Maritime Law and Charter Parties - Essay Example

?Maritime Law/ Charter Parties (The Question is written at Assignment Criteria Part) Introduction: The Law of International Trade interprets the exchange of commodities, resources, and service, crossing the boundaries of nations on regions. The concept of foreign exchange obtained its primary momentum from the trade rebellion in the late 19 century. Voyage and time charters are the main types of contract that deal with “carriage of goods”1 by sea and they explain commercial requirements of differing parties. “Charter party, in its turn, is a contract concluded between the ship-owner and the charterer with the purpose to employ an entire vessel or some principal part of her for a voyage or series of voyages or for a period of time (see Caffin v Aldridge [1895] 2 QB 366; [1895] 2 QB 648 for discussion on hiring of entire capacity of ship)”2 Here, I am employed by a company which is in the process of negotiating a time charter of vessels for the ship owner. My duty is to give an advice about the Paramount Clause, and differences among them. “There are several standard agreements, such as box time, or New York Produce Exchange (NYPE). Box time is favored more than NYPE, which dates to the 1920s and contains archaic language”3 Time Charter Parties: According to the provisions stated in “the unaltered Time Charter Party Outlines, it is the Charterer (rather than the possessor) who is primarily in charge of loading, storing, and discharging the load. Nevertheless, the Master is always entitled to supervise those operations and there may be certain situations where responsibility shifts back to owners”4 In contrast, not odd for Charter parties to alter to make the master responsible for storing, loading, and finally discharging procedure and, in those cases, the liability is reassigned, even where the stevedores are occupied by the Charterer. “At the close of the 19 C, the United States Congress enacted the Harter Act, 46 U.S.C. §190, et seq. (1893), to protect American shippers from comprehensive limitation of liability clauses found in bills of lading issued, primarily, by British liner companies carrying American goods to England”5 In the case of time charter, it is the hiring of a ship for a particular period of time; the owner still controls the ship, but at the same time the charterer chooses the ports and directs the ship where to go. For Chartering out any of the ships by shipping and trading organizations, BPCL, empanelled dealers registered with BPCL, and oil majors, will be intimated on the list of all positions, cargo grades, trading part, laycan etc. Negotiations in the business reveal that, “Based on the offers received, BPCL may carry out negotiation with the best offer. On successful completion of the negotiations the vessel shall be given on subjects to the charterer for their approval”6 Paramount Clauses: Clause Paramount is one of the most significant provisions under the Maritime law. “This typically incorporates the Carriage of Goods by Sea Act ((46 U.S.C.A. § 1300) into the charter”7 Clause paramount is a necessary provision which must be integrated in any bill of lading along with the federal law. Both time and voyage charters frequently consist of a “Clause Paramount” either in the written form or in the diversity of typed clauses which are often found at the last part of charters. The impact of such insertion can be dramatic because: 1) It will normally include the provisos of The Hague or Hague-Visby Rules (Article III Rule 8). 2) It is significant to ascertain whether the Paramount Clause is planned to integrate the Hague , Hague-Visby or other version of the Rules for example the US COGSA 1936 The declaration under this clause offers that such a bill prescribed in the clause is subject to the provisos of “the Carriage of Goods by Sea Act (46 U.S.C.A. § 1300 et seq. [1936]),” and that”8 the national legislation manages the rights, duties, and legal responsibilities arising out of the association of issuer to holder of the sea bill of lading, considering the loss or damage of goods. The purpose of a paramount clause is to guarantee that, bills of lading issued for all goods, or the cargo carried in the charter party whether it may be time charter or voyage charter are subject to the provisos of the Rules of Hague-Visby. The Hague-Visby Rules