A charter party is an agreement between two parties regarding lease of a cargo or a vessel. One party offers to lease its vessel or cargo to another party at stipulated rate or under decided conditions. It is a legal contract, made under the laws governing the shipping world between a cargo vessel owner and a charterer.
Clauses for a different charter parties vary. It is these clauses that make different types of charter parties.
Depending on these clauses, the charter parties are:
Bareboat charter party
This is a typical agreement where there is no maintenance liability or any kind of claim on the vessel by the owner for the period of lease of the vessel. The owner agrees to lease the vessel without any administration, financial or technical responsibility for it. The charterer acts as the sole owner of the ship and is responsible for all the maintenance and functioning costs of the vessel including fuel, crew maintenance, repair, custom duties, port expenses etc for that time. It is the most suitable for tankers and bulk carriers.
Voyage charter party
This is the most commonly used Charter Party. Under this particular agreement, the owner of the ship agrees to lease the cargo to the charterer for a particular voyage. The cost paid for such a lease includes costs like fuel, loading and unloading of the cargo etc. The vessel owner supplies the charterer with the vessel and sometimes the crew for a voyage to a designated port. However, there is a specific time limit under this kind of contract. The time mentioned in the lease contract includes the time needed for loading and unloading of the cargo, exceeding which may need the charterer to remunerate the owner in terms of compensation charges. Also, the charterer remains responsible for any incidental charges. Being a voyage bound trip with availability of crew, voyage charter party becomes one of the most famous charter parties.
Time charter party
Often confused with the previous charter party, this charter party refers to lease of a vessel by the owner to a charterer for a specified period of time. The owner only offers his vessel at a predetermined rate. The charterer agrees to bear all the expenses incurred on running of the vessel in return of availability of vessel for that time.
Lump sum charter party
In this particular type of charter party, the owner agrees to lease his vessel to the charterer for a specified cargo to be shipped to a specified port.
Contract of Affreightment
This type of charter party particularly suits to bulk cargos that often need more than one voyage for complete shipment. Under this contract, the owner offers to carry the mentioned cargo at a price decided at rate of per tonnage or per voyage. This type of contract is especially found in industrial cargos like that of coal, stones, building material, metallurgical materials etc.
Dock charter party
This type of contract is made on the basis of the port or dock where the vessel is received by the charterer upon leasing or the owner while returning. The exchange happens in areas which are essentially suited to the size of vessel and are called commercial area of the port.