The Time Charterparty - Report Example

The Time Charterparty Due: The Time Charterparty A contract law is an area of law that deals with the promises people or given parties make with one another and they need to be enforced by the court.1 Contract laws allow parties to make an agreement between themselves which is accepted and recognized by law. Essentially, contracts were just oral agreements between the concerned persons but whoever should contracts be written agreements? In order to maintain legality the need for writing an agreement is important for the agreement and moreover agreements must meet a number of criteria to be legally valid: All the parties must be in agreement and something of value must be exchanged in the process. Different states have laws that allow whether given contracts need to be written or not. With a clear understanding of the contract law a closer look at what happens during an agreement between the parties and the exchange process is important.2 Agreement Between Parties Although it may seem obvious to talk about an agreement since when two parties enter into a contract they must have come to an agreement. However this is an essential element for any contract to be valid and all the parties must agree on major issues in the contract. Although there might be situations that prevent an agreement from being fully settled at and with regard to this different states have rules defining when an agreement legally exists. Offer and Acceptance A legal contract exists when one party makes an offer and the other party accepts it. This however would be orally or in writing. In normal businesses today, once an offer has been made it must be accepted for the deal to go on but however there would be situations when one party may be slow in fully settling the agreement and would think about it for a while or try to get a better deal. Thus unless an offer states an “expiry” date it however remains open for a “reasonable” period of time. To avoid any conflicts the best way to make an offer is to include an expiry date.3 In the sea there are often contracts of hire for vessels. This is for a specific period of time and hence the name “time charter hire”. Different lawyers have got a different interpretation of the laws relating to time charter hire. In this paper, different terms and concepts would be introduced. An in depth analysis of the charter party clauses for both hire and freight follows and finally a closer look on the two statements provided and a conclusion that reflects which of the two statements from Satya Kamal and Lord Denning’s cases best shows how the law relating to time charter hire should be applied. Terms and Concepts Time Charter Party The Time Charter Party is also called the Voyage Charter. It is governed by the general rules that bind the contract of law whereby there should be an offer and acceptance and that the two parties must have agreed on given terms and conditions. Moreover, the contract should be in writing or orally whatever the two parties agree on for the contract to be legal. In other terms, a Time Charter is a contract for the services to be given by the owner of a ship to a charterer. The services are usually given by the owner’s employees usually servants led by the master and the members are the crew.4 The charterer has does not receive any interest for use of the vessel but the services being rendered by the ship’s owner are the ones that matter. Moreover, the charterer benefits from the commercial use of the vessel by giving the instructions to the servants on the cargoes to be loaded and the voyages to be undertaken and other orders may be given by the charterer in accordance with the terms and agreements of the charter-party. The charter-party has a duration that implicates the period of service but not limited to the geographical area covered or the amount of load carried. Thus time charter does not provide for freight, laytime and the charterer is obliged to pay for hire, delivery, redelivery and off-hire event.5 Hire This is the payment made by a charterer to the owner of a ship for the services rendered. This money obliged by a charterer is payable monthly but though in advance and usually calculated daily. Unlike freight, some instances of hire might be subject to equatable set off. According to the terms of payment, the charterer pays depending on the time range and geographical area covered by the vessel, when and where the vessel starts and finishes their service, the date of delivery and redelivery. The time charter also pays for the bunkers and therefore the recording of the bunker volumes on both delivery and redelivery dates is important.6 Off-Hire According to John Weal loss of time in the time charter clause may arise out of the off-hire clause but then arise without any breach on the part of the owner. Moreover, it can be attributed to the breach by the owner which may in this case be covered by indemnity. Or it may fall in the off-hire clause but arise as a result of breach by the charterer. Once the owner of a ship lets the charterer use their ship they are to owner the contract and use the vessel within the stipulated period of time. In case of off-hire by the