will frequently apply the allegations to allege brought by the receivers of the cargo. The jobs of the owners are in practice altered by the Hague-Visby Rules. Strictly, neither the Hague-Visby nor Hague Rules apply forcibly to charters as such Rules merely apply to “bills of lading. Though, Hague or Hague-Visby Rules are invariably integrated into charters by the medium of the “Paramount Clause”. The integration into the charter is significant to the carrier since the liability insurance and also he has from P&I club is expected to be based upon the Hague-Visby and Hague Rules. “The aim is that cargo claims will always be subject to the same uniform legal regime and that carriers will always have the benefit of the defenses and limitations contained in the Rules”9 Loss of time in the party time may come in the “off-hire clause”10 and also occur from the breach of the owner. As it may fall in to the owner’s breach, the owner is covered by “indemnity”11 Types of Paramount Clauses in Time Charter: Various clauses are incorporated in every charter regarding the mode of payment, time of delivery, allocation of risks etc. It would be beneficial for the time charter and for the time chatterers, if the time charter were to contain a Paramount Clause of a particular kind. In “Santa Martha Baay Scheepvaart & Handelsmaatschappij N.V. v Scanbulk A/S (The "Rijn")”[1981] 2 Lloyd’s Rep. 267 it is stated that, apart from preventing the full working of the vessel, only those clauses qualify for consideration under clause 15 of NYPE time charter party form, which are fortuitous, whereas speed reduction due to hull fouling during 3 months inactivity at the loading port, was the natural result of the ship complying with the charterers' orders and was not a "defect in hull"”12 “Speed and Consumption Parties Clauses”13 The description of the ship includes the name of the ship, possession, flag, and capacity of the ship, speed, deadweight, fuel consumption, flag and class. It is particularly regarding the statements of fuel consumption and speed. In addition, the time charterer is in charge of the proviso of the bunker fuel, and as an effect, the ship’s consumption has a strong impact on the financial outlay of the charterer. It is the one of the significant parts of the contract. The Owners of the ship agree to permit and the Charterers consent to hire the ship from the time of release for a period of mentioned trading confines. “The carrier shall be bound due diligence to (a) Make the ship seaworthy; (b) Properly man, equip and supply the ship; (c) Make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation”14 “Safe Port Clauses”15 Majority of the charter parties, consist express undertakings that the ship shall be used by the charterer in safe ports. The clause specified delivery port to discharge the particular cargo. “The vessel shall be employed in such lawful trades between safe ports and safe places within excluding as the Charterers shall direct”16 Delivery Clauses” 17 The ship shall be placed at the discarding of the Charterers on its delivery shall be prepared to obtain cargo with fresh- swept, and in all way fitted for normal cargo service, having water counterweight and with adequate power to function every cargo- handling gear at the same time. The owner of the ship must deliver the ship by the specified delivery date. The owner of the ship can agree to provide an anticipated readiness to load in good faith and on sensible grounds. “Where a charter party specifically names the loading port or berth, and contains no warranty as to the safety of the port or berth can be implied into the charter party”18 1) “Canceling Clauses” 19 Charter parties include this clause in which the charterer is specified the right to revoke the charter party must he so desire. If the ship is not delivered the cargo by the specified date.  2) Maintenance Clauses: Every kind of charter party includes maintenances clause. The owner of the ship shall give and pay for every provisos, salary, consular shipping, and releasing fees of the team during the service period. “The contract for the Carriage of Goods by Sea often provides an express duty to provide a seaworthy vessel especially in case of charter parties, as opposed to the bills of lading, which are more likely to be subject to the Hague/Hague-Visby where the duty is already expressed”20 Inter-Club Clauses: The overall problem of determining the final liability of claims relating to cargo in the NYFE charter has led to the main mutual defense and Indemnity Insurance Associations which is known as I & P club. This club is not binding as a charterer or the owner of the ship unless it is incorporated in the charter party. This clause aims at solving the various types of problems that may arise from the unsatisfactory terms in of the clauses which is dealing with legal responsibility of the cargo claim. 