Exploring Charterparty Contracts in Maritime Goods Transport

Charterparty contracts are central to maritime transportation, governing the relationship between shipowners and charterers. These contracts outline specific terms for carriage of goods by sea, including the liabilities and obligations of involved parties. The essay examines key components like seaworthiness, where shipowners must ensure their vessels meet safety standards before commencing a voyage. Additionally, it explores how these agreements interact with international shipping laws such as those involving bills of lading, which serve as documents of title and receipt for goods transported. By analyzing different types of charterparty contracts—voyage and time charters—the essay highlights the unique rights and responsibilities they impose on carriers and shippers. Understanding these elements is crucial in navigating the complex landscape of maritime law, ensuring compliance with international standards, and safeguarding against potential legal disputes in global shipping operations.

LAW

CARRIAGE OF GOODS BY SEA
Carriage of Goods by Sea Act (COGSA) encompasses statutory laws and provisions that
govern rights as well as responsibilities of cargo shippers and ship owners. Charter party is a
contract made between the owner of the ship and charterer for the purpose of hiring either an
entire vessel or principle part for voyage or its series for a definite period of time. The aim of the
assignment is to investigate all the statutory laws and principles related to the charter party in
Carriage of Goods by Sea Act. In this, different categories of charterparties that are voyage
charterparty, time charterparty and bareboat charterparty will be compared and contrasted.
Moreover, implied obligations on the charterer that is imposed by law will be thoroughly
examined. All the provisions will be evident with a case study and different legal cases.
Charter party
In Carriage of Goods by Sea Act, bill of lading and charterparty contract are widely used
contracts. Former is just a receipt that evident that goods had been loaded on the board and can
be used as evidence in legal disputes. It imposes legal contractual liabilities on the carrier for the
safe custody of goods before its delivery (Carriage of Goods by Sea, 2016). By contrast,
charterparty is a maritime contract between charterer and shipowner for hiring of either a ship for
carrying cargo or passengers or a yacht for the purpose of pleasure. As per the Act, there are
three categories of charterparties that are enumerated below:
Voyage charterparty: It is a contract wherein ship owner agrees to transport a fully
shipped cargo that is owned by another person, thus, vessel is chartered for specified voyage. In
such situation, charterer has authority to have shippers’ goods between all the nominated parts
(Wilson, 2008). In this respect, vessel use starts, when owner declares ready on arrival and
finishes at the point of departure.
Time charterparty: As name itself, vessel is chartered for a fixed time period, in which, it
is under the control & supervision of shipowner. Charterer pays monthly hire charges normally
in advance. Charterer is obliged to deliver the vessel on agreed geographical place.
Charterparty by demise: It is also called bareboat chartparty wherein entire vessel is
leased by shipowner to charterer who is accountable to operate it as it is his own vessel. It is the
responsibility of charterer to crew, manage and maintain ship during the period and follow all
such obligations being an owner called, disponent owner.
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Unlike bill of lading, it is not necessary for charterparties to mandatory follow Hague and
Hague-Visby Rules and also not subjected with the statutory obligation under COGSA m until
and unless a bill of lading has been issued and given to an innocent third party such as to
consignee. In a case, Companhia Siderugica Paulista (COSIPA) concluded a Gencon-form
voyage charterparty with disponent owner, Fednav for carriage of steel coils from Brazil to
Canada and the USA. COSIPA issued a letter of indemnity to Fednav to hold him harmless
against any claim of damages to the coils. T. Co. Metals sued Fednav and shipowner for the
condensation damage to the coils. Defendant invoked subsection 46(1) of Marrine Liability Act
against COSIPA in Federal court under LOI and Voyage charterparty. Prothonotary hed the
decision that voyage charterparty was a contract for the carriage of good by water under MLA.
However, appellant authority, Justice Scott reversed the decision and stated that both
Hague/Visby rules and Hamburg rules international conventions do not include charter parties
and in the given case, COSIPA had relationship with Fednav under subject to Voyage
charterparty. Court held the decision that it is not logical to invoke sec 46 of MLA to grant more
sue rights in Canada than Hamburg Rules (Is a charterparty a contract for carriage of goods by
water?, 2011).
