER OF INDEMNITY IN OWNRS WORDINGS INDEMNIFING OWRS AGNST ALL CONSEQS THEREFROM THE 1ST SET OF B/LADING TB RETURD TO OWNRS ASAP
  • IF U HV NO OBJTN PLS GO AHEAD TO PREPARE C/P FOR EARLIER SIGNATURE.
  • TK U VERY MUCH
  • BRGS
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Messrs Thailand Far East XYZ International Trading Co. Bangkok
  • Dear Sirs,
  • Please find enclosed herewith two sets of the Charter Party dated. Hong Kong 7th April, l998 as per our telexes exchange from 2nd to 7th April, l998 Covering a shipment of 6,000.00 metric tons of coke in bulk from Xingang to Bangkok.
  • Please check and sing them and return us one set which being duly signed by your goodselves.
  • We thank you very much for prompt fixture of the Charter Party based on your support and our board appreciates cooperation between our two parties and looking forward to developing our good relation.
  • For your information, MV "Rudia" is now sailing to Pushan to discharge there a full cargo of gypsum in bulk and we expect she can depart from Pushan around 22nd instance and arrive at Xingang on 23rd. ________________

Vice President

MARD Shipping Co., Ltd