charterer they are to proof that the said vessel did not perform the services as expected and that caused the delay and such inability is mentioned in the “off-hire” clause.7 Freight This kind of payment falls under the voyage charter party. This represents a fixed sum of money that is paid to the owner of a ship once cargo that was carried in the vessel has successfully been delivered to its destination. The freight paid by a charterer is to cater for the owner’s operating costs, cost of fuel and the owner’s profit margin. Moreover, unlike hire payments freight is paid on delivery of the cargoes and at times the owner is in risk of not being paid should the cargo fail to be delivered as agreed.8 According to the terms of the agreement between the charterer and the owner of the vessel the freight is usually paid as a remuneration for the service rendered to the charterer and therefore the charterer is not obliged to pay the freight when the ship owner fails to provide such service as transportation of the cargo. This implies that no freight is due and thus the delivery of the cargo to any destination as agreed by the owner is a key characteristic in any contract between the owner of the vessel and the charterer. The question to most charterers is however whether the contract between them and the owner of the vessel in delivering the cargo has been honored. They continue to assert that in regard to England’s law, freight is only paid to the owner of the ship if the goods carried arrive in the destination whether safely or in a damaged state. Moreover, the freight is not payable in full should the goods not carried in whole and they are paid in accordance with the part only carried. But they however state that the rule has not been in practice in England yet.9 Therefore the question whether the goods have been wholly delivered or part of it has been delivered is most often an indication whether the contract has or has not been honored. This therefore calls for the review of the contractual terms. The charter-party may therefore call for payment of a small sum of money as a freighter. In that case, contrary to the general rule, the owner is entitled to full pay even in the delivery of part of the goods caused due to the sea problems but not the owner’s mistakes. However, commercial conditions may force the parties to avoid the use of the general rule and decide on applying of the express terms. For this reason the owner would be entitled for a small portion of the money in advance for the shipping of goods. This enables the owner to have some pay even if the goods are not delivered safely and in full quantity.10 Freight Clause According to Samir Mankabady in 1978 a one-third of the cargo that was loaded at persian gulf was lost due to the grounding of a tanker. The remaining cargo was however delivered successfully. The question in that case was however if the owner was entitled to full freight inspite of delivery of a portion of the cargo. Lloyd’s representative however, in clause 2 of the case stated that: Freight … shall be computed on intake quantity … as shown on the Inspector’s Certificate of Inspection… Payment of freight shall be made by the Charterer without discount upon delivery of cargo at destination, less any disbursements or advances made to the Master or Owner’s agents at ports of loading and/or discharge and the cost of insurance thereon…11 This however alters the meaning of freight and that the owner is not entitled to full pay but on the amount delivered. However both Lord Denning, M.R. and Roskill LJ noted that, although, provisions of the charter-party in question related to the freight payment were not stated explicitly. They both questioned on the alteration of the freight contract and the payment of only a small portion of money to the owner.12 They believe that there were nowhere in the freight agreement where such agreement on payment of the small portion of money if the ship would not get to the destination safely. The charter-party do not provide adjustment for delivered quantity. Breach Of Contract One party may decide to go against the agreement with another party. A breach is thought to be the failure of service rendered by a party is deemed defective. If a party either renounce the contract or incapacitate himself before the date when performance is due, it is said to have committed an anticipatory breach of contract. 13Both the freight and hire should abide by the terms of the contract that both had agreed with the owner of the ship and with the other way the owner of the ship should also owner the contract and that the ships should be able to perform their services as required. It is not often easy to establish a breach of contract as the existence of a breach itself is a matter of dispute. Moreover, it is not that every failure to perform is a breach of contract and thus breach of contracts must be assessed properly to find their cause. 