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Reference Books （ I ）

Practice and Law of Charter Party Law School Dalian Maritime University Spring Term 2011-2012 Prof. GUO Ping. Reference Books （ I ）. 1, JOHN WILSON ,<CARRIAGE OF GOODS BY SEA>,(6th edition) ， 2008,Pearson Longman Publishing

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Reference Books （ I ）

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  1. Practice and Law of Charter PartyLaw SchoolDalian Maritime UniversitySpring Term 2011-2012Prof. GUO Ping

  2. Reference Books（I） • 1, JOHN WILSON ,<CARRIAGE OF GOODS BY SEA>,(6th edition) ，2008,Pearson Longman Publishing • 2, MICHAEL WILFORD, TERENCE COGHLIN, JOHN D. KIMBALL,<Time Charter Party>, LLP • 3,<Voyage Charter Party>,LLP • 4, JOHN SCHOFIELD , <Laytime and Demurrage>, latest editon LLP • 5,SCRUTTON ON CHARTERPARTIES AND BILLS OF LADING (22th ed.) 2011,Sweet& Maxwell Thomson Reuters • 6,LARS GORTON etc. SHIPBROKING AND CHARTERING PRACTICE (6th ed.) 2004 LLP

  3. Reference Books（II） • 1, 郭萍编著 《租船实务与法律》（第二版）大连海事大学出版社，2002年9月 • 2, 司玉琢主编 《海商法》（第二版）法律出版社 • 3,《程租合约》杨良宜 大连海事大学出版社 最新版 • 4,《期租合约》杨良宜 大连海事大学出版社 最新版 • 5,郭萍主编 《租船缩略语与常用条款》大连海事大学出版社 2010年 • 6,郭萍等 《国际海上货物运输实务与法律》大连海事大学出版社 2010年

  4. PART ONE GENERAL INTRODUCTION • Chapter one: General introduction of tramp shipping • Chapter two: Introduction of charter party • Chapter three: Entering into c/p & standard form • Chapter four: Law and International shipping practice of charter party • Chapter five: Tramp Shipping Market

  5. Chapter one -General introduction of tramp shipping Key words and terms: • Liner shipping：班轮运输 • Tramp shipping：租船运输 • Bulk cargo：散杂货 • General cargo---container cargo：件杂货 • COA-contract of affreightment：运输合同 • C/P:charter party：租船合同 • Charter：租赁

  6. Chapter one -General introduction of tramp shipping • I Concept of tramp shipping • ---A contract by charter party differs from a contract by b/l, although both are normally contracts of carriage, in that in the tramp shipping a vessel is used for the carriage of full cargoes or less frequently of part cargoes while b/l are used as the document of a contract of carriage in the liner trade, where ships carry general cargoes and call at ports which are previously advertised. On the contrary, in the tramp shipping the vessel loads and delivers the cargo at the port or place indicated by the charterer.

  7. The calculation of the freight or hire differs profoundly: • in the liner shipping the freight is calculated on the basis of the weight or volume of the goods delivered for shipment by a shipper; • in the tramp shipping freight (or hire) is calculated on the basis of the carrying capacity of the vessel, or of part thereof in the case of part cargoes, and is payable in full irrespective of the quantity loaded being equal to or lower than the full carrying capacity.

  8. The allocation of costs and risks differs substantially as a consequence of the varying control of the shipper/charterer over the employment of the ship. • In the liner shipping the carrier must have full control of loading and unloading operations in order to ensure that his ship operates on schedule and therefore normally pays for such operations, the cost of which is included in the freight, and takes upon himself the risk of delays during loading/discharging, delivery and redelivery of the cargo taking place ashore, normally in the warehouses of the carrier or of the port authority. Conversely, the carrier does not wait for the goods at the loading port and if they are not placed at his disposal on time the vessel will sail without them, the shipper paying the freight. • In the tramp shipping, the charterer has a varying degree or control over the operation of the vessel and consequently a part of the related risks and expenses are allocated to him. This allocation varies according to the type of C/P

  9. II Characteristic of tramp shipping -no fixed schedule, no fixed route, arrange carriage as agreed -specially for bulk cargo ( not general cargo) -costs and risks depend on the clauses -contract of affreightment (COA) or charter party entered into

