Liability in Time and Voyage
Charterparty
IN THIS ISSUE:
Written by Mr. Valentins Abasins, Senior Claims Executive and
Mr. Max Korndoerfer, Claims Handler
Introduction
1
2
5
Introduction &
Differences in
Charterparty
Liabilities
Conclusion &
Contact Details
BE&O P&I has recently experienced a number of requests from our Assureds regarding the
burden of liability in time and voyage charterparty. In many instances the relevant parties are
unaware of the extent of their liabilities following a maritime accident; whether it is personal
injury, collision, damage to or loss of cargo, or any other unfortunate event.
Under English law, the terms and conditions of any given charterparty are subject to the freedom
of contract principle, i.e. the parties may agree on almost everything and any legal terms they
like. In both voyage and time chartering the relevant parties, shipowner and charterer, are free to
allocate their responsibilities and liabilities as they find appropriate and commercially necessary.
It is imperative, however, for the parties to understand their burden of liability in case of an
accident in order to avoid double insurance or having no insurance at all. This article aims to
highlight charterers’ and shipowners’ as well as P&I clubs’ role in this context and contains
basic differences between time and voyage charterparties, including the respective allocation
of liabilities.
1. Differences Between Time and Voyage Charterparties
A charterparty is a contract between two parties for either hiring the service of a ship for an
agreed period of time to carry a number of cargoes, or for a single voyage to carry a number of
cargoes from port A to port B. The two parties to the charterparty are the owner of the vessel
and the charterer. The owner may be the actual registered owner of the vessel or he may be the
“demise” owner, having hired the vessel from the real owner on a long-term basis (this is also
called a demise or bareboat charterparty). The charterer may use the vessel to carry his own
cargoes or to carry cargo on behalf ofothers. In the following, the main differences between a
voyage and a time charterparty will be described.
Issue 2013/17
A time charterparty is a contract to hire the service of a vessel for an agreed period of time.
The charterer’s payment to the owner for that service is called hire and entitles him to issue
voyage orders to that vessel. During the period of a time charter, the charterer is responsible for
all operational costs including bunkers, port expenses, pilotage and stevedoring costs. While
the owner retains possession of the ship he is still responsible for the non-operational costs
including crew, supplies and insurance premiums.
In return to the charterer’s obligation to pay the hire to fulfil the
requirements of a time charterparty, the shipowner is obliged to
deliver the agreed vessel at the pre-arranged geographical position
and in a good seaworthy condition. The vessel has to comply with
her description in the charterparty. Should the vessel not match
that description, the charterer will be able to claim damages. The
charterer also has a possibility to cancel the charterparty if the
actual condition of the vessel differs significantly from the vessel’s
description in the charterparty, because the main element of the
charterparty has been compromised.
discharging operations, the charterer is normally responsible for the
quantity and quality of the cargo.
This part of the article will outline different types of liabilities that
shipowners and charterers may face in case of various types of
accidents. This analysis will come under the P&I’s umbrella.
A voyage charterparty, compared to the time charterparty, is an
agreement where the owner performs a designated voyage in return
for the payment of freight. All operational and non-operational costs
remain with the shipowner. Usually the charterer is responsible and
pays for cargo handling.
Besides the charterer’s obligation to pay freight for the service of
shipment to perform a voyage charterparty, he is also obliged to
actually provide the cargo. The consequences of the charterer’s
failure to provide the cargo are either damages for detention or
demurrage. Should the charterer be unable to provide a full and
complete cargo, the shipowner is entitled to demand a “deadfreight”.
Comparing both types of charterparties, it is important to notice
that there is a difference in the allocation of risks. Under a voyage
charterparty, payment of freight is calculated in accordance with
the amount, usually expressed in metric tonnes, of cargo loaded
on board. All delays during a voyage charterparty lower the value of
the received freight. Therefore, the risk of delay falls on the owners.
An exception is the time during loading and discharging operation.
To the contrary, under a time charter, the risk of delay falls on the
charterer. The received payment of hire is calculated in accordance
with time in which the charterer has the right to issue voyage orders.
2. Charterer´s and Shipowner´s Liability
In most time and voyage charterparties, the charterer is obliged to
indemnify the shipowner against third party liability claims if such
claims result from charterer’s breach of the charterparty, or originate
from charterer’s activities and responsibilities when chartering the
vessel.
In fact, when engaged in time and voyage chartering, a charterer will
need to have a standard P&I cover for almost the same risks that are
usually insured under owner’s standard P&I cover. This is because
the charterer may be directly liable to third parties either in contract
or in tort.
