Time Charter : Everything you need to know
What is Time Charter(T/C)?
Time charter definition: It is a contract (time charter party) between the shipowner and the charterer wherein the shipowner agrees to let the charterer hire the vessel & its crew for a pre-defined period at an agreed amount payable by the charterer.
Who is a time charterer? What time charter party?
In a time charter, the person who charters the vessel is called the time charterer, the payment is called hire & the contract is called time charter party.
The hire rate is calculated differently, in $/DWT/month.
Time charter party pdf example:
Click here to see a sample of the time charter party (NYPE approved).
What are the significant parts of a time charter party?
Time chartering of a vessel refers to the hiring of the vessel and its crew for a pre-defined time period.
During the period of T/C, the shipowner is responsible for the employment of the crew, the navigational operation, maintenance(vessel/equipment) & maintaining the seaworthiness of the vessel.
The shipowner also guarantees various criteria of service like speed, consumption, etc.
The charterer is responsible for the commercial operation & covers separately the costs for fuels, port dues, and loading/unloading expenses.
Also, the charterer may be liable for damage caused to the vessel in connection with her use, other than the normal wear & tear.
When the vessel is under t/c, keeping the owner’s and charterer’s responsibilities & risk allocation in mind, the Master must play an in-between balanced role between the owner (his/her employer) & the charterer (principal).
The t/c determines a place & time for the delivery of the vessel from the owner to the charterer and redelivery of the vessel from the charterer to the owner.
The chartered vessel must be in conformity with the charter party with respect to the cargo-carrying capacity, speed, bunker consumption, and other agreed terms and conditions. Particularly, the cargo carrying capacity is important to the charterer.
In a time charter also, the ship must be delivered to the t/c not later than a certain date, and any delay beyond the canceling date entitles the charterer to cancel the charter. The voyages also must be carried out without delay.
If the vessel is delayed due to a breakdown of machinery or for other specified reasons, she may be off-hired, 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 t/c the owner, is not liable for delay not caused by the ship, hence the time lost because of adverse weather is the responsibility of the charterer.
During the time charter, the charterer has the freedom to use the vessel in whatever way, for example, for another charter to a third party.
Check out Common Shipping Terms & Chartering Terms.
What are the different types of time charters?
There is an immediate and period t/c, as well as a "bareboat" charter (in this case, the charterer additionally provides the crew).
Below are various types of the time charter.
Trip time charter (TCT): A trip t/c is a short-term time charter where the vessel performs a single voyage between load port(s) and discharge port(s) and the charterer pays a fixed daily hire. The vessel is redelivered at a named place after completion of discharge.
Round trip t/c: In this type of charter, the vessel is employed on a round trip basis & the delivery and redelivery of the vessel will take place in approximately the same area.
Period t/c: In this type of charter, the vessel is employed within an agreed geographical area or on a worldwide basis with delivery/redelivery somewhere within the geographical area range. It may vary from several days to several years.
Bareboat charter (demise charter): This is a contract between the shipowner and the charterer where the charterer takes the vessel on lease from the owner. The vessel is put under the disposal of the charterer without any crew. In this case, the charterer will have both commercial and technical responsibility for the vessel & will pay for maintenance, crew cost & insurance, etc.
What is the difference between a demise charter and a bareboat charter?
If the shipowner leases the ship with the ship owner’s crew members, it is called a demise charter. If the shipowner leases the ship without crew members, it is called a bareboat charter.
How the hire is payable?
The hire rate is calculated differently, in $/DWT/month.
The hire is payable in advance for a month or as agreed. If the hire is not paid promptly the owner may be entitled to cancel the charter.
When the advance payment of hire is to be made, the charterer often makes a deduction, if any, for off-hire during the previous period, any disbursement on the owner’s account & for any planned off-hire, like dry-docking period, etc.
For the last hire payment, the charterer will normally have claims against owners with respect to redelivery for bunkers remaining on board & governed by the “last hire payment” clause usually mentioned in the agreed time charter party.
See other featured articles: Voyage Charter : Definition & Full Detail