  10. III Kinds of tramp shippingbasically include the followings:1 voyage charter2 time charter3 bare boat charter new type :- TCT (time charter on trip basis or trip time charter)-Bare boat charter by purchase

  11. Voyage Charter • Key words and terms • Shipowner-出租人 • Charterer-承租人 • Preliminary voyage-预备航次 • Demurrage-滞期费 • Despatch money-速遣费 • Laytime-装卸时间

  12. Voyage Charter • -Conceptshipowner provides part of or whole of ship to charterer for agreed voyage(s) agreed cargo is carried from agreed loading port to discharging port. -the voyage may be divided into 4 stages: -preliminary voyage stage: vessel sails to the port of lading,during which all costs and risks are borne by the owner. -loading stage: vessel is at the port of loading, waits for berth and loads. There is cooperation between owner and charterer, costs shall be allocated according to clauses -voyage stage: all risks and costs are borne by owner,who has exclusive control over the preformance of the voyage -unloading stage: vessel is at the port of discharging, waits for berth and unloads. Also there is cooperation between owner and charterer, and costs and risks shall be allocated by clauses.

  13. -Characteristic -the shipowner provides wages, bonus and other fees for crew -the shipowner is responsible for operation and management of ship -freight shall be calculated on the basis of quantity of cargo and freight rate -The cost for loading/discharging shall be ascertained -The provisions on demurrage, despatch money and laytime • -Kinds: single trip charter, return trip charter, consecutive single voyage charter or continuous return voyage charter • L/P D/P

  14. Time Charter • Key words and terms • Hire-租金 • Delivery of ship-交船 • Redeliver of vessel-还船 • Withdrawal of vessel-撤船 • Off-hire-停租

  15. Time Charter • --Conceptcharterer has the right within the contractual period, to employ the vessel within the contractual limits in the way he likes and can directly order the master to perform the voyage he decides to make. • As the consequence of the employment of the vessel being under the control of charterer, there is no question of dividing the voyage into stages, and all risk of delay due to bad weather or congestion or other causes are borne by charterer. The owner only bears the risks connected with the working of the vessel, and if the vessel is prevented from working owning to breakdown of machinery or others, payment of hire is suspended until the vessel is placed again at the full disposal of the charterer.

  16. -Characteristic -the shipowner provides the vessel and wages, bonus and other fees for crew -the charterer is responsible for operation and management of ship -hire shall be calculated on the basis of period of hire and hire rate etc. -The costs born for operation shall be provided as agreement -The provisions on delivery, redelivery of ship

  17. TCT: which is a combination between a voyage and a time charter in that the allocation of risks and costs is that of time charter; the duration, however, is not fixed, but related to the performance of the specified voyage. It is used -----when the owner does not wish to take upon himself the risks which are normally at the charge of an owner in a voyage charter. ------ Such as: not familiar to the loading port / navigation route, or for some religious reasons during specified periods. (When the month of Ramadan（斋月） comes round each year, Moslems have to fast from dawn to dusk )

  18. Bareboat Charter • --ConceptWhich is opposite to voyage and time charter, is qualified as contracts of lease. The possession of the vessel is transferred from the owner to charterer and the master and the crew are under the employment of the charterer and are paid by him. • -Characteristic -the shipowner provides the bare boat -the charterer is responsible for crewing,wages,bonus and other fees for crew - the charterer is responsible for operation and management of ship -The provisions on non-lien promise - special clauses for changing equipments and instruments onboard

  19. bareboat charter by hire purchase • which is actually a contract of sale of ship with the form of bare boat charter. • For the reason of finance of shipping • Charterer (buyer) pays regular installment of hire together with purchase charge until the end of the hire of period any may employ possess the vessel under his disposal as if he were shipowner • Shipowner (seller) may withdraw of vessel if any regular payments fail to protect himself.