3) Off-hire Clauses : In the clauses pertain occasions of time loss due to storage and/or default and/or hit of officers or squad, breakdown of, or shortage of stores, flames, or damages to hull, equipment or tools, grounding, confinement by the arrest of the ship, or confinement by average accidents to the ship or load unless resulting. “The charterers bear the burden of proof to show that the owners’ failure is within provisions of ‘off-hire’ clause” 21 In the “Leolga v. Glynn [1953]”22 case, the charterers loaded the vessel with ammunition in violation of agreement, and the ship was kept under arrest by the local authorities: consequently, the court found that the violation was the reason of the custody, and as such it couldn’t trigger the clause of off-hire .Lastly there should also be evidence of loss of time. With regard to “NYPE 1993”23 it must associate equally to the period of time for which the vessel is banned from work, and to the period of time by which the development of the charter service has been late. “In Cosco Bulk Carrier Co. Ltd. v Team-Up Owning Co. Ltd. (the “Saldanha”) [2010] EWHC 1340, the English High Court upheld a London arbitration decision that charterers were not entitled to place a vessel off-hire when detained by pirates. The court considered the facts in detail; though primarily in the context of clause 15 of the NYPE charter party”24 4) Indemnity Clauses Time charter parties normally includes indemnity clauses enabling the owner of the ship to claim against the charterer for any kind of the loss occurred as an effect of the master fulfilling with the order of the charter. The amount of safety under such clauses to the ships owner has so far completely been worked out by the judgment of court. So uncertainties subsists both regarding implied indemnities and expressed indemnities in time charter parties. 5) Bills of lading Issued Under Time Charter Parties: A bill of lading is a kind of document that is used to admit the receiving of a shipment of merchandise. It offers protection to each and every party in the worldwide trade. As a carrier, the carrier must fulfill the whole lawful as well as legal prerequisite, at the time of delivering the goods to the carrier. Long term and short term bill of lading are the two type of bill of lading. In Long form it sets out every conditions of the deal of carriage and which is planned to operate as a free-standing agreement without any reference to the conditions of any other agreement; and “short form”, purport to integrate the conditions of a charter party into the bill of lading. 6) Payment of Hire and Removal Clauses: In a time charter contract, the hire for all times has to be paid beforehand. The method of payment can be settled and agreed among the parties. It may be in every 30 days, every day or every two weeks. “Payment of hire is a primary obligation of the charterer under the terms of time charter party.”25 The charterer tolerates the risks that may happen to the ship by disbursing hire, and an absolute duty. This duty is reinforced by provisos as to the time and method of payment, of which failure to examine may entitle the owner of the ship to withdraw the contract and remove the ship from services. This right may be inclined to “anti-technicality clauses or waivers”26 Lien Clauses: This clause gives the owner of the ship the right to detain the load and sub-frieght for any sum of amount due in the charter parties which has remained unpaid. 