Sometimes a charterer will want to relieve himself from liability by
means of shipowner’s P&I cover if it is stated in the charterparty
that the charterer can benefit from shipowner’s P&I cover. It should
be noted that such clauses are not enforceable because P&I insurer
is not a party to this contract and will not be bound by its terms.
Hence, the charterer will be left without any P&I cover.
Although many standard-form charterparties exist and are constantly
updated, parties normally agree to amend certain clauses to serve
their commercial needs. It is also common in the industry to insert socalled “rider clauses” that are additional typewritten clauses drafted
by the parties. These amendments as well as “rider clauses” could
lead to ambiguities and inevitable disputes. Thus, parties should be
very careful in amending any standard-form charterparty’s clauses.
Generally, when performing voyage charterparties, allocation of
liability differs between charterer and shipowner. While the risk
for commercial operation of the ship is borne by the shipowner,
decisions and responsibilities concerning how, when and where the
cargo is loaded are shared between both parties. During loading and
2.1. Time Charterparty and Bills of Lading
There is an important relationship between time charterparty and
Bills of Lading (B/L). Under most time charterparty forms B/L will be
issued by the shipowner, charterer or by their agents to the shipper.
If the charterer is not the cargo owner, then two contracts of carriage
may exist at the same time. Consequently, the charterparty will be
the contract of carriage between the charterer and the shipowner;
whereas the contract of carriage between the shipper (or cargo
owner) and the carrier (shipowner, but could be the charterer),
is evidenced by the B/L. All of the above could lead to legal
complexities and result in disputes and prolonged litigation.
It is usual for a time charterer to issue B/L on behalf of the Master,
thus making those B/L the shipowner’s B/L, despite being issued by
the charterer. It should be noted that under the B/L the shipowner
may be exposed to greater liabilities than under time charterparty,
where parties may agree on different clauses and exclusions limiting
their liabilities. The charterer may insist that the Master shall issue
clean B/L and the charterer, in turn, promises to indemnify the
shipowner in case of a loss, arising from complying with this order
(e.g. BIMCO Uniform Time Charter 1939 (BALTIME 1939), Clause 9
for dry cargo; Shell Time Charter Party (SHELLTIME 4), clause 13,
for tanker trade). However, the Master is not obliged to do so if he
knows that the information provided by the charterer or shipper in
the B/L is incorrect, as to apparent order and condition of the cargo
loaded.
It was clearly stated in Brown Jenkinson v. Percy Dalton1 that
knowingly issuing clean B/L when a claused B/L should have
been issued will amount to fraud and any indemnity provided by
the charterer or shipper will not be enforced. Such information is
misleading as well as deceiving to innocent cargo receivers as
well as creditors under respective letters of credit who rely on the
B/L for the description, condition and quantity of the cargo being
purchased. It will also prejudice the respective party’s P&I cover.
GENCON clause no. 5
Last but not least, under some charterparties the shipowner might
be obliged to deliver cargo without presentation of the original B/L
and at a port other than that stated in the respective B/L. It should
be emphasized that the shipowner does it at his own peril and
prejudices P&I Cover under BE&O P&I Rule 11.8.3. iv.
Loading / Discharging
(a) Costs / Risks.
The cargo shall be brought into the holds, loaded, stowed and /
or trimmed, tallied, lashed and / or secured and taken from the
holds and discharged by the Charterers, free of any risk, liability and
expense whatsoever to the Owners. The Charterers shall provide
and lay all dunnage material as required for the proper stowage and
protection of the cargo on board, the Owners allowing the use of all
dunnage available on board. The Charterers shall be responsible for
and pay the cost of removing their dunnage after discharge of the
cargo under this Charter Party and time to count until dunnage has
been removed.
Normally, it is then the charterer who appoints the stevedores and
he is therefore to be held liable should any damage to the cargo
have occurred due to bad stowage, defect lashings or securing. In
this respect, clause no. 2 can be interpreted as a conjunction to
clause no. 5 in reference to the risks and liabilities.
GENCON clause no. 2
Owners’ responsibility clause
The Owners are to be responsible for loss of or damage to the goods
or for delay in delivery of the goods only in case the loss, damage or
delay has been caused by personal want of due diligence on the part
of the Owners or their Manager to make the Vessel in all respects
seaworthy and to secure that she is properly manned, equipped and
supplied, or by the personal act or default of the Owners or their
Manager. And the Owners are not responsible for loss, damage or
delay arising from any other cause whatsoever, even from the neglect
or default of the Master or crew or some other person employed by
the Owners on board or ashore for whose acts they would, but for
this clause, be responsible, or from unseaworthiness of the Vessel on
loading or commencement of the voyage or at anytime whatsoever.