14In order to honor the contract each party needs to understand their duties. The charterer performs duties that include: To decide the port in which the cargo is to be loaded and discharged, to provide the goods to be loaded and finally to load and then discharge them at the final destination. Breach of these duties would only force the owner to sue them for damages.15 Judgement Of Time Charter Cases Cases of time charter bring in court different aspects that have to be looked on since in time charter there is the hire and freight clauses. Both scenarios have different times of payment however in the hire clause the owner of the vessel is given a certain amount is paid before the delivery of goods. In cases involving time charter the court ought to decide who the “carrier” of the goods is. Most of the laws of different states do not provide a comprehensive definition of a “carrier” and moreover the bills of lading do not identify the carrier.16 Therefore a “carrier” would be the owner of the vessel or the charterer who enters into a contract of carriage with a shipper or some other person hired that is neither the owner of the ship nor the charterer. Thus the concern to most parties should be who the carrier is for easy judgement of the case involving cargo and should not only be a concern to lawyers alone but to everyone involved in cargo claims. Finding the carrier thus determines who should be put on notice of a claim and for whom time extensions should be obtained. Most cases involving cargo claims have been defeated on the ground that a suit time extension was obtained from the wrong person.17 When the carrying vessel is not included under the charter but however the bill of lading is on the vessel owner’s form then the carrier would be the vessel owner. However, when the carrying vessel is under charter and the bill of lading is on someone else’s form then the issue of who is liable as the carrier arises. During hire the charterer however is in full control of the vessel unlike in freight where the charterer is only concerned with whether the goods have been delivered safely so that they would make their payments. Thus the in hire clause the “carrier” would be the charterer as they are responsible for any form of instructions to the master and their servants. On top of this in the case of freight the “carrier” is the owner of the vessel. However, the general rule is to ask whom during the contract agreed to be the carrier of the goods to the required destination. The answer to this would largely depend on the facts. According to Anglo-Canadian law the carrier of the goods has been always the shipowner that solves the problem of identifying who in the contract agreed to be the carrier.18 In consideration of Satya Kamal [1975] 2 Lloy’s Representative 188, per Donaldson J. Case, the lawyer concluded that both the hire and freight should be treated in the same way is a violation of the rule of contract. The case did not consider the carrier of the goods and in both the hire and freight clauses the charterer’s have different duties to perform. While the latter does not have to be present all the way in the delivery of the goods but however in hiring the charterer is present and in case of any damage of the goods they act as witness of what happened. Thus treating both of them equally in judgement moreover is against people’s human rights. In a two party contract, the bill of lading clearly defines the rights and responsibilities of all the people involved in the transaction. Thus Lord Denning MR in The Nanfr [1978] QB 927 was right to state that both the hire and the freight have different responsibilities as regard to vessel use is concerned and should be treated in a different manner in a court of law.   Bibliography Cambridge Academy of Transport. Disputes on Charter parties.(2012) Url:http://www.catz.co.uk/courses/pms_london_seminars/disputes_on_charter_parties/ Francis J. O’Brien. Symposium on Charter Parties: Freight and Charter Hire. 49, (1975) Url:https://litigation-essentials.lexisnexis.com/webcd/app?action=DocumentDisplay&crawlid=1&doctype=cite&docid=49+Tul.+L.+Rev. +956&srctype=smi&srcid=3B15&key=f9bded27994fd91b63db32dae1457043 Giaschi Christopher. Who is Carrier? Shipowner or Charterer. (1994) Url:http://www.admiraltylaw.com/papers/Carrier.htm John Weal.Time CharterParty: Off-Hire. (2012) http://www.lawandsea.net/CP_Voy/Charterparty_Voyage_Freight1.html Law and Sea. Voyage Charterparty: Freight . (2012) http://www.lawandsea.net/CP_Voy/Charterparty_Voyage_Freight1.html Lowe Martin Co. Limited. Encyclopaedia of the Laws of England Being a New Abridgment Url:http://www.archive.org/stream/encyclopaediaofl06polluoft/encyclopaediaofl06polluoft_djvu.txt (1987-1988). Nolo. Contracts 101: Make a Legally Valid Contract. (2012) Url: http://www.nolo.com/legal-encyclopedia/contracts-101-make-legally-valid-30247.html Samir Mankabady. Arbitration in Shipping Disputes Under English Law Url:http://heinonline.org/HOL/LandingPage?collection=journals&handle=hein.journals/nkenlr14&div=8&id=&page= Shevell, Steven.why Breach of Contract May not be Immoral given the incompleteness of Contracts, 107.(2009). Tham, Chee Ho. Discharge of a Contract Where Both Parties Are in Breach. 22, (2010) Timothy Murphy, eHow: Basic Rules of Contract Law. (1999) http://www.ehow.com/facts_5771845_basic-rules-contract-law.html Voyage Charterparty. Freight. 2007 Url:http://www.lawandsea.net/CP_Voy/Charterparty_Voyage_Freight1.html Read More