Currently, standard set of clauses in charterparty includes following:
Introductory clause: It includes terms and conditions like vessel conditions, tank
cleanliness, contracting parties, agreed voyage and vessel. It also express cargo capacity in terms
of deadweight tonnage means that maximum permitted weight of cargo that the vessel can
loaded.
Cargo clause: It presents details about type and quantity of cargo that are under the
charter’s liability for deadfreight. These clauses are trade-specific like cargo retention, cargo
heating, oil washing, pumping, and others (Standard sets of clauses in voyage charterparty
contracts, 2016).
Freight clause: This clause specifies agreed freight charges, measurement unit along with
the time as well as payment place. It may be necessary to make advance payment of some freight
charges and rest at the time of delivery.
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ETA and NOR clause and Demurrage/Laytime: It specifies that whether a charterparty is
a port charter or berth. It also presents that amount of time for cargo loading and unloading
(Thomas, 2017).
Bill of Lading clause/Employment and Idemnity clause: It presents that how Bill of lading
will be present and signed by Master. The document also clarify the obligation of environment to
indemnify owner against consequences or liability which may take place.
Eligibility clause: It stipulates compliance requirement with international laws, trade
specific regulations, law and arbitration and others.
Despite this, a charterparty may contain following clauses, mentioned below:
Bunker clause: In this, charterer need to pay for fuelling oil in vessel’s bunkers and
afterwards, owner pay for all fuel oil in the vessel’s bunkers at redelivery port stated in the OW
Bunker test case.
Ship clause: Shipowner clearly states that ship will be seaworthy and appropriate to
travel to the country.
Ice clause: This clause is inserted when vessel is legally bound for a port or ports.
Lighterage clause: This clause is included into charterparty that indicates discharge point
in certain specified range (Abuelenin, 2017).
Negligence clause: It is one of the important clause that is use to exclude the liability of
carrier or shipowner against all the losses and damages that are the result of neglecting behaviour
of master, pilot, servants or mariner.
Ready berth clause: It stipulates that laydays will started when the vessel reached the
point of discharge. Such clause protect the owner of the ship against any delay (Thomas, 2017).
When it comes to transportation of the goods, charter party contract plays an important role
in it. It is basically the maritime contract which takes place between a charterer and shipowner. It
takes place with the aim to hire a ship for carriage of passenger or cargo or a yacht for certain
purpose of trading or pleasure. Hence, the contract is concluded by the two parties involved in it.
The charter parties are not subjected to come under the application of The Hague Visby rules and
the Hague. The statutory obligations of charter party are included in the Carriage of the Goods
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by The Sea Act 1992. Hence, in the case of independent parties with the unorganized sector, the
bargaining strength of the involved parties become high. Hence, the price ultimately depends
upon the factors of supply and demand. It is normally governed by ordinary law of contract.
As per the case law Caffin v Aldridge [1895] 2 QB 366; [1895] 2 QB 648, it stated that the
methods of deliver and the provisions included in it have high dependence on the construction of
charter party. If the charter has been hired in the full carrying capacity, then in that case with the
exclusion of carrying goods belonging to other party, then in that case, contention is strongly
supported by the law. However, if the case, is where the voyage is carrying the shipment of more
than one party, deviation in the routes can be made after making appropriate consulting with all
the parties to which charter is involved (Hill, 2017).
There are several main implied obligations that can be imposed on the charter party. First
obligation is to nominated safe port. The other obligation is not to ship goods which are
dangerous in nature. As per the provisions of safe port, the charter must mention in the contract
that the ultimate goods will be delivered by it on the safe port and deliver them to the receiver
(Dangerous Goods, 2016). Moreover, the other party must be responsible to pay freight for the
delivered goods and services. As per the provisions of dangerous goods, it is the absolute duty of
charter to not to deliver the shipment which are dangerous in nature without giving any notice
that they are dangerous in nature. In case if any difficulty can arise during the shipment, it must
be known to both the parties. Mustill J in The Athanasia Cominos [1990] 1 Lloyd’s Rep 277 at
pp.283-284 mentioned regarding the risks that is borne by the shipowner contracts and those
which do not comes under his periphery of bearing risk. As per the verdict being rendered in The
Giannis NK [1998] 1 All ER 495, at p.502 article IV, r 6 introduced a free standing provision
which deals with the specific subject matter, where strict liability is imposed on shippers with
respect to the shipment of dangerous goods, irrespective of the neglect or fault that has been
performed on his part (Papageorgiou, 2017).