  20. Chapter two Charter Party • Under English Law: COA---- contract evidenced by B/L , Voyage C/P ,Time C/p; (COA: contract of affreightment) • Under CMC chapter IV: COA- Contract evidenced by B/l, voyage c/p , multimodal transport contract • Under CMC Chapter VI charter party: time c/p and bareboat c/p • Generally, C/P : voy.c/p,time c/p, bareboat c/p

  21. Voyage Charter Party • Concept: ------CMC Art.92 “A voyage charter party is a charter party under which the shipowner charters out and the charterer charters in the whole or part of the ship's space for the carriage by sea of the intended goods from one port to another and the charterer pays the agreed amount of freight ”

  22. Voyage c/p-non-compulsory clause • CMC art.94 • The provision in art 47 and art 49 of this code shall apply to the shipowner under voy c/p. • The other provisions in this chapter (Chapter IV) regarding the rights and obligations of the parties to the contract shall apply to the shipowner and the charterer under voy.c/p only in the absence of relevant provisions or in the absence of provisions differing therefrom in the voy.c/p.---’freedom of contract with limits’ • Voy c/p shall be concluded in writing which differs from other contract of affreightments. (CMC art.43)

  23. The main provisions • CMC art. 93: name of owner/charterer,bale or grain capacity, description of goods, laydays, laytime, freight, demurrage ,dispatch money etc. • --description of vessel clause • --preliminary voyage clause • --owner’ liabilities and exceptions clause • --payment of freight clause • --loading and discharging clause • --demurrage and dispatch money clause • --cancelling clause • --lien clause and cesser clause • --both-to-blame collision clause, new Jason clause, general average clause, bill of lading clause, strike and war clause, ice, arbitration , commission clause etc.

  24. Time Charter Party • Concept: • CMC Art.129 “A time charter party is a contract under which the shipowner provides a designated manned ship to the charterer, and the charterer employs the ship during the contractual period for the agreed service against payment of hire. ” • The character: seems to be a contract of leasing property-arguable comments on this issue

  25. Freedom of contract for time & bareboat c/p • CMC art.127 -------The provisions concerning the rights and obligations of shipowner and charterer in this chapter (VI) shall apply only when there are no stipulations or no different stipulations in this regard in the charter party. • CMC art 128 -------Time & bareboat c/p shall be concluded in writing.

  26. CMC art.130 • A time charter party mainly contains the name of the shipowner, the name of the charter; the name, nationality, class, tonnage, capacity, speed and fuel consumption of the ship; the trading area; the agreed service, the contractual period, the time, place and conditions of delivery and redelivery of the ship; the hire and the way of its payment and other relevant matters.

  27. The main provisions: • --description of vessel clause • --vessel’s speed and fuel consumption • --delivery of vessel • --period of hire clause • --cancelling clause • --lawful merchandise • --trading limits • --owners to provide,--charterers to provide • --payment of hire • --redelivery of vessel • --off-hire clause • --employment and indemnity clause • --sublet clause ，--others etc.

  28. Bareboat Charter Party • Concept: • CMC Art.144 “A bareboat charter party is a charter party under which the shipowner provides the charterer with an unmanned ship which the charterer shall possess, employ and operate within an agreed period and for which the charterer shall pay the shipowner the hire. ” • Characteristics: purely lease contract of property

  29. CMC art 145 • Mainly contains: the name of shipowner/charterer; name, nationality, class, tonnage and capacity of ship; trading area; employment of ship and period of hire; time, place and condition of delivery/redelivery; survey, maintenance and repair of ship; hire and payment; insurance of ship, the time and condition for the termination of c/p and others.

  30. Main provisions: • There are some provisions which are quite similar to those of time c/p, except • --maintenance and operation clause • --inspection • -mortgage clause • --insurance and repairs • --assignment and sub-demise • --non-lien clause • --others etc.

  31. Chapter three: Entering into C/P & Standard Form • I The making of c/p : chartering broker • Generally, dry cargo c/p is negotiated and concluded in one of freight markets of the world or through broker, while oil c/p are only negotiated through brokers. • Liner shipping, ship agent or freight forwarder plays important role in creating COA as agent only. • Chartering broker just plays the role of informative , intermediary and co-ordination functions.

  32. The broker should keep both owner and charterer continuously informed about the market situation, market development, available cargo proposals and shipment possibilities. • The broker should act strictly within given authorities in connection with the negotiations. • The broker should in all respects work loyally for this principal and should carry out skillfully negotiation and other works connected with c/p. • The broker may not withhold any information from his principal nor give him wrong information • Payment : commission/ address commission 1.25% of freight and/or hire, • Brokerage Commission usually shall be paid by shipowner only in the practice, except otherwise.

