Charter Party

A charter party is a legally binding contract between a shipowner (or disponent owner) and a charterer that governs the use of a ship or cargo space for a specified purpose and period. The term derives from the Latin carta partita — a divided document where both parties retained a copy.

Answer in Brief

A charter party defines: who hires the ship, for what, for how long, at what freight rate, and under what conditions. Every commercial voyage on a tramp ship is governed by one.

Types of Charter Parties

Voyage Charter

The shipowner provides the vessel to carry a specific cargo from a named port to a named port in exchange for freight (payment per tonne of cargo carried or as a lump sum).

• Owner pays for vessel operating costs (crew, bunkers, maintenance)
• Charterer pays for port costs (usually — depends on terms)
• Freight is typically payable on delivery of cargo
• Common in bulk carrier trades

Key terms: Laytime, demurrage, dispatch, laycan

Time Charter

The shipowner provides the vessel and crew to the charterer for a fixed period in exchange for daily hire rate (in US dollars per day).

• Owner pays for crew and vessel maintenance
• Charterer pays for bunkers and port charges
• Charterer directs the ship commercially (routes, cargoes within contract limits)
• Owner retains navigational control through the Master

Key terms: Off-hire, redelivery, bunkers on delivery/redelivery

Bareboat Charter (Demise Charter)

The charterer takes full possession and control of the vessel — including crew management. They become the disponent owner.

• Charterer pays all operating costs including crew, maintenance, insurance
• Used in vessel financing arrangements and long-term fleet building
• The bareboat charterer can sub-charter the vessel (voyage or time)

Contract of Affreightment (COA)

Not a single voyage but a commitment to carry multiple cargoes over a period, at agreed freight rates, using ships to be nominated.

Key Clauses Every Seafarer Should Understand

Laytime: The time allowed to the charterer for loading and discharging. Defined in the charter party as hours or days.

Demurrage: Penalty payable by charterer to shipowner if loading/discharge takes longer than the agreed laytime.

Dispatch: Bonus payable by shipowner to charterer if loading/discharge is completed faster than laytime allows.

Freight: Payment for carriage of cargo. Can be prepaid (risk stays with charterer if ship sinks) or payable on delivery (risk with shipowner).

Safe port/safe berth clause: Charterer warrants the nominated port/berth is safe for the vessel.

Off-hire: Period when the ship is not performing for reasons attributable to the shipowner (breakdown, drydock, detention). Hire stops during off-hire.

Seafarer Implications

As a ship’s officer, you don’t negotiate charter parties — but they directly affect your operations:

• Laytime pressure: The commercial department is under pressure to complete cargo operations within laytime. This can create pressure on officers to rush cargo operations. Safety always takes priority — you must not compromise cargo securing or stability for laytime savings.
• Port orders: In time charter, the charterer directs ports. If the Master considers a port unsafe, they can refuse. The charter party safe port warranty supports this.
• Cargo claims: If cargo is damaged, the charter party defines liability between shipowner and charterer. Your cargo survey reports and logbook entries are evidence.

Frequently Asked Questions

Q: Does the crew see the charter party? The Master should have access to relevant parts of the charter party, particularly voyage instructions, cargo clauses, and any special requirements.

Q: Who employs seafarers in a time charter? The shipowner — even though the charterer directs commercial operations. Your employer is the company whose flag is on your CDC/employment agreement.

Q: What is a sub-charter? A time charterer can itself charter out the vessel to another party (sub-charterer) for a shorter period or a voyage.

Want to understand how charter party terms affect your specific voyage or cargo operations? Chat with SailorGPT