It is seen in the tanker trade that allocation of risks and liabilities
concerning cargo damage during loading and discharging operation
is more balanced between owner and charterer. The popular and
versatile used charterparty ASBATANKVOY (Association of Ship
Brokers & Agents Tanker Voyage Charter Party) for all kind of tanker
vessels imposes a clear regime of responsibility for cargo.
2.2. Damage to Cargo and Personal Injury
There are a number of situations when the charterer, instead of the
shipowner, may be held liable for damaged or lost cargo.
First, if the charterer is named as the carrier under his own B/L
(in some jurisdictions the charterer may be the carrier under a
shipowner’s B/L) he may be directly liable to the cargo owner if
cargo is damaged or lost during voyage.
Second, under BALTIME 1939, clause 9, the shipowner will not be
responsible for shortage, mixtures, marks, nor for number of pieces
or packages, nor for damage to or claims on cargo caused by bad
stowage or otherwise. Similar wording is found in New York Produce
Exchange (NYPE 1946) and NYPE 1993, where clause 8 (a) states
that it is the time charterer who is responsible for all cargo handling
such as loading, stowing, trimming, [etc.] of the cargo. In this case
the charterer bears the burden of loss.
In view of voyage charterparties and the often used FIOS terms (free
in and out, stowed and trimmed), the charterer is responsible for the
whole loading and discharging operation. The referred FIOS clause
is described in clause no. 5 of the widely used voyage charterparty
GENCON (BIMCO Uniform General Charter as Revised 1922, 1976
and 1994).
Asbatankvoy clause no. 10
Pumping in and out
The cargo shall be pumped into the Vessel at the expense, risk and
peril of the Charterer, and shall be pumped out of the Vessel at the
expense of the Vessel, but at the risk and peril of the Vessel only so
far as the Vessel’s permanent hose connections, where delivery of
the cargo shall be taken by the Charterer or its consignee.
Both the owner and the charterer share the risk for loading and
discharging operation as well as the respective costs, presuming
the vessel’s permanent hose connection were used during the
discharging operation.
Despite the above described allocation of liabilities between owners
and charterers with regards to voyage charterparties, it is important
to note that in case of a cargo claim the claimant will most likely
try to hold the owner responsible for the damage, as the charterer
might not have any assets that the claimant would accept as
security. Therefore, it is common practice that the claimant will try
to arrest the ship. After the settling of the claim, the owner could be
entitled to a FD&D claim against the charterer due to the contractual
liabilities between owners and charterers.
When carrying oil or LPG/LNG cargoes, the charterer should pay
particular attention to loading procedures since incorrect loading
may change cargo’s substance, - thus making it unfit for the ultimate
receiver (e.g. too low or too high temperatures may change cargo’s
specification). Consequently, failure to observe proper loading
procedures may lead to substantial cargo claims and may result in
the vessel’s arrest or detention.
It should be noted that bad stowage, loading or wrongful declaration
of cargo (in case of dangerous goods e.g. explosives) could lead to
other claims such as damage to the hull, personal injury of crew or
stevedores, property damage, pollution damage (in case of carriage
of oil, LPG/LNG cargo) and even wreck removal. These standard
form charterparties specify that the charterer will be responsible to
indemnify the shipowner for such damage or injury. Even though it
is the shipowner who takes care of the crew’s injuries and will be
ultimately reimbursed by the P&I Club, the shipowner will definitely
have a right of recourse against the charterer in this type of claim.
2.4. Safe Port or Safe Berth
Safe port or safe berth provision is the clause seen in most time
charterparties. For example, SHELLTIME 4, clause 4 (c), obliges the
charterer to exercise due diligence in ensuring that the vessel is only
employed between and at safe places. NYPE 1993 clause 4, in turn,
provides that the vessel shall be employed in such lawful trades
between safe ports and safe places.
If the vessel, its cargo and/or crew have suffered damage because
of the charterer sending the vessel to an unsafe port or berth in
contravention of this clause, the charterer will most likely be liable
for all the direct and consequential losses.
2.3. Pollution
Under the International Convention on Civil Liability for Oil Pollution
Damage and the International Convention on Civil Liability for Bunker
Oil Pollution Damage, it is the owner of the vessel who is ultimately
responsible for an oil or bunker spill. When pollution occurs, port
authorities will most likely blame the owner of the vessel in the first
instance. However, both conventions explicitly state that nothing
in these conventions shall prejudice any right of recourse of the
shipowner against third parties.
In certain types of situations it is the charterer who might be
responsible for oil or bunker pollution and the shipowner will
most likely be successful in exercising his right of recourse. For
example, in BALTIME 1939 clause 4 and NYPE 1993 clause 7,
it is stated that the charterer shall provide and pay for fuel oil.