  33. Process for negotiation of c/p • Inquiry(询价)—offer（要约）—counter offer—firm offer—acceptance（承诺）—issue fixture note（订租确认书）—making, checking and signing c/p (on the basis of one kind of standard form) • According to Chinese Contract Law (art 13) “the parties shall, in making a contract, take the form of offer and acceptance.”

  34. FIXTURE NOTE (sample )It is mutually agreed between Messrs (shipowner’s name and address) as Owners and Messrs (charterer’s name and address) as Charterers as the followings that:Cargo xxx t bag rice 5% MOLOOLOADING AT 1SBP IN XXX PORTLYCN: 27TH-30TH APRIL,2009FRT RATE USD XXX PER MT FIOST CQD BENDSFULL FRT PREPAID TO XXXX B4 RELEASING /SIGNING B/L BUT ALWAYS BBB (BEFORE BREAK BULK)…OTHERWISE DETAILS AS PER ‘94GENCON C/PFOR AND ON BEHALF OF / FOR AND ON BEHALF OFSHIPOWNER CHARTERER(signature) (signature)

  35. II The forms of c/p • In the negotiation of c/p, reference form is made which the parties agree to take as a basis for their contract. • The specific elements are discussed and the printed clauses are modified to the extent agreed and additional clauses are appended to the form (so called : ‘rider clause’) • standard c/p form---drafted or accepted by BIMCO (The Baltic and International Maritime Council) , UK Chamber of Shipping( previous- GCBS :General Chamber of British Shipping), NYPE (New York Produce Exchange) and Japanese Shipping Exchange (JSE)etc. • Also some other form prepared by big owners or charterers in special trade, such as Shell, Exxon, BP, Cargill etc.

  36. Forms of Voy.c/p • Uniform General Charter—GENCON 76/94 (BIMCO) • Scandinavian Voyage Charter-SCANCON (BIMCO) • Chamber of Shipping Walsh Coal Charter Party (GCBS) • Americanized Welsh Coal Charter-AMWELSH • Coal Voyage Charter-POLCOALVOY

  37. Baltimore Berth Charter Party—Steam (Form C), 1913 • BIMCO Grain Voyage Charter Party-GRAINCON • North American Grain Charter Party-NORGRAIN 89 • North American Fertilizer Charter Party- FERTIVOY • Fertilizer Voyage Charter Party-FERTICON • C (ore) 7 Mediterran Iron Ore Charter party • Tanker Voyage Charter Party (ASBATANKVOY) • Australian Wheat Charter - AUSTWHEAT 1990 • Others: SYNACOMEX ，GRAINVOY, NIPPONGRAIN etc.

  38. Form of Time c/p • Uniform Time Charter (BALTIME) • Time Charter Party (NYPE) 46/93 ASBATIME AND FONASBATIME • Time Charter Party 1980 (SINOTIME 1980) • General Time Charter Party（GENTIME） • Others：BIMCHEMTIME2005，BOXTIME，BPTIME3， GASTIME，SUPPLYTIME etc. Form of Bareboat c/p • Standard Bareboat Charter (BARECON)

  39. Chapter FourTHE LAW AND SHIPPING CUSTOMS RELATING TO THE CHARTER PARTIES • No compulsory international conventions for c/p, and the provisions of the most of national law are not compulsory . • See CMC Art.94 and Art.127 • However, the international conventions on b/l, such as 1924Hague Rules, 1968Visby Rules,1978Hamburg Rules, 2008Rotterdam Rules shall apply to bill of lading under c/p if only the holder of document is not charterer

  40. International Shipping Practice • There are some international shipping practice and rules on the terms and clauses of c/p. Such as 1980 Laytime Definition, 1993 Voyage Charter Party Laytime Interpretation Rules (voylayrule) • CMC art 268 “International practice may be applied to matters for which neither the relevant laws of PRC nor any international treaty concluded or acceded to by the PRC contain any relevant provisions.”

  41. Chapter Five Chartering Market • Purpose -The chartering market is not a uniform market where the trend is entirely up or down. It does not have a homogeneous connection with a specific geographical area but rather with ships that can carry similar types of cargoes. -The current trend of the market is determined by the balance between the supply and demand of shipping services of various kinds. The freight market is dependent on the state of the world trade market and ever-changing price of oil and sometimes strongly influenced by circumstances such as war, widespread strike, bad harvests, ice-bound waters etc. -Contract between the different freight markets may be more or less extensively. This depends on the type and size of ships, the goods involved , and to certain extent on the distance of transportation.

