A cargo owner needs cargo moved (or a ship operator needs an additional ship.)

• He engages a shipbroker who finds suitable ships.
• After meticulous checking of the ships, the charterer chooses a ship, and via the broker, makes a FIRST OFFER.
• The ffirst offer includes charter/freight rates and other conditions
• The shipowner either accepts or rejects the offer.
• Further offers and counter-offers may lead to a charter being FIXED, i.e. the shipowner and the charterer agree to the charter, and a CHARTER PARTY (a special document) is signed by the owner and the charterer. All details in the charter party govern the charter.

Similarly, a shipowner may engage the services of a shipbroker to find cargo for his ship. The procedure is the same as outlined above.

Bulk carriers such as these Capesize bulk carriers loading iron ore at Saldanha Bay are usually chartered to move specific cargoes. Photograph : Brian Ingpen

Some details that are included in the charter party

• Name and IMO number of the ship
• Date of commencement and end of charter
• Port (or range of ports) where the charter begins.
• Port (or range of ports) where the charter will end.
• Laycan date when the ship must be at a particular place and ready to load/discharge.
• Cargo to be carried (for voyage or time charters)
• Exclusions regarding areas of trade, cargoes.
• Insurance details
• Rates applicable to the charter and payment details
• Laytime agreement. (See below.)

Voyage Instructions

These are issued by the shipowner to the Master, and contain all the basic information in the charter party.

• Date of commencement and end of charter
• Port (or range of ports) where the charter begins.
• Port (or range of ports) where the charter will end.
• Laycan date (see below) when the ship must be at a particular place and ready to load/discharge.
• Cargo to be carried (for voyage or time charters)
• Exclusions regarding areas of trade, cargoes.
• Insurance details
• Specific instructions to the master regarding the required ship’s speed, fuel consumption, routeing, recording the weather, unusual incidents, etc.
• Laytime agreement. (See below.)

Definitions

• Laycan – The dates between which a ship must be a given place (as agreed in the charter party) to start her charter and be ready to load. If the ship is late, the charter can be cancelled or renegotiated. If the ship is early, the shipowner is responsible for all costs up to the starting date and time of the charter.

• Laytime – The agreed number of hours it will take to load or discharge a ship. This is included in the charter party. If the cargowork takes more time than agreed, the charterer pays the shipowner an agreed amount per hour of delay, which is called demurrage. If the cargowork takes less time than agreed, the shipowner pays the charterer an agreed amount per hour, which is called dispatch. The number of hours and the amount of money paid are in accordance with the charter party. Delays that are caused by factors that are the fault of no one involved in the charter are not subject to demurrage or dispatch. Rain during loading a weather-sensitive cargo (e.g. cement or grain) or a strike among shoreside workers would not be subject to demurrage of dispatch.

• Off Hire – If a ship does not meet her requirements in terms of the charter party (e.g. she cannot maintain the agreed speed because of a machinery problem; she suffers an engine breakdown; a crane breaks down; the ship is detained) the charterer can put her off hire. This means that she will not earn money during the time she will be off hire. Some events do not count as time off hire e.g. a ship diverting to assist a vessel in distress or to land an injured crewmember, or weather-related delays.

• Notice of Readiness – When his ship has arrived at a given place to start the charter, the holds or tanks must be ready to receive the cargo. They should be clean and dry. The Master issues to the charterer a notice of readiness that his ship is ready to load. The charterer sends a surveyor to check the condition of the ship. If he is satisfied that the condition of the ship is satisfactory, the surveyor will inform the charterer and instructions will follow that loading can start. If the surveyor finds that the ship has deficiencies and cannot start loading, he will list the deficiencies and refuse to allow loading to start until the deficiencies have been put right.