The case can be considered of two parties where one party requires to deliver the
shipment which already have beetle infestation. Both the parties are aware of it and the cargo
party have already disclosed the facts regarding the same to the ship owner. In this case, it is the
duty of the charter party to not to deliver the goods which are dangerous in nature. Moreover, in
terms of obligations being put on the charter party, it is his absolute responsibility to not to
deliver these goods to other port.
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Considering the above mentioned case scenario and decision being taken in Effort Shipping
Co Ltd v Linden Management Sa, the liability of the shipowner is not restricted to knowing
regarding the intensity of loss of dangerous goods, but rather act upon it in the nature where one
can refuse to the deliver the goods to the ultimate destination (Mota, 2015). In the above case,
the cargo is contaminated and it is known to the shipowner as well. The shipowner can be found
guilty in case of delivery of infected consignment, if the shipment is made by the party without
considering the same.
The main responsibility of the charter is to upkeep, preservations and safety of the vessel
so that it can ultimately be transferred safely to the final party. It is the responsibility to survey
the vessel before delivering it. It can be done on the sample basis sample selection as well. The
material is tested to assess whether it is fit for delivery or not. The same is done in the process of
redelivery as well. It is also the duty of charterer to maintain the ship during the charter services.
The legal responsibilities of charterer come under the periphery of disponent owner (Nikaki,
2016). The disponent owner is held liable for the damages being done to the consignment. In this
case, the party is held on default for carrying out his obligation being mentioned in the contract.
It is important for the parties to tackle the issues of Doctrine of Stages. Hence, it is the
duty of sea owner to make sure that the ship is seaworthy at each stage of commencement of the
stage of transferring cargo. Hence, in the case of beetle infest as well, it is the duty to understand
the seaworthiness of the ship and cargo in it (Qouteshat, 2016).
From the above essay, it can be concluded that, carriage of the goods by sea is a
conglomeration of explanations of rights and obligations of the duties to be fulfilled by shipper,
consignee and carrier of marine cargo. The essay outlines regarding rights and responsibilities of
charterer with respect to shipment. Moreover, a case has been discussed where shipper has got a
consignment with beetle infest. The provisions mentioned in it helps in ascertaining that whether
the shipper must deliver the same or not.
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REFERENCES
Books and journals
Abuelenin, A.H.M., 2017. Development of Maritime carrier liability for goods transported by
sea. Development. 3(3).
Hill, D. J., 2017. CMR: contracts for the international carriage of goods by road. Routledge.
Mota, C. E., 2015. Validity and Effects of the Incorporation by Reference of Arbitration
Agreements in International Maritime Arbitration: Current Situation and Future
Trends. Rev. Drept Mar.. 5. p.64.
Nikaki, T., 2016. International Recent Developments: United Kingdom. Tul. Mar. LJ. 41. p.563.
Papageorgiou, C. O., 2017. The incorporation of a charterparty arbitration clause into a bill of
lading.
Qouteshat, O. H., 2016. The Enforceability of the Unfair Arbitration Agreement in Consumer
Disputes before Dubai Courts.
Thomas, R, 2017. The carriage of goods by sea under the Rotterdam Rules. Taylor & Francis.
Wilson, J.F., 2008. Carriage of goods by sea. Pearson Education.
Online
Carriage of Goods by Sea. 2016. [Online]. Available through: <
http://www.lawandsea.net/COG/COG_Charterparty.html>.
Is a charterparty a contract for carriage of goods by water?. 2011. [Online]. Available through:
< https://www.lexology.com/library/detail.aspx?g=18299330-380f-4f0e-862c-dea8df8b0>.
Standard sets of clauses in voyage charterparty contracts. 2016. [Online]. Available through: <
http://www.lawandsea.net/CP_Voy/Charterparty_Voyage_4StandardSet.html>.
Dangerous Goods. 2016. [Online]. Available through <
http://www.lawandsea.net/COG/COG_Dangerous_Goods.html >.
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