However, off-specification fuel may cause damage to the vessel’s
main and auxiliary engines, which can lead to many problems and
potential accidents including, but not limited to, fire, explosion (and
subsequent bunker and oil pollution), personal injury, finding place
to discharge off-specification bunkers, losses from slow speeding
and so on.
Allocation of liabilities with regards to pollution claims under a
voyage charterparty is mainly on the side of the shipowner. However,
the charterer may face liabilities for pollution claims when these
are directly caused by loading or discharging operations. In tanker
trade this might become the case. Furthermore, it is very likely that
similar to cargo claims, as the charterer might not have any assets
to secure the claim, the claimant will try to blame the owner for the
occurred damage and try to arrest the ship.
2.5. Penalties and Fines
Time charterer may be held liable for pollution damage resulting
in penalties and fines imposed by authorities owing to bunkering
operations if the spill occurred because of the vessel that was
supposed to deliver bunkers as contracted by the charterer.
Furthermore, both time and voyage charterer may find themselves
liable for fines levied for breach of immigration laws and regulations
(e.g., stowaways, especially in container trade); for shortage or for
over delivery of cargo (e.g., “paper” shortage) since it is the charterer
who is responsible for the cargo; for fines imposed in relation to
violations of MARPOL Annex VI on sulphur oxide and nitrogen
oxide emissions from vessels by virtue of supplying off-specification
bunkers.
2.6 General Average, Salvage and Special Charges
According to the York-Antwerp Rules 1994 (revised 2004), all parties
to a sea venture proportionally share any extraordinary losses and
expenditures resulting from a voluntary sacrifice of a part of the ship
or cargo to save the whole adventure in an emergency. The term
“all parties”, normally contains the shipowner and the cargo-owner.
However, also the time-charterer who put his own bunkers on
board the vessel may be faced to contribute to the general average
expenses. Therefore, the shipowner, the time-charterer as well as
the voyage charterer (presumed he is also the cargo owner) may
have to pay general average costs.
Conclusion
Both shipowners and charterers should be aware of their exposure
and liabilities in case of a maritime accident. As can be seen from the
above, great care must be taken when amending any standard form
time or voyage charterparty. Different standard charterparty forms
impose different obligations, exclusions and limitation clauses.
Sound legal and practical advice is an absolute necessity in cases
of amending or complementing standard form charterparties.
BE&O P&I Standard P&I Cover for Shipowners and
Charterers
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operators and managers of the vessel. The Standard Cover provides
intensive support for the loss prevention, claim defence and claim
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claim arises as well as at preliminary loss prevention stage.
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For more information on BE&O P&I Standard P&I Cover please visit
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In many instances the shipowner will be the first one to blame,
because the vessel (usually) is a valuable asset which can be
arrested. Arrest of the vessel, which in some jurisdictions is a
rather simplified process, can lead to great losses and tremendous
financial exposure. Absence of P&I cover for either of the parties
involved could be detrimental to the company’s financial and market
standing.
1
Brown Jenkinson & Co., Ltd. v. Percy Dalton (London), Ltd., [1957] 2 Lloyd’s Law
Reports 2.
Should you have any queries or require any
further information on the above, please contact:
Capt. Andreas Efthimiades
Director of Claims
Email: andreas@dgsmarine.com
Office: +357 (0) 253 491 00
Mob: +357 (0) 99 478 854
Ms. Tina Liisa Ohlhaber
Director & Company Secretary
Email: tina@dgsmarine.com
Office: +49 (0) 40 70 299 820
Mob: +49 (0) 170 22 84 764
Capt. Nigel Moniz
Divisional Director
Email: moniz@dgsmarine.com
Office: +44 (0) 20 7283 4230
Mob: +44 (0) 794 410 8174
Ms. Sanndhya Pillai
Director
Email: pillai@dgsmarine.com
Office: +91 (0) 226 759 7400
Mob: +91 (0) 98 2088 3074
Mr. Nicolas A. Skinner
Divisional Director
Email: n.skinner@dgsmarine.com
Office: +45 (0) 55 77 59 19
Mob: +45 (0) 25 77 98 40
Office: +44 (0) 207 929 0939
Mob: +44 (0) 796 127 4386
Capt. Sirpreet Kahlon
General Manager, Dubai
Email: sirpreet@dgsmarine.com
Office: +971 (0) 44 56 59 09
Mob: +971 (0) 50 141 88 68
Ms. Anna Hien
General Manager, Vietnam
Email: anna-hien@dgsmarine.com
Mob: +84 (0) 907 13 41 79
www.dgsmarine.com