7) Household Fuel Clauses: The NYFE is only one of the four charters which offer that fuel employ for crew propose is to be remunerated for the owner of the ship. 8) Re-delivery Clauses: The time charter party normally includes provisos setting out various circumstances for the redelivery of the ship at the end of the prescribed charter period. “Beware that even standard form contracts may be amended by the parties as with the following example, of a Baltime 1920, which was amended to read “Delivery in the Bristol Channel and redelivery in the Cape town/Lourenco Marques range for a period of one round voyage to the Kara Sea.” in Temple Steamship v Sovfracht”27 In this case, redelivery clause is not applied and so the charterer is the only person answerable to pay the rate of hire as prescribed by the contact until the re-delivery of the ship, and not the superior marketplace rate for the excess time. Conclusion: The matter of Carriage of Goods by Sea Act is indeed a complex and intricate one. The main function of the act is to guarantee security, security of maritime trade, and also to defend the interest of the parties. Various paramount clauses are incorporated in time charter to enable the easy delivery of cargo at the delivery port. Each of the clauses is different from the other and that is beneficial for the time charterers. Here I am employed by a company which is in the process of negotiating a time charter of a vessel from the ship owner. Reference List Cancellation Clause. 2012. Business Dictionary.com. [Online] Available at [Accessed on 14 March 2012] Carriage of Goods by Sea. 2007. Law and Sea. [Online] Available at [Accessed on 14 March 2012] Chapter 7.01: Carriage of Goods by Sea Act. 2002. Montserrat. Available at [Accessed on 14 March 2012] Chapter Nine: Time Charter-Parties. 2005. Print. Available at [Accessed on 14 March 2012] Clause Paramount Law & Legal Definition. 2001. USLegal. [Online] Available at [Accessed on 14 March 2012] Clause Paramount. 2012. Farlex, Inc. [Online] Available at [Accessed on 14 March 2012] Connel, RA 2002. Charterparties and the Clause Paramount. UK P&I Club. [Online] Available at [Accessed on 14 March 2012] Eight Annual International Maritime Law Arbitration: Moot Competition. 2007. Padjadjaran University. Available at [Accessed on 14 March 2012] Force et al. 2006. Admiralty and Maritime Law. Beard Books, Washington, D. C. Available at < http://books.google.co.in/books?id=uQhZ4yajjOgC&pg=PA365&dq=Safe+Port+Clauses+in+maritime&hl=en&ei=RQVjT-S1IoTQrQfU9Ki9Bw&sa=X&oi=book_result&ct=book-thumbnail&resnum=2&ved=0CDsQ6wEwAQ#v=onepage&q=Safe%20Port%20Clauses%20in%20maritime&f=false> [Accessed on 21 March 2012] Hague – Visby Rules. n.d. [Online] Available at [Accessed on 14 March 2012] Kassem, AH 2006. The Legal Aspects of Seaworthiness: Current Law and Development. Swansea University. Available at < http://discovery.ucl.ac.uk/6988/1/6988.pdf> [Accessed on 14 March 2012] Klinger et al. 2008. The Surety’s Indemnity Agreement: Law and Practice. 2nd Edn. American Bar Association. ABA Publishing Limited. Available at [Accessed on 21 March 2012] Makkar, JS n.d. Speed and Consumption Warranties in Time Charterparties. [Online] Available at [Accessed on 14 March 2012] Non-Payment of Hire Clause for Time Charter Parties. 2006. BIMCO. Available at [Accessed on 14 March 2012] Paramount Clause. 2008. Skuld. [Online] Available at [Accessed on 14 March 2012] Part 5: Responsibilities Under Charterparties. 2008. Skuld. [Online] Available at [Accessed on 14 March 2012] Piracy – An off Hire Event?. n.d. [Online] Available at [Accessed on 14 March 2012] Safe Port and Safe Berth Warranties – Time and Voyage Charters. 1999. Steamship Mutual. [Online] Available at [Accessed on 14 March 2012] Ship Chartering. n.d. Bharat Petroleum Corporation Limited. [Online] Available at [Accessed on 14 March 2012] Subpart 11.4—Delivery or Performance Schedules. n.d. [Online] Available at [Accessed on 14 March 2012] Terms & Conditions. 2011. Chartering Terms & Conditions. [Online] Available at [Accessed on 14 March 2012] Time Charterparty: Payment of Hire. 2007. Law and Sea. [Online] Available at [Accessed on 14 March 2012] Time Charter. 2003. China Maritime Arbitration Commission. [Online] Available at [Accessed on 14 March 2012] Time Charterparty: Off-Hire. 2007. Law and Sea. [Online] Available at [Accessed on 14 March 2012] Time Charter. n.d. Available at < http://kczx.shupl.edu.cn/download/59882ae2-a235-4f5b-bd54-612b1558382f.pdf> [Accessed on 14 March 2012] Weale, J n.d. The Nype Off-Hire Clause and Third Party Intervention: Can an Efficient Vessel be Placed Off-Hire? Available at < http://www.simsl.com/Weale_Offhirepaper9.pdf> [Accessed on 14 March 2012] Read More