  42. Kinds of freight markets • -dry cargo market -- Bulker --Tweendecker -- Container --Ro/ro --Liner --Small ships --Special ships (tug, barge etc.) • Tanker market • -Reefer market • -Car carrier market • Passenger market • London market, New York market, Europe market, Asia market (Tokyo, Hong Kong, Shanghai etc.)

  43. Bulker and tweendecker (5,000-180,000 tons dwt)

  44. Part two Voyage Charter Party • Key words and terms • MISREPRESENTATIONS:误述 • Intermediate clause：中间义务条款 • Laydays：受载期 • Cancelling date: 解约日 • Interpellation clause：质询条款 • PRELIMINARY VOGAGE：预备航次

  45. Part two Voyage Charter Party • Chapter I REPRESENTATIONS UNDER VOYAGE CHARTER PARTY • I Definition • Representation means the statements given by shipowner about description of vessel. • Misrepresentation is a false statement of fact. A pure statement of opinion or of intention cannot amount to a misrepresentation • In negotiations leading to a contract, silence, even about a material fact, will not amount to a representation. But a statement which is only half true, in the sense that it discloses parts of the truth but conceals other parts, may be a misrepresentation.

  46. II LEGAL EFFECT OF MISREPRESENTATIONS • Under English Law, two forms of misrepresentations: • A Make the parties of contract to enter into contract • fraudulent misrepresentation • (1)knowingly;or (2)without belief in its truth;or(3)recklessly, careless whether it be true or false --a party who suffers loss through relying on it is entitled not only to rescind the contract, but also claim damages in tort for deceit. • negligent misrepresentation --innocent party may recover damages from the party making the misrepresentation unless the latter ‘proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.’ • innocent misrepresentation • --the court or arbitrator shall decide to rescind or award damage on the basis of the fact and circumstances.

  47. B Consist the provisions of contract • condition clause -A condition is a term of the contract that is of such importance that any breach of it will entitle the innocent party to treat the whole contract as discharged. • warranty clause -A warranty is a term of the contract of such minor importance that no breach of it will entitle the innocent party to treat the whole contract discharge, but only claims for damages • intermediate (or innominate) clause -Any term of the contract which cannot be classified as a condition or a warranty. Whether the innocent party is entitled to discharge the contract depends on the nature and consequences of the particular breach that has occurred, also may claim for damages

  48. Chapter II main provisions of representation • name of vessel, see CMC art. 96 Only the named ship may be accepted by charterer except one substitute vessel agreed by c/p • nationality of ship The flag concerns with safety or trading opportunities, as in wartime, neutrality or otherwise (intermediate clause) • classification (condition term) classification certificate given by one classification society is one of factor to determine the technical condition of vessel • Tonnage (intermediate clause) • position (condition term) • expected ready to load (laydays, cancelling date:LAYCAN ) (condition term) Eg:1st-5th May, 2011 layday: 1-5th, May • If cancelling date: 5th, May------laycan • If Cancelling date: 7th,May

  49. CMC art 96 • The shipowner shall provide the intended ship.The intended ship may be substituted with the consent of the charterer. However, if the ship substituted does not meet the requirements of the charter party, the charterer may reject the ship or cancel the charter. • Should any damage or loss occur to the charterer as a result of the shipowner’s failure in providing the intended ship due to his fault, the shipowner shall be liable for compensation.

  50. interpellation clause (GENCON 94 Cl. 9) • Should the Owners anticipate that, despite the exercise of due diligence, the Vessel will not be ready to load by the cancelling date, they shall notify the Charterers thereof without delay stating the expected date of the Vessel's readiness to load the day she is stated to be expected ready to load, Charterers have the option of cancelling this contract, unless a cancelling date has been agreed upon and asking whether the charterers will exercise their option of cancelling the Charter Party, or agree to a new cancelling date. • Such option must be declared by the Charterers within 48 running hours after the receipt of the owners' notice. If the charterers do not exercise their option of cancelling, then this Charter Party shall be deemed to be amended such that the seventh day after the new readiness date stated in the Owners' notification to the Charterers shall be the new cancelling date.

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